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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2491 Enrolled Bill (ENR)]

        H.R.2491

                       One Hundred Fourth Congress

                                 of the

                        United States of America

                          AT THE FIRST SESSION

         Begun and held at the City of Washington on Wednesday,
  the fourth day of January, one thousand nine hundred and ninety-five

                                 An Act

 
To provide for reconciliation pursuant to section 105 of the concurrent 
             resolution on the budget for fiscal year 1996.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

Section 1. SHORT TITLE.

    This Act may be cited as the ``Balanced Budget Act of 1995''.

Sec. 2. TABLE OF TITLES.

    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 Provision
Title XI--Revenues
Title XII--Teaching hospitals and graduate medical education; asset 
          sales; welfare; and other provisions

              TITLE I--AGRICULTURE AND RELATED PROVISIONS

SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This title may be cited as the ``Agricultural 
Reconciliation Act of 1995''.
    (b) Table of Contents.--The table of contents of this 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.

           Subtitle A--Agricultural Market Transition Program

SEC. 1101. SHORT TITLE.

    This subtitle may be cited as the ``Agricultural Market Transition 
Act''.

SEC. 1102. DEFINITIONS.

    In this subtitle:
        (1) Considered planted.--The term ``considered planted'' means 
    acreage that is considered planted under title V of the 
    Agricultural Act of 1949 (7 U.S.C. 1461 et seq.) (as in effect 
    prior to the amendment made by section 1109(b)(2)).
        (2) Contract.--The term ``contract'' means a production 
    flexibility contract entered into under section 1103.
        (3) Contract acreage.--The term ``contract acreage'' means 1 or 
    more crop acreage bases established for contract commodities under 
    title V of the Agricultural Act of 1949 (as in effect prior to the 
    amendment made by section 1109(b)(2)). If a crop acreage base was 
    not enrolled in an annual program for the 1995 crop in order to 
    increase crop acreage base, the contract acreage for the 1996 crop 
    shall reflect the increased base acreage that would have been 
    established under title V of the Act (as so in effect).
        (4) Contract commodity.--The term ``contract commodity'' means 
    wheat, corn, grain sorghum, barley, oats, upland cotton, and rice.
        (5) Contract payment.--The term ``contract payment'' means a 
    payment made under section 1103 pursuant to a contract.
        (6) Farm program payment yield.--The term ``farm program 
    payment yield'' means the farm program payment yield established 
    for the 1995 crop of a contract commodity under title V of the 
    Agricultural Act of 1949 (as in effect prior to the amendment made 
    by section 1109(b)(2)).
        (7) Loan commodity.--The term ``loan commodity'' means each 
    contract commodity, extra long staple cotton, and oilseeds.
        (8) Oilseed.--The term ``oilseed'' means a crop of soybeans, 
    sunflower seed, rapeseed, canola, safflower, flaxseed, mustard 
    seed, or, if designated by the Secretary, other oilseeds.
        (9) Program.--The term ``program'' means the agricultural 
    market transition program established under this subtitle.
        (10) Secretary.--The term ``Secretary'' means the Secretary of 
    Agriculture.

SEC. 1103. PRODUCTION FLEXIBILITY CONTRACTS.

    (a) Contracts Authorized.--
        (1) Offer and terms.--Beginning as soon as practicable after 
    the date of the enactment of this subtitle, the Secretary shall 
    offer to enter into a contract with an eligible owner or operator 
    described in paragraph (2) on a farm containing eligible farmland. 
    Under the terms of a contract, the owner or operator shall agree, 
    in exchange for annual contract payments, to comply with--
            (A) the conservation plan for the farm prepared in 
        accordance with section 1212 of the Food Security Act of 1985 
        (16 U.S.C. 3812);
            (B) wetland protection requirements applicable to the farm 
        under subtitle C of title XII of the Act (16 U.S.C. 3821 et 
        seq.); and
            (C) the planting flexibility requirements of subsection 
        (j).
        (2) Eligible owners and operators described.--The following 
    persons shall be considered to be an owner or operator eligible to 
    enter into a contract:
            (A) An owner of eligible farmland who assumes all of the 
        risk of producing a crop.
            (B) An owner of eligible farmland who shares in the risk of 
        producing a crop.
            (C) An operator of eligible farmland with a share-rent 
        lease of the eligible farmland, regardless of the length of the 
        lease, if the owner enters into the same contract.
            (D) An operator of eligible farmland who cash rents the 
        eligible farmland under a lease expiring on or after September 
        30, 2002, in which case the consent of the owner is not 
        required.
            (E) An operator of eligible farmland who cash rents the 
        eligible farmland under a lease expiring before September 30, 
        2002, if the owner consents to the contract.
            (F) An owner of eligible farmland who cash rents the 
        eligible farmland and the lease term expires before September 
        30, 2002, but only if the actual operator of the farm declines 
        to enter into a contract. In the case of an owner covered by 
        this subparagraph, contract payments shall not begin under a 
        contract until the fiscal year following the fiscal year in 
        which the lease held by the nonparticipating operator expires.
            (G) An owner or operator described in a preceding 
        subparagraph regardless of whether the owner or operator 
        purchased catastrophic risk protection for a fall-planted 1996 
        crop under section 508(b) of the Federal Crop Insurance Act (7 
        U.S.C. 1508(b)).
        (3) Tenants and sharecroppers.--In carrying out this section, 
    the Secretary shall provide adequate safeguards to protect the 
    interests of operators who are tenants and sharecroppers.
    (b) Elements.--
        (1) Time for contracting.--
            (A) Deadline.--Except as provided in subparagraph (B), the 
        Secretary may not enter into a contract after April 15, 1996.
            (B) Conservation reserve lands.--
                (i) In general.--At the beginning of each fiscal year, 
            the Secretary shall allow an eligible owner or operator on 
            a farm covered by a conservation reserve contract entered 
            into under section 1231 of the Food Security Act of 1985 
            (16 U.S.C. 3831) that terminates after the date specified 
            in subparagraph (A) to enter into or expand a production 
            flexibility contract to cover the contract acreage of the 
            farm that was subject to the former conservation reserve 
            contract.
                (ii) Amount.--Contract payments made for contract 
            acreage under this subparagraph shall be made at the rate 
            and amount applicable to the annual contract payment level 
            for the applicable crop.
        (2) Duration of contract.--
            (A) Beginning date.--A contract shall begin with--
                (i) the 1996 crop of a contract commodity; or
                (ii) in the case of acreage that was subject to a 
            conservation reserve contract described in paragraph 
            (1)(B), the date the production flexibility contract was 
            entered into or expanded to cover the acreage.
            (B) Ending date.--A contract shall extend through the 2002 
        crop.
        (3) Estimation of contract payments.--At the time the Secretary 
    enters into a contract, the Secretary shall provide an estimate of 
    the minimum contract payments anticipated to be made during at 
    least the first fiscal year for which contract payments will be 
    made.
    (c) Eligible Farmland Described.--Land shall be considered to be 
farmland eligible for coverage under a contract only if the land has 
contract acreage attributable to the land and--
        (1) for at least 1 of the 1991 through 1995 crops, at least a 
    portion of the land was enrolled in the acreage reduction program 
    authorized for a crop of a contract commodity under section 101B, 
    103B, 105B, or 107B of the Agricultural Act of 1949 (as in effect 
    prior to the amendment made by section 1109(b)(2)) or was 
    considered planted;
        (2) was subject to a conservation reserve contract under 
    section 1231 of the Food Security Act of 1985 (16 U.S.C. 3831) 
    whose term expired, or was voluntarily terminated, on or after 
    January 1, 1995; or
        (3) is released from coverage under a conservation reserve 
    contract by the Secretary during the period beginning on January 1, 
    1995, and ending on the date specified in subsection (b)(1)(A).
    (d) Time for Payment.--
        (1) In general.--An annual contract payment shall be made not 
    later than September 30 of each of fiscal years 1996 through 2002.
        (2) Advance payments.--
            (A) Fiscal year 1996.--At the option of the owner or 
        operator, 50 percent of the contract payment for fiscal year 
        1996 shall be made not later than 60 days after the date on 
        which the owner or operator enters into a contract.
            (B) Subsequent fiscal years.--At the option of the owner or 
        operator for fiscal year 1997 and each subsequent fiscal year, 
        50 percent of the annual contract payment shall be made on 
        December 15.
    (e) Amounts Available for Contract Payments for Each Fiscal Year.--
        (1) In general.--The Secretary shall expend on a fiscal year 
    basis the following amounts to satisfy the obligations of the 
    Secretary under all contracts:
            (A) For fiscal year 1996, $5,570,000,000.
            (B) For fiscal year 1997, $5,385,000,000.
            (C) For fiscal year 1998, $5,800,000,000.
            (D) For fiscal year 1999, $5,603,000,000.
            (E) For fiscal year 2000, $5,130,000,000.
            (F) For fiscal year 2001, $4,130,000,000.
            (G) For fiscal year 2002, $4,008,000,000.
        (2) Allocation.--The amount made available for a fiscal year 
    under paragraph (1) shall be allocated as follows:
            (A) For wheat, 26.26 percent.
            (B) For corn, 46.22 percent.
            (C) For grain sorghum, 5.11 percent.
            (D) For barley, 2.16 percent.
            (E) For oats, 0.15 percent.
            (F) For upland cotton, 11.63 percent.
            (G) For rice, 8.47 percent.
        (3) Adjustment.--The Secretary shall adjust the amounts 
    allocated for each contract commodity under paragraph (2) for a 
    particular fiscal year by--
            (A) subtracting an amount equal to the amount, if any, 
        necessary to satisfy payment requirements under sections 101B, 
        103B, 105B, and 107B of the Agricultural Act of 1949 (as in 
        effect prior to the amendment made by section 1109(b)(2)) for 
        the 1994 and 1995 crops of the commodity;
            (B) adding an amount equal to the sum of all producer 
        repayments of deficiency payments received under section 
        114(a)(2) of the Act (as so in effect) for the commodity;
            (C) adding an amount equal to the sum of all contract 
        payments withheld by the Secretary, at the request of 
        producers, during the preceding fiscal year as an offset 
        against producer repayments of deficiency payments otherwise 
        required under section 114(a)(2) of the Act (as so in effect) 
        for the commodity; and
            (D) adding an amount equal to the sum of all refunds of 
        contract payments received during the preceding fiscal year 
        under subsection (h) for the commodity.
    (f) Determination of Contract Payments.--
        (1) Individual payment quantity of contract commodities.--For 
    each contract, the payment quantity of a contract commodity for 
    each fiscal year shall be equal to the product of--
            (A) 85 percent of the contract acreage; and
            (B) the farm program payment yield.
        (2) Annual payment quantity of contract commodities.--The 
    payment quantity of each contract commodity covered by all 
    contracts for each fiscal year shall equal the sum of the amounts 
    calculated under paragraph (1) for each individual contract.
        (3) Annual payment rate.--The payment rate for a contract 
    commodity for each fiscal year shall be equal to--
            (A) the amount made available under subsection (e) for the 
        contract commodity for the fiscal year; divided by
            (B) the amount determined under paragraph (2) for the 
        fiscal year.
        (4) Annual payment amount.--The amount to be paid under a 
    contract in effect for each fiscal year with respect to a contract 
    commodity shall be equal to the product of--
            (A) the payment quantity determined under paragraph (1) 
        with respect to the contract; and
            (B) the payment rate in effect under paragraph (3).
        (5) Assignment of contract payments.--The provisions of section 
    8(g) of the Soil Conservation and Domestic Allotment Act (16 U.S.C. 
    590h(g)) (relating to assignment of payments) shall apply to 
    contract payments under this subsection. The owner or operator 
    making the assignment, or the assignee, shall provide the Secretary 
    with notice, in such manner as the Secretary may require in the 
    contract, of any assignment made under this paragraph.
        (6) Sharing of contract payments.--The Secretary shall provide 
    for the sharing of contract payments among the owners and operators 
    subject to the contract on a fair and equitable basis.
    (g) Payment Limitation.--The total amount of contract payments made 
to a person under a contract during any fiscal year may not exceed the 
payment limitations established under section 1105.
    (h) Effect of Violation.--
        (1) Termination of contract.--Except as provided in paragraph 
    (2), if an owner or operator subject to a contract violates the 
    conservation plan for the farm containing eligible farmland under 
    the contract, wetland protection requirements applicable to the 
    farm, or the planting flexibility requirements of subsection (j), 
    the Secretary shall terminate the contract with respect to the 
    owner or operator. On the termination, the owner or operator shall 
    forfeit all rights to receive future contract payments and shall 
    refund to the Secretary all contract payments received by the owner 
    or operator during the period of the violation, together with 
    interest on the contract payments as determined by the Secretary.
        (2) Refund or adjustment.--If the Secretary determines that a 
    violation does not warrant termination of the contract under 
    paragraph (1), the Secretary may require the owner or operator 
    subject to the contract--
            (A) to refund to the Secretary that part of the contract 
        payments received by the owner or operator during the period of 
        the violation, together with interest on the contract payments 
        as determined by the Secretary; or
            (B) to accept a reduction in the amount of future contract 
        payments that is proportionate to the severity of the 
        violation, as determined by the Secretary.
        (3) Foreclosure.--An owner or operator subject to a contract 
    may not be required to make repayments to the Secretary of amounts 
    received under the contract if the contract acreage has been 
    foreclosed on and the Secretary determines that forgiving the 
    repayments is appropriate in order to provide fair and equitable 
    treatment. This paragraph shall not void the responsibilities of 
    such an owner or operator under the contract if the owner or 
    operator continues or resumes operation, or control, of the 
    contract acreage. On the resumption of operation or control over 
    the contract acreage by the owner or operator, the provisions of 
    the contract in effect on the date of the foreclosure shall apply.
        (4) Review.--A determination of the Secretary under this 
    subsection shall be considered to be an adverse decision for 
    purposes of the availability of administrative review of the 
    determination.
    (i) Transfer of Interest in Lands Subject to Contract.--
        (1) Effect of transfer.--Except as provided in paragraph (2), 
    the transfer by an owner or operator subject to a contract of the 
    right and interest of the owner or operator in the contract acreage 
    shall result in the termination of the contract with respect to the 
    acreage, effective on the date of the transfer, unless the 
    transferee of the acreage agrees with the Secretary to assume all 
    obligations of the contract. At the request of the transferee, the 
    Secretary may modify the contract if the modifications are 
    consistent with the objectives of this section as determined by the 
    Secretary.
        (2) Exception.--If an owner or operator who is entitled to a 
    contract payment dies, becomes incompetent, or is otherwise unable 
    to receive the contract payment, the Secretary shall make the 
    payment, in accordance with regulations prescribed by the 
    Secretary.
    (j) Planting Flexibility.--
        (1) Permitted crops.--Subject to paragraph (2)(A), any 
    commodity or crop may be planted on contract acreage.
        (2) Limitations.--
            (A) In general.--Except as provided in subparagraph (B), 
        the planting of any fruit or vegetable, and unlimited haying 
        and grazing, shall be permitted on not more than 15 percent of 
        the contract acreage.
            (B) Exception.--Subparagraph (A) shall not apply to the 
        planting of contract commodities, lentils, mung beans, and dry 
        peas on contract acreage.
        (3) Alfalfa.--The planting of alfalfa on contract acreage is 
    unlimited, except that the quantity of acreage on which the 
    contract payment of the owner or operator would otherwise be based 
    shall be reduced for each acre planted to alfalfa in excess of the 
    limitation in effect under paragraph (2)(A) for the contract.
        (4) Haying and grazing.--Subject to paragraphs (2) and (3), 
    haying and grazing of contract acreage shall be permitted, except 
    during any consecutive 5-month period that is established by the 
    State committee established under section 8(b) of the Soil 
    Conservation and Domestic Allotment Act (16 U.S.C. 590h(b)) for a 
    State. The 5-month period shall be established during the period 
    beginning April 1, and ending October 31, of a year. In the case of 
    a natural disaster, the Secretary may permit unlimited haying and 
    grazing on the contract acreage.

SEC. 1104. NONRECOURSE MARKETING ASSISTANCE LOANS AND LOAN DEFICIENCY 
              PAYMENTS.

    (a) Availability of Nonrecourse Loans.--
        (1) Availability.--For each of the 1996 through 2002 crops of 
    each loan commodity, the Secretary shall make available to 
    producers on a farm nonrecourse marketing assistance loans for loan 
    commodities produced on the farm. The loans shall be made under 
    terms and conditions that are prescribed by the Secretary and at 
    the loan rate established under subsection (b) for the loan 
    commodity.
        (2) Eligible production.--The following production shall be 
    eligible for a marketing assistance loan under this section:
            (A) In the case of a marketing assistance loan for a 
        contract commodity, any production by a producer who has 
        entered into a production flexibility contract.
            (B) In the case of a marketing assistance loan for extra 
        long staple cotton and oilseeds, any production.
    (b) Loan Rates.--
        (1) Wheat.--
            (A) Loan rate.--Subject to subparagraph (B), the loan rate 
        for a marketing assistance loan for wheat shall be--
                (i) not less than 85 percent of the simple average 
            price received by producers of wheat, as determined by the 
            Secretary, during the marketing years for the immediately 
            preceding 5 crops of wheat, excluding the year in which the 
            average price was the highest and the year in which the 
            average price was the lowest in the period; but
                (ii) not more than $2.58 per bushel.
            (B) Stocks to use ratio adjustment.--If the Secretary 
        estimates for any marketing year that the ratio of ending 
        stocks of wheat to total use for the marketing year will be--
                (i) equal to or greater than 30 percent, the Secretary 
            may reduce the loan rate for wheat for the corresponding 
            crop by an amount not to exceed 10 percent in any year;
                (ii) less than 30 percent but not less than 15 percent, 
            the Secretary may reduce the loan rate for wheat for the 
            corresponding crop by an amount not to exceed 5 percent in 
            any year; or
                (iii) less than 15 percent, the Secretary may not 
            reduce the loan rate for wheat for the corresponding crop.
            (C) No effect on future years.--Any reduction in the loan 
        rate for wheat under subparagraph (B) shall not be considered 
        in determining the loan rate for wheat for subsequent years.
        (2) Feed grains.--
            (A) Loan rate for corn.--Subject to subparagraph (B), the 
        loan rate for a marketing assistance loan for corn shall be--
                (i) not less than 85 percent of the simple average 
            price received by producers of corn, as determined by the 
            Secretary, during the marketing years for the immediately 
            preceding 5 crops of corn, excluding the year in which the 
            average price was the highest and the year in which the 
            average price was the lowest in the period; but
                (ii) not more than $1.89 per bushel.
            (B) Stocks to use ratio adjustment.--If the Secretary 
        estimates for any marketing year that the ratio of ending 
        stocks of corn to total use for the marketing year will be--
                (i) equal to or greater than 25 percent, the Secretary 
            may reduce the loan rate for corn for the corresponding 
            crop by an amount not to exceed 10 percent in any year;
                (ii) less than 25 percent but not less than 12.5 
            percent, the Secretary may reduce the loan rate for corn 
            for the corresponding crop by an amount not to exceed 5 
            percent in any year; or
                (iii) less than 12.5 percent the Secretary may not 
            reduce the loan rate for corn for the corresponding crop.
            (C) No effect on future years.--Any reduction in the loan 
        rate for corn under subparagraph (B) shall not be considered in 
        determining the loan rate for corn for subsequent years.
            (D) Other feed grains.--The loan rate for a marketing 
        assistance loan for grain sorghum, barley, and oats, 
        respectively, shall be established at such level as the 
        Secretary determines is fair and reasonable in relation to the 
        rate that loans are made available for corn, taking into 
        consideration the feeding value of the commodity in relation to 
        corn.
        (3) Upland cotton.--
            (A) Loan rate.--Subject to subparagraph (B), the loan rate 
        for a marketing assistance loan for upland cotton shall be 
        established by the Secretary at such loan rate, per pound, as 
        will reflect for the base quality of upland cotton, as 
        determined by the Secretary, at average locations in the United 
        States a rate that is not less than the smaller of--
                (i) 85 percent of the average price (weighted by market 
            and month) of the base quality of cotton as quoted in the 
            designated United States spot markets during 3 years of the 
            5-year period ending July 31 in the year in which the loan 
            rate is announced, excluding the year in which the average 
            price was the highest and the year in which the average 
            price was the lowest in the period; or
                (ii) 90 percent of the average, for the 15-week period 
            beginning July 1 of the year in which the loan rate is 
            announced, of the 5 lowest-priced growths of the growths 
            quoted for Middling 1\3/32\-inch cotton C.I.F. Northern 
            Europe (adjusted downward by the average difference during 
            the period April 15 through October 15 of the year in which 
            the loan is announced between the average Northern European 
            price quotation of such quality of cotton and the market 
            quotations in the designated United States spot markets for 
            the base quality of upland cotton), as determined by the 
            Secretary.
            (B) Limitations.--The loan rate for a marketing assistance 
        loan for upland cotton shall not be less than $0.50 per pound 
        or more than $0.5192 per pound.
        (4) Extra long staple cotton.--The loan rate for a marketing 
    assistance loan for extra long staple cotton shall be--
            (A) not less than 85 percent of the simple average price 
        received by producers of extra long staple cotton, as 
        determined by the Secretary, during 3 years of the 5 previous 
        marketing years, excluding the year in which the average price 
        was the highest and the year in which the average price was the 
        lowest in the period; but
            (B) not more than $0.7965 per pound.
        (5) Rice.--The loan rate for a marketing assistance loan for 
    rice shall be $6.50 per hundredweight.
        (6) Oilseeds.--
            (A) Soybeans.--The loan rate for a marketing assistance 
        loan for soybeans shall be $4.92 per bushel.
            (B) Sunflower seed, canola, rapeseed, safflower, mustard 
        seed, and flaxseed.--The loan rates for a marketing assistance 
        loan for sunflower seed, canola, rapeseed, safflower, mustard 
        seed, and flaxseed, individually, shall be $0.087 per pound.
            (C) Other oilseeds.--The loan rates for a marketing 
        assistance loan for other oilseeds shall be established at such 
        level as the Secretary determines is fair and reasonable in 
        relation to the loan rate available for soybeans, except in no 
        event shall the rate for the oilseeds (other than cottonseed) 
        be less than the rate established for soybeans on a per-pound 
        basis for the same crop.
    (c) Term of Loan.--In the case of each loan commodity (other than 
upland cotton or extra long staple cotton), a marketing assistance loan 
under subsection (a) shall have a term of 9 months beginning on the 
first day of the first month after the month in which the loan is made. 
A marketing assistance loan for upland cotton or extra long staple 
cotton shall have a term of 10 months. The Secretary may not extend the 
term of a marketing assistance loan for any loan commodity.
    (d) Repayment.--
        (1) Repayment rates generally.--The Secretary shall permit 
    producers to repay a marketing assistance loan under subsection (a) 
    for a loan commodity (other than extra long staple cotton) at a 
    level that is the lesser of--
            (A) the loan rate established for the commodity under 
        subsection (b); or
            (B) the prevailing world market price for the commodity 
        (adjusted to United States quality and location), as determined 
        by the Secretary.
        (2) Repayment rates for extra long staple cotton.--Repayment of 
    a marketing assistance loan for extra long staple cotton shall be 
    at the loan rate established for the commodity under subsection 
    (b).
        (3) Prevailing world market price.--For purposes of paragraph 
    (1)(B) and subsection (f), the Secretary shall prescribe by 
    regulation--
            (A) a formula to determine the prevailing world market 
        price for each loan commodity, adjusted to United States 
        quality and location; and
            (B) a mechanism by which the Secretary shall announce 
        periodically the prevailing world market price for each loan 
        commodity.
        (4) Adjustment of prevailing world market price for upland 
    cotton.--
            (A) In general.--During the period ending July 31, 2003, 
        the prevailing world market price for upland cotton (adjusted 
        to United States quality and location) established under 
        paragraph (3) shall be further adjusted if--
                (i) the adjusted prevailing world market price is less 
            than 115 percent of the loan rate for upland cotton 
            established under subsection (b), as determined by the 
            Secretary; and
                (ii) the Friday through Thursday average price 
            quotation for the lowest-priced United States growth as 
            quoted for Middling (M) 1\3/32\-inch cotton delivered 
            C.I.F. Northern Europe is greater than the Friday through 
            Thursday average price of the 5 lowest-priced growths of 
            upland cotton, as quoted for Middling (M) 1\3/32\-inch 
            cotton, delivered C.I.F. Northern Europe (referred to in 
            this subsection as the ``Northern Europe price'').
            (B) Further adjustment.--Except as provided in subparagraph 
        (C), the adjusted prevailing world market price for upland 
        cotton shall be further adjusted on the basis of some or all of 
        the following data, as available:
                (i) The United States share of world exports.
                (ii) The current level of cotton export sales and 
            cotton export shipments.
                (iii) Other data determined by the Secretary to be 
            relevant in establishing an accurate prevailing world 
            market price for upland cotton (adjusted to United States 
            quality and location).
            (C) Limitation on further adjustment.--The adjustment under 
        subparagraph (B) may not exceed the difference between--
                (i) the Friday through Thursday average price for the 
            lowest-priced United States growth as quoted for Middling 
            1\3/32\-inch cotton delivered C.I.F. Northern Europe; and
                (ii) the Northern Europe price.
    (e) Loan Deficiency Payments.--
        (1) Availability.--Except as provided in paragraph (4), the 
    Secretary may make loan deficiency payments available to producers 
    who, although eligible to obtain a marketing assistance loan under 
    subsection (a) with respect to a loan commodity, agree to forgo 
    obtaining the loan for the commodity in return for payments under 
    this subsection.
        (2) Computation.--A loan deficiency payment under this 
    subsection shall be computed by multiplying--
            (A) the loan payment rate determined under paragraph (3) 
        for the loan commodity; by
            (B) the quantity of the loan commodity that the producers 
        on a farm are eligible to place under loan but for which the 
        producers forgo obtaining the loan in return for payments under 
        this subsection.
        (3) Loan payment rate.--For purposes of this subsection, the 
    loan payment rate shall be the amount by which--
            (A) the loan rate established under subsection (b) for the 
        loan commodity; exceeds
            (B) the rate at which a loan for the commodity may be 
        repaid under subsection (d).
        (4) Exception for extra long staple cotton.--This subsection 
    shall not apply with respect to extra long staple cotton.
    (f) Special Marketing Loan Provisions for Upland Cotton.--
        (1) First handler marketing certificates.--
            (A) In general.--During the period ending on July 31, 2003, 
        if the repayment rates provided in subsection (d) for upland 
        cotton or the availability of loan deficiency payments for 
        upland cotton under subsection (e) fails to make United States 
        upland cotton fully competitive in world markets and the 
        prevailing world market price of upland cotton (adjusted to 
        United States quality and location) is below the current loan 
        repayment rate for upland cotton, to make United States upland 
        cotton competitive in world markets and to maintain and expand 
        domestic consumption and exports of upland cotton produced in 
        the United States, the Secretary shall provide for the issuance 
        of marketing certificates or cash payments in accordance with 
        this paragraph.
            (B) Payments.--The Commodity Credit Corporation, under such 
        regulations as the Secretary may prescribe, shall make 
        payments, through the issuance of marketing certificates or 
        cash payments, to first handlers of upland cotton (persons 
        regularly engaged in buying or selling upland cotton) who have 
        entered into an agreement with the Commodity Credit Corporation 
        to participate in the program established under this paragraph. 
        The payments shall be made in such amounts and subject to such 
        terms and conditions as the Secretary determines will make 
        upland cotton produced in the United States available at 
        competitive prices, consistent with the purposes of this 
        paragraph.
            (C) Value.--The value of each certificate or cash payment 
        issued under subparagraph (B) shall be based on the difference 
        between--
                (i) the loan repayment rate for upland cotton; and
                (ii) the prevailing world market price of upland cotton 
            (adjusted to United States quality and location), as 
            determined by the Secretary.
            (D) Redemption, marketing, or exchange.--The Commodity 
        Credit Corporation, under regulations prescribed by the 
        Secretary, may assist any person receiving marketing 
        certificates under this paragraph in the redemption of 
        certificates for cash, or marketing or exchange of the 
        certificates for agricultural commodities or products owned by 
        the Commodity Credit Corporation, at such times, in such 
        manner, and at such price levels as the Secretary determines 
        will best effectuate the purposes of the program established 
        under this paragraph. Any price restrictions that may otherwise 
        apply to the disposition of agricultural commodities by the 
        Commodity Credit Corporation shall not apply to the redemption 
        of certificates under this paragraph.
            (E) Designation of commodities and products; charges.--
        Insofar as practicable, the Secretary shall permit owners of 
        certificates to designate the commodities and products, 
        including storage sites, the owners would prefer to receive in 
        exchange for certificates. If any certificate is not presented 
        for redemption, marketing, or exchange within a reasonable 
        number of days after the issuance of the certificate (as 
        determined by the Secretary), reasonable costs of storage and 
        other carrying charges, as determined by the Secretary, shall 
        be deducted from the value of the certificate for the period 
        beginning after the reasonable number of days and ending with 
        the date of the presentation of the certificate to the 
        Commodity Credit Corporation.
            (F) Displacement.--The Secretary shall take such measures 
        as may be necessary to prevent the marketing or exchange of 
        agricultural commodities and products for certificates under 
        this subsection from adversely affecting the income of 
        producers of the commodities or products.
            (G) Transfers.--Under regulations prescribed by the 
        Secretary, certificates issued to cotton handlers under this 
        paragraph may be transferred to other handlers and persons 
        approved by the Secretary.
        (2) Cotton user marketing certificates.--
            (A) Issuance.--Subject to subparagraph (D), during the 
        period ending July 31, 2003, the Secretary shall issue 
        marketing certificates or cash payments to domestic users and 
        exporters for documented purchases by domestic users and sales 
        for export by exporters made in the week following a 
        consecutive 4-week period in which--
                (i) the Friday through Thursday average price quotation 
            for the lowest-priced United States growth, as quoted for 
            Middling (M) 1\3/32\-inch cotton, delivered C.I.F. Northern 
            Europe exceeds the Northern Europe price by more than 1.25 
            cents per pound; and
                (ii) the prevailing world market price for upland 
            cotton (adjusted to United States quality and location) 
            does not exceed 130 percent of the loan rate for upland 
            cotton established under subsection (b).
            (B) Value of certificates or payments.--The value of the 
        marketing certificates or cash payments shall be based on the 
        amount of the difference (reduced by 1.25 cents per pound) in 
        the prices during the 4th week of the consecutive 4-week period 
        multiplied by the quantity of upland cotton included in the 
        documented sales.
            (C) Administration.--Subparagraphs (D) through (G) of 
        paragraph (1) shall apply to marketing certificates issued 
        under this paragraph. Any such certificates may be transferred 
        to other persons in accordance with regulations issued by the 
        Secretary.
            (D) Exception.--The Secretary shall not issue marketing 
        certificates or cash payments under subparagraph (A) if, for 
        the immediately preceding consecutive 10-week period, the 
        Friday through Thursday average price quotation for the lowest 
        priced United States growth, as quoted for Middling (M) 1\3/
        32\-inch cotton, delivered C.I.F. Northern Europe, adjusted for 
        the value of any certificate issued under this paragraph, 
        exceeds the Northern Europe price by more than 1.25 cents per 
        pound.
            (E) Limitation on expenditures.--Total expenditures under 
        this paragraph shall not exceed $701,000,000 during fiscal 
        years 1996 through 2002.
        (3) Special import quota.--
            (A) Establishment.--The President shall carry out an import 
        quota program that provides that, during the period ending July 
        31, 2003, whenever the Secretary determines and announces that 
        for any consecutive 10-week period, the Friday through Thursday 
        average price quotation for the lowest-priced United States 
        growth, as quoted for Middling (M) 1\3/32\-inch cotton, 
        delivered C.I.F. Northern Europe, adjusted for the value of any 
        certificates issued under paragraph (2), exceeds the Northern 
        Europe price by more than 1.25 cents per pound, there shall 
        immediately be in effect a special import quota.
            (B) Quantity.--The quota shall be equal to 1 week's 
        consumption of upland cotton by domestic mills at the 
        seasonally adjusted average rate of the most recent 3 months 
        for which data are available.
            (C) Application.--The quota shall apply to upland cotton 
        purchased not later than 90 days after the date of the 
        Secretary's announcement under subparagraph (A) and entered 
        into the United States not later than 180 days after the date.
            (D) Overlap.--A special quota period may be established 
        that overlaps any existing quota period if required by 
        subparagraph (A), except that a special quota period may not be 
        established under this paragraph if a quota period has been 
        established under subsection (g).
            (E) Preferential tariff treatment.--The quantity under a 
        special import quota shall be considered to be an in-quota 
        quantity for purposes of--
                (i) section 213(d) of the Caribbean Basin Economic 
            Recovery Act (19 U.S.C. 2703(d));
                (ii) section 204 of the Andean Trade Preference Act (19 
            U.S.C. 3203);
                (iii) section 503(d) of the Trade Act of 1974 (19 
            U.S.C. 2463(d)); and
                (iv) General Note 3(a)(iv) to the Harmonized Tariff 
            Schedule.
            (F) Definition.--In this paragraph, the term ``special 
        import quota'' means a quantity of imports that is not subject 
        to the over-quota tariff rate of a tariff-rate quota.
    (g) Limited Global Import Quota for Upland Cotton.--
        (1) In general.--The President shall carry out an import quota 
    program that provides that whenever the Secretary determines and 
    announces that the average price of the base quality of upland 
    cotton, as determined by the Secretary, in the designated spot 
    markets for a month exceeded 130 percent of the average price of 
    such quality of cotton in the markets for the preceding 36 months, 
    notwithstanding any other provision of law, there shall immediately 
    be in effect a limited global import quota subject to the following 
    conditions:
            (A) Quantity.--The quantity of the quota shall be equal to 
        21 days of domestic mill consumption of upland cotton at the 
        seasonally adjusted average rate of the most recent 3 months 
        for which data are available.
            (B) Quantity if prior quota.--If a quota has been 
        established under this subsection during the preceding 12 
        months, the quantity of the quota next established under this 
        subsection shall be the smaller of 21 days of domestic mill 
        consumption calculated under subparagraph (A) or the quantity 
        required to increase the supply to 130 percent of the demand.
            (C) Preferential tariff treatment.--The quantity under a 
        limited global import quota shall be considered to be an in-
        quota quantity for purposes of--
                (i) section 213(d) of the Caribbean Basin Economic 
            Recovery Act (19 U.S.C. 2703(d));
                (ii) section 204 of the Andean Trade Preference Act (19 
            U.S.C. 3203);
                (iii) section 503(d) of the Trade Act of 1974 (19 
            U.S.C. 2463(d)); and
                (iv) General Note 3(a)(iv) to the Harmonized Tariff 
            Schedule.
            (D) Definitions.--In this subsection:
                (i) Supply.--The term ``supply'' means, using the 
            latest official data of the Bureau of the Census, the 
            Department of Agriculture, and the Department of the 
            Treasury--

                    (I) the carry-over of upland cotton at the 
                beginning of the marketing year (adjusted to 480-pound 
                bales) in which the quota is established;
                    (II) production of the current crop; and
                    (III) imports to the latest date available during 
                the marketing year.

                (ii) Demand.--The term ``demand'' means--

                    (I) the average seasonally adjusted annual rate of 
                domestic mill consumption in the most recent 3 months 
                for which data are available; and
                    (II) the larger of--

                        (aa) average exports of upland cotton during 
                    the preceding 6 marketing years; or
                        (bb) cumulative exports of upland cotton plus 
                    outstanding export sales for the marketing year in 
                    which the quota is established.
                (iii) Limited global import quota.--The term ``limited 
            global import quota'' means a quantity of imports that is 
            not subject to the over-quota tariff rate of a tariff-rate 
            quota.
            (D) Quota entry period.--When a quota is established under 
        this subsection, cotton may be entered under the quota during 
        the 90-day period beginning on the date the quota is 
        established by the Secretary.
        (2) No overlap.--Notwithstanding paragraph (1), a quota period 
    may not be established that overlaps an existing quota period or a 
    special quota period established under subsection (f)(3).

SEC. 1105. PAYMENT LIMITATIONS.

    (a) Limitation on Payments Under Production Flexibility 
Contracts.--The total amount of contract payments made to a person 
under 1 or more production flexibility contracts during any fiscal year 
may not exceed $40,000.
    (b) Limitation on Marketing Loan Gains and Loan Deficiency 
Payments.--
        (1) Limitation.--The total amount of payments specified in 
    paragraph (2) that a person shall be entitled to receive under 
    section 1104 for contract commodities and oilseeds during any 
    fiscal year may not exceed $75,000.
        (2) Description of payments.--The payments referred to in 
    paragraph (1) are the following:
            (A) Any gain realized by a producer from repaying a 
        marketing assistance loan for a crop of any loan commodity at a 
        lower level than the original loan rate established for the 
        commodity under section 1104(b).
            (B) Any loan deficiency payment received for a loan 
        commodity under section 1104(e).
    (c) Applicability of Other Provisions Regarding Payment 
Limitations.--Paragraphs (5), (6), and (7) of section 1001 and sections 
1001A through 1001C of the Food Security Act of 1985 (7 U.S.C. 1308 et 
seq.) shall apply with respect to the application of payment 
limitations under this section.
    (d) Conforming Amendments.--Section 1001 of the Food Security Act 
of 1985 (7 U.S.C. 1308) is amended by striking ``1997'' each place it 
appears in paragraphs (1)(A), (1)(B), and (2)(A) and inserting 
``1995''.

SEC. 1106. PEANUT PROGRAM.

    (a) Quota Peanuts.--
        (1) Availability of loans.--The Secretary shall make 
    nonrecourse loans available to producers of quota peanuts.
        (2) Loan rate.--The national average quota loan rate for quota 
    peanuts shall be $610 per ton.
        (3) Inspection, handling, or storage.--The loan amount may not 
    be reduced by the Secretary by any deductions for inspection, 
    handling, or storage.
        (4) Location and other factors.--The Secretary may make 
    adjustments in the loan rate for quota peanuts for location of 
    peanuts and such other factors as are authorized by section 411 of 
    the Agricultural Adjustment Act of 1938.
    (b) Additional Peanuts.--
        (1) In general.--The Secretary shall make nonrecourse loans 
    available to producers of additional peanuts at such rates as the 
    Secretary finds appropriate, taking into consideration the demand 
    for peanut oil and peanut meal, expected prices of other vegetable 
    oils and protein meals, and the demand for peanuts in foreign 
    markets.
        (2) Announcement.--The Secretary shall announce the loan rate 
    for additional peanuts of each crop not later than February 15 
    preceding the marketing year for the crop for which the loan rate 
    is being determined.
    (c) Area Marketing Associations.--
        (1) Warehouse storage loans.--
            (A) In general.--In carrying out subsections (a) and (b), 
        the Secretary shall make warehouse storage loans available in 
        each of the producing areas (described in section 1446.95 of 
        title 7 of the Code of Federal Regulations (January 1, 1989)) 
        to a designated area marketing association of peanut producers 
        that is selected and approved by the Secretary and that is 
        operated primarily for the purpose of conducting the loan 
        activities. The Secretary may not make warehouse storage loans 
        available to any cooperative that is engaged in operations or 
        activities concerning peanuts other than those operations and 
        activities specified in this section and section 358e of the 
        Agricultural Adjustment Act of 1938 (7 U.S.C. 1359a).
            (B) Administrative and supervisory activities.--An area 
        marketing association shall be used in administrative and 
        supervisory activities relating to loans and marketing 
        activities under this section and section 358e of the 
        Agricultural Adjustment Act of 1938 (7 U.S.C. 1359a).
            (C) Association costs.--Loans made to the association under 
        this paragraph shall include such costs as the area marketing 
        association reasonably may incur in carrying out the 
        responsibilities, operations, and activities of the association 
        under this section and section 358e of the Agricultural 
        Adjustment Act of 1938 (7 U.S.C. 1359a).
        (2) Pools for quota and additional peanuts.--
            (A) In general.--The Secretary shall require that each area 
        marketing association establish pools and maintain complete and 
        accurate records by area and segregation for quota peanuts 
        handled under loan and for additional peanuts placed under 
        loan, except that separate pools shall be established for 
        Valencia peanuts produced in New Mexico. Bright hull and dark 
        hull Valencia peanuts shall be considered as separate types for 
        the purpose of establishing the pools.
            (B) Net gains.--Net gains on peanuts in each pool, unless 
        otherwise approved by the Secretary, shall be distributed only 
        to producers who placed peanuts in the pool and shall be 
        distributed in proportion to the value of the peanuts placed in 
        the pool by each producer. Net gains for peanuts in each pool 
        shall consist of the following:
                (i) Quota peanuts.--For quota peanuts, the net gains 
            over and above the loan indebtedness and other costs or 
            losses incurred on peanuts placed in the pool.
                (ii) Additional peanuts.--For additional peanuts, the 
            net gains over and above the loan indebtedness and other 
            costs or losses incurred on peanuts placed in the pool for 
            additional peanuts.
    (d) Losses.--Losses in quota area pools shall be covered using the 
following sources in the following order of priority:
        (1) Transfers from additional loan pools.--The proceeds due any 
    producer from any pool shall be reduced by the amount of any loss 
    that is incurred with respect to peanuts transferred from an 
    additional loan pool to a quota loan pool by the producer under 
    section 358-1(b)(8) of the Agricultural Adjustment Act of 1938 (7 
    U.S.C. 1358-1(b)(8)).
        (2) Other producers in same pool.--Further losses in an area 
    quota pool shall be offset by reducing the gain of any producer in 
    the pool by the amount of pool gains attributed to the same 
    producer from the sale of additional peanuts for domestic and 
    export edible use.
        (3) Use of marketing assessments.--The Secretary shall use 
    funds collected under subsection (g) (except funds attributable to 
    handlers) to offset further losses in area quota pools. The 
    Secretary shall transfer to the Treasury those funds collected 
    under subsection (g) and available for use under this subsection 
    that the Secretary determines are not required to cover losses in 
    area quota pools.
        (4) Cross compliance.--Further losses in area quota pools, 
    other than losses incurred as a result of transfers from additional 
    loan pools to quota loan pools under section 358-1(b)(8) of the 
    Agricultural Adjustment Act of 1938 (7 U.S.C. 1358-1(b)(8)), shall 
    be offset by any gains or profits from quota pools in other 
    production areas (other than separate type pools established under 
    subsection (c)(2)(A) for Valencia peanuts produced in New Mexico) 
    in such manner as the Secretary shall by regulation prescribe.
        (5) Increased assessments.--If use of the authorities provided 
    in the preceding paragraphs is not sufficient to cover losses in an 
    area quota pool, the Secretary shall increase the marketing 
    assessment established under subsection (g) by such an amount as 
    the Secretary considers necessary to cover the losses. The 
    increased assessment shall apply only to quota peanuts in the 
    production area covered by the pool. Amounts collected under 
    subsection (g) as a result of the increased assessment shall be 
    retained by the Secretary to cover losses in that pool.
    (e) Disapproval of Quotas.--Notwithstanding any other provision of 
law, no loan for quota peanuts may be made available by the Secretary 
for any crop of peanuts with respect to which poundage quotas have been 
disapproved by producers, as provided for in section 358-1(d) of the 
Agricultural Adjustment Act of 1938 (7 U.S.C. 1358-1(d)).
    (f) Quality Improvement.--
        (1) In general.--With respect to peanuts under loan, the 
    Secretary shall--
            (A) promote the crushing of peanuts at a greater risk of 
        deterioration before peanuts of a lesser risk of deterioration;
            (B) ensure that all Commodity Credit Corporation 
        inventories of peanuts sold for domestic edible use must be 
        shown to have been officially inspected by licensed Department 
        of Agriculture inspectors both as farmer stock and shelled or 
        cleaned in-shell peanuts;
            (C) continue to endeavor to operate the peanut program so 
        as to improve the quality of domestic peanuts and ensure the 
        coordination of activities under the Peanut Administrative 
        Committee established under Marketing Agreement No. 146, 
        regulating the quality of domestically produced peanuts (under 
        the Agricultural Adjustment Act (7 U.S.C. 601 et seq.), 
        reenacted with amendments by the Agricultural Marketing 
        Agreement Act of 1937); and
            (D) ensure that any changes made in the peanut program as a 
        result of this subsection requiring additional production or 
        handling at the farm level shall be reflected as an upward 
        adjustment in the Department of Agriculture loan schedule.
        (2) Exports and other peanuts.--The Secretary shall require 
    that all peanuts in the domestic and export markets fully comply 
    with all quality standards under Marketing Agreement No. 146.
    (g) Marketing Assessment.--
        (1) In general.--The Secretary shall provide for a 
    nonrefundable marketing assessment. The assessment shall be made on 
    a per pound basis in an amount equal to 1.1 percent for each of the 
    1994 and 1995 crops, 1.15 percent for the 1996 crop, and 1.2 
    percent for each of the 1997 through 2002 crops, of the national 
    average quota or additional peanut loan rate for the applicable 
    crop.
        (2) First purchasers.--
            (A) In general.--Except as provided under paragraphs (3) 
        and (4), the first purchaser of peanuts shall--
                (i) collect from the producer a marketing assessment 
            equal to the quantity of peanuts acquired multiplied by--

                    (I) in the case of each of the 1994 and 1995 crops, 
                .55 percent of the applicable national average loan 
                rate;
                    (II) in the case of the 1996 crop, .6 percent of 
                the applicable national average loan rate; and
                    (III) in the case of each of the 1997 through 2002 
                crops, .65 percent of the applicable national average 
                loan rate;

                (ii) pay, in addition to the amount collected under 
            clause (i), a marketing assessment in an amount equal to 
            the quantity of peanuts acquired multiplied by .55 percent 
            of the applicable national average loan rate; and
                (iii) remit the amounts required under clauses (i) and 
            (ii) to the Commodity Credit Corporation in a manner 
            specified by the Secretary.
            (B) Definition of first purchaser.--In this subsection, the 
        term ``first purchaser'' means a person acquiring peanuts from 
        a producer except that in the case of peanuts forfeited by a 
        producer to the Commodity Credit Corporation, the term means 
        the person acquiring the peanuts from the Commodity Credit 
        Corporation.
        (3) Other private marketings.--In the case of a private 
    marketing by a producer directly to a consumer through a retail or 
    wholesale outlet or in the case of a marketing by the producer 
    outside of the continental United States, the producer shall be 
    responsible for the full amount of the assessment and shall remit 
    the assessment by such time as is specified by the Secretary.
        (4) Loan peanuts.--In the case of peanuts that are pledged as 
    collateral for a loan made under this section, \1/2\ of the 
    assessment shall be deducted from the proceeds of the loan. The 
    remainder of the assessment shall be paid by the first purchaser of 
    the peanuts. For purposes of computing net gains on peanuts under 
    this section, the reduction in loan proceeds shall be treated as 
    having been paid to the producer.
        (5) Penalties.--If any person fails to collect or remit the 
    reduction required by this subsection or fails to comply with the 
    requirements for recordkeeping or otherwise as are required by the 
    Secretary to carry out this subsection, the person shall be liable 
    to the Secretary for a civil penalty up to an amount determined by 
    multiplying--
            (A) the quantity of peanuts involved in the violation; by
            (B) the national average quota peanut rate for the 
        applicable crop year.
        (6) Enforcement.--The Secretary may enforce this subsection in 
    the courts of the United States.
    (h) Crops.--Subsections (a) through (f) shall be effective only for 
the 1996 through 2002 crops of peanuts.
    (i) Marketing Quotas.--
        (1) In general.--Part VI of subtitle B of title III of the 
    Agricultural Adjustment Act of 1938 is amended--
            (A) in section 358-1 (7 U.S.C. 1358-1)--
                (i) in the section heading, by striking ``1991 through 
            1997 crops of'';
                (ii) in subsections (a)(1), (b)(1)(B), (b)(2)(A), 
            (b)(2)(C), and (b)(3)(A), by striking ``of the 1991 through 
            1997 marketing years'' each place it appears and inserting 
            ``marketing year'';
                (iii) in subsection (a)(3), by striking ``1990'' and 
            inserting ``1990, for the 1991 through 1995 marketing 
            years, and 1995, for the 1996 through 2002 marketing 
            years'';
                (iv) in subsection (b)(1)(A)--

                    (I) by striking ``each of the 1991 through 1997 
                marketing years'' and inserting ``each marketing 
                year''; and
                    (II) in clause (i), by inserting before the 
                semicolon the following: ``, in the case of the 1991 
                through 1995 marketing years, and the 1995 marketing 
                year, in the case of the 1996 through 2002 marketing 
                years''; and

                (v) in subsection (f), by striking ``1997'' and 
            inserting ``2002'';
            (B) in section 358b (7 U.S.C. 1358b)--
                (i) in the section heading, by striking ``1991 through 
            1995 crops of''; and
                (ii) in subsection (c), by striking ``1995'' and 
            inserting ``2002'';
            (C) in section 358c(d) (7 U.S.C. 1358c(d)), by striking 
        ``1995'' and inserting ``2002''; and
            (D) in section 358e (7 U.S.C. 1359a)--
                (i) in the section heading, by striking ``for 1991 
            through 1997 crops of peanuts''; and
                (ii) in subsection (i), by striking ``1997'' and 
            inserting ``2002''.
        (2) Elimination of quota floor.--Section 358-1(a)(1) of the Act 
    (7 U.S.C. 1358-1(a)(1)) is amended by striking the second sentence.
        (3) Temporary quota allocation.--Section 358-1 of the Act (7 
    U.S.C. 1358-1) is amended--
            (A) in subsection (a)(1), by striking ``domestic edible, 
        seed,'' and inserting ``domestic edible use''; and
            (B) in subsection (b)(2)--
                (i) in subparagraph (A), by striking ``subparagraph (B) 
            and subject to''; and
                (ii) by striking subparagraph (B) and inserting the 
            following:
            ``(B) Temporary quota allocation.--
                ``(i) Allocation related to seed peanuts.--Temporary 
            allocation of quota pounds for the marketing year only in 
            which the crop is planted shall be made to producers for 
            each of the 1996 through 2002 marketing years as provided 
            in this subparagraph.
                ``(ii) Quantity.--The temporary quota allocation shall 
            be equal to the pounds of seed peanuts planted on the farm, 
            as may be adjusted under regulations prescribed by the 
            Secretary.
                ``(iii) Additional quota.--The temporary allocation of 
            quota pounds under this paragraph shall be in addition to 
            the farm poundage quota otherwise established under this 
            subsection and shall be credited, for the applicable 
            marketing year only, in total to the producer of the 
            peanuts on the farm in a manner prescribed by the 
            Secretary.
                ``(iv) Effect of other requirements.--Nothing in this 
            section alters or changes the requirements regarding the 
            use of quota and additional peanuts established by section 
            358e(b).''.
        (4) Undermarketings.--Part VI of subtitle B of title III of the 
    Act is amended--
            (A) in section 358-1(b) (7 U.S.C. 1358-1(b))--
                (i) in paragraph (1)(B), by striking ``including--'' 
            and clauses (i) and (ii) and inserting ``including any 
            increases resulting from the allocation of quotas 
            voluntarily released for 1 year under paragraph (7).'';
                (ii) in paragraph (3)(B), by striking ``include--'' and 
            clauses (i) and (ii) and inserting ``include any increase 
            resulting from the allocation of quotas voluntarily 
            released for 1 year under paragraph (7).''; and
                (iii) by striking paragraphs (8) and (9); and
            (B) in section 358b(a) (7 U.S.C. 1358b(a))--
                (i) in paragraph (1), by striking ``(including any 
            applicable under marketings)'' both places it appears;
                (ii) in paragraph (1)(A), by striking ``of 
            undermarketings and'';
                (iii) in paragraph (2), by striking ``(including any 
            applicable under marketings)''; and
                (iv) in paragraph (3), by striking ``(including any 
            applicable undermarketings)''.
        (5) Disaster transfers.--Section 358-1(b) of the Act (7 U.S.C. 
    1358-1(b)), as amended by paragraph (4)(A)(iii), is further amended 
    by adding at the end the following:
        ``(8) Disaster transfers.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        additional peanuts produced on a farm from which the quota 
        poundage was not harvested and marketed because of drought, 
        flood, or any other natural disaster, or any other condition 
        beyond the control of the producer, may be transferred to the 
        quota loan pool for pricing purposes on such basis as the 
        Secretary shall by regulation provide.
            ``(B) Limitation.--The poundage of peanuts transferred 
        under subparagraph (A) shall not exceed the difference 
        between--
                ``(i) the total quantity of peanuts meeting quality 
            requirements for domestic edible use, as determined by the 
            Secretary, marketed from the farm; and
                ``(ii) the total farm poundage quota, excluding quota 
            pounds transferred to the farm in the fall.
            ``(C) Support rate.--Peanuts transferred under this 
        paragraph shall be supported at not more than 70 percent of the 
        quota support rate for the marketing years in which the 
        transfers occur. The transfers for a farm shall not exceed 25 
        percent of the total farm quota pounds, excluding pounds 
        transferred in the fall.''.

SEC. 1107. SUGAR PROGRAM.

    (a) Sugarcane.--The Secretary shall make loans available to 
processors of domestically grown sugarcane at a rate equal to 18 cents 
per pound for raw cane sugar.
    (b) Sugar Beets.--The Secretary shall make loans available to 
processors of domestically grown sugar beets at a rate equal to 22.9 
cents per pound for refined beet sugar.
    (c) Term of Loans.--
        (1) In general.--Loans under this section during any fiscal 
    year shall be made available not earlier than the beginning of the 
    fiscal year and shall mature at the earlier of--
            (A) the end of 9 months; or
            (B) the end of the fiscal year.
        (2) Supplemental loans.--In the case of loans made under this 
    section in the last 3 months of a fiscal year, the processor may 
    repledge the sugar as collateral for a second loan in the 
    subsequent fiscal year, except that the second loan shall--
            (A) be made at the loan rate in effect at the time the 
        second loan is made; and
            (B) mature in 9 months less the quantity of time that the 
        first loan was in effect.
    (d) Loan Type; Processor Assurances.--
        (1) Recourse loans.--Subject to paragraph (2), the Secretary 
    shall carry out this section through the use of recourse loans.
        (2) Nonrecourse loans.--During any fiscal year in which the 
    tariff rate quota for imports of sugar into the United States is 
    established at, or is increased to, a level in excess of 1,500,000 
    short tons raw value, the Secretary shall carry out this section by 
    making available nonrecourse loans. Any recourse loan previously 
    made available by the Secretary under this section during the 
    fiscal year shall be changed by the Secretary into a nonrecourse 
    loan.
        (3) Processor assurances.--If the Secretary is required under 
    paragraph (2) to make nonrecourse loans available during a fiscal 
    year or to change recourse loans into nonrecourse loans, the 
    Secretary shall obtain from each processor that receives a loan 
    under this section such assurances as the Secretary considers 
    adequate to ensure that the processor will provide payments to 
    producers that are proportional to the value of the loan received 
    by the processor for sugar beets and sugarcane delivered by 
    producers served by the processor. The Secretary may establish 
    appropriate minimum payments for purposes of this paragraph.
    (e) Marketing Assessment.--
        (1) Sugarcane.--Effective for marketings of raw cane sugar 
    during the 1996 through 2003 fiscal years, the first processor of 
    sugarcane shall remit to the Commodity Credit Corporation a 
    nonrefundable marketing assessment in an amount equal to--
            (A) in the case of marketings during fiscal year 1996, 1.1 
        percent of the loan rate established under subsection (a) per 
        pound of raw cane sugar, processed by the processor from 
        domestically produced sugarcane or sugarcane molasses, that has 
        been marketed (including the transfer or delivery of the sugar 
        to a refinery for further processing or marketing); and
            (B) in the case of marketings during each of fiscal years 
        1997 through 2003, 1.375 percent of the loan rate established 
        under subsection (a) per pound of raw cane sugar, processed by 
        the processor from domestically produced sugarcane or sugarcane 
        molasses, that has been marketed (including the transfer or 
        delivery of the sugar to a refinery for further processing or 
        marketing).
        (2) Sugar beets.--Effective for marketings of beet sugar during 
    the 1996 through 2003 fiscal years, the first processor of sugar 
    beets shall remit to the Commodity Credit Corporation a 
    nonrefundable marketing assessment in an amount equal to--
            (A) in the case of marketings during fiscal year 1996, 
        1.1794 percent of the loan rate established under subsection 
        (a) per pound of beet sugar, processed by the processor from 
        domestically produced sugar beets or sugar beet molasses, that 
        has been marketed; and
            (B) in the case of marketings during each of fiscal years 
        1997 through 2003, 1.47425 percent of the loan rate established 
        under subsection (a) per pound of beet sugar, processed by the 
        processor from domestically produced sugar beets or sugar beet 
        molasses, that has been marketed.
        (3) Collection.--
            (A) Timing.--A marketing assessment required under this 
        subsection shall be collected on a monthly basis and shall be 
        remitted to the Commodity Credit Corporation not later than 30 
        days after the end of each month. Any cane sugar or beet sugar 
        processed during a fiscal year that has not been marketed by 
        September 30 of the year shall be subject to assessment on that 
        date. The sugar shall not be subject to a second assessment at 
        the time that it is marketed.
            (B) Manner.--Subject to subparagraph (A), marketing 
        assessments shall be collected under this subsection in the 
        manner prescribed by the Secretary and shall be nonrefundable.
        (4) Penalties.--If any person fails to remit the assessment 
    required by this subsection or fails to comply with such 
    requirements for recordkeeping or otherwise as are required by the 
    Secretary to carry out this subsection, the person shall be liable 
    to the Secretary for a civil penalty up to an amount determined by 
    multiplying--
            (A) the quantity of cane sugar or beet sugar involved in 
        the violation; by
            (B) the loan rate for the applicable crop of sugarcane or 
        sugar beets.
        (5) Enforcement.--The Secretary may enforce this subsection in 
    a court of the United States.
    (f) Forfeiture Penalty.--
        (1) In general.--A penalty shall be assessed on the forfeiture 
    of any sugar pledged as collateral for a nonrecourse loan under 
    this section.
        (2) Sugarcane.--The penalty for sugarcane shall be 1 cent per 
    pound.
        (3) Sugar beets.--The penalty for sugar beets shall bear the 
    same relation to the penalty for sugarcane as the marketing 
    assessment for sugar beets bears to the marketing assessment for 
    sugarcane.
        (4) Effect of forfeiture.--Any payments owed producers by a 
    processor that forfeits of any sugar pledged as collateral for a 
    nonrecourse loan shall be reduced in proportion to the loan 
    forfeiture penalty incurred by the processor.
    (g) Information Reporting.--
        (1) Duty of processors and refiners to report.--A sugarcane 
    processor, cane sugar refiner, and sugar beet processor shall 
    furnish the Secretary, on a monthly basis, such information as the 
    Secretary may require to administer sugar programs, including the 
    quantity of purchases of sugarcane, sugar beets, and sugar, and 
    production, importation, distribution, and stock levels of sugar.
        (2) Penalty.--Any person willfully failing or refusing to 
    furnish the information, or furnishing willfully any false 
    information, shall be subject to a civil penalty of not more than 
    $10,000 for each such violation.
        (3) Monthly reports.--Taking into consideration the information 
    received under paragraph (1), the Secretary shall publish on a 
    monthly basis composite data on production, imports, distribution, 
    and stock levels of sugar.
    (h) Marketing Allotments.--Part VII of subtitle B of title III of 
the Agricultural Adjustment Act of 1938 (7 U.S.C. 1359aa et seq.) is 
repealed.
    (i) Crops.--This section (other than subsection (h)) shall be 
effective only for the 1996 through 2002 crops of sugar beets and 
sugarcane.

SEC. 1108. ADMINISTRATION.

    (a) Commodity Credit Corporation.--
        (1) Use of corporation.--The Secretary shall carry out this 
    subtitle through the Commodity Credit Corporation.
        (2) Salaries and expenses.--No funds of the Corporation shall 
    be used for any salary or expense of any officer or employee of the 
    Department of Agriculture in connection with the administration of 
    payments or loans under this subtitle.
    (b) Administration.--Title IV of the Agricultural Adjustment Act of 
1938 (as added by section 1109) shall apply to the administration of 
this subtitle.
    (c) Regulations.--The Secretary may issue such regulations as the 
Secretary determines necessary to carry out this subtitle.

SEC. 1109. ELIMINATION OF PERMANENT PRICE SUPPORT AUTHORITY.

    (a) Agricultural Adjustment Act of 1938.--The Agricultural 
Adjustment Act of 1938 is amended--
        (1) in title III--
            (A) in subtitle B--
                (i) by striking parts II through V (7 U.S.C. 1326-
            1351); and
                (ii) in part VI, by striking sections 358, 358a, and 
            358d (7 U.S.C. 1358, 1358a, and 1359); and
            (B) by striking subtitle D (7 U.S.C. 1379a-1379j); and
        (2) by striking title IV (7 U.S.C. 1401-1407).
    (b) Agricultural Act of 1949.--
        (1) Transfer of certain sections.--The Agricultural Act of 1949 
    is amended--
            (A) by transferring sections 106, 106A, and 106B (7 U.S.C. 
        1445, 1445-1, 1445-2) to appear after section 314A of the 
        Agricultural Adjustment Act of 1938 (7 U.S.C. 1314-1) and 
        redesignating the transferred sections as sections 315, 315A, 
        and 315B, respectively;
            (B) by transferring sections 111, 201(c), and 204 (7 U.S.C. 
        1445f, 1446(c), 1446e) to appear after section 304 of the 
        Agricultural Adjustment Act of 1938 (7 U.S.C. 1304) and 
        redesignating the transferred sections as sections 305, 306, 
        and 307, respectively;
            (C) by transferring sections 403, 405, 407, 412, and 422 (7 
        U.S.C. 1423, 1425, 1427, 1429, 1431a) to appear after section 
        393 (7 U.S.C. 1393) and redesignating the transferred sections 
        as sections 411, 412, 413, 414, and 415, respectively; and
            (D) by transferring section 416 (7 U.S.C. 1431) to appear 
        after section 415 of the Agricultural Adjustment Act of 1938 
        (as transferred and redesignated by subparagraph (C)).
        (2) Repeal.--The Agricultural Act of 1949 (7 U.S.C. 1421 et 
    seq.) (as amended by paragraph (1)) is repealed.
    (c) Conforming Amendments.--The Agricultural Adjustment Act of 1938 
is amended--
        (1) in section 306 (as transferred and redesignated by 
    subsection (b)(1)(B)), by striking ``204'' and inserting ``307''; 
    and
        (2) by striking section 411 (as transferred and redesignated by 
    subsection (b)(1)(C)) and inserting the following:

                  ``TITLE IV--ADMINISTRATION OF LOANS

``SEC. 411. ADJUSTMENTS FOR GRADE, TYPE, QUALITY, LOCATION, AND OTHER 
              FACTORS.

    ``The Secretary may make such adjustments in the announced loan 
rate for a commodity as the Secretary considers appropriate to reflect 
differences in grade, type, quality, location, and other factors.''.

SEC. 1110. EFFECT OF AMENDMENTS.

    (a) Effect on Prior Crops.--Except as otherwise specifically 
provided and notwithstanding any other provision of law, this subtitle 
and the amendments made by this subtitle shall not affect the authority 
of the Secretary to carry out a price support or production adjustment 
program for any of the 1991 through 1995 crops of an agricultural 
commodity established under a provision of law in effect immediately 
before the date of the enactment of this Act.
    (b) Liability.--A provision of this subtitle or an amendment made 
by this subtitle shall not affect the liability of any person under any 
provision of law as in effect before the date of the enactment of this 
Act.

                        Subtitle B--Conservation

SEC. 1201. CONSERVATION.

    (a) Funding.--Subtitle E of title XII of the Food Security Act of 
1985 (16 U.S.C. 3841 et seq.) is amended to read as follows:

                         ``Subtitle E--Funding

``SEC. 1241. FUNDING.

    ``(a) Mandatory Expenses.--For each of fiscal years 1996 through 
2002, the Secretary shall use the funds of the Commodity Credit 
Corporation to carry out the programs authorized by--
        ``(1) subchapter B of chapter 1 of subtitle D (including 
    contracts extended by the Secretary pursuant to section 1437 of the 
    Food, Agriculture, Conservation, and Trade Act of 1990 (Public Law 
    101-624; 16 U.S.C. 3831 note));
        ``(2) subchapter C of chapter 1 of subtitle D; and
        ``(3) chapter 4 of subtitle D.
    ``(b) Livestock Environmental Assistance Program.--For each of 
fiscal years 1996 through 2002, $100,000,000 of the funds of the 
Commodity Credit Corporation shall be available for providing technical 
assistance, cost-sharing payments, and incentive payments for practices 
relating to livestock production under the livestock environmental 
assistance program under chapter 4 of subtitle D.''.
    (b) Livestock Environmental Assistance Program.--To carry out the 
programs funded under the amendment made by subsection (a), subtitle D 
of title XII of the Food Security Act of 1985 (16 U.S.C. 3830 et seq.) 
is amended by adding at the end the following:

        ``CHAPTER 4--LIVESTOCK ENVIRONMENTAL ASSISTANCE PROGRAM

``SEC. 1240. DEFINITIONS.

    ``In this chapter:
        ``(1) Land management practice.--The term `land management 
    practice' means a site-specific nutrient or manure management, 
    irrigation management, tillage or residue management, grazing 
    management, or other land management practice that the Secretary 
    determines is needed to protect, in the most cost effective manner, 
    water, soil, or related resources from degradation due to livestock 
    production.
        ``(2) Large confined livestock operation.--The term `large 
    confined livestock operation' means an operation that--
            ``(A) is a confined animal feeding operation; and
            ``(B) has more than--
                ``(i) 55 mature dairy cattle;
                ``(ii) 10,000 beef cattle;
                ``(iii) 30,000 laying hens or broilers (if the facility 
            has continuous overflow watering);
                ``(iv) 100,000 laying hens or broilers (if the facility 
            has a liquid manure system);
                ``(v) 55,000 turkeys;
                ``(vi) 15,000 swine; or
                ``(vii) 10,000 sheep or lambs.
        ``(3) Livestock.--The term `livestock' means dairy cows, beef 
    cattle, laying hens, broilers, turkeys, swine, sheep, lambs, and 
    such other animals as determined by the Secretary.
        ``(4) Operator.--The term `operator' means a person who is 
    engaged in livestock production (as defined by the Secretary).
        ``(5) Structural practice.--The term `structural practice' 
    means the establishment of an animal waste management facility, 
    terrace, grassed waterway, contour grass strip, filterstrip, or 
    other structural practice that the Secretary determines is needed 
    to protect, in the most cost effective manner, water, soil, or 
    related resources from degradation due to livestock production.

``SEC. 1240A. ESTABLISHMENT AND ADMINISTRATION OF LIVESTOCK 
              ENVIRONMENTAL ASSISTANCE PROGRAM.

    ``(a) Establishment.--
        ``(1) In general.--During the 1996 through 2002 fiscal years, 
    the Secretary shall provide technical assistance, cost-sharing 
    payments, and incentive payments to operators who enter into 
    contracts with the Secretary, through a livestock environmental 
    assistance program.
        ``(2) Eligible practices.--
            ``(A) Structural practices.--An operator who implements a 
        structural practice shall be eligible for technical assistance 
        or cost-sharing payments, or both.
            ``(B) Land management practices.--An operator who performs 
        a land management practice shall be eligible for technical 
        assistance or incentive payments, or both.
        ``(3) Eligible land.--Assistance under this chapter may be 
    provided with respect to land that is used for livestock production 
    and on which a serious threat to water, soil, or related resources 
    exists, as determined by the Secretary, by reason of the soil 
    types, terrain, climatic, soil, topographic, flood, or saline 
    characteristics, or other factors or natural hazards.
        ``(4) Selection criteria.--In providing technical assistance, 
    cost-sharing payments, and incentive payments to operators in a 
    region, watershed, or conservation priority area in which an 
    agricultural operation is located, the Secretary shall consider--
            ``(A) the significance of the water, soil, and related 
        natural resource problems; and
            ``(B) the maximization of environmental benefits per dollar 
        expended.
    ``(b) Application and Term.--
        ``(1) In general.--A contract between an operator and the 
    Secretary under this chapter may--
            ``(A) apply to 1 or more structural practices or 1 or more 
        land management practices, or both; and
            ``(B) have a term of not less than 5, nor more than 10, 
        years, as determined appropriate by the Secretary, depending on 
        the practice or practices that are the basis of the contract.
        ``(2) Duties of operators and secretary.--To receive cost-
    sharing or incentive payments, or technical assistance, 
    participating operators shall comply with all terms and conditions 
    of the contract and a plan, as established by the Secretary.
    ``(c) Structural Practices.--
        ``(1) Competitive offer.--The Secretary shall administer a 
    competitive offer system for operators proposing to receive cost-
    sharing payments in exchange for the implementation of 1 or more 
    structural practices by the operator. The competitive offer system 
    shall consist of--
            ``(A) the submission of a competitive offer by the operator 
        in such manner as the Secretary may prescribe; and
            ``(B) evaluation of the offer in light of the selection 
        criteria established under subsection (a)(4) and the projected 
        cost of the proposal, as determined by the Secretary.
        ``(2) Concurrence of owner.--If the operator making an offer to 
    implement a structural practice is a tenant of the land involved in 
    agricultural production, for the offer to be acceptable, the 
    operator shall obtain the concurrence of the owner of the land with 
    respect to the offer.
    ``(d) Land Management Practices.--The Secretary shall establish an 
application and evaluation process for awarding technical assistance or 
incentive payments, or both, to an operator in exchange for the 
performance of 1 or more land management practices by the operator.
    ``(e) Cost-Sharing, Incentive Payments, and Technical Assistance.--
        ``(1) Cost-sharing payments.--
            ``(A) In general.--The Federal share of cost-sharing 
        payments to an operator proposing to implement 1 or more 
        structural practices shall not be greater than 75 percent of 
        the projected cost of each practice, as determined by the 
        Secretary, taking into consideration any payment received by 
        the operator from a State or local government.
            ``(B) Limitation.--An operator of a large confined 
        livestock operation shall not be eligible for cost-sharing 
        payments to construct an animal waste management facility.
            ``(C) Other payments.--An operator shall not be eligible 
        for cost-sharing payments for structural practices on eligible 
        land under this chapter if the operator receives cost-sharing 
        payments or other benefits for the same land under chapter 1, 
        2, or 3.
        ``(2) Incentive payments.--The Secretary shall make incentive 
    payments in an amount and at a rate determined by the Secretary to 
    be necessary to encourage an operator to perform 1 or more land 
    management practices.
        ``(3) Technical assistance.--
            ``(A) Funding.--The Secretary shall allocate funding under 
        this chapter for the provision of technical assistance 
        according to the purpose and projected cost for which the 
        technical assistance is provided for a fiscal year. The 
        allocated amount may vary according to the type of expertise 
        required, quantity of time involved, and other factors as 
        determined appropriate by the Secretary. Funding shall not 
        exceed the projected cost to the Secretary of the technical 
        assistance provided for a fiscal year.
            ``(B) Other authorities.--The receipt of technical 
        assistance under this chapter shall not affect the eligibility 
        of the operator to receive technical assistance under other 
        authorities of law available to the Secretary.
    ``(f) Limitation on Payments.--
        ``(1) In general.--The total amount of cost-sharing and 
    incentive payments paid to a person under this chapter may not 
    exceed--
            ``(A) $10,000 for any fiscal year; or
            ``(B) $50,000 for any multiyear contract.
        ``(2) Regulations.--The Secretary shall issue regulations that 
    are consistent with section 1001 for the purpose of--
            ``(A) defining the term `person' as used in paragraph (1); 
        and
            ``(B) prescribing such rules as the Secretary determines 
        necessary to ensure a fair and reasonable application of the 
        limitations established under this subsection.
    ``(g) Regulations.--Not later than 180 days after the effective 
date of this subsection, the Secretary shall issue regulations to 
implement the livestock environmental assistance program established 
under this chapter.''.
    (c) Conforming Amendments.--
        (1) Commodity credit corporation charter act.--Section 5(g) of 
    the Commodity Credit Corporation Charter Act (15 U.S.C. 714c(g)) is 
    amended to read as follows:
    ``(g) Carry out conservation functions and programs.''.
        (2) Wetlands reserve program.--
            (A) In general.--Section 1237 of the Food Security Act of 
        1985 (16 U.S.C. 3837) is amended--
                (i) in subsection (b)(2)--

                    (I) by striking ``not less'' and inserting ``not 
                more''; and
                    (II) by striking ``2000'' and inserting ``2002''; 
                and

                (ii) in subsection (c), by striking ``2000'' and 
            inserting ``2002''.
            (B) Length of easement.--Section 1237A(e) of the Food 
        Security Act of 1985 (16 U.S.C. 3837a(e)) is amended by 
        striking paragraph (2) and inserting the following:
        ``(2) shall be for 15 years, but in no case shall be a 
    permanent easement.''.
        (3) Conservation reserve program.--
            (A) In general.--Section 1231(d) of the Food Security Act 
        of 1985 (16 U.S.C. 3831(d)) is amended by striking ``total of'' 
        and all that follows through the period at the end of the 
        subsection and inserting ``total of 36,400,000 acres.''.
            (B) Optional contract termination by producers.--Section 
        1235 of the Food Security Act of 1985 (16 U.S.C. 3835) is 
        amended by adding at the end the following:
    ``(e) Termination by Owner or Operator.--
        ``(1) Notice of termination.--An owner or operator of land 
    subject to a contract entered into under this subchapter may 
    terminate the contract by submitting to the Secretary written 
    notice of the intention of the owner or operator to terminate the 
    contract.
        ``(2) Effective date.--The contract termination shall take 
    effect 60 days after the date on which the owner or operator 
    submits the written notice under paragraph (1).
        ``(3) Prorated rental payment.--If a contract entered into 
    under this subchapter is terminated under this subsection before 
    the end of the fiscal year for which a rental payment is due, the 
    Secretary shall provide a prorated rental payment covering the 
    portion of the fiscal year during which the contract was in effect.
        ``(4) Renewed enrollment.--The termination of a contract 
    entered into under this subchapter shall not affect the ability of 
    the owner or operator who requested the termination to submit a 
    subsequent bid to enroll the land that was subject to the contract 
    into the conservation reserve.
        ``(5) Conservation requirements.--If land that was subject to a 
    contract is returned to production of an agricultural commodity, 
    the conservation requirements under subtitles B and C shall apply 
    to the use of the land to the extent that the requirements are 
    similar to those requirements imposed on other similar lands in the 
    area, except that the requirements may not be more onerous that the 
    requirements imposed on other lands.
        ``(6) Repayment of cost share.--A person who terminates a 
    contract entered into under this subchapter within less than 3 
    years after entering into the contract shall reimburse the 
    Secretary for any cost share assistance provided under the 
    contract.''.
            (C) Limitation.--Notwithstanding any other provision of 
        law, no new acres shall be enrolled in the conservation reserve 
        program established under subchapter B of chapter 1 of subtitle 
        D of title XII of the Food Security Act of 1985 (16 U.S.C. 3831 
        et seq.) in calendar year 1997.

         Subtitle C--Agricultural Promotion and Export Programs

SEC. 1301. MARKET PROMOTION PROGRAM.

    Effective October 1, 1995, section 211(c)(1) of the Agricultural 
Trade Act of 1978 (7 U.S.C. 5641(c)(1)) is amended--
        (1) by striking ``and'' after ``1991 through 1993,''; and
        (2) by striking ``through 1997,'' and inserting ``through 1995, 
    and not more than $100,000,000 for each of fiscal years 1996 
    through 2002,''.

SEC. 1302. EXPORT ENHANCEMENT PROGRAM.

    Effective October 1, 1995, section 301(e)(1) of the Agricultural 
Trade Act of 1978 (7 U.S.C. 5651(e)(1)) is amended to read as follows:
        ``(1) In general.--The Commodity Credit Corporation shall make 
    available to carry out the program established under this section 
    not more than--
            ``(A) $350,000,000 for fiscal year 1996;
            ``(B) $350,000,000 for fiscal year 1997;
            ``(C) $500,000,000 for fiscal year 1998;
            ``(D) $550,000,000 for fiscal year 1999;
            ``(E) $579,000,000 for fiscal year 2000;
            ``(F) $478,000,000 for fiscal year 2001; and
            ``(G) $478,000,000 for fiscal year 2002.''.

                       Subtitle D--Miscellaneous

SEC. 1401. CROP INSURANCE.

    (a) Catastrophic Risk Protection.--Section 508(b) of the Federal 
Crop Insurance Act (7 U.S.C. 1508(b)) is amended--
        (1) in paragraph (4), by adding at the end the following:
            ``(C) Delivery of coverage.--
                ``(i) In general.--In full consultation with approved 
            insurance providers, the Secretary may continue to offer 
            catastrophic risk protection in a State (or a portion of a 
            State) through local offices of the Department if the 
            Secretary determines that there is an insufficient number 
            of approved insurance providers operating in the State or 
            portion to adequately provide catastrophic risk protection 
            coverage to producers.
                ``(ii) Coverage by approved insurance providers.--To 
            the extent that catastrophic risk protection coverage by 
            approved insurance providers is sufficiently available in a 
            State as determined by the Secretary, only approved 
            insurance providers may provide the coverage in the State.
                ``(iii) Current policies.--Subject to clause (ii), all 
            catastrophic risk protection policies written by local 
            offices of the Department shall be transferred (including 
            all fees collected for the crop year in which the approved 
            insurance provider will assume the policies) to the 
            approved insurance provider for performance of all sales, 
            service, and loss adjustment functions.''; and
        (2) in paragraph (7), by striking subparagraph (A) and 
    inserting the following:
            ``(A) In general.--Effective for the spring-planted 1996 
        and subsequent crops, to be eligible for any payment or loan 
        under the Agricultural Market Transition Act, the conservation 
        reserve program, or any benefit described in section 371 of the 
        Consolidated Farm and Rural Development Act (7 U.S.C. 2008f), a 
        person shall--
                ``(i) obtain at least the catastrophic level of 
            insurance for each crop of economic significance in which 
            the person has an interest; or
                ``(ii) provide a written waiver to the Secretary that 
            waives any eligibility for emergency crop loss assistance 
            in connection with the crop.''.
    (b) Coverage of Seed Crops.--Section 519(a)(2)(B) of the Act (7 
U.S.C. 1519(a)(2)(B)) is amended by inserting ``seed crops,'' after 
``turfgrass sod,''.

SEC. 1402. COLLECTION AND USE OF AGRICULTURAL QUARANTINE AND INSPECTION 
              FEES.

    Subsection (a) of section 2509 of the Food, Agriculture, 
Conservation, and Trade Act of 1990 (21 U.S.C. 136a) is amended to read 
as follows:
    ``(a) Quarantine and Inspection Fees.--
        ``(1) Fees authorized.--The Secretary of Agriculture may 
    prescribe and collect fees sufficient--
            ``(A) to cover the cost of providing agricultural 
        quarantine and inspection services in connection with the 
        arrival at a port in the customs territory of the United 
        States, or the preclearance or preinspection at a site outside 
        the customs territory of the United States, of an international 
        passenger, commercial vessel, commercial aircraft, commercial 
        truck, or railroad car;
            ``(B) to cover the cost of administering this subsection; 
        and
            ``(C) through fiscal year 2002, to maintain a reasonable 
        balance in the Agricultural Quarantine Inspection User Fee 
        Account established under paragraph (5).
        ``(2) Limitation.--In setting the fees under paragraph (1), the 
    Secretary shall ensure that the amount of the fees are commensurate 
    with the costs of agricultural quarantine and inspection services 
    with respect to the class of persons or entities paying the fees. 
    The costs of the services with respect to passengers as a class 
    includes the costs of related inspections of the aircraft or other 
    vehicle.
        ``(3) Status of fees.--Fees collected under this subsection by 
    any person on behalf of the Secretary are held in trust for the 
    United States and shall be remitted to the Secretary in such manner 
    and at such times as the Secretary may prescribe.
        ``(4) Late payment penalties.--If a person subject to a fee 
    under this subsection fails to pay the fee when due, the Secretary 
    shall assess a late payment penalty, and the overdue fees shall 
    accrue interest, as required by section 3717 of title 31, United 
    States Code.
        ``(5) Agricultural quarantine inspection user fee account.--
            ``(A) Establishment.--There is established in the Treasury 
        of the United States a no-year fund, to be known as the 
        `Agricultural Quarantine Inspection User Fee Account', which 
        shall contain all of the fees collected under this subsection 
        and late payment penalties and interest charges collected under 
        paragraph (4) through fiscal year 2002.
            ``(B) Use of account.--For each of the fiscal years 1996 
        through 2002, funds in the Agricultural Quarantine Inspection 
        User Fee Account shall be available, in such amounts as are 
        provided in advance in appropriations Acts, to cover the costs 
        associated with the provision of agricultural quarantine and 
        inspection services and the administration of this subsection. 
        Amounts made available under this subparagraph shall be 
        available until expended.
            ``(C) Excess fees.--Fees and other amounts collected under 
        this subsection in any of the fiscal years 1996 through 2002 in 
        excess of $100,000,000 shall be available for the purposes 
        specified in subparagraph (B) until expended, without further 
        appropriation.
        ``(6) Use of amounts collected after fiscal year 2002.--After 
    September 30, 2002, the unobligated balance in the Agricultural 
    Quarantine Inspection User Fee Account and fees and other amounts 
    collected under this subsection shall be credited to the Department 
    of Agriculture accounts that incur the costs associated with the 
    provision of agricultural quarantine and inspection services and 
    the administration of this subsection. The fees and other amounts 
    shall remain available to the Secretary until expended without 
    fiscal year limitation.
        ``(7) Staff years.--The number of full-time equivalent 
    positions in the Department of Agriculture attributable to the 
    provision of agricultural quarantine and inspection services and 
    the administration of this subsection shall not be counted toward 
    the limitation on the total number of full-time equivalent 
    positions in all agencies specified in section 5(b) of the Federal 
    Workforce Restructuring Act of 1994 (Public Law 103-226; 5 U.S.C. 
    3101 note) or other limitation on the total number of full-time 
    equivalent positions.''.

SEC. 1403. COMMODITY CREDIT CORPORATION INTEREST RATE.

    Notwithstanding any other provision of law, the monthly Commodity 
Credit Corporation interest rate applicable to loans provided for 
agricultural commodities by the Corporation shall be 100 basis points 
greater than the rate determined under the applicable interest rate 
formula in effect on October 1, 1995.

           TITLE II--BANKING, HOUSING, AND RELATED PROVISIONS

SEC. 2001. TABLE OF CONTENTS.

    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.

           TITLE II--BANKING, HOUSING, AND RELATED PROVISIONS
                   Subtitle A--Financial Institutions

SEC. 2011. SPECIAL ASSESSMENT TO CAPITALIZE SAIF.

    (a) In General.--Except as provided in subsection (f), the Board of 
Directors shall impose a special assessment on the SAIF-assessable 
deposits of each insured depository institution at a rate applicable to 
all such institutions that the Board of Directors, in its sole 
discretion, determines (after taking into account the adjustments 
described in subsections (g) through (j)) will cause the Savings 
Association Insurance Fund to achieve the designated reserve ratio on 
the first business day of January 1996.
    (b) Factors To Be Considered.--In carrying out subsection (a), the 
Board of Directors shall base its determination on--
        (1) the monthly Savings Association Insurance Fund balance most 
    recently calculated;
        (2) data on insured deposits reported in the most recent 
    reports of condition filed not later than 70 days before the date 
    of enactment of this Act by insured depository institutions; and
        (3) any other factors that the Board of Directors deems 
    appropriate.
    (c) Date of Determination.--For purposes of subsection (a), the 
amount of the SAIF-assessable deposits of an insured depository 
institution shall be determined as of March 31, 1995.
    (d) Date Payment Due.--The special assessment imposed under this 
section shall be--
        (1) due on the first business day of January 1996; and
        (2) paid to the Corporation on the later of--
            (A) the first business day of January 1996; or
            (B) such other date as the Corporation shall prescribe, but 
        not later than 60 days after the date of enactment of this Act.
    (e) Assessment Deposited in SAIF.--Notwithstanding any other 
provision of law, the proceeds of the special assessment imposed under 
this section shall be deposited in the Savings Association Insurance 
Fund.
    (f) Exemptions for Certain Institutions.--
        (1) Exemption for weak institutions.--The Board of Directors 
    may, by order, in its sole discretion, exempt any insured 
    depository institution that the Board of Directors determines to be 
    weak, from paying the special assessment imposed under this section 
    if the Board of Directors determines that the exemption would 
    reduce risk to the Savings Association Insurance Fund.
        (2) Guidelines required.--Not later than 30 days after the date 
    of enactment of this Act, the Board of Directors shall prescribe 
    guidelines setting forth the criteria that the Board of Directors 
    will use in exempting institutions under paragraph (1). Such 
    guidelines shall be published in the Federal Register.
        (3) Exemption for certain newly chartered and other defined 
    institutions.--
            (A) In general.--In addition to the institutions exempted 
        from paying the special assessment under paragraph (1), the 
        Board of Directors shall exempt any insured depository 
        institution from payment of the special assessment if the 
        institution--
                (i) was in existence on October 1, 1995, and held no 
            SAIF-assessable deposits prior to January 1, 1993;
                (ii) is a Federal savings bank which--

                    (I) was established de novo in April 1994 in order 
                to acquire the deposits of a savings association which 
                was in default or in danger of default; and
                    (II) received minority interim capital assistance 
                from the Resolution Trust Corporation under section 
                21A(w) of the Federal Home Loan Bank Act in connection 
                with the acquisition of any such savings association; 
                or

                (iii) is a savings association, the deposits of which 
            are insured by the Savings Association Insurance Fund, 
            which--

                    (I) prior to January 1, 1987, was chartered as a 
                Federal savings bank insured by the Federal Savings and 
                Loan Insurance Corporation for the purpose of acquiring 
                all or substantially all of the assets and assuming all 
                or substantially all of the deposit liabilities of a 
                national bank in a transaction consummated after July 
                1, 1986; and
                    (II) as of the date of that transaction, had assets 
                of less than $150,000,000.

            (B) Definition.--For purposes of this paragraph, an 
        institution shall be deemed to have held SAIF-assessable 
        deposits prior to January 1, 1993, if--
                (i) it directly held SAIF-assessable insured deposits 
            prior to that date; or
                (ii) it succeeded to, acquired, purchased, or otherwise 
            holds any SAIF-assessable deposits as of the date of 
            enactment of this Act that were SAIF-assessable deposits 
            prior to January 1, 1993.
        (4) Exempt institutions required to pay assessments at former 
    rates.--
            (A) Payments to saif and dif.--Any insured depository 
        institution that the Board of Directors exempts under this 
        subsection from paying the special assessment imposed under 
        this section shall pay semiannual assessments--
                (i) during calendar years 1996 and 1997, into the 
            Savings Association Insurance Fund, based on SAIF-
            assessable deposits of that institution, at assessment 
            rates calculated under the schedule in effect for Savings 
            Association Insurance Fund members on June 30, 1995; and
                (ii) during calendar years 1998 and 1999--

                    (I) into the Deposit Insurance Fund, based on SAIF-
                assessable deposits of that institution as of December 
                31, 1997, at assessment rates calculated under the 
                schedule in effect for Savings Association Insurance 
                Fund members on June 30, 1995; or
                    (II) in accordance with clause (i), if the Bank 
                Insurance Fund and the Savings Association Insurance 
                Fund are not merged into the Deposit Insurance Fund.

            (B) Optional pro rata payment of special assessment.--This 
        paragraph shall not apply with respect to any insured 
        depository institution (or successor insured depository 
        institution) that has paid, during any calendar year from 1997 
        through 1999, upon such terms as the Corporation may announce, 
        an amount equal to the product of--
                (i) 12.5 percent of the special assessment that the 
            institution would have been required to pay under 
            subsection (a), if the Board of Directors had not exempted 
            the institution; and
                (ii) the number of full semiannual periods remaining 
            between the date of the payment and December 31, 1999.
    (g) Special Election for Certain Institutions Facing Hardship as a 
Result of the Special Assessment.--
        (1) Election authorized.--If--
            (A) an insured depository institution, or any depository 
        institution holding company which, directly or indirectly, 
        controls such institution, is subject to terms or covenants in 
        any debt obligation or preferred stock outstanding on September 
        13, 1995; and
            (B) the payment of the special assessment under subsection 
        (a) would pose a significant risk of causing such depository 
        institution or holding company to default or violate any such 
        term or covenant,
    the depository institution may elect, with the approval of the 
    Corporation, to pay such special assessment in accordance with 
    paragraphs (2) and (3) in lieu of paying such assessment in the 
    manner required under subsection (a).
        (2) 1st assessment.--An insured depository institution which 
    makes an election under paragraph (1) shall pay an assessment of 50 
    percent of the amount of the special assessment that would 
    otherwise apply under subsection (a), by the date on which such 
    special assessment is otherwise due under subsection (d).
        (3) 2d assessment.--An insured depository institution which 
    makes an election under paragraph (1) shall pay a 2d assessment, by 
    the date established by the Board of Directors in accordance with 
    paragraph (4), in an amount equal to the product of 51 percent of 
    the rate determined by the Board of Directors under subsection (a) 
    for determining the amount of the special assessment and the SAIF-
    assessable deposits of the institution on March 31, 1996, or such 
    other date in calendar year 1996 as the Board of Directors 
    determines to be appropriate.
        (4) Due date of 2d assessment.--The date established by the 
    Board of Directors for the payment of the assessment under 
    paragraph (3) by a depository institution shall be the earliest 
    practicable date which the Board of Directors determines to be 
    appropriate, which is at least 15 days after the date used by the 
    Board of Directors under paragraph (3).
        (5) Supplemental special assessment.--An insured depository 
    institution which makes an election under paragraph (1) shall pay a 
    supplemental special assessment, at the same time the payment under 
    paragraph (3) is made, in an amount equal to the product of--
            (A) 50 percent of the rate determined by the Board of 
        Directors under subsection (a) for determining the amount of 
        the special assessment; and
            (B) 95 percent of the amount by which the SAIF-assessable 
        deposits used by the Board of Directors for determining the 
        amount of the 1st assessment under paragraph (2) exceeds, if 
        any, the SAIF-assessable deposits used by the Board for 
        determining the amount of the 2d assessment under paragraph 
        (3).
    (h) Adjustment of Special Assessment for Certain Bank Insurance 
Fund Member Banks.--
        (1) In general.--For purposes of computing the special 
    assessment imposed under this section with respect to a Bank 
    Insurance Fund member bank, the amount of any deposits of any 
    insured depository institution which section 5(d)(3) of the Federal 
    Deposit Insurance Act treats as insured by the Savings Association 
    Insurance Fund shall be reduced by 20 percent--
            (A) if the adjusted attributable deposit amount of the Bank 
        Insurance Fund member bank is less than 50 percent of the total 
        domestic deposits of that member bank as of June 30, 1995; or
            (B) if, as of June 30, 1995, the Bank Insurance Fund 
        member--
                (i) had an adjusted attributable deposit amount equal 
            to less than 75 percent of the total assessable deposits of 
            that member bank;
                (ii) had total assessable deposits greater than 
            $5,000,000,000; and
                (iii) was owned or controlled by a bank holding company 
            that owned or controlled insured depository institutions 
            having an aggregate amount of deposits insured or treated 
            as insured by the Bank Insurance Fund greater than the 
            aggregate amount of deposits insured or treated as insured 
            by the Savings Association Insurance Fund.
        (2) Adjusted attributable deposit amount.--For purposes of this 
    subsection, the ``adjusted attributable deposit amount'' shall be 
    determined in accordance with section 5(d)(3)(C) of the Federal 
    Deposit Insurance Act.
    (i) Adjustment to the Adjusted Attributable Deposit Amount for 
Certain Bank Insurance Fund Member Banks.--Section 5(d)(3) of the 
Federal Deposit Insurance Act (12 U.S.C. 1815(d)(3)) is amended--
        (1) in subparagraph (C), by striking ``The adjusted 
    attributable deposit amount'' and inserting ``Except as provided in 
    subparagraph (K), the adjusted attributable deposit amount''; and
        (2) by adding at the end the following new subparagraph:
            ``(K) Adjustment of adjusted attributable deposit amount.--
        The amount determined under subparagraph (C)(i) for deposits 
        acquired by March 31, 1995, shall be reduced by 20 percent for 
        purposes of computing the adjusted attributable deposit amount 
        for the payment of any assessment for any semiannual period 
        after December 31, 1995 (other than the special assessment 
        imposed under section 2011(a) of the Balanced Budget Act of 
        1995), for a Bank Insurance Fund member bank that, as of June 
        30, 1995--
                ``(i) had an adjusted attributable deposit amount that 
            was less than 50 percent of the total deposits of that 
            member bank; or
                ``(ii)(I) had an adjusted attributable deposit amount 
            equal to less than 75 percent of the total assessable 
            deposits of that member bank;
                ``(II) had total assessable deposits greater than 
            $5,000,000,000; and
                ``(III) was owned or controlled by a bank holding 
            company that owned or controlled insured depository 
            institutions having an aggregate amount of deposits insured 
            or treated as insured by the Bank Insurance Fund greater 
            than the aggregate amount of deposits insured or treated as 
            insured by the Savings Association Insurance Fund.''.
    (j) Adjustment of Special Assessment for Certain Savings 
Associations.--
        (1) Special assessment reduction.--For purposes of computing 
    the special assessment imposed under this section, in the case of 
    any converted association, the amount of any deposits of such 
    association which were insured by the Savings Association Insurance 
    Fund as of March 31, 1995, shall be reduced by 20 percent.
        (2) Converted association.--For purposes of this subsection, 
    the term ``converted association'' means--
            (A) any Federal savings association--
                (i) that is a member of the Savings Association 
            Insurance Fund and that has deposits subject to assessment 
            by that fund which did not exceed $4,000,000,000, as of 
            March 31, 1995; and
                (ii) that had been, or is a successor by merger, 
            acquisition, or otherwise to an institution that had been, 
            a State savings bank, the deposits of which were insured by 
            the Federal Deposit Insurance Corporation prior to August 
            9, 1989, that converted to a Federal savings association 
            pursuant to section 5(i) of the Home Owners' Loan Act prior 
            to January 1, 1985;
            (B) a State depository institution that is a member of the 
        Savings Association Insurance Fund that had been a State 
        savings bank prior to October 15, 1982, and was a Federal 
        savings association on August 9, 1989;
            (C) an insured bank that--
                (i) was established de novo in order to acquire the 
            deposits of a savings association in default or in danger 
            of default;
                (ii) did not open for business before acquiring the 
            deposits of such savings association; and
                (iii) was a Savings Association Insurance Fund member 
            as of the date of enactment of this Act; and
            (D) an insured bank that--
                (i) resulted from a savings association before December 
            19, 1991, in accordance with section 5(d)(2)(G) of the 
            Federal Deposit Insurance Act; and
                (ii) had an increase in its capital in conjunction with 
            the conversion in an amount equal to more than 75 percent 
            of the capital of the institution on the day before the 
            date of the conversion.

SEC. 2012. FINANCING CORPORATION ASSESSMENTS SHARED PROPORTIONALLY BY 
              ALL INSURED DEPOSITORY INSTITUTIONS.

    (a) In General.--Section 21 of the Federal Home Loan Bank Act (12 
U.S.C. 1441) is amended--
        (1) in subsection (f)(2)--
            (A) in the matter immediately preceding subparagraph (A)--
                (i) by striking ``Savings Association Insurance Fund 
            member'' and inserting ``insured depository institution''; 
            and
                (ii) by striking ``members'' and inserting 
            ``institutions''; and
            (B) by striking ``, except that--'' and all that follows 
        through the end of the paragraph and inserting ``, except 
        that--
            ``(A) the Financing Corporation shall have first priority 
        to make the assessment; and
            ``(B) no limitation under clause (i) or (iii) of section 
        7(b)(2)(A) of the Federal Deposit Insurance Act shall apply for 
        purposes of this paragraph.''; and
        (2) in subsection (k)--
            (A) by striking ``section--'' and inserting ``section, the 
        following definitions shall apply:'';
            (B) by striking paragraph (1);
            (C) by redesignating paragraphs (2) and (3) as paragraphs 
        (1) and (2), respectively; and
            (D) by adding at the end the following new paragraph:
        ``(3) Insured depository institution.--The term `insured 
    depository institution' has the same meaning as in section 3 of the 
    Federal Deposit Insurance Act.''.
    (b) Conforming Amendment.--Section 7(b)(2) of the Federal Deposit 
Insurance Act (12 U.S.C. 1817(b)(2)) is amended by striking 
subparagraph (D).
    (c) Effective Date.--This section and the amendments made by this 
section shall become effective on January 1, 1996.

SEC. 2013. MERGER OF BIF AND SAIF.

    (a) In General.--
        (1) Merger.--The Bank Insurance Fund and the Savings 
    Association Insurance Fund shall be merged into the Deposit 
    Insurance Fund established by section 11(a)(4) of the Federal 
    Deposit Insurance Act, as amended by this section.
        (2) Disposition of assets and liabilities.--All assets and 
    liabilities of the Bank Insurance Fund and the Savings Association 
    Insurance Fund shall be transferred to the Deposit Insurance Fund.
        (3) No separate existence.--The separate existence of the Bank 
    Insurance Fund and the Savings Association Insurance Fund shall 
    cease.
    (b) Special Reserve of the Deposit Insurance Fund.--
        (1) In general.--Immediately before the merger of the Bank 
    Insurance Fund and the Savings Association Insurance Fund, if the 
    reserve ratio of the Savings Association Insurance Fund exceeds the 
    designated reserve ratio, the amount by which that reserve ratio 
    exceeds the designated reserve ratio shall be placed in the Special 
    Reserve of the Deposit Insurance Fund, established under section 
    11(a)(5) of the Federal Deposit Insurance Act, as amended by this 
    section.
        (2) Definition.--For purposes of this subsection, the term 
    ``reserve ratio'' means the ratio of the net worth of the Savings 
    Association Insurance Fund to aggregate estimated insured deposits 
    held in all Savings Association Insurance Fund members.
    (c) Effective Date.--This section and the amendments made by this 
section shall become effective on January 1, 1998, if no insured 
depository institution is a savings association on that date.
    (d) Technical and Conforming Amendments.--
        (1) Deposit insurance fund.--Section 11(a)(4) of the Federal 
    Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is amended--
            (A) by redesignating subparagraph (B) as subparagraph (C);
            (B) by striking subparagraph (A) and inserting the 
        following:
            ``(A) Establishment.--There is established the Deposit 
        Insurance Fund, which the Corporation shall--
                ``(i) maintain and administer;
                ``(ii) use to carry out its insurance purposes in the 
            manner provided by this subsection; and
                ``(iii) invest in accordance with section 13(a).
            ``(B) Uses.--The Deposit Insurance Fund shall be available 
        to the Corporation for use with respect to Deposit Insurance 
        Fund members.''; and
            (C) by striking ``(4) General provisions relating to 
        funds.--'' and inserting the following:
        ``(4) Establishment of the deposit insurance fund.--''.
        (2) Other references.--Section 11(a)(4)(C) of the Federal 
    Deposit Insurance Act (12 U.S.C. 1821(a)(4)(C), as redesignated by 
    paragraph (1) of this subsection) is amended by striking ``Bank 
    Insurance Fund and the Savings Association Insurance Fund'' and 
    inserting ``Deposit Insurance Fund''.
        (3) Deposits into fund.--Section 11(a)(4) of the Federal 
    Deposit Insurance Act (12 U.S.C. 1821(a)(4)) is amended by adding 
    at the end the following new subparagraph:
            ``(D) Deposits.--All amounts assessed against insured 
        depository institutions by the Corporation shall be deposited 
        in the Deposit Insurance Fund.''.
        (4) Special reserve of deposits.--Section 11(a)(5) of the 
    Federal Deposit Insurance Act (12 U.S.C. 1821(a)(5)) is amended to 
    read as follows:
        ``(5) Special reserve of deposit insurance fund.--
            ``(A) Establishment.--
                ``(i) In general.--There is established a Special 
            Reserve of the Deposit Insurance Fund, which shall be 
            administered by the Corporation and shall be invested in 
            accordance with section 13(a).
                ``(ii) Limitation.--The Corporation shall not provide 
            any assessment credit, refund, or other payment from any 
            amount in the Special Reserve.
            ``(B) Emergency use of special reserve.--Notwithstanding 
        subparagraph (A)(ii), the Corporation may, in its sole 
        discretion, transfer amounts from the Special Reserve to the 
        Deposit Insurance Fund, for the purposes set forth in paragraph 
        (4), only if--
                ``(i) the reserve ratio of the Deposit Insurance Fund 
            is less than 50 percent of the designated reserve ratio; 
            and
                ``(ii) the Corporation expects the reserve ratio of the 
            Deposit Insurance Fund to remain at less than 50 percent of 
            the designated reserve ratio for each of the next 4 
            calendar quarters.
            ``(C) Exclusion of special reserve in calculating reserve 
        ratio.--Notwithstanding any other provision of law, any amounts 
        in the Special Reserve shall be excluded in calculating the 
        reserve ratio of the Deposit Insurance Fund under section 7.''.
        (5) Federal home loan bank act.--Section 21B(f)(2)(C)(ii) of 
    the Federal Home Loan Bank Act (12 U.S.C. 1441b(f)(2)(C)(ii)) is 
    amended--
            (A) in subclause (I), by striking ``to Savings Associations 
        Insurance Fund members'' and inserting ``to insured depository 
        institutions, and their successors, which were Savings 
        Association Insurance Fund members on September 1, 1995''; and
            (B) in subclause (II), by striking ``to Savings 
        Associations Insurance Fund members'' and inserting ``to 
        insured depository institutions, and their successors, which 
        were Savings Association Insurance Fund members on September 1, 
        1995''.
        (6) Repeals.--
            (A) Section 3.--Section 3(y) of the Federal Deposit 
        Insurance Act (12 U.S.C. 1813(y)) is amended to read as 
        follows:
    ``(y) Definitions Relating to the Deposit Insurance Fund.--
        ``(1) Deposit insurance fund.--The term `Deposit Insurance 
    Fund' means the fund established under section 11(a)(4).
        ``(2) Reserve ratio.--The term `reserve ratio' means the ratio 
    of the net worth of the Deposit Insurance Fund to aggregate 
    estimated insured deposits held in all insured depository 
    institutions.
        ``(3) Designated reserve ratio.--The designated reserve ratio 
    of the Deposit Insurance Fund for each year shall be--
            ``(A) 1.25 percent of estimated insured deposits; or
            ``(B) a higher percentage of estimated insured deposits 
        that the Board of Directors determines to be justified for that 
        year by circumstances raising a significant risk of substantial 
        future losses to the fund.
            (B) Section 7.--Section 7 of the Federal Deposit Insurance 
        Act (12 U.S.C. 1817) is amended--
                (i) by striking subsection (l);
                (ii) by redesignating subsections (m) and (n) as 
            subsections (l) and (m), respectively;
                (iii) in subsection (b)(2), by striking subparagraphs 
            (B) and (F), and by redesignating subparagraphs (C), (E), 
            (G), and (H) as subparagraphs (B) through (E), 
            respectively.
            (C) Section 11.--Section 11(a) of the Federal Deposit 
        Insurance Act (12 U.S.C. 1821(a)) is amended--
                (i) by striking paragraphs (6) and (7); and
                (ii) by redesignating paragraph (8) as paragraph (6).
        (7) Section 5136 of the revised statutes.--Paragraph Eleventh 
    of section 5136 of the Revised Statutes (12 U.S.C. 24) is amended 
    in the fifth sentence, by striking ``affected deposit insurance 
    fund'' and inserting ``Deposit Insurance Fund''.
        (8) Investments promoting public welfare; limitations on 
    aggregate investments.--The 23d undesignated paragraph of section 9 
    of the Federal Reserve Act (12 U.S.C. 338a) is amended in the 
    fourth sentence, by striking ``affected deposit insurance fund'' 
    and inserting ``Deposit Insurance Fund''.
        (9) Advances to critically undercapitalized depository 
    institutions.--Section 10B(b)(3)(A)(ii) of the Federal Reserve Act 
    (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by striking ``any deposit 
    insurance fund in'' and inserting ``the Deposit Insurance Fund 
    of''.
        (10) Amendments to the balanced budget and emergency deficit 
    control act of 1985.--Section 255(g)(1)(A) of the Balanced Budget 
    and Emergency Deficit Control Act of 1985 (2 U.S.C. 905(g)(1)(A)) 
    is amended--
            (A) by striking ``Bank Insurance Fund'' and inserting 
        ``Deposit Insurance Fund''; and
            (B) by striking ``Federal Deposit Insurance Corporation, 
        Savings Association Insurance Fund;''.
        (11) Further amendments to the federal home loan bank act.--The 
    Federal Home Loan Bank Act (12 U.S.C. 1421 et seq.) is amended--
            (A) in section 11(k) (12 U.S.C. 1431(k))--
                (i) in the subsection heading, by striking ``SAIF'' and 
            inserting ``the Deposit Insurance Fund''; and
                (ii) by striking ``Savings Association Insurance Fund'' 
            each place such term appears and inserting ``Deposit 
            Insurance Fund'';
            (B) in section 21A(b)(4)(B) (12 U.S.C. 1441a(b)(4)(B)), by 
        striking ``affected deposit insurance fund'' and inserting 
        ``Deposit Insurance Fund'';
            (C) in section 21A(b)(6)(B) (12 U.S.C. 1441a(b)(6)(B))--
                (i) in the subparagraph heading, by striking ``SAIF-
            insured banks'' and inserting ``Charter conversions''; and
                (ii) by striking ``Savings Association Insurance Fund 
            member'' and inserting ``savings association'';
            (D) in section 21A(b)(10)(A)(iv)(II) (12 U.S.C. 
        1441a(b)(10)(A)(iv)(II)), by striking ``Savings Association 
        Insurance Fund'' and inserting ``Deposit Insurance Fund'';
            (E) in section 21B(e) (12 U.S.C. 1441b(e))--
                (i) in paragraph (5), by inserting ``as of the date of 
            funding'' after ``Savings Association Insurance Fund 
            members'' each place such term appears;
                (ii) by striking paragraph (7); and
                (iii) by redesignating paragraph (8) as paragraph (7); 
            and
            (F) in section 21B(k) (12 U.S.C. 1441b(k))--
                (i) by striking paragraph (8); and
                (ii) by redesignating paragraphs (9) and (10) as 
            paragraphs (8) and (9), respectively.
        (12) Amendments to the home owners' loan act.--The Home Owners' 
    Loan Act (12 U.S.C. 1461 et seq.) is amended--
            (A) in section 5 (12 U.S.C. 1464)--
                (i) in subsection (c)(5)(A), by striking ``that is a 
            member of the Bank Insurance Fund'';
                (ii) in subsection (c)(6), by striking ``As used in 
            this subsection--'' and inserting ``For purposes of this 
            subsection, the following definitions shall apply:'';
                (iii) in subsection (o)(1), by striking ``that is a 
            Bank Insurance Fund member'';
                (iv) in subsection (o)(2)(A), by striking ``a Bank 
            Insurance Fund member until such time as it changes its 
            status to a Savings Association Insurance Fund member'' and 
            inserting ``insured by the Deposit Insurance Fund'';
                (v) in subsection (t)(5)(D)(iii)(II), by striking 
            ``affected deposit insurance fund'' and inserting ``Deposit 
            Insurance Fund'';
                (vi) in subsection (t)(7)(C)(i)(I), by striking 
            ``affected deposit insurance fund'' and inserting ``Deposit 
            Insurance Fund''; and
                (vii) in subsection (v)(2)(A)(i), by striking ``, the 
            Savings Association Insurance Fund'' and inserting ``or the 
            Deposit Insurance Fund''; and
            (B) in section 10 (12 U.S.C. 1467a)--
                (i) in subsection (e)(1)(A)(iii)(VII), by adding ``or'' 
            at the end;
                (ii) in subsection (e)(1)(A)(iv), by adding ``and'' at 
            the end;
                (iii) in subsection (e)(1)(B), by striking ``Savings 
            Association Insurance Fund or Bank Insurance Fund'' and 
            inserting ``Deposit Insurance Fund'';
                (iv) in subsection (e)(2), by striking ``Savings 
            Association Insurance Fund or the Bank Insurance Fund'' and 
            inserting ``Deposit Insurance Fund''; and
                (v) in subsection (m)(3), by striking subparagraph (E), 
            and by redesignating subparagraphs (F), (G), and (H) as 
            subparagraphs (E), (F), and (G), respectively.
        (13) Amendments to the national housing act.--The National 
    Housing Act (12 U.S.C. 1701 et seq.) is amended--
            (A) in section 317(b)(1)(B) (12 U.S.C. 1723i(b)(1)(B)), by 
        striking ``Bank Insurance Fund for banks or through the Savings 
        Association Insurance Fund for savings associations'' and 
        inserting ``Deposit Insurance Fund''; and
            (B) in section 526(b)(1)(B)(ii) (12 U.S.C. 1735f-
        14(b)(1)(B)(ii)), by striking ``Bank Insurance Fund for banks 
        and through the Savings Association Insurance Fund for savings 
        associations'' and inserting ``Deposit Insurance Fund''.
        (14) Further amendments to the federal deposit insurance act.--
    The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is 
    amended--
            (A) in section 3(a)(1) (12 U.S.C. 1813(a)(1)), by striking 
        subparagraph (B) and inserting the following:
            ``(B) includes any former savings association.'';
            (B) in section 5(b)(5) (12 U.S.C. 1815(b)(5)), by striking 
        ``the Bank Insurance Fund or the Savings Association Insurance 
        Fund;'' and inserting ``Deposit Insurance Fund,'';
            (C) in section 5(d) (12 U.S.C. 1815(d)), by striking 
        paragraphs (2) and (3);
            (D) in section 5(d)(1) (12 U.S.C. 1815(d)(1))--
                (i) in subparagraph (A), by striking ``reserve ratios 
            in the Bank Insurance Fund and the Savings Association 
            Insurance Fund'' and inserting ``the reserve ratio of the 
            Deposit Insurance Fund'';
                (ii) by striking subparagraph (B) and inserting the 
            following:
        ``(2) Fee credited to the deposit insurance fund.--The fee paid 
    by the depository institution under paragraph (1) shall be credited 
    to the Deposit Insurance Fund.'';
                (iii) by striking ``(1) Uninsured institu- tions.--''; 
            and
                (iv) by redesignating subparagraphs (A) and (C) as 
            paragraphs (1) and (3), respectively, and moving the 
            margins 2 ems to the left;
            (E) in section 5(e) (12 U.S.C. 1815(e))--
                (i) in paragraph (5)(A), by striking ``Bank Insurance 
            Fund or the Savings Association Insurance Fund'' and 
            inserting ``Deposit Insurance Fund'';
                (ii) by striking paragraph (6); and
                (iii) by redesignating paragraphs (7), (8), and (9) as 
            paragraphs (6), (7), and (8), respectively;
            (F) in section 6(5) (12 U.S.C. 1816(5)), by striking ``Bank 
        Insurance Fund or the Savings Association Insurance Fund'' and 
        inserting ``Deposit Insurance Fund'';
            (G) in section 7(b) (12 U.S.C. 1817(b))--
                (i) in paragraph (1)(D), by striking ``each deposit 
            insurance fund'' and inserting ``the Deposit Insurance 
            Fund'';
                (ii) in clauses (i)(I) and (iv) of paragraph (2)(A), by 
            striking ``each deposit insurance fund'' each place such 
            term appears and inserting ``the Deposit Insurance Fund'';
                (iii) in paragraph (2)(A)(iii), by striking ``a deposit 
            insurance fund'' and inserting ``the Deposit Insurance 
            Fund'';
                (iv) by striking clause (iv) of paragraph (2)(A);
                (v) in paragraph (2)(C) (as redesignated by paragraph 
            (6)(B) of this subsection)--

                    (I) by striking ``any deposit insurance fund'' and 
                inserting ``the Deposit Insurance Fund''; and
                    (II) by striking ``that fund'' each place such term 
                appears and inserting ``the Deposit Insurance Fund'';

                (vi) in paragraph (2)(D) (as redesignated by paragraph 
            (6)(B) of this subsection)--

                    (I) in the subparagraph heading, by striking 
                ``funds achieve'' and inserting ``fund achieves''; and
                    (II) by striking ``a deposit insurance fund'' and 
                inserting ``the Deposit Insurance Fund'';

                (vii) in paragraph (3)--

                    (I) in the paragraph heading, by striking ``funds'' 
                and inserting ``fund'';
                    (II) by striking ``that fund'' each place such term 
                appears and inserting ``the Deposit Insurance Fund'';
                    (III) in subparagraph (A), by striking ``Except as 
                provided in paragraph (2)(F), if'' and inserting 
                ``If'';
                    (IV) in subparagraph (A), by striking ``any deposit 
                insurance fund'' and inserting ``the Deposit Insurance 
                Fund''; and
                    (V) by striking subparagraphs (C) and (D) and 
                inserting the following:

            ``(C) Amending schedule.--The Corporation may, by 
        regulation, amend a schedule promulgated under subparagraph 
        (B).''; and
                (viii) in paragraph (6)--

                    (I) by striking ``any such assessment'' and 
                inserting ``any such assessment is necessary'';
                    (II) by striking ``(A) is necessary--'';
                    (III) by striking subparagraph (B);
                    (IV) by redesignating clauses (i), (ii), and (iii) 
                as subparagraphs (A), (B), and (C), respectively, and 
                moving the margins 2 ems to the left; and
                    (V) in subparagraph (C) (as redesignated), by 
                striking ``; and'' and inserting a period;

            (H) in section 11(f)(1) (12 U.S.C. 1821(f)(1)), by striking 
        ``, except that--'' and all that follows through the end of the 
        paragraph and inserting a period;
            (I) in section 11(i)(3) (12 U.S.C. 1821(i)(3))--
                (i) by striking subparagraph (B);
                (ii) by redesignating subparagraph (C) as subparagraph 
            (B); and
                (iii) in subparagraph (B) (as redesignated), by 
            striking ``subparagraphs (A) and (B)'' and inserting 
            ``subparagraph (A)'';
            (J) in section 11A(a) (12 U.S.C. 1821a(a))--
                (i) in paragraph (2), by striking ``liabilities.--'' 
            and all that follows through ``Except'' and inserting 
            ``liabilities.--Except'';
                (ii) by striking paragraph (2)(B); and
                (iii) in paragraph (3), by striking ``the Bank 
            Insurance Fund, the Savings Association Insurance Fund,'' 
            and inserting ``the Deposit Insurance Fund'';
            (K) in section 11A(b) (12 U.S.C. 1821a(b)), by striking 
        paragraph (4);
            (L) in section 11A(f) (12 U.S.C. 1821a(f)), by striking 
        ``Savings Association Insurance Fund'' and inserting ``Deposit 
        Insurance Fund'';
            (M) in section 13 (12 U.S.C. 1823)--
                (i) in subsection (a)(1), by striking ``Bank Insurance 
            Fund, the Savings Association Insurance Fund,'' and 
            inserting ``Deposit Insurance Fund, the Special Reserve of 
            the Deposit Insurance Fund,'';
                (ii) in subsection (c)(4)(E)--

                    (I) in the subparagraph heading, by striking 
                ``funds'' and inserting ``fund''; and
                    (II) in clause (i), by striking ``any insurance 
                fund'' and inserting ``the Deposit Insurance Fund'';

                (iii) in subsection (c)(4)(G)(ii)--

                    (I) by striking ``appropriate insurance fund'' and 
                inserting ``Deposit Insurance Fund'';
                    (II) by striking ``the members of the insurance 
                fund (of which such institution is a member)'' and 
                inserting ``insured depository institutions'';
                    (III) by striking ``each member's'' and inserting 
                ``each insured depository institution's''; and
                    (IV) by striking ``the member's'' each place such 
                term appears and inserting ``the institution's'';

                (iv) in subsection (c), by striking paragraph (11);
                (v) in subsection (h), by striking ``Bank Insurance 
            Fund'' and inserting ``Deposit Insurance Fund'';
                (vi) in subsection (k)(4)(B)(i), by striking ``Savings 
            Association Insurance Fund'' and inserting ``Deposit 
            Insurance Fund''; and
                (vii) in subsection (k)(5)(A), by striking ``Savings 
            Association Insurance Fund'' and inserting ``Deposit 
            Insurance Fund'';
            (N) in section 14(a) (12 U.S.C. 1824(a)) in the fifth 
        sentence--
                (i) by striking ``Bank Insurance Fund or the Savings 
            Association Insurance Fund'' and inserting ``Deposit 
            Insurance Fund''; and
                (ii) by striking ``each such fund'' and inserting ``the 
            Deposit Insurance Fund'';
            (O) in section 14(b) (12 U.S.C. 1824(b)), by striking 
        ``Bank Insurance Fund or Savings Association Insurance Fund'' 
        and inserting ``Deposit Insurance Fund'';
            (P) in section 14(c) (12 U.S.C. 1824(c)), by striking 
        paragraph (3);
            (Q) in section 14(d) (12 U.S.C. 1824(d))--
                (i) by striking ``BIF'' each place such term appears 
            and inserting ``DIF''; and
                (ii) by striking ``Bank Insurance Fund'' each place 
            such term appears and inserting ``Deposit Insurance Fund'';
            (R) in section 15(c)(5) (12 U.S.C. 1825(c)(5))--
                (i) by striking ``the Bank Insurance Fund or Savings 
            Association Insurance Fund, respectively'' each place such 
            term appears and inserting ``the Deposit Insurance Fund''; 
            and
                (ii) in subparagraph (B), by striking ``the Bank 
            Insurance Fund or the Savings Association Insurance Fund, 
            respectively'' and inserting ``the Deposit Insurance 
            Fund'';
            (S) in section 17(a) (12 U.S.C. 1827(a))--
                (i) in the subsection heading, by striking ``BIF, 
            SAIF,'' and inserting ``the Deposit Insurance Fund''; and
                (ii) in paragraph (1), by striking ``the Bank Insurance 
            Fund, the Savings Association Insurance Fund,'' each place 
            such term appears and inserting ``the Deposit Insurance 
            Fund'';
            (T) in section 17(d) (12 U.S.C. 1827(d)), by striking ``the 
        Bank Insurance Fund, the Savings Association Insurance Fund,'' 
        each place such term appears and inserting ``the Deposit 
        Insurance Fund'';
            (U) in section 18(m)(3) (12 U.S.C. 1828(m)(3))--
                (i) by striking ``Savings Association Insurance Fund'' 
            each place such term appears and inserting ``Deposit 
            Insurance Fund''; and
                (ii) in subparagraph (C), by striking ``or the Bank 
            Insurance Fund'';
            (V) in section 18(p) (12 U.S.C. 1828(p)), by striking 
        ``deposit insurance funds'' and inserting ``Deposit Insurance 
        Fund'';
            (W) in section 24 (12 U.S.C. 1831a) in subsections (a)(1) 
        and (d)(1)(A), by striking ``appropriate deposit insurance 
        fund'' each place such term appears and inserting ``Deposit 
        Insurance Fund'';
            (X) in section 28 (12 U.S.C. 1831e), by striking ``affected 
        deposit insurance fund'' each place such term appears and 
        inserting ``Deposit Insurance Fund'';
            (Y) by striking section 31 (12 U.S.C. 1831h);
            (Z) in section 36(i)(3) (12 U.S.C. 1831m(i)(3)) by striking 
        ``affected deposit insurance fund'' and inserting ``Deposit 
        Insurance Fund'';
            (AA) in section 38(a) (12 U.S.C. 1831o(a)) in the 
        subsection heading, by striking ``Funds'' and inserting 
        ``Fund'';
            (BB) in section 38(k) (12 U.S.C. 1831o(k))--
                (i) in paragraph (1), by striking ``a deposit insurance 
            fund'' and inserting ``the Deposit Insurance Fund''; and
                (ii) in paragraph (2)(A)--

                    (I) by striking ``A deposit insurance fund'' and 
                inserting ``The Deposit Insurance Fund''; and
                    (II) by striking ``the deposit insurance fund's 
                outlays'' and inserting ``the outlays of the Deposit 
                Insurance Fund''; and

            (CC) in section 38(o) (12 U.S.C. 1831o(o))--
                (i) by striking ``Associations.--'' and all that 
            follows through ``Subsections (e)(2)'' and inserting 
            ``Associations.--Subsections (e)(2)'';
                (ii) by redesignating subparagraphs (A), (B), and (C) 
            as paragraphs (1), (2), and (3), respectively, and moving 
            the margins 2 ems to the left; and
                (iii) in paragraph (1) (as redesignated), by 
            redesignating clauses (i) and (ii) as subparagraphs (A) and 
            (B), respectively, and moving the margins 2 ems to the 
            left.
        (15) Amendments to the financial institutions reform, recovery, 
    and enforcement act of 1989.--The Financial Institutions Reform, 
    Recovery, and Enforcement Act (Public Law 101-73; 103 Stat. 183) is 
    amended--
            (A) in section 951(b)(3)(B) (12 U.S.C. 1833a(b)(3)(B)), by 
        striking ``Bank Insurance Fund, the Savings Association 
        Insurance Fund,'' and inserting ``Deposit Insurance Fund''; and
            (B) in section 1112(c)(1)(B) (12 U.S.C. 3341(c)(1)(B)), by 
        striking ``Bank Insurance Fund, the Savings Association 
        Insurance Fund,'' and inserting ``Deposit Insurance Fund''.
        (16) Amendment to the bank enterprise act of 1991.--Section 
    232(a)(1) of the Bank Enterprise Act of 1991 (12 U.S.C. 1834(a)(1)) 
    is amended by striking ``section 7(b)(2)(H)'' and inserting 
    ``section 7(b)(2)(G)''.
        (17) Amendment to the bank holding company act.--Section 
    2(j)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 
    1841(j)(2)) is amended by striking ``Savings Association Insurance 
    Fund'' and inserting ``Deposit Insurance Fund''.

SEC. 2014. CREATION OF SAIF SPECIAL RESERVE.

    Section 11(a)(6) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(a)(6)) is amended by adding at the end the following new 
subparagraph:
        ``(L) Establishment of saif special reserve.--
            ``(i) Establishment.--If, on January 1, 1998, the reserve 
        ratio of the Savings Association Insurance Fund exceeds the 
        designated reserve ratio, there is established a Special 
        Reserve of the Savings Association Insurance Fund, which shall 
        be administered by the Corporation and shall be invested in 
        accordance with section 13(a).
            ``(ii) Amounts in special reserve.--If, on January 1, 1998, 
        the reserve ratio of the Savings Association Insurance Fund 
        exceeds the designated reserve ratio, the amount by which the 
        reserve ratio exceeds the designated reserve ratio shall be 
        placed in the Special Reserve of the Savings Association 
        Insurance Fund established by clause (i).
            ``(iii) Limitation.--The Corporation shall not provide any 
        assessment credit, refund, or other payment from any amount in 
        the Special Reserve of the Savings Association Insurance Fund.
            ``(iv) Emergency use of special reserve.--Notwithstanding 
        clause (iii), the Corporation may, in its sole discretion, 
        transfer amounts from the Special Reserve of the Savings 
        Association Insurance Fund to the Savings Association Insurance 
        Fund for the purposes set forth in paragraph (4), only if--
                ``(I) the reserve ratio of the Savings Association 
            Insurance Fund is less than 50 percent of the designated 
            reserve ratio; and
                ``(II) the Corporation expects the reserve ratio of the 
            Savings Association Insurance Fund to remain at less than 
            50 percent of the designated reserve ratio for each of the 
            next 4 calendar quarters.
            ``(v) Exclusion of special reserve in calculating reserve 
        ratio.--Notwithstanding any other provision of law, any amounts 
        in the Special Reserve of the Savings Association Insurance 
        Fund shall be excluded in calculating the reserve ratio of the 
        Savings Association Insurance Fund.''.

SEC. 2015. REFUND OF AMOUNTS IN DEPOSIT INSURANCE FUND IN EXCESS OF 
              DESIGNATED RESERVE AMOUNT.

    Subsection (e) of section 7 of the Federal Deposit Insurance Act 
(12 U.S.C. 1817(e)) is amended to read as follows:
    ``(e) Refunds.--
        ``(1) Overpayments.--In the case of any payment of an 
    assessment by an insured depository institution in excess of the 
    amount due to the Corporation, the Corporation may--
            ``(A) refund the amount of the excess payment to the 
        insured depository institution; or
            ``(B) credit such excess amount toward the payment of 
        subsequent semiannual assessments until such credit is 
        exhausted.
        ``(2) Balance in insurance fund in excess of designated 
    reserve.--
            ``(A) In general.--Subject to subparagraphs (B) and (C), 
        if, as of the end of any semiannual assessment period, the 
        amount of the actual reserves in--
                ``(i) the Bank Insurance Fund (until the merger of such 
            fund into the Deposit Insurance Fund pursuant to section 
            2013 of the Balanced Budget Act of 1995); or
                ``(ii) the Deposit Insurance Fund (after the 
            establishment of such fund),
        exceeds the balance required to meet the designated reserve 
        ratio applicable with respect to such fund, such excess amount 
        shall be refunded to insured depository institutions by the 
        Corporation on such basis as the Board of Directors determines 
        to be appropriate, taking into account the factors considered 
        under the risk-based assessment system.
            ``(B) Refund not to exceed previous semiannual 
        assessment.--The amount of any refund under this paragraph to 
        any member of a deposit insurance fund for any semiannual 
        assessment period may not exceed the total amount of 
        assessments paid by such member to the insurance fund with 
        respect to such period.
            ``(C) Refund limitation for certain institutions.--No 
        refund may be made under this paragraph with respect to the 
        amount of any assessment paid for any semiannual assessment 
        period by any insured depository institution described in 
        clause (v) of subsection (b)(2)(A).''.

SEC. 2016. ASSESSMENT RATES FOR SAIF MEMBERS MAY NOT BE LESS THAN 
              ASSESSMENT RATES FOR BIF MEMBERS.

    Section 7(b)(2)(C) of the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)(2)(E), as redesignated by section 2013(d)(6) of this Act) is 
amended--
        (1) by striking ``and'' at the end of clause (i);
        (2) by striking the period at the end of clause (ii) and 
    inserting ``; and''; and
        (3) by adding at the end the following new clause:
                ``(iii) notwithstanding any other provision of this 
            subsection, during the period beginning on the date of 
            enactment of the Balanced Budget Act of 1995, and ending on 
            January 1, 1998, the assessment rate for a Savings 
            Association Insurance Fund member may not be less than the 
            assessment rate for a Bank Insurance Fund member that poses 
            a comparable risk to the deposit insurance fund.''.

SEC. 2017. ASSESSMENTS AUTHORIZED ONLY IF NEEDED TO MAINTAIN THE 
              RESERVE RATIO OF A DEPOSIT INSURANCE FUND.

    (a) In General.--Section 7(b)(2)(A)(i) of the Federal Deposit 
Insurance Act (12 U.S.C. 1817(b)(2)(A)(i)) is amended in the matter 
preceding subclause (I) by inserting ``when necessary, and only to the 
extent necessary'' after ``insured depository institutions''.
    (b) Limitation on Assessment.--Section 7(b)(2)(A)(iii) of the 
Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)(A)(iii)) is amended 
to read as follows:
                ``(iii) Limitation on assessment.--Except as provided 
            in clause (v), the Board of Directors shall not set 
            semiannual assessments with respect to a deposit insurance 
            fund in excess of the amount needed--

                    ``(I) to maintain the reserve ratio of the fund at 
                the designated reserve ratio; or
                    ``(II) if the reserve ratio is less than the 
                designated reserve ratio, to increase the reserve ratio 
                to the designated reserve ratio.''.

    (c) Exception to Limitation on Assessments.--Section 7(b)(2)(A) of 
the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2)(A)) is amended 
by adding at the end the following new clause:
                ``(v) Exception to limitation on assessments.--The 
            Board of Directors may set semiannual assessments in excess 
            of the amount permitted under clauses (i) and (iii) with 
            respect to insured depository institutions that exhibit 
            financial, operational, or compliance weaknesses ranging 
            from moderately severe to unsatisfactory, or are not well 
            capitalized, as that term is defined in section 38.''.

SEC. 2018. LIMITATION ON AUTHORITY OF OVERSIGHT BOARD TO CONTINUE TO 
              EMPLOY MORE THAN 18 OFFICERS AND EMPLOYEES.

    (a) In General.--Section 21A(a) of the Federal Home Loan Bank Act 
(12 U.S.C. 1441a(a)) is amended by adding at the end the following new 
paragraph:
        ``(17) Phased-down operation of oversight board following 
    termination of corporation.--
            ``(A) Termination of authority to employ staff.--Except as 
        provided in subparagraph (B), the authority of the Thrift 
        Depositor Protection Oversight Board under paragraph (5) to 
        establish officer and employee positions, to compensate 
        officers and employees of the Board, and to provide other 
        benefits for officers and employees of the Board shall 
        terminate as of December 31, 1995.
            ``(B) Limited authority for employing staff.--The Thrift 
        Depositor Protection Oversight Board may employ not more than 
        18 individuals, excluding any employee of any other department 
        or agency utilized by the Board, to carry out the functions of 
        the Board during the period beginning on January 1, 1996 and 
        ending on May 1, 1996, other than employees whose employment is 
        in the process of being terminated in accordance with 
        subparagraph (C).
            ``(C) Termination of employment of additional employees 
        required to be commenced.--The Thrift Depositor Protection 
        Oversight Board shall commence terminating, not later than 
        December 31, 1995, and in accordance with title 5, United 
        States Code, and applicable regulations of the Office of 
        Personnel Management, the employment of any employee of the 
        Board whose continued employment by the Board after such date 
        is inconsistent with the requirement of subparagraph (B).''.
    (b) Technical and Conforming Amendments.--Section 21A(a)(5) of the 
Federal Home Loan Bank Act (12 U.S.C. 1441a(a)(5)) is amended in 
subparagraphs (B), (C), (D), and (E), by inserting ``subject to 
paragraph (17),'' after the closing parenthesis of the subparagraph 
designation in each such subparagraph.

SEC. 2019. DEFINITIONS.

    For purposes of this subtitle--
        (1) the term ``Bank Insurance Fund'' means the fund established 
    pursuant to section (11)(a)(5)(A) of the Federal Deposit Insurance 
    Act, as that section existed on the day before the date of 
    enactment of this Act;
        (2) the terms ``Bank Insurance Fund member'' and ``Savings 
    Association Insurance Fund member'' have the same meanings as in 
    section 7(l) of the Federal Deposit Insurance Act;
        (3) the terms ``bank'', ``Board of Directors'', 
    ``Corporation'', ``insured depository institution'', ``Federal 
    savings association'', ``savings association'', ``State savings 
    bank'', and ``State depository institution'' have the same meanings 
    as in section 3 of the Federal Deposit Insurance Act;
        (4) the term ``Deposit Insurance Fund'' means the fund 
    established under section 11(a)(4) of the Federal Deposit Insurance 
    Act, as amended by section 2013(d) of this Act;
        (5) the term ``depository institution holding company'' has the 
    same meaning as in section 3 of the Federal Deposit Insurance Act;
        (6) the term ``designated reserve ratio'' has the same meaning 
    as in section 7(b)(2)(A)(iv) of the Federal Deposit Insurance Act;
        (7) the term ``Savings Association Insurance Fund'' means the 
    fund established pursuant to section 11(a)(6)(A) of the Federal 
    Deposit Insurance Act, as that section existed on the day before 
    the date of enactment of this Act; and
        (8) the term ``SAIF-assessable deposit'' means--
            (A) a deposit that is subject to assessment for purposes of 
        the Savings Association Insurance Fund under the Federal 
        Deposit Insurance Act; and
            (B) a deposit that section 5(d)(3) of the Federal Deposit 
        Insurance Act treats as insured by the Savings Association 
        Insurance Fund.

                          Subtitle B--Housing

SEC. 2051. ANNUAL ADJUSTMENT FACTORS FOR OPERATING COSTS ONLY; 
              RESTRAINT ON RENT INCREASES.

    (a) Annual Adjustment Factors for Operating Costs Only.--Section 
8(c)(2)(A) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(c)(2)(A)) is amended--
        (1) by striking ``(2)(A)'' and inserting ``(2)(A)(i)'';
        (2) by striking the second sentence and all that follows 
    through the end of the subparagraph; and
        (3) by adding at the end the following new clause:
    ``(ii) Each assistance contract under this section shall provide 
that--
        ``(I) if the maximum monthly rent for a unit in a new 
    construction or substantial rehabilitation project to be adjusted 
    using an annual adjustment factor exceeds 100 percent of the fair 
    market rent for an existing dwelling unit in the market area, the 
    Secretary shall adjust the rent using an operating costs factor 
    that increases the rent to reflect increases in operating costs in 
    the market area; and
        ``(II) if the owner of a unit in a project described in 
    subclause (I) demonstrates that the adjusted rent determined under 
    subclause (I) would not exceed the rent for an unassisted unit of 
    similar quality, type, and age in the same market area, as 
    determined by the Secretary, the Secretary shall use the otherwise 
    applicable annual adjustment factor.''.
    (b) Restraint on Section 8 Rent Increases.--Section 8(c)(2)(A) of 
the United States Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)), as 
amended by subsection (a), is amended by adding at the end the 
following new clause:
    ``(iii)(I) Subject to subclause (II), with respect to any unit 
assisted under this section that is occupied by the same family at the 
time of the most recent annual rental adjustment, if the assistance 
contract provides for the adjustment of the maximum monthly rent by 
applying an annual adjustment factor, and if the rent for the unit is 
otherwise eligible for an adjustment based on the full amount of the 
annual adjustment factor, 0.01 shall be subtracted from the amount of 
the annual adjustment factor, except that the annual adjustment factor 
shall not be reduced to less than 1.0.
    ``(II) With respect to any unit described in subclause (I) that is 
assisted under the certificate program, the adjusted rent shall not 
exceed the rent for a comparable unassisted unit of similar quality, 
type, and age in the market area in which the unit is located.''.
    (c) Effective Date.--The amendments made by this section shall 
become effective on October 1, 1995.

SEC. 2052. FORECLOSURE AVOIDANCE AND BORROWER ASSISTANCE.

    (a) Foreclosure Avoidance.--Except as provided in subsection (e), 
the last sentence of section 204(a) of the National Housing Act (12 
U.S.C. 1710(a)) is amended by inserting before the period the 
following: ``: And provided further, That the Secretary may pay 
insurance benefits to the mortgagee to recompense the mortgagee for its 
actions to provide an alternative to foreclosure of a mortgage that is 
in default, which actions may include such actions as special 
forbearance, loan modification, and deeds in lieu of foreclosure, all 
upon such terms and conditions as the mortgagee shall determine in the 
mortgagee's sole discretion within guidelines provided by the 
Secretary, but which may not include assignment of a mortgage to the 
Secretary: And provided further, That for purposes of the preceding 
proviso, no action authorized by the Secretary and no action taken, nor 
any failure to act, by the Secretary or the mortgagee shall be subject 
to judicial review''.
    (b) Authority to Assist Mortgagors in Default.--Except as provided 
in subsection (e), section 230 of the National Housing Act (12 U.S.C. 
1715u) is amended to read as follows:

               ``authority to assist mortgagors in default

    ``Sec. 230. (a) Payment of Partial Claim.--The Secretary may 
establish a program for payment of a partial insurance claim to a 
mortgagee that agrees to apply the claim amount to payment of a 
mortgage on a 1- to 4-family residence that is in default. Any such 
payment under such program to the mortgagee shall be made in the 
Secretary's sole discretion and on terms and conditions acceptable to 
the Secretary, except that--
        ``(1) the amount of the payment shall be in an amount 
    determined by the Secretary, which shall not exceed an amount 
    equivalent to 12 monthly mortgage payments and any costs related to 
    the default that are approved by the Secretary; and
        ``(2) the mortgagor shall agree to repay the amount of the 
    insurance claim to the Secretary upon terms and conditions 
    acceptable to the Secretary.
The Secretary may pay the mortgagee, from the appropriate insurance 
fund, in connection with any activities that the mortgagee is required 
to undertake concerning repayment by the mortgagor of the amount owed 
to the Secretary.
    ``(b) Assignment.--
        ``(1) Program authority.--The Secretary may establish a program 
    for assignment to the Secretary, upon request of the mortgagee, of 
    a mortgage on a 1- to 4-family residence insured under this Act.
        ``(2) Program requirements.--The Secretary may accept 
    assignment of a mortgage under a program under this subsection only 
    if--
            ``(A) the mortgage was in default;
            ``(B) the mortgagee has modified the mortgage to cure the 
        default and provide for mortgage payments within the reasonable 
        ability of the mortgagor to pay at interest rates not exceeding 
        current market interest rates; and
            ``(C) the Secretary arranges for servicing of the assigned 
        mortgage by a mortgagee (which may include the assigning 
        mortgagee) through procedures that the Secretary has determined 
        to be in the best interests of the appropriate insurance fund.
        ``(3) Payment of insurance benefits.--Upon accepting assignment 
    of a mortgage under the program under this subsection, the 
    Secretary may pay insurance benefits to the mortgagee from the 
    appropriate insurance fund in an amount that the Secretary 
    determines to be appropriate, but which may not exceed the amount 
    necessary to compensate the mortgagee for the assignment and any 
    losses and expenses resulting from the mortgage modification.
    ``(c) Prohibition of Judicial Review.--No decision by the Secretary 
to exercise or forego exercising any authority under this section shall 
be subject to judicial review.
    ``(d) Savings Provision.--Any mortgage for which the mortgagor has 
applied to the Secretary, before the date of the enactment of the 
Balanced Budget Act of 1995, for assignment pursuant to subsection (b) 
of this section as in effect before such date of enactment shall 
continue to be governed by the provisions of this section in effect 
immediately before such date of enactment.
    ``(e) Applicability of Other Laws.--No provision of this Act or any 
other law shall be construed to require the Secretary to provide an 
alternative to foreclosure for mortgagees with mortgages on 1- to 4-
family residences insured by the Secretary under this Act, or to accept 
assignments of such mortgages.''.
    (c) Applicability of Amendments.--Except as provided in subsection 
(e), the amendments made by subsections (a) and (b) shall apply only 
with respect to mortgages insured under the National Housing Act that 
are originated on or after October 1, 1995.
    (d) Regulations.--Not later than the expiration of the 60-day 
period beginning on the date of the enactment of this Act, the 
Secretary of Housing and Urban Development shall issue interim 
regulations to implement this section and the amendments made by this 
section.
    (e) Effectiveness and Applicability.--If this Act is enacted after 
the date of the enactment of the Departments of Veterans Affairs and 
Housing and Urban Development, and Independent Agencies Appropriations 
Act, 1996--
        (1) subsections (a), (b), (c), and (d) of this section shall 
    not take effect; and
        (2) subsection (c) of the section relating to foreclosure 
    avoidance and borrower assistance in title II of the Departments of 
    Veterans Affairs and Housing and Urban Development, and Independent 
    Agencies Appropriations Act, 1996, is amended by striking ``only 
    with respect to mortgages insured under the National Housing Act 
    that are originated before October 1, 1995'' and inserting ``to 
    mortgages originated before, on, and after October 1, 1995''.

      TITLE III--COMMUNICATIONS AND SPECTRUM ALLOCATION PROVISIONS

SEC. 3001. SPECTRUM AUCTIONS.

    (a) Extension and Expansion of Auction Authority.--
        (1) Amendments.--Section 309(j) of the Communications Act of 
    1934 (47 U.S.C. 309(j)) is amended--
            (A) by striking paragraphs (1) and (2) and inserting the 
        following:
        ``(1) General authority.--If, consistent with the obligations 
    described in paragraph (6)(E), mutually exclusive applications are 
    accepted for any initial license or construction permit, then the 
    Commission shall grant such license or permit to a qualified 
    applicant through a system of competitive bidding that meets the 
    requirements of this subsection.
        ``(2) Exemptions.--The competitive bidding authority granted by 
    this subsection shall not apply to licenses or construction permits 
    issued by the Commission--
            ``(A) that, as the result of the Commission carrying out 
        the obligations described in paragraph (6)(E), are not mutually 
        exclusive;
            ``(B) for public safety radio services, including non-
        Government uses the sole or principal purpose of which is to 
        protect the safety of life, health, and property and which are 
        not made commercially available to the public; or
            ``(C) for initial licenses or construction permits for new 
        terrestrial digital television services assigned by the 
        Commission to existing terrestrial broadcast licensees to 
        replace their current television licenses, unless--
                ``(i) the Commission, not later than 180 days after the 
            date of enactment of the Balanced Budget Act of 1995, after 
            notice and public comment, submits to Congress a report on 
            the use of the authority provided in this subsection for 
            the assignment of initial licenses or construction permits 
            for use of the electromagnetic spectrum allocated but not 
            assigned as of the date of enactment of that Act for 
            television broadcast services; and
                ``(ii) the Congress amends this subsection to authorize 
            the use of the authority provided by this subsection for 
            such licenses or permits.
        Except as provided in this subparagraph, the Commission may not 
        assign initial licenses or construction permits under this 
        title to terrestrial commercial television broadcast licensees 
        to replace their existing broadcast licenses before November 
        15, 1996.''; and
            (B) by striking ``1998'' in paragraph (11) and inserting 
        ``2002''.
        (2) Conforming amendment.--Subsection (i) of section 309 of 
    such Act is repealed.
        (3) Effective date.--The amendment made by paragraph (1)(A) 
    shall not apply with respect to any license or permit for a 
    terrestrial radio or television broadcast station for which the 
    Federal Communications Commission has accepted mutually exclusive 
    applications on or before the date of enactment of this Act.
    (b) Commission Obligation To Make Additional Spectrum Available by 
Auction.--
        (1) In general.--The Federal Communications Commission shall 
    complete all actions necessary to permit the assignment, by 
    September 30, 2002, by competitive bidding pursuant to section 
    309(j) of the Communications Act of 1934 (47 U.S.C. 309(j)) of 
    licenses for the use of bands of frequencies that--
            (A) individually span not less than 25 megahertz, unless a 
        combination of smaller bands can, notwithstanding the 
        provisions of paragraph (7) of such section, reasonably be 
        expected to produce greater receipts;
            (B) in the aggregate span not less than 100 megahertz;
            (C) are located below 3 gigahertz; and
            (D) have not, as of the date of enactment of this Act--
                (i) been designated by Commission regulation for 
            assignment pursuant to such section;
                (ii) been identified by the Secretary of Commerce 
            pursuant to section 113 of the National Telecommunications 
            and Information Administration Organization Act; or
                (iii) been reserved for Federal Government use pursuant 
            to section 305 of the Communications Act of 1934 (47 U.S.C. 
            305).
        The Commission shall conduct the competitive bidding for not 
        less than one-half of such aggregate spectrum by September 30, 
        2000.
        (2) Criteria for reassignment.--In making available bands of 
    frequencies for competitive bidding pursuant to paragraph (1), the 
    Commission shall--
            (A) seek to promote the most efficient use of the spectrum;
            (B) take into account the cost to incumbent licensees of 
        relocating existing uses to other bands of frequencies or other 
        means of communication;
            (C) take into account the needs of public safety radio 
        services;
            (D) comply with the requirements of international 
        agreements concerning spectrum allocations; and
            (E) take into account the costs to satellite service 
        providers that could result from multiple auctions of like 
        spectrum internationally for global satellite systems.
        (3) Notification to ntia.--The Commission shall notify the 
    Secretary of Commerce if--
            (A) the Commission is not able to provide for the effective 
        relocation of incumbent licensees to bands of frequencies that 
        are available to the Commission for assignment; and
            (B) the Commission has identified bands of frequencies that 
        are--
                (i) suitable for the relocation of such licensees; and
                (ii) allocated for Federal Government use, but that 
            could be reallocated pursuant to part B of the National 
            Telecommunications and Information Administration 
            Organization Act (as amended by this section).
    (c) Identification and Reallocation of Frequencies.--The National 
Telecommunications and Information Administration Organization Act (47 
U.S.C. 901 et seq.) is amended--
        (1) in section 113, by adding at the end the following new 
    subsections:
    ``(f) Additional Reallocation Report.--If the Secretary receives a 
notice from the Commission pursuant to section 3001(b)(3) of the 
Balanced Budget Act of 1995, the Secretary shall prepare and submit to 
the President and the Congress a report recommending for reallocation 
for use other than by Federal Government stations under section 305 of 
the 1934 Act (47 U.S.C. 305), bands of frequencies that are suitable 
for the uses identified in the Commission's notice.
    ``(g) Relocation of Federal Government Stations.--
        ``(1) In general.--In order to expedite the efficient use of 
    the electromagnetic spectrum and notwithstanding section 3302(b) of 
    title 31, United States Code, any Federal entity which operates a 
    Federal Government station may accept payment in advance or in-kind 
    reimbursement of costs, or a combination of payment in advance and 
    in-kind reimbursement, from any person to defray entirely the 
    expenses of relocating the Federal entity's operations from one or 
    more radio spectrum frequencies to another frequency or 
    frequencies, including, without limitation, the costs of any 
    modification, replacement, or reissuance of equipment, facilities, 
    operating manuals, regulations, or other expenses incurred by that 
    entity. Any such payment shall be deposited in the account of such 
    Federal entity in the Treasury of the United States. Funds 
    deposited according to this paragraph shall be available, without 
    appropriation or fiscal year limitation, only for the operations of 
    the Federal entity for which such funds were deposited under this 
    paragraph.
        ``(2) Process for relocation.--Any person seeking to relocate a 
    Federal Government station that has been assigned a frequency 
    within a band allocated for mixed Federal and non-Federal use may 
    submit a petition for such relocation to NTIA. The NTIA shall limit 
    or terminate the Federal Government station's operating license 
    when the following requirements are met:
            ``(A) the person seeking relocation of the Federal 
        Government station has guaranteed to defray entirely, through 
        payment in advance, in-kind reimbursement of costs, or a 
        combination thereof, all relocation costs incurred by the 
        Federal entity, including all engineering, equipment, site 
        acquisition and construction, and regulatory fee costs;
            ``(B) the person seeking relocation completes all 
        activities necessary for implementing the relocation, including 
        construction of replacement facilities (if necessary and 
        appropriate) and identifying and obtaining on the Federal 
        entity's behalf new frequencies for use by the relocated 
        Federal Government station (where such station is not 
        relocating to spectrum reserved exclusively for Federal use);
            ``(C) any necessary replacement facilities, equipment 
        modifications, or other changes have been implemented and 
        tested to ensure that the Federal Government station is able to 
        successfully accomplish its purposes; and
            ``(D) NTIA has determined that the proposed use of the 
        spectrum frequency band to which the Federal entity will 
        relocate its operations is--
                ``(i) consistent with obligations undertaken by the 
            United States in international agreements and with United 
            States national security and public safety interests; and
                ``(ii) suitable for the technical characteristics of 
            the band and consistent with other uses of the band.
        In exercising its authority under subparagraph (D)(i), NTIA 
        shall consult with the Secretary of Defense, the Secretary of 
        State, or other appropriate officers of the Federal Government.
        ``(3) Right to reclaim.--If within one year after the 
    relocation the Federal Government station demonstrates to the 
    Commission that the new facilities or spectrum are not comparable 
    to the facilities or spectrum from which the Federal Government 
    station was relocated, the person seeking such relocation must take 
    reasonable steps to remedy any defects or pay the Federal entity 
    for the costs of returning the Federal Government station to the 
    spectrum from which such station was relocated.
    ``(h) Federal Action To Expedite Spectrum Transfer.--Any Federal 
Government station which operates on electromagnetic spectrum that has 
been identified for reallocation for mixed Federal and non-Federal use 
in any reallocation report under subsection (a) shall, to the maximum 
extent practicable through the use of the authority granted under 
subsection (g) and any other applicable provision of law, take action 
to relocate its spectrum use to other frequencies that are reserved for 
Federal use or to consolidate its spectrum use with other Federal 
Government stations in a manner that maximizes the spectrum available 
for non-Federal use. Subsection (c)(4) of this section shall not apply 
to the extent that a non-Federal user seeks to relocate or relocates a 
Federal power agency under subsection (g).
    ``(i) Definition.--For purposes of this section, the term `Federal 
entity' means any department, agency, or other instrumentality of the 
Federal Government that utilizes a Government station license obtained 
under section 305 of the 1934 Act (47 U.S.C. 305).''; and
        (2) in section 114(a)(1), by striking ``(a) or (d)(1)'' and 
    inserting ``(a), (d)(1), or (f)''.
    (d) Identification and Reallocation of Auctionable Frequencies.--
The National Telecommunications and Information Administration 
Organization Act (47 U.S.C. 901 et seq.) is amended--
        (1) in section 113(b)--
            (A) by striking the heading of paragraph (1) and inserting 
        ``Initial reallocation report.--'';
            (B) by inserting ``in the first report required by 
        subsection (a)'' after ``recommend for reallocation'' in 
        paragraph (1);
            (C) by inserting ``or (3)'' after ``paragraph (1)'' each 
        place it appears in paragraph (2); and
            (D) by inserting after paragraph (2) the following new 
        paragraph:
        ``(3) Second reallocation report.--In accordance with the 
    provisions of this section, the Secretary shall recommend for 
    reallocation in the second report required by subsection (a), for 
    use other than by Federal Government stations under section 305 of 
    the 1934 Act (47 U.S.C. 305), a single frequency band that spans 
    not less than an additional 20 megahertz, that is located below 3 
    gigahertz, and that meets the criteria specified in paragraphs (1) 
    through (5) of subsection (a).''; and
        (2) in section 115--
            (A) in subsection (b), by striking ``the report required by 
        section 113(a)'' and inserting ``the initial reallocation 
        report required by section 113(a)''; and
            (B) by adding at the end the following new subsection:
    ``(c) Allocation and Assignment of Frequencies Identified in the 
Second Reallocation Report.--With respect to the frequencies made 
available for reallocation pursuant to section 113(b)(3), the 
Commission shall, not later than 1 year after receipt of the second 
reallocation report required by such section, prepare, submit to the 
President and the Congress, and implement, a plan for the allocation 
and assignment under the 1934 Act of such frequencies. Such plan shall 
propose the immediate allocation and assignment of all such frequencies 
in accordance with section 309(j) of the 1934 Act (47 U.S.C. 
309(j)).''.

               TITLE IV--EDUCATION AND RELATED PROVISIONS

SEC. 4000. TABLE OF CONTENTS.

    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.

                      Subtitle A--Higher Education

SEC. 4001. SHORT TITLE; REFERENCES; AND GENERAL EFFECTIVE DATE.

    (a) Short Title.--This subtitle may be cited as the ``Student Loan 
Reform Act of 1995''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this subtitle an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).
    (c) General Effective Date.--Unless otherwise specified in this 
subtitle, the amendments made by this subtitle shall take effect on 
January 1, 1996.

SEC. 4002. PARTICIPATION OF INSTITUTIONS AND ADMINISTRATION OF LOAN 
              PROGRAMS.

    (a) Limitation on Proportion of Loans Made Under the Direct Loan 
Program.--Section 453(a) (20 U.S.C. 1087c(a)) is amended--
        (1) by amending paragraph (2) to read as follows:
        ``(2) Determination of number of agreements.--Notwithstanding 
    any other provision of law, the Secretary may enter into agreements 
    under subsections (a) and (b) of section 454 with institutions for 
    participation in the direct loan program under this part, subject 
    to the following:
            ``(A) For academic year 1994-1995, loans made under this 
        part shall represent not more than 5 percent of new student 
        loan volume for such year.
            ``(B) For academic year 1995-1996, loans made under this 
        part, including Federal Direct Consolidation Loans, shall 
        represent not more than 30 percent of the new student loan 
        volume for such year, except that the Secretary shall not enter 
        into such an agreement with an eligible institution that has 
        not applied and been accepted for participation in the direct 
        loan program under this part on or before September 30, 1995.
            ``(C) For academic year 1996-1997 and for each succeeding 
        academic year, loans made under this part, including Federal 
        Direct Consolidation Loans, shall represent not more than 10 
        percent of the new student loan volume for such year, except 
        that only the 102 eligible institutions that participated in 
        the direct loan program under this part for academic year 1994-
        1995 shall be eligible to participate in such program for 
        academic year 1996-1997 and for each succeeding academic 
        year.'';
        (2) by striking paragraph (3);
        (3) by redesignating paragraph (4) as paragraph (3); and
        (4) in the second sentence of paragraph (3) (as redesignated by 
    paragraph (3)), by striking ``on the most recent program data 
    available'' and inserting ``on data from the academic year 
    preceding the academic year for which the estimate is made''.
    (b) Elimination of Conscription.--Section 453(b)(2) (20 U.S.C. 
1087c(b)(2)) is amended--
        (1) by striking subparagraph (B); and
        (2) in subparagraph (A)--
            (A) in clause (ii)--
                (i) by striking ``beginning''; and
                (ii) by striking ``clause (i); and'' and inserting 
            ``subparagraph (A).'';
            (B) by redesignating clause (ii) (as amended by 
        subparagraph (A)) as subparagraph (B); and
            (C) by striking ``(i) categorizing'' and inserting 
        ``categorizing''.
    (c) Control of Administrative Expenses.--Section 458 (20 U.S.C. 
1087h) is amended--
        (1) by amending subsection (a) to read as follows:
    ``(a) Expenses.--
        ``(1) In general.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        each fiscal year there shall be available to the Secretary from 
        funds not otherwise appropriated, funds to be obligated for 
        subsidy costs under this part for the William D. Ford Federal 
        Direct Loan Program. There shall also be available from funds 
        not otherwise appropriated, funds to be obligated for indirect 
        administrative expenses under this part and part B, not to 
        exceed (from such funds not otherwise appropriated) 
        $260,000,000 for fiscal year 1994, $345,000,000 for fiscal year 
        1995, $85,000,000 (and such sums as may be necessary for 
        administrative cost allowances for guaranty agencies for costs 
        accrued prior to January 1, 1996) for fiscal year 1996, and 
        $85,000,000 for each of the fiscal years 1997 through 2002.
            ``(B) Reduction.--The amount authorized to be made 
        available for fiscal year 1997 under subparagraph (A) shall be 
        reduced by the amount of any unobligated unexpended funds 
        available to carry out this subsection for any fiscal year 
        prior to fiscal year 1996.
        ``(2) Direct and indirect administrative expenses.--
            ``(A) Direct administrative expenses.--
                ``(i) In general.--For purposes of this subsection the 
            term `direct administrative expenses' means the cost under 
            the William D. Ford Federal Direct Loan Program of--

                    ``(I) activities related to credit extension, loan 
                origination, loan servicing, management of contractors, 
                and payments to contractors, other government entities, 
                and program participants, under this part;
                    ``(II) collection of delinquent loans under this 
                part; and
                    ``(III) write-off and closeout of loans under this 
                part.

                ``(ii) Clarification with respect to certain 
            expenses.--Such term does not include the costs to the 
            Department of personnel, training, rent, printing, or other 
            administrative costs, associated with the activities 
            described in subclause (I), (II), or (III) of clause (i).
            ``(B) Indirect administrative expenses.--For purposes of 
        this subsection the term `indirect administrative expenses' 
        means the cost of--
                ``(i) personnel engaged in developing program 
            regulations, policy and administrative guidance;
                ``(ii) audits of institutions and contractors;
                ``(iii) program reviews; and
                ``(iv) other oversight of the program under this part 
            or under part B.
        ``(3) Subsidy cost.--The term `subsidy cost' means the 
    estimated long-term cost to the Federal Government of direct 
    administrative expenses calculated on a net present value basis.''; 
    and
        (2) by striking subsection (d).
    (d) Default Rate Limitations on Direct Lending.--
        (1) Institutional eligibility based on default rates.--The 
    first sentence of section 435(a)(2)(A) (20 U.S.C. 1085(a)(2)(A)) is 
    amended by inserting ``or part D'' after ``under this part''.
        (2) Cohort default rate.--Section 435(m)(1) (20 U.S.C. 
    1085(m)(1)) is amended--
            (A) in subparagraph (A)--
                (i) by striking ``428, 428A, or 428H'' and inserting 
            ``428, 428A, 428H, or part D (other than Federal Direct 
            PLUS Loans)''; and
                (ii) by striking ``428C'' and inserting ``428C or 
            455(g)'';
            (B) in subparagraph (B)--
                (i) by striking ``only''; and
                (ii) by inserting ``and loans made under part D 
            determined by the Secretary to be in default,'' after ``for 
            insurance,''; and
            (C) in subparagraph (C), by striking ``428C'' and inserting 
        ``428C or 455(g)''.
        (3) Default rates and income contingent repayment.--Section 
    435(m) (20 U.S.C. 1085(m)) is amended by adding at the end the 
    following new paragraph:
        ``(5) Default rate and income contingent repayment.--The 
    Secretary shall prescribe regulations for the calculation of 
    default rates for loans that are repaid pursuant to income 
    contingent repayment under this part, which regulations shall be 
    comparable to regulations for the calculation of default rates for 
    loans that are repaid pursuant to income contingent repayment under 
    part D.''.
        (4) Termination of institutional participation.--Section 455 
    (20 U.S.C. 1087e) is amended by adding at the end the following new 
    subsection:
    ``(l) Termination of Institutions for High Default Rates.--
        ``(1) Methodology and criteria.--The Secretary shall develop--
            ``(A) a methodology for the calculation of institutional 
        default rates under the loan programs operated pursuant to this 
        part;
            ``(B) criteria for the initiation of termination 
        proceedings on the basis of such default rates; and
            ``(C) procedures for the conduct of such termination 
        proceedings.
        ``(2) Comparability to part b.--In developing the methodology, 
    criteria, and procedures required by paragraph (1), the Secretary, 
    to the maximum extent possible, shall establish standards for the 
    termination of institutions from participation in loan programs 
    under this part that are comparable to the standards established 
    for the termination of institutions from participation in the loan 
    programs under part B. Such procedures shall include provisions for 
    the appeal of default rate calculations based on deficiencies in 
    the servicing of loans under this part that are comparable to the 
    provisions for such appeals based on deficiencies in the servicing 
    of loans under part B.
        ``(3) Promulgation.--The methodology, criteria, procedures and 
    standards required by paragraphs (1) and (2) shall be promulgated 
    in final form not later than 120 days after the date of enactment 
    of this paragraph.''.
    (e) Elimination of Transition to Direct Loans.--The Act (20 U.S.C. 
1001 et seq.) is further amended--
        (1) in section 422(c)(7) (20 U.S.C. 1072(c)(7))--
            (A) in subparagraph (A), by striking ``during the 
        transition'' and all that follows through ``part D of this 
        title''; and
            (B) in subparagraph (B), by striking ``section 
        428(c)(10)(F)(v)'' and inserting ``section 428(c)(9)(F)(v)'';
        (2) in section 422(g)(1) (20 U.S.C. 1072(g)(1))--
            (A) in the first sentence, by striking ``or the program 
        authorized by part D of this title''; and
            (B) in the second sentence, by striking ``or the program 
        authorized by part D of this title'';
        (3) in section 428(c)(8) (20 U.S.C. 1078(c)(8))--
            (A) by striking subparagraph (B); and
            (B) by striking ``(A) If'' and inserting ``If'';
        (4) in section 428(c)(9)(F)(vii) (20 U.S.C. 
    1078(c)(9)(F)(vii))--
            (A) by inserting ``and'' before ``to avoid disruption''; 
        and
            (B) by striking ``, and to ensure an orderly transition'' 
        and all that follows through the end of such clause and 
        inserting a period;
        (5) in section 428(c)(9)(K) (20 U.S.C. 1078(c)(9)(K)), by 
    striking ``the progress of the transition from the loan programs 
    under this part to'' and inserting ``the integrity and 
    administration of'';
        (6) in section 428(e)(1)(B)(ii) (20 U.S.C. 1078(e)(1)(B)(ii)), 
    by striking ``during the transition'' and all that follows through 
    ``under part D of this title'';
        (7) in section 428(e)(3) (20 U.S.C. 1078(e)(3)), by striking 
    ``costs of transition'' and inserting ``indirect administrative 
    expenses'';
        (8) in section 428(j)(3) (20 U.S.C. 1078(j)(3))--
            (A) in the heading for paragraph (3), by striking ``during 
        transition to direct lending''; and
            (B) in subparagraph (A), by striking ``during the 
        transition'' and all that follows through ``part D of this 
        title'';
        (9) in the heading for paragraph (2) of section 453(c) (20 
    U.S.C. 1087c(c)), by striking ``Transition'' and inserting 
    ``Institutional'';
        (10) in the heading for paragraph (3) of section 453(c) (20 
    U.S.C. 1087c(c)), by striking ``after transition''; and
        (11) in section 456(b) (20 U.S.C. 1087f(b))--
            (A) in paragraph (3), by inserting ``and'' after the 
        semicolon;
            (B) by striking paragraph (4);
            (C) by redesignating paragraph (5) as paragraph (4); and
            (D) in paragraph (4) (as redesignated by subparagraph (C)), 
        by striking ``successful operation'' and inserting ``integrity 
        and efficiency''.
    (f) Fees for Origination Services.--Section 452 (20 U.S.C. 1087b) 
is amended--
        (1) by striking subsection (b); and
        (2) by redesignating subsections (c) and (d) as subsections (b) 
    and (c), respectively.
    (g) Risk Sharing.--Section 428(n) (20 U.S.C. 1078(n)) is amended by 
adding at the end the following new paragraph:
        ``(5) Applicability to part d loans.--The provisions of this 
    subsection shall apply to institutions of higher education 
    participating in direct lending under part D with respect to loans 
    made under such part, and for the purposes of this paragraph, 
    paragraph (4) shall be applied by inserting `or part D' after `this 
    part'.''.
    (h) Technical Amendment.--Section 428(b)(1)(X) (20 U.S.C. 
1078(b)(1)(X)) is amended by striking ``section 428(c)(10)'' and 
inserting ``section 428(c)(9)''.

SEC. 4003. LOAN TERMS AND CONDITIONS.

    (a) Comparability Provisions.--
        (1) In general.--Paragraph (1) of section 455(a) (20 U.S.C. 
    1087e(a)) is amended to read as follows:
        ``(1) Parallel terms, conditions, eligibility requirements, 
    benefits and amounts.--Unless otherwise specified in this part, 
    loans made to borrowers under this part shall have the same terms, 
    conditions, deferments, forbearances, eligibility requirements, and 
    benefits, be subject to the same administrative requirements for 
    origination, payment and processing of applications, be available 
    in the same amounts, be subject to the same interest rates and same 
    amount of fees, and have the same repayment plans, as the 
    corresponding types of loans made to borrowers under sections 428, 
    428B, and 428H. The Secretary shall promulgate regulations 
    implementing this paragraph not later than 120 days after the date 
    of enactment of the Student Loan Reform Act of 1995.''.
        (2) Conforming amendments.--Section 428(b)(1) (20 U.S.C. 
    1078(b)(1)) is amended--
            (A) in subparagraph (D)(ii), by inserting ``(except 
        pursuant to a graduated, income-sensitive, or income contingent 
        repayment schedule)'' after ``10 years''; and
            (B) in subparagraph (E)(ii), by inserting ``(except 
        pursuant to a graduated, income-sensitive, or income contingent 
        repayment schedule)'' after ``10 years''.
    (b) Ability of Part D Borrowers To Obtain Federal Stafford 
Consolidation Loans.--Section 428C(a)(4) (20 U.S.C. 1078-3(a)(4)) is 
amended--
        (1) by redesignating subparagraphs (B), (C), and (D) as 
    subparagraphs (C), (D), and (E), respectively; and
        (2) by inserting after subparagraph (A) the following new 
    subparagraph:
            ``(B) made under part D of this title;''.
    (c) Ability of Part B Borrowers To Obtain Federal Direct 
Consolidation Loans.--Paragraph (5) of section 428C(b) (20 U.S.C. 1078-
3(b)) is amended to read as follows:
        ``(5) Direct consolidation loans for borrowers in specified 
    circumstances.--
            ``(A) Subject to subparagraphs (B) and (C) of section 
        453(a)(2), the Secretary may offer a borrower a Federal Direct 
        Consolidation loan if such borrower is otherwise eligible for a 
        consolidation loan pursuant to this section and such borrower 
        is--
                ``(i) unable to obtain a consolidation loan from a 
            lender with an agreement under subsection (a)(1) that holds 
            one of such borrower's loans under this part; or
                ``(ii) unable to obtain a consolidation loan with 
            income contingent repayment terms from a lender with an 
            agreement under subsection (a)(1).
            ``(B) The Secretary shall establish appropriate 
        certification procedures to verify the eligibility of borrowers 
        for consolidation loans under this paragraph.
            ``(C) The Secretary shall not offer consolidation loans 
        under this paragraph if, in the Secretary's judgment, the 
        Department does not have the necessary origination and 
        servicing arrangements in place for such loans, or the 
        projected volume in such loans will be destabilizing to the 
        availability of loans otherwise available under this part.''.
    (d) Income Contingent Repayment in the Federal Family Education 
Loan Program.--
        (1) Insurance program agreements.--Section 428(b)(1)(E)(i) (20 
    U.S.C. 1078(b)(1)(E)(i)) is amended by striking ``or income-
    sensitive repayment schedule'' and inserting ``repayment schedule 
    or an income-sensitive repayment schedule, and may, at the 
    discretion of the lender, offer the borrower the option of repaying 
    the loan in accordance with an income contingent repayment 
    schedule,''.
        (2) Repayment schedules.--The matter preceding clause (i) of 
    section 428C(c)(2)(A) (20 U.S.C. 1078-3(c)(2)(A)) is amended--
            (A) in the first sentence, by striking ``or income-
        sensitive repayment schedules'' and inserting ``repayment 
        schedules or income-sensitive repayment schedules, and may 
        include, at the discretion of the lender, the establishment of 
        income contingent repayment schedules''; and
            (B) in the second sentence, by striking ``income-
        sensitive'' and inserting ``graduated, income-sensitive, or 
        income contingent''.
        (3) Comparable terms and conditions.--Section 428(m) (20 U.S.C. 
    1078(m)) is amended by adding at the end the following new 
    paragraph:
        ``(3) Income contingent repayment schedules.--For the purpose 
    of this part, income contingent repayment schedules established 
    pursuant to subsection (b)(1)(E)(i) and section 428C(c)(2)(A) shall 
    have terms and conditions comparable to the terms and conditions 
    established by the Secretary pursuant to section 455(e)(4). The 
    Secretary shall discharge or cancel the indebtedness of borrowers 
    that repay pursuant to income contingent repayment under this part 
    to the same extent, and under the same circumstances, as the 
    Secretary discharges or cancels the indebtedness of borrowers that 
    repay pursuant to income contingent repayment under part D.''.
    (e) Plus Program Reductions.--Section 428B(b) (20 U.S.C. 1078-2(b)) 
is amended--
        (1) by striking ``(b) Limitation based on need.--'' and 
    inserting the following:
    ``(b) Annual Limits.--
        ``(1) Limitation based on need.--'';
        (2) by inserting before the last sentence thereof the 
    following:
        ``(3) Limitation computed on basis of actual payments.--''; and
        (3) by inserting before paragraph (3) (as designated by the 
    amendment made by paragraph (2) of this section) the following new 
    paragraph:
        ``(2) Dollar limitation.--Subject to paragraph (1), the maximum 
    amount parents may borrow for one student in any academic year or 
    its equivalent (as defined by regulations of the Secretary) is 
    $15,000.''.

SEC. 4004. AMENDMENTS AFFECTING GUARANTY AGENCIES.

    (a) Use of Reserve Funds To Purchase Defaulted Loans.--Section 422 
(20 U.S.C. 1072) is amended by adding at the end the following new 
subsection:
    ``(h) Use of Reserve Funds To Purchase Defaulted Loans.--
        ``(1) In general.--Except as provided in paragraph (2), a 
    guaranty agency shall use not less than 50 percent of such agency's 
    reserve funds to purchase and hold defaulted loans that are 
    guaranteed by such agency and for which a claim for insurance is 
    filed with such agency by an eligible lender. The amount of such 
    purchases shall be considered as reserve funds under this section 
    and used in the calculation of the minimum reserve level under 
    section 428(c)(9).
        ``(2) Special rule.--A guaranty agency shall not be required to 
    use its reserve funds to purchase and hold defaulted loans in 
    accordance with paragraph (1) to the extent that--
            ``(A) the dollar volume of insurance claims filed with such 
        agency does not amount to 50 percent of such agency's available 
        reserve funds;
            ``(B) such use is prohibited by State law; or
            ``(C) such use will compromise the ability of the guaranty 
        agency to pay program expenses.''.
    (b) Extension of Period a Guaranty Agency Must Hold a Defaulted 
Loan.--
        (1) Exemption for extended holding period.--The last sentence 
    of section 428(c)(1)(A) (20 U.S.C. 1078(c)(1)(A)) is amended by 
    striking ``A guaranty agency'' and inserting ``Except as provided 
    in section 428K, a guaranty agency''.
        (2) New extended holding period program.--
            (A) Amendment.--Part B of title IV (20 U.S.C. 1071 et seq.) 
        is amended by inserting after section 428J the following new 
        section:

``SEC. 428K. GUARANTOR PURCHASE OF CLAIMS WITH RESERVE FUNDS.

    ``(a) Loans Subject to Extended Holding Period.--Except as provided 
in subsection (b), a guaranty agency shall file a claim for 
reimbursement with respect to losses (resulting from the default of a 
borrower) subject to reimbursement by the Secretary pursuant to section 
428(c)(1) not less than 180 days nor more than 225 days after the 
guaranty agency discharges such agency's insurance obligation on a loan 
insured under this part. Such claim shall include losses on the unpaid 
principal and accrued interest of any such loan, including interest 
accrued from the date of such discharge to the date such agency files 
the claim for reimbursement from the Secretary.
    ``(b) Loans Excluded From Extended Holding.--A guaranty agency may 
file a claim with respect to losses subject to reimbursement by the 
Secretary pursuant to section 428(c)(1) prior to 180 days after the 
date the guaranty agency discharges such agency's insurance obligation 
on a loan insured under this part, if--
        ``(1) such agency used 50 percent or more of such agency's 
    reserve funds to purchase or hold loans in accordance with section 
    422(h);
        ``(2) such claim is based on an inability to locate the 
    borrower and the guaranty agency certifies to the Secretary that--
            ``(A) diligent attempts were made to locate the borrower 
        through the use of reasonable skip-tracing techniques in 
        accordance with section 428(c)(2)(G); and
            ``(B) such skip-tracing attempts to locate the borrower 
        were unsuccessful; or
        ``(3) the guaranty agency determines that the borrower is 
    unlikely to possess the financial resources to begin repaying the 
    loan prior to 180 days after default by the borrower.
    ``(c) Guaranty Agency Efforts During Extended Holding Period.--A 
guaranty agency shall attempt to bring a loan described in subsection 
(a) into repayment status during the period prior to 225 days after the 
date the guaranty agency discharges its insurance obligation on such 
loan, so that no claim for reimbursement by the Secretary is necessary. 
Upon securing payments satisfactory to the guaranty agency during such 
period, such agency shall, if practicable, sell such loan to an 
eligible lender. Such loan shall not be sold to an eligible lender that 
the guaranty agency determines has substantially failed to exercise the 
due diligence required of lenders under this part.
    ``(d) Regulation Prohibited.--The Secretary shall not promulgate 
regulations regarding the collection activity of a guaranty agency with 
respect to a loan described in subsection (a) for which reinsurance has 
not been paid under section 428(c)(1).''.
            (B) Effective date.--The amendment made by this paragraph 
        shall apply with respect to loans for which claims for 
        insurance are filed by eligible lenders on or after January 1, 
        1996.
    (c) Administrative Cost Allowance.--Section 428(f)(1) (20 U.S.C. 
1078(f)(1)) is amended--
        (1) in the matter preceding clause (i) of subparagraph (A), by 
    striking ``For a fiscal year prior to fiscal year 1994, the'' and 
    inserting ``The''; and
        (2) by amending subparagraph (B) to read as follows:
        ``(B)(i) The total amount of payments for any fiscal year prior 
    to fiscal year 1994 made under this paragraph shall be equal to 1 
    percent of the total principal amount of the loans upon which 
    insurance was issued under this part during such fiscal year by 
    such guaranty agency.
        ``(ii) For the period beginning January 1, 1996 and ending 
    September 30, 1996, and for each fiscal year thereafter, each 
    guaranty agency shall receive an administrative cost allowance, 
    payable quarterly, for such fiscal year calculated on the basis of 
    0.85 percent of the total principal amount of the loans upon which 
    insurance was issued under this part during such fiscal year by 
    such guaranty agency.
        ``(iii) The guaranty agency shall be deemed to have a 
    contractual right against the United States to receive payments 
    according to the provisions of this subparagraph. Payments shall be 
    made promptly and without administrative delay to any guaranty 
    agency submitting an accurate and complete application therefor 
    under this subparagraph.
        ``(iv) Notwithstanding clauses (ii) and (iii)--
            ``(I) for each of the fiscal years 1996 through 1998, the 
        Secretary shall pay an aggregate amount for such year of not 
        more than $220,000,000 to all guaranty agencies receiving 
        administrative cost allowances under this subparagraph; and
            ``(II) for each of the fiscal years 1999 through 2002, the 
        Secretary shall pay an aggregate amount for such year of not 
        more than $180,000,000 to all guaranty agencies receiving 
        administrative cost allowances under this subparagraph.''.
    (d) Secretary's Equitable Share of Collections on Consolidated 
Defaulted Loans.--Section 428(c)(6)(A) (20 U.S.C. 1078(c)(6)(A)) is 
amended--
        (1) in the matter preceding clause (i)--
            (A) by inserting ``or on behalf of'' after ``made by''; and
            (B) by inserting ``, including payments made to discharge 
        loans made under this title to obtain a consolidation loan 
        pursuant to this part or part D,'' after ``borrower''; and
        (2) in clause (ii), by inserting after ``an amount equal to'' 
    the following: ``--

                    ``(I) for defaulted loans consolidated pursuant to 
                this part or part D on or after January 1, 1996, 18.5 
                percent of the balance of the principal, accrued 
                interest, and collection costs, outstanding at the time 
                of such consolidation; or
                    ``(II) for all other loans,''.

    (e) Reserve Fund Reforms.--
        (1) Strengthening and stabilizing guaranty agencies.--Section 
    428(c) (20 U.S.C. 1078(c)) is amended--
            (A) in paragraph (9)(C)(ii), by striking ``80 percent'' and 
        inserting ``76 percent''; and
            (B) in paragraph (9)(E)--
                (i) in the matter preceding clause (i), by striking 
            ``The Secretary may terminate a'' and inserting ``After 
            providing a guaranty agency notice and opportunity for a 
            hearing on the record, the Secretary may terminate such'';
                (ii) in clause (iv), by inserting ``or'' after the 
            semicolon;
                (iii) by striking clause (vi); and
                (iv) in clause (v), by striking ``; or'' and inserting 
            a period.
        (2) Additional amendments.--Section 422 (20 U.S.C. 1072) is 
    further amended--
            (A) in the last sentence of subsection (a)(2), by striking 
        ``Except as provided in section 428(c)(10) (E) or (F), such'' 
        and inserting ``Except as provided in subparagraph (E) or (F) 
        of section 428(c)(9), such''; and
            (B) in subsection (g), by amending paragraph (4) to read as 
        follows:
        ``(4) Disposition of funds returned to or recovered by the 
    secretary.--Any funds that are returned to or otherwise recovered 
    by the Secretary pursuant to this subsection shall be returned to 
    the Treasury of the United States for purposes of reducing the 
    Federal debt and shall be deposited into the special account under 
    section 3113(d) of title 31, United States Code.''.
    (f) Elimination of Supplemental Preclaims Assistance.--
        (1) Amendment.--Section 428(l) (20 U.S.C. 1078(l)) is amended--
            (A) by striking paragraph (2); and
            (B) by striking ``(l) Preclaims'' and all that follows 
        through ``Upon receipt'' and inserting the following:
    ``(l) Preclaims Assistance and Supplemental Preclaims Assistance.--
Upon receipt''.
        (2) Effective date.--The amendments made by this subsection 
    shall apply to loans for which the first delinquency occurs on or 
    after January 1, 1996.
    (g) Reserve Ratios.--Section 428(c)(9)(A) (20 U.S.C. 1078(c)(9)(A)) 
is amended--
        (1) in clause (i), by inserting ``and'' after the semicolon;
        (2) in clause (ii), by striking ``; and'' and inserting a 
    period; and
        (3) by striking clause (iii).
    (h) Guaranty Agency Reimbursement.--
        (1) In general.--Section 428(c)(1) (20 U.S.C. 1078(c)(1)) is 
    amended--
            (A) in subparagraph (A), by striking ``98 percent'' and 
        inserting ``96 percent''; and
            (B) in subparagraph (B)--
                (i) in clause (i), by striking ``88 percent'' and 
            inserting ``86 percent''; and
                (ii) in clause (ii), by striking ``78 percent'' and 
            inserting ``76 percent''.
        (2) Effective date.--The amendments made by paragraph (1) shall 
    apply with respect to loans for which the first disbursement is 
    made on or after January 1, 1996.

SEC. 4005. AMENDMENTS AFFECTING FFELP LENDERS AND LOAN HOLDERS.

    (a) Risk Sharing by the Loan Holders.--
        (1) Amendment.--Section 428(b)(1)(G) (20 U.S.C. 1078(b)(1)(G)) 
    is amended by striking ``not less than 98 percent'' and inserting 
    ``95 percent''.
        (2) Effective date.--The amendment made by this subsection 
    shall apply with respect to loans for which the first disbursement 
    is made on or after January 1, 1996.
    (b) Lenders-of-Last-Resort.--Section 428(j)(2) (20 U.S.C. 
1078(j)(2)) is amended--
        (1) in subparagraph (A), by striking ``60 days'' and inserting 
    ``15 days''; and
        (2) in subparagraph (B), by striking ``two rejections from 
    eligible lenders'' and inserting ``one rejection from an eligible 
    lender''.
    (c) Exceptional Performance Insurance Reduction.--Section 
428I(b)(1) (20 U.S.C. 1078-9(b)(1)) is amended--
        (1) in the paragraph heading, by striking ``100 percent''; and
        (2) by striking ``100 percent'' and inserting ``95 percent (or 
    100 percent in the case of a lender-of-last-resort)''.
    (d) Loan Fees From Lenders.--
        (1) Amendment.--Section 438(d)(2) (20 U.S.C. 1087-1(d)(2)) is 
    amended by striking ``0.50 percent'' and inserting ``0.80 
    percent''.
        (2) Effective date.--The amendment made by this subsection 
    shall apply with respect to loans for which the first disbursement 
    is made on or after January 1, 1996.
    (e) Lender and Holder Rebate.--
        (1) Amendment.--Section 438 (20 U.S.C. 1078) is amended by 
    adding at the end the following new subsection:
    ``(g) Subsidy Rebate on Stafford and PLUS Loans.--
        ``(1) Rebate.--Each holder of a subsidized or unsubsidized 
    Federal Stafford Loan under this part, or a Federal PLUS loan under 
    section 428B, shall pay to the Secretary, on June 30 and December 
    31 of each year, a subsidy rebate in an amount equal to 0.035 
    percent of the unpaid principal amount of each such loan that such 
    holder holds during the repayment period described in section 
    428(b)(7), except that, notwithstanding subparagraphs (A), (B), and 
    (C) of section 428(b)(7), such holder shall pay a subsidy rebate 
    under this paragraph with respect to such loan during any period of 
    authorized forbearance.
        ``(2) Payment of rebate.--The subsidy rebate shall be paid, to 
    the extent possible, by subtracting from amounts owed such holder 
    under section 438(b) (after deducting from such amounts any amount 
    owed by such holder under section 438(d) for the quarters ending 
    June 30 and December 31, as appropriate) the amount of subsidy 
    rebates owed by such holder. To the extent the amounts owed such 
    holder under section 438(b) (after making the deduction described 
    in the preceding sentence) are insufficient to pay in full the 
    subsidy rebates due from such holder, such holder shall pay the 
    insufficiency by check or wire transfer of funds, in a manner 
    determined by the Secretary.
        ``(3) Deposit.--The Secretary shall deposit all subsidy rebates 
    collected under the second sentence of paragraph (2) into the 
    insurance fund established in section 431.''.
        (2) Effective date.--The amendment made by this subsection 
    shall apply with respect to loans for which the first disbursement 
    is made on or after January 1, 1996.
    (f) Small Lender Audit Exemption.--Section 428(b)(1)(U)(iii) (20 
U.S.C. 1078(b)(1)(U)(iii)) is amended--
        (1) by inserting ``in the case of any lender that originates or 
    holds more than $5,000,000 in principal on loans made under this 
    title in any fiscal year'' before ``for (I)'';
        (2) in subclause (I), by inserting ``such'' before ``lender at 
    least once'';
        (3) in subclause (II), by inserting ``such'' before ``a lender 
    that is audited''; and
        (4) by striking ``if the lender'' and inserting ``if such 
    lender''.

SEC. 4006. CONNIE LEE PRIVATIZATION.

    (a) Status of the Corporation and Corporate Powers; Obligations Not 
Federally Guaranteed.--
        (1) Status of the corporation.--The Corporation shall not be an 
    agency, instrumentality, or establishment of the United States 
    Government, nor a Government corporation nor a Government 
    controlled corporation as such terms are defined in section 103 of 
    title 5, United States Code. No action under section 1491 of title 
    28, United States Code (commonly known as the Tucker Act) shall be 
    allowable against the United States based on the actions of the 
    Corporation.
        (2) Corporate powers.--The Corporation shall be subject to the 
    provisions of this section, and, to the extent not inconsistent 
    with this section, to the District of Columbia Business Corporation 
    Act (or the comparable law of another State, if applicable). The 
    Corporation shall have the powers conferred upon a corporation by 
    the District of Columbia Business Corporation Act (or such other 
    applicable State law) as from time to time in effect in order to 
    conduct its affairs as a private, for-profit corporation and to 
    carry out its purposes and activities incidental thereto. The 
    Corporation shall have the power to enter into contracts, to 
    execute instruments, to incur liabilities, to provide products and 
    services, and to do all things as are necessary or incidental to 
    the proper management of its affairs and the efficient operation of 
    a private, for-profit business.
        (3) Limitation on ownership of stock.--
            (A) Secretary of the treasury.--The Secretary of the 
        Treasury, in completing the sale of stock pursuant to 
        subsection (c), may not sell or issue the stock held by the 
        Secretary of Education to an agency, instrumentality, or 
        establishment of the United States Government, or to a 
        Government corporation or a Government controlled corporation 
        as such terms are defined in section 103 of title 5, United 
        States Code, or to a government-sponsored enterprise as such 
        term is defined in section 622 of title 2, United States Code.
            (B) Student loan marketing association.--The Student Loan 
        Marketing Association shall not increase its share of the 
        ownership of the Corporation in excess of 42 percent of the 
        shares of stock of the Corporation outstanding on the date of 
        enactment of this Act. The Student Loan Marketing Association 
        shall not control the operation of the Corporation, except that 
        the Student Loan Marketing Association may participate in the 
        election of directors as a shareholder, and may continue to 
        exercise its right to appoint directors under section 754 of 
        the Higher Education Act of 1965 (20 U.S.C. 1132f-3) as long as 
        that section is in effect.
            (C) Prohibition.--Until such time as the Secretary of the 
        Treasury sells the stock of the Corporation owned by the 
        Secretary of Education pursuant to subsection (c), the Student 
        Loan Marketing Association shall not provide financial support 
        or guarantees to the Corporation.
            (D) Financial support or guarantees.--After the Secretary 
        of the Treasury sells the stock of the Corporation owned by the 
        Secretary of Education pursuant to subsection (c), the Student 
        Loan Marketing Association may provide financial support or 
        guarantees to the Corporation, if such support or guarantees 
        are subject to terms and conditions that are no more 
        advantageous to the Corporation than the terms and conditions 
        the Student Loan Marketing Association provides to other 
        entities, including, where applicable, other monoline financial 
        guaranty corporations in which the Student Loan Marketing 
        Association has no ownership interest.
        (4) No federal guarantee.--
            (A) Obligations insured by the corporation.--
                (i) Full faith and credit of the united states.--No 
            obligation that is insured, guaranteed, or otherwise backed 
            by the Corporation shall be deemed to be an obligation that 
            is guaranteed by the full faith and credit of the United 
            States.
                (ii) Student loan marketing association.--No obligation 
            that is insured, guaranteed, or otherwise backed by the 
            Corporation shall be deemed to be an obligation that is 
            guaranteed by the Student Loan Marketing Association.
                (iii) Special rule.--This paragraph shall not affect 
            the determination of whether such obligation is guaranteed 
            for purposes of Federal income taxes.
            (B) Securities offered by the corporation.--No debt or 
        equity securities of the Corporation shall be deemed to be 
        guaranteed by the full faith and credit of the United States.
        (5) Definition.--The term ``Corporation'' as used in this 
    section means the College Construction Loan Insurance Association 
    as in existence on the day before the date of enactment of this 
    Act, and to any successor corporation.
    (b) Related Privatization Requirements.--
        (1) Notice requirements.--
            (A) In general.--During the six-year period following the 
        date of enactment of this Act, the Corporation shall include, 
        in each of the Corporation's contracts for the insurance, 
        guarantee, or reinsurance of obligations, and in each document 
        offering debt or equity securities of the Corporation a 
        prominent statement providing notice that--
                (i) such obligations or such securities, as the case 
            may be, are not obligations of the United States, nor are 
            such obligations guaranteed in any way by the full faith 
            and credit of the United States; and
                (ii) the Corporation is not an instrumentality of the 
            United States.
            (B) Additional notice.--During the five-year period 
        following the sale of stock pursuant to subsection (c)(1), in 
        addition to the notice requirements in subparagraph (A), the 
        Corporation shall include, in each of the contracts and 
        documents referred to in such subparagraph, a prominent 
        statement providing notice that the United States is not an 
        investor in the Corporation.
        (2) Corporate charter.--The Corporation's charter shall be 
    amended as necessary and without delay to conform to the 
    requirements of this section.
        (3) Corporate name.--The name of the Corporation, or of any 
    direct or indirect subsidiary thereof, may not contain the term 
    ``College Construction Loan Insurance Association'', or any 
    substantially similar variation thereof.
        (4) Articles of incorporation.--The Corporation shall amend its 
    articles of incorporation without delay to reflect that one of the 
    purposes of the Corporation shall be to guarantee, insure, and 
    reinsure bonds, leases, and other evidences of debt of educational 
    institutions, including Historically Black Colleges and 
    Universities and other academic institutions which are ranked in 
    the lower investment grade category using a nationally recognized 
    credit rating system.
        (5) Requirements until stock sale.--Notwithstanding subsection 
    (d), the requirements of sections 754 and 760 of the Higher 
    Education Act of 1965 (20 U.S.C. 1132f-3 and 1132f-9), as such 
    sections were in effect on the day before the date of enactment of 
    this Act, shall continue to be effective until the day immediately 
    following the date of closing of the purchase of the Secretary of 
    Education's stock (or the date of closing of the final purchase, in 
    the case of multiple transactions) pursuant to subsection (c)(1) of 
    this Act.
    (c) Sale of Federally Owned Stock.--
        (1) Sale of stock required.--The Secretary of the Treasury 
    shall sell, pursuant to section 324 of title 31, United States 
    Code, the stock of the Corporation owned by the Secretary of 
    Education as soon as possible after the date of enactment of this 
    Act, but not later than six months after such date.
        (2) Purchase by the corporation.--In the event that the 
    Secretary of the Treasury is unable to sell the stock, or any 
    portion thereof, at a price acceptable to the Secretary of 
    Education and the Secretary of the Treasury, the Corporation shall 
    purchase, within six months after the date of enactment of this 
    Act, such stock at a price determined by the Secretary of the 
    Treasury and acceptable to the Corporation based on the independent 
    appraisal of one or more nationally recognized financial firms, 
    except that such price shall not exceed the value of the Secretary 
    of Education's stock as determined by the Congressional Budget 
    Office in House Report 104-153, dated June 22, 1995.
        (3) Reimbursement of costs of sale.--The Secretary of the 
    Treasury shall be reimbursed from the proceeds of the sale of the 
    stock under this subsection for all reasonable costs related to 
    such sale, including all reasonable expenses relating to one or 
    more independent appraisals under this subsection.
        (4) Assistance by the corporation.--The Corporation shall 
    provide such assistance as the Secretary of the Treasury and the 
    Secretary of Education may require to facilitate the sale of the 
    stock under this subsection.
    (d) Repeal of Statutory Restrictions and Related Provisions.--Part 
D of title VII of the Higher Education Act of 1965 (20 U.S.C. 1001 et 
seq.) is repealed.

SEC. 4007. EXTENSION OF PROGRAM DURATION.

    Part B of title IV (20 U.S.C. 1071 et seq.) is amended--
        (1) in section 424(a) (20 U.S.C. 1074(a)), by striking ``1998'' 
    and inserting ``2002'';
        (2) in section 428(a)(5) (20 U.S.C. 1078(a)(5))--
            (A) by striking ``1998'' and inserting ``2002''; and
            (B) by striking ``2002'' and inserting ``2006''; and
        (3) in section 428C(e) (20 U.S.C. 1078-3(e)), by amending the 
    first sentence to read as follows: ``The authority to make loans 
    under this section expires at the close of September 30, 2002.''.

   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.

    (a) General Rule.--For purposes of section 205(c)(3)(A) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1055(c)(3)(A)), the minimum period prescribed by the Secretary of the 
Treasury between the date that the explanation referred to in such 
section is provided and the annuity starting date shall not apply if 
waived by the participant and, if applicable, the participant's spouse.
    (b) Effective Date.--Subsection (a) shall apply to plan years 
beginning after December 31, 1995.

            TITLE V--ENERGY AND NATURAL RESOURCES PROVISIONS
        Subtitle A--Nuclear Regulatory Commission Annual Charges

SEC. 5001. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.

    Section 6101(a)(3) of the Omnibus Budget Reconciliation Act of 1990 
(42 U.S.C. 2214(a)(3)) is amended by striking ``September 30, 1998'' 
and inserting ``September 30, 2002''.

                Subtitle B--Department of Energy Assets

            CHAPTER 1--UNITED STATES ENRICHMENT CORPORATION

SEC. 5201. SHORT TITLE.

    This chapter may be cited as the ``USEC Privatization Act''.

SEC. 5202. DEFINITIONS.

    For purposes of this chapter:
        (1) The term ``AVLIS'' means atomic vapor laser isotope 
    separation technology.
        (2) The term ``Corporation'' means the United States Enrichment 
    Corporation and, unless the context otherwise requires, includes 
    the private corporation and any successor thereto following 
    privatization.
        (3) The term ``gaseous diffusion plants'' means the Paducah 
    Gaseous Diffusion Plant at Paducah, Kentucky and the Portsmouth 
    Gaseous Diffusion Plant at Piketon, Ohio.
        (4) The term ``highly enriched uranium'' means uranium enriched 
    to 20 percent or more of the uranium-235 isotope.
        (5) The term ``low-enriched uranium'' means uranium enriched to 
    less than 20 percent of the uranium-235 isotope, including that 
    which is derived from highly enriched uranium.
        (6) The term ``low-level radioactive waste'' has the meaning 
    given such term in section 2(9) of the Low-Level Radioactive Waste 
    Policy Act (42 U.S.C. 2021b(9)).
        (7) The term ``private corporation'' means the corporation 
    established under section 5205.
        (8) The term ``privatization'' means the transfer of ownership 
    of the Corporation to private investors.
        (9) The term ``privatization date'' means the date on which 100 
    percent of the ownership of the Corporation has been transferred to 
    private investors.
        (10) The term ``public offering'' means an underwritten 
    offering to the public of the common stock of the private 
    corporation pursuant to section 5204.
        (11) The term ``Russian HEU Agreement'' means the Agreement 
    Between the Government of the United States of America and the 
    Government of the Russian Federation Concerning the Disposition of 
    Highly Enriched Uranium Extracted from Nuclear Weapons, dated 
    February 18, 1993.
        (12) The term ``Secretary'' means the Secretary of Energy.
        (13) The term ``Suspension Agreement'' means the Agreement to 
    Suspend the Antidumping Investigation on Uranium from the Russian 
    Federation, as amended.
        (14) The term ``uranium enrichment'' means the separation of 
    uranium of a given isotopic content into 2 components, 1 having a 
    higher percentage of a fissile isotope and 1 having a lower 
    percentage.

SEC. 5203. SALE OF THE CORPORATION.

    (a) Authorization.--The Board of Directors of the Corporation, with 
the approval of the Secretary of the Treasury, shall transfer the 
interest of the United States in the United States Enrichment 
Corporation to the private sector in a manner that provides for the 
long-term viability of the Corporation, provides for the continuation 
by the Corporation of the operation of the Department of Energy's 
gaseous diffusion plants, provides for the protection of the public 
interest in maintaining a reliable and economical domestic source of 
uranium mining, enrichment and conversion services, and, to the extent 
not inconsistent with such purposes, secures the maximum proceeds to 
the United States.
    (b) Proceeds.--Proceeds from the sale of the United States' 
interest in the Corporation shall be deposited in the general fund of 
the Treasury.

SEC. 5204. METHOD OF SALE.

    (a) Authorization.--The Board of Directors of the Corporation, with 
the approval of the Secretary of the Treasury, shall transfer ownership 
of the assets and obligations of the Corporation to the private 
corporation established under section 5205 (which may be consummated 
through a merger or consolidation effected in accordance with, and 
having the effects provided under, the law of the State of 
incorporation of the private corporation, as if the Corporation were 
incorporated thereunder).
    (b) Board Determination.--The Board, with the approval of the 
Secretary of the Treasury, shall select the method of transfer and 
establish terms and conditions for the transfer that will provide the 
maximum proceeds to the Treasury of the United States and will provide 
for the long-term viability of the private corporation, the continued 
operation of the gaseous diffusion plants, and the public interest in 
maintaining reliable and economical domestic uranium mining and 
enrichment industries.
    (c) Adequate Proceeds.--The Secretary of the Treasury shall not 
allow the privatization of the Corporation unless before the sale date 
the Secretary of the Treasury determines that the method of transfer 
will provide the maximum proceeds to the Treasury consistent with the 
principles set forth in section 5203(a).
    (d) Application of Securities Laws.--Any offering or sale of 
securities by the private corporation shall be subject to the 
Securities Act of 1933 (15 U.S.C. 77a. et seq.), the Securities 
Exchange Act of 1934 (15 U.S.C. 78a. et seq.), and the provisions of 
the Constitution and laws of any State, Territory, or possession of the 
United States relating to transactions in securities.

SEC. 5205. ESTABLISHMENT OF PRIVATE CORPORATION.

    (a) Incorporation.--(1) The directors of the Corporation shall 
establish a private for-profit corporation under the laws of a State 
for the purpose of receiving the assets and obligations of the 
Corporation at privatization and continuing the business operations of 
the Corporation following privatization.
    (2) The directors of the Corporation may serve as incorporators of 
the private corporation and shall take all steps necessary to establish 
the private corporation, including the filing of articles of 
incorporation consistent with the provisions of this chapter.
    (3) Employees and officers of the Corporation (including members of 
the Board of Directors) acting in accordance with this section on 
behalf of the private corporation shall be deemed to be acting in their 
official capacities as employees or officers of the Corporation for 
purposes of section 205 of title 18, United States Code.
    (b) Status of the Private Corporation.--(1) The private corporation 
shall not be an agency, instrumentality, or establishment of the United 
States, a Government corporation, or a Government-controlled 
corporation.
    (2) Except as otherwise provided by this chapter, financial 
obligations of the private corporation shall not be obligations of, or 
guaranteed as to principal or interest by, the Corporation or the 
United States, and the obligations shall so plainly state.
    (3) No action under section 1491 of title 28, United States Code, 
shall be allowable against the United States based on actions of the 
private corporation.
    (c) Application of Post-Government Employment Restrictions.--
Beginning on the privatization date, the restrictions stated in section 
207 (a), (b), (c), and (d) of title 18, United States Code, shall not 
apply to the acts of an individual done in carrying out official duties 
as a director, officer, or employee of the private corporation, if the 
individual was an officer or employee of the Corporation (including a 
director) continuously during the 45 days prior to the privatization 
date.
    (d) Dissolution.--In the event that the privatization does not 
occur, the Corporation will provide for the dissolution of the private 
corporation within 1 year of the private corporation's incorporation 
unless the Secretary of the Treasury or his delegate, upon the 
Corporation's request, agrees to delay any such dissolution for an 
additional year.

SEC. 5206. TRANSFERS TO THE PRIVATE CORPORATION.

    Concurrent with privatization, the Corporation shall transfer to 
the private corporation--
        (1) the lease of the gaseous diffusion plants in accordance 
    with section 5207,
        (2) all personal property and inventories of the Corporation,
        (3) all contracts, agreements, and leases under section 
    5208(a),
        (4) the Corporation's right to purchase power from the 
    Secretary under section 5208(b),
        (5) such funds in accounts of the Corporation held by the 
    Treasury or on deposit with any bank or other financial institution 
    as approved by the Secretary of the Treasury, and
        (6) all of the Corporation's records, including all of the 
    papers and other documentary materials, regardless of physical form 
    or characteristics, made or received by the Corporation.

SEC. 5207. LEASING OF GASEOUS DIFFUSION FACILITIES.

    (a) Transfer of Lease.--Concurrent with privatization, the 
Corporation shall transfer to the private corporation the lease of the 
gaseous diffusion plants and related property for the remainder of the 
term of such lease in accordance with the terms of such lease.
    (b) Renewal.--The private corporation shall have the exclusive 
option to lease the gaseous diffusion plants and related property for 
additional periods following the expiration of the initial term of the 
lease.
    (c) Exclusion of Facilities for Production of Highly Enriched 
Uranium.--The Secretary shall not lease to the private corporation any 
facilities necessary for the production of highly enriched uranium but 
may, subject to the requirements of the Atomic Energy Act of 1954 (42 
U.S.C. 2011 et seq.), grant the Corporation access to such facilities 
for purposes other than the production of highly enriched uranium.
    (d) DOE Responsibility for Preexisting Conditions.--The payment of 
any costs of decontamination and decommissioning, response actions, or 
corrective actions with respect to conditions existing before July 1, 
1993, at the gaseous diffusion plants shall remain the sole 
responsibility of the Secretary.
    (e) Environmental Audit.--For purposes of subsection (d), the 
conditions existing before July 1, 1993, at the gaseous diffusion 
plants shall be determined from the environmental audit conducted 
pursuant to section 1403(e) of the Atomic Energy Act of 1954 (42 U.S.C. 
2297c-2(e)).
    (f) Treatment Under Price-Anderson Provisions.--Any lease executed 
between the Secretary and the Corporation or the private corporation, 
and any extension or renewal thereof, under this section shall be 
deemed to be a contract for purposes of section 170d. of the Atomic 
Energy Act of 1954 (42 U.S.C. 2210(d)).
    (g) Waiver of EIS Requirement.--The execution or transfer of the 
lease between the Secretary and the Corporation or the private 
corporation, and any extension or renewal thereof, shall not be 
considered a major Federal action significantly affecting the quality 
of the human environment for purposes of section 102 of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332).

SEC. 5208. TRANSFER OF CONTRACTS.

    (a) Transfer of Contracts.--Concurrent with privatization, the 
Corporation shall transfer to the private corporation all contracts, 
agreements, and leases, including all uranium enrichment contracts, 
that were--
        (1) transferred by the Secretary to the Corporation pursuant to 
    section 1401(b) of the Atomic Energy Act of 1954 (42 U.S.C. 
    2297c(b)), or
        (2) entered into by the Corporation before the privatization 
    date.
    (b) Nontransferable Power Contracts.--The Corporation shall 
transfer to the private corporation the right to purchase power from 
the Secretary under the power purchase contracts for the gaseous 
diffusion plants executed by the Secretary before July 1, 1993. The 
Secretary shall continue to receive power for the gaseous diffusion 
plants under such contracts and shall continue to resell such power to 
the private corporation at cost during the term of such contracts.
    (c) Effect of Transfer.--(1) Notwithstanding subsection (a), the 
United States shall remain obligated to the parties to the contracts, 
agreements, and leases transferred under subsection (a) for the 
performance of its obligations under such contracts, agreements, or 
leases during their terms. Performance of such obligations by the 
private corporation shall be considered performance by the United 
States.
    (2) If a contract, agreement, or lease transferred under subsection 
(a) is terminated, extended, or materially amended after the 
privatization date--
        (A) the private corporation shall be responsible for any 
    obligation arising under such contract, agreement, or lease after 
    any extension or material amendment, and
        (B) the United States shall be responsible for any obligation 
    arising under the contract, agreement, or lease before the 
    termination, extension, or material amendment.
    (3) The private corporation shall reimburse the United States for 
any amount paid by the United States under a settlement agreement 
entered into with the consent of the private corporation or under a 
judgment, if the settlement or judgment--
        (A) arises out of an obligation under a contract, agreement, or 
    lease transferred under subsection (a), and
        (B) arises out of actions of the private corporation between 
    the privatization date and the date of a termination, extension, or 
    material amendment of such contract, agreement, or lease.
    (d) Pricing.--The Corporation may establish prices for its 
products, materials, and services provided to customers on a basis that 
will allow it to attain the normal business objectives of a profit 
making corporation.

SEC. 5209. LIABILITIES.

    (a) Liability of the United States.--(1) Except as otherwise 
provided in this chapter, all liabilities arising out of the operation 
of the uranium enrichment enterprise before July 1, 1993, shall remain 
the direct liabilities of the Secretary.
    (2) Except as provided in subsection (a)(3) or otherwise provided 
in a memorandum of agreement entered into by the Corporation and the 
Office of Management and Budget prior to the privatization date, all 
liabilities arising out of the operation of the Corporation between 
July 1, 1993, and the privatization date shall remain the direct 
liabilities of the United States.
    (3) All liabilities arising out of the disposal of depleted uranium 
generated by the Corporation between July 1, 1993, and the 
privatization date shall become the direct liabilities of the 
Secretary.
    (4) Any stated or implied consent for the United States, or any 
agent or officer of the United States, to be sued by any person for any 
legal, equitable, or other relief with respect to any claim arising 
from any action taken by any agent or officer of the United States in 
connection with the privatization of the Corporation is hereby 
withdrawn.
    (5) To the extent that any claim against the United States under 
this section is of the type otherwise required by Federal statute or 
regulation to be presented to a Federal agency or official for 
adjudication or review, such claim shall be presented to the Department 
of Energy in accordance with procedures to be established by the 
Secretary. Nothing in this paragraph shall be construed to impose on 
the Department of Energy liability to pay any claim presented pursuant 
to this paragraph.
    (6) The Attorney General shall represent the United States in any 
action seeking to impose liability under this subsection.
    (b) Liability of the Corporation.--Notwithstanding any provision of 
any agreement to which the Corporation is a party, the Corporation 
shall not be considered in breach, default, or violation of any 
agreement because of the transfer of such agreement to the private 
corporation under section 5208 or any other action the Corporation is 
required to take under this chapter.
    (c) Liability of the Private Corporation.--Except as provided in 
this chapter, the private corporation shall be liable for any 
liabilities arising out of its operations after the privatization date.
    (d) Liability of Officers and Directors.--(1) No officer, director, 
employee, or agent of the Corporation shall be liable in any civil 
proceeding to any party in connection with any action taken in 
connection with the privatization if, with respect to the subject 
matter of the action, suit, or proceeding, such person was acting 
within the scope of his employment.
    (2) This subsection shall not apply to claims arising under the 
Securities Act of 1933 (15 U.S.C. 77a. et seq.), the Securities 
Exchange Act of 1934 (15 U.S.C. 78a. et seq.), or under the 
Constitution or laws of any State, territory, or possession of the 
United States relating to transactions in securities.

SEC. 5210. EMPLOYEE PROTECTIONS.

    (a) Contractor Employees.--(1) Privatization shall not diminish the 
accrued, vested pension benefits of employees of the Corporation's 
operating contractor at the two gaseous diffusion plants.
    (2) In the event that the private corporation terminates or changes 
the contractor at either or both of the gaseous diffusion plants, the 
plan sponsor or other appropriate fiduciary of the pension plan 
covering employees of the prior operating contractor shall arrange for 
the transfer of all plan assets and liabilities relating to accrued 
pension benefits of such plan's participants and beneficiaries from 
such plant to a pension plan sponsored by the new contractor or the 
private corporation or a joint-labor management plan, as the case may 
be.
    (3) In addition to any obligations arising under the National Labor 
Relations Act (29 U.S.C. 151 et seq.), any employer (including the 
private corporation if it operates a gaseous diffusion plant without a 
contractor or any contractor of the private corporation) at a gaseous 
diffusion plant shall--
        (A) abide by the terms of any unexpired collective bargaining 
    agreement covering employees in bargaining units at the plant and 
    in effect on the privatization date until the stated expiration or 
    termination date of the agreement; or
        (B) in the event a collective bargaining agreement is not in 
    effect upon the privatization date, have the same bargaining 
    obligations under section 8(d) of the National Labor Relations Act 
    (29 U.S.C. 158(d)) as it had immediately before the privatization 
    date.
    (4) If the private corporation replaces its operating contractor at 
a gaseous diffusion plant, the new employer (including the new 
contractor or the private corporation if it operates a gaseous 
diffusion plant without a contractor) shall--
        (A) offer employment to non-management employees of the 
    predecessor contractor to the extent that their jobs still exist or 
    they are qualified for new jobs, and
        (B) abide by the terms of the predecessor contractor's 
    collective bargaining agreement until the agreement expires or a 
    new agreement is signed.
    (5) In the event of a plant closing or mass layoff (as such terms 
are defined in section 2101(a) (2) and (3) of title 29, United States 
Code) at either of the gaseous diffusion plants, the Secretary of 
Energy shall treat any adversely affected employee of an operating 
contractor at either plant who was an employee at such plant on July 1, 
1993, as a Department of Energy employee for purposes of sections 3161 
and 3162 of the National Defense Authorization Act for Fiscal Year 1993 
(42 U.S.C. 7274h-7274i).
    (6)(A) The Secretary and the private corporation shall cause the 
post-retirement health benefits plan provider (or its successor) to 
continue to provide benefits for eligible persons, as described under 
subparagraph (B), employed by an operating contractor at either of the 
gaseous diffusion plants in an economically efficient manner and at 
substantially the same level of coverage as eligible retirees are 
entitled to receive on the privatization date.
    (B) Persons eligible for coverage under subparagraph (A) shall be 
limited to:
        (i) persons who retired from active employment at one of the 
    gaseous diffusion plants on or before the privatization date as 
    vested participants in a pension plan maintained either by the 
    Corporation's operating contractor or by a contractor employed 
    prior to July 1, 1993, by the Department of Energy to operate a 
    gaseous diffusion plant; and
        (ii) persons who are employed by the Corporation's operating 
    contractor on or before the privatization date and are vested 
    participants in a pension plan maintained either by the 
    Corporation's operating contractor or by a contractor employed 
    prior to July 1, 1993, by the Department of Energy to operate a 
    gaseous diffusion plant.
    (C) The Secretary shall fund the entire cost of post-retirement 
health benefits for persons who retired from employment with an 
operating contractor prior to July 1, 1993.
    (D) The Secretary and the Corporation shall fund the cost of post-
retirement health benefits for persons who retire from employment with 
an operating contractor on or after July 1, 1993, in proportion to the 
retired person's years and months of service at a gaseous diffusion 
plant under their respective management.
    (7)(A) Any suit under this subsection alleging a violation of an 
agreement between an employer and a labor organization shall be brought 
in accordance with section 301 of the Labor Management Relations Act 
(29 U.S.C. 185).
    (B) Any charge under this subsection alleging an unfair labor 
practice violative of section 8 of the National Labor Relations Act (29 
U.S.C. 158) shall be pursued in accordance with section 10 of the 
National Labor Relations Act (29 U.S.C. 160).
    (C) Any suit alleging a violation of any provision of this 
subsection, to the extent it does not allege a violation of the 
National Labor Relations Act, may be brought in any district court of 
the United States having jurisdiction over the parties, without regard 
to the amount in controversy or the citizenship of the parties.
    (b) Former Federal Employees.--(1)(A) An employee of the 
Corporation that was subject to either the Civil Service Retirement 
System (referred to in this section as ``CSRS'') or the Federal 
Employees' Retirement System (referred to in this section as ``FERS'') 
on the day immediately preceding the privatization date shall elect--
        (i) to retain the employee's coverage under either CSRS or 
    FERS, as applicable, in lieu of coverage by the Corporation's 
    retirement system, or
        (ii) to receive a deferred annuity or lump-sum benefit payable 
    to a terminated employee under CSRS or FERS, as applicable.
    (B) An employee that makes an election under subparagraph (A)(ii) 
shall have the option to transfer the balance in the employee's Thrift 
Savings Plan account to a defined contribution plan under the 
Corporation's retirement system, consistent with applicable law and the 
terms of the Corporation's defined contribution plan.
    (2) The Corporation shall pay to the Civil Service Retirement and 
Disability Fund--
        (A) such employee deductions and agency contributions as are 
    required by sections 8334, 8422, and 8423 of title 5, United States 
    Code, for those employees who elect to retain their coverage under 
    either CSRS or FERS pursuant to paragraph (1);
        (B) such additional agency contributions as are determined 
    necessary by the Office of Personnel Management to pay, in 
    combination with the sums under subparagraph (A), the ``normal 
    cost'' (determined using dynamic assumptions) of retirement 
    benefits for those employees who elect to retain their coverage 
    under CSRS pursuant to paragraph (1), with the concept of ``normal 
    cost'' being used consistent with generally accepted actuarial 
    standards and principles; and
        (C) such additional amounts, not to exceed two percent of the 
    amounts under subparagraphs (A) and (B), as are determined 
    necessary by the Office of Personnel Management to pay the cost of 
    administering retirement benefits for employees who retire from the 
    Corporation after the privatization date under either CSRS or FERS, 
    for their survivors, and for survivors of employees of the 
    Corporation who die after the privatization date (which amounts 
    shall be available to the Office of Personnel Management as 
    provided in section 8348(a)(1)(B) of title 5, United States Code).
    (3) The Corporation shall pay to the Thrift Savings Fund such 
employee and agency contributions as are required by section 8432 of 
title 5, United States Code, for those employees who elect to retain 
their coverage under FERS pursuant to paragraph (1).
    (4) Any employee of the Corporation who was subject to the Federal 
Employee Health Benefits Program (referred to in this section as 
``FEHBP'') on the day immediately preceding the privatization date and 
who elects to retain coverage under either CSRS or FERS pursuant to 
paragraph (1) shall have the option to receive health benefits from a 
health benefit plan established by the Corporation or to continue 
without interruption coverage under the FEHBP, in lieu of coverage by 
the Corporation's health benefit system.
    (5) The Corporation shall pay to the Employees Health Benefits 
Fund--
        (A) such employee deductions and agency contributions as are 
    required by section 8906(a)-(f) of title 5, United States Code, for 
    those employees who elect to retain their coverage under FEHBP 
    pursuant to paragraph (4); and
        (B) such amounts as are determined necessary by the Office of 
    Personnel Management under paragraph (6) to reimburse the Office of 
    Personnel Management for contributions under section 8906(g)(1) of 
    title 5, United States Code, for those employees who elect to 
    retain their coverage under FEHBP pursuant to paragraph (4).
    (6) The amounts required under paragraph (5)(B) shall pay the 
Government contributions for retired employees who retire from the 
Corporation after the privatization date under either CSRS or FERS, for 
survivors of such retired employees, and for survivors of employees of 
the Corporation who die after the privatization date, with said amounts 
prorated to reflect only that portion of the total service of such 
employees and retired persons that was performed for the Corporation 
after the privatization date.

SEC. 5211. OWNERSHIP LIMITATIONS.

    (a) Securities Limitations.--No director, officer, or employee of 
the Corporation may acquire any securities, or any rights to acquire 
any securities of the private corporation on terms more favorable than 
those offered to the general public--
        (1) in a public offering designed to transfer ownership of the 
    Corporation to private investors,
        (2) pursuant to any agreement, arrangement, or understanding 
    entered into before the privatization date, or
        (3) before the election of the directors of the private 
    corporation.
    (b) Ownership Limitation.--Immediately following the consummation 
of the transaction or series of transactions pursuant to which 100 
percent of the ownership of the Corporation is transferred to private 
investors, and for a period of three years thereafter, no person may 
acquire, directly or indirectly, beneficial ownership of securities 
representing more than 10 percent of the total votes of all outstanding 
voting securities of the Corporation. The foregoing limitation shall 
not apply to--
        (1) any employee stock ownership plan of the Corporation,
        (2) members of the underwriting syndicate purchasing shares in 
    stabilization transactions in connection with the privatization, or
        (3) in the case of shares beneficially held in the ordinary 
    course of business for others, any commercial bank, broker-dealer, 
    or clearing agency.

SEC. 5212. URANIUM TRANSFERS AND SALES.

    (a) Transfers and Sales by the Secretary.--The Secretary shall not 
provide enrichment services or transfer or sell any uranium (including 
natural uranium concentrates, natural uranium hexafluoride, or enriched 
uranium in any form) to any person except as consistent with this 
section.
    (b) Russian HEU.--(1) On or before December 31, 1996, the United 
States Executive Agent under the Russian HEU Agreement shall transfer 
to the Secretary without charge title to an amount of uranium 
hexafluoride equivalent to the natural uranium component of low-
enriched uranium derived from at least 18 metric tons of highly 
enriched uranium purchased from the Russian Executive Agent under the 
Russian HEU Agreement. The quantity of such uranium hexafluoride 
delivered to the Secretary shall be based on a tails assay of 0.30 
U\235\. Uranium hexafluoride transferred to the Secretary pursuant to 
this paragraph shall be deemed under United States law for all purposes 
to be of Russian origin.
    (2) Within 7 years of the date of enactment of this Act, the 
Secretary shall sell, and receive payment for, the uranium hexafluoride 
transferred to the Secretary pursuant to paragraph (1). Such uranium 
hexafluoride shall be sold--
        (A) at any time for use in the United States for the purpose of 
    overfeeding;
        (B) at any time for end use outside the United States;
        (C) in 1995 and 1996 to the Russian Executive Agent at the 
    purchase price for use in matched sales pursuant to the Suspension 
    Agreement; or
        (D) in calendar year 2001 for consumption by end users in the 
    United States not prior to January 1, 2002, in volumes not to 
    exceed 3,000,000 pounds U<INF>3O<INF>8 equivalent per year.
    (3) With respect to all enriched uranium delivered to the United 
States Executive Agent under the Russian HEU Agreement on or after 
January 1, 1997, the United States Executive Agent shall, upon request 
of the Russian Executive Agent, enter into an agreement to deliver 
concurrently to the Russian Executive Agent an amount of uranium 
hexafluoride equivalent to the natural uranium component of such 
uranium. An agreement executed pursuant to a request of the Russian 
Executive Agent, as contemplated in this paragraph, may pertain to any 
deliveries due during any period remaining under the Russian HEU 
Agreement. The quantity of such uranium hexafluoride delivered to the 
Russian Executive Agent shall be based on a tails assay of 0.30 U\235\. 
Title to uranium hexafluoride delivered to the Russian Executive Agent 
pursuant to this paragraph shall transfer to the Russian Executive 
Agent upon delivery of such material to the Russian Executive Agent, 
with such delivery to take place at a North American facility 
designated by the Russian Executive Agent. Uranium hexafluoride 
delivered to the Russian Executive Agent pursuant to this paragraph 
shall be deemed under United States law for all purposes to be of 
Russian origin. Such uranium hexafluoride may be sold to any person or 
entity for delivery and use in the United States only as permitted in 
subsections (b)(5), (b)(6) and (b)(7) of this section.
    (4) In the event that the Russian Executive Agent does not exercise 
its right to enter into an agreement to take delivery of the natural 
uranium component of any low-enriched uranium, as contemplated in 
paragraph (3), within 90 days of the date such low-enriched uranium is 
delivered to the United States Executive Agent, or upon request of the 
Russian Executive Agent, then the United States Executive Agent shall 
engage an independent entity through a competitive selection process to 
auction an amount of uranium hexafluoride or U<INF>3O<INF>8 (in the 
event that the conversion component of such hexafluoride has previously 
been sold) equivalent to the natural uranium component of such low-
enriched uranium. An agreement executed pursuant to a request of the 
Russian Executive Agent, as contemplated in this paragraph, may pertain 
to any deliveries due during any period remaining under the Russian HEU 
Agreement. Such independent entity shall sell such uranium hexafluoride 
in one or more lots to any person or entity to maximize the proceeds 
from such sales, for disposition consistent with the limitations set 
forth in this subsection. The independent entity shall pay to the 
Russian Executive Agent the proceeds of any such auction less all 
reasonable transaction and other administrative costs. The quantity of 
such uranium hexafluoride auctioned shall be based on a tails assay of 
0.30 U\235\. Title to uranium hexafluoride auctioned pursuant to this 
paragraph shall transfer to the buyer of such material upon delivery of 
such material to the buyer. Uranium hexafluoride auctioned pursuant to 
this paragraph shall be deemed under United States law for all purposes 
to be of Russian origin.
    (5) Except as provided in paragraphs (6) and (7), uranium 
hexafluoride delivered to the Russian Executive Agent under paragraph 
(3) or auctioned pursuant to paragraph (4), may not be delivered for 
consumption by end users in the United States either directly or 
indirectly prior to January 1, 1998, and thereafter only in accordance 
with the following schedule:

                 Annual maximum deliveries to end users

    Year:
                               (millions lbs. U<INF>3O<INF>8 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.

    (6) Uranium hexafluoride delivered to the Russian Executive Agent 
under paragraph (3) or auctioned pursuant to paragraph (4) may be sold 
at any time as Russian-origin natural uranium in a matched sale 
pursuant to the Suspension Agreement, and 
    in such case shall not be counted against the annual maximum 
deliveries set forth in paragraph (5).
    (7) Uranium hexafluoride delivered to the Russian Executive Agent 
under paragraph (3) or auctioned pursuant to paragraph (4) may be sold 
at any time for use in the United States for the purpose of overfeeding 
in the operations of enrichment facilities.
    (8) Nothing in this subsection (b) shall restrict the sale of the 
conversion component of such uranium hexafluoride.
    (9) The Secretary of Commerce shall have responsibility for the 
administration and enforcement of the limitations set forth in this 
subsection. The Secretary of Commerce may require any person to provide 
any certifications, information, or take any action that may be 
necessary to enforce these limitations. The United States Customs 
Service shall maintain and provide any information required by the 
Secretary of Commerce and shall take any action requested by the 
Secretary of Commerce which is necessary for the administration and 
enforcement of the uranium delivery limitations set forth in this 
section.
    (10) The President shall monitor the actions of the United States 
Executive Agent under the Russian HEU Agreement and shall report to the 
Congress not later than December 31 of each year on the effect the low-
enriched uranium delivered under the Russian HEU Agreement is having on 
the domestic uranium mining, conversion, and enrichment industries, and 
the operation of the gaseous diffusion plants. Such report shall 
include a description of actions taken or proposed to be taken by the 
President to prevent or mitigate any material adverse impact on such 
industries or any loss of employment at the gaseous diffusion plants as 
a result of the Russian HEU Agreement.
    (c) Transfers to the Corporation.--(1) The Secretary shall transfer 
to the Corporation without charge up to 50 metric tons of enriched 
uranium and up to 7,000 metric tons of natural uranium from the 
Department of Energy's stockpile, subject to the restrictions in 
subsection (c)(2).
    (2) The Corporation shall not deliver for commercial end use in the 
United States--
        (A) any of the uranium transferred under this subsection before 
    January 1, 1998;
        (B) more than 10 percent of the uranium (by uranium 
    hexafluoride equivalent content) transferred under this subsection 
    or more than 4,000,000 pounds, whichever is less, in any calendar 
    year after 1997; or
        (C) more than 800,000 separative work units contained in low-
    enriched uranium transferred under this subsection in any calendar 
    year.
    (d) Inventory Sales.--(1) In addition to the transfers authorized 
under subsections (c) and (e), the Secretary may, from time to time, 
sell natural and low-enriched uranium (including low-enriched uranium 
derived from highly enriched uranium) from the Department of Energy's 
stockpile.
    (2) Except as provided in subsections (b), (c), and (e), no sale or 
transfer of natural or low-enriched uranium shall be made unless--
        (A) the President determines that the material is not necessary 
    to national security needs,
        (B) the Secretary determines that the sale of the material will 
    not have an adverse material impact on the domestic uranium mining, 
    conversion, or enrichment industry, taking into account the sales 
    of uranium under the Russian HEU Agreement and the Suspension 
    Agreement, and
        (C) the price paid to the Secretary will not be less than the 
    fair market value of the material.
    (e) Government Transfers.--Notwithstanding subsection (d)(2), the 
Secretary may transfer or sell enriched uranium--
        (1) to a Federal agency if the material is transferred for the 
    use of the receiving agency without any resale or transfer to 
    another entity and the material does not meet commercial 
    specifications;
        (2) to any person for national security purposes, as determined 
    by the Secretary; or
        (3) to any State or local agency or nonprofit, charitable, or 
    educational institution for use other than the generation of 
    electricity for commercial use.
    (f) Savings Provision.--Nothing in this chapter shall be read to 
modify the terms of the Russian HEU Agreement.

SEC. 5213. LOW-LEVEL WASTE.

    (a) Responsibility of DOE.--(1) The Secretary, at the request of 
the generator, shall accept for disposal low-level radioactive waste, 
including depleted uranium if it were ultimately determined to be low-
level radioactive waste, generated by the Corporation as a result of 
the operations of the gaseous diffusion plants or as a result of the 
treatment of such wastes at a location other than a gaseous diffusion 
plant. The terms and conditions for such service shall be no more 
favorable than those the Secretary offers any other generator of such 
wastes generated by uranium enrichment plants licensed by the Nuclear 
Regulatory Commission.
    (2) The Secretary shall recover the cost of providing the service 
in paragraph (1), including a pro rata share of any capital costs, by 
charging the Corporation a fee for such service in an amount equal to 
the price charged uranium enrichment plants licensed by the Nuclear 
Regulatory Commission, but in no event shall the Secretary charge any 
generator more than an amount equal to that which would be charged by 
commercial, State, regional, or interstate compact entities for 
disposal of such waste.
    (b) Agreements With Other Persons.--The Corporation or any other 
generator may also enter into agreements for the disposal of low-level 
radioactive waste subject to subsection (a) with any person other than 
the Secretary that is authorized by applicable laws and regulations to 
dispose of such wastes, but shall have no authority under this or any 
other law to require a State or interstate compact to treat, store, or 
dispose of such waste in a State or interstate compact facility without 
the State or compact's consent.

SEC. 5214. AVLIS.

    (a) Exclusive Right To Commercialize.--The Corporation shall have 
the exclusive commercial right to deploy and use any AVLIS patents, 
processes, and technical information owned or controlled by the 
Government, upon completion of a royalty agreement with the Secretary.
    (b) Transfer of Related Property to Corporation.--
        (1) In general.--To the extent requested by the Corporation and 
    subject to the requirements of the Atomic Energy Act of 1954 (42 
    U.S.C. 2011 et seq.), the President shall transfer without charge 
    to the Corporation all of the right, title, or interest in and to 
    property owned by the United States under control or custody of the 
    Secretary that is directly related to and materially useful in the 
    performance of the Corporation's purposes regarding AVLIS and 
    alternative technologies for uranium enrichment, including--
            (A) facilities, equipment, and materials for research, 
        development, and demonstration activities; and
            (B) all other facilities, equipment, materials, processes, 
        patents, technical information of any kind, contracts, 
        agreements, and leases.
        (2) Exception.--Facilities, real estate, improvements, and 
    equipment related to the gaseous diffusion, and gas centrifuge, 
    uranium enrichment programs of the Secretary shall not transfer 
    under paragraph (1)(B).
        (3) Expiration of transfer authority.--The President's 
    authority to transfer property under this subsection shall expire 
    upon the privatization date.
    (c) Liability for Patent and Related Claims.--With respect to any 
right, title, or interest provided to the Corporation under subsection 
(a) or (b), the Corporation shall have sole liability for any payments 
made or awards under section 157 b. (3) of the Atomic Energy Act of 
1954 (42 U.S.C. 2187(b)(3)), or any settlements or judgments involving 
claims for alleged patent infringement. Any royalty agreement under 
subsection (a) of this section shall provide for a reduction of royalty 
payments to the Secretary to offset any payments, awards, settlements, 
or judgments under this subsection.

SEC. 5215. APPLICATION OF CERTAIN LAWS.

    (a) OSHA.--(1) As of the privatization date, the private 
corporation shall be subject to and comply with the Occupational Safety 
and Health Act of 1970 (29 U.S.C. 651 et seq.).
    (2) The Nuclear Regulatory Commission and the Occupational Safety 
and Health Administration shall, within 90 days after the date of 
enactment of this Act, enter into a memorandum of agreement to govern 
the exercise of their authority over occupational safety and health 
hazards at the gaseous diffusion plants, including inspection, 
investigation, enforcement, and rulemaking relating to such hazards.
    (b) Antitrust Laws.--For purposes of the antitrust laws, the 
performance by the private corporation of a ``matched import'' contract 
under the Suspension Agreement shall be considered to have occurred 
prior to the privatization date, if at the time of privatization, such 
contract had been agreed to by the parties in all material terms and 
confirmed by the Secretary of Commerce under the Suspension Agreement.
    (c) Energy Reorganization Act Requirements.--(1) The private 
corporation and its contractors and subcontractors shall be subject to 
the provisions of section 211 of the Energy Reorganization Act of 1974 
(42 U.S.C. 5851) to the same extent as an employer subject to such 
section.
    (2) With respect to the operation of the facilities leased by the 
private corporation, section 206 of the Energy Reorganization Act of 
1974 (42 U.S.C. 5846) shall apply to the directors and officers of the 
private corporation.

SEC. 5216. AMENDMENTS TO THE ATOMIC ENERGY ACT.

    (a) Repeal.--(1) Chapters 22 through 26 of the Atomic Energy Act of 
1954 (42 U.S.C. 2297-2297e-7) are repealed as of the privatization 
date.
    (2) The table of contents of such Act is amended as of the 
privatization date by striking the items referring to sections repealed 
by paragraph (1).
    (b) NRC Licensing.--(1) Section 11v. of the Atomic Energy Act of 
1954 (42 U.S.C. 2014v.) is amended by striking ``or the construction 
and operation of a uranium enrichment facility using Atomic Vapor Laser 
Isotope Separation technology''.
    (2) Section 193 of the Atomic Energy Act of 1954 (42 U.S.C. 2243) 
is amended by adding at the end the following:
    ``(f) Limitation.--No license or certificate of compliance may be 
issued to the United States Enrichment Corporation or its successor 
under this section or sections 53, 63, or 1701, if the Commission 
determines that--
        ``(1) the Corporation is owned, controlled, or dominated by an 
    alien, a foreign corporation, or a foreign government; or
        ``(2) the issuance of such a license or certificate of 
    compliance would be inimical to--
            ``(A) the common defense and security of the United States; 
        or
            ``(B) the maintenance of a reliable and economical domestic 
        source of enrichment services.''.
    (3) Section 1701(c)(2) of the Atomic Energy Act of 1954 (42 U.S.C. 
2297f(c)(2)) is amended to read as follows:
        ``(2) Periodic application for certificate of compliance.--The 
    Corporation shall apply to the Nuclear Regulatory Commission for a 
    certificate of compliance under paragraph (1) periodically, as 
    determined by the Commission, but not less than every 5 years. The 
    Commission shall review any such application and any determination 
    made under subsection (b)(2) shall be based on the results of any 
    such review.''.
    (4) Section 1702(a) of the Atomic Energy Act of 1954 (42 U.S.C. 
2297f-1(a)) is amended--
        (1) by striking ``other than'' and inserting ``including'', and
        (2) by striking ``sections 53 and 63'' and inserting ``sections 
    53, 63, and 193''.
    (c) Judicial Review of NRC Actions.--Section 189b. of the Atomic 
Energy Act of 1954 (42 U.S.C. 2239(b)) is amended to read as follows:
    ``b. The following Commission actions shall be subject to judicial 
review in the manner prescribed in chapter 158 of title 28, United 
States Code and chapter 7 of title 5, United States Code:
        ``(1) Any final order entered in any proceeding of the kind 
    specified in subsection (a).
        ``(2) Any final order allowing or prohibiting a facility to 
    begin operating under a combined construction and operating 
    license.
        ``(3) Any final order establishing by regulation standards to 
    govern the Department of Energy's gaseous diffusion uranium 
    enrichment plants, including any such facilities leased to a 
    corporation established under the USEC Privatization Act.
        ``(4) Any final determination under section 1701(c) relating to 
    whether the gaseous diffusion plants, including any such facilities 
    leased to a corporation established under the USEC Privatization 
    Act, are in compliance with the Commission's standards governing 
    the gaseous diffusion plants and all applicable laws.''.
    (d) Civil Penalties.--Section 234 a. of the Atomic Energy Act of 
1954 (42 U.S.C. 2282(a)) is amended by--
        (1) striking ``any licensing provision of section 53, 57, 62, 
    63, 81, 82, 101, 103, 104, 107, or 109'' and inserting: ``any 
    licensing or certification provision of section 53, 57, 62, 63, 81, 
    82, 101, 103, 104, 107, 109, or 1701''; and
        (2) by striking ``any license issued thereunder'' and 
    inserting: ``any license or certification issued thereunder''.
    (e) References to the Corporation.--Following the privatization 
date, all references in the Atomic Energy Act of 1954 to the United 
States Enrichment Corporation shall be deemed to be references to the 
private corporation.

SEC. 5217. AMENDMENTS TO OTHER LAWS.

    (a) Definition of Government Corporation.--As of the privatization 
date, section 9101(3) of title 31, United States Code, is amended by 
striking subparagraph (N) as added by section 902(b) of Public Law 102-
486.
    (b) Definition of the Corporation.--Section 1018(1) of the Energy 
Policy Act of 1992 (42 U.S.C. 2296b-7(1) is amended by inserting ``or 
its successor'' before the period.

                    CHAPTER 2--DEPARTMENT OF ENERGY

SEC. 5221. SALE OF DOE ASSETS.

    (a) Asset Management and Disposition Program.--
        (1) In general.--In order to maximize the use of Department of 
    Energy assets and to reduce overhead and other costs related to 
    asset management at the Department's facilities and laboratories, 
    the Secretary of Energy shall conduct an asset management and 
    disposition program that will result in not less than $225,000,000 
    in receipts and savings by October 1, 2000.
        (2) Items to be included.--The program shall include an 
    inventory of assets in the care of the Department and its 
    contractors; the recovery, reuse, and stewardship of assets; and 
    disposition of a minimum of 1,139,000,000 pounds of fuel, 136,000 
    tons of chemicals and industrial gases, 557,000 tons of scrap 
    metal, 14,000 radiation sources, 17,000 pieces of major equipment, 
    11,000 pounds of precious metals, and 91,000,000 pounds of base 
    metals.
    (b) Federal Property and Adminstrative Services Act.--The 
disposition of assets under this section is not subject to section 202 
or 203 of the Federal Property and Administrative Services Act of 1949 
(40 U.S.C. 483, 484) or section 13 of the Surplus Property Act of 1944 
(50 U.S.C. App. 1622). In order to avoid market disruptions, the 
Secretary shall consult with appropriate executive agencies with 
respect to dispositions under this section.
    (c) Disposition of Proceeds.--After deduction of administrative 
costs of disposition under this section not to exceed $7,000,000 per 
year, the remainder of the proceeds from dispositions under this 
subpart shall be returned to the Treasury as miscellaneous receipts. 
There shall be established a new receipt account in the Treasury for 
proceeds of asset sales under this section.

SEC. 5222. SALE OF WEEKS ISLAND OIL.

    Notwithstanding section 161 of the Energy Policy and Conservation 
Act (42 U.S.C. 6241), the Secretary of Energy shall draw down and sell 
32,000,000 barrels of oil contained in the Weeks Island Strategic 
Petroleum Reserve Facility. The Secretary shall, to the greatest extent 
practicable, sell oil from the reserve in a manner that minimizes the 
impact of such sale upon supply levels and market forces.

SEC. 5223. LEASE OF EXCESS STRATEGIC PETROLEUM RESERVE CAPACITY.

    (a) Amendment.--Part B of title I of the Energy Policy and 
Conservation Act (42 U.S.C. 6231 et seq.) is amended by adding at the 
end the following:

                    ``USE OF UNDERUTILIZED FACILITIES

    ``Sec. 168. (a) Authority.--Notwithstanding any other provision of 
this title, the Secretary, by lease or otherwise, for any term and 
under such other conditions as the Secretary considers necessary or 
appropriate, may store in underutilized Strategic Petroleum Reserve 
facilities petroleum product owned by a foreign government or its 
representative. Petroleum products stored under this section are not 
part of the Strategic Petroleum Reserve and may be exported without 
license from the United States.
    ``(b) Protection of Facilities.--All agreements entered into 
pursuant to subsection (a) shall contain provisions providing for fees 
to fully compensate the United States for all costs of storage and 
removals of petroleum products, including the cost of replacement 
facilities necessitated as a result of any withdrawals.
    ``(c) Access to Stored Oil.--The Secretary shall ensure that 
agreements to store petroleum products for foreign governments or their 
representatives do not affect the ability of the United States to 
withdraw, distribute, or sell petroleum from the Strategic Petroleum 
Reserve in response to an energy emergency or to the obligations of the 
United States under the Agreement on an International Energy Program.
    ``(d) Availability of Funds.--Beginning in fiscal year 2001 and in 
each fiscal year thereafter except for fiscal years 2003 and 2004, 50 
percent of the funds resulting from the leasing of Strategic Petroleum 
Reserve facilities authorized by subsection (a) shall be available to 
the Secretary of Energy without further appropriation for the purchase 
of oil for the Strategic Petroleum Reserve.''.
    (b) Table of Contents Amendment.--The table of contents of part B 
of title I of the Energy Policy and Conservation Act is amended by 
adding at the end the following:
``Sec. 168. Use of underutilized facilities.''.

                     Subtitle C--Natural Resources

           CHAPTER 1--DEPARTMENT OF THE INTERIOR CONVEYANCES

              Subchapter A--California Directed Land Sale

SEC. 5301. CONVEYANCE OF PROPERTY.

    All right, title and interest of the United States in the property 
depicted on a map designated USGS 7.5 minute quadrangle, west of 
Flattop Mtn, CA 1984, entitled ``Location Map for Ward Valley Site'', 
located in San Bernardino Meridian, Township 9 North, Range 19 East, 
and improvements thereon, together with all necessary easements for 
utilities and ingress and egress to such property, including, but not 
limited to, the right to improve those easements, are conveyed to the 
Department of Health Services of the State of California upon the 
tendering of $500,100 on behalf of the State of California and the 
release of the United States by the State of California from any 
liability for claims relating to the property described in this section 
and, as part of the consideration paid for such property, such 
conveyance is declared to meet and fully comply with any otherwise 
applicable provisions of section 7 of the Endangered Species Act of 
1973 (16 U.S.C. 1536) and the National Environmental Policy Act of 1969 
(42 U.S.C. 4332). The Secretary of the Interior shall issue evidence of 
title pursuant to this Act notwithstanding any other provision of law.

                     Subchapter B--Helium Reserves

SEC. 5311. SHORT TITLE.

    This subchapter may be cited as the ``Helium Act of 1995''.

SEC. 5312. AMENDMENT OF HELIUM ACT.

    Except as otherwise expressly provided, whenever in this chapter an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Helium Act (50 U.S.C. 
167 to 167n).

SEC. 5313. AUTHORITY OF SECRETARY.

    Sections 3, 4, and 5 are amended to read as follows:

``SEC. 3. AUTHORITY OF SECRETARY.

    ``(a) Extraction and Disposal of Helium on Federal Lands.--
        ``(1) In general.--The Secretary may enter into agreements with 
    private parties for the recovery and disposal of helium on Federal 
    lands upon such terms and conditions as the Secretary deems fair, 
    reasonable, and necessary.
        ``(2) Leasehold rights.--The Secretary may grant leasehold 
    rights to any such helium.
        ``(3) Limitation.--The Secretary may not enter into any 
    agreement by which the Secretary sells such helium other than to a 
    private party with whom the Secretary has an agreement for recovery 
    and disposal of helium.
        ``(4) Regulations.--Agreements under paragraph (1) may be 
    subject to such regulations as may be prescribed by the Secretary.
        ``(5) Existing rights.--An agreement under paragraph (1) shall 
    be subject to any rights of any affected Federal oil and gas lessee 
    that may be in existence prior to the date of the agreement.
        ``(6) Terms and conditions.--An agreement under paragraph (1) 
    (and any extension or renewal of an agreement) shall contain such 
    terms and conditions as the Secretary may consider appropriate.
        ``(7) Prior agreements.--This subsection shall not in any 
    manner affect or diminish the rights and obligations of the 
    Secretary and private parties under agreements to dispose of helium 
    produced from Federal lands in existence on the date of enactment 
    of the Helium Act of 1995 except to the extent that such agreements 
    are renewed or extended after that date.
    ``(b) Storage, Transportation and Sale.--The Secretary may store, 
transport, and sell helium only in accordance with this Act.

``SEC. 4. STORAGE, TRANSPORTATION, AND WITHDRAWAL OF CRUDE HELIUM.

    ``(a) Storage, Transportation and Withdrawal.--The Secretary may 
store, transport and withdraw crude helium and maintain and operate 
crude helium storage facilities, in existence on the date of enactment 
of the Helium Act of 1995 at the Bureau of Mines Cliffside Field, and 
related helium transportation and withdrawal facilities.
    ``(b) Cessation of Production, Refining, and Marketing.--Not later 
than 18 months after the date of enactment of the Helium Act of 1995, 
the Secretary shall cease producing, refining, and marketing refined 
helium and shall cease carrying out all other activities relating to 
helium which the Secretary was authorized to carry out under this Act 
before the date of enactment of the Helium Act of 1995, except 
activities described in subsection (a).
    ``(c) Disposal of Facilities.--
        ``(1) In general.--Subject to paragraph (5), not later than 24 
    months after the cessation of activities referred to in subsection 
    (b) of this section, the Secretary shall designate as excess 
    property and dispose of all facilities, equipment, and other real 
    and personal property, and all interests therein, held by the 
    United States for the purpose of producing, refining and marketing 
    refined helium.
        ``(2) Applicable law.--The disposal of such property shall be 
    in accordance with the Federal Property and Administrative Services 
    Act of 1949.
        ``(3) Proceeds.--All proceeds accruing to the United States by 
    reason of the sale or other disposal of such property shall be 
    treated as moneys received under this chapter for purposes of 
    section 6(f).
        ``(4) Costs.--All costs associated with such sale and disposal 
    (including costs associated with termination of personnel) and with 
    the cessation of activities under subsection (b) shall be paid from 
    amounts available in the helium production fund established under 
    section 6(f).
        ``(5) Exception.--Paragraph (1) shall not apply to any 
    facilities, equipment, or other real or personal property, or any 
    interest therein, necessary for the storage, transportation and 
    withdrawal of crude helium or any equipment, facilities, or other 
    real or personal property, required to maintain the purity, quality 
    control, and quality assurance of crude helium in the Bureau of 
    Mines Cliffside Field.
    ``(d) Existing Contracts.--
        ``(1) In general.--All contracts that were entered into by any 
    person with the Secretary for the purchase by the person from the 
    Secretary of refined helium and that are in effect on the date of 
    the enactment of the Helium Act of 1995 shall remain in force and 
    effect until the date on which the refining operations cease, as 
    described in subsection (b).
        ``(2) Costs.--Any costs associated with the termination of 
    contracts described in paragraph (1) shall be paid from the helium 
    production fund established under section 6(f).

``SEC. 5. FEES FOR STORAGE, TRANSPORTATION AND WITHDRAWAL.

    ``(a) In General.--Whenever the Secretary provides helium storage 
withdrawal or transportation services to any person, the Secretary 
shall impose a fee on the person to reimburse the Secretary for the 
full costs of providing such storage, transportation, and withdrawal.
    ``(b) Treatment.--All fees received by the Secretary under 
subsection (a) shall be treated as moneys received under this Act for 
purposes of section 6(f).''.

SEC. 5314. SALE OF CRUDE HELIUM.

    (a) Subsection 6(a) is amended by striking ``from the Secretary'' 
and inserting ``from persons who have entered into enforceable 
contracts to purchase an equivalent amount of crude helium from the 
Secretary''.
    (b) Subsection 6(b) is amended--
        (1) by inserting ``crude'' before ``helium''; and
        (2) by adding the following at the end: ``Except as may be 
    required by reason of subsection (a), sales of crude helium under 
    this section shall be in amounts as the Secretary determines, in 
    consultation with the helium industry, necessary to carry out this 
    subsection with minimum market disruption.''.
    (c) Subsection 6(c) is amended--
        (1) by inserting ``crude'' after ``Sales of''; and
        (2) by striking ``together with interest as provided in this 
    subsection'' and all that follows through the end of the subsection 
    and inserting ``all funds required to be repaid to the United 
    States as of October 1, 1995 under this section (referred to in 
    this subsection as `repayable amounts'). The price at which crude 
    helium is sold by the Secretary shall not be less than the amount 
    determined by the Secretary by--
        ``(1) dividing the outstanding amount of such repayable amounts 
    by the volume (in million cubic feet) of crude helium owned by the 
    United States and stored in the Bureau of Mines Cliffside Field at 
    the time of the sale concerned, and
        ``(2) adjusting the amount determined under paragraph (1) by 
    the Consumer Price Index for years beginning after December 31, 
    1995.''.
    (d) Subsection 6(d) is amended to read as follows:
    ``(d) Extraction of Helium From Deposits on Federal Lands.--All 
moneys received by the Secretary from the sale or disposition of helium 
on Federal lands shall be paid to the Treasury and credited against the 
amounts required to be repaid to the Treasury under subsection (c).''.
    (e) Subsection 6(e) is repealed.
    (f) Subsection 6(f) is amended--
        (1) by striking ``(f)'' and inserting ``(e)(1)''; and
        (2) by adding the following at the end:
    ``(2)(A) Within 7 days after the commencement of each fiscal year 
after the disposal of the facilities referred to in section 4(c), all 
amounts in such fund in excess of $2,000,000 (or such lesser sum as the 
Secretary deems necessary to carry out this Act during such fiscal 
year) shall be paid to the Treasury and credited as provided in 
paragraph (1).
    ``(B) On repayment of all amounts referred to in subsection (c), 
the fund established under this section shall be terminated and all 
moneys received under this Act shall be deposited in the general fund 
of the Treasury.''.

SEC. 5315. ELIMINATION OF STOCKPILE.

    Section 8 is amended to read as follows:

``SEC. 8. ELIMINATION OF STOCKPILE.

    ``(a) Stockpile Sales.--
        ``(1) Commencement.--Not later than January 1, 2005, the 
    Secretary shall commence offering for sale crude helium from helium 
    reserves owned by the United States in such amounts as would be 
    necessary to dispose of all such helium reserves in excess of 
    600,000,000 cubic feet on a straight-line basis between such date 
    and January 1, 2015.
        ``(2) Times of sale.--The sales shall be at such times during 
    each year and in such lots as the Secretary determines, in 
    consultation with the helium industry, to be necessary to carry out 
    this subsection with minimum market disruption.
        ``(3) Price.--The price for all sales under paragraph (1), as 
    determined by the Secretary in consultation with the helium 
    industry, shall be such price as will ensure repayment of the 
    amounts required to be repaid to the Treasury under section 6(c).
    ``(b) Discovery of Additional Reserves.--The discovery of 
additional helium reserves shall not affect the duty of the Secretary 
to make sales of helium under subsection (a).''.

SEC. 5316. REPEAL OF AUTHORITY TO BORROW.

    Sections 12 and 15 are repealed.

SEC. 5317. LAND CONVEYANCE IN POTTER COUNTY, TEXAS.

    (a) In General.--The Secretary of the Interior shall transfer all 
right, title, and interest of the United States in and to the parcel of 
land described in subsection (b) to the Texas Plains Girl Scout Council 
for consideration of $1, reserving to the United States such easements 
as may be necessary for pipeline rights-of-way.
    (b) Land Description.--The parcel of land referred to in subsection 
(a) is all those certain lots, tracts or parcels of land lying and 
being situated in the County of Potter and State of Texas, and being 
the East Three Hundred Thirty-One (E331) acres out of Section Seventy-
eight (78) in Block Nine (9), B.S. & F. Survey, (some times known as 
the G.D. Landis pasture) Potter County, Texas, located by certificate 
No. 1/39 and evidenced by letters patents Nos. 411 and 412 issued by 
the State of Texas under date of November 23, 1937, and of record in 
Vol. 66A of the Patent Records of the State of Texas. The metes and 
bounds description of such lands is as follows:
        (1) First tract.--One Hundred Seventy-one (171) acres of land 
    known as the North part of the East part of said survey Seventy-
    eight (78) aforesaid, described by metes and bounds as follows:
        Beginning at a stone 20 x 12 x 3 inches marked X, set by W.D. 
    Twichell in 1905, for the Northeast corner of this survey and the 
    Northwest corner of Section 59;
        Thence, South 0 degrees 12 minutes East with the West line of 
    said Section 59, 999.4 varas to the Northeast corner of the South 
    160 acres of East half of Section 78;
        Thence, North 89 degrees 47 minutes West with the North line of 
    the South 150 acres of the East half, 956.8 varas to a point in the 
    East line of the West half Section 78;
        Thence, North 0 degrees 10 minutes West with the East line of 
    the West half 999.4 varas to a stone 18 x 14 x 3 inches in the 
    middle of the South line of Section 79;
        Thence, South 89 degrees 47 minutes East 965 varas to the place 
    of beginning.
        (2) Second tract.--One Hundred Sixty (160) acres of land known 
    as the South part of the East part of said survey No. Seventy-eight 
    (78) described by metes and bounds as follows:
        Beginning at the Southwest corner of Section 59, a stone marked 
    X and a pile of stones; Thence, North 89 degrees 47 minutes West 
    with the North line of Section 77, 966.5 varas to the Southeast 
    corner of the West half of Section 78; Thence, North 0 degrees 10 
    minutes West with the East line of the West half of Section 78;
        Thence, South 89 degrees 47 minutes East 965.8 varas to a point 
    in the East line of Section 78;
        Thence, South 0 degrees 12 minutes East 934.6 varas to the 
    place of beginning.
        Containing an area of 331 acres, more or less.

        CHAPTER 2--ARCTIC COASTAL PLAIN LEASING AND REVENUE ACT

SEC. 5331. SHORT TITLE.

    This chapter may be cited as the ``Arctic Coastal Plain Leasing and 
Revenue Act of 1995''.

SEC. 5332. DEFINITIONS.

    When used in this chapter the term--
        (1) ``Coastal Plain'' means that area identified as such in the 
    map entitled ``Arctic National Wildlife Refuge'', dated August 
    1980, as referenced in section 1002(b) of the Alaska National 
    Interest Lands Conservation Act of 1980 (16 U.S.C. 3142(b)(1)) 
    comprising approximately 1,549,000 acres; and
        (2) ``Secretary'' except as otherwise provided, means the 
    Secretary of the Interior or the Secretary's designee.

SEC. 5333. LEASING PROGRAM FOR LANDS WITHIN THE COASTAL PLAIN.

    (a) Authorization.--The Congress hereby authorizes and directs the 
Secretary, acting through the Bureau of Land Management in consultation 
with the Fish and Wildlife Service and other appropriate Federal 
offices and agencies, to take such actions as are necessary to 
establish and implement a competitive oil and gas leasing program that 
will result in an environmentally sound program for the exploration, 
development, and production of the oil and gas resources of the Coastal 
Plain and to administer the provisions of this chapter through 
regulations, lease terms, conditions, restrictions, prohibitions, 
stipulations and other provisions that ensure the oil and gas 
exploration, development, and production activities on the Coastal 
Plain will result in no significant adverse effect on fish and 
wildlife, their habitat, subsistence resources, and the environment, 
and shall require the application of the best commercially available 
technology for oil and gas exploration, development, and production, on 
all new exploration, development, and production operations, and 
whenever practicable, on existing operations, and in a manner to ensure 
the receipt of fair market value by the public for the mineral 
resources to be leased.
    (b) Repeal.--The prohibitions and limitations contained in section 
1003 of the Alaska National Interest Lands Conservation Act of 1980 (16 
U.S.C. 3143) are hereby repealed.
    (c) Compatibility.--Congress hereby determines that the oil and gas 
leasing program and activities authorized by this section in the 
Coastal Plain are compatible with the purposes for which the Arctic 
National Wildlife Refuge was established, and that no further findings 
or decisions are required to implement this determination.
    (d) Sole Authority.--This chapter shall be the sole authority for 
leasing on the Coastal Plain: Provided, That nothing in this chapter 
shall be deemed to expand or limit State and local regulatory 
authority.
    (e) Federal Land.--The Coastal Plain shall be considered ``Federal 
land'' for the purposes of the Federal Oil and Gas Royalty Management 
Act of 1982 .
    (f) Special Areas.--The Secretary, after consultation with the 
State of Alaska, City of Kaktovik, and the North Slope Borough, is 
authorized to designate up to a total of 45,000 acres of the Coastal 
Plain as Special Areas and close such areas to leasing if the Secretary 
determines that these Special Areas are of such unique character and 
interest so as to require special management and regulatory protection. 
The Secretary may, however, permit leasing of all or portions of any 
Special Areas within the Coastal Plain by setting lease terms that 
limit or condition surface use and occupancy by lessees of such lands 
but permit the use of horizontal drilling technology from sites on 
leases located outside the designated Special Areas.
    (g) Limitation on Closed Areas.--The Secretary's sole authority to 
close lands within the Coastal Plain to oil and gas leasing and to 
exploration, development, and production is that set forth in this 
subtitle.
    (h) Conveyance.--In order to maximize Federal revenues by removing 
clouds on title of lands and clarifying land ownership patterns within 
the Coastal Plain, the Secretary, notwithstanding the provisions of 
section 1302(h)(2) of the Alaska National Interest Lands Conservation 
Act (16 U.S.C. 3192(h)(2)), is authorized and directed to convey (1) to 
the Kaktovik Inupiat Corporation the surface estate of the lands 
described in paragraph 2 of Public Land Order 6959, to the extent 
necessary to fulfill the Corporation's entitlement under section 12 of 
the Alaska Native Claims Settlement Act (43 U.S.C. 1611), and (2) to 
the Arctic Slope Regional Corporation the subsurface estate beneath 
such surface estate pursuant to the August 9, 1983, agreement between 
the Arctic Slope Regional Corporation and the United States of America.

SEC. 5334. RULES AND REGULATIONS.

    (a) Promulgation.--The Secretary shall prescribe such rules and 
regulations as may be necessary to carry out the purposes and 
provisions of this chapter, including rules and regulations relating to 
protection of the fish and wildlife, their habitat, subsistence 
resources, and the environment of the Coastal Plain. Such rules and 
regulations shall be promulgated no later than fourteen months after 
the date of enactment of this chapter and shall, as of their effective 
date, apply to all operations conducted under a lease issued or 
maintained under the provisions of this chapter and all operations on 
the Coastal Plain related to the leasing, exploration, development and 
production of oil and gas.
    (b) Revision of Regulations.--The Secretary shall periodically 
review and, if appropriate, revise the rules and regulations issued 
under subsection (a) of this section to reflect any significant 
biological, environmental, or engineering data which come to the 
Secretary's attention.

SEC. 5335. ADEQUACY OF THE DEPARTMENT OF THE INTERIOR'S LEGISLATIVE 
              ENVIRONMENTAL IMPACT STATEMENT.

    The ``Final Legislative Environmental Impact Statement'' (April 
1987) on the Coastal Plain prepared pursuant to section 1002 of the 
Alaska National Interest Lands Conservation Act of 1980 (16 U.S.C. 
3142) and section 102(2)(C) of the National Environmental Policy Act of 
1969 (42 U.S.C. 4332(2)(C)) is hereby found by the Congress to be 
adequate to satisfy the legal and procedural requirements of the 
National Environmental Policy Act of 1969 with respect to actions 
authorized to be taken by the Secretary to develop and promulgate the 
regulations for the establishment of the leasing program authorized by 
this chapter, to conduct the first lease sale and any subsequent lease 
sale authorized by this chapter, and to grant rights-of-way and 
easements to carry out the purposes of this chapter.

SEC. 5336. LEASE SALES.

    (a) Lease Sales.--Lands may be leased pursuant to the provisions of 
this chapter to any person qualified to obtain a lease for deposits of 
oil and gas under the Mineral Leasing Act, as amended (30 U.S.C. 181).
    (b) Procedures.--The Secretary shall, by regulation, establish 
procedures for--
        (1) receipt and consideration of sealed nominations for any 
    area in the Coastal Plain for inclusion in, or exclusion (as 
    provided in subsection (c)) from, a lease sale; and
        (2) public notice of and comment on designation of areas to be 
    included in, or excluded from, a lease sale.
    (c) Lease Sales on Coastal Plain.--The Secretary shall, by 
regulation, provide for lease sales of lands on the Coastal Plain. When 
lease sales are to be held, they shall occur after the nomination 
process provided for in subsection (b) of this section. For the first 
lease sale, the Secretary shall offer for lease those acres receiving 
the greatest number of nominations, but no less than two hundred 
thousand acres and no more than three hundred thousand acres shall be 
offered. If the total acreage nominated is less than two hundred 
thousand acres, the Secretary shall include in such sale any other 
acreage which he believes has the highest resource potential, but in no 
event shall more than three hundred thousand acres of the Coastal Plain 
be offered in such sale. With respect to subsequent lease sales, the 
Secretary shall offer for lease no less than two hundred thousand acres 
of the Coastal Plain. The initial lease sale shall be held within 
twenty months of the date of enactment of this chapter. The second 
lease sale shall be held no later than twenty-four months after the 
initial sale, with additional sales conducted no later than twelve 
months thereafter so long as sufficient interest in development exists 
to warrant, in the Secretary's judgment, the conduct of such sales.

SEC. 5337. GRANT OF LEASES BY THE SECRETARY.

    (a) In General.--The Secretary is authorized to grant to the 
highest responsible qualified bidder by sealed competitive cash bonus 
bid any lands to be leased on the Coastal Plain upon payment by the 
lessee of such bonus as may be accepted by the Secretary and of such 
royalty as may be fixed in the lease, which shall be not less than 
12\1/2\ per centum in amount or value of the production removed or sold 
from the lease.
    (b) Antitrust Review.--Following each notice of a proposed lease 
sale and before the acceptance of bids and the issuance of leases based 
on such bids, the Secretary shall allow the Attorney General, in 
consultation with the Federal Trade Commission, thirty days to perform 
an antitrust review of the results of such lease sale on the likely 
effects the issuance of such leases would have on competition and the 
Attorney General shall advise the Secretary with respect to such 
review, including any recommendation for the nonacceptance of any bid 
or the imposition of terms or conditions on any lease, as may be 
appropriate to prevent any situation inconsistent with the antitrust 
laws.
    (c) Subsequent Transfers.--No lease issued under this chapter may 
be sold, exchanged, assigned, sublet, or otherwise transferred except 
with the approval of the Secretary. Prior to any such approval the 
Secretary shall consult with, and give due consideration to the views 
of, the Attorney General.
    (d) Immunity.--Nothing in this chapter shall be deemed to convey to 
any person, association, corporation, or other business organization 
immunity from civil or criminal liability, or to create defenses to 
actions, under any antitrust law.
    (e) Definitions.--As used in this section, the term--
        (1) ``antitrust review'' shall be deemed an ``antitrust 
    investigation'' for the purposes of the Antitrust Civil Process Act 
    (15 U.S.C. 1311); and
        (2) ``antitrust laws'' means those Acts set forth in section 1 
    of the Clayton Act (15 U.S.C. 12) as amended.

SEC. 5338. LEASE TERMS AND CONDITIONS.

    An oil or gas lease issued pursuant to this chapter shall--
        (1) be for a tract consisting of a compact area not to exceed 
    five thousand seven hundred sixty acres, or nine surveyed or 
    protracted sections which shall be as compact in form as possible;
        (2) be for an initial period of ten years and shall be extended 
    for so long thereafter as oil or gas is produced in paying 
    quantities from the lease or unit area to which the lease is 
    committed or for so long as drilling or reworking operations, as 
    approved by the Secretary, are conducted on the lease or unit area;
        (3) require the payment of royalty as provided for in section 
    5337 of this chapter;
        (4) require that exploration activities pursuant to any lease 
    issued or maintained under this chapter shall be conducted in 
    accordance with an exploration plan or a revision of such plan 
    approved by the Secretary;
        (5) require that all development and production pursuant to a 
    lease issued or maintained pursuant to this chapter shall be 
    conducted in accordance with development and production plans 
    approved by the Secretary;
        (6) require posting of bond as required by section 5339 of this 
    chapter;
        (7) provide that the Secretary may close, on a seasonal basis, 
    portions of the Coastal Plain to exploratory drilling activities as 
    necessary to protect caribou calving areas and other species of 
    fish and wildlife;
        (8) contain such provisions relating to rental and other fees 
    as the Secretary may prescribe at the time of offering the area for 
    lease;
        (9) provide that the Secretary may direct or assent to the 
    suspension of operations and production under any lease granted 
    under the terms of this chapter in the interest of conservation of 
    the resource or where there is no available system to transport the 
    resource. If such a suspension is directed or assented to by the 
    Secretary, any payment of rental prescribed by such lease shall be 
    suspended during such period of suspension of operations and 
    production, and the term of the lease shall be extended by adding 
    any such suspension period thereto;
        (10) provide that whenever the owner of a nonproducing lease 
    fails to comply with any of the provisions of this chapter, or of 
    any applicable provision of Federal or State environmental law, or 
    of the lease, or of any regulation issued under this chapter, such 
    lease may be canceled by the Secretary if such default continues 
    for more than thirty days after mailing of notice by registered 
    letter to the lease owner at the lease owner's record post office 
    address of record;
        (11) provide that whenever the owner of any producing lease 
    fails to comply with any of the provisions of this chapter, or of 
    any applicable provision of Federal or State environmental law, or 
    of the lease, or of any regulation issued under this chapter, such 
    lease may be forfeited and canceled by any appropriate proceeding 
    brought by the Secretary in any United States district court having 
    jurisdiction under the provisions of this chapter;
        (12) provide that cancellation of a lease under this chapter 
    shall in no way release the owner of the lease from the obligation 
    to provide for reclamation of the lease site;
        (13) allow the lessee, at the discretion of the Secretary, to 
    make written relinquishment of all rights under any lease issued 
    pursuant to this chapter. The Secretary shall accept such 
    relinquishment by the lessee of any lease issued under this chapter 
    where there has not been surface disturbance on the lands covered 
    by the lease;
        (14) provide that for the purpose of conserving the natural 
    resources of any oil or gas pool, field, or like area, or any part 
    thereof, and in order to avoid the unnecessary duplication of 
    facilities, to protect the environment of the Coastal Plain, and to 
    protect correlative rights, the Secretary shall require that, to 
    the greatest extent practicable, lessees unite with each other in 
    collectively adopting and operating under a cooperative or unit 
    plan of development for operation of such pool, field, or like 
    area, or any part thereof, and the Secretary is also authorized and 
    directed to enter into such agreements as are necessary or 
    appropriate for the protection of the United States against 
    drainage;
        (15) require that the holder of a lease or leases on lands 
    within the Coastal Plain shall be fully responsible and liable for 
    the reclamation of lands within the Coastal Plain and any other 
    Federal lands adversely affected in connection with exploration, 
    development, production or transportation activities on a lease 
    within the Coastal Plain by the holder of a lease or as a result of 
    activities conducted on the lease by any of the leaseholder's 
    subcontractors or agents;
        (16) provide that the holder of a lease may not delegate or 
    convey, by contract or otherwise, the reclamation responsibility 
    and liability to another party without the express written approval 
    of the Secretary;
        (17) provide that the standard of reclamation for lands 
    required to be reclaimed under this chapter be, as nearly as 
    practicable, a condition capable of supporting the uses which the 
    lands were capable of supporting prior to any exploration, 
    development, or production activities, or upon application by the 
    lessee, to a higher or better use as approved by the Secretary;
        (18) contain the terms and conditions relating to protection of 
    fish and wildlife, their habitat, and the environment, as required 
    by section 5333(a) of this chapter;
        (19) provide that the holder of a lease, its agents, and 
    contractors use best efforts to provide a fair share, as determined 
    by the level of obligation previously agreed to in the 1974 
    agreement implementing Section 29 of the Federal Agreement and 
    Grant of Right of Way for the Operation of the Trans-Alaska 
    Pipeline, of employment and contracting for Alaska Natives and 
    Alaska Native Corporations from throughout the State; and
        (20) contain such other provisions as the Secretary determines 
    necessary to ensure compliance with the provisions of this chapter 
    and the regulations issued under this chapter.

SEC. 5339. BONDING REQUIREMENTS TO ENSURE FINANCIAL RESPONSIBILITY OF 
              LESSEE AND AVOID FEDERAL LIABILITY.

    (a) Requirement.--The Secretary shall, by rule or regulation, 
establish such standards as may be necessary to ensure that an adequate 
bond, surety, or other financial arrangement will be established prior 
to the commencement of surface disturbing activities on any lease, to 
ensure the complete and timely reclamation of the lease tract, and the 
restoration of any lands or surface waters adversely affected by lease 
operations after the abandonment or cessation of oil and gas operations 
on the lease. Such bond, surety, or financial arrangement is in 
addition to, and not in lieu, of any bond, surety, or financial 
arrangement required by any other regulatory authority or required by 
any other provision of law.
    (b) Amount.--The bond, surety, or financial arrangement shall be in 
an amount--
        (1) to be determined by the Secretary to provide for 
    reclamation of the lease site in accordance with an approved or 
    revised exploration or development and production plan; plus
        (2) set by the Secretary consistent with the type of operations 
    proposed, to provide the means for rapid and effective cleanup, and 
    to minimize damages resulting from an oil spill, the escape of gas, 
    refuse, domestic wastewater, hazardous or toxic substances, or fire 
    caused by oil and gas activities.
    (c) Adjustment.--In the event that an approved exploration or 
development and production plan is revised, the Secretary may adjust 
the amount of the bond, surety, or other financial arrangement to 
conform to such modified plan.
    (d) Duration.--The responsibility and liability of the lessee and 
its surety under the bond, surety, or other financial arrangement shall 
continue until such time as the Secretary determines that there has 
been compliance with the terms and conditions of the lease and all 
applicable law.
    (e) Termination.--Within sixty days after determining that there 
has been compliance with the terms and conditions of the lease and all 
applicable laws, the Secretary, after consultation with affected 
Federal and State agencies, shall notify the lessee that the period of 
liability under the bond, surety, or other financial arrangement has 
been terminated.

SEC. 5340. OIL AND GAS INFORMATION.

    (a) In General.--(1) Any lessee or permittee conducting any 
exploration for, or development or production of, oil or gas pursuant 
to this chapter shall provide the Secretary access to all data and 
information from any lease granted pursuant to this chapter (including 
processed and analyzed) obtained from such activity and shall provide 
copies of such data and information as the Secretary may request. Such 
data and information shall be provided in accordance with regulations 
which the Secretary shall prescribe.
    (2) If processed and analyzed information provided pursuant to 
paragraph (1) is provided in good faith by the lessee or permittee, 
such lessee or permittee shall not be responsible for any consequence 
of the use or of reliance upon such processed and analyzed information.
    (3) Whenever any data or information is provided to the Secretary, 
pursuant to paragraph (1)--
            (A) by a lessee or permittee, in the form and manner of 
        processing which is utilized by such lessee or permittee in the 
        normal conduct of business, the Secretary shall pay the 
        reasonable cost of reproducing such data and information; or
            (B) by a lessee or permittee, in such other form and manner 
        of processing as the Secretary may request, the Secretary shall 
        pay the reasonable cost of processing and reproducing such data 
        and information.
    (b) Regulations.--The Secretary shall prescribe regulations to: (1) 
assure that the confidentiality of privileged or proprietary 
information received by the Secretary under this section will be 
maintained; and (2) set forth the time periods and conditions which 
shall be applicable to the release of such information.

SEC. 5341. EXPEDITED JUDICIAL REVIEW.

    (a) Any complaint seeking judicial review of any provision in this 
chapter, or any other action of the Secretary under this chapter may be 
filed in any appropriate district court of the United States, and such 
complaint must be filed within ninety days from the date of the action 
being challenged, or after such date if such complaint is based solely 
on grounds arising after such ninetieth day, in which case the 
complaint must be filed within ninety days after the complainant knew 
or reasonably should have known of the grounds for the complaint: 
Provided, That any complaint seeking judicial review of an action of 
the Secretary in promulgating any regulation under this chapter may be 
filed only in the United States Court of Appeals for the District of 
Columbia.
    (b) Actions of the Secretary with respect to which review could 
have been obtained under this section shall not be subject to judicial 
review in any civil or criminal proceeding for enforcement.

SEC. 5342. RIGHTS-OF-WAY ACROSS THE COASTAL PLAIN.

    Notwithstanding Title XI of the Alaska National Interest Lands 
Conservation Act of 1980 (16 U.S.C. 3161 et seq.), the Secretary is 
authorized and directed to grant, in accordance with the provisions of 
Section 28(c) through (t) and (v) through (y) of the Mineral Leasing 
Act of 1920 (30 U.S.C. 185), rights-of-way and easements across the 
Coastal Plain for the transportation of oil and gas under such terms 
and conditions as may be necessary so as not to result in a significant 
adverse effect on the fish and wildlife, subsistence resources, their 
habitat, and the environment of the Coastal Plain. Such terms and 
conditions shall include requirements that facilities be sited or 
modified so as to avoid unnecessary duplication of roads and pipelines. 
The regulations issued as required by section 5334 of this chapter 
shall include provisions granting rights-of-way and easements across 
the Coastal Plain.

SEC. 5343. ENFORCEMENT OF SAFETY AND ENVIRONMENTAL REGULATIONS TO 
              ENSURE COMPLIANCE WITH TERMS AND CONDITIONS OF LEASE.

    (a) Responsibility of the Secretary.--The Secretary shall 
diligently enforce all regulations, lease terms, conditions, 
restrictions, prohibitions, and stipulations promulgated pursuant to 
this chapter.
    (b) Responsibility of Holders of Lease.--It shall be the 
responsibility of any holder of a lease under this chapter to--
        (1) maintain all operations within such lease area in 
    compliance with regulations intended to protect persons and 
    property on, and fish and wildlife, their habitat, subsistence 
    resources, and the environment of, the Coastal Plain; and
        (2) allow prompt access at the site of any operations subject 
    to regulation under this chapter to any appropriate Federal or 
    State inspector, and to provide such documents and records which 
    are pertinent to occupational or public health, safety, or 
    environmental protection, as may be requested.
    (c) On-Site Inspection.--The Secretary shall promulgate regulations 
to provide for--
        (1) scheduled onsite inspection by the Secretary, at least 
    twice a year, of each facility on the Coastal Plain which is 
    subject to any environmental or safety regulation promulgated 
    pursuant to this chapter or conditions contained in any lease 
    issued pursuant to this chapter to assure compliance with such 
    environmental or safety regulations or conditions; and
        (2) periodic onsite inspection by the Secretary at least once a 
    year without advance notice to the operator of such facility to 
    assure compliance with all environmental or safety regulations.

SEC. 5344. NEW REVENUES.

    (a) Distribution of Revenues.--(1) Notwithstanding any other 
provision of law, all revenues received by the Federal Government from 
competitive bids, sales, bonuses, royalties, rents, fees, or interest 
derived from the leasing of oil and gas within the Coastal Plain shall 
be deposited into the Treasury of the United States, solely as provided 
in this subsection.
    (2) Fifty percent of all revenues referred to in paragraph (1) 
shall be paid by the Secretary of the Treasury semiannually to the 
State of Alaska, on March 30 and September 30 of each year.
    (3)(A) The Secretary of the Treasury is directed to monitor the 
revenues deposited into the Treasury from oil and gas leases issued 
under the authority of this chapter. Except as provided in subparagraph 
(B), all monies deposited into the Treasury from such oil and gas 
leases in excess of $2,600,000,000 shall be distributed as follows:
        (i) Fifty percent shall be paid to the State of Alaska in the 
    manner provided in this subsection; and
        (ii) Fifty percent shall be deposited into a special fund 
    established in the Treasury of the United States known as the 
    ``National Park, Refuge, and Fish and Wildlife Renewal and 
    Protection Fund (hereinafter in this section referred to as the 
    ``renewal fund'').
    (B) Deposits into the renewal fund shall not exceed $250,000,000 
over the life of the renewal fund. Monies in excess of such amount 
shall be deposited as miscellaneous receipts in the Treasury of the 
United States.
    (C) Deposits into the renewal fund shall remain available until 
expended. The Secretary of the Treasury is directed to develop 
procedures for use of the renewal fund to ensure accountability and 
demonstrated results.
    (b) Use of Renewal Fund.--Monies from the renewal fund shall be 
made available to the Secretary of the Interior, without further 
appropriation, at the beginning of each fiscal year in which funds are 
available, and shall be expended by the Secretary as follows:
        (1) Twenty-five percent shall be used for infrastructure needs 
    at units of the National Park System, including but not limited to, 
    facility refurbishment, repair and replacement, interpretive media 
    and exhibit repair and replacement, and infrastructure projects 
    associated with park resource protection;
        (2) Twenty-five percent shall be used for infrastructure needs 
    at units of the National Wildlife Refuge System, including but not 
    limited to, facility refurbishment, repair and replacement, 
    interpretive media and exhibit repair and replacement, and 
    infrastructure projects associated with refuge resource protection;
        (3) Twenty-five percent shall be used for acquisition of 
    important habitat lands for threatened or endangered species from 
    owners of private property. Such lands shall be acquired solely on 
    a willing seller basis and shall be managed by the Secretary for 
    the conservation of such species pursuant to the terms of section 5 
    of the Endangered Species Act of 1973 (16 U.S.C. 1534); and
        (4) Twenty-five percent shall be available for wetlands 
    projects in accordance with the applicable provision of the North 
    American Wetlands Conservation Act (16 U.S.C. 4401 et seq.).
    (c) Community Assistance.--There is hereby established a Community 
Assistance Fund in the Treasury into which shall be deposited 
$30,000,000 from revenues derived from the Federal share of the first 
lease sale authorized under this chapter. The Secretary of the Treasury 
shall invest the funds in the Community Assistance Fund in interest 
bearing government securities. No more than $5,000,000 per year from 
the Community Assistance Fund, shall be available to the Secretary for 
distribution, upon application and without further appropriation, to 
organized boroughs, other municipal subdivisions of the State of 
Alaska, and recognized Indian Reorganization Act entities which are 
directly impacted by the exploration and production of oil and gas on 
the Coastal Plain authorized by this chapter to provide public and 
social services and facilities required in connection with such 
activities.

                       CHAPTER 3--WATER PROJECTS

                  Subchapter A--Irrigation Prepayment

SEC. 5351. AUTHORIZATION FOR PREPAYMENT OF CONSTRUCTION CHARGES.

    Subsection 213(a) of the Reclamation Reform Act of 1982 (96 
Stat.1269, 43 U.S.C. 390mm(a)) is amended:
        (1) by adding at the beginning:
    ``Notwithstanding any provision of Reclamation law or limitation 
contained in any repayment or water service contract, any person or 
district holding such a contract or receiving water under such a 
contract with the United States may prepay the construction costs 
referred to in this section either through accelerated or lump sum 
payments. For the purposes of such prepayment only, the project to 
which such contract applies is declared to be complete and the 
Secretary shall determine the repayment obligations associated with the 
construction costs of the project facilities so that accelerated 
payments or a lump sum payment may be made. The amount of any 
prepayment shall be calculated by discounting the remaining payments 
due under a contract in accordance with the guidelines set forth in 
Circular A-129 issued by the Office of Management and Budget: Provided, 
That the discount shall be adjusted by any amounts necessary to 
compensate the Federal Government for the direct or indirect loss of 
future tax revenues if the individual or district plans to use 
federally tax-exempt financing for such prepayment.'';
        (2) by striking ``lands in a district'' and inserting: ``lands 
    in a district, or lands owned or leased by a person'';
        (3) by striking ``obligation of a district'' and inserting: 
    ``obligation of a district or a person'';
        (4) by striking ``enactment of this Act.'' and inserting: 
    ``enactment of this Act or as otherwise provided for in this 
    section. Any additional capital costs incurred after the date of 
    such prepayment shall be recoverable as a separate obligation and 
    shall not be considered to be a new or supplemental benefit for the 
    purposes of this Act nor cause the full cost pricing limitation of 
    this Act or the ownership limitations contained in any provision of 
    Federal reclamation law to apply to the lands to which such capital 
    costs apply.''.

SEC. 5352. CONFORMING AMENDMENT.

    Subsection 213(c) of the Reclamation Reform Act of 1982 (43 U.S.C. 
390mm(c)) is repealed.

                       Subchapter B--Hetch Hetchy

SEC. 5353. HETCH HETCHY DAM.

    Section 7 of the Act of December 19, 1913 (38 Stat. 242, chapter 
4), is amended--
        (1) by striking ``$30,000'' in the first sentence and inserting 
    ``$2,000,000''; and
        (2) by amending the second and third sentences to read as 
    follows: ``These funds shall be placed in a separate fund by the 
    United States and, notwithstanding any other provision of law, 
    shall not be available for obligation or expenditure until 
    appropriated by the Congress. The highest priority use of the funds 
    shall be for annual operation of Yosemite National Park, with the 
    remainder of any funds to be used to fund operations of other 
    national parks in the State of California.''.

                     Subchapter C--Collbran Project

SEC. 5355. COLLBRAN PROJECT.

    (a) Short Title.--This subchapter may be cited as the ``Collbran 
Project Unit Conveyance Act''.
    (b) Definitions.--For purposes of this subchapter:
        (1) Districts.--The term ``Districts'' means the Ute Water 
    Conservancy District and the Collbran Conservancy District 
    (including their successors and assigns), which are political 
    subdivisions of the State of Colorado.
        (2) Federal reclamation laws.--The term ``Federal reclamation 
    laws'' means the Act of June 17, 1902 and Acts amendatory thereof 
    or supplementary thereto (32 Stat. 388, chapter 1093; 43 U.S.C. 371 
    et seq.) (including regulations adopted pursuant to those Acts).
        (3) Project.--The term ``Project'' means the Collbran 
    Reclamation Project, as constructed and operated under the Act of 
    July 3, 1952 (66 Stat. 325, chapter 565), including all property, 
    equipment, and assets of or relating to the Project that are owned 
    by the United States, including--
            (A) Vega Dam and Reservoir (but not including The Vega 
        Recreation Facilities);
            (B) Leon-Park Dams and Feeder Canal;
            (C) Southside Canal;
            (D) East Fork Diversion Dam and Feeder Canal;
            (E) Bonham-Cottonwood Pipeline;
            (F) Snowcat Shed and Diesel Storage;
            (G) Upper Molina Penstock and Power Plant;
            (H) Lower Molina Penstock and Power Plant;
            (I) the diversion structure in the tailrace of the Lower 
        Molina Power Plant;
            (J) all substations and switchyards;
            (K) a non-exclusive easement for the use of existing 
        easements or rights-of-way owned by the United States on or 
        across non-Federal lands which are necessary for access to 
        Project facilities;
            (L) title to lands reasonably necessary for all Project 
        facilities except for land described in subparagraph (K) or 
        subsection (c)(1)(B) or (C);
            (M) all permits and contract rights held by the Bureau of 
        Reclamation, including, without limitation, contract or other 
        rights relating to the operation, use, maintenance, repair, or 
        replacement of the water storage reservoirs located on the 
        Grand Mesa which are operated as a part of the Project;
            (N) all equipment, parts inventories, and tools;
            (O) all additions, replacements, betterments, and 
        appurtenances to any of the above; and
            (P) a copy of all data, plans, designs, reports, records, 
        or other materials, whether in writing or in any form of 
        electronic storage relating specifically to the Project.
        (4) Vega recreation facilities.--The term ``Vega Recreation 
    Facilities'' includes, but is not limited to, buildings, 
    campgrounds, picnic areas, parking lots, fences, boat docks and 
    ramps, electrical lines, water and sewer systems, trash and toilet 
    facilities, roads and trails, and other structures and equipment 
    used for State park purposes at and near Vega Reservoir such as 
    recreation, maintenance and daily and overnight visitor use, and 
    lands above the high water level of Vega Reservoir within the area 
    previously defined by the Department of the Interior as the 
    ``Reservoir Area Boundary'' which have not historically been 
    utilized for Collbran Project water storage and delivery 
    facilities, together with an easement for public access for 
    recreational purposes to Vega Reservoir and the water surface 
    thereof, and construction, operation, maintenance and replacement 
    of such recreation facilities below the high water line. Such 
    facilities shall also include improvements constructed or added as 
    a result of the agreements referred to in section (c)(6).
    (c) Conveyance of the Collbran Project.--
        (1) In general.--
            (A) Conveyance to districts.--The Secretary of the Interior 
        shall convey to the Districts all right, title, and interest of 
        the United States in and to the Project, as described in 
        subsection (b)(3), by quitclaim deed and bill of sale, without 
        warranties, in the last quarter of fiscal year 2000, subject 
        only to the requirements of this section. Until such conveyance 
        occurs, the Bureau of Reclamation shall continue to provide for 
        the operation, maintenance, repair, and replacement of Project 
        facilities and the storage reservoirs on the Grand Mesa to the 
        extent such responsibilities are the responsibility of the 
        Bureau of Reclamation and have not been delegated to the 
        Districts prior to the date of enactment of this Act or are 
        delegated or transferred to the Districts by agreement 
        thereafter, so that at the time of conveyance such facilities 
        are in the same condition as, or better condition than, the 
        condition of the facilities on the date of enactment of this 
        Act.
            (B) Easements on national forest system lands.--The 
        Secretary of Agriculture shall grant, in the last quarter of 
        fiscal year 2000, subject only to the requirements of this 
        section; (i) a non-exclusive easement on and across National 
        Forest System lands to the Districts for ingress and egress on 
        existing access routes to each existing component of the 
        Project and to the existing storage reservoirs on the Grand 
        Mesa which are operated as a part of the Project; (ii) a non-
        exclusive easement on National Forest System lands for the 
        operation, use, maintenance, repair, and replacement, but not 
        enlargement, of the existing storage reservoirs on the Grand 
        Mesa to the owners and operators of such reservoirs which are 
        operated as a part of the Project; which easement may be 
        exercised in the event that the existing land use 
        authorizations for such storage reservoirs are restricted, 
        terminated, relinquished, or abandoned, and which easement 
        shall not be subject to conditions or requirements that 
        interfere with or limit the use of such reservoirs for water 
        supply or power purposes; and (iii) a non-exclusive easement to 
        the Districts for the operation, use, maintenance, repair, and 
        replacement, but not enlargement, of those components of 
        Project facilities which are located on National Forest System 
        lands, subject to the requirement that the Districts shall 
        provide reasonable notice to and the opportunity for 
        consultation with the designated representative of the 
        Secretary of Agriculture for non-routine, non-emergency 
        activities that occur on such easements.
            (C) Easements to districts for southside canal.--The 
        Secretary of the Interior shall grant to the Districts, in the 
        last quarter of fiscal year 2000, subject only to the 
        requirements of this section, (i) a non-exclusive easement on 
        and across lands administered by agencies within the Department 
        of the Interior for ingress and egress on existing access 
        routes to and along the Southside Canal, and (ii) a non-
        exclusive easement for the operation, use, maintenance, repair, 
        and replacement of the Southside Canal, subject to the 
        requirement that the Districts shall provide reasonable notice 
        to and the opportunity for consultation with the designated 
        representative of the Secretary of the Interior for non-
        routine, non-emergency activities that occur on such easements.
        (2) Reservation.--The transfer of rights and interests pursuant 
    to paragraphs (1)(A), (B), and (C) shall reserve to the United 
    States all minerals, including hydrocarbons, and a perpetual right 
    of public access over, across, under, and to the portions of the 
    Project which on the date of enactment of this Act were open to 
    public use for fishing, boating, hunting, and other outdoor 
    recreation purposes and other public uses such as grazing, mineral 
    development and logging: Provided, That the United States may allow 
    for continued public use and enjoyment of such portions of the 
    Project for recreational activities and other public uses conducted 
    as of the date of enactment of this Act.
        (3) Conveyance to state of colorado.--All right, title, and 
    interest in the Vega Recreation Facilities shall remain in the 
    United States until the terms of the agreements referred to in 
    paragraph (6) have been fulfilled by the United States. At such 
    time, all right, title, and interest in the Vega Recreation 
    Facilities shall be conveyed by the Secretary of the Interior to 
    the State of Colorado, Division of Parks and Outdoor Recreation.
        (4) Payment.--
            (A) In general.--At the time of transfer, the Districts 
        shall pay to the United States $12,900,000 ($12,300,000 of 
        which represents the net present value of the outstanding 
        repayment obligations for the Project), of which--
                (i) $12,300,000 shall be deposited in the general fund 
            of the United States Treasury; and
                (ii) $600,000 shall be deposited in a special account 
            in the United States Treasury and shall be available to the 
            United States Fish and Wildlife Service, Region 6, without 
            further appropriation, for use in funding Colorado 
            operations and capital expenditures associated with the 
            Grand Valley Water Management Project for the purpose of 
            recovering endangered fish in the Upper Colorado River 
            Basin, as identified in the Recovery Implementation Program 
            for Endangered Fish Species in the Upper Colorado River 
            Basin, or such other component of the Recovery 
            Implementation Program within Colorado that is selected 
            with the concurrence of the Governor of the State of 
            Colorado.
            (B) Source of funds.--Funds for the payment to the extent 
        of the amount specified in subparagraph (A) shall not be 
        derived from the issuance or sale, prior to the conveyance, of 
        State or local bonds the interest on which is exempt from 
        taxation under section 103 of the Internal Revenue Code of 
        1986.
        (5) Operation of project.--
            (A) In general.--The Project was authorized and constructed 
        to place water to beneficial use for authorized purposes within 
        the State of Colorado. The Project shall be operated and used 
        by the Districts for a period of 40 years after the date of 
        enactment of this Act for the purposes for which the Project 
        was authorized under the Act of July 3, 1952 (66 Stat. 325, 
        chapter 565). The Districts shall attempt to the extent 
        practicable, taking into consideration historic Project 
        operations, to notify the State of Colorado of changes in 
        historic Project operations which may adversely affect State 
        park operations.
            (B) Requirements.--During the 40-year period described in 
        subparagraph (A)--
                (i) the Districts shall annually submit to the 
            Secretary of Agriculture and the Colorado Department of 
            Natural Resources a plan for operation of the Project, 
            which plan shall--

                    (I) report on Project operations for the previous 
                year;
                    (II) provide a description of the manner of Project 
                operations anticipated for the forthcoming year, which 
                shall be prepared after consultation with the 
                designated representatives of the Secretary of 
                Agriculture, the Board of County Commissioners of Mesa 
                County, Colorado, and the Colorado Department of 
                Natural Resources; and
                    (III) certify that the Districts have operated and 
                will operate and maintain the Project facilities in 
                accordance with sound engineering practices; and

                (ii) subject to subsection (d), all electric power 
            generated by operation of the Project shall be made 
            available to and be marketed by the Western Area Power 
            Administration (including its successors or assigns).
        (6) Agreements.--Conveyance of the Project shall be subject to 
    the agreements between the United States and the State of Colorado 
    dated August 22, 1994, and September 23, 1994, relating to the 
    construction and operation of recreational facilities at Vega 
    Reservoir, which agreements shall continue to be performed by the 
    parties thereto according to the terms of the agreements.
    (d) Operation of the Power Component.--
        (1) Conformity to historic operations.--The power component and 
    facilities of the Project shall be operated in substantial 
    conformity with the historic operations of the power component and 
    facilities (including recent operations in a peaking mode).
        (2) Power marketing.--
            (A) Existing marketing arrangement.--The Post-1989 
        Marketing Criteria, which provide for the marketing of power 
        generated by the power component of the Project as part of the 
        output of the Salt Lake City Area Integrated Projects, shall no 
        longer be binding on the Project upon conveyance of the Project 
        under subsection (c)(1).
            (B) After termination of existing marketing arrangement.--
                (i) In general.--After the conveyance, the Districts 
            shall offer all power produced by the power component of 
            the Project to the Western Area Power Administration or its 
            successors or assigns (referred to in this section as 
            ``Western''), which, in consultation with its affected 
            preference customers, shall have the first right to 
            purchase such power at the rates established in accordance 
            with clause (ii). If Western declines to purchase the power 
            after consultation with its affected preference customers, 
            such power shall then be offered at the same rates first to 
            Western's preference customers located in the Salt Lake 
            City Area Integrated Projects marketing area (referred to 
            in this section as the ``SLCAIP preference customers''). 
            Thereafter, such power may be sold to any other party: 
            Provided, however, That no such sale may occur at rates 
            less than rates established in accordance with clause (ii) 
            unless such power is first offered at such lesser rate 
            first to Western and then to its SLCAIP preference 
            customers.
                (ii) The rate for power initially offered to Western 
            and its SLCAIP preference customers under this paragraph 
            shall not exceed that required to produce revenues 
            sufficient to provide for--

                    (I) annual debt service and/or recoupment of the 
                cost of capital for the amount specified in subsection 
                (c)(4)(A)(i) of this section, less the sum of $310,000 
                (which is the net present value of the outstanding 
                repayment obligation of the Collbran Conservancy 
                District), and
                    (II) the cost of operation, maintenance, and 
                replacement of the power component of the Project.

            Such costs and rate shall be determined in a manner 
            consistent with the current principles followed by the 
            Secretary of the Interior and by Western in its annual 
            power and repayment study.
    (e) License.--
        (1) Prior to the conveyance of the Project to the Districts, 
    the Commission shall issue to the Districts a license or licenses 
    as appropriate under part I of the Federal Power Act, as amended, 
    (16 U.S.C. 791 et seq.), authorizing for a term of 40 years the 
    continued operation and maintenance of the power component of the 
    Project.
        (2) The license issued pursuant to subsection (1):
            (A) shall be for the purpose of operating, using, 
        maintaining, repairing, and replacing the power component of 
        the Project as authorized by the Act of July 3, 1952 (66 Stat. 
        325, chapter 565);
            (B) shall be conditioned upon the requirement that the 
        power component of the Project continue to be operated and 
        maintained in accordance with the authorized purposes of the 
        Project;
            (C) shall be subject only to the provisions of Part I of 
        the Federal Power Act, except the word ``constructed'' in 
        section 3(10); the four provisos of section 4(e); section 6 to 
        the extent it requires the licensee's acceptance of those terms 
        and conditions of the Act that this subsection waives; section 
        10(e) as concerns annual charges for the use and occupancy of 
        Federal lands and facilities; section 10(f); section 10(j); 
        section 18; section 19; section 20; and section 22 of the 
        Federal Power Act, 16 U.S.C. 796(10), 797(e), 799, 803(e), 
        803(f), 803(j), 811, 812, 813, and 815; and shall not be 
        subject to the standard ``L-Form'' license conditions, 
        published at 54 FPC 1792-1928 (1975), the Federal Land Policy 
        and Management Act (43 U.S.C. 1701 et seq.), as amended, 
        section 2402 of the Energy Policy Act of 1992 (16 U.S.C. 797c), 
        the National Environmental Policy Act of 1969 (42 U.S.C. 4321 
        et seq.), the Endangered Species Act of 1973 (16 U.S.C. 1531 et 
        seq.), the Wild and Scenic Rivers Act (16 U.S.C. 1271 et seq.), 
        the Federal Water Pollution Control Act (commonly known as the 
        ``Clean Water Act'') (33 U.S.C. 1251 et seq.), the National 
        Historic Preservation Act (16 U.S.C. 470 et seq.), the Coastal 
        Zone Management Act of 1972 (16 U.S.C. 1451 et seq.), the Fish 
        and Wildlife Coordination Act (16 U.S.C. 661 et seq.), or any 
        other Act otherwise applicable to the licensing of the project.
        (3) The license issued under paragraph (1) is deemed to meet 
    the licensing standards of the Federal Power Act, including section 
    10(a) and the last sentence of section 4(e), 16 U.S.C. 797(e).
        (4) Any power site reservation established by the President, 
    the Secretary of the Interior, or pursuant to section 24 of the 
    Federal Power Act (16 U.S.C. 818) or any other law, which exists on 
    any lands, whether federally or privately owned, that are included 
    within the boundaries of the project shall be vacated by operation 
    of law upon issuance of the license for the project.
        (5) All requirements of Part I of the Federal Power Act and of 
    any other Act applicable to the licensing of a hydroelectric 
    project shall apply to the project upon expiration of the license 
    issued under this section.
        (6) For purposes of this section, ``Commission'' means the 
    Federal Energy Regulatory Commission.
        (7) The operation of the Project shall be subject to all 
    applicable State and Federal laws subsequent to the issuance of the 
    license pursuant to paragraph (1).
    (f) Inapplicability of NEPA.--Neither the conveyance of the Project 
nor the issuance of easements pursuant to this section constitutes a 
major Federal action within the meaning of the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321 et seq.), including any regulations 
issued under such Act.
    (g) Inapplicability of Prior Agreements and of Federal Reclamation 
Laws.--On conveyance of the Project to the Districts--
        (1) the Repayment Contract dated May 27, 1957, as amended April 
    12, 1962, between the Collbran Conservancy District and the United 
    States, and the Contract for use of Project facilities for 
    Diversion of Water dated January 11, 1962, as amended November 10, 
    1977, between the Ute Water Conservancy District and the United 
    States, shall be terminated and of no further force or effect; and
        (2) the Project shall no longer be subject to or governed by 
    the Federal reclamation laws.
    (h) Districts' Liability.--The Districts shall be liable, to the 
extent allowed under State law, for all acts or omissions relating to 
the operation and use of the Project by the Districts that occur 
subsequent to the conveyance under section (c), including damages to 
Federal lands or facilities which result from the failure of Project 
facilities.
    (i) Effect on State Law.--Nothing in this section shall be 
construed to impair the effectiveness of any State or local law 
(including regulations) relating to land use.
    (j) Treatment of Sales for Purposes of Certain Laws.--The sales of 
assets under this subchapter shall not be considered a disposal of 
Federal surplus property under the following provisions of law:
        (1) Section 203 of the Federal Property and Administrative 
    Services Act of 1949 (40 U.S.C. 484).
        (2) Section 13 of the Surplus Property Act of 1944 (50 U.S.C. 
    App. 1622).

                         Subchapter D--Sly Park

SEC. 5356. SLY PARK.

    (a) Short Title.--This subchapter may be cited as the ``Sly Park 
Unit Conveyance Act''.
    (b) Definitions.--For purposes of this subchapter:
        (1) The term ``El Dorado Irrigation District'' or ``District'' 
    means a political subdivision of the State of California duly 
    organized, existing, and acting pursuant to the laws thereof with 
    its principal place of business in the city of Placerville, El 
    Dorado County, California.
        (2) The term ``Secretary'' means the Secretary of the Interior.
        (3) The term ``Sly Park Unit'' means the Sly Park Dam and 
    Reservoir, Camp Creek Diversion Dam and Tunnel and conduits and 
    canals as authorized under the Act entitled ``An Act to authorize 
    the American River Basin Development, California, for irrigation 
    and reclamation, and for other purposes'', approved October 14, 
    1949 (63 Stat. 852 chapter 690), together with all other facilities 
    owned by the United States including those used to convey and store 
    water delivered from Sly Park, as well as all recreation facilities 
    associated thereto.
    (c) Sale of the Sly Park Unit.--
        (1) In general.--The Secretary shall, on or before December 31, 
    1997, and upon receipt of the payment for the original construction 
    debt described in paragraph (2), sell and convey to the El Dorado 
    Irrigation District all right, title, and interest of the United 
    States in and to the Sly Park Unit. At the time the Sly Park Unit 
    is conveyed, the Secretary shall also transfer and assign to the 
    District the water rights relating to the Sly Park Unit held in 
    trust by the Secretary for diversion and storage under California 
    State permits numbered 2631, 5645A, 10473, and 10474.
        (2) Sale price.--The sale price for the Sly Park Unit shall be 
    $3,993,982, which is the outstanding balance for the original 
    construction of the Sly Park Unit payable to the United States. 
    Payment shall be deposited as miscellaneous receipts in the 
    Treasury and credited to the Central Valley Project Restoration 
    Fund. Payment of such price shall extinguish all payment 
    obligations under contract numbered 14-06-200-949 between the 
    District and the Secretary.
    (d) No Additional Environmental Impact.--The Congress specifically 
finds that (A) the sale, conveyance and assignment of the Sly Park Unit 
and water rights under this section involves the transfer of the 
ownership and operation of an existing ongoing water project, (B) the 
Sly Park Unit operation, facilities, and water rights have been, and 
after the sale and transfer will continue to be, committed to maximum 
reasonable and beneficial use for existing services, and (C) the sale, 
conveyance and assignment of the Sly Park Unit and water rights does 
not involve any additional growth or expansion of the Project or other 
environmental impacts. Consequently, the sale, conveyance and 
assignment of the Sly Park Unit and water rights shall not be subject 
to environmental review pursuant to the National Environmental Policy 
Act of 1969 (42 U.S.C. 4332) or endangered species review or 
consultation pursuant to section 7 of the Endangered Species Act of 
1973 (16 U.S.C. 1536).
    (e) Certain Contract Obligations Not Affected.--The sale of the Sly 
Park Unit under this section shall not affect the payment obligations 
of the District under the contract between the District and the 
Secretary numbered 14-06-200-7734, as amended by contracts numbered 14-
06-200-4282A and 14-06-200-8536A.
    (f) Treatment of Sales for Purposes of Certain Laws.--The sales of 
assets under this subchapter part shall not be considered a disposal of 
Federal surplus property under the following provisions of law:
        (1) Section 203 of the Federal Property and Administrative 
    Services Act of 1949 (40 U.S.C. 484).
        (2) Section 13 of the Surplus Property Act of 1944 (50 U.S.C. 
    App. 1622).

                   Subchapter E--Central Utah Project

SEC. 5357. PREPAYMENT OF CERTAIN REPAYMENT CONTRACTS BETWEEN THE UNITED 
              STATES AND THE CENTRAL UTAH WATER CONSERVANCY DISTRICT.

    The second sentence of section 210 of the Central Utah Project 
Completion Act (106 Stat. 4624) is amended to read as follows: ``The 
Secretary shall allow for prepayment of the repayment contract between 
the United States and the Central Utah Water Conservancy District dated 
December 28, 1965, and supplemented on November 26, 1985, providing for 
repayment of municipal and industrial water delivery facilities for 
which repayment is provided pursuant to such contract, under terms and 
conditions similar to those contained in the supplemental contract that 
provided for the prepayment of the Jordan Aqueduct dated October 28, 
1993. The prepayment may be provided in several installments to reflect 
substantial completion of the delivery facilities being prepaid and may 
not be adjusted on the basis of the type of prepayment financing 
utilized by the District: Provided, That the District shall complete 
all payments authorized pursuant to this section by the end of fiscal 
year 2002.''.

                CHAPTER 4--FEDERAL OIL AND GAS ROYALTIES

SEC. 5361. DEFINITIONS.

    Section 3 of the Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1701 et seq.) is amended--
        (1) by amending paragraph (7) to read as follows:
        ``(7) `lessee' means any person to whom the United States 
    issues an oil and gas lease or any person to whom operating rights 
    in a lease have been assigned;''; and
        (2) by striking ``and'' at the end of paragraph (15), by 
    striking the period at the end of paragraph (16) and inserting a 
    semicolon, and by adding at the end the following:
        ``(17) `adjustment' means an amendment to a previously filed 
    report on an obligation, and any additional payment or credit, if 
    any, applicable thereto, to rectify an underpayment or overpayment 
    on a lease;
        ``(18) `administrative proceeding' means any Department of the 
    Interior agency process in which a demand, decision or order issued 
    by the Secretary or a delegated State is subject to appeal or has 
    been appealed;
        ``(19) `assessment' means any fee or charge levied or imposed 
    by the Secretary or a delegated State other than--
            ``(A) the principal amount of any royalty, minimum royalty, 
        rental, bonus, net profit share or proceed of sale;
            ``(B) any interest; or
            ``(C) any civil or criminal penalty;
        ``(20) `commence' means--
            ``(A) with respect to a judicial proceeding, the service of 
        a complaint, petition, counterclaim, crossclaim, or other 
        pleading seeking affirmative relief or seeking credit or 
        recoupment; or
            ``(B) with respect to a demand, the receipt by the 
        Secretary or a delegated State or a lessee of the demand;
        ``(21) `credit' means the application of an overpayment (in 
    whole or in part) against an obligation which has become due to 
    discharge, cancel or reduce the obligation;
        ``(22) `delegated State' means a State which, pursuant to an 
    agreement or agreements under section 205, performs authorities, 
    duties, responsibilities, or activities of the Secretary which may 
    be performed by a State under the Constitution of the United States 
    for all lands within the State, including, but not limited to--
            ``(A) activities under sections 111 and 115;
            ``(B) collection, audit, lease and post-lease management 
        activities, and applicable enforcement activities;
            ``(C) inspections (including activities described in 
        section 108);
            ``(D) approval of pooling, unitization, and communitization 
        agreements; and
            ``(E) investigations;
        ``(23) `demand' means--
            ``(A) an order to pay issued by the Secretary or the 
        applicable delegated State that has a reasonable basis to 
        conclude that the obligation in the amount of the demand is due 
        and owing; or
            ``(B) a separate written request by a lessee which asserts 
        an obligation due the lessee that has a reasonable basis to 
        conclude that the obligation in the amount of the demand is due 
        and owing, but does not mean any royalty or production report, 
        or any information contained therein, required by the Secretary 
        or a delegated State;
        ``(24) `obligation' means--
            ``(A) any duty of the Secretary or, if applicable, a 
        delegated State--
                ``(i) to take oil or gas royalty in kind at or near the 
            lease (unless the lease expressly provides for delivery at 
            a different location); or
                ``(ii) to pay, refund, offset, or credit monies 
            including but not limited to)--

                    ``(I) the principal amount of any royalty, minimum 
                royalty, rental, bonus, net profit share or proceed of 
                sale; or
                    ``(II) any interest;

            ``(B) any duty of a lessee--
                ``(i) to deliver oil or gas royalty in kind at or near 
            the lease (unless the lease expressly provides for delivery 
            at a different location); or
                ``(ii) to pay, offset or credit monies including but 
            not limited to--

                    ``(I) the principal amount of any royalty, minimum 
                royalty, rental, bonus, net profit share or proceed of 
                sale;
                    ``(II) any interest;
                    ``(III) any penalty; or
                    ``(IV) any assessment, which arises from or relates 
                to any lease administered by the Secretary for, or any 
                mineral leasing law related to, the exploration, 
                production and development of oil or gas on Federal 
                lands or the Outer Continental Shelf;

        ``(25) `order to pay' means a written order issued by the 
    Secretary or the applicable delegated State which--
            ``(A) asserts a specific, definite, and quantified 
        obligation claimed to be due, and
            ``(B) specifically identifies the obligation by lease, 
        production month and monetary amount of such obligation claimed 
        to be due and ordered to be paid, as well as the reason or 
        reasons such obligation is claimed to be due, but such term 
        does not include any other communication or action by or on 
        behalf of the Secretary or a delegated State;
        ``(26) `overpayment' means any payment by a lessee in excess of 
    an amount legally required to be paid on an obligation and includes 
    the portion of any estimated payment for a production month that is 
    in excess of the royalties due for that month;
        ``(27) `payment' means satisfaction, in whole or in part, of an 
    obligation;
        ``(28) `penalty' means a statutorily authorized civil fine 
    levied or imposed for a violation of this Act, any mineral leasing 
    law, or a term or provision of a lease administered by the 
    Secretary;
        ``(29) `refund' means the return of an overpayment;
        ``(30) `State concerned' means, with respect to a lease, a 
    State which receives a portion of royalties or other payments under 
    the mineral leasing laws from such lease;
        ``(31) `underpayment' means any payment or nonpayment by a 
    lessee that is less than the amount legally required to be paid on 
    an obligation; and
        ``(32) `United States' means the United States Government and 
    any department, agency, or instrumentality thereof, the several 
    States, the District of Columbia, and the territories of the United 
    States.''.

SEC. 5362. MAXIMIZING RECEIPTS THROUGH STATE EFFORTS.

    (a) General Authority.--Section 205(a) of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1735(a)) is amended to read 
as follows:
    ``(a) In order to provide incentives to States to maximize the 
amount of oil and gas receipts collected on lease obligations within 
the six-year period of limitations, and consequently to maximize the 
Federal share of such receipts to the United States Treasury, upon 
written request of a State, the State, pursuant to an agreement or 
agreements and consistent with subsection (c), may perform all or part 
of the authorities, duties, responsibilities, and activities of the 
Secretary under this Act which may be delegated to a State under the 
Constitution of the United States for all Federal lands within the 
State. The delegated State shall assume and perform the authorities, 
duties, responsibilities, or activities delegated under this section. 
To avoid duplication of effort, any authority, duty, responsibility, or 
activity delegated to a State under this Act with respect to all 
Federal lands within the State may not be carried out by the Secretary. 
Under any such agreement, the Secretary shall share oil or gas royalty 
management information.''.
    (b) Determination.--Section 205(b) of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1735(b)) is amended by 
striking ``is authorized to'' and inserting ``shall''.
    (c) Federal-State Royalty Collection Efforts.--Subsection (c) 
section 205 of the Federal Oil and Gas Royalty Management Act of 1982 
(30 U.S.C. 1735) is amended by striking ``which define'' and all that 
follows and inserting ``within 18 months after the date of enactment of 
section 115, under which States may perform the authorities, duties, 
responsibilities, and activities under this title which are subject to 
delegation, based on the recommendations of the States concerned 
following consultation with affected persons. If the Secretary decides 
not to follow any recommendations supported by all States concerned, 
the Secretary shall justify such decision within 30 days after making 
such decision. In carrying out this section the Secretary shall provide 
for reasonable flexibility to a State to perform any authority, duty, 
responsibility or activity delegated hereunder in a more efficient and 
cost-effective manner and provide the States concerned a direct role in 
determining such requirements, procedures and policies. To ensure 
efficient and timely collections of royalties pursuant to this Act, the 
delegated States shall provide--
        ``(1) for the effective and efficient performance of any 
    authority, duty, responsibility or activity delegated under this 
    Act;
        ``(2) for the consistent and uniform performance among the 
    delegated States of any authority, duty, responsibility or activity 
    delegated under this Act;
        ``(3) for valuation under the terms of the leases and 
    applicable Federal statutes; and
        ``(4) for uniform reporting form and reporting requirements for 
    all Federal lessees, unless the State and all affected parties 
    otherwise agree.''.
    (d) Performance.--Subsection (d) of section 205 of the Federal Oil 
and Gas Royalty Management Act of 1982 (30 U.S.C. 1735) is amended by 
striking ``, pertaining'' and all that follows and inserting the 
following: ``for requirements pertaining to records and accounts to be 
maintained and reporting procedures to be required by delegated States 
under this section. The records and accounts under such reporting 
procedures shall be sufficient to allow the Secretary to monitor the 
performance of any delegated State under this section. The applicable 
delegated State and the Secretary shall agree to terms and conditions 
for inclusion into an agreement to perform all or part of the 
authorities, duties, responsibilities, and activities under this title 
consistent with subsection (c).''.
    (e) State Actions.--Section 204 of the Federal Oil and Gas Royalty 
Management Act of 1982 (30 U.S.C. 1734) is amended by adding at the end 
the following:
    ``(d) With respect to enforcement of an obligation under this Act, 
a State bringing an action under this section shall enjoy no greater 
rights than the Secretary enjoys under this Act.''.
    (f) Savings Provision.--Nothing in the amendments made by this 
section shall impair any agreement, or any extension thereof, existing 
under section 205 as in effect on the day before the date of enactment 
of this Act. Following enactment of this Act, any State which is a 
party to an existing agreement under such section under which the State 
has been delegated audit or inspection responsibility, may issue orders 
to pay, subpoenas, or notices to perform restructured accounting and 
may continue to perform audits or inspections under terms and 
conditions consistent with the Federal Oil and Gas Royalty Management 
Act of 1982 (30 U.S.C. 1701 et seq.), as amended by this chapter.
    (g) Receipts.--Section 205(f) of the Federal Oil and Gas Royalty 
Management Act of 1982 (30 U.S.C. 1735(f)) is amended by adding at the 
end the following: ``Such costs shall be allocable for the purposes of 
section 35(b) of the Act entitled ``An Act to promote the mining of 
coal, phosphate, oil, oil shale, gas, and sodium on the public 
domain'', approved February 25, 1920 (commonly known as the ``Mineral 
Leasing Act'') (30 U.S.C. 191(b)) to the administration and enforcement 
of laws providing for the leasing of any onshore lands or interests in 
land owned by the United States. The Secretary shall compensate any 
State in the next succeeding fiscal year for the aggregate amount of 
such costs incurred but not compensated due to such allocation for the 
current fiscal year. All money received from sales, bonuses, royalties, 
and interest, including money claimed to be due and owing pursuant to a 
delegation under this section, shall be payable and paid to the 
Treasury of the United States.''.

SEC. 5363. SECRETARIAL AND DELEGATED STATES' ACTIONS AND LIMITATION 
              PERIODS.

    (a) In General.--The Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1701 et seq.) is amended by adding after section 114 
the following new section:

``SEC. 115. SECRETARIAL AND DELEGATED STATES' ACTIONS AND LIMITATION 
              PERIODS.

    ``(a) In General.--All duties, responsibilities, and activities 
with respect to a lease shall be performed by the Secretary, delegated 
States, and lessees in a timely manner.
    ``(b) Limitation Period.--
        ``(1) A judicial proceeding or demand which arises from, or 
    relates to an obligation, shall be commenced within six years from 
    the date on which the obligation becomes due and if not so 
    commenced shall be barred. The Secretary, a delegated State, or a 
    lessee (A) shall not take any other or further action regarding 
    that obligation, including (but not limited to) the issuance of any 
    order, request, demand or other communication seeking any document, 
    accounting, determination, calculation, recalculation, payment, 
    principal, interest, assessment, or penalty or the initiation, 
    pursuit or completion of an audit with respect to that obligation; 
    and (B) shall not pursue any other equitable or legal remedy, 
    whether under statute or common law, with respect to an action on 
    or an enforcement of said obligation.
        ``(2) The limitations set forth in sections 2401, 2415, 2416, 
    and 2462 of title 28, United States Code and section 42 of the 
    Mineral Leasing Act (30 U.S.C. 226-2) shall not apply to any 
    obligation to which this Act applies. Section 3716 of title 31, 
    United States Code, may be applied to an obligation the enforcement 
    of which is not barred by this Act, but may not be applied to any 
    obligation the enforcement of which is barred by this Act.
    ``(c) Obligation Becomes Due.--
        ``(1) In general.--For purposes of this Act, an obligation 
    becomes due when the right to enforce the obligation is fixed.
        ``(2) Royalty obligations.--The right to enforce any royalty 
    obligation for any given production month for a lease is fixed for 
    purposes of this Act on the last day of the calendar month 
    following the month in which oil or gas is produced.
    ``(d) Tolling of Limitation Period.--The running of the limitation 
period under subsection (b) shall not be suspended, tolled, extended, 
or enlarged for any obligation for any reason by any action, including 
an action by the Secretary or a delegated State, other than the 
following:
        ``(1) Tolling agreement.--A written agreement executed during 
    the limitation period between the Secretary or a delegated State 
    and a lessee which tolls the limitation period for the amount of 
    time during which the agreement is in effect.
        ``(2) Subpoena.--
            ``(A) The issuance of a subpoena to a lessee in accordance 
        with the provisions of subsection (B)(i) shall toll the 
        limitation period with respect to the obligation which is the 
        subject of a subpoena only for the period beginning on the date 
        the lessee receives the subpoena and ending on the date on 
        which (i) the lessee has produced such subpoenaed records for 
        the subject obligation, (ii) the Secretary or a delegated State 
        receives written notice that the subpoenaed records for the 
        subject obligation are not in existence or are not in the 
        lessee's possession or control, or (iii) a court has determined 
        in a final decision that such records are not required to be 
        produced, whichever occurs first.
            ``(B)(i) A subpoena for the purposes of this section which 
        requires a lessee to produce records necessary to determine the 
        proper reporting and payment of an obligation due the Secretary 
        may be issued only by an Assistant Secretary of the Interior or 
        an Acting Assistant Secretary of the Interior who is a schedule 
        C employee (as defined by section 213.3301 of title 5, Code of 
        Federal Regulations) and may not be delegated to any other 
        person. If a State has been delegated authority pursuant to 
        section 205, the State, acting through the highest elected 
        State official having ultimate authority over the collection of 
        royalties from leases on Federal lands within the State, may 
        issue such subpoena, but may not delegate such authority to any 
        other person.
            ``(ii) A subpoena described in clause (i) may only be 
        issued against a lessee during the limitation period provided 
        in this section and only after the Secretary or a delegated 
        State has in writing requested the records from the lessee 
        related to the obligation which is the subject of the subpoena 
        and has determined that--
                ``(I) the lessee has failed to respond within a 
            reasonable period of time to the Secretary's or the 
            applicable delegated State's written request for such 
            records necessary for an audit, investigation or other 
            inquiry made in accordance with the Secretary's or such 
            delegated State's responsibilities under this Act; or
                ``(II) the lessee has in writing denied the Secretary's 
            or the applicable delegated State's written request to 
            produce such records in the lessee's possession or control 
            necessary for an audit, investigation or other inquiry made 
            in accordance with the Secretary's or such delegated 
            State's responsibilities under this Act; or
                ``(III) the lessee has unreasonably delayed in 
            producing records necessary for an audit, investigation or 
            other inquiry made in accordance with the Secretary's or 
            the applicable delegated State's responsibilities under 
            this Act after the Secretary's or such delegated State's 
            written request.
            ``(C) In seeking records, the Secretary or the applicable 
        delegated State shall afford the lessee a reasonable period of 
        time after a written request by the Secretary or such delegated 
        State in which to provide such records prior to the issuance of 
        any subpoena.
        ``(3) Misrepresentation or concealment.--The intentional 
    misrepresentation or concealment of a material fact for the purpose 
    of evading the payment of an obligation in which case the 
    limitation period shall be tolled for the period of such 
    misrepresentation or such concealment.
        ``(4) Order to perform a restructured accounting.--(A) The 
    issuance of a notice under subsection (D) that the lessee has not 
    adequately performed a restructured accounting shall toll the 
    limitation period with respect to the obligation which is the 
    subject of the notice only for the period beginning on the date the 
    lessee receives the notice and ending 120 days after the date on 
    which (i) the Secretary or the applicable delegated State receives 
    written notice the accounting or other requirement has been 
    performed, or (ii) a court has determined in a final decision that 
    the lessee is not required to perform the accounting, whichever 
    occurs first.
        ``(B)(i) The Secretary or the applicable delegated State may 
    issue an order to perform a restructured accounting to a lessee 
    when the Secretary or such delegated State determines during an in-
    depth audit of a lessee that the lessee should recalculate royalty 
    due on an obligation based upon the Secretary's or the delegated 
    State's finding that the lessee has made identified underpayments 
    or overpayments which are demonstrated by the Secretary or the 
    delegated State to be based upon repeated, systemic reporting 
    errors for a significant number of leases or a single lease for a 
    significant number of reporting months with the same type of error 
    which constitutes a pattern of violations and which are likely to 
    result in either significant underpayments or overpayments.
        ``(ii) The power of the Secretary to issue an order to perform 
    a restructured accounting may not be delegated below the most 
    senior career professional position having responsibility for the 
    royalty management program, which position is currently designated 
    as the `Associate Director for Royalty Management', and may not be 
    delegated to any other person. If a State has been delegated 
    authority pursuant to section 205, the State, acting through the 
    highest ranking State official having ultimate authority over the 
    collection of royalties from leases on Federal lands within the 
    State, may issue such order to perform, which may not be delegated 
    to any other person. An order to perform a restructured accounting 
    shall--
            ``(I) be issued within a reasonable period of time from 
        when the audit identifies the systemic, reporting errors;
            ``(II) specify the reasons and factual bases for such 
        order; and
            ``(III) be specifically identified as an `order to perform 
        a restructured accounting'.
        ``(C) An order to perform a restructured accounting shall not 
    mean or be construed to include any other communication or action 
    by or on behalf of the Secretary or a delegated State.
        ``(D) If a lessee fails to adequately perform a restructured 
    accounting pursuant to this subsection, a notice shall be issued to 
    the lessee that the restructured accounting has not been adequately 
    performed. A lessee shall be given a reasonable time within which 
    to perform the restructured accounting. Such notice may be issued 
    under this section only by an Assistant Secretary of the Interior 
    or an acting Assistant Secretary of the Interior who is a schedule 
    C employee (as defined by section 213.3301 of title 5, Code of 
    Federal Regulations) and may not be delegated to any other person. 
    If a State has been delegated authority pursuant to section 205, 
    the State, acting through the highest elected State official having 
    ultimate authority over the collection of royalties from leases on 
    Federal lands within the State, may issue such notice, which may 
    not be delegated to any other person.
    ``(e) Termination of Limitations Period.--An action or an 
enforcement of an obligation by the Secretary or delegated State or a 
lessee shall be barred under this section prior to the running of the 
six-year period provided in subsection (b) in the event--
        ``(1) the Secretary or a delegated State has notified the 
    lessee in writing that a time period is closed to further audit; or
        ``(2) the Secretary or a delegated State and a lessee have so 
    agreed in writing.
    ``(f) Records Required for Determining Collections.--Records 
required pursuant to section 103 by the Secretary or any delegated 
State for the purpose of determining obligations due and compliance 
with any applicable mineral leasing law, lease provision, regulation or 
order with respect to oil and gas leases from Federal lands or the 
Outer Continental Shelf shall be maintained for the same period of time 
during which a judicial proceeding or demand may be commenced under 
subsection (b). If a judicial proceeding or demand is timely commenced, 
the record holder shall maintain such records until the final 
nonappealable decision in such judicial proceeding is made, or with 
respect to that demand is rendered, unless the Secretary or the 
applicable delegated State authorizes in writing an earlier release of 
the requirement to maintain such records. Notwithstanding anything 
herein to the contrary, under no circumstance shall a record holder be 
required to maintain or produce any record relating to an obligation 
for any time period which is barred by the applicable limitation in 
this section. Records required for administrative actions and 
investigations (including, but not limited to, accounting collection 
and audits) under this Act involving obligations shall not be 
duplicated pursuant to section 3518(c)(1)(B) of title 44, United States 
Code.
    ``(g) Timely Collections.--In order to most effectively utilize 
resources available to the Secretary to maximize the collection of oil 
and gas receipts from lease obligations to the Treasury within the six-
year period of limitations, and consequently to maximize the State 
share of such receipts, the Secretary shall not perform or require 
accounting, reporting, or audit activities if the Secretary and the 
State concerned determines that the cost of conducting or requiring the 
activity exceeds the expected amount to be collected by the activity, 
based on the most current 12 months of activity. To the maximum extent 
possible, the Secretary and delegated States shall reduce costs to the 
United States Treasury and the States by discontinuing requirements for 
unnecessary or duplicative data and other information, such as separate 
allowances and payor information, relating to obligations due. If the 
Secretary and the State concerned determine that collection will result 
sooner, the Secretary or the applicable delegated State may waive or 
forego interest in whole or in part.
    ``(h) Appeals and Final Agency Action.--
        ``(1) 30-month period.--All orders issued by the Secretary or a 
    delegated State are subject to appeal to the Secretary. No State 
    shall impose any conditions which would hinder a lessee's immediate 
    appeal of an order to the Secretary or the Secretary's designee. 
    The Secretary shall issue a final decision in any administrative 
    proceeding, including any administrative proceedings pending on the 
    date of enactment of this section, within 30 months from the date 
    such proceeding was commenced or 30 months from the date of such 
    enactment, whichever is later. The 30-month period may be extended 
    by any period of time agreed upon in writing by the Secretary and 
    the lessee.
        ``(2) Effect of failure to issue decision.--If no such decision 
    has been issued by the Secretary within the 30-month period 
    referred to in paragraph (1)--
            ``(A) the Secretary shall be deemed to have issued and 
        granted a decision in favor of the lessee or lessees as to any 
        nonmonetary obligation and any monetary obligation the 
        principal amount of which is less than $2,500; and
            ``(B) the Secretary shall be deemed to have issued a final 
        decision in favor of the Secretary, which decision shall be 
        deemed to affirm those issues for which the agency rendered a 
        decision prior to the end of such period, as to any monetary 
        obligation the principal amount of which is $2,500 or more, and 
        the lessee shall have a right to a de novo judicial review of 
        such deemed final decision.
    ``(i) Collections of Disputed Amounts Due.--To expedite collections 
relating to disputed obligations due within the six-year period 
beginning on the date the obligation became due, the parties shall hold 
not less than one settlement consultation and the Secretary and the 
State concerned may take such action as is appropriate to compromise 
and settle a disputed obligation, including waiving or reducing 
interest and allowing offsetting of obligations among leases.
    ``(j) Enforcement of a Claim for Judicial Review.--In the event a 
demand subject to this section is properly and timely issued, the 
obligation which is the subject of the demand may be enforced beyond 
the six-year limitations period without being barred by this statute of 
limitations. In the event a demand subject to this section is properly 
and timely commenced, a judicial proceeding challenging the final 
agency action with respect to such demand shall be deemed timely so 
long as such judicial proceeding is commenced within 180 days from 
receipt of notice by the lessee of the final agency action.
    ``(k) Implementation of Final Decision.--In the event a judicial 
proceeding or demand subject to this section is timely commenced and 
thereafter the limitation period in this section lapses during the 
pendency of such proceeding, any party to such proceeding shall not be 
barred from taking such action as is required or necessary to implement 
a final unappealable judicial or administrative decision, including any 
action required or necessary to implement such decision by the recovery 
or recoupment of an underpayment or overpayment by means of refund or 
credit.
    ``(l) Stay of Payment Obligation Pending Review.--Any party ordered 
by the Secretary or a delegated State to pay any obligation (other than 
an assessment) shall be entitled to a stay of such payment without bond 
or other surety instrument pending an administrative or judicial 
proceeding if the party periodically demonstrates to the satisfaction 
of the Secretary that such party is financially solvent or otherwise 
able to pay the obligation. In the event the party is not able to so 
demonstrate, the Secretary may require a bond or other surety 
instrument satisfactory to cover the obligation. Any party ordered by 
the Secretary or a delegated State to pay an assessment shall be 
entitled to a stay without bond or other surety instrument.''.
    (b) Clerical Amendment.--The table of contents in section 1 of the 
Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701) is 
amended by inserting after the item relating to section 114 the 
following new item:
``Sec. 115. Limitation periods and agency actions.''.

SEC. 5364. ADJUSTMENT AND REFUNDS.

    (a) In General.--The Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1701 et seq.) is amended by inserting after section 111 
the following:

``SEC. 111A. ADJUSTMENTS AND REFUNDS.

    ``(a) Adjustments to Royalties Paid to the Secretary or a Delegated 
State.--
        ``(1) If, during the adjustment period, a lessee determines 
    that an adjustment or refund request is necessary to correct an 
    underpayment or overpayment of an obligation, the lessee shall make 
    such adjustment or request a refund within a reasonable period of 
    time and only during the adjustment period. The filing of a royalty 
    report which reflects the underpayment or overpayment of an 
    obligation shall constitute prior written notice to the Secretary 
    or the applicable delegated State of an adjustment.
        ``(2)(A) For any adjustment, the lessee shall calculate and 
    report the interest due attributable to such adjustment at the same 
    time the lessee adjusts the principal amount of the subject 
    obligation, except as provided by subparagraph (B).
        ``(B) In the case of a lessee who determines that subparagraph 
    (A) would impose a hardship, the Secretary or such delegated State 
    shall calculate the interest due and notify the lessee within a 
    reasonable time of the amount of interest due, unless such lessee 
    elects to calculate and report interest in accordance with 
    subparagraph (A).
        ``(3) An adjustment or a request for a refund for an obligation 
    may be made after the adjustment period only upon written notice to 
    and approval by the Secretary or the applicable delegated State, as 
    appropriate, during an audit of the period which includes the 
    production month for which the adjustment is being made. If an 
    overpayment is identified during an audit, then the Secretary or 
    the applicable delegated State, as appropriate, shall allow a 
    credit or refund in the amount of the overpayment.
        ``(4) For purposes of this section, the adjustment period for 
    any obligation shall be the five-year period following the date on 
    which an obligation became due. The adjustment period shall be 
    suspended, tolled, extended, enlarged, or terminated by the same 
    actions as the limitation period in section 115.
    ``(b) Refunds.--
        ``(1) In general.--A request for refund is sufficient if it--
            ``(A) is made in writing to the Secretary and, for purposes 
        of section 115, is specifically identified as a demand;
            ``(B) identifies the person entitled to such refund;
            ``(C) provides the Secretary information that reasonably 
        enables the Secretary to identify the overpayment for which 
        such refund is sought; and
            ``(D) provides the reasons why the payment was an 
        overpayment.
        ``(2) Notice.--The Secretary shall promptly notify each State 
    concerned of a request for refund.
        ``(3) Payment by secretary of the treasury.--The Secretary 
    shall certify the amount of the refund to be paid under paragraph 
    (1) to the Secretary of the Treasury who shall make such refund. 
    Such refund shall be paid from amounts received as current receipts 
    from sales, bonuses, royalties (including interest charges 
    collected under this section) and rentals of the public lands and 
    the Outer Continental Shelf under the provisions of the Mineral 
    Leasing Act and the Outer Continental Shelf Lands Act, which are 
    not payable to a State or the Reclamation Fund. The portion of any 
    such refund attributable to any amounts previously disbursed to a 
    State, the Reclamation Fund, or any recipient prescribed by law 
    shall be deducted from the next disbursements to that recipient 
    made under the applicable law. Such amounts deducted from 
    subsequent disbursements shall be credited to miscellaneous 
    receipts in the Treasury.
        ``(4) Payment period.--A refund under this subsection shall be 
    paid or denied (with an explanation of the reasons for the denial) 
    within 120 days of the date on which the request for refund is 
    received by the Secretary. Such refund shall be subject to later 
    audit by the Secretary or the applicable delegated State and 
    subject to the provisions of this Act.
        ``(5) Prohibition against reduction of refunds or credits.--In 
    no event shall the Secretary or any delegated State directly or 
    indirectly claim or offset any amount or amounts against, or reduce 
    any refund or credit (or interest accrued thereon) by the amount of 
    any obligation the enforcement of which is barred by section 
    115.''.
    (b) Clerical Amendment.--The table of contents in section 1 of the 
Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1701) is 
amended by inserting after the item relating to section 111 the 
following new item:
``Sec. 111A. Adjustments and refunds.''.

SEC. 5365. ROYALTY TERMS AND CONDITIONS, INTEREST, AND PENALTIES.

    (a) Lessee Interest.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1721) is amended by adding 
after subsection (g) the following:
    ``(h) Interest shall be allowed and paid or credited on any 
overpayment, with such interest to accrue from the date such 
overpayment was made, at the rate obtained by applying the provisions 
of subparagraphs (A) and (B) of section 6621(a)(1) of the Internal 
Revenue Code of 1986, but determined without regard to the matter 
following subparagraph (B) of section 6621(a)(1). Interest which has 
accrued on any overpayment may be applied to reduce an underpayment. 
This subsection applies to overpayments made later than six months 
after the date of enactment of this subsection or September 1, 1996, 
whichever is later. Such interest shall be paid from amounts received 
as current receipts from sales, bonuses, royalties (including interest 
charges collected under this section) and rentals of the public lands 
and the Outer Continental Shelf under the provisions of the Mineral 
Leasing Act, and the Outer Continental Shelf Lands Act, which are not 
payable to a State or the Reclamation Fund. The portion of any such 
interest payment attributable to any amounts previously disbursed to a 
State, the Reclamation Fund, or any other recipient designated by law 
shall be deducted from the next disbursements to that recipient made 
under the applicable law. Such amounts deducted from subsequent 
disbursements shall be credited to miscellaneous receipts in the 
Treasury.''.
    (b) Limitation on Interest.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982, as amended by subsection (a), is 
further amended by adding at the end the following:
    ``(i) Upon a determination by the Secretary that an excessive 
overpayment (based upon all obligations of a lessee for a given 
reporting month) was made for the sole purpose of receiving interest, 
interest shall not be paid on the excessive amount of such overpayment. 
For purposes of this Act, an `excessive overpayment' shall be the 
amount that any overpayment a lessee pays for a given reporting month 
(excluding payments for demands for obligations determined to be due as 
a result of judicial or administrative proceedings or agreed to be paid 
pursuant to settlement agreements) for the aggregate of all of its 
Federal leases exceeds 10 percent of the total royalties paid that 
month for those leases.''.
    (c) Estimated Payment.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1721), as amended by 
subsections (a) and (b), is further amended by adding at the end the 
following:
    ``(j) A lessee may make a payment for the approximate amount of 
royalties (hereinafter in this subsection `estimated payment') that 
would otherwise be due for such lease to avoid underpayment or 
nonpayment interest charges. When an estimated payment is made, actual 
royalties are due and payable at the end of the month following the 
month in which the estimated payment is made. If the lessee makes a 
payment for such actual royalties, the lessee may apply the estimated 
payment to future royalties. Any estimated payment may be adjusted, 
recouped, or reinstated at any time by the lessee.''.
    (d) Volume Allocation of Oil and Gas Production.--Section 111 of 
the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 
1721), as amended by subsections (a) through (c), is amended by adding 
at the end the following:
    ``(k)(1) Except as otherwise provided by this subsection--
        ``(A) a lessee of a lease in a unit or communitization 
    agreement which contains only Federal leases with the same royalty 
    rate and funds distribution shall report and pay royalties on oil 
    and gas production for each production month based on the actual 
    volume of production sold by or on behalf of that lessee;
        ``(B) a lessee of a lease in any other unit or communitization 
    agreement shall report and pay royalties on oil and gas production 
    for each production month based on the volume of oil and gas 
    produced from such agreement and allocated to the lease in 
    accordance with the terms of the agreement; and
        ``(C) a lessee of a lease that is not contained in a unit or 
    communitization agreement shall report and pay royalties on oil and 
    gas production for each production month based on the actual volume 
    of production sold by or on behalf of that lessee.
    ``(2) This subsection applies only to requirements for reporting 
and paying royalties. Nothing in this subsection is intended to alter a 
lessee's liability for royalties on oil or gas production based on the 
share of production allocated to the lease in accordance with the terms 
of the lease, a unit or communitization agreement, or any other 
agreement.
    ``(3) For any unit or communitization agreement, if all lessees 
contractually agree to an alternative method of royalty reporting and 
payment, the lessees may submit such alternative method to the 
Secretary or the delegated State for approval and make payments in 
accordance with such approved alternative method so long as such 
alternative method does not reduce the amount of the royalty 
obligation.
    ``(4) The Secretary or the delegated State shall grant an exception 
from the reporting and payment requirements for marginal properties by 
allowing for any calendar year or portion thereof royalties to be paid 
each month based on the volume of production sold. Interest shall not 
accrue on the difference for the entire calendar year or portion 
thereof between the amount of oil and gas actually sold and the share 
of production allocated to the lease until the beginning of the month 
following such calendar year or portion thereof. Any additional 
royalties due or overpaid royalties and associated interest shall be 
paid, refunded, or credited within six months after the end of each 
calendar year in which royalties are paid based on volumes of 
production sold. For the purpose of this subsection, the term `marginal 
property' means a lease that produces on average the combined 
equivalent of less than 15 barrels of oil per day or 90 thousand cubic 
feet of gas per day, or a combination thereof, determined by dividing 
the average daily production of crude oil and natural gas from 
producing wells on such lease by the number of such wells, unless the 
Secretary, together with the State concerned, determines that a 
different production is more appropriate.
    ``(5) Not later than two years after the date of the enactment of 
this subsection, the Secretary shall issue any appropriate demand for 
all outstanding royalty payment disputes regarding who is required to 
report and pay royalties on production from units and communitization 
agreements outstanding on the date of the enactment of this subsection, 
and collect royalty amounts owed on such production.''.
    (e) Production Allocation.--Section 111 of the Federal Oil and Gas 
Royalty Management Act of 1982 (30 U.S.C. 1721), as amended by 
subsections (a) through (d), is amended by adding at the end the 
following:
    ``(l) The Secretary or the delegated State shall issue all 
determinations of allocations of production for units and 
communitization agreements within 120 days of a request for 
determination. If the Secretary or the delegated State fails to issue a 
determination within such 120-day period, the Secretary shall waive 
interest due on obligations subject to the determination until the end 
of the month following the month in which the determination is made.''.
    (f) New Assessment To Encourage Proper Royalty Payments.--
        (1) In general.--The Federal Oil and Gas Royalty Management Act 
    of 1982 (30 U.S.C. 1721), as amended by this section, is further 
    amended by adding at the end the following:

``SEC. 116. ASSESSMENTS.

    ``Beginning eighteen months after the date of enactment of this 
section, to encourage proper royalty payment the Secretary or the 
delegated State shall impose assessments on lessees who chronically 
submit erroneous reports under this Act. Assessments under this Act may 
only be issued as provided for in this section.''.
        (2) Clerical amendment.--The table of contents in section 1 of 
    such Act (30 U.S.C. 1701) is amended by adding after the item 
    relating to section 115 the following new item:
``Sec. 116. Assessments.''.
    (g) Liability for Royalty Payments.--Section 102(a) of the Federal 
Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1712(a)) is 
amended to read as follows:
    ``(a) In order to increase receipts and achieve effective 
collections of royalty and other payments, a lessee who is required to 
make any royalty or other payment under a lease or under the mineral 
leasing laws, shall make such payments in the time and manner as may be 
specified by the Secretary or the applicable delegated State. A lessee 
may designate a person to make all or part of the payments due under a 
lease on the lessee's behalf and shall notify the Secretary or the 
applicable delegated State in writing of such designation, in which 
event said designated person may, in its own name, pay, offset or 
credit monies, make adjustments, request and receive refunds and submit 
reports with respect to payments required by the lessee. The person 
owning operating rights in a lease shall be primarily liable for its 
pro rata share of payment obligations under the lease. If the person 
owning the legal record title in a lease is other than the operating 
rights owner, the person owning the legal record title shall be 
secondarily liable for its pro rata share of such payment obligations 
under the lease.''.
    (h) Clerical Amendment.--The heading of section 111 of the Federal 
Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 1721) is amended 
to read as follows:

        ``royalty terms and conditions, interest, and penalties''.

SEC. 5366. ALTERNATIVES FOR MARGINAL PROPERTIES.

    (a) In General.--The Federal Oil and Gas Royalty Management Act of 
1982 (30 U.S.C. 1701 et seq.), as amended by section 5365 of this 
chapter, is further amended by adding at the end the following:

``SEC. 117. ALTERNATIVES FOR MARGINAL PROPERTIES.

    ``(a) Determination of Best Interests of State Concerned and the 
United States.--The Secretary and the State concerned, acting in the 
best interests of the United States and the State concerned to promote 
production, reduce administrative costs, and increase net receipts to 
the United States and the States, shall jointly determine, on a case by 
case basis, the amount of what marginal production from a lease or 
leases or well or wells, or parts thereof, shall be subject to a 
prepayment under subsection (b) or regulatory relief under subsection 
(c). If the State concerned does not consent, such prepayments or 
regulatory relief shall not be made available under this section for 
such marginal production, provided that if royalty payments from a 
lease or leases, or well or wells is not shared with any State, such 
determination shall be made solely by the Secretary.
    ``(b) Prepayment of Royalty.--
        ``(1) In general.--Notwithstanding the provisions of any lease 
    to the contrary, for any lease or leases or well or wells 
    identified by the Secretary and the State concerned pursuant to 
    subsection (a), the Secretary is authorized to accept a prepayment 
    for royalties in lieu of monthly royalty payments under the lease 
    for the remainder of the lease term if the affected lessee so 
    agrees. Any prepayment agreed to by the Secretary, State concerned 
    and lessee which is less than an average $500 per month in total 
    royalties shall be effectuated under this section not earlier than 
    two years after the date of enactment of this section and, any 
    prepayment which is greater than an average $500 per month in total 
    royalties shall be effectuated under this section not earlier than 
    three years after the date of enactment of this section. The 
    Secretary and the State concerned may condition their acceptance of 
    the prepayment authorized under this section on the lessee's 
    agreeing to such terms and conditions as the Secretary and the 
    State concerned deem appropriate and consistent with the purposes 
    of this Act. Such terms may--
            ``(A) provide for prepayment that does not result in a loss 
        of revenue to the United States in present value terms;
            ``(B) include provisions for receiving additional 
        prepayments or royalties for developments in the lease or 
        leases or well or wells that deviate significantly from the 
        assumptions and facts on which the valuation is determined; and
            ``(C) require the lessee to provide such periodic 
        production reports as may be necessary to allow the Secretary 
        and the State concerned to monitor production for the purposes 
        of subparagraph (B).
        ``(2) State share.--A prepayment under this section shall be 
    shared by the Secretary with any State or other recipient to the 
    same extent as any royalty payment for such lease.
        ``(3) Satisfaction of obligation.--Except as may be provided in 
    the terms and conditions established by the Secretary under 
    subsection (b), a lessee who makes a prepayment under this section 
    shall have satisfied in full its obligation to pay royalty on the 
    production stream sold from the lease or leases or well or wells.
    ``(c) Alternative Accounting and Auditing Requirements.--Within one 
year after the date of the enactment of this section, the Secretary or 
the delegated State shall provide accounting, reporting, and auditing 
relief that will encourage lessees to continue to produce and develop 
properties subject to subsection (a); provided, that such relief will 
only be available to lessees in a State that concurs, which concurrence 
is not required if royalty from the lease or leases or well or wells is 
not shared with any State. Prior to granting such relief, the Secretary 
and, if appropriate, the State concerned shall agree that the type of 
marginal wells and relief provided under this paragraph is in the best 
interest of the United States and, if appropriate, the State 
concerned.''.
    (b) Clerical Amendment.--The table of contents in section 1 of such 
Act (30 U.S.C. 1701) is amended by adding after the item relating to 
section 115 the following new item:
``Sec. 117. Alternatives for marginal properties.''.

SEC. 5367. REPEALS.

    (a) FOGRMA.--As applicable to Federal lands, sections 202 and 307 
of the Federal Oil and Gas Royalty Management Act of 1982 (30 U.S.C. 
1732 and 1755), are repealed. Such repeal shall not affect cooperative 
agreements involving Indian tribes or Indian lands. Section 1 of such 
Act (relating to the table of contents) is amended by striking out the 
items relating to sections 202 and 307.
    (b) OCSLA.--Effective on the date of the enactment of this Act, 
section 10 of the Outer Continental Shelf Lands Act (43 U.S.C. 1339) is 
repealed.

SEC. 5368. INDIAN LANDS.

    The amendments and repeals made by this chapter shall not apply 
with respect to Indian lands, and the provisions of the Federal Oil and 
Gas Royalty Management Act of 1982 as in effect on the day before the 
date of enactment of this Act shall continue to apply after such date 
with respect to Indian lands.

SEC. 5369. PRIVATE LANDS.

    This chapter shall not apply to any privately owned minerals.

SEC. 5369A. EFFECTIVE DATE.

    Except as provided by section 115(f), section 111(h), section 
111(k)(5), and section 117 of the Federal Oil and Gas Royalty 
Management Act of 1982 (as added by this chapter), this chapter, and 
the amendments made by this chapter, shall apply with respect to the 
production of oil and gas after the first day of the month following 
the date of the enactment of this Act.

                           CHAPTER 5--MINING

SEC. 5371. SHORT TITLE.

    This chapter may be cited as ``The Mining Law Revenue Act of 
1995''.

SEC. 5372. DEFINITIONS.

    When used in this chapter--
        (1) ``Assessment year'' means the annual period commencing at 
    12 o'clock noon on the 1st day of September and ending at 12 
    o'clock noon on the 1st day of September of the following year.
        (2) ``Federal lands'' means lands and interests in lands owned 
    by the United States that are open to mineral location, or that 
    were open to mineral location when a mining claim or site was 
    located and which have not been patented under the general mining 
    laws.
        (3) ``General mining laws'' means those Acts which generally 
    comprise chapters 2, 11, 12, 12A, 15, and 16, and sections 161 and 
    162, of Title 30 of the United States Code, all Acts heretofore 
    enacted which are amendatory of or supplementary to any of the 
    foregoing Acts, and the judicial and administrative decisions 
    interpreting such Acts.
        (4) ``Locatable minerals'' means those minerals owned by the 
    United States and subject to location and disposition under the 
    general mining laws on or after the effective date of this chapter, 
    but not including any mineral held in trust by the United States 
    for any Indian or Indian tribe, as defined in section 2 of the 
    Indian Mineral Development Act of 1982 (25 U.S.C. 2101), or any 
    mineral owned by any Indian or Indian tribe, as defined in that 
    section, that is subject to a restriction against alienation 
    imposed by the United States, or any mineral owned by any 
    incorporated Native group, village corporation, or regional 
    corporation and acquired by the group or corporation under the 
    provisions of the Alaska Native Claims Settlement Act (43 U.S.C. 
    1601 et seq.).
        (5) ``Mineral activities'' means any activity related to, or 
    incidental to, exploration for or development, mining, production, 
    beneficiation, or processing of any locatable mineral or mineral 
    that would be locatable if it were subject to disposition under the 
    general mining laws, or reclamation of the impacts of such 
    activities.
        (6) ``Mining claim or site'', except where provided otherwise, 
    means a lode mining claim, placer mining claim, mill site or tunnel 
    site.
        (7) ``Operator'' means any person conducting mineral activities 
    subject to this chapter.
        (8) ``Person'' means an individual, Indian tribe, partnership, 
    association, society, joint venture, joint stock company, firm, 
    company, limited liability company, corporation, cooperative or 
    other organization, and any instrumentality of State or local 
    government, including any publicly owned utility or publicly owned 
    corporation of State or local government.
        (9) ``Secretary'' means the Secretary of the Interior.

SEC. 5373. RENTAL PAYMENT REQUIREMENTS.

    (a) Rental Payments.--(1) After the date of enactment of this Act, 
the owner of each unpatented mining claim or site located pursuant to 
the general mining laws, whether located before or after the enactment 
of this Act, shall pay to the Secretary prior to September 1 of each 
year, until a patent has been issued therefor, an annual rental payment 
for each unpatented mining claim or site.
    (2) Location payment.--The owner of each unpatented mining claim or 
site located after the date of enactment of this Act pursuant to the 
general mining laws shall pay to the Secretary, at the time the copy of 
the notice or certificate of location is filed with the Bureau of Land 
Management pursuant to section 314(b) of the Federal Land Policy and 
Management Act of 1976 (43 U.S.C. 1744(b)), a $25.00 location payment, 
in lieu of the annual rental payment of $100 per mining claim or site 
for the assessment year which includes the date of location of such 
mining claim or site.
    (3) Exemption and waiver.--(A) The owner of any mining claim or 
site who demonstrates to the Secretary on or before the first day of 
any assessment year that access to such mining claim or site was denied 
during the prior assessment year by the action or inaction of any State 
or Federal governmental officer, agency, or court, or by any Indian 
tribal authority, shall be exempt from the annual rental payment 
requirements of paragraph (1) for the assessment year following the 
filing of the certification.
    (B) The rental payment provided for in subsection 5373(a) shall be 
waived for the owner of a mining claim or site who certifies in writing 
to the Secretary, on or before the date the payment is due, that, as of 
the date such payment is due, such owner and all related persons own 
not more than ten unpatented mining claims or sites. Any owner of a 
mining claim or site that is not required to pay a rental payment under 
this subsection shall continue to be subject to the assessment work 
requirements of the general mining laws or of any other State or 
Federal law, subject to any suspension or deferment of annual 
assessment work provided by law, for the assessment year following the 
filing of the certification required by this subsection.
    (4) Amount of annual rental payment.--For each assessment year the 
annual rental payment payable for a claim or site referred to in 
paragraph (1) shall be in the amount specified in Table 1.

                                Table 1

Assessment Year:
Amount of Payment Per Site or Claim:
  1996-1998
  $100 per year
  1999 and thereafter
  $200 per year

    (5) Effect of forfeiture.--No owner or co-owner of a mining claim 
or site which has been forfeited because the rental payment has not 
been paid and no person who is a related person of any such owner or 
co-owner may relocate a new claim on any part of lands located within 
the forfeited claim for a period of 12 months after the date of 
forfeiture.
    (b) Annual Labor.--(1) Beginning in 1999, amounts expended on 
activities that qualify as annual labor under the general mining laws 
may be credited on a dollar for dollar basis towards up to 50 percent 
of the annual rental payment payable under this section for the 
following assessment year. During the assessment year in 1999, annual 
labor performed in 1998 may be credited toward the annual rental 
payment due in 1999.
    (2) In order to receive credit under this subsection for annual 
labor work, the description and value of the work must be included in 
the statement required in subsection (e) and the statement must be 
timely filed.
    (3) Annual labor performed on an individual mining claim or site 
within a group of contiguous claims may be credited towards the 
aggregate amount of rental payments due on all of the contiguous claims 
within that group.
    (c) Work Qualifying as Annual Labor.--(1) Only work which directly 
benefits or develops a mining claim or facilitates the extraction of 
ore qualifies as annual labor or other activities as determined by the 
Secretary. Acceptable labor and improvements include, but are not 
limited to, any of the following:
        (A) Drilling or excavating, including ore extraction.
        (B) Mining costs directly associated with the production of 
    ore.
        (C) Prospecting work which benefits the claim or a contiguous 
    claim.
        (D) Development work toward an actual mine, such as shafts, 
    tunnels, crosscuts and drifts, settling ponds and dams.
        (E) Activities covered under section 1 of the Act of September 
    2, 1958 (30 U.S.C. 281), as amended.
        (F) Reclamation conducted pursuant to State or Federal surface 
    management laws or regulations.
    (2) The following activities do not qualify as annual labor:
        (A) Work involved in maintaining the location such as brushing 
    and marking boundaries or replacing corner posts and location 
    notices.
        (B) Transportation of workers to or from the location.
        (C) Prospecting or exploration work not conducted within the 
    location or a contiguous location.
    (d) Amendments of Public Law 85-876.--The Act of September 2, 1958 
(Public Law 85-876; 30 U.S.C. 281), is amended as follows:
        (1) Section 1 is amended by inserting ``mineral activities, 
    environmental baseline monitoring, and'' after ``without being 
    limited to'' and before ``geological, geochemical and geophysical 
    surveys'' and by striking ``Such'' at the beginning of the last 
    sentence and inserting ``Airborne''.
        (2) Section 2(d) is amended by inserting ``environmental 
    baseline monitoring or'' after ``experience to conduct'' and before 
    ``geological, geochemical or geophysical surveys''.
        (3) Section 2 is amended by adding the following new subsection 
    at the end thereof:
    ``(e) The term `environmental baseline monitoring' means activities 
for collecting, reviewing and analyzing information concerning soil, 
vegetation, wildlife, mineral, air, water, cultural, historical, 
archaeological or other resources related to planning for or complying 
with Federal and State environmental or permitting requirements 
applicable to potential or proposed mineral activities on the 
claim(s).''.
    (e) Rental Payment Statement.--Each payment under subsection (a) of 
this section shall be accompanied by a statement which reasonably 
identifies the mining claim or site for which the rental payment is 
being paid. The statement required under this subsection shall be in 
lieu of any annual filing requirements for mining claims or sites, 
under any other Federal law, but shall not supersede any such filing 
requirement under applicable State law.
    (f) Annual Labor Statement.--When the value of annual labor is 
credited towards part or all of the rental payment, subject to the 50-
percent limit set forth in subsection (b)(1), the following shall 
apply:
        (1) The rental payment statement required in subsection (e) 
    must also state the dates of performance of the labor, describe the 
    character and total value of the improvements made or the labor 
    performed, and the amount of labor used as a credit toward the 
    rental payment for the current year.
        (2) The annual labor statements must include a summary of the 
    quantity, value and location of work done. This includes a listing 
    of the physical work done, to include drilling, trenching, sampling 
    and underground excavation, and the location of any environmental, 
    geologic, geochemical, and geophysical surveys. The claim holder 
    shall maintain sufficient records which document the value of the 
    work claimed.
        (3) All supporting material filed pursuant to paragraph (2) 
    shall remain confidential in accordance with section 552 of title 5 
    of the United States Code as long as the location is maintained and 
    for a period of one year after the location is abandoned, after 
    which all data filed shall be considered public information.
        (4) To the extent that labor credited against the rental 
    payment payable under this section is determined by a final action 
    not to qualify as labor under the general mining laws, the claimant 
    shall pay the insufficiency by making payment to the Secretary of 
    an amount equal to the amount of the rental payment against which 
    the insufficient labor was credited. If such payment is made within 
    30 days of the claimant's receipt of a notice of a final decision 
    making such determination, the claim concerned shall not be 
    forfeited or null or void, and the rental payment applicable to 
    such claim shall be deemed timely paid.
    (g) Credit Against Royalty.--The annual claim rental payment 
payable in advance of the assessment year for any unpatented mining 
claim or site, or the aggregate rental payments from a group of 
contiguous claims or sites, shall be credited against the amount of 
royalty obligation accruing for that year for such claims or sites 
under section 5375.
    (h) Failure To Comply.--The failure of the owner to pay any claim 
rental payment for a mining claim or site by the date such payment is 
due under this section shall constitute forfeiture of the mining claim 
or site and such mining claim or site shall be null and void, effective 
as of the day after the date such payment is due: Provided, That if 
such rental payment is paid on or before the 30th day after such 
payment was due under this section, such mining claim or site shall not 
be forfeited or null or void.
    (i) Amendment of FLPMA Filing Requirements.--Section 314(a) of the 
Federal Land Policy and Management Act of 1976 (43 U.S.C. 1744(a)) is 
hereby repealed.
    (j) Related Persons.--As used in this section, the term ``related 
persons'' includes--
        (1) the spouse and dependent children (as defined in section 
    152 of the Internal Revenue Code of 1986) of the owner of the 
    mining claim or site; and
        (2) a person controlled by, controlling, or under common 
    control with the owner of the mining claim or site.
    (k) Repeal.--Sections 10101 through 10106 of the Omnibus Budget 
Reconciliation Act of 1993 (107 Stat. 406; 30 U.S.C. 28g) are repealed.

SEC. 5374. PATENTS.

    (a) In General.--Except as provided in subsection (c), any patent 
issued by the United States under the general mining laws after the 
date of enactment of this chapter shall be issued only--
        (1) upon payment by the owner of the claim of the fair market 
    value for the interest in the land owned by the United States 
    exclusive of and without regard to the mineral deposits in the land 
    or the use of the land for mineral activities; and
        (2) subject to reservation by the United States of the royalty 
    provided in section 5375.
    (b) Right of Re-entry.--
        (1) Except as provided in subsection 5374(c), and 
    notwithstanding any other provision of law, the United States shall 
    retain a right of re-entry in lands patented under section 5374.
        (2) Such right of re-entry of the United States shall ripen 
    if--
            (A) the land is used by the patentee, or any subsequent 
        owners, for any purpose other than conducting mineral 
        activities in good faith;
            (B) such use is not discontinued within a time period 
        specified by the Secretary (but not earlier than 90 days after 
        the Secretary provides the owner of the land with written 
        notice pursuant to paragraph (2) to discontinue such use); and
            (C) the Secretary elects to assert the right of re-entry in 
        accordance with paragraph (3).
        (3) The ripened right of re-entry retained by the United States 
    pursuant to subparagraph (2) shall vest and all right, title and 
    interest in such patented estate shall revert to the United States 
    only if--
            (A) the Secretary files a declaration of re-entry within 6 
        months of the requisite occurrences under paragraph (2) with 
        the Office of the Bureau of Land Management in the State where 
        the land subject to such right of re-entry is situated; and
            (B) the Secretary records such declaration in the office of 
        the county recorder of the county in which the lands subject to 
        a reversion are situated within 30 days of filing under 
        subparagraph (A).
        (4) One year after the patent holder provides written notice to 
    the Secretary that all mineral activities are completed and 
    applicable reclamation is completed, the right of re-entry held by 
    the United States and created under the subsection (b) shall expire 
    unless within such period the Secretary notifies the patent holder 
    in writing that he is exercising the right of re-entry held by the 
    United States. At such time, ownership of the patented lands shall 
    automatically revert to the United States, notwithstanding 
    subparagraphs (A), (B) and (C) of subsection (b)(2). The Secretary 
    may decline to exercise the right of re-entry and such rights shall 
    continue if--
            (A) solid waste or hazardous substances released on or from 
        the patented estate may pose a threat to public safety or the 
        environment; or
            (B) acceptance of title would expose the United States to 
        liability for past mineral activities on the patented estate.
    (c) Protection of Valid Existing Rights.--Notwithstanding any other 
provision of law, the requirements of this chapter (except with respect 
to rental payments in accordance with section 5373)--
        (1) shall not apply to the mining claims and sites contained 
    within those mineral patent applications pending at the Department 
    as of September 30, 1995, which shall be processed under the 
    general mining laws in effect immediately prior to the date of 
    enactment of this chapter; and
        (2) likewise shall not apply to the mining claims or sites for 
    which there is on the date of enactment of this chapter a vested 
    possessory property right against the Government under the general 
    mining laws in effect immediately prior to the date of enactment of 
    this chapter.

SEC. 5375. ROYALTY.

    (a) In General.--The production and sale of locatable minerals 
(including associated minerals) from any unpatented mining claim (other 
than those from Federal lands to which subsection 5374(c) applies) or 
any mining claim patented under subsection 5374(a) shall be subject to 
a royalty of 5.0 percent on the net proceeds from such production mined 
and sold from such claim.
    (b) Royalty Exclusion.--
        (1) The royalty payable under this section shall be waived for 
    any person with annual net proceeds from mineral production subject 
    to subsection (a) of less than $50,000.
        (2) The obligation to pay royalties hereunder shall accrue upon 
    the sale of locatable minerals or mineral products produced from a 
    mining claim subject to such royalty, and not upon the stockpiling 
    of the same for future processing.
        (3) Where mining operations subject to this section are 
    conducted in two or more places by the same person, the operations 
    shall be considered a single operation the aggregate net proceeds 
    from which shall be subject to the $50,000 limitation set forth in 
    this subsection.
        (4) No royalty shall be payable under this section with respect 
    to minerals processed at a facility by the same person or entity 
    which extracted the minerals if an urban development action grant 
    has been made under section 119 of the Housing and Community 
    Development Act of 1974 with respect to any portion of such 
    facility.
    (c) Definitions.--For the purposes of this chapter:
        (1) The term ``net proceeds'' shall mean gross yield, less the 
    sum of the following deductions for costs incurred prior to sale or 
    value determination, and none other:
            (A) The actual cost of extracting the locatable mineral.
            (B) The actual cost of transporting the locatable mineral 
        from the claim to the place or places of reduction, 
        beneficiation, refining, and sale.
            (C) The actual cost of reduction, beneficiation, refining, 
        and sale of the locatable mineral.
            (D) The actual cost of marketing and delivering the 
        locatable mineral and the conversion of the locatable mineral 
        into money.
            (E) The actual cost of maintenance and repairs of--
                (i) all machinery, equipment, apparatus, and facilities 
            used in the mine;
                (ii) all crushing, milling, leaching, refining, 
            smelting, and reduction works, plants, and facilities; and
                (iii) all facilities and equipment for transportation.
            (F) The actual cost for support personnel and support 
        services at the mine site, including without limitation, 
        accounting, assaying, drafting and mapping, computer services, 
        surveying, housing, camp, and office expenses, safety, and 
        security.
            (G) The actual cost of engineering, sampling, and assaying 
        pertaining to development and production.
            (H) The actual cost of permitting, reclamation, 
        environmental compliance and monitoring.
            (I) The actual cost of fire and other insurance on the 
        machinery, equipment, apparatus, works, plants, and facilities 
        mentioned in subparagraph (E).
            (J) Depreciation of the original capitalized cost of the 
        machinery, equipment, apparatus, works, plants, and facilities 
        listed in subparagraph (E). The annual depreciation charge 
        shall consist of amortization of the original cost in the 
        manner consistent with the Internal Revenue Code of 1986, as 
        amended from time to time. The probable life of the property 
        represented by the original cost must be considered in 
        computing the depreciation charge.
            (K) All money expended for premiums for industrial 
        insurance, and the owner paid cost of hospital and medical 
        attention and accident benefits and group insurance for all 
        employees engaged in the production or processing of locatable 
        minerals.
            (L) All money paid as contributions or payments under State 
        unemployment compensation law, all money paid as contributions 
        under the Federal Social Security Act, and all money paid to 
        State government in real property taxes and severance or other 
        taxes measured or levied on production, or Federal excise tax 
        payments and payments as fees or charges for use of the Federal 
        lands from which the locatable minerals are produced.
            (M) The actual cost of the developmental work in or about 
        the mine or upon a group of mines when operated as a unit.
        (2) The term ``gross yield'' shall having the following 
    meaning:
            (A) In the case of sales of gold and silver ore, 
        concentrates or bullion, or the sales of other locatable 
        minerals in the form of ore or concentrates, the term ``gross 
        yield'' means the actual proceeds of sale of such ore, 
        concentrates or bullion.
            (B) In the case of sales of beneficiated products from 
        locatable minerals other than those subject to subparagraph (A) 
        (including cathode, anode or copper rod or wire, or other 
        products fabricated from the locatable minerals), the term 
        ``gross yield'' means the gross income from mining derived from 
        the first commercially marketable product determined in the 
        same manner as under section 613 of the Internal Revenue Code 
        of 1986.
            (C) If ore, concentrates, beneficiated or fabricated 
        products, or locatable minerals are used or consumed and are 
        not sold in an arms length transaction, the term ``gross 
        yield'' means the reasonable fair market value of the ore, 
        concentrates, beneficiated or fabricated products at the mine 
        or wellhead determined from the first applicable of the 
        following:
                (i) Published or other competitive selling prices of 
            locatable minerals of like kind and grade.
                (ii) Any proceeds of sale.
                (iii) Value received in exchange for any thing or 
            service.
                (iv) The value of any locatable minerals in kind or 
            used or consumed in a manufacturing process or in providing 
            a service.
        Without limiting the foregoing, the profits or losses incurred 
        in connection with forward sales, futures or commodity options 
        trading, metal loans, or any other price hedging or speculative 
        activity or arrangement shall not be included in gross yield.
    (d) Limitations and Allocations of Net Proceeds, Gross Yield, and 
Allowable Deductions.--
        (1) The deductions listed in subsection (c)(1) are intended to 
    allow a reasonable allowance for overhead. Such deductions shall 
    not include any expenditures for salaries, or any portion of 
    salaries, of any person not actually engaged in--
            (A) the working of the mine;
            (B) the operating of the leach pads, ponds, plants, mills, 
        smelters, or reduction works;
            (C) the operating of the facilities or equipment for 
        transportation; or
            (D) superintending the management of any of those 
        operations described in subparagraphs (A) through (C).
        (2) Ores or solutions of locatable minerals subject to the 
    royalty requirements of this section may be extracted from mines 
    comprised of mining claims and lands other than mining claims and 
    ore or solutions of locatable minerals subject to the royalty 
    requirements of this section may be commingled with ores or 
    solutions from lands other than mining claims. In any such case, 
    for purposes of determining the amount of royalties payable under 
    this section--
            (A) the operator shall first sample, weigh or measure, and 
        assay the same in accordance with accepted industry standards; 
        and
            (B) gross yield, allowable costs and net proceeds for 
        royalty purposes shall be allocated in proportion to mineral 
        products recovered from the mining claims in accordance with 
        accepted industry standards.
    (e) Liability for Royalty Payments.--The owner or co-owners of a 
mining claim subject to a royalty under this section shall be liable 
for such royalty to the extent of the interest in such claim owned. As 
used in this subsection, the terms ``owner'' and ``co-owner'' mean the 
person or persons owning the right to mine locatable minerals from such 
claim and receiving the net proceeds of such sale. No person who makes 
any royalty payment attributable to the interest of the owner or co-
owners liable therefor shall become liable to the United States for 
such royalty as a result of making such payment on behalf of such owner 
or co-owners.
    (f) Time and Manner of Payment.--
        (1) Royalty payments for production from any mining claim 
    subject to the royalty payable under this section shall be due to 
    the United States at the end of the month following the end of the 
    calendar quarter in which the net proceeds from the sale of such 
    production are received by the owner or co-owners. Royalty payments 
    may be made based upon good faith estimates of the gross yield, net 
    proceeds and the quantity of ore, concentrates, or other 
    beneficiated or fabricated products of locatable minerals, subject 
    to adjustment when the actual annual gross yield, net proceeds and 
    quantity are determined by the owner of the mining claim or site or 
    co-owners.
        (2) Each royalty payment or adjustment shall be accompanied by 
    a statement containing each of the following:
            (A) The name and Bureau of Land Management serial number of 
        the mining claim or claims from which ores, concentrates, 
        solutions or beneficiated products of locatable minerals 
        subject to the royalty required in this section were produced 
        and sold for the period covered by such payment or adjustment.
            (B) The estimated (or actual, if determined) quantity of 
        such ore, concentrates, solutions or beneficiated or fabricated 
        products produced and sold from such mining claim or claims for 
        such period.
            (C) The estimated (or actual, if determined) gross yield 
        from the production and sale of such ore, concentrates, 
        solutions or beneficiated products for such period.
            (D) The estimated (or actual, if determined) net proceeds 
        from the production and sale of such ores, concentrates, 
        solutions or beneficiated products for such period, including 
        an itemization of the applicable deductions described in 
        subsection (c)(1).
            (E) The estimated (or actual, if determined) royalty due to 
        the United States, or adjustment due to the United States or 
        such owner or co-owners, for such period.
        (3) In lieu of receiving a refund under subsection (h), the 
    owner or co-owners may elect to apply any adjustment due to such 
    owner or co-owners as an offset against royalties due from such 
    owner or co-owners to the United States under this Act, regardless 
    of whether such royalties are due for production and sale from the 
    same mining claim or claims.
    (g) Recordkeeping and Reporting Requirements.--
        (1) An owner, operator, or other person directly involved in 
    the conduct of mineral activities, transportation, purchase, or 
    sale of locatable minerals, concentrates, or products derived 
    therefrom, subject to the royalty under this section, through the 
    point of royalty computation, shall establish and maintain any 
    records, make any reports, and provide any information that the 
    Secretary may reasonably require for the purposes of implementing 
    this section or determining compliance with regulations or orders 
    under this section. Upon the request of the Secretary when 
    conducting an audit or investigation pursuant to subsection (i), 
    the appropriate records, reports, or information required by this 
    subsection shall be made available for inspection and duplication 
    by the Secretary.
        (2) Records required by the Secretary under this section shall 
    be maintained for 3 years after the records are generated unless 
    the Secretary notifies the record holder that he or she has 
    initiated an audit or investigation specifically identifying and 
    involving such records and that such records must be maintained for 
    a longer period. When an audit or investigation is under way, such 
    records shall be maintained until the earlier of the date that the 
    Secretary releases the record holder of the obligation to maintain 
    such records or the date that the limitations period applicable to 
    such audit or investigation under subsection (i) expires.
    (h) Interest Assessments.--
        (1) If royalty payments under this section are not received by 
    the Secretary on the date that such payments are due, or if such 
    payments are less than the amount due, the Secretary shall charge 
    interest on such unpaid amount. Interest under this subsection 
    shall be computed at the rate published by the Department of the 
    Treasury as the ``Treasury Current Value of Funds Rate.'' In the 
    case of an underpayment or partial payment, interest shall be 
    computed and charged only on the amount of the deficiency and not 
    on the total amount, and only for the number of days such payment 
    is late. No other late payment or underpayment charge or penalty 
    shall be charged with respect to royalties under this section.
        (2) In any case in which royalty payments are made in excess of 
    the amount due, or amounts are held by the Secretary pending the 
    outcome of any appeal in which the Secretary does not prevail, the 
    Secretary shall promptly refund such overpayments or pay such 
    amounts to the person or persons entitled thereto, together with 
    interest thereon for the number of days such overpayment or amounts 
    were held by the Secretary, with the addition of interest charged 
    against the United States computed at the rate published by the 
    Department of the Treasury as the ``Treasury Current Value of Funds 
    Rate.''
    (i) Audits, Payment Demands and Limitations.--
        (1) The Secretary may conduct, after notice, any audit 
    reasonably necessary and appropriate to verify the payments 
    required under this section.
        (2) The Secretary shall send or issue any billing or demand 
    letter for royalty due on locatable minerals produced and sold from 
    any mining claim subject to royalty required by this section not 
    later than 3 years after the date such royalty was due and must 
    specifically identify the production involved, the royalty 
    allegedly due and the basis for the claim. No action, proceeding or 
    claim for royalty due on locatable minerals produced and sold, or 
    relating to such production, may be brought by the United States, 
    including but not limited to any claim for additional royalties or 
    claim of the right to offset the amount of such additional 
    royalties against amounts owed to any person by the United States, 
    unless judicial suit or administrative proceedings are commenced to 
    recover specific amounts claimed to be due prior to the expiration 
    of 3 years from the date such royalty is alleged to have been due.
    (j) Transitional Rules.--Any mining claim for which a patent is 
issued pursuant to section 5374(c) shall not be subject to the 
obligation to pay the royalty pursuant to this section. Royalty 
payments for any claim processed under section 5374(c) shall be 
suspended pending final determination of the right to patent. For any 
such claim that is determined not to qualify for the issuance of a 
patent under section 5374(c), royalties shall be payable under this 
section on production after the date of enactment of this Act, plus 
interest computed at the rate published by the Department of the 
Treasury as the ``Treasury Current Value of Funds Rate'' on production 
after such date of enactment and before the date of such determination.
    (k) Penalties.--Any person who withholds payment or royalties under 
this section after a final, nonappealable determination of liability 
may be liable for civil penalties of up to $5,000 per day that payment 
is withheld after becoming due.
    (l) Disbursement of Revenues.--The receipts from royalties 
collected under this section shall be disbursed as follows:
        (1) Fifty percent of such receipts shall be paid into the 
    Treasury of the United States and deposited as miscellaneous 
    receipts.
        (2) Forty percent of such receipts shall be paid into a State 
    Fund or Federal Fund in accordance with section 5376; until 
    termination as provided in section 5379.
        (3) Ten percent of such receipts shall be paid by the Secretary 
    of the Treasury to the State in which the mining claim from which 
    production occurred is located.

SEC. 5376. ABANDONED LOCATABLE MINERALS MINE RECLAMATION FUND.

    (a) State Fund.--Any State within which royalties are collected 
pursuant to section 5375 from a mining claim and which wishes to become 
eligible to receive such proceeds allocated by paragraph 5375(l)(2) 
shall establish and maintain an interest-bearing abandoned locatable 
mineral mine reclamation fund (hereinafter referred to in this chapter 
as ``State Fund'') to accomplish the purposes of this chapter. States 
with existing abandoned locatable mineral reclamation programs shall 
qualify to receive proceeds allocated by section 5375(l)(2).
    (b) Federal Fund.--There is established on the books of the 
Treasury of the United States an interest-bearing fund to be known as 
the Abandoned Locatable Minerals Mine Reclamation Fund (hereinafter 
referred to in this chapter as ``Federal Fund'') which shall consist of 
royalty proceeds allocated by paragraph 5375(l)(2) from mining claims 
in a State where a State Fund has not been established or maintained 
under subsection (a).

SEC. 5377. ALLOCATION AND PAYMENTS.

    (a) State Fund.--Royalties collected pursuant to section 5375 and 
allocated by section 5375(l)(2) shall be paid by the Secretary of the 
Treasury to the State Fund established pursuant to subsection 5376(a) 
for the State where the mining claim from which the production occurred 
is located. Payments to States under this subsection with respect to 
any royalties received by the United States, shall be made not later 
than the last business day of the month in which such royalties are 
warranted by the United States Treasury to the Secretary of the 
Interior as having been received, except for any portion of such 
royalties which is under challenge, which shall be placed in a suspense 
account pending resolution of such challenge. Such warrants shall be 
issued by the United States Treasury not later than 10 days after 
receipt of such royalties by the Treasury. Royalties placed in a 
suspense account which are determined to be due the United States shall 
be payable to a State Fund not later than fifteen days after such 
challenge is resolved. Any such amount placed in a suspense account 
pending resolution shall bear interest until the challenge is resolved. 
In determining the amount of payments to State Funds under this 
section, the amount of such payments shall not be reduced by any 
administrative or other costs incurred by the United States.
    (b) Federal Fund.--Royalties collected pursuant to section 5375, 
and allocated by paragraph 5375(l)(2), from mining claims located in a 
State which has not established or maintained a State Fund, and such 
royalties from mining claims located in a State for which the 
Secretary's authority has expired under subsection 5379(a), shall be 
credited to the Federal Fund and distributed in accordance with 
subsection (c).
    (c) Transition.--Prior to the time a State establishes a State Fund 
pursuant to subsection 5376(a), any royalties collected from a mining 
claim within such State shall be deposited into the Federal Fund and 
allocated to such State. Once a State establishes a State Fund under 
subsection 5376(a), the State allocation in the Federal Fund with 
accrued interest shall be paid by the Secretary of the Treasury to the 
State Fund in accordance with subsection (a). Commencing three years 
after the date of enactment of this chapter, the Secretary of the 
Treasury shall distribute royalty proceeds then accrued or which are 
thereafter credited to the Federal Fund equally among all States which 
maintain a State Fund established under subsection 5376(a), and for 
which the Secretary of the Treasury's authority has not expired under 
subsection 5379(a).

SEC. 5378. ELIGIBLE AREA.

    (a) In General.--Subject to subsection (b), lands and water 
eligible for reclamation under this chapter shall be Federal lands that 
--
        (1) have been adversely affected by past mineral activities on 
    lands abandoned and left inadequately reclaimed prior to the date 
    of enactment of this chapter; and
        (2) for which the State determines there is no identifiable 
    party with a continuing reclamation responsibility under State or 
    Federal laws.
    (b) Specific Sites and Areas Not Eligible.--The following areas 
shall not be eligible for expenditures from a State Fund--
        (1) any area subject to a plan of operations submitted or 
    approved prior to, on or after the date of enactment of this 
    chapter which includes remining or reclamation of the area 
    adversely affected by past locatable mineral activities;
        (2) any area affected by coal mining eligible for reclamation 
    expenditures pursuant to section 404 of the Surface Mining Control 
    and Reclamation Act (30 U.S.C. 1234);
        (3) any area designated for remedial action pursuant to the 
    Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C. 
    7912); and
        (4) any area that was listed on the National Priorities List 
    pursuant to the Comprehensive Environmental Response, Compensation 
    and Liability Act of 1980 (42 U.S.C. 9605) prior to the date of 
    enactment of this chapter, or where the Environmental Protection 
    Agency has initiated or caused to be initiated a response action 
    pursuant to that Act.

SEC. 5379. SUNSET PROVISIONS.

    (a) Termination of Authority.--The Secretary of the Treasury's 
authority to allocate funds to a State Fund under section 5377 shall 
expire on the date that the State submits a report to the Congress 
which states that there are no areas in the State eligible under 
subsection 5378(a) which remain to be reclaimed.
    (b) Termination of Fund.--Upon the termination of authority as 
provided in subsection (a) with respect to all State Funds, the Federal 
Fund shall also be terminated, and all royalty proceeds thereafter 
remaining in the Federal Fund shall be distributed to the States as 
provided for in section 5375(l)(3).

SEC. 5380. EFFECT ON THE GENERAL MINING LAWS.

    The provisions of this chapter shall supersede the general mining 
laws only to the extent such laws conflict with the requirements of 
this chapter. Where no such conflict exists, the general mining laws, 
including all judicial and administrative decisions interpreting them, 
shall remain in full force and effect.

SEC. 5381. SEVERABILITY.

    If any provision of this chapter or the applicability thereof to 
any person or circumstances is held invalid, the remainder of this 
chapter and the application of such provision to other persons or 
circumstances shall not be affected thereby.

SEC. 5382. MINERAL MATERIALS.

    (a) Determinations.--Section 3 of the Act of July 23, 1955 (30 
U.S.C. 611), is amended as follows:
        (1) Insert ``(a)'' before the first sentence.
        (2) Add the following new subsection at the end thereof:
    ``(b)(1) Subject to valid existing rights, after the date of 
enactment of this subsection, notwithstanding the reference to common 
varieties in subsection (a) and to the exception to such term relating 
to a deposit of materials with some property giving it distinct and 
special value, all deposits of mineral materials referred to in such 
subsection, including the block pumice referred to in such subsection, 
shall be subject to disposal only under the terms and conditions of the 
Materials Act of 1947.
    ``(2) For purposes of paragraph (1), the term `valid existing 
rights' means that a mining claim located for any such mineral material 
had some property giving it the distinct and special value referred to 
in subsection (a), or as the case may be, met the definition of block 
pumice referred to in such subsection, was properly located and 
maintained under the general mining laws prior to the date of the 
enactment of this subsection, and was supported by a discovery of a 
valuable mineral deposit within the meaning of the general mining laws 
as in effect immediately prior to such date of enactment and that such 
claim continues to be valid under this Act.''.
    (b) Identified Deposits.--The Act entitled ``An Act to provide for 
the disposal of materials on the public lands of the United States'', 
approved July 31, 1947 (30 U.S.C. 602), is amended by adding at the end 
the following:
    ``(b) Identified Deposits.--
        ``(1) Lands known to contain valuable deposits of mineral 
    materials subject to this Act and subsequent amendments and not 
    covered by any contract, permit, or lease, for uncommon varieties 
    of mineral materials under this section or by a valid mining claim 
    for an uncommon variety of a mineral material under the general 
    mining laws shall be subject to disposition by lease under this Act 
    by the Secretary through advertisement, competitive bidding, or 
    such other methods as he may by general regulations adopt, and in 
    such reasonably compact areas as he shall fix.
        ``(2) All leases will be conditioned upon--
            ``(A) the payment by the lessee of such royalty as may be 
        fixed in the lease, not less than two percent of the quantity 
        or gross value of the output of mineral materials, and
            ``(B) the payment in advance of a rental of 25 cents per 
        acre for the first calendar year or fraction thereof; 50 cents 
        per acre for the second, third, fourth, and fifth years, 
        respectively; and $1 per acre per annum thereafter during the 
        continuance of the lease, such rental for that year being 
        credited against royalties accruing for that year.
        ``(3)(A) Any lease issued under this subsection shall be for a 
    term of 20 years and so long thereafter as the lessee complies with 
    the terms and conditions of the lease and upon the further 
    condition that at the end of each 20-year period succeeding the 
    date of the lease such reasonable adjustment of the terms and 
    conditions thereof may be made therein as may be prescribed by the 
    Secretary unless otherwise provided by law at the expiration of 
    such periods.
        ``(B) Leases shall be conditioned upon a minimum annual 
    production or the payment of a minimum royalty in lieu thereof, 
    except when production is interrupted by strikes, the elements, or 
    casualties not attributable to the lessee.
        ``(C) The Secretary may permit suspension of operations under 
    any such leases when marketing conditions are such that the leases 
    cannot be operated except at a loss.
        ``(D) The Secretary upon application by the lessee prior to the 
    expiration of any existing lease in good standing shall amend such 
    lease to provide for the same tenure and to contain the same 
    conditions, including adjustment at the end of each 20-year period 
    succeeding the date of said lease, as provided for in this 
    subsection.
    ``(c) Other Lands.--
        ``(1) The Secretary is hereby authorized, under such rules and 
    regulations as he may prescribe, to grant to any qualified 
    applicant a prospecting permit which shall give the exclusive right 
    to prospect for mineral materials in lands belonging to the United 
    States which are not subject to subsection (b), and are not covered 
    by a contract, permit, or lease under this Act, except that a 
    prospecting permit shall not exceed a period of 2 years and the 
    area to be included in such a permit shall not exceed 2,560 acres 
    of land in reasonably compact form.
        ``(2) The Secretary shall reserve and may exercise the 
    authority to cancel any prospecting permit upon failure by the 
    permittee to exercise due diligence in the prosecution of the 
    prospecting work in accordance with the terms and conditions stated 
    in the permit, and shall insert in every such permit issued under 
    the provisions of this Act appropriate provisions for its 
    cancellation by him.
        ``(3)(A) Upon showing to the satisfaction of the Secretary that 
    valuable deposits of one of the mineral materials subject to the 
    Materials Act of 1947 have been discovered by the permittee within 
    the area covered by his permit, and that such land is valuable 
    therefor, the permittee shall be entitled to a lease for any or all 
    of the land embraced in the prospecting permit, at a royalty of not 
    less than two percent of the quantity or gross value of the output 
    of the mineral materials at the point of shipment to market, such 
    lease to be taken in compact form by legal subdivisions of the 
    public land surveys, or if the land be not surveyed, by survey 
    executed at the cost of the permittee in accordance with 
    regulations prescribed by the Secretary.
        ``(B) Persons holding valid mining claims for uncommon 
    varieties of mineral materials shall be entitled to receive a lease 
    under this subsection.''.
    (d) Mineral Materials Disposal Clarification.--Section 4 July 23, 
1955 (30 U.S.C. 612), is amended as follows:
        (1) In subsection (b) insert ``and mineral material'' after 
    ``vegetative''.
        (2) In subsection (c) insert ``and mineral material'' after 
    ``vegetative''.
    (e) Authorization for Disposal of Mineral Materials by Contract.--
Section 2(a) of the Act entitled ``An Act to provide for the disposal 
of materials on the public lands of the United States'', approved July 
31, 1947 (30 U.S.C. 602(a)), is amended--
        (1) by striking the period at the end of paragraph (3) and 
    inserting ``or, if''; and
        (2) by adding after paragraph (3) the following:
        ``(4) the material is a mineral material.''.

                 CHAPTER 6--DEPARTMENT OF THE INTERIOR

SEC. 5391. AIRCRAFT SERVICES.

    (a) Use of Private Contractors.--By not later than October 1, 1996, 
the Secretary of the Interior shall contract with private entities for 
the provision of all aircraft services required by the Department of 
the Interior, other than those available from existing DOI aircraft 
whose primary purpose is fire suppression.
    (b) Sale of Federal Aircraft.--By September 30, 1998, the Secretary 
of the Interior is authorized and directed to sell all aircraft owned 
by the Department of the Interior and all associated equipment and 
facilities, other than those whose primary purpose is fire suppression.
    (c) Exemptions.--The disposition of assets under this section is 
not subject to section 202 and 203 of the Federal Property and 
Administrative Services Act of 1949 (40 U.S.C. 483 and 484) or section 
13 of the Surplus Property Act of 1944 (50 U.S.C. App. 1622).
    (d) Disposition of Proceeds.--The proceeds from dispositions under 
this section shall be returned to the Treasury as miscellaneous 
receipts and all savings from reduced overhead and other costs related 
to the management of the assets sold shall be returned to the Treasury.

               CHAPTER 7--POWER MARKETING ADMINISTRATIONS

       Subchapter A--Bonneville Power Administration Refinancing

SEC. 5401. DEFINITIONS.

    For the purposes of this subchapter--
        (1) ``Administrator'' means the Administrator of the Bonneville 
    Power Administration;
        (2) ``capital investment'' means a capitalized cost funded by 
    Federal appropriations that--
            (A) is for a project, facility, or separable unit or 
        feature of a project or facility;
            (B) is a cost for which the Administrator is required by 
        law to establish rates to repay to the United States Treasury 
        through the sale of electric power, transmission, or other 
        services;
            (C) excludes a Federal irrigation investment; and
            (D) excludes an investment financed by the current revenues 
        of the Administrator or by bonds issued and sold, or authorized 
        to be issued and sold, by the Administrator under section 13 of 
        the Federal Columbia River Transmission System Act (16 U.S.C. 
        838k);
        (3) ``new capital investment'' means a capital investment for a 
    project, facility, or separable unit or feature of a project, 
    facility, or separable unit or feature of a project or facility, 
    placed in service after September 30, 1995;
        (4) ``old capital investment'' means a capital investment the 
    capitalized cost of which--
            (A) was incurred, but not repaid, before October 1, 1995, 
        and
            (B) was for a project, facility, or separable unit or 
        feature of a project or facility, placed in service before 
        October 1, 1995;
        (5) ``repayment date'' means the end of the period within which 
    the Administrator's rates are to assure the repayment of the 
    principal amount of a capital investment; and
        (6) ``Treasury rate'' means--
            (A) for an old capital investment, a rate determined by the 
        Secretary of the Treasury, taking into consideration prevailing 
        market yields, during the month preceding October 1, 1995, on 
        outstanding interest-bearing obligations of the United States 
        with periods to maturity comparable to the period between 
        October 1, 1995, and the repayment date for the old capital 
        investment; and
            (B) for a new capital investment, a rate determined by the 
        Secretary of the Treasury, taking into consideration prevailing 
        market yields, during the month preceding the beginning of the 
        fiscal year in which the related project, facility, or 
        separable unit or feature is placed in service, on outstanding 
        interest-bearing obligations of the United States with periods 
        to maturity comparable to the period between the beginning of 
        the fiscal year and the repayment date for the new capital 
        investment.

SEC. 5402. NEW PRINCIPAL AMOUNTS.

    (a) Principal Amount.--Effective October 1, 1995, an old capital 
investment has a new principal amount that is the sum of--
        (1) the present value of the old payment amounts for the old 
    capital investment, calculated using a discount rate equal to the 
    Treasury rate for the old capital investment; and
        (2) an amount equal to $100,000,000 multiplied by a fraction 
    the numerator of which is the principal amount of the old payment 
    amounts for the old capital investment and the denominator of which 
    is the sum of the principal amounts of the old payment amounts for 
    all old capital investments.
    (b) Determination.--With the approval of the Secretary of the 
Treasury, based solely on consistency with this subchapter, the 
Administrator shall determine the new principal amounts under this 
section and the assignment of interest rates to the new principal 
amounts under section 5403.
    (c) Old Payment Amount.--For the purposes of this section, ``old 
payment amounts'' means, for an old capital investment, the annual 
interest and principal that the Administrator would have paid to the 
United States Treasury from October 1, 1995, if this subchapter had not 
been enacted, assuming that--
        (1) the principal were repaid--
            (A) on the repayment date the Administrator assigned before 
        October 1, 1993, to the old capital investment, or
            (B) with respect to an old capital investment for which the 
        Administrator has not assigned a repayment date before October 
        1, 1993, on a repayment date the Administrator shall assign to 
        the old capital investment in accordance with paragraph 
        10(d)(1) of the version of Department of Energy Order RA 6120.2 
        in effect on October 1, 1993; and
        (2) interest were paid--
            (A) at the interest rate the Administrator assigned before 
        October 1, 1993, to the old capital investment, or
            (B) with respect to an old capital investment for which the 
        Administrator has not assigned an interest rate before October 
        1, 1993, at a rate determined by the Secretary of the Treasury, 
        taking into consideration prevailing market yields, during the 
        month preceding the beginning of the fiscal year in which the 
        related project, facility, or separable unit or feature is 
        placed in service, on outstanding interest-bearing obligations 
        of the United States with periods to maturity comparable to the 
        period between the beginning of the fiscal year and the 
        repayment date for the old capital investment.

SEC. 5403. INTEREST RATE FOR NEW PRINCIPAL AMOUNTS.

    As of October 1, 1995, the unpaid balance on the new principal 
amount established for an old capital investment under section 5402 
bears interest annually at the Treasury rate for the old capital 
investment until the earlier of the date that the new principal amount 
is repaid or the repayment date for the new principal amount.

SEC. 5404. REPAYMENT DATES.

    As of October 1, 1995, the repayment date for the new principal 
amount established for an old capital investment under section 5402 is 
no earlier than the repayment date for the old capital investment 
assumed in section 5402(c)(1).

SEC. 5405. PREPAYMENT LIMITATIONS.

    During the period October 1, 1995, through September 30, 2000, the 
total new principal amounts of old capital investments, as established 
under section 5402, that the Administrator may pay before their 
respective repayment dates shall not exceed $100,000,000.

SEC. 5406. INTEREST RATES FOR NEW CAPITAL INVESTMENTS DURING 
              CONSTRUCTION.

    (a) New Capital Investment.--The principal amount of a new capital 
investment includes interest in each fiscal year of construction of the 
related project, facility, or separable unit or feature at a rate equal 
to the one-year rate for the fiscal year on the sum of--
        (1) construction expenditures that were made from the date 
    construction commenced through the end of the fiscal year, and
        (2) accrued interest during construction.
    (b) Payment.--The Administrator is not required to pay, during 
construction of the project, facility, or separable unit or feature, 
the interest calculated, accrued, and capitalized under subsection (a).
    (c) One-Year Rate.--For the purposes of this section, ``one-year 
rate'' for a fiscal year means a rate determined by the Secretary of 
the Treasury, taking into consideration prevailing market yields, 
during the month preceding the beginning of the fiscal year, on 
outstanding interest-bearing obligations of the United States with 
periods to maturity of approximately one year.

SEC. 5407. INTEREST RATES FOR NEW CAPITAL INVESTMENTS.

    The unpaid balance on the principal amount of a new capital 
investment bears interest at the Treasury rate for the new capital 
investment from the date the related project, facility, or separable 
unit or feature is placed in service until the earlier of the date the 
new capital investment is repaid or the repayment date for the new 
capital investment.

SEC. 5408. CREDITS TO ADMINISTRATOR'S PAYMENTS TO THE UNITED STATES 
              TREASURY.

    The Confederated Tribe of the Colville Reservation Grand Coulee Dam 
Settlement Act (Public Law 103-436; 108 Stat. 4577) is amended by 
striking section 6 and inserting the following:

``SEC. 6. CREDITS TO ADMINISTRATOR'S PAYMENTS TO THE UNITED STATES 
              TREASURY.

    ``So long as the Administrator makes annual payments to the tribes 
under the settlement agreement, the Administrator shall apply against 
amounts otherwise payable by the Administrator to the United States 
Treasury a credit that reduces the Administrator's payment in the 
amount and for each fiscal year as follows: $15,250,000 in fiscal year 
1996; $15,860,000 in fiscal year 1997; $16,490,000 in fiscal year 1998; 
$17,150,000 in fiscal year 1999; $17,840,000 in fiscal year 2000; and 
$4,100,000 in each succeeding fiscal year.''.

SEC. 5409. CONTRACT PROVISIONS.

    In each contract of the Administrator that provides for the 
Administrator to sell electric power, transmission, or related 
services, and that is in effect after September 30, 1995, the 
Administrator shall offer to include, or as the case may be, shall 
offer to amend to include, provisions specifying that after September 
30, 1995--
        (1) the Administrator shall establish rates and charges on the 
    basis that--
            (A) the principal amount of an old capital investment shall 
        be no greater than the new principal amount established under 
        section 5402;
            (B) the interest rate applicable to the unpaid balance of 
        the new principal amount of an old capital investment shall be 
        no greater than the interest rate established under section 
        5403;
            (C) any payment of principal of an old capital investment 
        shall reduce the outstanding principal balance of the old 
        capital investment in the amount of the payment at the time the 
        payment is tendered; and
            (D) any payment of interest on the unpaid balance of the 
        new principal amount of an old capital investment shall be a 
        credit against the appropriate interest account in the amount 
        of the payment at the time the payment is tendered;
        (2) apart from charges necessary to repay the new principal 
    amount of an old capital investment as established under section 
    5402 and to pay the interest on the principal amount under section 
    5403, no amount may be charged for return to the United States 
    Treasury as repayment for or return on an old capital investment, 
    whether by way of rate, rent, lease payment, assessment, user 
    charge, or any other fee;
        (3) amounts provided under section 1304 of title 31, United 
    States Code, shall be available to pay, and shall be the sole 
    source for payment of, a judgment against or settlement by the 
    Administrator or the United States on a claim for a breach of the 
    contract provisions required by this subchapter; and
        (4) the contract provisions specified in this subchapter do 
    not--
            (A) preclude the Administrator from recovering, through 
        rates or other means, any tax that is generally imposed on 
        electric utilities in the United States, or
            (B) affect the Administrator's authority under applicable 
        law, including section 7(g) of the Pacific Northwest Electric 
        Power Planning and Conservation Act (16 U.S.C. 839e(g)), to--
                (i) allocate costs and benefits, including but not 
            limited to fish and wildlife costs, to rates or resources, 
            or
                (ii) design rates.

SEC. 5410. SAVINGS PROVISIONS.

    (a) Repayment.--This subchapter does not affect the obligation of 
the Administrator to repay the principal associated with each capital 
investment, and to pay interest on the principal, only from the 
``Administrator's net proceeds,'' as defined in section 13(b) of the 
Federal Columbia River Transmission System Act (16 U.S.C. 838k(b)).
    (b) Payment of Capital Investment.--Except as provided in section 
5405, this subchapter does not affect the authority of the 
Administrator to pay all or a portion of the principal amount 
associated with a capital investment before the repayment date for the 
principal amount.

        Subchapter B--Alaska Power Marketing Administration Sale

SEC. 5411. SHORT TITLE.

    This subchapter may be cited as the ``Alaska Power Administration 
Asset Sale and Termination Act''.

SEC. 5412. DEFINITIONS.

    For purposes of this subchapter:
        (1) The term ``Eklutna'' means Eklutna Hydroelectric Project 
    and related assets as described in section 4 and Exhibit A of the 
    Eklutna Purchase Agreement.
        (2) The term ``Eklutna Purchase Agreement'' means the August 2, 
    1989, Eklutna Purchase Agreement between the Alaska Power 
    Administration of the Department of Energy and the Eklutna 
    Purchasers, together with any amendments thereto adopted before the 
    date of enactment of this Act.
        (3) The term ``Eklutna Purchasers'' means the Municipality of 
    Anchorage doing business as Municipal Light and Power, the Chugach 
    Electric Association, Inc. and the Matanuska Electric Association, 
    Inc.
        (4) The term ``Snettisham'' means the Snettisham Hydroelectric 
    Project and related assets as described in section 4 and Exhibit A 
    of the Snettisham Purchase Agreement.
        (5) The term ``Snettisham Purchase Agreement'' means the 
    February 10, 1989, Snettisham Purchase Agreement between the Alaska 
    Power Administration of the Department of Energy and the Alaska 
    Power Authority and its successors in interest, together with any 
    amendments thereto adopted before the date of enactment of this 
    Act.
        (6) The term ``Snettisham Purchaser'' means the Alaska 
    Industrial Development and Export Authority or a successor State 
    agency or authority.

SEC. 5413. SALE OF EKLUTNA AND SNETTISHAM HYDROELECTRIC PROJECTS.

    (a) Sale of Eklutna.--The Secretary of Energy is authorized and 
directed to sell Eklutna to the Eklutna Purchasers in accordance with 
the terms of this subchapter and the Eklutna Purchase Agreement.
    (b) Sale of Snettisham.--The Secretary of Energy is authorized and 
directed to sell Snettisham to the Snettisham Purchaser in accordance 
with the terms of this subchapter and the Snettisham Purchase 
Agreement.
    (c) Cooperation of Other Agencies.--The heads of other Federal 
departments, agencies, and instrumentalities of the United States shall 
assist the Secretary of Energy in implementing the sales and 
conveyances authorized and directed by this subchapter.
    (d) Proceeds.--Proceeds from the sales required by this subchapter 
shall be deposited in the Treasury of the United States to the credit 
of miscellaneous receipts.
    (e) Preparation of Eklutna and Snettisham for Sale.--The Secretary 
of Energy is authorized and directed to use such funds from the sale of 
electric power by the Alaska Power Administration as may be necessary 
to prepare, survey, and acquire Eklutna and Snettisham assets for sale 
and conveyance. Such preparations and acquisitions shall provide 
sufficient title to ensure the beneficial use, enjoyment, and occupancy 
by the purchaser.
    (f) Contributed Funds.--Notwithstanding any other provision of law, 
the Alaska Power Administration is authorized to receive, administer, 
and expend such contributed funds as may be provided by the Eklutna 
Purchasers or customers or the Snettisham Purchaser or customers for 
the purposes of upgrading, improving, maintaining, or administering 
Eklutna or Snettisham. Upon the termination of the Alaska Power 
Administration under section 5414(f), the Secretary of Energy shall 
administer and expend any remaining balances of such contributed funds 
for the purposes intended by the contributors.

SEC. 5414. EXEMPTION AND OTHER PROVISIONS.

    (a) Federal Power Act.--
        (1) After the sales authorized by this subchapter occur, 
    Eklutna and Snettisham, including future modifications, shall 
    continue to be exempt from the requirements of part I of the 
    Federal Power Act (16 U.S.C. 791a et seq.), except as provided in 
    subsection (b).
        (2) The exemption provided by paragraph (1) shall not affect 
    the Memorandum of Agreement entered into among the State of Alaska, 
    the Eklutna Purchasers, the Alaska Energy Authority, and Federal 
    fish and wildlife agencies regarding the protection, mitigation of, 
    damages to, and enhancement of fish and wildlife, dated August 7, 
    1991, which remains in full force and effect.
        (3) Nothing in this subchapter or the Federal Power Act (16 
    U.S.C. 791 et seq.) preempts the State of Alaska from carrying out 
    the responsibilities and authorities of the Memorandum of 
    Agreement.
    (b) Subsequent Transfers.--Except for subsequent assignment of 
interest in Eklutna by the Eklutna Purchasers to the Alaska Electric 
Generation and Transmission Cooperative Inc. pursuant to section 19 of 
the Eklutna Purchase Agreement, upon any subsequent sale or transfer of 
any portion of Eklutna or Snettisham from the Eklutna Purchasers or the 
Snettisham Purchaser to any other person, the exemption set forth in 
paragraph (1) of subsection (a) of this section shall cease to apply to 
such portion.
    (c) Review.--
        (1) The United States District Court for the District of Alaska 
    shall have jurisdiction to review decisions made under the 
    Memorandum of Agreement and to enforce the provisions of the 
    Memorandum of Agreement, including the remedy of specific 
    performance.
        (2) An action seeking review of a Fish and Wildlife Program 
    (``Program'') of the Governor of Alaska under the Memorandum of 
    Agreement or challenging actions of any of the parties to the 
    Memorandum of Agreement prior to the adoption of the Program shall 
    be brought not later than 90 days after the date on which the 
    Program is adopted by the Governor of Alaska, or be barred.
        (3) An action seeking review of implementation of the Program 
    shall be brought not later than 90 days after the challenged Act 
    implementing the Program, or be barred.
    (d) Eklutna Lands.--With respect to Eklutna lands described in 
Exhibit A of the Eklutna Purchase Agreement:
        (1) The Secretary of the Interior shall issue rights-of-way to 
    the Alaska Power Administration for subsequent reassignment to the 
    Eklutna Purchasers--
            (A) at no cost to the Eklutna Purchasers;
            (B) to remain effective for a period equal to the life of 
        Eklutna as extended by improvements, repairs, renewals, or 
        replacements; and
            (C) sufficient for the operation of, maintenance of, repair 
        to, and replacement of, and access to, Eklutna facilities 
        located on military lands and lands managed by the Bureau of 
        Land Management, including lands selected by the State of 
        Alaska.
        (2) Fee title to lands at Anchorage Substation shall be 
    transferred to Eklutna Purchasers at no additional cost if the 
    Secretary of the Interior determines that pending claims to, and 
    selections of, those lands are invalid or relinquished.
        (3) With respect to the Eklutna lands identified in paragraph 1 
    of Exhibit A of the Eklutna Purchase Agreement, the State of Alaska 
    may select, and the Secretary of the Interior shall convey to the 
    State, improved lands under the selection entitlements in section 6 
    of the Act of July 7, 1958 (commonly known as the Alaska Statehood 
    Act, Public Law 85-508; 72 Stat. 339), and the North Anchorage Land 
    Agreement dated January 31, 1983. This conveyance shall be subject 
    to the rights-of-way provided to the Eklutna Purchasers under 
    paragraph (1).
    (e) Snettisham Lands.--With respect to the Snettisham lands 
identified in paragraph 1 of Exhibit A of the Snettisham Purchase 
Agreement and Public Land Order No. 5108, the State of Alaska may 
select, and the Secretary of the Interior shall convey to the State of 
Alaska, improved lands under the selection entitlements in section 6 of 
the Act of July 7, 1958 (commonly known as the Alaska Statehood Act, 
Public Law 85-508; 72 Stat. 339).
    (f) Termination of Alaska Power Administration.--Not later than one 
year after both of the sales authorized in section 5413 have occurred, 
as measured by the Transaction Dates stipulated in the Purchase 
Agreements, the Secretary of Energy shall--
        (1) complete the business of, and close out, the Alaska Power 
    Administration;
        (2) submit to Congress a report documenting the sales; and
        (3) return unobligated balances of funds appropriated for the 
    Alaska Power Administration to the Treasury of the United States.
    (g) Repeals.--
        (1) The Act of July 31, 1950 (64 Stat. 382) is repealed 
    effective on the date that Eklutna is conveyed to the Eklutna 
    Purchasers.
        (2) Section 204 of the Flood Control Act of 1962 (76 Stat. 
    1193) is repealed effective on the date that Snettisham is conveyed 
    to the Snettisham Purchaser.
        (3) The Act of August 9, 1955, concerning water resources 
    investigation in Alaska (69 Stat. 618), is repealed.
    (h) DOE Organization Act.--As of the later of the two dates 
determined in paragraphs (1) and (2) of subsection (g), section 302(a) 
of the Department of Energy Organization Act (42 U.S.C. 7152(a)) is 
amended--
        (1) in paragraph (1)--
            (A) by striking subparagraph (C); and
            (B) by redesignating subparagraphs (D), (E), and (F) as 
        subparagraphs (C), (D), and (E) respectively; and
        (2) in paragraph (2) by striking out ``and the Alaska Power 
    Administration'' and by inserting ``and'' after ``Southwestern 
    Power Administration,''.
    (i) Disposal.--The sales of Eklutna and Snettisham under this 
subchapter are not considered disposal of Federal surplus property 
under the Federal Property and Administrative Services Act of 1949 (40 
U.S.C. 484) or the Act of October 3, 1944, popularly known as the 
``Surplus Property Act of 1944'' (50 U.S.C. App. 1622).

SEC. 5415. OTHER FEDERAL HYDROELECTRIC PROJECTS.

    The provisions of this subchapter regarding the sale of the Alaska 
Power Administration's hydroelectric projects under section 5413 and 
the exemption of these projects from part I of the Federal Power Act 
under section 5414 do not apply to other Federal hydroelectric 
projects.

      CHAPTER 8--OUTER CONTINENTAL SHELF DEEP WATER ROYALTY RELIEF

SEC. 5421. SHORT TITLE.

    This chapter may be referred to as the ``Outer Continental Shelf 
Deep Water Royalty Relief Act''.

SEC. 5422. AMENDMENTS TO THE OUTER CONTINENTAL SHELF LANDS ACT.

    Section 8(a)(3) of the Outer Continental Shelf Lands Act (43 U.S.C. 
1337(a)(3)), is amended--
        (1) by designating the provisions of paragraph (3) as 
    subparagraph (A) of such paragraph (3); and
        (2) by inserting after subparagraph (A), as so designated, the 
    following:
            ``(B) In the Western and Central Planning Areas of the Gulf 
        of Mexico and the portion of the Eastern Planning Area of the 
        Gulf of Mexico encompassing whole lease blocks lying west of 87 
        degrees, 30 minutes West longitude, the Secretary may, in order 
        to--
                ``(i) promote development or increased production on 
            producing or non-producing leases; or
                ``(ii) encourage production of marginal resources on 
            producing or non-producing leases;
        through primary, secondary, or tertiary recovery means, reduce 
        or eliminate any royalty or net profit share set forth in the 
        lease(s). With the lessee's consent, the Secretary may make 
        other modifications to the royalty or net profit share terms of 
        the lease in order to achieve these purposes.
            ``(C)(i) Notwithstanding the provisions of this Act other 
        than this subparagraph, with respect to any lease or unit in 
        existence on the date of enactment of the Outer Continental 
        Shelf Deep Water Royalty Relief Act meeting the requirements of 
        this subparagraph, no royalty payments shall be due on new 
        production, as defined in clause (iv) of this subparagraph, 
        from any lease or unit located in water depths of 200 meters or 
        greater in the Western and Central Planning Areas of the Gulf 
        of Mexico, including that portion of the Eastern Planning Area 
        of the Gulf of Mexico encompassing whole lease blocks lying 
        west of 87 degrees, 30 minutes West longitude, until such 
        volume of production as determined pursuant to clause (ii) has 
        been produced by the lessee.
            ``(ii) Upon submission of a complete application by the 
        lessee, the Secretary shall determine within 180 days of such 
        application whether new production from such lease or unit 
        would be economic in the absence of the relief from the 
        requirement to pay royalties provided for by clause (i) of this 
        subparagraph. In making such determination, the Secretary shall 
        consider the increased technological and financial risk of deep 
        water development and all costs associated with exploring, 
        developing, and producing from the lease. The lessee shall 
        provide information required for a complete application to the 
        Secretary prior to such determination. The Secretary shall 
        clearly define the information required for a complete 
        application under this section. Such application may be made on 
        the basis of an individual lease or unit. If the Secretary 
        determines that such new production would be economic in the 
        absence of the relief from the requirement to pay royalties 
        provided for by clause (i) of this subparagraph, the provisions 
        of clause (i) shall not apply to such production. If the 
        Secretary determines that such new production would not be 
        economic in the absence of the relief from the requirement to 
        pay royalties provided for by clause (i), the Secretary must 
        determine the volume of production from the lease or unit on 
        which no royalties would be due in order to make such new 
        production economically viable; except that for new production 
        as defined in clause (iv)(I), in no case will that volume be 
        less than 17.5 million barrels of oil equivalent in water 
        depths of 200 to 400 meters, 52.5 million barrels of oil 
        equivalent in 400 to 800 meters of water, and 87.5 million 
        barrels of oil equivalent in water depths greater than 800 
        meters. Redetermination of the applicability of clause (i) 
        shall be undertaken by the Secretary when requested by the 
        lessee prior to the commencement of the new production and upon 
        significant change in the factors upon which the original 
        determination was made. The Secretary shall make such 
        redetermination within 120 days of submission of a complete 
        application. The Secretary may extend the time period for 
        making any determination or redetermination under this clause 
        for 30 days, or longer if agreed to by the applicant, if 
        circumstances so warrant. The lessee shall be notified in 
        writing of any determination or redetermination and the reasons 
        for and assumptions used for such determination. Any 
        determination or redetermination under this clause shall be a 
        final agency action. The Secretary's determination or 
        redetermination shall be judicially reviewable under section 
        10(a) of the Administrative Procedure Act (5 U.S.C. 702), only 
        for actions filed within 30 days of the Secretary's 
        determination or redetermination.
            ``(iii) In the event that the Secretary fails to make the 
        determination or redetermination called for in clause (ii) upon 
        application by the lessee within the time period, together with 
        any extension thereof, provided for by clause (ii), no royalty 
        payments shall be due on new production as follows:
                ``(I) For new production, as defined in clause (iv) (I) 
            of this subparagraph, no royalty shall be due on such 
            production according to the schedule of minimum volumes 
            specified in clause (ii) of this subparagraph.
                ``(II) For new production, as defined in clause (iv) 
            (II) of this subparagraph, no royalty shall be due on such 
            production for one year following the start of such 
            production.
            ``(iv) For purposes of this subparagraph, the term `new 
        production' is--
                ``(I) any production from a lease from which no 
            royalties are due on production, other than test 
            production, prior to the date of enactment of the Outer 
            Continental Shelf Deep Water Royalty Relief Act; or
                ``(II) any production resulting from lease development 
            activities pursuant to a Development Operations 
            Coordination Document, or supplement thereto that would 
            expand production significantly beyond the level 
            anticipated in the Development Operations Coordination 
            Document, approved by the Secretary after the date of 
            enactment of the Outer Continental Shelf Deep Water Royalty 
            Relief Act.
            ``(v) During the production of volumes determined pursuant 
        to clauses (ii) or (iii) of this subparagraph, in any year 
        during which the arithmetic average of the closing prices on 
        the New York Mercantile Exchange for light sweet crude oil 
        exceeds $28.00 per barrel, any production of oil will be 
        subject to royalties at the lease stipulated royalty rate. Any 
        production subject to this clause shall be counted toward the 
        production volume determined pursuant to clause (ii) or (iii). 
        Estimated royalty payments will be made if such average of the 
        closing prices for the previous year exceeds $28.00. After the 
        end of the calendar year, when the new average price can be 
        calculated, lessees will pay any royalties due, with interest 
        but without penalty, or can apply for a refund, with interest, 
        of any overpayment.
            ``(vi) During the production of volumes determined pursuant 
        to clause (ii) or (iii) of this subparagraph, in any year 
        during which the arithmetic average of the closing prices on 
        the New York Mercantile Exchange for natural gas exceeds $3.50 
        per million British thermal units, any production of natural 
        gas will be subject to royalties at the lease stipulated 
        royalty rate. Any production subject to this clause shall be 
        counted toward the production volume determined pursuant to 
        clauses (ii) or (iii). Estimated royalty payments will be made 
        if such average of the closing prices for the previous year 
        exceeds $3.50. After the end of the calendar year, when the new 
        average price can be calculated, lessees will pay any royalties 
        due, with interest but without penalty, or can apply for a 
        refund, with interest, of any overpayment.
            ``(vii) The prices referred to in clauses (v) and (vi) of 
        this subparagraph shall be changed during any calendar year 
        after 1994 by the percentage, if any, by which the implicit 
        price deflator for the gross domestic product changed during 
        the preceding calendar year.''.

SEC. 5423. NEW LEASES.

    Section 8(a)(1) of the Outer Continental Shelf Lands Act, as 
amended (43 U.S.C. 1337(a)(1)), is amended--
        (1) by redesignating subparagraph (H) as subparagraph (I);
        (2) by striking ``or'' at the end of subparagraph (G); and
        (3) by inserting after subparagraph (G) the following new 
    subparagraph:
            ``(H) cash bonus bid with royalty at no less than 12 and 
        \1/2\ percentum fixed by the Secretary in amount or value of 
        production saved, removed, or sold, and with suspension of 
        royalties for a period, volume, or value of production 
        determined by the Secretary, which suspensions may vary based 
        on the price of production from the lease; or''.

SEC. 5424. LEASE SALES.

    For all tracts located in water depths of 200 meters or greater in 
the Western and Central Planning Area of the Gulf of Mexico, including 
that portion of the Eastern Planning Area of the Gulf of Mexico 
encompassing whole lease blocks lying west of 87 degrees, 30 minutes 
West longitude, any lease sale within seven years of the date of 
enactment of this chapter, shall use the bidding system authorized in 
section 8(a)(1)(H) of the Outer Continental Shelf Lands Act, as amended 
by this chapter, except that the suspension of royalties shall be set 
at a volume of not less than the following:
        (1) 17.5 million barrels of oil equivalent for leases in water 
    depths of 200 to 400 meters;
        (2) 52.5 million barrels of oil equivalent for leases in 400 to 
    800 meters of water; and
        (3) 87.5 million barrels of oil equivalent for leases in water 
    depths greater than 800 meters.

SEC. 5425. REGULATIONS.

    The Secretary shall promulgate such rules and regulations as are 
necessary to implement the provisions of this chapter within 180 days 
after the enactment of this Act.

SEC. 5426. SAVINGS CLAUSE.

    Nothing in this chapter shall be construed to affect any offshore 
pre-leasing, leasing, or development moratorium, including any 
moratorium applicable to the Eastern Planning Area of the Gulf of 
Mexico located off the Gulf Coast of Florida.

             CHAPTER 9--EXPORTS OF ALASKAN NORTH SLOPE OIL

SEC. 5431. EXPORTS OF ALASKAN NORTH SLOPE OIL.

    Section 28 of the Mineral Leasing Act (30 U.S.C. 185) is amended by 
amending subsection (s) to read as follows:

                   ``exports of Alaskan north slope oil

    ``(s)(1) Subject to paragraphs (2) through (6) of this subsection 
and notwithstanding any other provision of this Act or any other 
provision of law (including any regulation) applicable to the export of 
oil transported by pipeline over right-of-way granted pursuant to 
section 203 of the Trans-Alaska Pipeline Authorization Act (43 U.S.C. 
1652), such oil may be exported unless the President finds that 
exportation of this oil is not in the national interest. The President 
shall make his national interest determination within five months of 
the date of enactment of this subsection. In evaluating whether exports 
of this oil are in the national interest, the President shall at a 
minimum consider--
        ``(A) whether exports of this oil would diminish the total 
    quantity or quality of petroleum available to the United States;
        ``(B) the results of an appropriate environmental review, 
    including consideration of appropriate measures to mitigate any 
    potential adverse effects of exports of this oil on the 
    environment, which shall be completed within four months of the 
    date of the enactment of this subsection; and
        ``(C) whether exports of this oil are likely to cause sustained 
    material oil supply shortages or sustained oil prices significantly 
    above world market levels that would cause sustained material 
    adverse employment effects in the United States or that would cause 
    substantial harm to consumers, including noncontiguous States and 
    Pacific territories. If the President determines that exports of 
    this oil are in the national interest, he may impose such terms and 
    conditions (other than a volume limitation) as are necessary or 
    appropriate to ensure that such exports are consistent with the 
    national interest.
    ``(2) Except in the case of oil exported to a country with which 
the United States entered into a bilateral international oil supply 
agreement before November 26, 1979, or to a country pursuant to the 
International Emergency Oil Sharing Plan of the International Energy 
Agency, any oil transported by pipeline over right-of-way granted 
pursuant to section 203 of the Trans-Alaska Pipeline Authorization Act 
(43 U.S.C. 1652) shall, when exported, be transported by a vessel 
documented under the laws of the United States and owned by a citizen 
of the United States (as determined in accordance with section 2 of the 
Shipping Act, 1916 (46 U.S.C. App. 802)).
    ``(3) Nothing in this subsection shall restrict the authority of 
the President under the Constitution, the International Emergency 
Economic Powers Act (50 U.S.C. 1701 et seq.), the National Emergencies 
Act (50 U.S.C. 1601 et seq.), or part B of title II of the Energy 
Policy and Conservation Act (42 U.S.C. 6271-76) to prohibit exports.
    ``(4) The Secretary of Commerce shall issue any rules necessary for 
implementation of the President's national interest determination, 
including any licensing requirements and conditions, within 30 days of 
the date of such determination by the President. The Secretary of 
Commerce shall consult with the Secretary of Energy in administering 
the provisions of this subsection.
    ``(5) If the Secretary of Commerce finds that exporting oil under 
authority of this subsection has caused sustained material oil supply 
shortages or sustained oil prices significantly above world market 
levels and further finds that these supply shortages or price increases 
have caused or are likely to cause sustained material adverse 
employment effects in the United States, the Secretary of Commerce, in 
consultation with the Secretary of Energy, shall recommend, and the 
President may take, appropriate action concerning exports of this oil, 
which may include modifying or revoking authority to export such oil.
    ``(6) Administrative action under this subsection is not subject to 
sections 551 and 553 through 559 of title 5, United States Code.''.

 CHAPTER 10--SKI AREA PERMIT RENTAL CHARGES ON NATIONAL FOREST SYSTEM 
                                 LANDS

SEC. 5441. SKI AREA PERMIT RENTAL CHARGE.

    (a) The Secretary of Agriculture shall charge a rental charge for 
all ski area permits issued pursuant to section 3 of the National 
Forest Ski Area Permit Act of 1986 (16 U.S.C. 497b), the Act of March 
4, 1915 (38 Stat. 1101, chapter 144; 16 U.S.C. 497), or the 9th through 
20th paragraphs under the heading ``Surveying the public lands'' under 
the heading ``under the department of the interior'' in the Act of June 
4, 1897 (30 Stat. 34, chapter 2), on National Forest System lands. 
Permit rental charges for permits issued pursuant to the National 
Forest Ski Area Permit Act of 1986 shall be calculated as set forth in 
subsection (b). Permit rental charges for existing ski area permits 
issued pursuant to the Act of March 4, 1915, and the Act of June 4, 
1897, shall be calculated in accordance with those existing permits: 
Provided, That a permittee may, at the permittee's option, use the 
calculation method set forth in subsection (b).
    (b)(1) The ski area permit rental charge (SAPRC) shall be 
calculated by adding the permittee's gross revenues from lift ticket/
year-round ski area use pass sales plus revenue from ski school 
operations (LT+SS) and multiplying such total by the slope transport 
feet percentage (STFP) on National Forest System land. That amount 
shall be increased by the gross year-round revenue from ancillary 
facilities (GRAF) physically located on national forest land, including 
all permittee or subpermittee lodging, food service, rental shops, 
parking and other ancillary operations, to determine the adjusted gross 
revenue (AGR) subject to the permit rental charge. The final rental 
charge shall be calculated by multiplying the AGR by the following 
percentages for each revenue bracket and adding the total for each 
revenue bracket--
        (A) 1.5 percent of all adjusted gross revenue below $3,000,000;
        (B) 2.5 percent for adjusted gross revenue between $3,000,000 
    and $15,000,000;
        (C) 2.75 percent for adjusted gross revenue between $15,000,000 
    and $50,000,000; and
        (D) 4.0 percent for the amount of adjusted gross revenue that 
    exceeds $50,000,000.
    (2) In cases where ski areas are only partially located on national 
forest lands, the slope transport feet percentage on national forest 
land referred to in subsection (b) shall be calculated as generally 
described in the Forest Service Manual in effect as of January 1, 1992. 
Revenues from Nordic ski operations shall be included or excluded from 
the rental charge calculation according to the percentage of trails 
physically located on national forest land.
    (3) In order to ensure that the rental charge remains fair and 
equitable to both the United States and ski area permittees, the 
adjusted gross revenue figures for each revenue bracket in paragraph 
(1) shall be adjusted annually by the percent increase or decrease in 
the national Consumer Price Index for the preceding calendar year.
    (c) The rental charge set forth in subsection (b) shall be due on 
June 1 of each year and shall be paid or pre-paid by the permittee on a 
monthly, quarterly, annual or other schedule as determined appropriate 
by the Secretary in consultation with the permittee. Unless mutually 
agreed otherwise by the Secretary of Agriculture and the permittee, the 
payment or prepayment schedule shall conform to the permittee's 
schedule in effect prior to the date of enactment of this Act. To 
reduce costs to the permittee and the Forest Service, the Secretary 
shall each year provide the permittee with a standardized form and 
worksheets (including annual rental charge calculation brackets and 
rates) to be used for rental charge calculation and submitted with the 
rental charge payment.
    (d) The ski area permit rental charge set forth in this section 
shall become effective on June 1, 1996 and cover receipts retroactive 
to June 1, 1995: Provided, however, That if a permittee has paid rental 
charges for the period June 1, 1995, to June 1, 1996, under the 
graduated rate rental charge system formula in effect prior to the date 
of enactment of this Act, such rental charges shall be credited toward 
the new rental charge due on June 1, 1996. In order to ensure 
increasing rental charge receipt levels to the United States during 
transition from the graduated rate rental charge system formula to the 
formula of this Act, the rental charge paid by any individual permittee 
shall be--
        (1) for the 1995-1996 permit year, shall be either the rental 
    charge paid for the preceding 1994-1995 base year or the rental 
    charge calculated pursuant to this Act, whichever is higher;
        (2) for the 1996-1997 permit year, the rental charge paid shall 
    be either the rental charge paid for the 1994-1995 base year or the 
    rental charge calculated pursuant to this Act, whichever is higher; 
    and
        (3) for the 1997-1998 permit year, the rental charge for the 
    1994-1995 base year or the rental charge calculated pursuant to 
    this Act, whichever is higher.
If an individual permittee's adjusted gross revenue for the 1995-1996, 
1996-1997, or 1997-1998 permit years falls more than 10 percent below 
the 1994-1995 base year, the rental charge paid shall be the rental 
charge calculated pursuant to this Act.
    (e) Under no circumstances shall revenue, or subpermittee revenue 
(other than lift ticket, area use pass, or ski school sales) obtained 
from operations physically located on non-national forest land be 
included in the ski area permit rental charge calculation.
    (f) To reduce administrative costs on ski area permittees and the 
Forest Service the terms ``revenue'' and ``sales'', as used in this 
section, shall mean actual income from sales and shall not include 
sales of operating equipment, refunds, rent paid to the permittee by 
sublessees, sponsor contributions to special events or any amounts 
attributable to employee gratuities or employee lift tickets, 
discounts, or other goods or services (except for bartered goods and 
complimentary lift tickets) for which the permittee does not receive 
money.
    (g) In cases where an area of national forest land is under a ski 
area permit but the permittee does not have revenue or sales qualifying 
for rental charge payment pursuant to subsection (a), the permittee 
shall pay an annual minimum rental charge of $2 for each national 
forest acre under permit or a percentage of appraised land value, as 
determined to be appropriate by the Secretary.
    (h) Where the new rental charge provided for in subsection (b)(1) 
results in an increase in permit rental charge greater than one half of 
one percent of the permittee's adjusted gross revenue (as determined 
under subsection (b)(1)), the new rental charge shall be phased in over 
a 5-year period in a manner providing for increases of approximately 
equal increments.

                     CHAPTER 11--PARK ENTRANCE FEES

SEC. 5451. FEES.

    (a) Admission Fees.--Section 4(a) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(a)) is amended--
        (1) in the first sentence of the subsection by striking ``no 
    more than 21'';
        (2) in the first sentence of paragraph (1)(A)(i) by striking 
    ``$25'' and inserting ``$50'';
        (3) in the second sentence of paragraph (1)(B) by striking 
    ``$15'' and inserting ``$25'';
        (4) in paragraph (2) by striking the fourth, fifth, and sixth 
    sentences and inserting ``The fee for a single-visit permit at any 
    designated area shall be collected on a per person basis, not to 
    exceed $6 per person, including for persons entering by private, 
    noncommercial vehicle.'';
        (5) in paragraph (3)--
            (A) in the third sentence by inserting ``Great'' before 
        ``Smoky''; and
            (B) by striking the last sentence;
        (6) in paragraph (4)--
            (A) by striking the second sentence and inserting ``Such 
        permit shall be nontransferable, shall be issued for a one-time 
        charge, which shall be set at the same rate as the fee for a 
        Golden Eagle Passport, and shall entitle the permittee to free 
        admission into any area designated pursuant to this 
        subsection.''; and
            (B) by striking the third sentence and inserting ``No fees 
        of any kind shall be collected from any persons who have a 
        right of access for hunting or fishing privileges under a 
        specific provision of law or treaty or who are engaged in the 
        conduct of official Federal, State, or local government 
        business.'';
        (7) by striking paragraph (5) and inserting the following:
        ``(5) The Secretary of the Interior and the Secretary of 
    Agriculture shall establish procedures providing for the issuance 
    of a lifetime admission permit to any citizen of, or person legally 
    domiciled in, the United States, if such citizen or person applies 
    for such permit and is permanently disabled. Such procedures shall 
    ensure that a lifetime admission permit shall be issued only to 
    persons who have been medically determined to be permanently 
    disabled. A lifetime admission permit shall be nontransferable, 
    shall be issued without charge, and shall entitle the permittee and 
    one accompanying individual to general admission into any area 
    designated pursuant to this subsection, notwithstanding the method 
    of travel.'';
        (8) by striking paragraph (9) and by redesignating paragraph 
    (10) as paragraph (9);
        (9) by striking all but the last sentence of paragraph (11) and 
    redesignating paragraph (11) as paragraph (10); and
        (10) by redesignating paragraph (12) as paragraph (11).
    (b) Recreation Fees.--Section 4 of the Land and Water Conservation 
Fund Act of 1965 (16 U.S.C. 460l-6a) is amended by striking subsection 
(b) and inserting the following:
    ``(b) Recreation Use Fees.--Each agency developing, administering, 
providing, or furnishing at Federal expense services for such 
activities as camping, including, but not limited to, back country 
camping under permit, guarded swimming sites, boat launch facilities, 
managed parking lots, motorized recreation use and other recreation 
uses, is authorized, in accordance with this section to provide for the 
collection of recreation use fees at the place of use or any reasonably 
convenient location. The administering Secretary may establish both 
daily and annual recreation use fees.''.
    (c) Criteria, Posting and Uniformity of Fees.--Section 4(d) of the 
Land and Water Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(d)) is 
amended in the first sentence by striking ``recreation fees charged by 
non-Federal public agencies,'' and inserting ``fees charged by other 
public and private entities,''.
    (d) Penalty.--Section 4(e) of the Land and Water Conservation Fund 
Act of 1965 (16 U.S.C. 460l-6a(e)) is amended by striking ``of not more 
than $100.'' and inserting ``as provided by law.''.
    (e) Technical Amendments.--Section 4(h) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(h)) is amended--
        (1) by striking ``Bureau of Outdoor Recreation'' and inserting 
    ``National Park Service'';
        (2) by striking ``Natural Resources'' and inserting 
    ``Resources''; and
        (3) by striking ``Bureau'' and inserting ``National Park 
    Service''.
    (f) Use of Fees.--Section 4(i) of the Land and Water Conservation 
Fund Act of 1965 (16 U.S.C. 460l-6a(i)) is amended--
        (1) in the first sentence of paragraph (1)(B) by striking ``fee 
    collection costs for that fiscal year'' and inserting ``fee 
    collection costs for the immediately preceding fiscal year'' and by 
    striking ``section in that fiscal year'' and inserting ``section in 
    such immediately preceding fiscal year'';
        (2) in the second sentence of subparagraph (B) by striking ``in 
    that fiscal year''; and
        (3) by striking paragraph (4) and inserting the following:
    ``(4) Amounts covered into the special account for the National 
Park Service shall be allocated among park system units in accordance 
with subsection (j) for obligation or expenditure by the Director of 
the National Park Service for park operations.''.
    (g) Time of Reimbursement.--Section 4(k) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(k)) is amended by 
striking the last sentence.
    (h) Commercial Tour Use Fees.--Section 4(n) of the Land and Water 
Conservation Fund Act of 1965 (16 U.S.C. 460l-6a(n)) is amended--
        (1) by striking the first sentence of paragraph (1) and 
    inserting ``In the case of each unit of the National Park System 
    for which an admission fee is charged under this section, the 
    Secretary of the Interior shall establish, by October 1, 1996, a 
    commercial tour use fee in lieu of a per person admission fee to be 
    imposed on each vehicle entering the unit for the purpose of 
    providing commercial tour services within the unit.''; and
        (2) by striking the period at the end of paragraph (3) and 
    inserting ``, with written notification of such adjustments 
    provided to commercial tour operators 12 months in advance of 
    implementation.''.
    (i) Conforming Amendments.--
        (1) Title I of the Department of the Interior and Related 
    Agencies Appropriations Act, 1994, is amended by striking the 
    second proviso under the heading ``Administrative Provisions'' 
    under the heading ``National Park Service'' (related to recovery of 
    costs associated with special use permits).
        (2) Section 3 of the Act entitled ``An Act creating the Mount 
    Rushmore National Memorial Commission and defining its purposes and 
    powers'', approved February 25, 1929 (45 Stat. 1300, chapter 315), 
    is amended by striking the last sentence.
        (3) Section 5 of Public Law 87-657 (16 U.S.C. 459c-5), is 
    amended by striking subsection (e).
        (4) Section 3 of Public Law 87-750 (16 U.S.C. 398e) is amended 
    by striking subsection (b).
        (5) Section 4(e) of Public Law 92-589 (16 U.S.C. 460bb-3) is 
    amended by striking the first sentence.
        (6) Section 6 of Public Law 95-348 (16 U.S.C. 410dd) is amended 
    by striking subsection (j).
        (7) Section 207 of Public Law 96-199 (16 U.S.C. 410ff-6) is 
    repealed.
        (8) Section 106 of Public Law 96-287 (16 U.S.C. 410gg-5) is 
    amended by striking the last sentence.
        (9) Section 204 of Public Law 96-287 (94 Stat. 601) is amended 
    by striking the last sentence.
        (10) Section 5 of Public Law 96-428 (94 Stat. 1842; 16 U.S.C. 
    461 note) is repealed.
        (11) Public Law 100-55 (101 Stat. 371; U.S.C. 460l-6a note) is 
    repealed.

SEC. 5452. COVERING OF INCREASED FEE REVENUES INTO SPECIAL ACCOUNTS.

    Of the funds deposited in special accounts in the Treasury for the 
National Park Service, Bureau of Land Management, and Forest Service as 
set forth in section 4(i) of the Land and Water Conservation Fund Act 
of 1965 (16 U.S.C. 460l-6a(i)), beginning in fiscal year 1997, 80 
percent of all receipts earned in the previous year in excess of the 
following amounts for each covered agency shall be made available to 
that agency without further appropriation:
        (1) National Park System:
            (A) $82,000,000 for fiscal year 1997.
            (B) $85,000,000 for fiscal year 1998.
            (C) $88,000,000 for fiscal year 1999.
            (D) $91,000,000 for fiscal year 2000.
            (E) $94,000,000 for fiscal year 2001.
            (F) $97,000,000 for fiscal year 2002.
            (G) $100,000,000 for fiscal year 2003.
            (H) $112,000,000 for fiscal year 2004.
            (I) $106,000,000 for fiscal year 2005.
        (2) Bureau of Land Management:
            (A) $4,500,000 for fiscal year 1997.
            (B) $5,000,000 for fiscal year 1998.
            (C) $5,000,000 for fiscal year 1999.
            (D) $5,000,000 for fiscal year 2000.
            (E) $5,000,000 for fiscal year 2001.
            (F) $5,000,000 for fiscal year 2002.
            (G) $5,000,000 /for fiscal year 2003.
            (H) $5,000,000 /for fiscal year 2004.
            (I) $5,000,000 /for fiscal year 2005.
        (3) Forest Service:
            (A) $20,000,000 for fiscal year 1997.
            (B) $20,600,000 for fiscal year 1998.
            (C) $21,200,000 for fiscal year 1999.
            (D) $21,900,000 for fiscal year 2000.
            (E) $22,500,000 for fiscal year 2001.
            (F) $23,600,000 for fiscal year 2002.
            (G) $24,300,000 for fiscal year 2003.
            (H) $25,000,000 for fiscal year 2004.
            (I) $25,800,000 for fiscal year 2005.
Beginning in fiscal year 2006, and in each fiscal year thereafter, the 
amounts set forth in this section for each covered agency in fiscal 
year 2005 shall be increased by 4 percent per year, and 80 percent of 
all receipts earned in excess of such amounts for each covered agency 
shall be made available to that agency without further appropriation.

SEC. 5453. ALLOCATION AND USE OF FEES.

    (a) Allocation.--Beginning in fiscal year 1997, receipts above the 
amounts stated in section 5452 in each covered agency's special account 
from the previous fiscal year shall be allocated as follows:
        (1) Seventy-five percent shall be allocated among the units or 
    areas of each affected agency in the same proportion as fees 
    collected pursuant to section 4 of the Land and Water Conservation 
    Fund Act of 1965 (16 U.S.C. 460l-6a) from a specific unit or area 
    bear to the total amount of such fees collected from all units or 
    areas of the same covered agency for each fiscal year.
        (2) Twenty-five percent shall be allocated among each covered 
    agency's units or areas on the basis of need, as determined by the 
    Secretary.
    (b) Use.--Expenditures from the special accounts shall be used 
solely for infrastructure related to visitor use and annual operating 
expenses related to visitor services at units or areas of the covered 
agencies.

                     CHAPTER 12--CONCESSION REFORM

SEC. 5461. SHORT TITLE.

    This chapter may be cited as the ``Visitor Facilities and Services 
Enhancement Act of 1995''.

SEC. 5462. DEFINITIONS.

    In this chapter:
        (1) ``adjusted gross receipts'' means gross receipts less 
    revenue derived from goods and services provided on other than 
    Federal lands or conveyed to units of Government for hunting or 
    fishing licenses or for entrance or recreation fees, or from such 
    other exclusions as the Secretary concerned might apply.
        (2) ``agency head'' means the head of an agency or his or her 
    designated representative.
        (3) ``bidder'' means a person who has submitted, or may submit, 
    a proposal respecting the facilities or services, whether or not 
    such bidder is the current concessioner.
        (4) ``concessioner'' means a person or other entity acting 
    under a concession authorization which provides public services, 
    facilities, or activities on Federal lands pursuant to a concession 
    service agreement or concession license.
        (5) ``concession authorization'' means a concession service 
    agreement or concession license as applicable.
        (6) ``concession license'' means a written contract between the 
    agency head and the concessioner which sets forth the terms and 
    conditions under which the concessioner is authorized to provide 
    recreation services or activities on a limited basis as well as the 
    rights and obligations of the Federal Government.
        (7) ``concession service agreement'' means a written contract 
    between the agency head and the concessioner which sets forth the 
    terms and conditions under which the concessioner is authorized to 
    provide visitor services, facilities, or activities as well as the 
    rights and obligations of the Federal Government.
        (8) ``Consumer Price Index'' means the Consumer Price Index-All 
    Urban Consumers published by the Bureau of Labor Statistics of the 
    Department of Labor, and from and after such time as such index is 
    no longer published, the Consumer Price Index or other regularly-
    published cost-of-living index chosen by the Secretary concerned 
    which reasonably approximates the Consumer Price Index specified 
    above.
        (9) ``gross receipts'' means revenue from goods or services 
    provided by concession services, facilities, or activities on 
    Federal lands and waters.
        (10) ``performance incentive'' means a credit based on past 
    performance toward the score awarded by the Secretary concerned to 
    an incumbent concessioner's proposal submitted in response to a 
    solicitation for the reissuance of such incumbent concessioner's 
    contract.
        (11) ``proposal'' means the complete submission for a 
    concession service agreement offered in response to the 
    solicitation for such concession service agreement.
        (12) ``prospectus'' means a document or documents issued by the 
    Secretary concerned and included with a solicitation which sets 
    forth the minimum requirements for the award of a concession 
    service agreement.
        (13) ``Secretary concerned'' means --
            (A) the Secretary of the Interior with respect to all 
        concession authorizations issued by the National Park Service, 
        and all concession authorizations for river runner, outfitter, 
        or guide concessions issued by the United States Fish and 
        Wildlife Service and the Bureau of Land Management; and
            (B) the Secretary of Agriculture with respect to all river 
        runner, outfitter, or guide concessions issued by the Forest 
        Service.
        (14) ``selected bidder'' means the bidder selected by the 
    Secretary concerned for the award of a concession service agreement 
    until such bidder becomes the concessioner.
        (15) ``solicitation'' means a request by the Secretary 
    concerned for proposals in response to a prospectus.

SEC. 5463. NATURE AND TYPES OF CONCESSION AUTHORIZATIONS.

    (a) In General.--The Secretary concerned may enter into concession 
authorizations as follows:
        (1) Concession service agreement.--A concession service 
    agreement shall be entered into for all concessions where the 
    Secretary concerned determines that the provision of concession 
    services is in the interest of the Federal Government and issues 
    either a competitive offering for concession services, facilities 
    or activities or a noncompetitive offering for such services, 
    facilities, or activities based on a finding that due to special 
    circumstances it is not in the public interest of the United States 
    to award a concession service agreement on a competitive basis.
        (2) Concession license.--Whenever the Secretary concerned makes 
    a determination that public enjoyment of Federal lands would be 
    enhanced through the provision of concession services for one-time, 
    intermittent, or infrequently scheduled activities and that there 
    exists no need to limit the number of concessionaires providing 
    such services, the Secretary shall enter into a concession license 
    with a qualified concessioner. The Secretary concerned may not 
    limit the number of concession licenses issued for the same types 
    of activities in a particular geographic area.
        (3) Lands under multiple jurisdictions.--In order to reduce 
    administrative costs the Secretaries of the Departments concerned 
    shall designate an agency to be the lead agency concerning 
    concessions which conduct a single operation on lands or waters 
    under the jurisdiction of more than one agency. Unless otherwise 
    agreed to by each such Secretary concerned, the lead agency shall 
    be that agency under whose jurisdiction the concessioner generates 
    the greatest amount of gross receipts. The agency so designated 
    shall issue a single concession authorization and collect a single 
    fee under paragraphs (1) and (2) for such operation.

SEC. 5464. COMPETITIVE SELECTION PROCESS FOR CONCESSION SERVICE 
              AGREEMENTS.

    (a) Award to Best Proposal.--The Secretary concerned shall enter 
into, and reissue, a concession service agreement with the person whom 
the Secretary determines in accordance with this section submits the 
best proposal through a competitive process as defined in this section.
    (b) Solicitation and Prospectus.--Prior to making a solicitation 
for a concession service agreement, the Secretary concerned shall 
prepare a prospectus for such solicitation, shall publish notice of its 
availability at least once in such local or national newspapers or 
trade publications as the Secretary determines appropriate, and shall 
make such prospectus available upon request to all interested parties. 
The prospectus shall specify the minimum requirements for such 
concession service agreement, including but not limited to:
        (1) a description of the services and facilities to be provided 
    by the concessioner.
        (2) the level of capital investment required by the 
    concessioner (if any).
        (3) terms and conditions of the concession service agreement.
        (4) minimum facilities and services to be provided by the 
    Secretary concerned to the concessioner, if any, including but not 
    limited to public access, utilities, buildings, and minimum public 
    services.
        (5) such other information related to the concession operation 
    available to the Secretary concerned as is not privileged or 
    otherwise exempt from disclosure under Federal law, as the 
    Secretary determines is necessary to allow for the submission of 
    competitive proposals;
        (6) local hiring preferences provisions, if applicable, and 
    notwithstanding any other provision of law, to increase revenue to 
    the United States by avoiding additional transportation and related 
    costs associated with nonresident labor, each contract awarded by 
    the Department of the Interior for concessioner or commercial use 
    contractor-provided visitor services performed in whole or in part 
    of a State which is not contiguous with another State and has an 
    unemployment rate in excess of the national average rate of 
    unemployment, as determined by the Secretary of Labor shall include 
    a provision requiring the concessioner or commercial use contractor 
    to employ individuals who are residents of such State, and who, in 
    the case of any craft or trade, possess or would be able to acquire 
    promptly the necessary skills for the purpose of performing that 
    portion of the contract in such State; and
        (7) minimum fees to the United States.
    (c) Factors and Minimum Standards in Determining Best Proposal.--
The prospectus shall assign a weight to each factor identified therein 
related to the importance of such factor in the selection process. 
Points shall be awarded for each such factor, based on the relative 
strength of the proposal concerning that factor. In selecting the best 
proposal, the Secretary concerned shall take into consideration (but 
shall not be limited to) the following, including whether the proposal 
meets the minimum requirements (if any) of the Secretary for each of 
the following:
        (1) Responsiveness to the prospectus.
        (2) Quality of visitor services to be provided taking into 
    account the nature of equipment and facilities to be provided.
        (3) Experience and performance in providing the same or similar 
    accommodations, facilities, or services. This factor shall account 
    for not less than 20 percent of the maximum points available under 
    any prospectus. Where the Secretary concerned determines it to be 
    warranted to provide for a high quality visitor experience, the 
    prospectus for a concession service agreement shall provide greater 
    weight to this factor based on such aspects of the concession 
    service agreement as scope or size, complexity, nature of technical 
    skills required, and site-specific knowledge of the area. The 
    similarity of the qualifying experience outlined in the proposal to 
    the nature of the services required under the concession service 
    agreement and the length of such qualifying experience shall be the 
    basis for awarding points for this factor.
        (4) Record of resource protection (as appropriate for services 
    and activities with potential to impact natural or cultural 
    resources).
        (5) Financial capability.
        (6) Fees to the United States.
    (d) Selection Process.--The process for selecting the best proposal 
shall consist of the following:
        (1) First, the Secretary concerned shall identify those 
    proposals which meet the minimum standards (if any) for the factors 
    identified under subsection (c).
        (2) Second, the Secretary concerned shall evaluate all 
    proposals identified under paragraph (1), considering all factors 
    identified under subsection (c), as well as performance incentives 
    earned under subsection (e) and renewal penalties incurred under 
    subsection (f).
        (3) Third, the Secretary concerned shall offer the concession 
    service agreement to the best qualified applicant as determined by 
    the evaluation under paragraph (2). Prior to any such offer, the 
    Secretary shall certify that such applicant has adequate funds to 
    purchase any investment interest.
    (e) Performance Incentives.--
        (1) In evaluating the proposal of an incumbent concessioner 
    when the Secretary concerned issues a prospectus for the renewal of 
    the concession service agreement, such concessioner is entitled to 
    a performance incentive of--
            (A) one percent of the maximum points available under such 
        prospectus for each year in which the concessioner's annual 
        performance is rated as exceeding the requirements outlined in 
        the prospectus or ``good'', and
            (B) a one-time 3-year merit term extension upon a finding 
        that a concessioner has been rated as ``good'' in each annual 
        performance evaluation through the term of the concession 
        service agreement.
        (2) A performance incentive awarded under paragraph (1)(A) may 
    not exceed 10 percent of the maximum points available under such 
    prospectus.
        (3) The performance incentive specified under paragraph (1)(A) 
    may only be awarded to a concessioner which meets the monetary 
    definition of a small business under section 3 of the Small 
    Business Act (15 U.S.C. 632). The Board of Contract Appeals within 
    each Department shall adjudicate disputes between the Federal 
    Government and concessionaires regarding performance evaluations.
    (f) Renewal Penalty.--In evaluating the proposal of an incumbent 
concessioner when the Secretary concerned issues a prospectus for the 
renewal of the concession service agreement, the incumbent concessioner 
shall be penalized 1 percent of the maximum points available under such 
prospectus for each year in which the concessioner's annual performance 
is found to be unsatisfactory.
    (g) Inapplicability of NEPA to Temporary Extensions and Similar 
Reissuance of Concessions Agreements.--The temporary extension of a 
concession authorization, or reissuance of a concession authorization 
to provide concession services similar in nature and amount to 
concession services provided under the previous authorization, is 
hereby determined not to be a major Federal action for the purposes of 
the National Environmental Policy Act of 1969 (42 U.S.C. 4331 et. 
seq.).
    (h) Provision for Additional Related Services.--The Secretary 
concerned may modify the concession service agreement to allow 
concessionaires to provide services closely related to such agreement 
only if the Secretary concerned determines that such changes would 
enhance the safety or enjoyment of visitors and would not unduly 
restrict the award of future concession service agreements.

SEC. 5465. CAPITAL IMPROVEMENTS.

    (a) In General.--Concessionaires may construct or finance 
construction under terms of section 5470 only such public facilities on 
Federal lands as are to be used by the concessioner under the terms of 
its concession service agreement or facilities which are necessary for 
the concessioner to administer such public facilities on Federal lands.
    (b) Investment Interest.--
        (1) In general.--A concessioner that is required or authorized 
    under a concession service agreement pursuant to this subchapter to 
    acquire or construct any structure, improvement, or fixture 
    pursuant to such agreement on Federal lands shall have an 
    investment interest therein, as defined in this subchapter. Any 
    such investment interest shall consist of all incidents of 
    ownership, except legal title which shall be vested in the Federal 
    Government. Such investment interest shall not be extinguished by 
    the expiration of such agreement. Such investment interest may be 
    assigned, transferred, encumbered or relinquished.
        (2) Limitation.--Such investment interest shall not be 
    construed to include or imply any authority, privilege, or right to 
    operate or engage in any business or other activity, and the use of 
    any improvement in which the concessioner has an investment 
    interest shall be wholly subject to the applicable provisions of 
    the concession service agreement and of laws and regulations 
    relating to the area.
        (3) Federal property.--Notwithstanding paragraph (1), a 
    concession service agreement may specify that certain new 
    structures, improvements, or fixtures required to be constructed 
    under terms of the concession service agreement shall be property 
    of the Federal Government subject only to the right of the 
    concessioner to use such improvements during the term of such 
    agreement and that the concessioner shall not be accorded an 
    investment interest therein. Concession service agreements shall 
    not, to the extent practicable, provide for a concessioner to 
    obtain an investment interest in any building or facilities wholly 
    owned by the Federal Government.
    (c) Sale of Assets.--If the existing concessioner is not the 
selected bidder at the time of reissuance of a concession service 
agreement, the Secretary concerned shall require the new concessioner 
to buy the investment interest of the existing concession. In the event 
that the successor concessioner is unable to fully pay such investment 
interest, any deficiency shall be paid by the Federal Government.
    (d) Closure of Concessioner Facilities.--If the Secretary concerned 
determines that the public interest, by reason of public and safety 
considerations or for other reasons beyond the control of the 
concessioner, requires the discontinuation or closure of facilities in 
which the concessioner has an investment interest, the Federal 
Government shall compensate the concessioner in the amount equal to the 
value of the investment interest.
    (e) Determination of Value of Investment Interest.--For purposes of 
this subchapter, the investment interest of any capital improvement at 
the end of the concession service agreement period shall be an amount 
equal to the actual cost of construction or purchase of such investment 
interest or such capital improvement adjusted from the time of 
completion of such construction by changes in the Consumer Price Index 
less depreciation evidenced by the condition and prospective 
serviceability in comparison with a new unit of like kind. The 
Secretary concerned shall include the value to be paid by the selected 
bidder for any existing investment interest in the prospectus for the 
related concession service agreement.

SEC. 5466. DURATION OF CONCESSION AUTHORIZATION.

    (a) Concession Service Agreement.--The standard term of a 
concession service agreement shall be 10 years. The Secretary concerned 
may issue a concession service agreement for less than 10 years if the 
Secretary determines that the average annual gross receipts over the 
life of the concession service agreement would be less than $100,000. 
The Secretary concerned may not issue a concession service agreement 
for less than 5 years. The Secretary concerned shall issue a concession 
service agreement for longer than 10 years if the Secretary determines 
that such longer term is in the public interest or necessary due to the 
extent of investment and associated financing requirements and to meet 
the obligations assumed. The term for a concession service agreement 
may not exceed 30 years.
    (b) Concession License.--The term for a concession license may not 
exceed 2 years.
    (c) Temporary Extension.--The Secretary concerned may agree to 
temporary extensions of concession service agreements for up to 2 years 
on a noncompetitive basis to avoid interruption of services to the 
public.

SEC. 5467. RATES AND CHARGES TO THE PUBLIC.

    In general, rates and charges to the public shall be set by the 
concessioner. For concession service agreements only, a concessioner's 
rates and charges to the public shall be subject to the approval of the 
Secretary concerned in those instances where the Secretary determines 
that sufficient competition for such facilities and services does not 
exist within or in close proximity to the area in which the 
concessioner operates. In those instances, the concession service 
agreement shall state that the reasonableness of the concessioner's 
rates and charges to the public shall be reviewed and approved by the 
Secretary concerned primarily by comparison with those rates and 
charges for facilities and services of comparable character under 
similar conditions, with due consideration for length of season, 
seasonal variations, average percentage of occupancy, accessibility, 
availability and costs of labor and materials, type of patronage, and 
other factors deemed significant by the Secretary concerned. Such 
review shall be completed within 90 days of receipt of all necessary 
information, or the requirement for the Secretary's approval shall be 
waived and such rates and charges as proposed by the concessioner 
considered to be approved for immediate use.

SEC. 5468. TRANSFERABILITY OF CONCESSION AUTHORIZATIONS.

    (a) Concession Service Agreements.--
        (1) Approval required.--A concession service agreement is 
    transferable or assignable only with the approval of the Secretary 
    concerned, which approval may not be unreasonably withheld or 
    delayed. The Secretary may not approve any such transfer or 
    assignment if the Secretary determines that the prospective 
    concessioner is or is likely to be unable to completely satisfy all 
    of the material requirements, term, and conditions of the agreement 
    or that the terms of the transfer or assignment would preclude 
    providing appropriate facilities or services to the public at 
    reasonable rates.
        (2) Consideration period.--If the Secretary concerned fails to 
    approve or disapprove a transfer or assignment under paragraph (1) 
    within 90 days after the date on which the Secretary receives all 
    necessary information requested by the Secretary with respect to 
    such transfer, the transfer or assignment shall be deemed to have 
    been approved.
        (3) No modification of terms and conditions.--The terms and 
    conditions of the concessions service agreement shall not be 
    subject to modification by reason of any transfer or assignment 
    under this section.
    (b) Concession License.--A concession license may not be 
transferred.

SEC. 5469. FEES CHARGED BY THE UNITED STATES FOR CONCESSION 
              AUTHORIZATIONS.

    (a) In General.--The Secretary concerned shall charge a fee for the 
privilege of providing concession services pursuant to this subchapter. 
The fee for any concession service agreement may include any of the 
following:
        (1) An annual cash payment for the privilege of providing 
    concession services.
        (2) The amount required for capital improvements required 
    pursuant to section 5465(a).
        (3) Fees for rental or lease of Government-owned facilities or 
    lands occupied by the concessioner.
        (4) Expenditures for maintenance of or improvements to 
    Government-owned facilities occupied by the concessioner.
    (b) Establishment of Amount.--
        (1) Minimum acceptable fee.--The Secretary concerned shall 
    establish a minimum fee for each applicable category specified in 
    paragraphs (1) through (4) of subsection (a) which is acceptable to 
    the Secretary under this section and shall include the minimum fee 
    in the prospectus under section 5464. This fee shall be based on 
    historical data, where available, as well as industry-specific and 
    other market data available to the Secretary concerned.
        (2) Final fee.--Except as provided in paragraph (3), the final 
    fee shall be the amount bid by the selected applicant under section 
    5464.
        (3) Substantially similar services in a specific geographic 
    area.--When the Secretary concerned simultaneously offers 
    authorizations for more than one river runner, outfitter, or guide 
    concession operation to provide substantially similar services in a 
    defined geographic area, the concession fee for all such 
    concessionaires shall be specified by the Secretary concerned in 
    the prospectus. The Secretary concerned shall base the fee on 
    historical data, where available, as well as on industry-specific 
    and other market data available to the Secretary concerned or may 
    establish a charge per user day.
    (c) Adjustment of Fees.--The amount of any fee for the term of the 
concession service agreement shall be set at the beginning of the 
concession authorization and may only be modified if stated in the 
contract on the basis of inflation, when the annual payment is not 
determined by a percentage of adjusted gross receipts (as measured by 
changes in the Consumer Price Index), to reflect substantial changes 
from the conditions specified in the prospectus, or in the event of an 
unforseen disaster.
    (d) Concession License Fee.--The fee for a concession license shall 
at least cover the program administrative costs and may not be changed 
over the term of the license.

SEC. 5470. DISPOSITION OF FEES.

    (a) Concession Improvement Account.--
        (1) In general.--The Secretary concerned shall, whenever the 
    concession service agreement requires or authorizes the 
    concessioner to perform maintenance or make improvements to 
    Government-owned facilities occupied by the concessioner, require 
    the concessioner to establish a concession improvement account. The 
    concessioner shall deposit into this account all funds for 
    maintenance of or improvements to Government-owned facilities 
    occupied by the concessioner;
        (2) Terms and conditions.--The account shall be maintained by 
    the concessioner in an interest bearing account in a federally 
    insured financial institution. The concessioner shall maintain the 
    account separately from any other funds or accounts and shall not 
    commingle the money in the account with any other money.
        (3) Disbursements.--The concessioner shall make disbursements 
    from the account for improvements and other activities, only for 
    capital improvements or maintenance of improvements to Government-
    owned facilities occupied by the concessioner as specified in the 
    concession service agreement.
        (4) Transfer of remaining balance.--On the termination of a 
    concession authorization, or on the transfer of a concession 
    service agreement, any remaining balance in the account shall be 
    transferred by the concessioner to the successor concessioner, to 
    be used solely as set forth in this subsection. In the event there 
    is no successor concessioner, the account balance shall be 
    deposited in the Treasury as miscellaneous receipts.
    (b) When the concessioner is required to make capital improvements 
to other than Government-owned facilities occupied by the concessioner 
in accordance with a concession service agreement, the concessioner 
shall have the option to control and expend such funds directly.
    (c) Amounts Received Relating to Privilege of Providing Concession 
Services and Rental of Government-Owned Facilities.--
        (1) Deposit into treasury.--The Secretary concerned shall 
    deposit in the Treasury of the United States as miscellaneous 
    receipts all funds not deposited in concession improvement accounts 
    or funds for capital improvements specified in (b) above, including 
    specifically amounts received for a fiscal year for the privilege 
    of providing concession services and the rental of Government-owned 
    facilities, except that of the amount of fees paid by vessel 
    operators for the privilege of entering into Glacier Bay, Alaska, 
    50 percent of such fees for the 5-year period beginning on the 
    first full fiscal year following the date of enactment of this 
    subchapter shall be deposited into a special account and that such 
    funds shall be available without further appropriation and may only 
    be used to conduct research to quantify any effect of such vessel 
    activity on wildlife and other natural resource values of Glacier 
    Bay National Park. For the National Park Service such deposits into 
    the Treasury shall total not less than the amounts specified in the 
    table in paragraph (2). For the other agencies covered under this 
    subchapter, the Secretary concerned shall develop a schedule of 
    anticipated receipts to be deposited to the Treasury and submit 
    such schedule to the appropriate Congressional committees not later 
    than 18 months after the date of enactment of this Act. Nothing in 
    this chapter shall be construed to modify any provision of law 
    relating to sharing of Federal receipts with any other level of 
    Government.
        (2) Deposit into concession improvement accounts.--The table 
    referred to in paragraph (1), expressed by fiscal year, is as 
    follows:

                         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.

    (d) Beginning in fiscal year 1998, the Inspector General of the 
Department concerned shall conduct a biennial audit of concession fees 
generated pursuant to this chapter. The Inspector General shall make a 
determination as to whether concession fees are being collected and 
expended in accordance with this chapter and shall submit copies of 
each audit to the Committee on Resources of the House of 
Representatives and the Committee on Energy and Natural Resources of 
the Senate.

SEC. 5471. REGULATIONS.

    The Secretary concerned shall promulgate regulations to implement 
this chapter no later than 2 years after the date of enactment of this 
Act. Subsequent to the date of enactment of this chapter, no new 
concession authorization may be issued, nor may any existing concession 
authorization be amended or extended, unless such authorization, 
amendment, or extension is fully consistent with sections 5465, 
5469(c), and 5470.

SEC. 5472. RELATIONSHIP TO OTHER LAWS.

    (a) Repeals.--
        (1) The Act entitled ``An Act relating to the establishment of 
    concession policies in the areas administered by the National Park 
    Service and for other purposes'' (16 U.S.C. 20-20g) approved 
    October 9, 1965, is repealed.
    (b) Savings.--
        (1) In general.--The repeal of any provision, the superseding 
    of any provision, and the amendment of any provision, of an Act 
    referred to in subsection (a) shall not affect the validity of any 
    authorizations entered into under any such Act. The provisions of 
    this chapter shall apply to any such authorizations, except to the 
    extent such provisions are inconsistent with the express terms and 
    conditions of such authorizations.
        (2) Right of renewal.--The right of renewal explicitly provided 
    for by any concession contract under any such provision shall be 
    preserved for a single renewal of a contract following the 
    enactment of, or concession authorization under, this chapter.
        (3) Value of capital improvements or possessory interest.--
    Nothing in this chapter shall be construed to change the value as 
    of the date of enactment of this chapter for existing capital 
    improvements or possessory interest as identified in concession 
    contracts entered into before the date of enactment of this Act. 
    Subsequent to enactment of this chapter, the increase in value for 
    any possessory interest established under any concession contract 
    in effect on the date of enactment of this chapter shall be as 
    provided for in this chapter unless otherwise specifically provided 
    in the contract.
        (4) ANILCA.--Nothing in this chapter shall be construed to 
    amend, supersede or otherwise affect any provision of the Alaska 
    National Interest Lands Conservation Act (16 U.S.C. 3101 et seq.) 
    relating to revenue-producing visitor services.
        (5) Procedures for considering existing concessionaires in 
    reissuance of contracts.--In the case of a concession contract 
    which has expired prior to the date of the enactment of this Act, 
    or within 5 years after the date of the enactment of this Act, an 
    incumbent concessioner shall be entitled to a one-time bonus of 5 
    percent of the maximum points available in the reissuance of a 
    previous concession authorization. For any concession contract 
    entered into prior to the date of enactment of this Act, which is 
    projected to terminate 5 years or later after the date of enactment 
    of this Act, any concessioner shall be entitled to a performance 
    incentive in accordance with this chapter. The concessioner shall 
    be entitled to an evaluation of ``good'' for each year in which the 
    Secretary concerned does not complete an evaluation as provided for 
    in this chapter.

          TITLE VI--FEDERAL RETIREMENT AND RELATED PROVISIONS
        Subtitle A--Civil Service and Postal Service Provisions

SEC. 6001. EXTENSION OF DELAY IN COST-OF-LIVING ADJUSTMENTS IN FEDERAL 
              EMPLOYEE RETIREMENT BENEFITS THROUGH FISCAL YEAR 2002.

    Section 11001(a) of the Omnibus Budget Reconciliation Act of 1993 
(Public Law 103-66; 107 Stat. 408) is amended in the matter preceding 
paragraph (1) by striking out ``or 1996,'' and inserting in lieu 
thereof ``1996, 1997, 1998, 1999, 2000, 2001, or 2002,''.

SEC. 6002. INCREASED CONTRIBUTIONS TO FEDERAL CIVILIAN RETIREMENT 
              SYSTEMS.

    (a) Civil Service Retirement System.--
        (1) Deductions.--The first sentence of section 8334(a)(1) of 
    title 5, United States Code, is amended to read as follows: ``The 
    employing agency shall deduct and withhold from the basic pay of an 
    employee, Member, Congressional employee, law enforcement officer, 
    firefighter, bankruptcy judge, judge of the United States Court of 
    Appeals for the Armed Forces, United States magistrate, or Claims 
    Court judge, as the case may be, the percentage of basic pay 
    applicable under subsection (c).''.
        (2) Agency contributions.--
            (A) Increase in agency contributions during calendar years 
        1996 through 2002.--Section 8334(a)(1) of title 5, United 
        States Code (as amended by this section) is further amended--
                (i) by inserting ``(A)'' after ``(1)''; and
                (ii) by adding at the end thereof the following new 
            subparagraph:
            ``(B)(i) Notwithstanding subparagraph (A), the agency 
        contribution under the second sentence of such subparagraph, 
        during the period beginning on January 1, 1996, through 
        December 31, 2002--
                ``(I) for each employing agency (other than the United 
            States Postal Service or the Washington Metropolitan 
            Airport Authority) shall be 8.51 percent of the basic pay 
            of an employee, Congressional employee, and a Member of 
            Congress, 9.01 percent of the basic pay of a law 
            enforcement officer, a member of the Capitol Police, and a 
            firefighter, and 8.51 percent of the basic pay of a Claims 
            Court judge, a United States magistrate, a judge of the 
            United States Court of Appeals for the Armed Services, and 
            a bankruptcy judge, as the case may be; and
                ``(II) for the United States Postal Service and the 
            Washington Metropolitan Airport Authority shall be 7 
            percent of the basic pay of an employee and 7.5 percent of 
            the basic pay of a law enforcement officer or 
            firefighter.''.
            (B) No reduction in agency contributions by the postal 
        service.--Agency contributions by the United States Postal 
        Service under section 8348(h) of title 5, United States Code--
                (i) shall not be reduced as a result of the amendments 
            made under paragraph (3) of this subsection; and
                (ii) shall be computed as though such amendments had 
            not been enacted.
        (3) Individual deductions, withholdings, and deposits.--The 
    table under section 8334(c) of title 5, United States Code, is 
    amended--
            (A) in the matter relating to an employee by striking out

                                          ``7....................  After December 31, 1969.''                   
                                                                                                                

        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.'';                  
                                                                                                                

  
---------------------------------------------------------------------------
            (B) in the matter relating to a Member or employee for 
        Congressional employee service by striking out

                                          ``7\1/2\...............  After December 31, 1969.''                   
                                                                                                                

        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.'';                  
                                                                                                                

            (C) in the matter relating to a Member for Member service 
        by striking out

                                          ``8....................  After December 31, 1969.''                   
                                                                                                                

        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.'';                  
                                                                                                                

            (D) in the matter relating to a law enforcement officer for 
        law enforcement service and firefighter for firefighter service 
        by striking out

                                          ``7\1/2\...............  After December 31, 1974.''                   
                                                                                                                

        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.'';                  
                                                                                                                

            (E) in the matter relating to a bankruptcy judge by 
        striking out

                                          ``8....................  After December 31, 1983.''                   
                                                                                                                

        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.'';                  
                                                                                                                

            (F) in the matter relating to a judge of the United States 
        Court of Appeals for the Armed Forces for service as a judge of 
        that court by striking out

                                          ``8....................  On and after the date of the enactment of the
                                                                    Department of Defense Authorization Act,    
                                                                    1984.''                                     
                                                                                                                

        and inserting in lieu thereof the following:

                                          ``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.'';                  
                                                                                                                

            (G) in the matter relating to a United States magistrate by 
        striking out

                                          ``8....................  After September 30, 1987.''                  
                                                                                                                

        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.'';                  
                                                                                                                

            (H) in the matter relating to a Claims Court judge by 
        striking out

                                          ``8....................  After September 30, 1988.''                  
                                                                                                                

        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.'';                  
                                                                                                                

        and
            (I) by inserting after the matter relating to 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.              
                                          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.''.                  
                                                                                                                

        (4) Other service.--
            (A) Military service.--Section 8334(j) of title 5, United 
        States Code, is amended--
                (i) in paragraph (1)(A) by inserting ``and subject to 
            paragraph (5),'' after ``Except as provided in subparagraph 
            (B),''; and
                (ii) by adding at the end thereof the following new 
            paragraph:
    ``(5) Effective with respect to any period of military service 
after December 31, 1995, the percentage of basic pay under section 204 
of title 37 payable under paragraph (1) shall be equal to the same 
percentage as would be applicable under section 8334(c) for that same 
period for service as an employee, subject to paragraph (1)(B).''.
            (B) Volunteer service.--Section 8334(l) of title 5, United 
        States Code, is amended--
                (i) in paragraph (1) by adding at the end thereof the 
            following: ``This paragraph shall be subject to paragraph 
            (4).''; and
                (ii) by adding at the end thereof the following new 
            paragraph:
    ``(4) Effective with respect to any period of service after 
December 31, 1995, the percentage of the readjustment allowance or 
stipend (as the case may be) payable under paragraph (1) shall be equal 
to the same percentage as would be applicable under section 8334(c) for 
that same period for service as an employee.''.
    (b) Federal Employees Retirement System.--
        (1) Individual deductions and withholdings.--
            (A) In general.--Section 8422(a) of title 5, United States 
        Code, is amended by striking out paragraph (2) and inserting in 
        lieu thereof the following:
    ``(2) The percentage to be deducted and withheld from basic pay for 
any pay period shall be equal to--
        ``(A) the applicable percentage under paragraph (3), minus
        ``(B) the percentage then in effect under section 3101(a) of 
    the Internal Revenue Code of 1986 (relating to rate of tax for old-
    age, survivors, and disability insurance).
    ``(3) The applicable percentage under this paragraph, for civilian 
service shall be as follows:

Employee...............................  7........................  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.                    
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,    7.5......................  Before January 1, 1996.                     
 member of the Capitol Police, or air                                                                           
 traffic controller.                                                                                            
                                         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.                    
                                                                                                                

            (B) Military service.--Section 8422(e) of title 5, United 
        States Code, is amended--
                (i) in paragraph (1)(A) by inserting ``and subject to 
            paragraph (6),'' after ``Except as provided in subparagraph 
            (B),''; and
                (ii) by adding at the end thereof the following:
        ``(6) The percentage of basic pay under section 204 of title 37 
    payable under paragraph (1), with respect to any period of military 
    service performed during--
            ``(A) January 1, 1996, through December 31, 1996, shall be 
        3.25 percent;
            ``(B) January 1, 1997, through December 31, 1997, shall be 
        3.4 percent; and
            ``(C) January 1, 1998, through December 31, 2002, shall be 
        3.5 percent.''.
            (C) Volunteer service.--Section 8422(f) of title 5, United 
        States Code, is amended--
                (i) in paragraph (1) by adding at the end thereof the 
            following: ``This paragraph shall be subject to paragraph 
            (4).''; and
                (ii) by adding at the end the following:
        ``(4) The percentage of the readjustment allowance or stipend 
    (as the case may be) payable under paragraph (1), with respect to 
    any period of volunteer service performed during--
            ``(A) January 1, 1996, through December 31, 1996, shall be 
        3.25 percent;
            ``(B) January 1, 1997, through December 31, 1997, shall be 
        3.4 percent; and
            ``(C) January 1, 1998, through December 31, 2002, shall be 
        3.5 percent.''.
        (2) No reduction in agency contributions.--Agency contributions 
    under section 8423 (a) and (b) of title 5, United States Code , 
    shall not be reduced as a result of the amendments made under 
    paragraph (1) of this subsection.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the first day of the first applicable pay period beginning on 
or after January 1, 1996.

SEC. 6003. FEDERAL RETIREMENT PROVISIONS RELATING TO MEMBERS OF 
              CONGRESS AND CONGRESSIONAL EMPLOYEES.

    (a) Relating to the Years of Service as a Member of Congress and 
Congressional Employees for Purposes of Computing an Annuity.--
        (1) CSRS.--Section 8339 of title 5, United States Code, is 
    amended--
            (A) in subsection (a) by inserting ``or Member'' after 
        ``employee''; and
            (B) by striking out subsections (b) and (c).
        (2) FERS.--Section 8415 of title 5, United States Code, is 
    amended--
            (A) by striking out subsections (b) and (c);
            (B) in subsections (a) and (g) by inserting ``or Member'' 
        after ``employee'' each place it appears; and
            (C) in subsection (g)(2) by striking out ``Congressional 
        employee''.
    (b) Accrual Rate for Member and Congressional Employee Service 
Performed but not Vested Before Effective Date.--
        (1) Application.--This subsection shall apply to an individual 
    who--
            (A) is a Member of Congress or Congressional employee on 
        December 31, 1995;
            (B) has performed less than 5 years of service as a Member 
        of Congress or Congressional employee on December 31, 1995; and
            (C) after December 31, 1995, completes 5 years of service 
        as a Member of Congress or Congressional employee, that 
        includes a period of service performed as a Member of Congress 
        or Congressional employee before January 1, 1996.
        (2) Computation of annuity.-- In computing the annuity of an 
    individual described under paragraph (1)--
            (A) any period of service as a Member of Congress or 
        Congressional employee performed before January 1, 1996, shall 
        be computed under sections 8339 or 8415 of title 5, United 
        States Code (as though the amendments under subsection (a) of 
        this section were not enacted); and
            (B) the 5 year service requirement under subsections (b) 
        and (c) of sections 8339 or 8415 of such title (as in effect 
        before the date of enactment of this Act) shall be deemed 
        fulfilled.
    (c) Capitol Police.--Section 8339(q) of title 5, United States 
Code, is amended by striking out ``with subsection (b), except that, in 
the case of a member who retires under section 8335(d) or 8336(m), and 
who meets the requirements of subsection (b)(2),'' and inserting in 
lieu thereof ``with subsection (a), except that in the case of a member 
who retires under section 8335(d) or 8336(m), and who has deductions 
withheld from his pay or has made deposit covering his last 5 years of 
civilian service,''.
    (d) Administrative Regulations.--The Office of Personnel 
Management, in consultation with the Secretary of the Senate and the 
Clerk of the House of Representatives, may prescribe regulations to 
carry out the provisions of this section and the amendments made by 
this section for applicable employees and Members of Congress.
    (e) Effective Dates.--
        (1) Years of service; annuity computation.--
            (A) Service after effective date.--The amendments made by 
        subsection (a) shall take effect on January 1, 1996, and shall 
        apply only with respect to the computation of an annuity 
        relating to--
                (i) the service of a Member of Congress as a Member or 
            as a Congressional employee performed on or after January 
            1, 1996; and
                (ii) the service of a Congressional employee as a 
            Congressional employee performed on or after January 1, 
            1996.
            (B) Service before effective date.--An annuity shall be 
        computed as though the amendments made under subsection (a) had 
        not been enacted with respect to--
                (i) the service of a Member of Congress as a Member or 
            a Congressional employee or military service performed 
            before January 1, 1996; and
                (ii) the service of a Congressional employee as a 
            Congressional employee or military service performed before 
            January 1, 1996.
            (C) Alternative effective date relating to members of 
        congress.--If a court of competent jurisdiction makes a final 
        determination that a provision of this paragraph violates the 
        27th amendment of the United States Constitution, the effective 
        date and application dates relating to Members of Congress 
        shall be January 1, 1997.
        (2) Administrative provisions.--The provisions of subsections 
    (b), (c), and (d) shall take effect on the date of the enactment of 
    this Act.

SEC. 6004. ACCRUAL RATES RELATING TO CERTAIN JUDGES WITH SIMILAR 
              TREATMENT AS CONGRESSIONAL SERVICE.

    (a) Judge of the United States Court of Military Appeals.--Section 
8339(d)(7) of title 5, United States Code, is amended by striking out 
``service.'' and inserting in lieu thereof ``service performed before 
January 1, 1996.''.
    (b) Claims Court Judge, Bankruptcy Judge, United States 
Magistrate.--Section 8339(n) of title 5, United States Code, is amended 
by striking out ``service.'' and inserting in lieu thereof ``service 
performed before January 1, 1996. The annuity of any such employee is, 
with respect to any service referred to in the preceding sentence that 
is performed on or after January 1, 1996, computed under subsection 
(a).''.

SEC. 6005. REPEAL OF AUTHORIZATION OF TRANSITIONAL APPROPRIATIONS FOR 
              THE UNITED STATES POSTAL SERVICE.

    (a) Repeal.--
        (1) In general.--Section 2004 of title 39, United States Code, 
    is repealed.
        (2) Technical and conforming amendments.--
            (A) The table of sections for chapter 20 of such title is 
        amended by repealing the item relating to section 2004.
            (B) Section 2003(e)(2) of such title is amended by striking 
        ``sections 2401 and 2004'' each place it appears and inserting 
        ``section 2401''.
    (b) Clarification That Liabilities Formerly Paid Pursuant to 
Section 2004 Remain Liabilities Payable by the Postal Service.--Section 
2003 of title 39, United States Code, is amended by adding at the end 
the following:
    ``(h) Liabilities of the former Post Office Department to the 
Employees' Compensation Fund (appropriations for which were authorized 
by former section 2004, as in effect before the effective date of this 
subsection) shall be liabilities of the Postal Service payable out of 
the Fund.''.
    (c) Effective Date.--
        (1) In general.--This section and the amendments made by this 
    section shall be effective as of October 1, 1995.
        (2) Provisions relating to payments for fiscal year 1996.--
            (A) Amounts not yet paid.--No payment may be made to the 
        Postal Service Fund, on or after the date of the enactment of 
        this Act, pursuant to any appropriation for fiscal year 1996 
        authorized by section 2004 of title 39, United States Code (as 
        in effect before the effective date of this section).
            (B) Amounts paid.--If any payment to the Postal Service 
        Fund is or has been made pursuant to an appropriation for 
        fiscal year 1996 authorized by such section 2004, then an 
        amount equal to the amount of such payment shall be paid from 
        such Fund into the Treasury as miscellaneous receipts.

                 Subtitle B--Patent and Trademark Fees

SEC. 6011. PATENT AND TRADEMARK FEES.

    Section 10101 of the Omnibus Budget Reconciliation Act of 1990 (35 
U.S.C. 41 note) is amended--
        (1) in subsection (a) by striking ``1998'' and inserting 
    ``2002'';
        (2) in subsection (b)(2) by striking ``1998'' and inserting 
    ``2002''; and
        (3) in subsection (c)--
            (A) by striking ``through 1998'' and inserting ``through 
        2002''; and
            (B) by adding at the end the following:
        ``(9) $119,000,000 in fiscal year 1999.
        ``(10) $119,000,000 in fiscal year 2000.
        ``(11) $119,000,000 in fiscal year 2001.
        ``(12) $119,000,000 in fiscal year 2002.''.

                     Subtitle C--GSA Property Sales

SEC. 6021. SALE OF GOVERNORS ISLAND, NEW YORK.

    (a) In General.--Notwithstanding any other provision of law, the 
Administrator of General Services shall dispose of by sale at fair 
market value all rights, title, and interests of the United States in 
and to the land of, and improvements to, Governors Island, New York.
    (b) Right of First Refusal.--Before a sale is made under subsection 
(a) to any other parties, the State of New York and the city of New 
York shall be given the right of first refusal to purchase all or part 
of Governors Island. Such right may be exercised by either the State of 
New York or the city of New York or by both parties acting jointly.
    (c) Proceeds.--Proceeds from the disposal of Governors Island under 
subsection (a) shall be deposited in the general fund of the Treasury 
and credited as miscellaneous receipts.

SEC. 6022. SALE OF AIR RIGHTS.

    (a) In General.--Notwithstanding any other provision of law, the 
Administrator of General Services shall sell, at fair market value and 
in a manner to be determined by the Administrator, the air rights 
adjacent to Washington Union Station described in subsection (b), 
including air rights conveyed to the Administrator under subsection 
(d). The Administrator shall complete the sale by such date as is 
necessary to ensure that the proceeds from the sale will be deposited 
in accordance with subsection (c).
    (b) Description.--The air rights referred to in subsection (a) 
total approximately 16.5 acres and are depicted on the plat map of the 
District of Columbia as follows:
        (1) Part of lot 172, square 720.
        (2) Part of lots 172 and 823, square 720.
        (3) Part of lot 811, square 717.
    (c) Proceeds.--Before September 30, 1996, proceeds from the sale of 
air rights under subsection (a) shall be deposited in the general fund 
of the Treasury and credited as miscellaneous receipts.
    (d) Conveyance of Amtrak Air Rights.--
        (1) General rule.--As a condition of future Federal financial 
    assistance, Amtrak shall convey to the Administrator of General 
    Services on or before December 31, 1995, at no charge, all of the 
    air rights of Amtrak described in subsection (b).
        (2) Failure to comply.--If Amtrak does not meet the condition 
    established by paragraph (1), Amtrak shall be prohibited from 
    obligating Federal funds after March 1, 1996.

SEC. 6023. AVAILABILITY OF SURPLUS PROPERTY FOR HOMELESS ASSISTANCE.

    (a) Repeal.--(1) Title V of the Stewart B. McKinney Homeless 
Assistance Act (42 U.S.C. 11411 et seq.) is repealed.
    (2) The table of contents in section 101(b) of that Act is amended 
by striking the items relating to title V.
    (3) This subsection shall be effective October 1, 1995.
    (b) Authority To Transfer Surplus Real Property for Housing Use.--
Section 203 of the Federal Property and Administrative Services Act of 
1949 (40 U.S.C. 484) is amended by adding at the end the following:
    ``(r) Under such regulations as the Administrator may prescribe, 
and in consultation with appropriate local governmental authorities, 
the Administrator may transfer to any nonprofit organization which 
exists for the primary purpose of providing housing or housing 
assistance for homeless individuals or families, such surplus real 
property, including buildings, fixtures, and equipment situated 
thereon, as is needed for housing use.
    ``(s)(1) Under such regulations as the Administrator may prescribe, 
and in consultation with appropriate local governmental authorities, 
the Administrator may transfer to any non-profit organization which 
exists for the primary purpose of providing housing or housing 
assistance for low-income individuals or families such surplus real 
property, including buildings, fixtures, and equipment situated 
thereon, as is needed for housing use.
    ``(2) In making transfers under this subsection, the Administrator 
shall take such actions, which may include grant agreements with an 
organization receiving a grant, as may be necessary to ensure that--
        ``(A) assistance provided under this subsection is used to 
    facilitate and encourage homeownership opportunities through the 
    construction of self-help housing, under terms which require that 
    the person receiving the assistance contribute a significant amount 
    of labor toward the construction; and
        ``(B) the dwellings constructed with property transferred under 
    this subsection shall be quality dwellings that comply with local 
    building and safety codes and standards and shall be available at 
    prices below the prevailing market prices.''.

           TITLE VII--TRANSFORMATION OF THE MEDICAID PROGRAM

SEC. 7000. SHORT TITLE OF TITLE; TABLE OF CONTENTS OF TITLE.

    (a) Short Title of Title.--This title may be cited as the 
``Medicaid Transformation Act of 1995''.
    (b) Table of Contents of Title.--The table of contents 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.

SEC. 7001. TRANSFORMATION OF MEDICAID PROGRAM.

    The Social Security Act is amended by adding at the end the 
following new title:

 ``TITLE XXI--MEDIGRANT PROGRAM FOR LOW-INCOME INDIVIDUALS AND FAMILIES

                       ``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.
``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.

``SEC. 2100. PURPOSE; STATE MEDIGRANT PLANS.

    ``(a) Purpose.--The purpose of this title is to provide block 
grants to States to enable them to provide medical assistance to low-
income individuals and families in a more effective, efficient, and 
responsive manner.
    ``(b) State Plan Required.--A State is not eligible for payment 
under section 2122 of this title unless the State has submitted to the 
Secretary under part E a plan (in this title referred to as a 
`MediGrant plan') that--
        ``(1) sets forth how the State intends to use the funds 
    provided under this title to provide medical assistance to needy 
    individuals and families consistent with the provisions of this 
    title, and
        ``(2) is approved under such part.
    ``(c) Continued Approval.--An approved MediGrant plan shall 
continue in effect unless and until--
        ``(1) the State amends the plan under section 2152,
        ``(2) the State terminates participation under this title under 
    section 2153, or
        ``(3) the Secretary finds substantial noncompliance of the plan 
    with the requirements of this title under section 2154.
    ``(d) State Entitlement.--This title constitutes budget authority 
in advance of appropriations Acts, and represents the obligation of the 
Federal Government to provide for the payment to States of amounts 
provided under part C.

     ``Part A--Objectives, Goals, and Performance Under State Plans

``SEC. 2101. DESCRIPTION OF STRATEGIC OBJECTIVES AND PERFORMANCE GOALS.

    ``(a) Description.--A MediGrant plan shall include a description of 
the strategic objectives and performance goals the State has 
established for providing health care services to low-income 
populations under this title, including a general description of the 
manner in which the plan is designed to meet these objectives and 
goals.
    ``(b) Certain Objectives and Goals Required.--A MediGrant plan 
shall include strategic objectives and performance goals relating to 
rates of childhood immunizations and reductions in infant mortality and 
morbidity.
    ``(c) Considerations.--In specifying these objectives and goals the 
State may consider factors such as the following:
        ``(1) The State's priorities with respect to providing 
    assistance to low-income populations.
        ``(2) The State's priorities with respect to the general public 
    health and the health status of individuals eligible for assistance 
    under the MediGrant plan.
        ``(3) The State's financial resources, the particular economic 
    conditions in the State, and relative adequacy of the health care 
    infrastructure in different regions of the State.
    ``(d) Performance Measures.--To the extent practicable--
        ``(1) one or more performance goals shall be established by the 
    State for each strategic objective identified in the MediGrant 
    plan; and
        ``(2) the MediGrant plan shall describe, how program 
    performance will be--
            ``(A) measured through objective, independently verifiable 
        means, and
            ``(B) compared against performance goals, in order to 
        determine the State's performance under this title.
    ``(e) Period Covered.--
        ``(1) Strategic objectives.--The strategic objectives shall 
    cover a period of not less than 5 years and shall be updated and 
    revised at least every 3 years.
        ``(2) Performance goals.--The performance goals shall be 
    established for dates that are not more than 3 years apart.

``SEC. 2102. ANNUAL REPORTS.

    ``(a) In General.--In the case of a State with a MediGrant plan 
that is in effect for part or all of a fiscal year, no later than March 
31 following such fiscal year (or March 31, 1998, in the case of fiscal 
year 1996) the State shall prepare and submit to the Secretary and the 
Congress a report on program activities and performance under this 
title for such fiscal year.
    ``(b) Contents.--Each annual report under this section for a fiscal 
year shall include the following:
        ``(1) Expenditure and beneficiary summary.--
            ``(A) Initial summary.--For the report for fiscal year 1997 
        (and, if applicable, fiscal year 1996), a summary of all 
        expenditures under the MediGrant plan during the fiscal year 
        (and during any portions of fiscal year 1996 during which the 
        MediGrant plan was in effect under this title) as follows:
                ``(i) Aggregate medical assistance expenditures, 
            disaggregated to the extent required to determine 
            compliance with the set-aside requirements of subsections 
            (a) through (d) of section 2112 and to compute the case mix 
            index under section 2121(d)(3).
                ``(ii) For each general category of eligible 
            individuals (specified in subsection (c)(1), aggregate 
            medical assistance expenditures and the total and average 
            number of eligible individuals under the MediGrant plan.
                ``(iii) By each general category of eligible 
            individuals, total expenditures for each of the categories 
            of health care items and services (specified in subsection 
            (c)(2)) which are covered under the MediGrant plan and 
            provided on a fee-for-service basis.
                ``(iv) By each general category of eligible 
            individuals, total expenditures for payments to capitated 
            health care organizations (as defined in section 
            2114(c)(1)).
                ``(v) Total administrative expenditures.
            ``(B) Subsequent summaries.--For reports for each 
        succeeding fiscal year, a summary of--
                ``(i) all expenditures under the MediGrant plan, and
                ``(ii) the total and average number of eligible 
            individuals under the MediGrant plan for each general 
            category of eligible individuals.
        ``(2) Utilization summary.--
            ``(A) Initial summary.--For the report for fiscal year 1997 
        (and, if applicable, fiscal year 1996), summary statistics on 
        the utilization of health care services under the MediGrant 
        plan during the year (and during any portions of fiscal year 
        1996 during which the MediGrant plan was in effect under this 
        title) as follows:
                ``(i) For each general category of eligible individuals 
            and for each of the categories of health care items and 
            services which are covered under the MediGrant plan and 
            provided on a fee-for-service basis, the number and 
            percentage of persons who received such a type of service 
            or item during the period covered by the report.
                ``(ii) Summary of health care utilization data reported 
            to the State by capitated health care organizations.
            ``(B) Subsequent summaries.--For reports for each 
        succeeding fiscal year, summary statistics on the utilization 
        of health care services under the MediGrant plan.
        ``(3) Achievement of performance goals.--With respect to each 
    performance goal established under section 2101 and applicable to 
    the year involved--
            ``(A) a brief description of the goal;
            ``(B) a description of the methods to be used to measure 
        the attainment of such goal;
            ``(C) data on the actual performance with respect to the 
        goal;
            ``(D) a review of the extent to which the goal was 
        achieved, based on such data; and
            ``(E) if a performance goal has not been met--
                ``(i) why the goal was not met, and
                ``(ii) actions to be taken in response to such 
            performance, including adjustments in performance goals or 
            program activities for subsequent years.
        ``(4) Program evaluations.--A summary of the findings of 
    evaluations under section 2103 completed during the fiscal year 
    covered by the report.
        ``(5) Fraud and abuse and quality control activities.--A 
    general description of the State's activities under part D to 
    detect and deter fraud and abuse and to assure quality of services 
    provided under the program.
        ``(6) Plan administration.--
            ``(A) A description of the administrative roles and 
        responsibilities of entities in the State responsible for 
        administration of this title.
            ``(B) Organizational charts for each entity in the State 
        primarily responsible for activities under this title.
            ``(C) A brief description of each interstate compact (if 
        any) the State has entered into with other States with respect 
        to activities under this title.
            ``(D) General citations to the State statutes and 
        administrative rules governing the State's activities under 
        this title.
    ``(c) Description of Categories.--In this section:
        ``(1) General categories of eligible individuals.--Each of the 
    following is a general category of eligible individuals:
            ``(A) Pregnant women.
            ``(B) Children.
            ``(C) Blind or disabled adults who are not elderly 
        individuals.
            ``(D) Elderly individuals.
            ``(E) Other adults.
        ``(2) Categories of health care items and services.--The health 
    care items and services described in each paragraph of section 
    2171(a) shall be considered a separate category of health care 
    items and services.

``SEC. 2103. PERIODIC, INDEPENDENT EVALUATIONS.

    ``(a) In General.--During fiscal year 1998 and every third fiscal 
year thereafter, each State shall provide for an evaluation of the 
operation of its MediGrant plan under this title.
    ``(b) Independent.--Each such evaluation with respect to an 
activity under the MediGrant plan shall be conducted by an entity that 
is neither responsible under State law for the submission of the State 
MediGrant plan (or part thereof) nor responsible for administering (or 
supervising the administration of) the activity. If consistent with the 
previous sentence, such an entity may be a college or university, a 
State agency, a legislative branch agency in a State, or an independent 
contractor.
    ``(c) Research Design.--Each such evaluation shall be conducted in 
accordance with a research design that is based on generally accepted 
models of survey design and sampling and statistical analysis.

``SEC. 2104. DESCRIPTION OF PROCESS FOR MEDIGRANT PLAN DEVELOPMENT.

    ``Each MediGrant plan shall include a description of the process 
under which the plan shall be developed and implemented in the State 
(consistent with section 2105).

``SEC. 2105. CONSULTATION IN MEDIGRANT PLAN DEVELOPMENT.

    ``(a) Public Notice Process.--Before submitting a MediGrant plan or 
a plan amendment described in subsection (c) to the Secretary under 
part E, a State shall provide--
        ``(1) public notice respecting the submittal of the proposed 
    plan or amendment, including a general description of the plan or 
    amendment,
        ``(2) a means for the public to inspect or obtain a copy (at 
    reasonable charge) of the proposed plan or amendment,
        ``(3) an opportunity for submittal and consideration of public 
    comments on the proposed plan or amendment, and
        ``(4) for consultation with one or more advisory committees 
    established and maintained by the State.
The previous sentence shall not apply to a revision of a MediGrant plan 
(or revision of an amendment to a plan) made by a State under section 
2154(c)(1) or to a plan amendment withdrawal described in section 
2154(c)(4).
    ``(b) Contents of Notice.--A notice under subsection (a)(1) for a 
proposed plan or amendment shall include a description of--
        ``(1) the general purpose of the proposed plan or amendment 
    (including applicable effective dates),
        ``(2) where the public may inspect the proposed plan or 
    amendment,
        ``(3) how the public may obtain a copy of the proposed plan or 
    amendment and the applicable charge (if any) for the copy, and
        ``(4) how the public may submit comments on the proposed plan 
    or amendment, including any deadlines applicable to consideration 
    of such comments.
    ``(c) Amendments Described.--An amendment to a MediGrant plan 
described in this subsection is an amendment which makes a material and 
substantial change in eligibility under the MediGrant plan or the 
benefits provided under the plan.
    ``(d) Publication.--Notices under this section may be published (as 
selected by the State) in one or more daily newspapers of general 
circulation in the State or in any publication used by the State to 
publish State statutes or rules.
    ``(e) Comparable Process.--A separate notice, or notices, shall not 
be required under this section for a State if notice of the MediGrant 
plan or an amendment to the plan will be provided under a process 
specified in State law that is substantially equivalent to the notice 
process specified in this section.

            ``Part B--Eligibility, Benefits, and Set-Asides

``SEC. 2111. ELIGIBILITY AND BENEFITS.

    ``(a) Description of General Eligibility and Benefits.--Each 
MediGrant plan shall include a description (consistent with this title) 
of the following:
        ``(1) General eligibility standards.--The general eligibility 
    standards of the plan for eligible low-income individuals 
    (including individuals described in subsection (b)), including--
            ``(A) any limitations as to the duration of eligibility,
            ``(B) any eligibility standards relating to age, income and 
        resources (including any standards relating to spenddowns and 
        disposition of resources), residency, disability status, 
        immigration status, or employment status of individuals,
            ``(C) methods of establishing and continuing eligibility 
        and enrollment, including the methodology for computing family 
        income,
            ``(D) the eligibility standards in the plan that protect 
        the income and resources of a married individual who is living 
        in the community and whose spouse is residing in an institution 
        in order to prevent the impoverishment of the community spouse, 
        and
            ``(E) any other standards relating to eligibility for 
        medical assistance under the plan.
        ``(2) Scope of assistance.--The amount, duration, and scope of 
    health care services and items covered under the plan, including 
    differences among different eligible population groups.
        ``(3) Delivery method.--The State's approach to delivery of 
    medical assistance, including a general description of--
            ``(A) the use (or intended use) of vouchers, fee-for-
        service, or managed care arrangements (such as capitated health 
        care plans, case management, and case coordination); and
            ``(B) utilization control systems.
        ``(4) Fee-for-service benefits.--To the extent that medical 
    assistance is furnished on a fee-for-service basis--
            ``(A) how the State determines the qualifications of health 
        care providers eligible to provide such assistance; and
            ``(B) how the State determines rates of reimbursement for 
        providing such assistance.
        ``(5) Cost-sharing.--Beneficiary cost-sharing (if any), 
    including variations in such cost-sharing by population group or 
    type of service and financial responsibilities of parents of 
    recipients who are children and the spouses of recipients.
        ``(6) Utilization incentives.--Incentives or requirements (if 
    any) to encourage the appropriate utilization of services.
        ``(7) Support for certain hospitals.--
            ``(A) In general.--With respect to hospitals described in 
        subparagraph (B) located in the State, a description of the 
        extent to which provisions are made for expenditures for items 
        and services furnished by such hospitals and covered under the 
        MediGrant plan.
            ``(B) Hospitals described.--A hospital described in this 
        subparagraph is a short-term acute care general hospital or a 
        children's hospital, the low-income utilization rate of which 
        exceeds the lesser of--
                ``(i) 1 standard deviation above the mean low-income 
            utilization rate for hospitals receiving payments under a 
            MediGrant plan in the State in which such hospital is 
            located, or
                ``(ii) 1\1/4\ standard deviations above the mean low-
            income utilization rate for hospitals receiving such 
            payments in the 50 States and the District of Columbia.
            ``(C) Low-income utilization rate.--For purposes of 
        subparagraph (B), the term `low-income utilization rate' means, 
        for a hospital, a fraction (expressed as a percentage), the 
        numerator of which is the hospital's number of patient days 
        attributable to patients who (for such days) were eligible for 
        medical assistance under a MediGrant plan or were uninsured in 
        a period, and the denominator of which is the total number of 
        the hospital's patient days in that period.
            ``(D) Patient days.--For purposes of subparagraph (C), the 
        term `patient day' includes each day in which--
                ``(i) an individual, including a newborn, is an 
            inpatient in the hospital, whether or not the individual is 
            in a specialized ward and whether or not the individual 
            remains in the hospital for lack of suitable placement 
            elsewhere; or
                ``(ii) an individual makes one or more outpatient 
            visits to the hospital.
    ``(b) Mandatory Coverage.--Each MediGrant plan shall provide for 
making medical assistance available (subject to the eligibility 
standards described under the plan pursuant to subsection (a)(1) and 
State flexibility of benefits under section 2116) to--
        ``(1) any pregnant woman or child under the age of 13 whose 
    family income does not exceed the poverty line applicable to a 
    family of the size involved, and
        ``(2) any individual who is disabled, as defined by the State.
    ``(c) Immunizations for Children.--The MediGrant plan shall provide 
medical assistance for immunizations for children eligible for any 
medical assistance under the MediGrant plan, in accordance with a 
schedule for immunizations established by the Health Department of the 
State in consultation with the individuals and entities in the State 
responsible for the administration of the plan.
    ``(d) Family Planning Services.--The MediGrant plan shall provide 
prepregnancy planning services and supplies as specified by the State.
    ``(e) Preexisting Condition Exclusions.--Notwithstanding any other 
provision of this title--
        ``(1) a MediGrant plan may not deny or exclude coverage of any 
    item or service for an eligible individual for benefits under the 
    MediGrant plan for such item or service on the basis of a 
    preexisting condition; and
        ``(2) if a State contracts or makes other arrangements (through 
    the eligible individual or through another entity) with a capitated 
    health care organization, insurer, or other entity, for the 
    provision of items or services to eligible individuals under the 
    MediGrant plan and the State permits such organization, insurer, or 
    other entity to exclude coverage of a covered item or service on 
    the basis of a preexisting condition, the State shall provide, 
    through its MediGrant plan, for such coverage (through direct 
    payment or otherwise) for any such covered item or service denied 
    or excluded on the basis of a preexisting condition.
    ``(f) Family Responsibility.--A MediGrant plan may not require an 
adult child with a family income below the State median income (as 
determined by the State) applicable to a family of the size involved to 
contribute to the cost of covered nursing facility services and other 
long-term care services for the child's parent under the plan.
    ``(g) Solvency Standards for Capitated Health Care Organizations.--
        ``(1) In general.--A State may not contract with a capitated 
    health care organization, as defined in section 2114(c)(1), for the 
    provision of medical assistance under a MediGrant plan under which 
    the organization is--
            ``(A) at full financial risk, as defined by the State, 
        unless the organization meets solvency standards established by 
        the State for private health maintenance organizations, or
            ``(B) is not at such risk, unless the organization meets 
        solvency standards that are established under the MediGrant 
        plan.
        ``(2) Treatment of public entities.--Paragraph (1) shall not 
    apply to an organization that is a public entity or if the solvency 
    of such organization is guaranteed by the State.
        ``(3) Transition.--In the case of a capitated health care 
    organization that as of the date of the enactment of this title has 
    entered into a contract with a State for the provision of medical 
    assistance under title XIX under which the organization assumes 
    full financial risk and is receiving capitation payments, paragraph 
    (1) shall not apply to such organization until 3 years after the 
    date of the enactment of this title.

``SEC. 2112. SET-ASIDES OF FUNDS.

    ``(a) For Targeted Low-Income Families.--
        ``(1) In general.--Subject to subsection (f), a MediGrant plan 
    shall provide that the amount of funds expended under the plan for 
    medical assistance for targeted low-income families (as defined in 
    paragraph (3)) for a fiscal year shall be not less than the minimum 
    low-income-family percentage specified in paragraph (2) of the 
    total funds expended under the plan for all medical assistance for 
    the fiscal year.
        ``(2) Minimum low-income-family percentage.--The minimum low-
    income-family percentage specified in this paragraph for a State is 
    equal to 85 percent of the average percentage of the expenditures 
    under title XIX for medical assistance in the State during Federal 
    fiscal years 1992 through 1994 which were attributable to 
    expenditures for medical assistance for mandated benefits (as 
    defined in subsection (h)) furnished to individuals--
            ``(A) who (at the time of furnishing the assistance) were 
        under 65 years of age;
            ``(B) whose coverage (at such time) under a State plan 
        under title XIX was required under Federal law; and
            ``(C) whose eligibility for such coverage (at such time) 
        was not on a basis directly related to disability status, 
        including being blind.
        ``(3) Targeted low-income family defined.--In this subsection, 
    the term `targeted low-income family' means a family (which may be 
    an individual)--
            ``(A) which includes a child or a pregnant woman; and
            ``(B) the income of which does not exceed 185 percent of 
        the poverty line applicable to a family of the size involved.
    ``(b) For Low-Income Elderly.--
        ``(1) Set-asides.--Subject to subsection (f)--
            ``(A) General set-aside.--A MediGrant plan shall provide 
        that the amount of funds expended under the plan for medical 
        assistance for eligible low-income elderly individuals for a 
        fiscal year shall be not less than the minimum low-income-
        elderly percentage specified in paragraph (2)(A) of the total 
        funds expended under the plan for all medical assistance for 
        the fiscal year.
            ``(B) Set-aside for medicare premium assistance.--A 
        MediGrant plan shall provide that the amount of funds expended 
        under the plan for medical assistance for medicare cost-sharing 
        described in section 2171(c)(1) for a fiscal year shall be not 
        less than the minimum medicare premium assistance percentage 
        specified in paragraph (2)(B) of the total funds expended under 
        the plan for all medical assistance for the fiscal year. The 
        MediGrant plan shall provide priority for making such 
        assistance available for targeted low-income elderly 
        individuals (as defined in paragraph (3)).
        ``(2) Minimum percentages.--
            ``(A) For general set-aside.--The minimum low-income-
        elderly percentage specified in this subparagraph for a State 
        is equal to 85 percent of the average percentage of the 
        expenditures under title XIX for medical assistance in the 
        State during Federal fiscal years 1992 through 1994 which was 
        attributable to expenditures for medical assistance for 
        mandated benefits furnished to individuals--
                ``(i) whose eligibility for such assistance was based 
            on their being 65 years of age or older; and
                ``(ii)(I) whose coverage (at such time) under a State 
            plan under title XIX was required under Federal law, or 
            (II) who (at such time) were residents of a nursing 
            facility.
            ``(B) For set-aside for medicare premium assistance.--The 
        minimum medicare premium assistance percentage specified in 
        this subparagraph for a State is equal to 90 percent of the 
        average percentage of the expenditures under title XIX for 
        medical assistance in the State during Federal fiscal years 
        1993 through 1995 which was attributable to expenditures for 
        medical assistance for medicare premiums described in section 
        1905(p)(3)(A) for individuals whose coverage (at such time) for 
        such assistance for such premiums under a State plan under 
        title XIX was required under Federal law.
        ``(3) Targeted low-income elderly individual defined.--In this 
    subsection, the term `targeted low-income elderly individual' means 
    an elderly individual whose family income does not exceed 100 
    percent of the poverty line applicable to a family of the size 
    involved.
    ``(c) For Low-Income Disabled Persons.--
        ``(1) In general.--Subject to subsection (f), a MediGrant plan 
    shall provide that the percentage of funds expended under the plan 
    for medical assistance for eligible low-income individuals who are 
    not elderly individuals and who are eligible for such assistance on 
    the basis of a disability, including being blind, for a fiscal year 
    is not less than the minimum low-income-disabled percentage 
    specified in paragraph (2) of the total funds expended under the 
    plan for medical assistance for the fiscal year.
        ``(2) Minimum low-income-disabled percentage.--The minimum low-
    income-disabled percentage specified in this paragraph for a State 
    is equal to 85 percent of the average percentage of the 
    expenditures under title XIX for medical assistance in the State 
    during Federal fiscal years 1992 through 1994 which was 
    attributable to expenditures for medical assistance for mandated 
    benefits furnished to individuals--
            ``(A) whose coverage (at such time) under a State plan 
        under title XIX was required under Federal law; and
            ``(B) whose coverage (at such time) was on a basis directly 
        related to disability status, including being blind.
    ``(d) For Services Provided at Federally-Qualified Health Centers 
and Rural Health Clinics.--Subject to subsection (f), a MediGrant plan 
shall provide that the amount of funds expended under the plan for 
medical assistance for services provided at rural health clinics (as 
defined in section 1861(aa)(2)) and Federally-qualified health centers 
(as defined in section 1861(aa)(4)), for eligible low-income 
individuals for a fiscal year is not less than 85 percent of the 
average annual expenditures under title XIX for medical assistance in 
the State during Federal fiscal years 1992 through 1994 which were 
attributable to expenditures for medical assistance for rural health 
clinic services and Federally-qualified health center services (as 
defined in section 1905(l)).
    ``(e) Use of Residual Funds.--
        ``(1) In general.--Subject to limitations on payment under 
    section 2123, any funds not required to be expended under the set-
    asides under the previous subsections may be expended under the 
    MediGrant plan for any of the following:
            ``(A) Additional medical assistance.--Medical assistance 
        for eligible low-income individuals (as defined in section 
        2171(b)), in addition to any medical assistance made available 
        under a previous subsection.
            ``(B) Medically-related services.--Payment for medically-
        related services (as defined in paragraph (2)).
            ``(C) Administration.--Payment for the administration of 
        the MediGrant plan.
        ``(2) Medically-related services defined.--In this title, the 
    term `medically-related services' means services reasonably related 
    to, or in direct support of, the State's attainment of one or more 
    of the strategic objectives and performance goals established under 
    section 2101, but does not include items and services included on 
    the list under section 2171(a) (relating to the definition of 
    medical assistance).
    ``(f) Exceptions to Minimum Set-Asides.--
        ``(1) Alternative minimum set-asides.--
            ``(A) In general.--A State may provide in its MediGrant 
        plan (through an amendment to the plan) for a lower percentage 
        of expenditures than the minimum percentages specified in any 
        (or all) of paragraphs (2) of subsections (a), (b), (c), and 
        (d) if the State determines (and certifies to the Secretary) 
        that--
                ``(i) the health care needs of the low-income 
            populations described in paragraph (1) of the subsections 
            (a), (b), (c), or (d) who are eligible for medical 
            assistance under the plan during the previous fiscal year 
            (or medicare premium assistance needs described in 
            subsection (b)(1)(B)) can be reasonably met without the 
            expenditure of the percentages otherwise required to be 
            expended,
                ``(ii) the performance goals established under section 
            2101 relating to the respective population can reasonably 
            be met with the expenditure of such lower percentage of 
            funds, and
                ``(iii) in the case of subsection (d) with respect to 
            rural health clinic services and Federally-qualified health 
            center services, the health care needs of eligible low-
            income individuals residing in medically underserved rural 
            areas can reasonably be met without the level of 
            expenditure for such services otherwise required and the 
            performance goals established under section 2101 relating 
            to such individuals can reasonably be met with such lower 
            level of expenditures.
            ``(B) Period of application.--The determination and 
        certification under subparagraph (A) shall be made for such 
        period as a State may request, but may not be made for a period 
        of more than 3 consecutive Federal fiscal years (beginning with 
        the first fiscal year for which the lower percentage is 
        sought). A new determination and certification must be made 
        under such clause for any subsequent period.
            ``(C) No exception permitted before fiscal year 1998.--This 
        paragraph may not apply with respect to the percentages 
        described in paragraphs (2) of subsections (a), (b), and (c) 
        for a fiscal year before fiscal year 1998.
        ``(2) Independent certification of compliance with goals.--
            ``(A) In general.--For purposes of section 2151(c), a 
        MediGrant plan shall not be considered to be in substantial 
        violation of the requirements of this section if the amount of 
        actual State expenditures specified in any (or all) of 
        paragraphs (1) of subsections (a), (b), (c), and (d) is lower 
        than the minimum percentages specified in any (or all) of 
        paragraphs (2) of such subsections if an independent actuary 
        determines and certifies to the State that the MediGrant plan 
        is reasonably designed to result in a level of expenditures 
        which is consistent with the requirements of such subsections.
            ``(B) Limit on variation.--Subparagraph (A) shall not apply 
        in the case of a MediGrant plan for which the actual State 
        expenditures described in any (or all) of paragraphs (1) of 
        subsections (a), (b), (c), and (d) are less than 95 percent of 
        the expenditures which would be made if the amount of State 
        expenditures specified in any (or all) of such paragraphs was 
        equal to the applicable minimum percentage specified in any (or 
        all) of paragraphs (2) of such subsections.
    ``(g) Computations.--States shall calculate the minimum percentages 
under paragraphs (2) of subsections (a), (b), (c), and (d) in a 
reasonable manner consistent with reports submitted to the Secretary 
for the fiscal years involved and medical assistance attributable to 
the exception provided under section 1903(v)(2) shall not be considered 
to be expenditures for medical assistance.
    ``(h) Benefits Included for Purposes of Computing Set-Asides.--In 
this section, the term `mandated benefits'--
        ``(1) means medical assistance for items and services described 
    in section 1905(a) to the extent such assistance with respect to 
    such items and services was required to be provided under title 
    XIX,
        ``(2) includes medical assistance for medicare cost-sharing 
    only to the extent such assistance was required to be provided 
    under section 1902(a)(10)(E), and
        ``(3) does not include medical assistance attributable to 
    disproportionate share payment adjustments described in section 
    1923.

``SEC. 2113. PREMIUMS AND COST-SHARING.

    ``(a) In General.--Subject to subsection (b), if any charges are 
imposed under the MediGrant plan for cost-sharing (as defined in 
subsection (d)), such cost-sharing shall be pursuant to a public cost-
sharing schedule.
    ``(b) Limitation on Premium and Certain Cost-Sharing for Low-Income 
Families Including Children or Pregnant Women.--
        ``(1) In general.--In the case of a pregnant woman or a child 
    who is a member of a family described in paragraph (2)--
            ``(A) the plan shall not impose any premium, and
            ``(B) the plan shall not (except as provided in subsection 
        (c)(1)) impose any cost-sharing with respect to primary and 
        preventive care services (as defined by the State) covered 
        under the MediGrant plan for children or pregnant women unless 
        such cost-sharing is nominal in nature.
        ``(2) Family described.--A family described in this paragraph 
    is a family (which may be an individual) which--
            ``(A) includes a child or a pregnant woman,
            ``(B) is made eligible for medical assistance under the 
        MediGrant plan, and
            ``(C) the income of which does not exceed 100 percent of 
        the poverty line applicable to a family of the size involved.
    ``(c) Certain Cost-Sharing Permitted.--Nothing in this section 
shall be construed as preventing a MediGrant plan (consistent with 
subsection (b))--
        ``(1) from imposing cost-sharing to discourage the 
    inappropriate use of emergency medical services delivered through a 
    hospital emergency room, a medical transportation provider, or 
    otherwise,
        ``(2) from imposing premiums and cost-sharing differentially in 
    order to encourage the use of primary and preventive care and 
    discourage unnecessary or less economical care,
        ``(3) from scaling cost-sharing in a manner that reflects 
    economic factors, employment status, and family size,
        ``(4) from scaling cost-sharing based on the availability to 
    the individual or family of other health insurance coverage, or
        ``(5) from scaling cost-sharing based on participation in 
    employment training programs, drug or alcohol abuse treatment, 
    counseling programs, or other programs promoting personal 
    responsibility.
    ``(d) Cost-Sharing Defined.--In this section, the term `cost-
sharing' includes copayments, deductibles, coinsurance, and other 
charges for the provision of health care services.

``SEC. 2114. DESCRIPTION OF PROCESS FOR DEVELOPING CAPITATION PAYMENT 
              RATES.

    ``(a) In General.--If a State contracts (or intends to contract) 
with a capitated health care organization (as defined in subsection 
(c)(1)) under which the State makes a capitation payment (as defined in 
subsection (c)(2)) to the organization for providing or arranging for 
the provision of medical assistance under the MediGrant plan for a 
group of services, including at least inpatient hospital services and 
physicians' services, the plan shall include a description of the 
following:
        ``(1) Use of actuarial science.--The extent and manner in which 
    the State uses actuarial science--
            ``(A) to analyze and project health care expenditures and 
        utilization for individuals enrolled (or to be enrolled) in 
        such an organization under the MediGrant plan, and
            ``(B) to develop capitation payment rates, including a 
        brief description of the general methodologies used by 
        actuaries.
        ``(2) Qualifications of organizations.--The general 
    qualifications, including any accreditation, State licensure or 
    certification, or provider network standards, required by the State 
    for participation of capitated health care organizations under the 
    MediGrant plan.
        ``(3) Dissemination process.--The process used by the State 
    under subsection (b) and otherwise to disseminate, before entering 
    into contracts with capitated health care organizations, actuarial 
    information to such organizations on the historical fee-for-service 
    costs (or, if not available, other recent financial data associated 
    with providing covered services) and utilization associated with 
    individuals described in paragraph (1)(A).
    ``(b) Public Notice and Comment.--Under the MediGrant plan the 
State shall provide a process for providing, before the beginning of 
each contract year--
        ``(1) public notice of--
            ``(A) the amounts of the capitation payments (if any) made 
        under the plan for the contract year preceding the public 
        notice, and
            ``(B)(i) the information described under subsection (a)(1) 
        with respect to capitation payments for the contract year 
        involved, or (ii) amounts of the capitation payments the State 
        expects to make for the contract year involved,
    unless such information is designated as proprietary and not 
    subject to public disclosure under State law, and
        ``(2) an opportunity for receiving public comment on the 
    amounts and information for which notice is provided under 
    paragraph (1).
    ``(c) Definitions.--In this title:
        ``(1) Capitated health care organization.--The term `capitated 
    health care organization' means a health maintenance organization 
    or any other entity (including a health insuring organization, 
    managed care organization, prepaid health plan, integrated service 
    network, or similar entity) which under State law is permitted to 
    accept capitation payments for providing (or arranging for the 
    provision of) a group of items and services including at least 
    inpatient hospital services and physicians' services.
        ``(2) Capitation payment.--The term `capitation payment' means, 
    with respect to payment, payment on a prepaid capitation basis or 
    any other risk basis to an entity for the entity's provision (or 
    arranging for the provision) of a group of items and services, 
    including at least inpatient hospital services and physicians' 
    services.

``SEC. 2115. PREVENTING SPOUSAL IMPOVERISHMENT.

    ``(a) Special Treatment for Institutionalized Spouses.--
        ``(1) Supersedes other provisions.--In determining the 
    eligibility for medical assistance of an institutionalized spouse 
    (as defined in subsection (h)(1)), the provisions of this section 
    supersede any other provision of this title which is inconsistent 
    with them.
        ``(2) Does not affect certain determinations.--Except as this 
    section specifically provides, this section does not apply to--
            ``(A) the determination of what constitutes income or 
        resources, or
            ``(B) the methodology and standards for determining and 
        evaluating income and resources.
        ``(3) No application in commonwealths and territories.--This 
    section shall only apply to a State that is one of the 50 States or 
    the District of Columbia.
    ``(b) Rules for Treatment of Income.--
        ``(1) Separate treatment of income.--During any month in which 
    an institutionalized spouse is in the institution, except as 
    provided in paragraph (2), no income of the community spouse shall 
    be deemed available to the institutionalized spouse.
        ``(2) Attribution of income.--In determining the income of an 
    institutionalized spouse or community spouse for purposes of the 
    post-eligibility income determination described in subsection (d), 
    except as otherwise provided in this section and regardless of any 
    State laws relating to community property or the division of 
    marital property, the following rules apply:
            ``(A) Non-trust property.--Subject to subparagraphs (C) and 
        (D), in the case of income not from a trust, unless the 
        instrument providing the income otherwise specifically 
        provides--
                ``(i) if payment of income is made solely in the name 
            of the institutionalized spouse or the community spouse, 
            the income shall be considered available only to that 
            respective spouse,
                ``(ii) if payment of income is made in the names of the 
            institutionalized spouse and the community spouse, \1/2\ of 
            the income shall be considered available to each of them, 
            and
                ``(iii) if payment of income is made in the names of 
            the institutionalized spouse or the community spouse, or 
            both, and to another person or persons, the income shall be 
            considered available to each spouse in proportion to the 
            spouse's interest (or, if payment is made with respect to 
            both spouses and no such interest is specified, \1/2\ of 
            the joint interest shall be considered available to each 
            spouse).
            ``(B) Trust property.--In the case of a trust--
                ``(i) except as provided in clause (ii), income shall 
            be attributed in accordance with the provisions of this 
            title; and
                ``(ii) income shall be considered available to each 
            spouse as provided in the trust, or, in the absence of a 
            specific provision in the trust--

                    ``(I) if payment of income is made solely to the 
                institutionalized spouse or the community spouse, the 
                income shall be considered available only to that 
                respective spouse,
                    ``(II) if payment of income is made to both the 
                institutionalized spouse and the community spouse, \1/
                2\ of the income shall be considered available to each 
                of them, and
                    ``(III) if payment of income is made to the 
                institutionalized spouse or the community spouse, or 
                both, and to another person or persons, the income 
                shall be considered available to each spouse in 
                proportion to the spouse's interest (or, if payment is 
                made with respect to both spouses and no such interest 
                is specified, \1/2\ of the joint interest shall be 
                considered available to each spouse).

            ``(C) Property with no instrument.--In the case of income 
        not from a trust in which there is no instrument establishing 
        ownership, subject to subparagraph (D), \1/2\ of the income 
        shall be considered to be available to the institutionalized 
        spouse and \1/2\ to the community spouse.
            ``(D) Rebutting ownership.--The rules of subparagraphs (A) 
        and (C) are superseded to the extent that an institutionalized 
        spouse can establish, by a preponderance of the evidence, that 
        the ownership interests in income are other than as provided 
        under such subparagraphs.
    ``(c) Rules for Treatment of Resources.--
        ``(1) Computation of spousal share at time of 
    institutionalization.--
            ``(A) Total joint resources.--There shall be computed (as 
        of the beginning of the first continuous period of 
        institutionalization of the institutionalized spouse)--
                ``(i) the total value of the resources to the extent 
            either the institutionalized spouse or the community spouse 
            has an ownership interest, and
                ``(ii) a spousal share which is equal to \1/2\ of such 
            total value.
            ``(B) Assessment.--At the request of an institutionalized 
        spouse or community spouse, at the beginning of the first 
        continuous period of institutionalization of the 
        institutionalized spouse and upon the receipt of relevant 
        documentation of resources, the State shall promptly assess and 
        document the total value described in subparagraph (A)(i) and 
        shall provide a copy of such assessment and documentation to 
        each spouse and shall retain a copy of the assessment for use 
        under this section. If the request is not part of an 
        application for medical assistance under this title, the State 
        may, at its option as a condition of providing the assessment, 
        require payment of a fee not exceeding the reasonable expenses 
        of providing and documenting the assessment. At the time of 
        providing the copy of the assessment, the State shall include a 
        notice indicating that the spouse will have a right to a fair 
        hearing under subsection (e)(2).
        ``(2) Attribution of resources at time of initial eligibility 
    determination.--In determining the resources of an 
    institutionalized spouse at the time of application for medical 
    assistance under this title, regardless of any State laws relating 
    to community property or the division of marital property--
            ``(A) except as provided in subparagraph (B), all the 
        resources held by either the institutionalized spouse, 
        community spouse, or both, shall be considered to be available 
        to the institutionalized spouse, and
            ``(B) resources shall be considered to be available to an 
        institutionalized spouse, but only to the extent that the 
        amount of such resources exceeds the amount computed under 
        subsection (f)(2)(A) (as of the time of application for medical 
        assistance).
        ``(3) Assignment of support rights.--The institutionalized 
    spouse shall not be ineligible by reason of resources determined 
    under paragraph (2) to be available for the cost of care where--
            ``(A) the institutionalized spouse has assigned to the 
        State any rights to support from the community spouse,
            ``(B) the institutionalized spouse lacks the ability to 
        execute an assignment due to physical or mental impairment but 
        the State has the right to bring a support proceeding against a 
        community spouse without such assignment, or
            ``(C) the State determines that denial of eligibility would 
        work an undue hardship.
        ``(4) Separate treatment of resources after eligibility for 
    medical assistance established.--During the continuous period in 
    which an institutionalized spouse is in an institution and after 
    the month in which an institutionalized spouse is determined to be 
    eligible for medical assistance under this title, no resources of 
    the community spouse shall be deemed available to the 
    institutionalized spouse.
        ``(5) Resources defined.--In this section, the term `resources' 
    does not include--
            ``(A) resources excluded under subsection (a) or (d) of 
        section 1613, and
            ``(B) resources that would be excluded under section 
        1613(a)(2)(A) but for the limitation on total value described 
        in such section.
    ``(d) Protecting Income for Community Spouse.--
        ``(1) Allowances to be offset from income of institutionalized 
    spouse.--After an institutionalized spouse is determined or 
    redetermined to be eligible for medical assistance, in determining 
    the amount of the spouse's income that is to be applied monthly to 
    payment for the costs of care in the institution, there shall be 
    deducted from the spouse's monthly income the following amounts in 
    the following order:
            ``(A) A personal needs allowance (described in paragraph 
        (2)(A)), in an amount not less than the amount specified in 
        paragraph (2)(C).
            ``(B) A community spouse monthly income allowance (as 
        defined in paragraph (3)), but only to the extent income of the 
        institutionalized spouse is made available to (or for the 
        benefit of) the community spouse.
            ``(C) A family allowance, for each family member, equal to 
        at least \1/3\ of the amount by which the amount described in 
        paragraph (4)(A)(i) exceeds the amount of the monthly income of 
        that family member.
            ``(D) Amounts for incurred expenses for medical or remedial 
        care for the institutionalized spouse as provided under 
        paragraph (6).
    In subparagraph (C), the term `family member' only includes minor 
    or dependent children, dependent parents, or dependent siblings of 
    the institutionalized or community spouse who are residing with the 
    community spouse.
        ``(2) Personal needs allowance.--
            ``(A) In general.--The MediGrant plan must provide that, in 
        the case of an institutionalized individual or couple described 
        in subparagraph (B), in determining the amount of the 
        individual's or couple's income to be applied monthly to 
        payment for the cost of care in an institution, there shall be 
        deducted from the monthly income (in addition to other 
        allowances otherwise provided under the plan) a monthly 
        personal needs allowance--
                ``(i) which is reasonable in amount for clothing and 
            other personal needs of the individual (or couple) while in 
            an institution, and
                ``(ii) which is not less (and may be greater) than the 
            minimum monthly personal needs allowance described in 
            subparagraph (C).
            ``(B) Institutionalized individual or couple defined.--In 
        this paragraph, the term `institutionalized individual or 
        couple' means an individual or married couple--
                ``(i) who is an inpatient (or who are inpatients) in a 
            medical institution or nursing facility for which payments 
            are made under this title throughout a month, and
                ``(ii) who is or are determined to be eligible for 
            medical assistance under the State MediGrant plan.
            ``(C) Minimum allowance.--The minimum monthly personal 
        needs allowance described in this subparagraph is $40 for an 
        institutionalized individual and $80 for an institutionalized 
        couple (if both are aged, blind, or disabled, and their incomes 
        are considered available to each other in determining 
        eligibility).
        ``(3) Community spouse monthly income allowance defined.--
            ``(A) In general.--In this section (except as provided in 
        subparagraph (B)), the community spouse monthly income 
        allowance for a community spouse is an amount by which--
                ``(i) except as provided in subsection (e), the minimum 
            monthly maintenance needs allowance (established under and 
            in accordance with paragraph (4)) for the spouse, exceeds
                ``(ii) the amount of monthly income otherwise available 
            to the community spouse (determined without regard to such 
            an allowance).
            ``(B) Court ordered support.--If a court has entered an 
        order against an institutionalized spouse for monthly income 
        for the support of the community spouse, the community spouse 
        monthly income allowance for the spouse shall be not less than 
        the amount of the monthly income so ordered.
        ``(4) Establishment of minimum monthly maintenance needs 
    allowance.--
            ``(A) In general.--Each State shall establish a minimum 
        monthly maintenance needs allowance for each community spouse 
        which, subject to subparagraph (B), is equal to or exceeds--
                ``(i) 150 percent of \1/12\ of the poverty line 
            applicable to a family unit of 2 members, plus
                ``(ii) an excess shelter allowance (as defined in 
            paragraph (4)).
        A revision of the poverty line referred to in clause (i) shall 
        apply to medical assistance furnished during and after the 
        second calendar quarter that begins after the date of 
        publication of the revision.
            ``(B) Cap on minimum monthly maintenance needs allowance.--
        The minimum monthly maintenance needs allowance established 
        under subparagraph (A) may not exceed $1,500 (subject to 
        adjustment under subsections (e) and (g)).
        ``(5) Excess shelter allowance defined.--In paragraph 
    (4)(A)(ii), the term `excess shelter allowance' means, for a 
    community spouse, the amount by which the sum of--
            ``(A) the spouse's expenses for rent or mortgage payment 
        (including principal and interest), taxes and insurance and, in 
        the case of a condominium or cooperative, required maintenance 
        charge, for the community spouse's principal residence, and
            ``(B) the standard utility allowance (used by the State 
        under section 5(e) of the Food Stamp Act of 1977) or, if the 
        State does not use such an allowance, the spouse's actual 
        utility expenses,
    exceeds 30 percent of the amount described in paragraph (4)(A)(i), 
    except that, in the case of a condominium or cooperative, for which 
    a maintenance charge is included under subparagraph (A), any 
    allowance under subparagraph (B) shall be reduced to the extent the 
    maintenance charge includes utility expenses.
        ``(6) Treatment of incurred expenses.--With respect to the 
    post-eligibility treatment of income under this section, there 
    shall be disregarded reparation payments made by the Federal 
    Republic of Germany and, there shall be taken into account amounts 
    for incurred expenses for medical or remedial care that are not 
    subject to payment by a third party, including--
            ``(A) medicare and other health insurance premiums, 
        deductibles, or coinsurance, and
            ``(B) necessary medical or remedial care recognized under 
        State law but not covered under the State MediGrant plan under 
        this title, subject to reasonable limits the State may 
        establish on the amount of these expenses.
    ``(e) Notice and Hearing.--
        ``(1) Notice.--Upon--
            ``(A) a determination of eligibility for medical assistance 
        of an institutionalized spouse, or
            ``(B) a request by either the institutionalized spouse, or 
        the community spouse, or a representative acting on behalf of 
        either spouse,
    each State shall notify both spouses (in the case described in 
    subparagraph (A)) or the spouse making the request (in the case 
    described in subparagraph (B)) of the amount of the community 
    spouse monthly income allowance (described in subsection 
    (d)(1)(B)), of the amount of any family allowances (described in 
    subsection (d)(1)(C)), of the method for computing the amount of 
    the community spouse resources allowance permitted under subsection 
    (f), and of the spouse's right to a hearing under the MediGrant 
    plan respecting ownership or availability of income or resources, 
    and the determination of the community spouse monthly income or 
    resource allowance.
        ``(2) Results of hearing.--
            ``(A) Revision of minimum monthly maintenance needs 
        allowance.--If either such spouse establishes in a hearing 
        under this subsection that the community spouse needs income, 
        above the level otherwise provided by the minimum monthly 
        maintenance needs allowance, due to exceptional circumstances 
        resulting in significant financial duress, there shall be 
        substituted, for the minimum monthly maintenance needs 
        allowance in subsection (d)(2)(A), an amount adequate to 
        provide such additional income as is necessary.
            ``(B) Revision of community spouse resource allowance.--If 
        either such spouse establishes in such a hearing that the 
        community spouse resource allowance (in relation to the amount 
        of income generated by such an allowance) is inadequate to 
        raise the community spouse's income to the minimum monthly 
        maintenance needs allowance, there shall be substituted, for 
        the community spouse resource allowance under subsection 
        (f)(2), an amount adequate to provide such a minimum monthly 
        maintenance needs allowance.
    ``(f) Permitting Transfer of Resources to Community Spouse.--
        ``(1) In general.--An institutionalized spouse may, without 
    regard to any other provision of the MediGrant plan to the 
    contrary, transfer an amount equal to the community spouse resource 
    allowance (as defined in paragraph (2)), but only to the extent the 
    resources of the institutionalized spouse are transferred to, or 
    for the sole benefit of, the community spouse. The transfer under 
    the preceding sentence shall be made as soon as practicable after 
    the date of the initial determination of eligibility, taking into 
    account such time as may be necessary to obtain a court order under 
    paragraph (3).
        ``(2) Community spouse resource allowance defined.--In 
    paragraph (1), the `community spouse resource allowance' for a 
    community spouse is an amount (if any) by which--
            ``(A) the greatest of--
                ``(i) $12,000 (subject to adjustment under subsection 
            (g)), or, if greater (but not to exceed the amount 
            specified in clause (ii)(II)) an amount specified under the 
            State MediGrant plan,
                ``(ii) the lesser of (I) the spousal share computed 
            under subsection (c)(1), or (II) $60,000 (subject to 
            adjustment under subsection (g)), or
                ``(iii) the amount established under subsection (e)(2);
        exceeds
            ``(B) the amount of the resources otherwise available to 
        the community spouse (determined without regard to such an 
        allowance).
    ``(g) Indexing Dollar Amounts.--For services furnished during a 
calendar year after 1989, the dollar amounts specified in subsections 
(d)(3)(C), (f)(2)(A)(i), and (f)(2)(A)(ii)(II) shall be increased by 
the same percentage as the percentage increase in the consumer price 
index for all urban consumers (all items; U.S. city average) between 
September 1988 and the September before the calendar year involved.
    ``(h) Definitions.--In this section:
        ``(1) Institutionalized spouse.--The term `institutionalized 
    spouse' means an individual--
            ``(A)(i) who is in a medical institution or nursing 
        facility, or
            ``(ii) at the option of the State (I) who would be eligible 
        under the MediGrant plan under this title if such individual 
        was in a medical institution, (II) with respect to whom there 
        has been a determination that but for the provision of home or 
        community-based services such individual would require the 
        level of care provided in a hospital, nursing facility or 
        intermediate care facility for the mentally retarded the cost 
        of which could be reimbursed under the plan, and (III) who will 
        receive home or community-based services pursuant the plan; and
            ``(B) is married to a spouse who is not in a medical 
        institution or nursing facility;
    but does not include any such individual who is not likely to meet 
    the requirements of subparagraph (A) for at least 30 consecutive 
    days.
        ``(2) Community spouse.--The term `community spouse' means the 
    spouse of an institutionalized spouse.

``SEC. 2116. STATE FLEXIBILITY.

    ``(a) State Flexibility in Benefits, Provider Payments, 
Geographical Coverage Area, and Selection of Providers.--Nothing in 
this title (other than subsections (c) and (d) of section 2111) shall 
be construed as requiring a State--
        ``(1) to provide medical assistance for any particular items or 
    services,
        ``(2) to provide for any payments with respect to any specific 
    health care providers or any level of payments for any services,
        ``(3) to provide for the same medical assistance in all 
    geographical areas or political subdivisions of the State, so long 
    as medical assistance is made available in all such areas or 
    subdivisions,
        ``(4) to provide that the medical assistance made available to 
    any individual eligible for medical assistance must not be less in 
    amount, duration, or scope than the medical assistance made 
    available to any other such individual, or
        ``(5) to provide that any individual eligible for medical 
    assistance with respect to an item or service may choose to obtain 
    such assistance from any institution, agency, or person qualified 
    to provide the item or service.
    ``(b) State Flexibility With Respect to Managed Care.--Nothing in 
this title shall be construed--
        ``(1) to limit a State's ability to contract with, on a 
    capitated basis or otherwise, health care plans or individual 
    health care providers for the provision or arrangement of medical 
    assistance,
        ``(2) to limit a State's ability to contract with health care 
    plans or other entities for case management services or for 
    coordination of medical assistance, or
        ``(3) to restrict a State from establishing capitation rates on 
    the basis of competition among health care plans or negotiations 
    between the State and one or more health care plans.

                      ``Part C--Payments to States

``SEC. 2121. ALLOTMENT OF FUNDS AMONG STATES.

    ``(a) Allotments.--
        ``(1) Computation.--The Secretary shall provide for the 
    computation of State obligation and outlay allotments in accordance 
    with this section for each fiscal year beginning with fiscal year 
    1996.
        ``(2) Limitation on obligations.--
            ``(A) In general.--Subject to subparagraph (B), the 
        Secretary shall not enter into obligations with any State under 
        this title for a fiscal year in excess of the obligation 
        allotment for that State for the fiscal year under paragraph 
        (4). The sum of such obligation allotments for all States in 
        any fiscal year (excluding amounts carried over under 
        subparagraph (B) and excluding changes in allotments effected 
        under paragraph (4)(D)) shall not exceed the aggregate limit on 
        new obligation authority specified in paragraph (3) for that 
        fiscal year.
            ``(B) Adjustments.--
                ``(i) Carryover of allotment permitted.--If the amount 
            of obligations entered into under this part with a State 
            for quarters in a fiscal year is less than the amount of 
            the obligation allotment under this section to the State 
            for the fiscal year, the amount of the difference shall be 
            added to the amount of the State obligation allotment 
            otherwise provided under this section for the succeeding 
            fiscal year. This clause shall be applied separately with 
            respect to the portion of the obligation allotment that is 
            attributable to the supplemental outlay allotment under 
            subsection (f).
                ``(ii) Reduction for post-enactment new obligations 
            under title xix in fiscal year 1996.--The amount of the 
            obligation allotment otherwise provided under this section 
            for fiscal year 1996 for a State shall be reduced by the 
            amount of the obligations entered into with respect to the 
            State under section 1903(a) after the date of the enactment 
            of this title.
            ``(C) No effect on prior year obligations.--Subparagraph 
        (A) shall not apply to or affect obligations for a fiscal year 
        prior to fiscal year 1996.
            ``(D) Obligation.--For purposes of this section, the 
        Secretary's establishment of an estimate under section 2123(b) 
        of the amount a State is entitled to receive for a quarter 
        (taking into account any adjustments described in such 
        subsection) shall be treated as the obligation of such amount 
        for the State as of the first day of the quarter.
        ``(3) Aggregate limit on new obligation authority.--
            ``(A) In general.--For purposes of this subsection, subject 
        to subparagraph (C), the `aggregate limit on new obligation 
        authority', for a fiscal year, is the pool amount under 
        subsection (b) for the fiscal year, divided by the payout 
        adjustment factor (described in subparagraph (B)) for the 
        fiscal year.
            ``(B) Payout adjustment factor.--For purposes of this 
        subsection, the `payout adjustment factor'--
                ``(i) for fiscal year 1996 is 0.950,
                ``(ii) for fiscal year 1997 is 0.986, and
                ``(iii) for a subsequent fiscal year is 0.998.
            ``(C) Transitional adjustment for pre-enactment-obligation 
        outlays.--In order to account for pre-enactment-obligation 
        outlays described in paragraph (4)(C)(iv), in determining the 
        aggregate limit on new obligation authority under subparagraph 
        (A) for fiscal year 1996, the pool amount for such fiscal year 
        is equal to--
                ``(i) the pool amount for such year, reduced by
                ``(ii) $24,624,000,000.
        ``(4) Obligation allotments.--
            ``(A) General rule for 50 states and the district of 
        columbia.--Except as provided in this paragraph, the 
        `obligation allotment' for any of the 50 States or the District 
        of Columbia for a fiscal year (beginning with fiscal year 1997) 
        is an amount that bears the same ratio to the outlay allotment 
        under subsection (c)(2) for such State or District (not taking 
        into account any adjustment due to an election under paragraph 
        (4)) for the fiscal year as the ratio of--
                ``(i) the aggregate limit on new obligation authority 
            (less the total of the obligation allotments under 
            subparagraph (B)) for the fiscal year, to
                ``(ii) the pool amount (less the sum of the outlay 
            allotments for the territories) for such fiscal year.
            ``(B) Territories.--The obligation allotment for each of 
        the Commonwealths and territories for a fiscal year is the 
        outlay allotment for such Commonwealth or Territory (as 
        determined under subsection (c)(5)) for the fiscal year divided 
        by the payout adjustment factor for the fiscal year (as defined 
        in paragraph (3)(B)).
            ``(C) Transitional rule for fiscal year 1996.--
                ``(i) In general.--The obligation amount for fiscal 
            year 1996 for any State (including the District of 
            Columbia, a Commonwealth, or Territory) is determined 
            according to the formula: A=(B-C)/D, where--

                    ``(I) `A' is the obligation amount for such State,
                    ``(II) `B' is the outlay allotment of such State 
                for fiscal year 1996, as determined under subsection 
                (c),
                    ``(III) `C' is the amount of the pre-enactment-
                obligation outlays (as established for such State under 
                clause (ii)), and
                    ``(IV) `D' is the payout adjustment factor for such 
                fiscal year (as defined in paragraph (3)(B)).

                ``(ii) Pre-enactment-obligation outlay amounts.--Within 
            30 days after the date of the enactment of this title, the 
            Secretary shall estimate (based on the best data available) 
            and publish in the Federal Register the amount of the pre-
            enactment-obligation outlays (as defined in clause (iv)) 
            for each State (including the District of Columbia, 
            Commonwealths, and Territories). The total of such amounts 
            shall equal the dollar amount specified in paragraph 
            (3)(C)(ii).
                ``(iii) Agreement.--The submission of a MediGrant plan 
            by a State under this title is deemed to constitute the 
            State's acceptance of the obligation allotment limitations 
            under this subsection, including the formula for computing 
            the amount of such obligation allotment.
                ``(iv) Pre-enactment-obligation outlays defined.--In 
            this subsection, the term `pre-enactment-obligation 
            outlays' means, for a State, the outlays of the Federal 
            Government that result from obligations that have been 
            incurred under title XIX with respect to the State before 
            the date of the enactment of this title, but for which 
            payments to States have not been made as of such date of 
            enactment.
            ``(D) Adjustment to reflect adoption of alternative growth 
        formula.--Any State that has elected an alternative growth 
        formula under subsection (c)(4) which increases or decreases 
        the dollar amount of an outlay allotment for a fiscal year is 
        deemed to have increased or decreased, respectively, its 
        obligation amount for such fiscal year by the amount of such 
        increase or decrease.
            ``(E) Transitional correction for fiscal year 1997.--
                ``(i) In general.--The obligation amount for fiscal 
            year 1997 for any State described in clause (ii) shall be 
            increased by 90 percent of the amount by which 90 percent 
            of the amount described in clause (ii)(I) exceeds the 
            amount described in clause (ii)(II), divided by the payout 
            adjustment factor specified in paragraph (3)(B) for fiscal 
            year 1996. The increase under this clause shall be paid to 
            a State in the first quarter of fiscal year 1997.
                ``(ii) States described.--A State described in this 
            clause is a State for which--

                    ``(I) the amount of the pre-enactment-obligation 
                outlays (as established for such State under 
                subparagraph (C)(ii)), exceeded
                    ``(II) the outlays of the Federal Government during 
                fiscal year 1996 that are attributable to obligations 
                that were incurred under title XIX with respect to the 
                State before the date of the enactment of this title, 
                but for which payments to States had not been made as 
                of such date of enactment,

            by at least 10 percent of the amount described in subclause 
            (I).
    ``(b) Pool of Available Funds.--
        ``(1) In general.--For purposes of this section, the `pool 
    amount' under this subsection for--
            ``(A) fiscal year 1996 is $96,386,037,894,
            ``(B) fiscal year 1997 is $103,233,603,164,
            ``(C) fiscal year 1998 is $107,907,625,827,
            ``(D) fiscal year 1999 is $112,644,040,408,
            ``(E) fiscal year 2000 is $117,359,685,046,
            ``(F) fiscal year 2001 is $122,284,072,525,
            ``(G) fiscal year 2002 is $127,418,239,580, and
            ``(H) each subsequent fiscal year is the pool amount under 
        this paragraph for the previous fiscal year increased by the 
        lesser of 4.2 percent or the annual percentage increase in the 
        gross domestic product for the 12-month period ending in June 
        before the beginning of that subsequent fiscal year.
        ``(2) National medigrant growth percentage.--For purposes of 
    this section for a fiscal year (beginning with fiscal year 1997), 
    the `national MediGrant growth percentage' is the percentage by 
    which--
            ``(A) the pool amount under paragraph (1) for the fiscal 
        year, exceeds
            ``(B) such pool amount for the previous fiscal year.
    ``(c) State Outlay Allotments.--
        ``(1) Fiscal year 1996.--
            ``(A) In general.--For each of the 50 States and the 
        District of Columbia, the amount of the State outlay allotment 
        under this subsection for fiscal year 1996 is, subject to 
        paragraph (4), determined in accordance with the following 
        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
  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.
        ``(2) Computation of state outlay allotments.--
            ``(A) In general.--Subject to the succeeding provisions of 
        this subsection, the amount of the State outlay allotment under 
        this subsection for one of the 50 States and the District of 
        Columbia for a fiscal year (beginning with fiscal year 1997) is 
        equal to the product of--
                ``(i) the needs-based amount determined under 
            subparagraph (B) for such State or District for the fiscal 
            year, and
                ``(ii) the scalar factor described in subparagraph (C) 
            for the fiscal year.
            ``(B) Needs-based amount.--The needs-based amount under 
        this subparagraph for a State or the District of Columbia for a 
        fiscal year is equal to the product of--
                ``(i) the State's or District's aggregate expenditure 
            need for the fiscal year (as determined under subsection 
            (d)), and
                ``(ii) the State's or District's old Federal medical 
            assistance percentage (as defined in section 2122(d)) for 
            the fiscal year (or, in the case of fiscal year 1997, the 
            Federal medical assistance percentage determined under 
            section 1905(b) for fiscal year 1996).
            ``(C) Scalar factor.--The scalar factor under this 
        subparagraph for a fiscal year is such proportion so that, when 
        it is applied under subparagraph (A)(ii) for the fiscal year 
        (taking into account the floors and ceilings under paragraph 
        (3)), the total of the outlay allotments under this subsection 
        for all the 50 States and the District of Columbia for the 
        fiscal year (not taking into account any increase in an outlay 
        allotment for a fiscal year attributable to the election of an 
        alternative growth formula under paragraph (4)) is equal to the 
        amount by which (i) the pool amount for the fiscal year (as 
        determined under subsection (b)), exceeds (ii) the sum of the 
        outlay allotments provided under paragraph (5) for the 
        Commonwealths and Territories for the fiscal year.
        ``(3) Floors and ceilings.--
            ``(A) Floors.--Subject to the ceiling established under 
        subparagraph (B), in no case shall the amount of the State 
        outlay allotment under paragraph (2) for a fiscal year be less 
        than the greatest of the following:
                ``(i) In general.--Beginning with fiscal year 1998, 
            0.24 percent of the pool amount for the fiscal year.
                ``(ii) Floor based on previous year's outlay 
            allotment.--Subject to clause (iii)--

                    ``(I) Fiscal year 1997.--For fiscal year 1997, 
                103.5 percent of the amount of the State outlay 
                allotment under this subsection for fiscal year 1996.
                    ``(II) Fiscal year 1998.--For fiscal year 1998, 103 
                percent of the amount of the State outlay allotment 
                under this subsection for fiscal year 1997.
                    ``(III) Subsequent fiscal years.--For a fiscal year 
                after 1998, 102 percent of the amount of the State 
                outlay allotment under this subsection for the previous 
                fiscal year.

                ``(iii) Floor based on outlay allotment growth rate in 
            first year.--Beginning with fiscal year 1998, in the case 
            of a State for which the outlay allotment under this 
            subsection for fiscal year 1997 exceeded its outlay 
            allotment under this subsection for the previous fiscal 
            year by more than the national MediGrant growth percentage 
            for fiscal year 1997, 104 percent of the amount of the 
            State outlay allotment under this subsection for the 
            previous fiscal year (or, if less, beginning with fiscal 
            year 2003, 95 percent of the national MediGrant growth 
            percentage for the year).
            ``(B) Ceilings.--
                ``(i) In general.--Subject to clause (ii), in no case 
            shall the amount of the State outlay allotment under 
            paragraph (2) for a fiscal year be greater than the product 
            of--

                    ``(I) the State outlay allotment under this 
                subsection for the State for the preceding fiscal year, 
                and
                    ``(II) the applicable percent (specified in clause 
                (ii) or (iii)) for the fiscal year involved.

                ``(ii) General rule for applicable percent.--For 
            purposes of clause (i), subject to clause (iii), the 
            `applicable percent'--

                    ``(I) for fiscal year 1997 is 109 percent, and
                    ``(II) for a subsequent fiscal year is 105.33 
                percent.

                ``(iii) Special rule.--For a fiscal year after fiscal 
            year 1997, in the case of a State (among the 50 States and 
            the District of Columbia) that is one of the 10 States with 
            the lowest Federal MediGrant spending per resident-in-
            poverty rates (as determined under clause (iv)) for the 
            fiscal year, the `applicable percent' is 107 percent.
                ``(iv) Determination of federal medigrant spending per 
            resident-in-poverty rate.--For purposes of clause (iii), 
            the `Federal MediGrant spending per resident-in-poverty 
            rate' for a State for a fiscal year is equal to--

                    ``(I) the State's outlay allotment under this 
                subsection for the previous fiscal year (determined 
                without regard to paragraph (4)), divided by
                    ``(II) the average annual number of residents of 
                the State in poverty (as defined in subsection (d)(2)) 
                with respect to the fiscal year.

            ``(C) Special rule.--
                ``(i) In general.--Notwithstanding the preceding 
            subparagraphs of this paragraph, the State outlay allotment 
            for--

                    ``(I) New Hampshire for each of the fiscal years 
                1997 through 2000, is $360,000,000,
                    ``(II) Louisiana, subject to subclause (III), for 
                each of the fiscal years 1997 through 2000, is 
                $2,622,000,000,
                    ``(III) Louisiana and Nebraska for fiscal year 
                1997, as otherwise determined, shall be increased by 
                $37,048,207 and $106,132,408, respectively, and
                    ``(IV) Nevada for each of fiscal years 1996, 1997, 
                and 1998, as otherwise determined, shall be increased 
                by $90,000,000.

                ``(ii) Exception.--A State described in subclause (I) 
            or (II) of clause (i) may apply to the Secretary for use of 
            the State outlay allotment otherwise determined under this 
            subsection for any fiscal year, if such State notifies the 
            Secretary not later than March 1 preceding such fiscal year 
            that such State will be able to expend sufficient State 
            funds in such fiscal year to qualify for such allotment.
                ``(iii) Treatment of increase as supplemental 
            allotment.--Any increase in an outlay allotment under 
            clause (i)(III) shall not be taken into account for 
            purposes of determining the scalar factor under paragraph 
            (2) for fiscal year 1997, any State outlay allotment for a 
            fiscal year after fiscal year 1997, the pool amount for a 
            fiscal year after fiscal year 1997, or determination of the 
            national MediGrant growth percentage for any fiscal year.
        ``(4) Election of alternative growth formula.--
            ``(A) Election.--In order to reduce variations in increases 
        in outlay allotments over time, any of the 50 States or the 
        District of Columbia may elect (by notice provided to the 
        Secretary by not later than April 1, 1996) to adopt an 
        alternative growth rate formula under this paragraph for the 
        determination of the State's outlay allotment in fiscal year 
        1996 and for the increase in the amount of such allotment in 
        subsequent fiscal years.
            ``(B) Formula.--The alternative growth formula under this 
        paragraph may be any formula under which a portion of the State 
        outlay allotment for fiscal year 1996 under paragraph (1) is 
        deferred and applied to increase the amount of its outlay 
        allotment for one or more subsequent fiscal years, so long as 
        the total amount of such increases for all such subsequent 
        fiscal years does not exceed the amount of the outlay allotment 
        deferred from fiscal year 1996.
        ``(5) Commonwealths and territories.--
            ``(A) In general.--The outlay allotment for each of the 
        Commonwealths and Territories for a fiscal year is the maximum 
        amount that could have been certified under section 1108(c) (as 
        in effect on the day before the date of the enactment of this 
        title) with respect to the Commonwealth or Territory for the 
        fiscal year with respect to title XIX, if the national 
        MediGrant growth percentage (as determined under subsection 
        (b)(2)) for the fiscal year had been substituted (beginning 
        with fiscal year 1997) for the percentage increase referred to 
        in section 1108(c)(1)(B) (as so in effect).
            ``(B) Disregard of rounding requirements.--For purposes of 
        subparagraph (A), the rounding requirements under section 
        1108(c) shall not apply.
            ``(C) Limitation on total amount for fiscal year 1996.--
        Notwithstanding the provisions of subparagraph (A), the total 
        amount of the outlay allotments for the Commonwealths and 
        Territories for fiscal year 1996 may not exceed $139,950,000.
    ``(d) State Aggregate Expenditure Need Determined.--
        ``(1) In general.--For purposes of subsection (c), the `State 
    aggregate expenditure need' for a State or the District of Columbia 
    for a fiscal year is equal to the product of the following 4 
    factors:
            ``(A) Residents in poverty.--The average annual number of 
        residents in poverty of such State or District with respect to 
        the fiscal year (as determined under paragraph (2)).
            ``(B) Case mix index.--The case mix index for such State or 
        District (as determined under paragraph (3)) for the most 
        recent fiscal year for which data are available, but in no case 
        less than 0.9 or greater than 1.15.
            ``(C) Input cost index.--The input cost index for the State 
        (as determined under paragraph (4)) for the most recent fiscal 
        year for which data are available.
            ``(D) National average spending per resident in poverty.--
        The national average spending per resident in poverty (as 
        determined under paragraph (5)).
        ``(2) Residents in poverty.--In this section--
            ``(A) In general.--The term `average annual number of 
        residents in poverty' means, with respect to a State or the 
        District of Columbia and a fiscal year, the average annual 
        number of residents in poverty (as defined in subparagraph (B)) 
        in such State or District (based on data made generally 
        available by the Bureau of the Census from the Current 
        Population Survey) for the most recent 3-calendar-year period 
        (ending before the fiscal year) for which such data are 
        available.
            ``(B) Resident in poverty defined.--The term `resident in 
        poverty' means an individual whose family income does not 
        exceed the poverty threshold (as such terms are defined by the 
        Office of Management and Budget and are generally interpreted 
        and applied by the Bureau of the Census for the year involved).
        ``(3) Case mix index.--
            ``(A) In general.--In this subsection, the `case mix index' 
        for a State or the District of Columbia for a fiscal year is 
        equal to--
                ``(i) the sum of--

                    ``(I) the projected per recipient expenditures with 
                respect to elderly individuals in such State or 
                District for the fiscal year (determined under 
                subparagraph (B)),
                    ``(II) the projected per recipient expenditures 
                with respect to the blind and disabled individuals in 
                such State or District for the fiscal year (determined 
                under subparagraph (C)), and
                    ``(III) the projected per recipient expenditures 
                with respect to other individuals in such State or 
                District (determined under subparagraph (D));

        divided by--
                ``(ii) the national average spending per recipient 
            determined under subparagraph (E) for the fiscal year 
            involved.
            ``(B) Projected per recipient expenditures for the 
        elderly.--For purposes of subparagraph (A)(i)(I), the 
        `projected per recipient expenditures with respect to elderly 
        individuals' in a State or the District of Columbia for a 
        fiscal year is equal to the product of--
                ``(i) the national average per recipient expenditures 
            under this title in the 50 States and the District of 
            Columbia for the most recent fiscal year for which data are 
            available for elderly individuals, and
                ``(ii) the proportion, of all individuals who received 
            medical assistance under this title in such State or 
            District in the most recent fiscal year referred to in 
            clause (i), that were individuals described in such clause.
            ``(C) Projected per recipient expenditures for the blind 
        and disabled.--For purposes of subparagraph (A)(i)(II), the 
        `projected per recipient expenditures with respect to blind and 
        disabled individuals' in a State or the District of Columbia 
        for a fiscal year is equal to the product of--
                ``(i) the national average per recipient expenditures 
            under this title in the 50 States and the District of 
            Columbia for the most recent fiscal year for which data are 
            available for individuals who are eligible for medical 
            assistance because such individuals are blind or disabled 
            and are not elderly individuals, and
                ``(ii) the proportion, of all individuals who received 
            medical assistance under this title in the State in the 
            most recent fiscal year referred to in clause (i), that 
            were individuals described in such clause.
            ``(D) Projected per recipient expenditures for other 
        individuals.--For purposes of subparagraph (A)(i)(III), the 
        `projected per recipient expenditures with respect to other 
        individuals' in a State or the District of Columbia for a 
        fiscal year is equal to the product of--
                ``(i) the national average per recipient expenditures 
            under this title in the 50 States and the District of 
            Columbia for the most recent fiscal year for which data are 
            available for individuals who are not described in 
            subparagraph (B)(i) or (C)(i), and
                ``(ii) the proportion, of all individuals who received 
            medical assistance under this title in such State or 
            District in the most recent fiscal year referred to in 
            clause (i), that were individuals described in such clause.
            ``(E) National average spending per recipient.--For 
        purposes of this paragraph, the `national average expenditures 
        per recipient' for a fiscal year is equal to the sum of--
                ``(i) the product of (I) the national average described 
            in subparagraph (B)(i), and (II) the proportion, of all 
            individuals who received medical assistance under this 
            title in any of the 50 States or the District of Columbia 
            in the fiscal year referred to in such subparagraph, who 
            are described in such subparagraph,
                ``(ii) the product of (I) the national average 
            described in subparagraph (C)(i), and (II) the proportion, 
            of all individuals who received medical assistance under 
            this title in any of the 50 States or the District of 
            Columbia in the fiscal year referred to in such 
            subparagraph, who are described in such subparagraph, and
                ``(iii) the product of (I) the national average 
            described in subparagraph (D)(i), and (II) the proportion, 
            of all individuals who received medical assistance under 
            this title in any of the 50 States or the District of 
            Columbia in the fiscal year referred to in such 
            subparagraph, who are described in such subparagraph.
            ``(F) Determination of national averages and proportions.--
                ``(i) In general.--The national averages per recipient 
            and the proportions referred to in clauses (i) and (ii), 
            respectively, of subparagraphs (B), (C), and (D) and 
            subparagraph (E) shall be determined by the Secretary using 
            the most recent data available.
                ``(ii) Use of medicaid data.--If for a fiscal year 
            there is inadequate data to compute such averages and 
            proportions based on expenditures and numbers of 
            individuals receiving medical assistance under this title, 
            the Secretary may compute such averages based on 
            expenditures and numbers of such individuals under title 
            XIX for the most recent fiscal year for which data are 
            available and, for this purpose--

                    ``(I) any reference in subparagraph (B)(i) to 
                `elderly individuals' is deemed a reference to 
                `individuals whose eligibility for medical assistance 
                is based on being 65 years of age or older',
                    ``(II) the reference in subparagraph (C)(i) to `and 
                are not elderly individuals' shall be considered to be 
                deleted, and
                    ``(III) individuals whose basis for eligibility for 
                medical assistance was reported as unknown shall not be 
                counted as individuals under subparagraph (D)(i).

                ``(iii) Expenditure defined.--For purposes of this 
            paragraph, the term `expenditure' means medical vendor 
            payments by basis of eligibility as reported by HCFA Form 
            2082.
        ``(4) Input cost index.--
            ``(A) In general.--In this section, the `input cost index' 
        for a State or the District of Columbia for a fiscal year is 
        the sum of--
                ``(i) 0.15, and
                ``(ii) 0.85 multiplied by the ratio of (I) the annual 
            average wages for hospital employees in such State or 
            District for the fiscal year (as determined under 
            subparagraph (B)), to (II) the annual average wages for 
            hospital employees in the 50 States and the District of 
            Columbia for such year (as determined under such 
            subparagraph).
            ``(B) Determination of annual average wages of hospital 
        employees.--The Secretary shall provide for the determination 
        of annual average wages for hospital employees in a State or 
        the District of Columbia and, collectively, in the 50 States 
        and the District of Columbia for a fiscal year based on the 
        area wage data applicable to hospitals under section 
        1886(d)(2)(E) (or, if such data no longer exists, comparable 
        data of hospital wages) for discharges occurring during the 
        fiscal year involved.
        ``(5) National average spending per resident in poverty.--For 
    purposes of this subsection, the `national average spending per 
    resident in poverty'--
            ``(A) for fiscal year 1997 is equal to--
                ``(i) the sum (for each of the 50 States and the 
            District of Columbia) of the total of the Federal and State 
            expenditures under title XIX for calendar quarters in 
            fiscal year 1994, increased by the percentage by which (I) 
            the pool amount for fiscal year 1997, exceeds (II) 
            $83,213,431,458 (which represents Federal medicaid 
            expenditures for such States and District for fiscal year 
            1994); divided by
                ``(ii) the sum of the number of residents in poverty 
            (as defined in paragraph (2)(A)) for all of the 50 States 
            and the District of Columbia for fiscal year 1994; and
            ``(B) for a succeeding fiscal year is equal to the national 
        average spending per resident in poverty under this paragraph 
        for the preceding fiscal year increased by the national 
        MediGrant growth percentage (as defined in subsection (b)(2)) 
        for the fiscal year involved.
    ``(e) Publication of Obligation and Outlay Allotments.--
        ``(1) Notice of preliminary allotments.--Not later than April 1 
    before the beginning of each fiscal year (beginning with fiscal 
    year 1997), the Secretary shall initially compute, after 
    consultation with the Comptroller General, and publish in the 
    Federal Register notice of the proposed obligation and outlay 
    allotments for each State under this section (not taking into 
    account subsection (a)(2)(B)) for the fiscal year. The Secretary 
    shall include in the notice a description of the methodology and 
    data used in deriving such allotments for the year.
        ``(2) Review by gao.--The Comptroller General shall submit to 
    Congress by not later than May 15 of each such fiscal year, a 
    report analyzing such allotments and the extent to which they 
    comply with the precise requirements of this section.
        ``(3) Notice of final allotments.--Not later than July 1 before 
    the beginning of each such fiscal year, the Secretary, taking into 
    consideration the analysis contained in the report of the 
    Comptroller General under paragraph (2), shall compute and publish 
    in the Federal Register notice of the final allotments under this 
    section (both taking into account and not taking into account 
    subsection (a)(2)(B)) for the fiscal year. The Secretary shall 
    include in the notice a description of any changes in such 
    allotments from the initial allotments published under paragraph 
    (1) for the fiscal year and the reasons for such changes. Once 
    published under this paragraph, the Secretary is not authorized to 
    change such allotments.
        ``(4) GAO report on final allotments.--The Comptroller General 
    shall submit to Congress by not later than August 1 of each such 
    fiscal year, a report analyzing the final allotments under 
    paragraph (3) and the extent to which they comply with the precise 
    requirements of this section.
    ``(f) Supplemental Allotment for Emergency Health Care Services to 
Certain Aliens.--
        ``(1) In general.--Notwithstanding the previous provisions of 
    this section, the amount of the State outlay allotment for each of 
    fiscal years 1996 through 2000 for each supplemental allotment 
    eligible State shall be increased by the amount of the supplemental 
    outlay allotment provided under paragraph (2) for the State for 
    that year. The amount of such increased allotment may only be used 
    for the purpose of providing medical assistance for care and 
    services for aliens described in paragraph (1) of section 2123(e) 
    and for which the exception described in paragraph (2) of such 
    section applies. Section 2122(f)(3) shall apply to such assistance 
    in the same manner as it applies to medical assistance described in 
    such section.
        ``(2) Supplemental outlay allotment.--
            ``(A) In general.--For purposes of paragraph (1), the 
        amount of the supplemental outlay allotment for a supplemental 
        allotment eligible State for a fiscal year is equal to the 
        supplemental allotment ratio (as defined in subparagraph (C)) 
        multiplied by the supplemental pool amount (specified in 
        subparagraph (D)) for the fiscal year.
            ``(B) Supplemental allotment eligible state.--In this 
        subsection, the term `supplemental allotment eligible State' 
        means one of the 15 States with the highest number of 
        undocumented alien residents of all the States.
            ``(C) Supplemental allotment ratio.--In this paragraph, the 
        `supplemental allotment ratio' for a State is the ratio of--
                ``(i) the number of undocumented aliens residing in the 
            State, to
                ``(ii) the sum of such numbers for all supplemental 
            allotment eligible States.
            ``(D) Supplemental pool amount.--In this paragraph, the 
        `supplemental pool amount'--
                ``(i) for fiscal year 1996 is $627,325,551,
                ``(ii) for fiscal year 1997 is $673,388,855,
                ``(iii) for fiscal year 1998 is $702,313,450,
                ``(iv) for fiscal year 1999 is $733,140,258, and
                ``(v) for fiscal year 2000 is $763,831,886.
            ``(E) Determination of number.--
                ``(i) In general.--The number of undocumented aliens 
            residing in a State under this paragraph--

                    ``(I) for fiscal year 1996 shall be determined 
                based on estimates of the resident illegal alien 
                population residing in each State prepared by the 
                Statistics Division of the Immigration and 
                Naturalization Service as of October 1992, and
                    ``(II) for a subsequent fiscal year shall be 
                determined based on the most recent updated estimate 
                made under clause (ii).

                ``(ii) Updating estimate.--For each fiscal year 
            beginning with fiscal year 1997, the Secretary, in 
            consultation with the Commission of the Immigration and 
            Naturalization Service, States, and outside experts, shall 
            estimate the number of undocumented aliens residing in each 
            of the 50 States and the District of Columbia.
        ``(3) Treatment for obligation purposes.--For purposes of 
    computing obligation allotments under subsection (a)--
            ``(A) the amount of the supplemental pool amount for a 
        fiscal year shall be added to the pool amount under subsection 
        (b) for that fiscal year, and
            ``(B) the amount of the supplemental allotment to a State 
        provided under paragraph (1) shall be added to the outlay 
        allotment of the State for that fiscal year.
        ``(4) Sequence of obligations.--For purposes of carrying out 
    this title, payments to a supplemental allotment eligible State 
    under section 2122 that are attributable to expenditures for 
    medical assistance described in the second sentence of paragraph 
    (1) shall first be counted toward the supplemental outlay allotment 
    provided under this subsection, rather than toward the outlay 
    allotment otherwise provided under this section.

``SEC. 2122. PAYMENTS TO STATES.

    ``(a) Amount of Payment.--From the allotment of a State under 
section 2121 for a fiscal year, subject to the succeeding provisions of 
this title, the Secretary shall pay to each State which has a MediGrant 
plan approved under part E, for each quarter in the fiscal year--
        ``(1) an amount equal to the applicable Federal medical 
    assistance percentage (as defined in subsection (c)) of the total 
    amount expended during such quarter as medical assistance under the 
    plan; plus
        ``(2) an amount equal to the applicable Federal medical 
    assistance percentage of the total amount expended during such 
    quarter for medically-related services (as defined in section 
    2112(e)(2)); plus
        ``(3) subject to section 2123(c)--
            ``(A) an amount equal to 90 percent of the amounts expended 
        during such quarter for the design, development, and 
        installation of information systems and for providing 
        incentives to promote the enforcement of medical support 
        orders, plus
            ``(B) an amount equal to 75 percent of the amounts expended 
        during such quarter for medical personnel, administrative 
        support of medical personnel, operation and maintenance of 
        information systems, modification of information systems, 
        quality assurance activities, utilization review, medical and 
        peer review, anti-fraud activities, independent evaluations, 
        coordination of benefits, and meeting reporting requirements 
        under this title, plus
            ``(C) an amount equal to 50 percent of so much of the 
        remainder of the amounts expended during such quarter as are 
        expended by the State in the administration of the State 
        MediGrant plan.
    ``(b) Payment Process.--
        ``(1) Quarterly estimates.--Prior to the beginning of each 
    quarter, the Secretary shall estimate the amount to which a State 
    will be entitled under subsection (a) for such quarter, such 
    estimates to be based on (A) a report filed by the State containing 
    its estimate of the total sum to be expended in such quarter in 
    accordance with the provisions of such subsections, and stating the 
    amount appropriated or made available by the State and its 
    political subdivisions for such expenditures in such quarter, and 
    if such amount is less than the State's proportionate share of the 
    total sum of such estimated expenditures, the source or sources 
    from which the difference is expected to be derived, and (B) such 
    other investigation as the Secretary may find necessary.
        ``(2) Payment.--
            ``(A) In general.--The Secretary shall then pay to the 
        State, in such installments as the Secretary may determine and 
        in accordance with section 6503(a) of title 31, United States 
        Code, the amount so estimated, reduced or increased to the 
        extent of any overpayment or underpayment which the Secretary 
        determines was made under this section (or section 1903) to 
        such State for any prior quarter and with respect to which 
        adjustment has not already been made under this subsection (or 
        under section 1903(d)).
            ``(B) Treatment as overpayments.--Expenditures for which 
        payments were made to the State under subsection (a) shall be 
        treated as an overpayment to the extent that the State or local 
        agency administering such plan has been reimbursed for such 
        expenditures by a third party pursuant to the provisions of its 
        plan in compliance with section 2135.
            ``(C) Recovery of overpayments.--For purposes of this 
        subsection, when an overpayment is discovered, which was made 
        by a State to a person or other entity, the State shall have a 
        period of 60 days in which to recover or attempt to recover 
        such overpayment before adjustment is made in the Federal 
        payment to such State on account of such overpayment. Except as 
        otherwise provided in subparagraph (D), the adjustment in the 
        Federal payment shall be made at the end of the 60 days, 
        whether or not recovery was made.
            ``(D) No adjustment for uncollectables.--In any case where 
        the State is unable to recover a debt which represents an 
        overpayment (or any portion thereof) made to a person or other 
        entity on account of such debt having been discharged in 
        bankruptcy or otherwise being uncollectable, no adjustment 
        shall be made in the Federal payment to such State on account 
        of such overpayment (or portion thereof).
        ``(3) Federal share of recoveries.--The pro rata share to which 
    the United States is equitably entitled, as determined by the 
    Secretary, of the net amount recovered during any quarter by the 
    State or any political subdivision thereof with respect to medical 
    assistance furnished under the State MediGrant plan shall be 
    considered an overpayment to be adjusted under this subsection.
        ``(4) Timing of obligation of funds.--Upon the making of any 
    estimate by the Secretary under this subsection, any appropriations 
    available for payments under this section shall be deemed 
    obligated.
        ``(5) Disallowances.--In any case in which the Secretary 
    estimates that there has been an overpayment under this section to 
    a State on the basis of a claim by such State that has been 
    disallowed by the Secretary under section 1116(d), and such State 
    disputes such disallowance, the amount of the Federal payment in 
    controversy shall, at the option of the State, be retained by such 
    State or recovered by the Secretary pending a final determination 
    with respect to such payment amount. If such final determination is 
    to the effect that any amount was properly disallowed, and the 
    State chose to retain payment of the amount in controversy, the 
    Secretary shall offset, from any subsequent payments made to such 
    State under this title, an amount equal to the proper amount of the 
    disallowance plus interest on such amount disallowed for the period 
    beginning on the date such amount was disallowed and ending on the 
    date of such final determination at a rate (determined by the 
    Secretary) based on the average of the bond equivalent of the 
    weekly 90-day treasury bill auction rates during such period.
    ``(c) Applicable Federal Medical Assistance Percentage Defined.--In 
this section, except as provided in subsection (f), the term 
`applicable Federal medical assistance percentage' means, with respect 
to one of the 50 States or the District of Columbia, at the State's or 
District's option--
        ``(1) the old Federal medical assistance percentage (as 
    determined in subsection (d));
        ``(2) the lesser of--
            ``(A) new Federal medical assistance percentage (as 
        determined under subsection (e)) or
            ``(B) the old Federal medical assistance percentage plus 10 
        percentage points; or
        ``(3) 60 percent.
    ``(d) Old Federal Medical Assistance Percentage.--
        ``(1) In general.--Except as provided in paragraph (2) and 
    subsection (f), the term `old Federal medical assistance 
    percentage' for any State is 100 percent less the State percentage; 
    and the State percentage is that percentage which bears the same 
    ratio to 45 percent as the square of the per capita income of such 
    State bears to the square of the per capita income of the 
    continental United States (including Alaska) and Hawaii.
        ``(2) Limitation on range.--In no case shall the old Federal 
    medical assistance percentage be less than 50 percent or more than 
    83 percent.
        ``(3) Promulgation.--The old Federal medical assistance 
    percentage for any State shall be determined and promulgated in 
    accordance with the provisions of section 1101(a)(8)(B).
    ``(e) New Federal Medical Assistance Percentage Defined.--
        ``(1) In general.--
            ``(A) Term defined.--Except as provided in paragraph (3) 
        and subsection (f), the term `new Federal medical assistance 
        percentage' means, for each of the 50 States and the District 
        of Columbia, 100 percent reduced by the product 0.39 and the 
        ratio of--
                ``(i)(I) for each of the 50 States, the total taxable 
            resources (TTR) ratio of the State specified in 
            subparagraph (B), or
                ``(II) for the District of Columbia, the per capita 
            income ratio specified in subparagraph (C),
        to--
                ``(ii) the aggregate expenditure need ratio of the 
            State or District, as described in subparagraph (D).
            ``(B) Total taxable resources (ttr) ratio.--For purposes of 
        subparagraph (A)(i)(I), the total taxable resources (TTR) ratio 
        for each of the 50 States is--
                ``(i) an amount equal to the most recent 3-year average 
            of the total taxable resources (TTR) of the State, as 
            determined by the Secretary of the Treasury, divided by
                ``(ii) an amount equal to the sum of the 3-year 
            averages determined under clause (i) for each of the 50 
            States.
            ``(C) Per capita income ratio.--For purposes of 
        subparagraph (A)(i)(II), the per capita income ratio of the 
        District of Columbia is--
                ``(i) an amount equal to the most recent 3-year average 
            of the total personal income of the District of Columbia, 
            as determined in accordance with the provisions of section 
            1101(a)(8)(B), divided by
                ``(ii) an amount equal to the total personal income of 
            the continental United States (including Alaska) and 
            Hawaii, as determined under section 1101(a)(8)(B).
            ``(D) Aggregate expenditure need ratio.--For purposes of 
        subparagraph (A), with respect to each of the 50 States and the 
        District of Columbia for a fiscal year, the aggregate 
        expenditure need ratio is--
                ``(i) the State aggregate expenditure need (as defined 
            in section 2121(d)) for the State for the fiscal year, 
            divided by
                ``(ii) the such of such State aggregate expenditure 
            needs for the 50 States and the District of Columbia for 
            the fiscal year.
        ``(2) Limitation on range.--Except as provided in subsection 
    (f), the new Federal medical assistance percentage shall in no case 
    be less than 40 percent or greater than 83 percent.
        ``(3) Promulgation.--The new Federal medical assistance 
    percentage for any State shall be promulgated in a timely manner 
    consistent with the promulgation of the old Federal medical 
    assistance percentage under section 1101(a)(8)(B).
    ``(f) Special Rules.--For purposes of this title--
        ``(1) Commonwealths and territories.--In the case of Puerto 
    Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and 
    American Samoa, the old and new Federal medical assistance 
    percentages are 50 percent.
        ``(2) Alaska.--In the case of Alaska, the old Federal medical 
    assistance percentage is that percentage which bears the same ratio 
    to 45 percent as the square of the adjusted per capita income of 
    such State bears to the square of the per capita income of the 
    continental United States. For purposes of the preceding sentence, 
    the adjusted per capita income for Alaska shall be determined by 
    dividing the State's most recent 3-year average per capita by the 
    input cost index for such State (as determined under section 
    2121(d)(4)).
        ``(3) Indian health service facilities.--
            ``(A) In general.--The old and new Federal medical 
        assistance percentages shall be 100 percent with respect to the 
        amounts expended as medical assistance for services which are 
        received through a facility described in subparagraph (B) of an 
        Indian tribe or tribal organization or through an Indian Health 
        Service facility whether operated by the Indian Health Service 
        or by an Indian tribe or tribal organization (as defined in 
        section 4 of the Indian Health Care Improvement Act).
            ``(B) Facility described.--For purposes of subparagraph 
        (A), a facility described in this subparagraph is a facility of 
        an Indian tribe if--
                ``(i) the facility is located in a State which, as of 
            the date of the enactment of this title, was not operating 
            its State plan under title XIX pursuant to a Statewide 
            waiver approved under section 1115,
                ``(ii) the facility is not an Indian Health Service 
            facility,
                ``(iii) the tribe owns at least 2 such facilities, and
                ``(iv) the tribe has at least 50,000 members (as of the 
            date of the enactment of this title).
        ``(4) No state matching required for certain expenditures.--In 
    applying subsection (a)(1) with respect to medical assistance 
    provided to unlawful aliens pursuant to the exception specified in 
    section 2123(f)(2), payment shall be made for the amount of such 
    assistance without regard to any need for a State match.
        ``(5) Special transitional rule.--
            ``(A) In general.--Notwithstanding subsections (a) and (f), 
        in order to receive the full State outlay allotment described 
        in section 2121(c)(3)(C)(i), a State described in subparagraph 
        (C) shall expend State funds in a fiscal year (before fiscal 
        year 2000) under a MediGrant plan under this title in an amount 
        not less than the adjusted base year State expenditures, plus 
        the applicable percentage of the difference between such 
        expenditures and the amount necessary to qualify for the full 
        State outlay allotment so described in such fiscal year as 
        determined under this section without regard to this paragraph.
            ``(B) Reduction in allotment if expenditure not met.--In 
        the event a State described in subparagraph (C) fails to expend 
        State funds in an amount required by subparagraph (A) for a 
        fiscal year, the outlay allotment described in section 
        2121(c)(3)(C)(i) for such year for such State shall be reduced 
        by an amount which bears the same ratio to such outlay 
        allotment as the State funds expended in such fiscal year bears 
        to the amount required by subparagraph (A).
            ``(C) Adjusted base year state expenditures.--For purposes 
        of this paragraph, the term `adjusted base year State 
        expenditures' means--
                ``(i) for New Hampshire, $203,000,000, and
                ``(ii) for Louisiana, $355,000,000.
            ``(D) Applicable percentage.--For purposes of this 
        paragraph, the applicable percentage for a fiscal year is 
        specified in the following table:
                                                              Applicable
``Fiscal year:
                                                             Percentage:
    1996......................................................

                                                                     20 

    1997......................................................

                                                                     40 

    1998......................................................

                                                                     60 

    1999......................................................

                                                                     80.

    ``(g) State Financial Participation.--Each MediGrant plan shall 
provide for financial participation by the State equal to not less than 
40 percent of the non-Federal share of the expenditures under the plan 
with respect to which payments may be made under this section.

``SEC. 2123. LIMITATION ON USE OF FUNDS; DISALLOWANCE.

    ``(a) In General.--Funds provided to a State under this title shall 
only be used to carry out the purposes of this title.
    ``(b) Disallowances for Excluded Providers.--
        ``(1) In general.--Payment shall not be made to a State under 
    this part for expenditures for items and services furnished--
            ``(A) by a provider who was excluded from participation 
        under title V, XVIII, or XX or under this title pursuant to 
        section 1128, 1128A, 1156, or 1842(j)(2), or
            ``(B) under the medical direction or on the prescription of 
        a physician who was so excluded, if the provider of the 
        services knew or had reason to know of the exclusion.
        ``(2) Exception for emergency services.--Paragraph (1) shall 
    not apply to emergency items or services, not including hospital 
    emergency room services.
    ``(c) Limitations.--
        ``(1) In general.--No Federal financial assistance is available 
    for expenditures under the MediGrant plan for--
            ``(A) medically-related services for a quarter to the 
        extent such expenditures exceed 5 percent of the total 
        expenditures under the plan for the quarter, or
            ``(B) total administrative expenses (other than expenses 
        described in paragraph (2) during the first 8 quarters in which 
        the plan is in effect under this title) for quarters in a 
        fiscal year to the extent such expenditures exceed the sum of 
        $20,000,000 plus 10 percent of the total expenditures under the 
        plan for the year.
        ``(2) Administrative expenses not subject to limitation.--The 
    administrative expenses referred to in this paragraph are 
    expenditures under the MediGrant plan for the following activities:
            ``(A) Quality assurance.
            ``(B) The development and operation of the certification 
        program for nursing facilities and intermediate care facilities 
        for the mentally retarded under section 2137.
            ``(C) Utilization review activities, including medical 
        activities and activities of peer review organizations.
            ``(D) Inspection and oversight of providers and capitated 
        health care organizations.
            ``(E) Anti-fraud activities.
            ``(F) Independent evaluations.
            ``(G) Activities required to meet reporting requirements 
        under this title.
    ``(d) Treatment of Third Party Liability.--No payment shall be made 
to a State under this part for expenditures for medical assistance 
provided for an individual under its MediGrant plan to the extent that 
a private insurer (as defined by the Secretary by regulation and 
including a group health plan (as defined in section 607(1) of the 
Employee Retirement Income Security Act of 1974), a service benefit 
plan, and a health maintenance organization) would have been obligated 
to provide such assistance but for a provision of its insurance 
contract which has the effect of limiting or excluding such obligation 
because the individual is eligible for or is provided medical 
assistance under the plan.
    ``(e) MediGrant as Secondary Payer.--Except as otherwise provided 
by law, no payment shall be made to a State under this part for 
expenditures for medical assistance provided for an individual under 
its MediGrant plan to the extent that payment has been made or can 
reasonably be expected to be made promptly (as determined in accordance 
with regulations) under any other federally operated or financed health 
care program, other than a program operated or financed by the Indian 
Health Service, as identified by the Secretary. For purposes of this 
subsection, rules similar to the rules for overpayments under section 
2122(b) shall apply.
    ``(f) Limitation on Payments to Emergency Services for Nonlawful 
Aliens.--
        ``(1) In general.--Notwithstanding the preceding provisions of 
    this section, except as provided in paragraph (2), no payment may 
    be made to a State under this part for medical assistance furnished 
    to an alien who is not lawfully admitted for permanent residence or 
    otherwise permanently residing in the United States under color of 
    law.
        ``(2) Exception for emergency services.--Payment may be made 
    under this section for care and services that are furnished to an 
    alien described in paragraph (1) only if--
            ``(A) such care and services are necessary for the 
        treatment of an emergency medical condition of the alien,
            ``(B) such alien otherwise meets the eligibility 
        requirements for medical assistance under the MediGrant plan 
        (other than a requirement of the receipt of aid or assistance 
        under title IV, supplemental security income benefits under 
        title XVI, or a State supplementary payment), and
            ``(C) such care and services are not related to an organ 
        transplant procedure.
        ``(3) Emergency medical condition defined.--For purposes of 
    this subsection, the term `emergency medical condition' means a 
    medical condition (including emergency labor and delivery) 
    manifesting itself by acute symptoms of sufficient severity 
    (including severe pain) such that the absence of immediate medical 
    attention could reasonably be expected to result in--
            ``(A) placing the patient's health in serious jeopardy,
            ``(B) serious impairment to bodily functions, or
            ``(C) serious dysfunction of any bodily organ or part.
    ``(g) Limitation on Payment for Certain Outpatient Prescription 
Drugs.--
        ``(1) In general.--No payment may be made to a State under this 
    part for medical assistance for covered outpatient drugs (as 
    defined in section 2175(i)(2)) of a manufacturer provided under the 
    MediGrant plan unless the manufacturer (as defined in section 
    2175(i)(4)) of the drug--
            ``(A) has entered into a MediGrant master rebate agreement 
        with the Secretary under section 2175,
            ``(B) is otherwise complying with the provisions of such 
        section,
            ``(C) is complying with the provisions of section 8126 of 
        title 38, United States Code, including the requirement of 
        entering into a master agreement with the Secretary of Veterans 
        Affairs under such section, and
            ``(D) subject to paragraph (4), is complying with the 
        provisions of section 340B of the Public Health Service Act, 
        including the requirement of entering into an agreement with 
        the Secretary under such section.
        ``(2) Construction.--Nothing in this subsection shall be 
    construed as requiring a State to participate in the MediGrant 
    master rebate agreement under section 2175.
        ``(3) Effect of subsequent amendments.--For purposes of 
    subparagraphs (C) and (D), in determining whether a manufacturer is 
    in compliance with the requirements of section 8126 of title 38, 
    United States Code, or section 340B of the Public Health Service 
    Act--
            ``(A) the Secretary shall not take into account any 
        amendments to such sections that are enacted after the 
        enactment of title VI of the Veterans Health Care Act of 1992, 
        and
            ``(B) a manufacturer is deemed to meet such requirements if 
        the manufacturer establishes to the satisfaction of the 
        Secretary that the manufacturer would comply (and has offered 
        to comply) with the provisions of such sections (as in effect 
        immediately after the enactment of the Veterans Health Care Act 
        of 1992) and would have entered into an agreement under such 
        section (as such section was in effect at such time), but for a 
        legislative change in such section after the date of the 
        enactment of the Veterans Health Care Act of 1992.
        ``(4) Effect of establishment of alternative mechanism under 
    public health service act.--If the Secretary does not establish a 
    mechanism to ensure against duplicate discounts or rebates under 
    section 340B(a)(5)(A) of the Public Health Service Act within 12 
    months of the date of the enactment of such section, the following 
    requirements shall apply:
            ``(A) Each covered entity under such section shall inform 
        the State when it is seeking reimbursement from the MediGrant 
        plan for medical assistance with respect to a unit of any 
        covered outpatient drug which is subject to an agreement under 
        section 340B(a) of such Act.
            ``(B) Each such State shall provide a means by which such 
        an entity shall indicate on any drug reimbursement claims form 
        (or format, where electronic claims management is used) that a 
        unit of the drug that is the subject of the form is subject to 
        an agreement under section 340B of such Act, and not submit to 
        any manufacturer a claim for a rebate payment with respect to 
        such a drug.

                ``Part D--Program Integrity and Quality

``SEC. 2131. USE OF AUDITS TO ACHIEVE FISCAL INTEGRITY.

    ``(a) Financial Audits of Program.--
        ``(1) In general.--Each MediGrant plan shall provide for an 
    annual audit of the State's expenditures from amounts received 
    under this title, in compliance with chapter 75 of title 31, United 
    States Code.
        ``(2) Verification audits.--If, after consultation with the 
    State and the Comptroller General and after a fair hearing, the 
    Secretary determines that a State's audit under paragraph (1) was 
    performed in substantial violation of chapter 75 of title 31, 
    United States Code, the Secretary may--
            ``(A) require that the State provide for a verification 
        audit in compliance with such chapter, or
            ``(B) conduct such a verification audit.
        ``(3) Availability of audit reports.--Within 30 days after 
    completion of each audit or verification audit under this 
    subsection, the State shall--
            ``(A) provide the Secretary with a copy of the audit 
        report, including the State's response to any recommendations 
        of the auditor, and
            ``(B) make the audit report available for public inspection 
        in the same manner as proposed MediGrant plan amendments are 
        made available under section 2105.
    ``(b) Fiscal Controls.--
        ``(1) In general.--With respect to the accounting and 
    expenditure of funds under this title, each State shall adopt and 
    maintain such fiscal controls, accounting procedures, and data 
    processing safeguards as the State deems reasonably necessary to 
    assure the fiscal integrity of the State's activities under this 
    title.
        ``(2) Consistency with generally accepted accounting 
    principles.--Such controls and procedures shall be generally 
    consistent with generally accepted accounting principles as 
    recognized by the Governmental Accounting Standards Board or the 
    Comptroller General.
    ``(c) Audits of Providers.--Each MediGrant plan shall provide that 
the records of any entity providing items or services for which payment 
may be made under the plan may be audited as necessary to ensure that 
proper payments are made under the plan.

``SEC. 2132. FRAUD PREVENTION PROGRAM.

    ``(a) Establishment.--Each MediGrant plan shall provide for the 
establishment and maintenance of an effective program for the detection 
and prevention of fraud and abuse by beneficiaries, providers, and 
others in connection with the operation of the program.
    ``(b) Program Requirements.--The program established pursuant to 
subsection (a) shall include at least the following requirements:
        ``(1) Disclosure of information.--Any disclosing entity (as 
    defined in section 1124(a)) receiving payments under the MediGrant 
    plan shall comply with the requirements of section 1124.
        ``(2) Supply of information.--An entity (other than an 
    individual practitioner or a group of practitioners) that 
    furnishes, or arranges for the furnishing of, an item or service 
    under the MediGrant plan shall supply upon request specifically 
    addressed to the entity by the Secretary or the State agency the 
    information described in section 1128(b)(9).
        ``(3) Exclusion.--
            ``(A) In general.--The MediGrant plan shall exclude any 
        specified individual or entity from participation in the plan 
        for the period specified by the Secretary when required by the 
        Secretary to do so pursuant to section 1128 or section 1128A, 
        and provide that no payment may be made under the plan with 
        respect to any item or service furnished by such individual or 
        entity during such period.
            ``(B) Authority.--In addition to any other authority, a 
        State may exclude any individual or entity for purposes of 
        participating under the MediGrant plan for any reason for which 
        the Secretary could exclude the individual or entity from 
        participation in a program under title XVIII or under section 
        1128, 1128A, or 1866(b)(2).
        ``(4) Notice.--The MediGrant plan shall provide that whenever a 
    provider of services or any other person is terminated, suspended, 
    or otherwise sanctioned or prohibited from participating under the 
    plan, the State agency responsible for administering the plan shall 
    promptly notify the Secretary and, in the case of a physician, the 
    State medical licensing board of such action.
        ``(5) Access to information.--The MediGrant plan shall provide 
    that the State will provide information and access to certain 
    information respecting sanctions taken against health care 
    practitioners and providers by State licensing authorities in 
    accordance with section 2133.

``SEC. 2133. INFORMATION CONCERNING SANCTIONS TAKEN BY STATE LICENSING 
              AUTHORITIES AGAINST HEALTH CARE PRACTITIONERS AND 
              PROVIDERS.

    ``(a) Information Reporting Requirement.--The requirement referred 
to in section 2132(b)(5) is that the State must provide for the 
following:
        ``(1) Information reporting system.--The State must have in 
    effect a system of reporting the following information with respect 
    to formal proceedings (as defined by the Secretary in regulations) 
    concluded against a health care practitioner or entity by any 
    authority of the State (or of a political subdivision thereof) 
    responsible for the licensing of health care practitioners (or any 
    peer review organization or private accreditation entity reviewing 
    the services provided by health care practitioners) or entities:
            ``(A) Any adverse action taken by such licensing authority 
        as a result of the proceeding, including any revocation or 
        suspension of a license (and the length of any such 
        suspension), reprimand, censure, or probation.
            ``(B) Any dismissal or closure of the proceedings by reason 
        of the practitioner or entity surrendering the license or 
        leaving the State or jurisdiction.
            ``(C) Any other loss of the license of the practitioner or 
        entity, whether by operation of law, voluntary surrender, or 
        otherwise.
            ``(D) Any negative action or finding by such authority, 
        organization, or entity regarding the practitioner or entity.
        ``(2) Access to documents.--The State must provide the 
    Secretary (or an entity designated by the Secretary) with access to 
    such documents of the authority described in paragraph (1) as may 
    be necessary for the Secretary to determine the facts and 
    circumstances concerning the actions and determinations described 
    in such paragraph for the purpose of carrying out this Act.
    ``(b) Form of Information.--The information described in subsection 
(a)(1) shall be provided to the Secretary (or to an appropriate private 
or public agency, under suitable arrangements made by the Secretary 
with respect to receipt, storage, protection of confidentiality, and 
dissemination of information) in such a form and manner as the 
Secretary determines to be appropriate in order to provide for 
activities of the Secretary under this Act and in order to provide, 
directly or through suitable arrangements made by the Secretary, 
information--
        ``(1) to agencies administering Federal health care programs, 
    including private entities administering such programs under 
    contract,
        ``(2) to licensing authorities described in subsection (a)(1),
        ``(3) to State agencies administering or supervising the 
    administration of State health care programs (as defined in section 
    1128(h)),
        ``(4) to utilization and quality control peer review 
    organizations described in part B of title XI and to appropriate 
    entities with contracts under section 1154(a)(4)(C) with respect to 
    eligible organizations reviewed under the contracts,
        ``(5) to State MediGrant fraud control units (as defined in 
    section 2134),
        ``(6) to hospitals and other health care entities (as defined 
    in section 431 of the Health Care Quality Improvement Act of 1986), 
    with respect to physicians or other licensed health care 
    practitioners that have entered (or may be entering) into an 
    employment or affiliation relationship with, or have applied for 
    clinical privileges or appointments to the medical staff of, such 
    hospitals or other health care entities (and such information shall 
    be deemed to be disclosed pursuant to section 427 of, and be 
    subject to the provisions of, that Act),
        ``(7) to the Attorney General and such other law enforcement 
    officials as the Secretary deems appropriate, and
        ``(8) upon request, to the Comptroller General,
    in order for such authorities to determine the fitness of 
    individuals to provide health care services, to protect the health 
    and safety of individuals receiving health care through such 
    programs, and to protect the fiscal integrity of such programs.
    ``(c) Confidentiality of Information Provided.--The Secretary shall 
provide for suitable safeguards for the confidentiality of the 
information furnished under subsection (a). Nothing in this subsection 
shall prevent the disclosure of such information by a party which is 
otherwise authorized, under applicable State law, to make such 
disclosure.
    ``(d) Appropriate Coordination.--The Secretary shall provide for 
the maximum appropriate coordination in the implementation of 
subsection (a) of this section and section 422 of the Health Care 
Quality Improvement Act of 1986 and section 1128E.

``SEC. 2134. STATE MEDIGRANT FRAUD CONTROL UNITS.

    ``(a) In General.--Each MediGrant plan shall provide for a State 
MediGrant fraud control unit described in subsection (b) that 
effectively carries out the functions and requirements described in 
such subsection, unless the State demonstrates to the satisfaction of 
the Secretary that the effective operation of such a unit in the State 
would not be cost-effective because minimal fraud exists in connection 
with the provision of covered services to eligible individuals under 
the plan, and that beneficiaries under the plan will be protected from 
abuse and neglect in connection with the provision of medical 
assistance under the plan without the existence of such a unit.
    ``(b) Units Described.--For purposes of this section, the term 
`State MediGrant fraud control unit' means a single identifiable entity 
of the State government which meets the following requirements:
        ``(1) Organization.--The entity--
            ``(A) is a unit of the office of the State Attorney General 
        or of another department of State government which possesses 
        statewide authority to prosecute individuals for criminal 
        violations;
            ``(B) is in a State the constitution of which does not 
        provide for the criminal prosecution of individuals by a 
        statewide authority and has formal procedures that--
                ``(i) assure its referral of suspected criminal 
            violations relating to the program under this title to the 
            appropriate authority or authorities in the State for 
            prosecution, and
                ``(ii) assure its assistance of, and coordination with, 
            such authority or authorities in such prosecutions; or
            ``(C) has a formal working relationship with the office of 
        the State Attorney General and has formal procedures (including 
        procedures for its referral of suspected criminal violations to 
        such office) which provide effective coordination of activities 
        between the entity and such office with respect to the 
        detection, investigation, and prosecution of suspected criminal 
        violations relating to the program under this title.
        ``(2) Independence.--The entity is separate and distinct from 
    any State agency that has principal responsibilities for 
    administering or supervising the administration of the MediGrant 
    plan.
        ``(3) Function.--The entity's function is conducting a 
    statewide program for the investigation and prosecution of 
    violations of all applicable State laws regarding any and all 
    aspects of fraud in connection with any aspect of the provision of 
    medical assistance and the activities of providers of such 
    assistance under the MediGrant plan.
        ``(4) Review of complaints.--The entity has procedures for 
    reviewing complaints of the abuse and neglect of patients of health 
    care facilities which receive payments under the MediGrant plan 
    under this title, and, where appropriate, for acting upon such 
    complaints under the criminal laws of the State or for referring 
    them to other State agencies for action.
        ``(5) Overpayments.--
            ``(A) In general.--The entity provides for the collection, 
        or referral for collection to a single State agency, of 
        overpayments that are made under the MediGrant plan to health 
        care providers and that are discovered by the entity in 
        carrying out its activities.
            ``(B) Treatment of certain overpayments.--If an overpayment 
        is the direct result of the failure of the provider (or the 
        provider's billing agent) to adhere to a change in the State's 
        billing instructions, the entity may recover the overpayment 
        only if the entity demonstrates that the provider (or the 
        provider's billing agent) received prior written or electronic 
        notice of the change in the billing instructions before the 
        submission of the claims on which the overpayment is based.
        ``(6) Personnel.--The entity employs such auditors, attorneys, 
    investigators, and other necessary personnel and is organized in 
    such a manner as is necessary to promote the effective and 
    efficient conduct of the entity's activities.

``SEC. 2135. RECOVERIES FROM THIRD PARTIES AND OTHERS.

    ``(a) Third Party Liability.--Each MediGrant plan shall provide for 
reasonable steps--
        ``(1) to ascertain the legal liability of third parties to pay 
    for care and services available under the plan, including the 
    collection of sufficient information to enable States to pursue 
    claims against third parties, and
        ``(2) to seek reimbursement for medical assistance provided to 
    the extent legal liability is established where the amount expected 
    to be recovered exceeds the costs of the recovery.
    ``(b) Beneficiary Protection.--
        ``(1) In general.--Each MediGrant plan shall provide that in 
    the case of a person furnishing services under the plan for which a 
    third party may be liable for payment--
            ``(A) the person may not seek to collect from the 
        individual (or financially responsible relative) payment of an 
        amount for the service more than could be collected under the 
        plan in the absence of such third party liability, and
            ``(B) may not refuse to furnish services to such an 
        individual because of a third party's potential liability for 
        payment for the service.
        ``(2) Penalty.--A MediGrant plan may provide for a reduction of 
    any payment amount otherwise due with respect to a person who 
    furnishes services under the plan in an amount equal to up to 3 
    times the amount of any payment sought to be collected by that 
    person in violation of paragraph (1)(A).
    ``(c) General Liability.--The State shall prohibit any health 
insurer, including a group health plan as defined in section 607 of the 
Employee Retirement Income Security Act of 1974, a service benefit 
plan, or a health maintenance organization, in enrolling an individual 
or in making any payments for benefits to the individual or on the 
individual's behalf, from taking into account that the individual is 
eligible for or is provided medical assistance under a MediGrant plan 
for any State.
    ``(d) Acquisition of Rights of Beneficiaries.--To the extent that 
payment has been made under a MediGrant plan in any case where a third 
party has a legal liability to make payment for such assistance, the 
State shall have in effect laws under which, to the extent that payment 
has been made under the plan for health care items or services 
furnished to an individual, the State is considered to have acquired 
the rights of such individual to payment by any other party for such 
health care items or services.
    ``(e) Assignment of Medical Support Rights.--The MediGrant plan 
shall provide for mandatory assignment of rights of payment for medical 
support and other medical care owed to recipients in accordance with 
section 2136.
    ``(f) Required Laws Relating to Medical Child Support.--
        ``(1) In general.--Each State with a MediGrant plan shall have 
    in effect the following laws:
            ``(A) A law that prohibits an insurer from denying 
        enrollment of a child under the health coverage of the child's 
        parent on the ground that--
                ``(i) the child was born out of wedlock,
                ``(ii) the child is not claimed as a dependent on the 
            parent's Federal income tax return, or
                ``(iii) the child does not reside with the parent or in 
            the insurer's service area.
            ``(B) In any case in which a parent is required by a court 
        or administrative order to provide health coverage for a child 
        and the parent is eligible for family health coverage through 
        an insurer, a law that requires such insurer--
                ``(i) to permit such parent to enroll under such family 
            coverage any such child who is otherwise eligible for such 
            coverage (without regard to any enrollment season 
            restrictions);
                ``(ii) if such a parent is enrolled but fails to make 
            application to obtain coverage of such child, to enroll 
            such child under such family coverage upon application by 
            the child's other parent or by the State agency 
            administering the program under this title or part D of 
            title IV; and
                ``(iii) not to disenroll, or eliminate coverage of, 
            such a child unless the insurer is provided satisfactory 
            written evidence that--

                    ``(I) such court or administrative order is no 
                longer in effect, or
                    ``(II) the child is or will be enrolled in 
                comparable health coverage through another insurer 
                which will take effect not later than the effective 
                date of such disenrollment.

            ``(C) In any case in which a parent is required by a court 
        or administrative order to provide health coverage for a child 
        and the parent is eligible for family health coverage through 
        an employer doing business in the State, a law that requires 
        such employer--
                ``(i) to permit such parent to enroll under such family 
            coverage any such child who is otherwise eligible for such 
            coverage (without regard to any enrollment season 
            restrictions);
                ``(ii) if such a parent is enrolled but fails to make 
            application to obtain coverage of such child, to enroll 
            such child under such family coverage upon application by 
            the child's other parent or by the State agency 
            administering the program under this title or part D of 
            title IV; and
                ``(iii) not to disenroll (or eliminate coverage of) any 
            such child unless--

                    ``(I) the employer is provided satisfactory written 
                evidence that such court or administrative order is no 
                longer in effect, or the child is or will be enrolled 
                in comparable health coverage which will take effect 
                not later than the effective date of such 
                disenrollment, or
                    ``(II) the employer has eliminated family health 
                coverage for all of its employees; and

                ``(iv) to withhold from such employee's compensation 
            the employee's share (if any) of premiums for health 
            coverage (except that the amount so withheld may not exceed 
            the maximum amount permitted to be withheld under section 
            303(b) of the Consumer Credit Protection Act), and to pay 
            such share of premiums to the insurer, except that the 
            Secretary may provide by regulation for appropriate 
            circumstances under which an employer may withhold less 
            than such employee's share of such premiums.
            ``(D) A law that prohibits an insurer from imposing 
        requirements on a State agency, which has been assigned the 
        rights of an individual eligible for medical assistance under 
        this title and covered for health benefits from the insurer, 
        that are different from requirements applicable to an agent or 
        assignee of any other individual so covered.
            ``(E) A law that requires an insurer, in any case in which 
        a child has health coverage through the insurer of a 
        noncustodial parent--
                ``(i) to provide such information to the custodial 
            parent as may be necessary for the child to obtain benefits 
            through such coverage,
                ``(ii) to permit the custodial parent (or provider, 
            with the custodial parent's approval) to submit claims for 
            covered services without the approval of the noncustodial 
            parent, and
                ``(iii) to make payment on claims submitted in 
            accordance with clause (ii) directly to such custodial 
            parent, the provider, or the State agency.
            ``(F) A law that permits the State agency under this title 
        to garnish the wages, salary, or other employment income of, 
        and requires withholding amounts from State tax refunds to, any 
        person who--
                ``(i) is required by court or administrative order to 
            provide coverage of the costs of health services to a child 
            who is eligible for medical assistance under this title,
                ``(ii) has received payment from a third party for the 
            costs of such services to such child, but
                ``(iii) has not used such payments to reimburse, as 
            appropriate, either the other parent or guardian of such 
            child or the provider of such services,
        to the extent necessary to reimburse the State agency for 
        expenditures for such costs under its plan under this title, 
        but any claims for current or past-due child support shall take 
        priority over any such claims for the costs of such services.
        ``(2) Definition.--For purposes of this subsection, the term 
    `insurer' includes a group health plan, as defined in section 
    607(1) of the Employee Retirement Income Security Act of 1974, a 
    health maintenance organization, and an entity offering a service 
    benefit plan.
    ``(g) Estate Recoveries and Liens Permitted.--A State may take such 
actions as it considers appropriate to adjust or recover from the 
individual or the individual's estate any amounts paid as medical 
assistance to or on behalf of the individual under the MediGrant plan, 
including through the imposition of liens against the property or 
estate of the individual.

``SEC. 2136. ASSIGNMENT OF RIGHTS OF PAYMENT.

    ``(a) In General.--For the purpose of assisting in the collection 
of medical support payments and other payments for medical care owed to 
recipients of medical assistance under the MediGrant plan, each 
MediGrant plan shall--
        ``(1) provide that, as a condition of eligibility for medical 
    assistance under the plan to an individual who has the legal 
    capacity to execute an assignment for himself, the individual is 
    required--
            ``(A) to assign the State any rights, of the individual or 
        of any other person who is eligible for medical assistance 
        under the plan and on whose behalf the individual has the legal 
        authority to execute an assignment of such rights, to support 
        (specified as support for the purpose of medical care by a 
        court or administrative order) and to payment for medical care 
        from any third party,
            ``(B) to cooperate with the State (i) in establishing the 
        paternity of such person (referred to in subparagraph (A)) if 
        the person is a child born out of wedlock, and (ii) in 
        obtaining support and payments (described in subparagraph (A)) 
        for himself and for such person, unless (in either case) the 
        individual is a pregnant woman or the individual is found to 
        have good cause for refusing to cooperate as determined by the 
        State, and
            ``(C) to cooperate with the State in identifying, and 
        providing information to assist the State in pursuing, any 
        third party who may be liable to pay for care and services 
        available under the plan, unless such individual has good cause 
        for refusing to cooperate as determined by the State; and
        ``(2) provide for entering into cooperative arrangements, 
    including financial arrangements, with any appropriate agency of 
    any State (including, with respect to the enforcement and 
    collection of rights of payment for medical care by or through a 
    parent, with a State's agency established or designated under 
    section 454(3)) and with appropriate courts and law enforcement 
    officials, to assist the agency or agencies administering the plan 
    with respect to--
            ``(A) the enforcement and collection of rights to support 
        or payment assigned under this section, and
            ``(B) any other matters of common concern.
    ``(b) Use of Amounts Collected.--Such part of any amount collected 
by the State under an assignment made under the provisions of this 
section shall be retained by the State as is necessary to reimburse it 
for medical assistance payments made on behalf of an individual with 
respect to whom such assignment was executed (with appropriate 
reimbursement of the Federal Government to the extent of its 
participation in the financing of such medical assistance), and the 
remainder of such amount collected shall be paid to such individual.

``SEC. 2137. QUALITY ASSURANCE REQUIREMENTS FOR NURSING FACILITIES.

    ``(a) Nursing Facility Defined.--In this title, the term `nursing 
facility' means an institution (or a distinct part of an institution) 
which--
        ``(1) is primarily engaged in providing to residents--
            ``(A) skilled nursing care and related services for 
        residents who require medical or nursing care,
            ``(B) rehabilitation services for the rehabilitation of 
        injured, disabled, or sick persons, or
            ``(C) on a regular basis, health-related care and services 
        to individuals who because of their mental or physical 
        condition require care and services (above the level of room 
        and board) which can be made available to them only through 
        institutional facilities,
    and is not primarily for the care and treatment of mental diseases;
        ``(2) has in effect a transfer agreement (meeting the 
    requirements of section 1861(l)) with one or more hospitals having 
    agreements in effect under section 1866; and
        ``(3) meets the requirements for a nursing facility described 
    in subsections (b), (c), and (d) of this section.
Such term also includes any facility which is located in a State on an 
Indian reservation and is certified by the Secretary as meeting the 
requirements of paragraph (1) and subsections (b), (c), and (d).
    ``(b) Requirements Relating to Provision of Services.--
        ``(1) Quality of life.--
            ``(A) In general.--A nursing facility must care for its 
        residents in such a manner and in such an environment as will 
        reasonably promote maintenance or enhancement of the quality of 
        life of each resident.
            ``(B) Quality assessment and assurance.--A nursing facility 
        must maintain a quality assessment and assurance committee, 
        consisting of the director of nursing services, a physician 
        designated by the facility, and at least 3 other members of the 
        facility's staff, which (i) meets at least quarterly to 
        identify issues with respect to which quality assessment and 
        assurance activities are necessary and (ii) develops and 
        implements appropriate plans of action to correct identified 
        quality deficiencies. A State or the Secretary may not require 
        disclosure of the records of such committee except insofar as 
        such disclosure is related to the compliance of such committee 
        with the requirements of this subparagraph.
        ``(2) Scope of services and activities under plan of care.--A 
    nursing facility must provide services and activities in accordance 
    with a written plan of care which--
            ``(A) describes the medical, nursing, and psychosocial 
        needs of the resident and how such needs will be met;
            ``(B) is initially prepared, with the participation to the 
        extent practicable of the resident or the resident's family or 
        legal representative, by a team which includes the resident's 
        attending physician and a registered professional nurse with 
        responsibility for the resident; and
            ``(C) is periodically reviewed and revised by such team 
        after each assessment under paragraph (3).
        ``(3) Residents' assessment.--
            ``(A) Requirement.--A nursing facility must conduct a 
        comprehensive, accurate, standardized, reproducible assessment 
        of each resident's functional capacity, which assessment--
                ``(i) describes the resident's capability to perform 
            daily life functions and significant impairments in 
            functional capacity;
                ``(ii) uses an instrument which is specified by the 
            State under subsection (e)(5); and
                ``(iii) includes the identification of medical 
            problems.
            ``(B) Certification.--
                ``(i) In general.--Each such assessment must be 
            conducted or coordinated (with the appropriate 
            participation of health professionals) by a registered 
            professional nurse who signs and certifies the completion 
            of the assessment. Each individual who completes a portion 
            of such an assessment shall sign and certify as to the 
            accuracy of that portion of the assessment.
                ``(ii) Penalty for falsification.--

                    ``(I) An individual who willfully and knowingly 
                certifies under clause (i) a material and false 
                statement in a resident assessment is subject to a 
                civil money penalty of not more than $1,000 with 
                respect to each assessment.
                    ``(II) An individual who willfully and knowingly 
                causes another individual to certify under clause (i) a 
                material and false statement in a resident assessment 
                is subject to a civil money penalty of not more than 
                $5,000 with respect to each assessment.
                    ``(III) The provisions of section 1128A (other than 
                subsections (a) and (b)) shall apply to a civil money 
                penalty under this clause in the same manner as such 
                provisions apply to a penalty or proceeding under 
                section 1128A(a).

                ``(iii) Use of independent assessors.--If a State 
            determines, under a survey under subsection (g) or 
            otherwise, that there has been a knowing and willful 
            certification of false assessments under this paragraph, 
            the State may require (for a period specified by the State) 
            that resident assessments under this paragraph be conducted 
            and certified by individuals who are independent of the 
            facility and who are approved by the State.
            ``(C) Frequency.--
                ``(i) In general.--Such an assessment must be 
            conducted--

                    ``(I) promptly upon (but no later than 14 days 
                after the date of) admission for each individual 
                admitted;
                    ``(II) promptly after a significant change in the 
                resident's physical or mental condition; and
                    ``(III) in no case less often than once every 12 
                months.

                ``(ii) Resident review.--The nursing facility must 
            examine each resident no less frequently than once every 3 
            months and, as appropriate, revise the resident's 
            assessment to assure the continuing accuracy of the 
            assessment.
            ``(D) Use.--The results of such an assessment shall be used 
        in developing, reviewing, and revising the resident's plan of 
        care under paragraph (2).
            ``(E) Coordination.--Such assessments shall be coordinated 
        with any State-required preadmission screening program to the 
        maximum extent practicable in order to avoid duplicative 
        testing and effort. In addition, a nursing facility shall 
        notify the State mental health authority or State mental 
        retardation or developmental disability authority, as 
        applicable, promptly after a significant change in the physical 
        or mental condition of a resident who is mentally ill or 
        mentally retarded.
        ``(4) Provision of services and activities.--
            ``(A) In general.--To the extent needed to fulfill all 
        plans of care described in paragraph (2), a nursing facility 
        must provide (or arrange for the provision of)--
                ``(i) nursing and related services and specialized 
            rehabilitative services;
                ``(ii) medically-related social services to attain or 
            maintain the highest practicable physical, mental, and 
            psychosocial well-being of residents;
                ``(iii) pharmaceutical services (including procedures 
            that assure the accurate acquiring, receiving, dispensing, 
            and administering of all drugs and biologicals) to meet the 
            needs of residents;
                ``(iv) dietary services that assure that the meals meet 
            the daily nutritional and special dietary needs of 
            residents;
                ``(v) an on-going program, directed by a qualified 
            professional, of activities designed to meet the interests 
            and the physical, mental, and psychosocial well-being of 
            residents; and
                ``(vi) routine dental services (to the extent covered 
            under the State MediGrant plan) and emergency dental 
            services to meet the needs of residents.
        The services provided or arranged by the facility must meet 
        professional standards of quality.
            ``(B) Qualified persons providing services.--Services 
        described in clauses (i), (ii), (iii), (iv), and (vi) of 
        subparagraph (A) must be provided by qualified persons in 
        accordance with each resident's written plan of care.
            ``(C) Required nursing care; facility waivers.--
                ``(i) General requirements.--A nursing facility--

                    ``(I) except as provided in clause (ii), must 
                provide 24-hour licensed nursing services which are 
                sufficient to meet the nursing needs of its residents, 
                and
                    ``(II) except as provided in clause (ii), must use 
                the services of a registered professional nurse for at 
                least 8 consecutive hours a day, 7 days a week.

                ``(ii) Waiver by state.--To the extent that a facility 
            is unable to meet the requirements of clause (i), a State 
            may waive such requirements with respect to the facility 
            if--

                    ``(I) the facility demonstrates to the satisfaction 
                of the State that the facility has been unable, despite 
                diligent efforts (including offering wages at the 
                community prevailing rate for nursing facilities), to 
                recruit appropriate personnel,
                    ``(II) the State determines that a waiver of the 
                requirement will not endanger the health or safety of 
                individuals staying in the facility,
                    ``(III) the State finds that, for any such periods 
                in which licensed nursing services are not available, a 
                registered professional nurse or a physician is 
                obligated to respond immediately to telephone calls 
                from the facility,
                    ``(IV) the State agency granting a waiver of such 
                requirements provides notice of the waiver to the State 
                long-term care ombudsman (established under section 
                307(a)(12) of the Older Americans Act of 1965) and the 
                protection and advocacy system in the State for the 
                mentally ill and the mentally retarded, and
                    ``(V) the nursing facility that is granted such a 
                waiver by a State notifies residents of the facility 
                (or, where appropriate, the guardians or legal 
                representatives of such residents) and members of their 
                immediate families of the waiver.

            A waiver under this clause shall be subject to annual 
            review and to the review of the Secretary and subject to 
            clause (iii) shall be accepted by the Secretary for 
            purposes of this title to the same extent as is the State's 
            certification of the facility. In granting or renewing a 
            waiver, a State may require the facility to use other 
            qualified, licensed personnel.
                ``(iii) Assumption of waiver authority by secretary.--
            If the Secretary determines that a State has shown a clear 
            pattern and practice of allowing waivers in the absence of 
            diligent efforts by facilities to meet the staffing 
            requirements, the Secretary shall assume and exercise the 
            authority of the State to grant waivers.
        ``(5) Required training of nurse aides.--
            ``(A) In general.--(i) Except as provided in clause (ii), a 
        nursing facility must not use on a full-time basis any 
        individual as a nurse aide in the facility, for more than 4 
        months unless the individual--
                ``(I) has completed a training and competency 
            evaluation program, or a competency evaluation program, 
            approved by the State under subsection (e)(1)(A), and
                ``(II) is competent to provide nursing or nursing-
            related services.
            ``(ii) A nursing facility must not use on a temporary, per 
        diem, leased, or on any other basis other than as a permanent 
        employee any individual as a nurse aide in the facility, unless 
        the individual meets the requirements described in clause (i).
            ``(B) Offering competency evaluation programs for current 
        employees.--A nursing facility must provide, for individuals 
        used as a nurse aide by the facility, for a competency 
        evaluation program approved by the State under subsection 
        (e)(1) and such preparation as may be necessary for the 
        individual to complete such a program.
            ``(C) Competency.--The nursing facility must not permit an 
        individual, other than in a training and competency evaluation 
        program approved by the State, to serve as a nurse aide or 
        provide services of a type for which the individual has not 
        demonstrated competency and must not use such an individual as 
        a nurse aide unless the facility has inquired of any State 
        registry established under subsection (e)(2)(A) that the 
        facility believes will include information concerning the 
        individual.
            ``(D) Re-training required.--For purposes of subparagraph 
        (A), if, since an individual's most recent completion of a 
        training and competency evaluation program, there has been a 
        continuous period of 24 consecutive months during none of which 
        the individual performed nursing or nursing-related services 
        for monetary compensation, such individual shall complete a new 
        training and competency evaluation program, or a new competency 
        evaluation program.
            ``(E) Regular in-service education.--The nursing facility 
        must provide such regular performance review and regular in-
        service education as assures that individuals used as nurse 
        aides are competent to perform services as nurse aides, 
        including training for individuals providing nursing and 
        nursing-related services to residents with cognitive 
        impairments.
            ``(F) Nurse aide defined.--In this paragraph, the term 
        `nurse aide' means any individual providing nursing or nursing-
        related services to residents in a nursing facility, but does 
        not include an individual--
                ``(i) who is a licensed health professional (as defined 
            in subparagraph (G)) or a registered dietician,
                ``(ii) who volunteers to provide such services without 
            monetary compensation, or
                ``(iii) who is trained, whether compensated or not, to 
            perform a task-specific function which assists residents in 
            their daily activities.
            ``(G) Licensed health professional defined.--In this 
        paragraph, the term `licensed health professional' means a 
        physician, physician assistant, nurse practitioner, physical, 
        speech, or occupational therapist, physical or occupational 
        therapy assistant, registered professional nurse, licensed 
        practical nurse, or licensed or certified social worker.
        ``(6) Physician supervision and clinical records.--A nursing 
    facility must--
            ``(A) require that the health care of every resident be 
        provided under the supervision of a physician (or, at the 
        option of a State, under the supervision of a nurse 
        practitioner, clinical nurse specialist, or physician assistant 
        who is not an employee of the facility but who is working in 
        collaboration with a physician);
            ``(B) provide for having a physician available to furnish 
        necessary medical care in case of emergency; and
            ``(C) maintain clinical records on all residents, which 
        records include the plans of care (described in paragraph (2)) 
        and the residents' assessments (described in paragraph (3)).
    ``(c) Requirements Relating to Residents' Rights.--
        ``(1) General rights.--
            ``(A) Specified rights.--A nursing facility must protect 
        and promote the rights of each resident, including each of the 
        following rights:
                ``(i) Free choice.--The right to choose a personal 
            attending physician, to be fully informed in advance about 
            care and treatment, to be fully informed in advance of any 
            changes in care or treatment that may affect the resident's 
            well-being, and (except with respect to a resident adjudged 
            incompetent) to participate in planning care and treatment 
            or changes in care and treatment.
                ``(ii) Free from restraints.--The right to be free from 
            physical or mental abuse, corporal punishment, involuntary 
            seclusion, and any physical or chemical restraints imposed 
            for purposes of discipline or convenience and not required 
            to treat the resident's medical symptoms. Restraints may 
            only be imposed--

                    ``(I) to ensure the physical safety of the resident 
                or other residents, and
                    ``(II) only upon the written order of a physician 
                that specifies the duration and circumstances under 
                which the restraints are to be used (except in 
                emergency circumstances specified by the Secretary 
                until such an order could reasonably be obtained).

                ``(iii) Privacy.--The right to privacy with regard to 
            accommodations, medical treatment, written and telephonic 
            communications, visits, and meetings of family and of 
            resident groups.
                ``(iv) Confidentiality.--The right to confidentiality 
            of personal and clinical records and to access to current 
            clinical records of the resident upon request by the 
            resident or the resident's legal representative, within 24 
            hours (excluding hours occurring during a weekend or 
            holiday) after making such a request.
                ``(v) Accommodation of needs.--The right--

                    ``(I) to reside and receive services with 
                reasonable accommodation of individual needs and 
                preferences, except where the health or safety of the 
                individual or other residents would be endangered, and
                    ``(II) to receive notice before the room or 
                roommate of the resident in the facility is changed 
                unless a delay in changing the room or roommate while 
                notice is given would endanger the resident or others.

                ``(vi) Grievances.--The right to voice grievances with 
            respect to treatment or care that is (or fails to be) 
            furnished, without discrimination or reprisal for voicing 
            the grievances and the right to prompt efforts by the 
            facility to resolve grievances the resident may have, 
            including those with respect to the behavior of other 
            residents.
                ``(vii) Participation in resident and family groups.--
            The right of the resident to organize and participate in 
            resident groups in the facility and the right of the 
            resident's family to meet in the facility with the families 
            of other residents in the facility.
                ``(viii) Participation in other activities.--The right 
            of the resident to participate in social, religious, and 
            community activities that do not interfere with the rights 
            of other residents in the facility.
                ``(ix) Examination of survey results.--The right to 
            examine, upon reasonable request, the results of the most 
            recent survey of the facility conducted by the Secretary or 
            a State with respect to the facility and any plan of 
            correction in effect with respect to the facility.
                ``(x) Other rights.--Any other right established by the 
            Secretary.
        Clause (iii) shall not be construed as requiring the provision 
        of a private room.
            ``(B) Notice of rights.--A nursing facility must--
                ``(i) inform each resident, orally and in writing at 
            the time of admission to the facility, of the resident's 
            legal rights during the stay at the facility and of the 
            requirements and procedures for establishing eligibility 
            for medical assistance under this title, including the 
            right to request an assessment under section 2115(c)(1)(B);
                ``(ii) make available to each resident, upon reasonable 
            request, a written statement of such rights (which 
            statement is updated upon changes in such rights) including 
            the notice (if any) of the State developed under subsection 
            (e)(6);
                ``(iii) inform each resident who is entitled to medical 
            assistance under this title--

                    ``(I) at the time of admission to the facility or, 
                if later, at the time the resident becomes eligible for 
                such assistance, of the items and services that are 
                included in nursing facility services under the State 
                MediGrant plan and for which the resident may not be 
                charged, and of those other items and services that the 
                facility offers and for which the resident may be 
                charged and the amount of the charges for such items 
                and services, and
                    ``(II) of changes in the items and services 
                described in subclause (I) and of changes in the 
                charges imposed for items and services described in 
                that subclause; and

                ``(iv) inform each other resident, in writing before or 
            at the time of admission and periodically during the 
            resident's stay, of services available in the facility and 
            of related charges for such services, including any charges 
            for services not covered under title XVIII or by the 
            facility's basic per diem charge.
        The written description of legal rights under this subparagraph 
        shall include a description of the protection of personal funds 
        under paragraph (6) and a statement that a resident may file a 
        complaint with a State survey and certification agency 
        respecting resident abuse and neglect and misappropriation of 
        resident property in the facility.
            ``(C) Rights of incompetent residents.--In the case of a 
        resident adjudged incompetent under the laws of a State, the 
        rights of the resident under this title shall devolve upon, 
        and, to the extent judged necessary by a court of competent 
        jurisdiction, be exercised by, the person appointed under State 
        law to act on the resident's behalf.
            ``(D) Use of psychopharmacologic drugs.--
        Psychopharmacologic drugs may be administered only on the 
        orders of a physician and only as part of a plan (included in 
        the written plan of care described in paragraph (2)) designed 
        to eliminate or modify the symptoms for which the drugs are 
        prescribed and only if, at least annually an independent, 
        external consultant reviews the appropriateness of the drug 
        plan of each resident receiving such drugs.
        ``(2) Transfer and discharge rights.--
            ``(A) In general.--A nursing facility must permit each 
        resident to remain in the facility and must not transfer or 
        discharge the resident from the facility unless--
                ``(i) the transfer or discharge is necessary to meet 
            the resident's welfare and the resident's welfare cannot be 
            met in the facility;
                ``(ii) the transfer or discharge is appropriate because 
            the resident's health has improved sufficiently so the 
            resident no longer needs the services provided by the 
            facility;
                ``(iii) the safety of individuals in the facility is 
            endangered;
                ``(iv) the health of individuals in the facility would 
            otherwise be endangered;
                ``(v) the resident has failed, after reasonable and 
            appropriate notice, to pay (or to have paid under this 
            title or title XVIII on the resident's behalf) for a stay 
            at the facility; or
                ``(vi) the facility ceases to operate.
        In each of the cases described in clauses (i) through (iv), the 
        basis for the transfer or discharge must be documented in the 
        resident's clinical record. In the cases described in clauses 
        (i) and (ii), the documentation must be made by the resident's 
        physician, and in the case described in clause (iv) the 
        documentation must be made by a physician. For purposes of 
        clause (v), in the case of a resident who becomes eligible for 
        assistance under this title after admission to the facility, 
        only charges which may be imposed under this title shall be 
        considered to be allowable.
            ``(B) Pre-transfer and pre-discharge notice.--
                ``(i) In general.--Before effecting a transfer or 
            discharge of a resident, a nursing facility must--

                    ``(I) notify the resident (and, if known, an 
                immediate family member of the resident or legal 
                representative) of the transfer or discharge and the 
                reasons therefor,
                    ``(II) record the reasons in the resident's 
                clinical record (including any documentation required 
                under subparagraph (A)), and
                    ``(III) include in the notice the items described 
                in clause (iii).

                ``(ii) Timing of notice.--The notice under clause 
            (i)(I) must be made at least 30 days in advance of the 
            resident's transfer or discharge except--

                    ``(I) in a case described in clause (iii) or (iv) 
                of subparagraph (A);
                    ``(II) in a case described in clause (ii) of 
                subparagraph (A), where the resident's health improves 
                sufficiently to allow a more immediate transfer or 
                discharge;
                    ``(III) in a case described in clause (i) of 
                subparagraph (A), where a more immediate transfer or 
                discharge is necessitated by the resident's urgent 
                medical needs;
                    ``(IV) in a case where a resident has not resided 
                in the facility for 30 days; or
                    ``(V) in a case where the provision of a 30-day 
                notice would be impossible or impracticable.

            In the case of such exceptions, notice must be given as 
            many days before the date of the transfer or discharge as 
            is practicable.
                ``(iii) Items included in notice.--Each notice under 
            clause (i) must include--

                    ``(I) notice of the resident's right to appeal the 
                transfer or discharge under the State process 
                established under subsection (e)(3);
                    ``(II) the name, mailing address, and telephone 
                number of the State long-term care ombudsman 
                (established under title III or VII of the Older 
                Americans Act of 1965);
                    ``(III) in the case of residents with developmental 
                disabilities, the mailing address and telephone number 
                of the agency responsible for the protection and 
                advocacy system for developmentally disabled 
                individuals established under part C of the 
                Developmental Disabilities Assistance and Bill of 
                Rights Act; and
                    ``(IV) in the case of mentally ill residents (as 
                defined in subsection (e)(7)(G)(i)), the mailing 
                address and telephone number of the agency responsible 
                for the protection and advocacy system for mentally ill 
                individuals established under the Protection and 
                Advocacy for Mentally Ill Individuals Act.

                ``(iv) Exception.--This subparagraph shall not apply to 
            a voluntary transfer or discharge or a transfer or 
            discharge necessitated by a medical emergency.
            ``(C) Orientation.--A nursing facility must provide 
        reasonable preparation and orientation to residents to promote 
        safe and orderly transfer or discharge from the facility.
            ``(D) Notice on bed-hold policy and readmission.--
                ``(i) Notice before transfer.--Before a resident of a 
            nursing facility is transferred for hospitalization or 
            therapeutic leave, a nursing facility must provide written 
            information to the resident and an immediate family member 
            or legal representative concerning--

                    ``(I) the provisions of the State MediGrant plan 
                under this title regarding the period (if any) during 
                which the resident will be permitted under the State 
                MediGrant plan to return and resume residence in the 
                facility, and
                    ``(II) the policies of the facility regarding such 
                a period, which policies must be consistent with clause 
                (iii).

                ``(ii) Notice upon transfer.--At the time of transfer 
            of a resident to a hospital or for therapeutic leave, a 
            nursing facility must provide written notice to the 
            resident and an immediate family member or legal 
            representative of the duration of any period described in 
            clause (i).
                ``(iii) Permitting resident to return.--A nursing 
            facility must establish and follow a written policy under 
            which a resident--

                    ``(I) who is eligible for medical assistance for 
                nursing facility services under a State MediGrant plan,
                    ``(II) who is transferred from the facility for 
                hospitalization or therapeutic leave, and
                    ``(III) whose hospitalization or therapeutic leave 
                exceeds a period paid for under the State MediGrant 
                plan for the holding of a bed in the facility for the 
                resident,

            will be permitted to be readmitted to the facility 
            immediately upon the first availability of a bed in a room 
            (not including a private room) in the facility if, at the 
            time of readmission, the resident requires the services 
            provided by the facility.
        ``(3) Access and visitation rights.--A nursing facility must--
            ``(A) permit immediate access to any resident by any 
        representative of the Secretary, by any representative of the 
        State, by an ombudsman or agency described in subclause (II), 
        (III), or (IV) of paragraph (2)(B)(iii), or by the resident's 
        individual physician;
            ``(B) permit immediate access to a resident, subject to the 
        resident's right to deny or withdraw consent at any time, by 
        immediate family or other relatives of the resident;
            ``(C) permit immediate access to a resident, subject to 
        reasonable restrictions and the resident's right to deny or 
        withdraw consent at any time, by others who are visiting with 
        the consent of the resident, unless such access would endanger 
        the health or safety of the resident or others in the facility;
            ``(D) permit reasonable access to a resident by any entity 
        or individual that provides health, social, legal, or other 
        services to the resident, subject to the resident's right to 
        deny or withdraw consent at any time; and
            ``(E) permit representatives of the State ombudsman 
        (described in paragraph (2)(B)(iii)(II)), with the permission 
        of the resident (or the resident's legal representative) and 
        consistent with State law, to examine a resident's clinical 
        records.
        ``(4) Equal access to quality care.--
            ``(A) In general.--A nursing facility must establish and 
        maintain identical policies and practices regarding transfer, 
        discharge, and the provision of services required under the 
        State MediGrant plan for all individuals regardless of source 
        of payment.
            ``(B) Construction.--
                ``(i) Nothing prohibiting any charges for non-medigrant 
            patients.--Subparagraph (A) shall not be construed as 
            prohibiting a nursing facility from charging any amount for 
            services furnished, consistent with the notice in paragraph 
            (1)(B) describing such charges.
                ``(ii) No additional services required.--Subparagraph 
            (A) shall not be construed as requiring a State to offer 
            additional services on behalf of a resident than are 
            otherwise provided under the State MediGrant plan.
        ``(5) Protection of resident funds.--
            ``(A) In general.--The nursing facility--
                ``(i) may not require residents to deposit their 
            personal funds with the facility, and
                ``(ii) upon the written authorization of the resident, 
            must hold, safeguard, and account for such personal funds 
            under a system established and maintained by the facility 
            in accordance with this paragraph.
            ``(B) Management of personal funds.--Upon written 
        authorization of a resident under subparagraph (A)(ii), the 
        facility must manage and account for the personal funds of the 
        resident deposited with the facility as follows:
                ``(i) Deposit.--The facility must deposit any amount of 
            personal funds in excess of $250 with respect to a resident 
            in an interest bearing account (or accounts) that is 
            separate from any of the facility's operating accounts and 
            credits all interest earned on such separate account to 
            such account. With respect to any other personal funds, the 
            facility must maintain such funds in a non-interest bearing 
            account or petty cash fund.
                ``(ii) Accounting and records.--The facility must 
            assure a full and complete accounting of each such 
            resident's personal funds, maintain a written record of all 
            financial transactions involving the personal funds of a 
            resident deposited with the facility, and afford the 
            resident (or a legal representative of the resident) 
            reasonable access to such record.
                ``(iii) Conveyance upon death.--Upon the death of a 
            resident with such an account, the facility must convey 
            promptly the resident's personal funds (and a final 
            accounting of such funds) to the individual administering 
            the resident's estate. All other personal property, 
            including medical records, shall be considered part of the 
            resident's estate and shall only be released to the 
            administrator of the estate.
            ``(C) Assurance of financial security.--The facility must 
        purchase a surety bond, or otherwise provide assurance 
        satisfactory to the State, to assure the security of all 
        personal funds of residents deposited with the facility.
            ``(D) Limitation on charges to personal funds.--The 
        facility may not impose a charge against the personal funds of 
        a resident for any item or service for which payment is made 
        under this title or title XVIII.
        ``(6) Limitation on charges in case of medigrant-eligible 
    individuals.--A nursing facility may not impose charges, for 
    certain MediGrant-eligible individuals for nursing facility 
    services covered by the State under its plan under this title, that 
    exceed the payment amounts established by the State for such 
    services under this title.
        ``(7) Posting of survey results.--A nursing facility must post 
    in a place readily accessible to residents, and family members and 
    legal representatives of residents, the results of the most recent 
    survey of the facility conducted under subsection (g).
    ``(d) Requirements Relating to Administration and Other Matters.--
        ``(1) Administration.--
            ``(A) In general.--A nursing facility must be administered 
        in a manner that enables it to use its resources effectively 
        and efficiently to attain or maintain the highest practicable 
        physical, mental, and psychosocial well-being of each resident 
        (consistent with requirements established under subsection 
        (f)(5)).
            ``(B) Required notices.--If a change occurs in--
                ``(i) the persons with an ownership or control interest 
            (as defined in section 1124(a)(3)) in the facility,
                ``(ii) the persons who are officers, directors, agents, 
            or managing employees (as defined in section 1126(b)) of 
            the facility,
                ``(iii) the corporation, association, or other company 
            responsible for the management of the facility, or
                ``(iv) the individual who is the administrator or 
            director of nursing of the facility,
        the nursing facility must provide notice to the State agency 
        responsible for the licensing of the facility, at the time of 
        the change, of the change and of the identity of each new 
        person, company, or individual described in the respective 
        clause.
            ``(C) Nursing facility administrator.--The administrator of 
        a nursing facility, whether freestanding or hospital-based, 
        must meet such standards as are established by the Secretary.
        ``(2) Licensing and life safety code.--
            ``(A) Licensing.--A nursing facility must be licensed under 
        applicable State and local law.
            ``(B) Life safety code.--A nursing facility must meet such 
        provisions of such edition (as specified by the Secretary in 
        regulation) of the Life Safety Code of the National Fire 
        Protection Association as are applicable to nursing homes; 
        except that--
                ``(i) the Secretary may waive, for such periods as he 
            deems appropriate, specific provisions of such Code which 
            if rigidly applied would result in unreasonable hardship 
            upon a facility, but only if such waiver would not 
            adversely affect the health and safety of residents or 
            personnel, and
                ``(ii) the provisions of such Code shall not apply in 
            any State if the Secretary finds that in such State there 
            is in effect a fire and safety code, imposed by State law, 
            which adequately protects residents of and personnel in 
            nursing facilities.
        ``(3) Sanitary and infection control and physical 
    environment.--A nursing facility must--
            ``(A) establish and maintain an infection control program 
        designed to provide a safe, sanitary, and comfortable 
        environment in which residents reside and to help prevent the 
        development and transmission of disease and infection, and
            ``(B) be designed, constructed, equipped, and maintained in 
        a manner to protect the health and safety of residents, 
        personnel, and the general public.
        ``(4) Miscellaneous.--
            ``(A) Compliance with federal, state, and local laws and 
        professional standards.--A nursing facility, whether 
        freestanding or hospital-based, must operate and provide 
        services in compliance with all applicable Federal, State, and 
        local laws and regulations (including the requirements of 
        section 1124) and with accepted professional standards and 
        principles which apply to professionals providing services in 
        such a facility.
            ``(B) Other.--A nursing facility must meet such other 
        requirements relating to the health and safety of residents or 
        relating to the physical facilities thereof as the Secretary 
        may find necessary.
    ``(e) State Requirements Relating to Nursing Facility 
Requirements.--A State with a MediGrant plan shall provide for the 
following:
        ``(1) Specification and review of nurse aide training and 
    competency evaluation programs and of nurse aide competency 
    evaluation programs.--The State must--
            ``(A) specify those training and competency evaluation 
        programs, and those competency evaluation programs, that the 
        State approves for purposes of subsection (b)(5) and that meet 
        the requirements established under subsection (f)(2), and
            ``(B) provide for the review and reapproval of such 
        programs, at a frequency and using a methodology consistent 
        with the requirements established under subsection 
        (f)(2)(A)(iii).
        ``(2) Nurse aide registry.--
            ``(A) In general.--The State shall establish and maintain a 
        registry of all individuals who have satisfactorily completed a 
        nurse aide training and competency evaluation program, or a 
        nurse aide competency evaluation program, approved under 
        paragraph (1) in the State, or any individual described in 
        subsection (f)(2)(B)(ii) or in subparagraph (B), (C), or (D) of 
        section 6901(b)(4) of the Omnibus Budget Reconciliation Act of 
        1989.
            ``(B) Information in registry.--The registry under 
        subparagraph (A) shall provide for the inclusion of specific 
        documented findings by a State under subsection (g)(1)(C) of 
        resident neglect or abuse or misappropriation of resident 
        property involving an individual listed in the registry, as 
        well as any brief statement of the individual disputing the 
        findings. The State shall make available to the public 
        information in the registry. In the case of inquiries to the 
        registry concerning an individual listed in the registry, any 
        information disclosed concerning such a finding shall also 
        include disclosure of any such statement in the registry 
        relating to the finding or a clear and accurate summary of such 
        a statement.
            ``(C) Prohibition against charges.--A State may not impose 
        any charges on a nurse aide relating to the registry 
        established and maintained under subparagraph (A).
        ``(3) State appeals process for transfers and discharges.--The 
    State must provide for a fair mechanism, meeting the guidelines 
    established under subsection (f)(3), for hearing appeals on 
    transfers and discharges of residents of such facilities.
        ``(4) Nursing facility administrator standards.--The State must 
    implement and enforce the nursing facility administrator standards 
    developed under subsection (f)(4) respecting the qualification of 
    administrators of nursing facilities. Any such standards 
    promulgated shall apply to administrators of hospital-based 
    facilities as well as administrators of freestanding facilities.
        ``(5) Specification of resident assessment instrument.--The 
    State shall specify the instrument to be used by nursing facilities 
    in the State in complying with the requirement of subsection 
    (b)(3)(A)(iii).
        ``(6) Notice of medigrant rights.--Each State shall develop 
    (and periodically update) a written notice of the rights and 
    obligations of residents of nursing facilities (and spouses of such 
    residents) under this title.
        ``(7) State requirements for preadmission screening and 
    resident review.--
            ``(A) Preadmission screening.--
                ``(i) In general.--The State must have in effect a 
            preadmission screening program, for identifying mentally 
            ill and mentally retarded individuals (as defined in 
            subparagraph (B)) who are admitted to nursing facilities.
                ``(ii) State requirement for resident review.--The 
            State shall notify the State mental health authority or the 
            State mental retardation or developmental disability 
            authority, as appropriate, of the individuals so 
            identified.
            ``(B) Definitions.--In this paragraph:
                ``(i) An individual is considered to be `mentally ill' 
            if the individual has a serious mental illness (as defined 
            by the Secretary in consultation with the National 
            Institute of Mental Health) and does not have a primary 
            diagnosis of dementia (including Alzheimer's disease or a 
            related disorder) or a diagnosis (other than a primary 
            diagnosis) of dementia and a primary diagnosis that is not 
            a serious mental illness.
                ``(ii) An individual is considered to be `mentally 
            retarded' if the individual is mentally retarded or a 
            person with a related condition.
    ``(f) Responsibilities Relating to Nursing Facility Requirements.--
        ``(1) General responsibility.--It is the duty and 
    responsibility of a State with a MediGrant plan under this title to 
    assure that requirements which govern the provision of care in 
    nursing facilities under the plan, and the enforcement of such 
    requirements, are adequate to protect the health, safety, welfare, 
    and rights of residents and to promote the effective and efficient 
    use of public moneys.
        ``(2) Requirements for nurse aide training and competency 
    evaluation programs and for nurse aide competency evaluation 
    programs.--For purposes of subsections (b)(5) and (e)(1)(A), the 
    State shall establish--
            ``(A) requirements for the approval of nurse aide training 
        and competency evaluation programs, including requirements 
        relating to (i) the areas to be covered in such a program 
        (including at least basic nursing skills, personal care skills, 
        recognition of mental health and social service needs, care of 
        cognitively impaired residents, basic restorative services, and 
        residents' rights) and content of the curriculum, (ii) minimum 
        hours of initial and ongoing training and retraining, (iii) 
        qualifications of instructors, and (iv) procedures for 
        determination of competency;
            ``(B) requirements for the approval of nurse aide 
        competency evaluation programs, including requirement relating 
        to the areas to be covered in such a program, including at 
        least basic nursing skills, personal care skills, recognition 
        of mental health and social service needs, care of cognitively 
        impaired residents, basic restorative services, and residents' 
        rights, and procedures for determination of competency;
            ``(C) requirements respecting the minimum frequency and 
        methodology to be used by a State in reviewing such programs' 
        compliance with the requirements for such programs; and
            ``(D) requirements, under both such programs, that--
                ``(i) provide procedures for determining competency 
            that permit a nurse aide, at the nurse aide's option, to 
            establish competency through procedures or methods other 
            than the passing of a written examination and to have the 
            competency evaluation conducted at the nursing facility at 
            which the aide is (or will be) employed, and
                ``(ii) prohibit the imposition on a nurse aide who is 
            employed by (or who has received an offer of employment 
            from) a facility on the date on which the aide begins 
            either such program of any charges (including any charges 
            for textbooks and other required course materials and any 
            charges for the competency evaluation) for either such 
            program.
        ``(3) Qualification of administrators.--For purposes of 
    subsections (d)(1)(C) and (e)(4), the State shall develop standards 
    to be applied in assuring the qualifications of administrators of 
    nursing facilities. Any such standards must apply to administrators 
    of hospital-based facilities as well as administrators of 
    freestanding facilities.
    ``(g) Survey and Certification Process.--
        ``(1) State and federal responsibility.--
            ``(A) In general.--Under each State MediGrant plan under 
        this title, the State shall be responsible for certifying, in 
        accordance with surveys conducted under paragraph (2), the 
        compliance of nursing facilities with the requirements of 
        subsections (b), (c), and (d). The Secretary shall be 
        responsible for certifying, in accordance with surveys 
        conducted under paragraph (2), the compliance of State nursing 
        facilities with the requirements of such subsections.
            ``(B) Investigation of allegations of resident neglect and 
        abuse and misappropriation of resident property.--The State 
        shall provide, through the agency responsible for surveys and 
        certification of nursing facilities under this subsection, for 
        a process for the receipt and timely review and investigation 
        of allegations of neglect and abuse and misappropriation of 
        resident property by a nurse aide of a resident in a nursing 
        facility or by another individual used by the facility in 
        providing services to such a resident. The State shall, after 
        notice to the individual involved and a reasonable opportunity 
        for a hearing for the individual to rebut allegations, make a 
        finding as to the accuracy of the allegations. If the State 
        finds that a nurse aide has neglected or abused a resident or 
        misappropriated resident property in a facility, the State 
        shall notify the nurse aide and the registry of such finding. 
        If the State finds that any other individual used by the 
        facility has neglected or abused a resident or misappropriated 
        resident property in a facility, the State shall notify the 
        appropriate licensure authority. A State shall not make a 
        finding that an individual has neglected a resident if the 
        individual demonstrates that such neglect was caused by factors 
        beyond the control of the individual.
        ``(2) Surveys.--
            ``(A) Annual standard survey.--
                ``(i) In general.--Each nursing facility shall be 
            subject to a standard survey, to be conducted without any 
            prior notice to the facility. Any individual who notifies 
            (or causes to be notified) a nursing facility of the time 
            or date on which such a survey is scheduled to be conducted 
            is subject to a civil money penalty of not to exceed 
            $2,000. The provisions of section 1128A (other than 
            subsections (a) and (b)) shall apply to a civil money 
            penalty under the previous sentence in the same manner as 
            such provisions apply to a penalty or proceeding under 
            section 1128A(a). The State shall take all reasonable steps 
            to avoid giving notice of such a survey through the 
            scheduling procedures and the conduct of the surveys 
            themselves.
                ``(ii) Contents.--Each standard survey shall include, 
            for a case-mix stratified sample of residents--

                    ``(I) a survey of the quality of care furnished, as 
                measured by indicators of medical, nursing, and 
                rehabilitative care, dietary and nutrition services, 
                activities and social participation, and sanitation, 
                infection control, and the physical environment,
                    ``(II) written plans of care provided under 
                subsection (b)(2) and an audit of the residents' 
                assessments under subsection (b)(3) to determine the 
                accuracy of such assessments and the adequacy of such 
                plans of care, and
                    ``(III) a review of compliance with residents' 
                rights under subsection (c).

                ``(iii) Frequency.--

                    ``(I) In general.--Each nursing facility shall be 
                subject to a standard survey not later than 24 months 
                after the date of the previous standard survey 
                conducted under this subparagraph, except that in the 
                case of a facility which has been subjected to an 
                extended survey under subparagraph (B), a standard 
                survey shall be conducted not later than 12 months 
                after the date of the preceding extended survey.
                    ``(II) Special surveys.--If not otherwise conducted 
                under subclause (I), a standard survey (or an 
                abbreviated standard survey) may be conducted within 4 
                months of any change of ownership, administration, 
                management of a nursing facility, or director of 
                nursing in order to determine whether the change has 
                resulted in any decline in the quality of care 
                furnished in the facility.

            ``(B) Extended surveys.--
                ``(i) In general.--Each nursing facility which is 
            found, under a standard survey, to have provided 
            substandard quality of care shall be subject to an extended 
            survey. Any other facility may, at the State's discretion, 
            be subject to such an extended survey (or a partial 
            extended survey).
                ``(ii) Timing.--The extended survey shall be conducted 
            immediately after the standard survey (or, if not 
            practicable, not later than 2 weeks after the date of 
            completion of the standard survey).
                ``(iii) Contents.--In such an extended survey, the 
            survey team shall review and identify the policies and 
            procedures which produced such substandard quality of care 
            and shall determine whether the facility has complied with 
            all the requirements described in subsections (b), (c), and 
            (d). Such review shall include an expansion of the size of 
            the sample of residents' assessments reviewed and a review 
            of the staffing, of in-service training, and, if 
            appropriate, of contracts with consultants.
                ``(iv) Construction.--Nothing in this paragraph shall 
            be construed as requiring an extended or partial extended 
            survey as a prerequisite to imposing a sanction against a 
            facility under subsection (h) on the basis of findings in a 
            standard survey.
            ``(C) Survey protocol.--Standard and extended surveys shall 
        be conducted--
                ``(i) based upon the protocol which the Secretary has 
            developed, tested, and validated, as of the date of the 
            enactment of this title, and
                ``(ii) by individuals, of a survey team, who meet such 
            minimum qualifications as the State establishes.
            ``(D) Consistency of surveys.--Each State shall implement 
        programs to measure and reduce inconsistency in the application 
        of survey results among surveyors.
            ``(E) Survey teams.--
                ``(i) In general.--Surveys under this subsection shall 
            be conducted by a multidisciplinary team of professionals 
            (including a registered professional nurse).
                ``(ii) Prohibition of conflicts of interest.--A State 
            may not use as a member of a survey team under this 
            subsection an individual who is serving (or has served 
            within the previous 2 years) as a member of the staff of, 
            or as a consultant to, the facility surveyed respecting 
            compliance with the requirements of subsections (b), (c), 
            and (d), or who has a personal or familial financial 
            interest in the facility being surveyed.
        ``(3) Validation surveys.--
            ``(A) In general.--The Secretary shall conduct onsite 
        surveys of a representative sample of nursing facilities in 
        each State, within 4 months of the date of surveys conducted 
        under paragraph (2) by the State, in a sufficient number to 
        allow inferences about the adequacies of each State's surveys 
        conducted under paragraph (2). In conducting such surveys, the 
        Secretary shall use the same survey protocols as the State is 
        required to use under paragraph (2). If the State has 
        determined that an individual nursing facility meets the 
        requirements of subsections (b), (c), and (d), but the 
        Secretary determines that the facility does not meet such 
        requirements, the Secretary's determination as to the 
        facility's noncompliance with such requirements is binding and 
        supersedes that of the State survey.
            ``(B) Scope.--With respect to each State, the Secretary 
        shall conduct surveys under subparagraph (A) at least every 
        third year with respect to at least 5 percent of the number of 
        nursing facilities surveyed by the State in the year, but in no 
        case less than 5 nursing facilities in the State.
            ``(C) Special surveys of compliance.--Where the Secretary 
        has found substantial evidence of a pattern of noncompliance by 
        a nursing facility with any of the requirements of subsections 
        (b), (c), and (d), the Secretary may conduct a survey of the 
        facility and, on the basis of that survey, make determinations 
        concerning the extent to which the nursing facility meets such 
        requirements.
        ``(4) Investigation of complaints and monitoring nursing 
    facility compliance.--Each State shall maintain procedures and 
    adequate staff to--
            ``(A) investigate complaints of violations of requirements 
        by nursing facilities, and
            ``(B) monitor, on-site, on a regular, as needed basis, a 
        nursing facility's compliance with the requirements of 
        subsections (b), (c), and (d), if--
                ``(i) the facility has been found not to be in 
            compliance with such requirements and is in the process of 
            correcting deficiencies to achieve such compliance;
                ``(ii) the facility was previously found not to be in 
            compliance with such requirements, has corrected 
            deficiencies to achieve such compliance, and verification 
            of continued compliance is indicated; or
                ``(iii) the State has reason to question the compliance 
            of the facility with such requirements.
        ``(5) Disclosure of results of inspections and activities.--
            ``(A) Public information.--Each State, and the Secretary, 
        shall make available to the public--
                ``(i) information respecting all surveys and 
            certifications made respecting nursing facilities, 
            including statements of deficiencies, within a reasonable 
            time after such information is made available to those 
            facilities, and approved plans of correction,
                ``(ii) copies of cost reports of such facilities filed 
            under this title or under title XVIII,
                ``(iii) copies of statements of ownership under section 
            1124, and
                ``(iv) information disclosed under section 1126.
            ``(B) Notice to ombudsman.--Each State shall notify the 
        State long-term care ombudsman (established under title III or 
        VII of the Older Americans Act of 1965 in accordance with 
        section 712 of the Act) of the State's findings of 
        noncompliance with any of the requirements of subsections (b), 
        (c), and (d), or of any adverse action taken against a nursing 
        facility under paragraphs (1), (2), or (3) of subsection (h), 
        with respect to a nursing facility in the State.
            ``(C) Notice to physicians and nursing facility 
        administrator licensing board.--If a State finds that a nursing 
        facility has provided substandard quality of care, the State 
        shall notify--
                ``(i) the attending physician of each resident with 
            respect to which such finding is made, and
                ``(ii) any State board responsible for the licensing of 
            the nursing facility administrator of the facility.
            ``(D) Access to fraud control units.--Each State shall 
        provide its State MediGrant fraud and abuse control unit 
        (established under section 2134) with access to all information 
        of the State agency responsible for surveys and certifications 
        under this subsection.
    ``(h) Enforcement Process.--
        ``(1) In general.--If a State finds, on the basis of a 
    standard, extended, or partial extended survey under subsection 
    (g)(2) or otherwise, that a nursing facility no longer meets a 
    requirement of subsection (b), (c), or (d)--
            ``(A) the State shall require the facility to correct the 
        deficiency involved;
            ``(B) if the State finds that the facility's deficiencies 
        immediately jeopardize the health or safety of its residents, 
        the State shall take immediate action to remove the jeopardy 
        and correct the deficiencies through the remedy specified in 
        paragraph (2)(A)(iii), or terminate the facility's 
        participation under the State MediGrant plan and may provide, 
        in addition, for one or more of the other remedies described in 
        paragraph (2); and
            ``(C) if the State finds that the facility's deficiencies 
        do not immediately jeopardize the health or safety of its 
        residents, the State may--
                ``(i) terminate the facility's participation under the 
            State MediGrant plan,
                ``(ii) provide for one or more of the remedies 
            described in paragraph (2), or
                ``(iii) do both.
        ``(2) Specified remedies.--
            ``(A) Listing.--Except as provided in subparagraph (B), 
        each State shall establish by law (whether statute or 
        regulation) at least the following remedies:
                ``(i) Denial of payment under the State MediGrant plan 
            with respect to any individual admitted to the nursing 
            facility involved after such notice to the public and to 
            the facility as may be provided for by the State.
                ``(ii) A civil money penalty assessed and collected, 
            with interest, for each day in which the facility is or was 
            out of compliance with a requirement of subsection (b), 
            (c), or (d).
                ``(iii) The appointment of temporary management to 
            oversee the operation of the facility and to assure the 
            health and safety of the facility's residents, where there 
            is a need for temporary management while--

                    ``(I) there is an orderly closure of the facility, 
                or
                    ``(II) improvements are made in order to bring the 
                facility into compliance with all the requirements of 
                subsections (b), (c), and (d).

            The temporary management under this clause shall not be 
            terminated under subclause (II) until the State has 
            determined that the facility has the management capability 
            to ensure continued compliance with all the requirements of 
            subsections (b), (c), and (d).
                ``(iv) The authority, in the case of an emergency, to 
            close the facility, to transfer residents in that facility 
            to other facilities, or both.
        The State also shall specify criteria, as to when and how each 
        of such remedies is to be applied, the amounts of any fines, 
        and the severity of each of these remedies, to be used in the 
        imposition of such remedies.
            ``(B) Alternative remedies.--A State may establish 
        alternative remedies to the remedies described in subparagraph 
        (A), if the State demonstrates to the Secretary's satisfaction 
        that the alternative remedies are as effective in deterring 
        noncompliance and correcting deficiencies as those described in 
        such subparagraph.
            ``(C) Assuring prompt compliance.--If a nursing facility 
        has not complied with any of the requirements of subsections 
        (b), (c), and (d), within 3 months after the date the facility 
        is found to be out of compliance with such requirements, the 
        State may impose the remedy described in subparagraph (A)(i) 
        for all individuals who are admitted to the facility after such 
        date.
            ``(D) Repeated noncompliance.--In the case of a nursing 
        facility which, on 3 consecutive standard surveys conducted 
        under subsection (g)(2), has been found to have provided 
        substandard quality of care, the State shall (regardless of 
        what other remedies are provided)--
                ``(i) impose the remedy described in subparagraph 
            (A)(i), and
                ``(ii) monitor the facility under subsection (g)(4)(B),
        until the facility has demonstrated, to the satisfaction of the 
        State, that it is in compliance with the requirements of 
        subsections (b), (c), and (d), and that it will remain in 
        compliance with such requirements.
        ``(3) Secretarial authority.--
            ``(A) For state nursing facilities.--With respect to a 
        State nursing facility, the Secretary shall have the authority 
        and duties of a State under this subsection. Nothing in this 
        subparagraph shall be construed as restricting the remedies 
        available to the Secretary to remedy a nursing facility's 
        deficiencies.
            ``(B) Other nursing facilities.--With respect to any other 
        nursing facility in a State, if the Secretary finds that a 
        nursing facility no longer meets a requirement of subsection 
        (b), (c), or (d), the Secretary shall notify the State of such 
        deficiency. If, after a reasonable period of time after such 
        notification is given, the Secretary finds that the State has 
        failed to carry out the requirements of paragraph (1)(A) or 
        paragraph (1)(B) (if appropriate) with respect to the 
        deficiency involved, or that the deficiency remains 
        uncorrected--
                ``(i) the Secretary shall require the facility to 
            correct the deficiency involved;
                ``(ii) if the Secretary finds that the deficiency 
            involved immediately jeopardizes the health or safety of 
            its residents, the Secretary shall, in consultation with 
            the State, take action to remove the jeopardy and correct 
            the deficiencies through the remedy specified in 
            subparagraph (C)(iii), or terminate the facility's 
            participation under the State MediGrant plan and may 
            provide, in addition, for one or more of the other remedies 
            described in subparagraph (C); and
                ``(iii) in the case of a deficiency that remains 
            uncorrected, if the Secretary finds that the deficiency 
            involved does not immediately jeopardize the health or 
            safety of its residents, the Secretary may impose any of 
            the remedies described in subparagraph (C).
            ``(C) Specified remedies.--The remedies specified in this 
        subparagraph are as follows:
                ``(i) Denial of payment.--Denial of any further 
            payments to the State in accordance with section 2154(f) 
            for medical assistance furnished by the facility to all 
            individuals in the facility or to individuals admitted to 
            the facility after the effective date of the finding.
                ``(ii) Authority with respect to civil money 
            penalties.--Imposition of a civil money penalty against the 
            facility in an amount not to exceed $5,000 for each day of 
            noncompliance. The provisions of section 1128A (other than 
            subsections (a) and (b)) shall apply to a civil money 
            penalty under the previous sentence in the same manner as 
            such provisions apply to a penalty or proceeding under 
            section 1128A(a).
                ``(iii) Appointment of temporary management.--
            Appointment of temporary management (in consultation with 
            the State) to oversee the operation of the facility and to 
            assure the health and safety of the facility's residents, 
            where there is a need for temporary management while--

                    ``(I) there is an orderly closure of the facility, 
                or
                    ``(II) improvements are made in order to bring the 
                facility into compliance with all the requirements of 
                subsections (b), (c), and (d).

            The temporary management under this clause shall not be 
            terminated under subclause (II) until the Secretary has 
            determined that the facility has the management capability 
            to ensure continued compliance with all the requirements of 
            subsections (b), (c), and (d).
        The Secretary shall specify criteria, as to when and how each 
        of such remedies is to be applied, the amounts of any fines, 
        and the severity of each of these remedies, to be used in the 
        imposition of such remedies.
        ``(4) Special rules regarding payments to facilities.--
            ``(A) Continuation of payments pending remediation.--The 
        State or the Secretary, as appropriate, may continue payments, 
        over a period of not longer than 6 months after the effective 
        date of the findings, under this title with respect to a 
        nursing facility not in compliance with a requirement of 
        subsection (b), (c), or (d).
            ``(B) Effective period of denial of payment.--A finding to 
        deny payment under this subsection shall terminate when the 
        State or Secretary (as the case may be) finds that the facility 
        is in substantial compliance with all the requirements of 
        subsections (b), (c), and (d).
        ``(5) Construction.--The remedies provided under this 
    subsection are in addition to those otherwise available under 
    Federal or State law and shall not be construed as limiting such 
    other remedies, including any remedy available to an individual at 
    common law. The provisions of this subsection shall apply to a 
    nursing facility (or portion thereof) notwithstanding that the 
    facility (or portion thereof) also is a skilled nursing facility 
    for purposes of title XVIII or is accredited by an entity pursuant 
    to subsection (i)(2).
        ``(6) Sharing of information.--Notwithstanding any other 
    provision of law, all information concerning nursing facilities 
    required by this section to be filed with the Secretary or a State 
    agency shall be made available by such facilities to Federal or 
    State employees for purposes consistent with the effective 
    administration of programs established under this title and title 
    XVIII, including investigations by State MediGrant fraud control 
    units.
    ``(i) Construction.--
        ``(1) Medicare requirements.--Where requirements or obligations 
    under this section are identical to those provided under section 
    1819 of this Act, the fulfillment of those requirements or 
    obligations under section 1819 shall be considered to be the 
    fulfillment of the corresponding requirements or obligations under 
    this section.
        ``(2) Effect of accreditation.--
            ``(A) In general.--At the option of a State, or the 
        Secretary, as appropriate, if a nursing facility in the State 
        is accredited by a national accrediting entity meeting such 
        standards as the State or the Secretary may impose, such 
        facility shall be deemed to have met the requirements of this 
        section and the State shall be deemed to have met the survey 
        and certification requirements under subsection (g).
            ``(B) Requirement for accrediting entity.--A State or the 
        Secretary, as appropriate, may not find that an accrediting 
        entity meets standards under subparagraph (A) unless such 
        entity applies standards for accreditation for facilities that 
        meet or exceed the requirements of this section.

``SEC. 2138. OTHER PROVISIONS PROMOTING PROGRAM INTEGRITY.

    ``(a) Public Access to Survey Results.--Each MediGrant plan shall 
provide that upon completion of a survey of any health care facility or 
organization by a State agency to carry out the plan, the agency shall 
make public in readily available form and place the pertinent findings 
of the survey relating to the compliance of the facility or 
organization with requirements of law.
    ``(b) Record Keeping.--Each MediGrant plan shall provide for 
agreements with persons or institutions providing services under the 
plan under which the person or institution agrees--
        ``(1) to keep such records, including ledgers, books, and 
    original evidence of costs, as are necessary to fully disclose the 
    extent of the services provided to individuals receiving assistance 
    under the plan, and
        ``(2) to furnish the State agency with such information 
    regarding any payments claimed by such person or institution for 
    providing services under the plan, as the State agency may from 
    time to time request.
    ``(c) Quality Assurance.--Each MediGrant plan shall provide a 
program to assure the quality of services provided under the plan, 
including such services provided to individuals with chronic mental or 
physical illness.

        ``Part E--Establishment and Amendment of MediGrant Plans

``SEC. 2151. SUBMITTAL AND APPROVAL OF MEDIGRANT PLANS.

    ``(a) Submittal.--As a condition of receiving funding under part C, 
each State shall submit to the Secretary a MediGrant plan that meets 
the applicable requirements of this title.
    ``(b) Approval.--Except as the Secretary may provide under section 
2154, a MediGrant plan submitted under subsection (a)--
        ``(1) shall be approved for purposes of this title, and
        ``(2) shall be effective beginning with a calendar quarter that 
    is specified in the plan, but in no case earlier than the first 
    calendar quarter that begins at least 60 days after the date the 
    plan is submitted.

``SEC. 2152. SUBMITTAL AND APPROVAL OF PLAN AMENDMENTS.

    ``(a) Submittal of Amendments.--A State may amend, in whole or in 
part, its MediGrant plan at any time through transmittal of a plan 
amendment under this section.
    ``(b) Approval.--Except as the Secretary may provide under section 
2154, an amendment to a MediGrant plan submitted under subsection (a)--
        ``(1) shall be approved for purposes of this title, and
        ``(2) shall be effective as provided in subsection (c).
    ``(c) Effective Dates for Amendments.--
        ``(1) In general.--Subject to the succeeding provisions of this 
    subsection, an amendment to a MediGrant plan shall take effect on 
    one or more effective dates specified in the amendment.
        ``(2) Amendments relating to eligibility or benefits.--Except 
    as provided in paragraph (4)--
            ``(A) Notice requirement.--Any plan amendment that 
        eliminates or restricts eligibility or benefits under the plan 
        may not take effect unless the State certifies that it has 
        provided prior or contemporaneous public notice of the change, 
        in a form and manner provided under applicable State law.
            ``(B) Timely transmittal.--Any plan amendment that 
        eliminates or restricts eligibility or benefits under the plan 
        shall not be effective for longer than a 60-day period unless 
        the amendment has been transmitted to the Secretary before the 
        end of such period.
        ``(3) Other amendments.--Subject to paragraph (4), any plan 
    amendment that is not described in paragraph (2) becomes effective 
    in a State fiscal year may not remain in effect after the end of 
    such fiscal year (or, if later, the end of the 90-day period on 
    which it becomes effective) unless the amendment has been 
    transmitted to the Secretary.
        ``(4) Exception.--The requirements of paragraphs (2) and (3) 
    shall not apply to a plan amendment that is submitted on a timely 
    basis pursuant to a court order or an order of the Secretary.

``SEC. 2153. PROCESS FOR STATE WITHDRAWAL FROM PROGRAM.

    ``(a) In General.--A State may rescind its MediGrant plan and 
discontinue participation in the program under this title at any time 
after providing--
        ``(1) the public with 90 days prior notice in a publication in 
    one or more daily newspapers of general circulation in the State or 
    in any publication used by the State to publish State statutes or 
    rules, and
        ``(2) the Secretary with 90 days prior written notice.
    ``(b) Effective Date.--Such discontinuation shall not apply to 
payments under part C for expenditures made for items and services 
furnished under the MediGrant plan before the effective date of the 
discontinuation.
    ``(c) Proration of Allotments.--In the case of any withdrawal under 
this section other than at the end of a Federal fiscal year, 
notwithstanding any provision of section 2121 to the contrary, the 
Secretary shall provide for such appropriate proration of the 
application of allotments under section 2121 as is appropriate.

``SEC. 2154. SANCTIONS FOR NONCOMPLIANCE.

    ``(a) Prompt Review of Plan Submittals.--The Secretary shall 
promptly review MediGrant plans and plan amendments submitted under 
this part to determine if they substantially comply with the 
requirements of this title.
    ``(b) Determinations of Substantial Noncompliance.--
        ``(1) At time of plan or amendment submittal.--
            ``(A) In general.--If the Secretary, during the 30-day 
        period beginning on the date of submittal of a MediGrant plan 
        or plan amendment--
                ``(i) determines that the plan or amendment 
            substantially violates (within the meaning of subsection 
            (c)) a requirement of this title, and
                ``(ii) provides written notice of such determination to 
            the State,
        the Secretary shall issue an order specifying that the plan or 
        amendment, insofar as it is in substantial violation of such a 
        requirement, shall not be effective, except as provided in 
        subsection (c), beginning at the end of a period of not less 
        than 30 days (or 120 days in the case of the initial submission 
        of the MediGrant plan) specified in the order beginning on the 
        date of the notice of the determination.
            ``(B) Extension of time periods.--The time periods 
        specified in subparagraph (A) may be extended by written 
        agreement of the Secretary and the State involved.
        ``(2) Violations in administration of plan.--
            ``(A) In general.--If the Secretary determines, after 
        reasonable notice and opportunity for a hearing for the State, 
        that in the administration of a MediGrant plan there is a 
        substantial violation of a requirement of this title, the 
        Secretary shall provide the State with written notice of the 
        determination and with an order to remedy such violation. Such 
        an order shall become effective prospectively, as specified in 
        the order, after the date of receipt of such written notice. 
        Such an order may include the withholding of funds, consistent 
        with subsection (f), for parts of the MediGrant plan affected 
        by such violation, until the Secretary is satisfied that the 
        violation has been corrected.
            ``(B) Effectiveness.--If the Secretary issues an order 
        under paragraph (1), the order shall become effective, except 
        as provided in subsection (c), beginning at the end of a period 
        (of not less than 30 days) specified in the order beginning on 
        the date of the notice of the determination to the State.
            ``(C) Timeliness of determinations relating to report-based 
        compliance.--The Secretary shall make determinations under this 
        paragraph respecting violations relating to information 
        contained in an annual report under section 2102, an 
        independent evaluation under section 2103, or an audit report 
        under section 2131 not later than 30 days after the date of 
        transmittal of the report or evaluation to the Secretary.
        ``(3) Consultation with state.--Before making a determination 
    adverse to a State under this section, the Secretary shall (within 
    any time periods provided under this section)--
            ``(A) reasonably consult with the State involved,
            ``(B) offer the State a reasonable opportunity to clarify 
        the submission and submit further information to substantiate 
        compliance with the requirements of this title, and
            ``(C) reasonably consider any such clarifications and 
        information submitted.
        ``(4) Justification of any inconsistencies in determinations.--
    If the Secretary makes a determination under this section that is, 
    in whole or in part, inconsistent with any previous determination 
    issued by the Secretary under this title, the Secretary shall 
    include in the determination a detailed explanation and 
    justification for any such difference.
        ``(5) Substantial violation defined.--For purposes of this 
    title, a MediGrant plan (or amendment to such a plan) or the 
    administration of the MediGrant plan is considered to 
    `substantially violate' a requirement of this title if a provision 
    of the plan or amendment (or an omission from the plan or 
    amendment) or the administration of the plan--
            ``(A) is material and substantial in nature and effect, and
            ``(B) is inconsistent with an express requirement of this 
        title.
    A failure to meet a strategic objective or performance goal (as 
    described in section 2101) shall not be considered to substantially 
    violate a requirement of this title.
    ``(c) State Response to Orders.--
        ``(1) State response by revising plan.--
            ``(A) In general.--Insofar as an order under subsection 
        (b)(1) relates to a substantial violation by a MediGrant plan 
        or plan amendment, a State may respond (before the date the 
        order becomes effective) to such an order by submitting a 
        written revision of the MediGrant plan or plan amendment to 
        substantially comply with the requirements of this part.
            ``(B) Review of revision.--In the case of submission of 
        such a revision, the Secretary shall promptly review the 
        submission and shall withhold any action on the order during 
        the period of such review.
            ``(C) Secretarial response.--The revision shall be 
        considered to have corrected the deficiency (and the order 
        rescinded insofar as it relates to such deficiency) unless the 
        Secretary determines and notifies the State in writing, within 
        15 days after the date the Secretary receives the revision, 
        that the MediGrant plan or amendment, as proposed to be 
        revised, still substantially violates a requirement of this 
        title. In such case the State may respond by seeking 
        reconsideration or a hearing under paragraph (2).
            ``(D) Revision retroactive.--If the revision provides for 
        substantial compliance, the revision may be treated, at the 
        option of the State, as being effective either as of the 
        effective date of the provision to which it relates or such 
        later date as the State and Secretary may agree.
        ``(2) State response by seeking reconsideration or an 
    administrative hearing.--A State may respond to an order under 
    subsection (b) by filing a request with the Secretary for--
            ``(A) a reconsideration of the determination, pursuant to 
        subsection (d)(1), or
            ``(B) a review of the determination through an 
        administrative hearing, pursuant to subsection (d)(2).
    In such case, the order shall not take effect before the completion 
    of the reconsideration or hearing.
        ``(3) State response by corrective action plan.--
            ``(A) In general.--In the case of an order described in 
        subsection (b)(2) that relates to a substantial violation in 
        the administration of the MediGrant plan, a State may respond 
        to such an order by submitting a corrective action plan with 
        the Secretary to correct deficiencies in the administration of 
        the plan which are the subject of the order.
            ``(B) Review of corrective action plan.--In such case, the 
        Secretary shall withhold any action on the order for a period 
        (not to exceed 30 days) during which the Secretary reviews the 
        corrective action plan.
            ``(C) Secretarial response.--The corrective action plan 
        shall be considered to have corrected the deficiency (and the 
        order rescinded insofar as it relates to such deficiency) 
        unless the Secretary determines and notifies the State in 
        writing, within 15 days after the date the Secretary receives 
        the corrective action plan, that the State's administration of 
        the MediGrant plan, as proposed to be corrected in the plan, 
        will still substantially violate a requirement of this title. 
        In such case the State may respond by seeking reconsideration 
        or a hearing under paragraph (2).
        ``(4) State response by withdrawal of plan amendment; failure 
    to respond.--Insofar as an order relates to a substantial violation 
    in a plan amendment submitted, a State may respond to such an order 
    by withdrawing the plan amendment and the MediGrant plan shall be 
    treated as though the amendment had not been made.
    ``(d) Administrative Review and Hearing.--
        ``(1) Reconsideration.--Within 30 days after the date of 
    receipt of a request under subsection (b)(2)(A), the Secretary 
    shall notify the State of the time and place at which a hearing 
    will be held for the purpose of reconsidering the Secretary's 
    determination. The hearing shall be held not less than 20 days nor 
    more than 60 days after the date notice of the hearing is furnished 
    to the State, unless the Secretary and the State agree in writing 
    to holding the hearing at another time. The Secretary shall affirm, 
    modify, or reverse the original determination within 60 days of the 
    conclusion of the hearing.
        ``(2) Administrative hearing.--Within 30 days after the date of 
    receipt of a request under subsection (b)(2)(B), an administrative 
    law judge shall schedule a hearing for the purpose of reviewing the 
    Secretary's determination. The hearing shall be held not less than 
    20 days nor more than 60 days after the date notice of the hearing 
    is furnished to the State, unless the Secretary and the State agree 
    in writing to holding the hearing at another time. The 
    administrative law judge shall affirm, modify, or reverse the 
    determination within 60 days of the conclusion of the hearing.
    ``(e) Judicial Review.--
        ``(1) In general.--A State which is dissatisfied with a final 
    determination made by the Secretary under subsection (d)(1) or a 
    final determination of an administrative law judge under subsection 
    (d)(2) may, within 60 days after it has been notified of such 
    determination, file with the United States court of appeals for the 
    circuit in which the State is located a petition for review of such 
    determination. A copy of the petition shall be forthwith 
    transmitted by the clerk of the court to the Secretary and, in the 
    case of a determination under subsection (d)(2), to the 
    administrative law judge involved. The Secretary (or judge 
    involved) thereupon shall file in the court the record of the 
    proceedings on which the final determination was based, as provided 
    in section 2112 of title 28, United States Code. Only the 
    Secretary, in accordance with this title, may compel a State under 
    Federal law to comply with the provisions of this title or a 
    MediGrant plan, or otherwise enforce a provision of this title 
    against a State, and no action may be filed under Federal law 
    against a State in relation to the State's compliance, or failure 
    to comply, with the provisions of this title or of a MediGrant plan 
    except by the Secretary as provided under this subsection.
        ``(2) Standard for review.--The findings of fact by the 
    Secretary or administrative law judge, if supported by substantial 
    evidence, shall be conclusive, but the court, for good cause shown, 
    may remand the case to the Secretary or judge to take further 
    evidence, and the Secretary or judge may thereupon make new or 
    modified findings of fact and may modify a previous determination, 
    and shall certify to the court the transcript and record of the 
    further proceedings. Such new or modified findings of fact shall 
    likewise be conclusive if supported by substantial evidence.
        ``(3) Jurisdiction of appellate court.--The court shall have 
    jurisdiction to affirm the action of the Secretary or judge or to 
    set it aside, in whole or in part. The judgment of the court shall 
    be subject to review by the Supreme Court of the United States upon 
    certiorari or certification as provided in section 1254 of title 
    28, United States Code.
    ``(f) Withholding of Funds.--
        ``(1) In general.--Any order under this section relating to the 
    withholding of funds shall be effective not earlier than the 
    effective date of the order and shall only relate to the portions 
    of a MediGrant plan or administration thereof which substantially 
    violate a requirement of this title. In the case of a failure to 
    meet a set-aside requirement under section 2112, any withholding 
    shall only apply to the extent of such failure.
        ``(2) Suspension of withholding.--The Secretary may suspend 
    withholding of funds under paragraph (1) during the period 
    reconsideration or administrative and judicial review is pending 
    under subsection (d) or (e).
        ``(3) Restoration of funds.--Any funds withheld under this 
    subsection under an order shall be immediately restored to a 
    State--
            ``(A) to the extent and at the time the order is--
                ``(i) modified or withdrawn by the Secretary upon 
            reconsideration,
                ``(ii) modified or reversed by an administrative law 
            judge, or
                ``(iii) set aside (in whole or in part) by an appellate 
            court; or
            ``(B) when the Secretary determines that the deficiency 
        which was the basis for the order is corrected;
            ``(C) when the Secretary determines that violation which 
        was the basis for the order is resolved or the amendment which 
        was the basis for the order is withdrawn; or
            ``(D) at any time upon the initiative of the Secretary.
    ``(g) Individual Complaint Process.--The Secretary shall provide 
for a process under which an individual may notify the Secretary 
concerning a State's failure to provide medical assistance as required 
under the State MediGrant plan or otherwise comply with the 
requirements of this title or such plan. If the Secretary finds that 
there is a pattern of complaints with respect to a State or that a 
particular failure or finding of noncompliance is egregious, the 
Secretary shall notify the chief executive officer of the State of such 
finding and shall notify the Congress if the State fails to respond to 
such notification within a reasonable period of time.

``SEC. 2155. SECRETARIAL AUTHORITY.

    ``(a) Negotiated Agreement and Dispute Resolution.--
        ``(1) Negotiations.--Nothing in this part shall be construed as 
    preventing the Secretary and a State from at any time negotiating a 
    satisfactory resolution to any dispute concerning the approval of a 
    MediGrant plan (or amendments to a MediGrant plan) or the 
    compliance of a MediGrant plan (including its administration) with 
    requirements of this title.
        ``(2) Cooperation.--The Secretary shall act in a cooperative 
    manner with the States in carrying out this title. In the event of 
    a dispute between a State and the Secretary, the Secretary shall, 
    whenever practicable, engage in informal dispute resolution 
    activities in lieu of formal enforcement or sanctions under section 
    2154.
    ``(b) Limitations on Delegation of Decisionmaking Authority.--The 
Secretary may not delegate (other than to the Administrator of the 
Health Care Financing Administration) the authority to make 
determinations or reconsiderations respecting the approval of MediGrant 
plans (or amendments to such plans) or the compliance of a MediGrant 
plan (including its administration) with requirements of this title. 
Such Administrator may not further delegate such authority to any 
individual, including any regional official of such Administration.
    ``(c) Requiring Formal Rulemaking for Changes in Secretarial 
Administration.--The Secretary shall carry out the administration of 
the program under this title only through a prospective formal 
rulemaking process, including issuing notices of proposed rulemaking, 
publishing proposed rules or modifications to rules in the Federal 
Register, and soliciting public comment.

                      ``Part F--General Provisions

``SEC. 2171. DEFINITIONS.

    ``(a) Medical Assistance.--For purposes of this title, the term 
`medical assistance' means payment of part or all of the cost of any of 
the following, or assistance in the purchase, in whole or in part, of 
health benefit coverage that includes any of the following, for 
eligible low-income individuals (as defined in subsection (b)) as 
specified under the MediGrant plan:
        ``(1) Inpatient hospital services.
        ``(2) Outpatient hospital services.
        ``(3) Physician services.
        ``(4) Surgical services.
        ``(5) Clinic services and other ambulatory health care 
    services.
        ``(6) Nursing facility services.
        ``(7) Intermediate care facility services for the mentally 
    retarded.
        ``(8) Prescription drugs and biologicals and the administration 
    of such drugs and biologicals, only if such drugs and biologicals 
    are not furnished for the purpose of causing, or assisting in 
    causing, the death, suicide, euthanasia, or mercy killing of a 
    person.
        ``(9) Over-the-counter medications.
        ``(10) Laboratory and radiological services.
        ``(11) Family planning services and supplies.
        ``(12) Inpatient mental health services, including services 
    furnished in a State-operated mental hospital and including 
    residential or other 24-hour therapeutically planned structured 
    services in the case of a child.
        ``(13) Outpatient mental health services, including services 
    furnished in a State-operated mental hospital and including 
    community-based services in the case of a child.
        ``(14) Durable medical equipment and other medically-related or 
    remedial devices (such as prosthetic devices, implants, eyeglasses, 
    hearing aids, dental devices, and adaptive devices).
        ``(15) Disposable medical supplies.
        ``(16) Home and community-based health care services and 
    related supportive services (such as home health nursing services, 
    home health aide services, personal care, assistance with 
    activities of daily living, chore services, day care services, 
    respite care services, training for family members, and minor 
    modifications to the home).
        ``(17) Community supported living arrangements.
        ``(18) Nursing care services (such as nurse practitioner 
    services, nurse midwife services, advanced practice nurse services, 
    private duty nursing care, pediatric nurse services, and 
    respiratory care services) in a home, school, or other setting.
        ``(19) Abortion only if necessary to save the life of the 
    mother or if the pregnancy is the result of an act of rape or 
    incest.
        ``(20) Dental services.
        ``(21) Inpatient substance abuse treatment services and 
    residential substance abuse treatment services.
        ``(22) Outpatient substance abuse treatment services.
        ``(23) Case management services.
        ``(24) Care coordination services.
        ``(25) Physical therapy, occupational therapy, and services for 
    individuals with speech, hearing, and language disorders.
        ``(26) Hospice care.
        ``(27) Any other medical, diagnostic, screening, preventive, 
    restorative, remedial, therapeutic, or rehabilitative services 
    (whether in a facility, home, school, or other setting) if 
    recognized by State law and only if the service is--
            ``(A) prescribed by or furnished by a physician or other 
        licensed or registered practitioner within the scope of 
        practice as defined by State law,
            ``(B) performed under the general supervision or at the 
        direction of a physician, or
            ``(C) furnished by a health care facility that is operated 
        by a State or local government or is licensed under State law 
        and operating within the scope of the license.
        ``(28) Premiums for private health care insurance coverage, 
    including private long-term care insurance coverage.
        ``(29) Medical transportation.
        ``(30) Medicare cost-sharing (as defined in subsection (c)).
        ``(31) Enabling services (such as transportation, translation, 
    and outreach services) only if designed to increase the 
    accessibility of primary and preventive health care services for 
    eligible low-income individuals.
        ``(32) Any other health care services or items specified by the 
    Secretary and not excluded under this section.
    ``(b) Eligible Low-Income Individual.--
        ``(1) In general.--The term `eligible low-income individual' 
    means an individual--
            ``(A) who has been determined eligible by the State for 
        medical assistance under the MediGrant plan and is not an 
        inmate of a public institution (except as a patient in a State 
        psychiatric hospital), and
            ``(B) whose family income (as determined under the plan) 
        does not exceed a percentage (specified in the MediGrant plan 
        and not to exceed 275 percent) of the poverty line for a family 
        of the size involved.
        ``(2) Amount of income.--In determining the amount of income 
    under paragraph (1)(B), a State may exclude costs incurred for 
    medical care or other types of remedial care recognized by the 
    State.
    ``(c) Medicare Cost-Sharing.--For purposes of this title, the term 
`medicare cost-sharing' means any of the following:
        ``(1)(A) Premiums under section 1839.
        ``(B) Premiums under section 1818 or 1818A.
        ``(2) Coinsurance under title XVIII (including coinsurance 
    described in section 1813).
        ``(3) Deductibles established under title XVIII (including 
    those described in sections 1813 and 1833(b)).
        ``(4) The difference between the amount that is paid under 
    section 1833(a) and the amount that would be paid under such 
    section if any reference to `80 percent' therein were deemed a 
    reference to `100 percent'.
        ``(5) Premiums for enrollment of an individual with an eligible 
    organization under section 1876 or with a MedicarePlus organization 
    under part C of title XVIII.
    ``(d) Additional Definitions.--For purposes of this title:
        ``(1) Child.--The term `child' means an individual under 19 
    years of age.
        ``(2) Elderly individual.--The term `elderly individual' means 
    an individual who has attained retirement age, as defined under 
    section 216(l)(1).
        ``(3) Poverty line defined.--The term `poverty line' has the 
    meaning given such term in section 673(2) of the Community Services 
    Block Grant Act (42 U.S.C. 9902(2)), including any revision 
    required by such section.
        ``(4) Pregnant woman.--The term `pregnant woman' includes a 
    woman during the 60-day period beginning on the last day of the 
    pregnancy.

``SEC. 2172. TREATMENT OF TERRITORIES.

    ``Notwithstanding any other requirement of this title, the 
Secretary may waive or modify any requirement of this title with 
respect to the medical assistance program for a State other than the 50 
States and the District of Columbia, other than a waiver of--
        ``(1) the applicable Federal medical assistance percentage,
        ``(2) the limitation on total payments in a fiscal year to the 
    amount of the allotment under section 2121(c), or
        ``(3) the requirement that payment may be made for medical 
    assistance only with respect to amounts expended by the State for 
    care and services described in section 2171(a) and medically-
    related services (as defined in section 2112(e)(2)).

``SEC. 2173. DESCRIPTION OF TREATMENT OF INDIAN HEALTH SERVICE 
              FACILITIES.

    ``In the case of a State in which one or more facilities of the 
Indian Health Service are located, the MediGrant plan shall include a 
description of--
        ``(1) what provision (if any) has been made for payment for 
    items and services furnished by such facilities, and
        ``(2) the manner in which medical assistance for low-income 
    eligible individuals who are Indians will be provided, as 
    determined by the State in consultation with the appropriate Indian 
    tribes and tribal organizations.

``SEC. 2174. APPLICATION OF CERTAIN GENERAL PROVISIONS.

    ``The following sections in part A of title XI shall apply to 
States under this title in the same manner as they applied to a State 
under title XIX:
        ``(1) Section 1101(a)(1) (relating to definition of State).
        ``(2) Section 1116 (relating to administrative and judicial 
    review), but only insofar as consistent with the provisions of part 
    C.
        ``(3) Section 1124 (relating to disclosure of ownership and 
    related information).
        ``(4) Section 1126 (relating to disclosure of information about 
    certain convicted individuals).
        ``(5) Section 1128B(d) (relating to criminal penalties for 
    certain additional charges).
        ``(6) Section 1132 (relating to periods within which claims 
    must be filed).

``SEC. 2175. MEDIGRANT MASTER DRUG REBATE AGREEMENTS.

    ``(a) Requirement for Manufacturer To Enter Into Agreement.--
        ``(1) In general.--Pursuant to section 2123(f), in order for 
    payment to be made to a State under part C for medical assistance 
    for covered outpatient drugs of a manufacturer, the manufacturer 
    shall enter into and have in effect a MediGrant master rebate 
    agreement described in subsection (b) with the Secretary on behalf 
    of States electing to participate in the agreement.
        ``(2) Coverage of drugs not covered under rebate agreements.--
    Nothing in this section shall be construed to prohibit a State in 
    its discretion from providing coverage under its MediGrant plan of 
    a covered outpatient drug for which no rebate agreement is in 
    effect under this section.
        ``(3) Effect on existing agreements.--If a State has a rebate 
    agreement in effect with a manufacturer on the date of the 
    enactment of this section which provides for a minimum aggregate 
    rebate equal to or greater than the minimum aggregate rebate which 
    would otherwise be paid under the MediGrant master agreement under 
    this section, at the option of the State--
            ``(A) such agreement shall be considered to meet the 
        requirements of the MediGrant master rebate agreement, and
            ``(B) the State shall be considered to have elected to 
        participate in the MediGrant master rebate agreement.
        ``(4) Limitation on prices of drugs purchased by covered 
    entities.--
            ``(A) Agreement with secretary.--A manufacturer meets the 
        requirements of this paragraph if the manufacturer has entered 
        into an agreement with the Secretary that meets the 
        requirements of section 340B of the Public Health Service Act 
        with respect to covered outpatient drugs purchased by a covered 
        entity on or after the first day of the first month that begins 
        after the date of the enactment of title VI of the Veterans 
        Health Care Act of 1992.
            ``(B) Covered entity defined.--In this subsection, the term 
        `covered entity' means an entity described in section 
        340B(a)(4) of the Public Health Service Act provided that--
                ``(i) an entity is licensed by the State to purchase 
            and take possession of covered outpatient drugs and 
            furnishes the drugs to patients at a cost no greater than 
            acquisition plus such dispensing fee as may be allowable 
            under a State pharmaceutical assistance program, and
                ``(ii) such entity is certified pursuant to section 
            340B(a)(7) of such Act.
            ``(C) Establishment of alternative mechanism to ensure 
        against duplicate discounts or rebates.--If the Secretary does 
        not establish a mechanism under section 340B(a)(5)(A) of the 
        Public Health Service Act within 12 months of the date of the 
        enactment of such section, the following requirements shall 
        apply:
                ``(i) Each covered entity shall inform the single State 
            agency under this title when it is seeking reimbursement 
            from the medicaid plan for medical assistance with respect 
            to a unit of any covered outpatient drug which is subject 
            to an agreement under section 340B(a) of such Act.
                ``(ii) Each such single State agency shall provide a 
            means by which a covered entity shall indicate on any drug 
            reimbursement claims form (or format, where electronic 
            claims management is used) that a unit of the drug that is 
            the subject of the form is subject to an agreement under 
            section 340B of such Act, and not submit to any 
            manufacturer a claim for a rebate payment under subsection 
            (b) with respect to such a drug.
            ``(D) Effect of subsequent amendments.--In determining 
        whether an agreement under subparagraph (A) meets the 
        requirements of section 340B of the Public Health Service Act, 
        the Secretary shall not take into account any amendments to 
        such section that are enacted after the enactment of title VI 
        of the Veterans Health Care Act of 1992.
            ``(E) Determination of compliance.--A manufacturer is 
        deemed to meet the requirements of this paragraph if the 
        manufacturer establishes to the satisfaction of the Secretary 
        that the manufacturer would comply (and has offered to comply) 
        with the provisions of section 340B of the Public Health 
        Service Act (as in effect immediately after the enactment title 
        VI of the Veterans Health Care Act of 1992, and would have 
        entered into an agreement under such section (as such section 
        was in effect at such time), but for a legislative change in 
        such section after such enactment.
    ``(b) Terms of Rebate Agreement.--
        ``(1) Periodic rebates.--The MediGrant master rebate agreement 
    under this section shall require the manufacturer to provide, to 
    the MediGrant plan of each State participating in the agreement, a 
    rebate for a rebate period in an amount specified in subsection (c) 
    for covered outpatient drugs of the manufacturer dispensed after 
    the effective date of the agreement, for which payment was made 
    under the plan for such period. Such rebate shall be paid by the 
    manufacturer not later than 30 days after the date of receipt of 
    the information described in paragraph (2) for the period involved.
        ``(2) State provision of information.--
            ``(A) State responsibility.--Each State participating in 
        the MediGrant master rebate agreement shall report to each 
        manufacturer not later than 60 days after the end of each 
        rebate period and in a form consistent with a standard 
        reporting format established by the Secretary, information on 
        the total number of units of each dosage form and strength and 
        package size of each covered outpatient drug, for which payment 
        was made under the MediGrant plan for the period, and shall 
        promptly transmit a copy of such report to the Secretary.
            ``(B) Audits.--A manufacturer may audit the information 
        provided (or required to be provided) under subparagraph (A). 
        Adjustments to rebates shall be made to the extent that 
        information indicates that utilization was greater or less than 
        the amount previously specified.
        ``(3) Manufacturer provision of price information.--
            ``(A) In general.--Each manufacturer which is subject to 
        the MediGrant master rebate agreement under this section shall 
        report to the Secretary--
                ``(i) not later than 30 days after the last day of each 
            rebate period under the agreement, on the average 
            manufacturer price (as defined in subsection (i)(1)) and, 
            for single source drugs and innovator multiple source 
            drugs, the manufacturer's best price (as defined in 
            subsection (c)(1)(C)) for each covered outpatient drug for 
            the rebate period under the agreement, and
                ``(ii) not later than 30 days after the date of 
            entering into an agreement under this section, on the 
            average manufacturer price (as defined in subsection 
            (i)(1)) as of October 1, 1990, for each of the 
            manufacturer's covered outpatient drugs.
            ``(B) Verification surveys of average manufacturer price.--
        The Secretary may survey wholesalers and manufacturers that 
        directly distribute their covered outpatient drugs, when 
        necessary, to verify manufacturer prices reported under 
        subparagraph (A). The Secretary may impose a civil monetary 
        penalty in an amount not to exceed $10,000 on a wholesaler, 
        manufacturer, or direct seller, if the wholesaler, 
        manufacturer, or direct seller of a covered outpatient drug 
        refuses a request for information by the Secretary in 
        connection with a survey under this subparagraph. The 
        provisions of section 1128A (other than subsections (a) (with 
        respect to amounts of penalties or additional assessments) and 
        (b)) shall apply to a civil money penalty under this 
        subparagraph in the same manner as such provisions apply to a 
        penalty or proceeding under section 1128A(a).
            ``(C) Penalties.--
                ``(i) Failure to provide timely information.--In the 
            case of a manufacturer which is subject to the MediGrant 
            master rebate agreement that fails to provide information 
            required under subparagraph (A) on a timely basis, the 
            amount of the penalty shall be $10,000 for each day in 
            which such information has not been provided and such 
            amount shall be paid to the Treasury. If such information 
            is not reported within 90 days of the deadline imposed, the 
            agreement shall be suspended for services furnished after 
            the end of such 90-day period and until the date such 
            information is reported (but in no case shall such 
            suspension be for a period of less than 30 days).
                ``(ii) False information.--Any manufacturer which is 
            subject to the MediGrant master rebate agreement, or a 
            wholesaler or direct seller, that knowingly provides false 
            information under subparagraph (A) or (B) is subject to a 
            civil money penalty in an amount not to exceed $100,000 for 
            each item of false information. Any such civil money 
            penalty shall be in addition to other penalties as may be 
            prescribed by law. The provisions of section 1128A (other 
            than subsections (a) and (b)) shall apply to a civil money 
            penalty under this subparagraph in the same manner as such 
            provisions apply to a penalty or proceeding under section 
            1128A(a).
            ``(D) Confidentiality of information.--Notwithstanding any 
        other provision of law, information disclosed by manufacturers 
        or wholesalers under this paragraph or under an agreement with 
        the Secretary of Veterans Affairs described in section 2123(f) 
        is confidential and shall not be disclosed by the Secretary or 
        the Secretary of Veterans Affairs or a State agency (or 
        contractor therewith) in a form which discloses the identity of 
        a specific manufacturer or wholesaler or the prices charged for 
        drugs by such manufacturer or wholesaler, except--
                ``(i) as the Secretary determines to be necessary to 
            carry out this section,
                ``(ii) to permit the Comptroller General to review the 
            information provided, and
                ``(iii) to permit the Director of the Congressional 
            Budget Office to review the information provided.
        ``(4) Length of agreement.--
            ``(A) In general.--The MediGrant master rebate agreement 
        under this section shall be effective for an initial period of 
        not less than 1 year and shall be automatically renewed for a 
        period of not less than 1 year unless terminated under 
        subparagraph (B).
            ``(B) Termination.--
                ``(i) By the secretary.--The Secretary may provide for 
            termination of the MediGrant master rebate agreement with 
            respect to a manufacturer for violation of the requirements 
            of the agreement or other good cause shown. Such 
            termination shall not be effective earlier than 60 days 
            after the date of notice of such termination. The Secretary 
            shall provide, upon request, a manufacturer with a hearing 
            concerning such a termination, but such hearing shall not 
            delay the effective date of the termination. Failure of a 
            State to provide any advance notice of such a termination 
            as required by regulation shall not affect the State's 
            right to terminate coverage of the drugs affected by such 
            termination as of the effective date of such termination.
                ``(ii) By a manufacturer.--A manufacturer may terminate 
            its participation in the MediGrant master rebate agreement 
            under this section for any reason. Any such termination 
            shall not be effective until the calendar quarter beginning 
            at least 60 days after the date the manufacturer provides 
            notice to the Secretary.
                ``(iii) Effectiveness of termination.--Any termination 
            under this subparagraph shall not affect rebates due under 
            the agreement before the effective date of its termination.
                ``(iv) Notice to states.--In the case of a termination 
            under this subparagraph, the Secretary shall provide notice 
            of such termination to the States within not less than 30 
            days before the effective date of such termination.
                ``(v) Application to terminations of other 
            agreements.--The provisions of this subparagraph shall 
            apply to the terminations of master agreements described in 
            section 8126(a) of title 38, United States Code.
            ``(C) Delay before reentry.--In the case of any rebate 
        agreement with a manufacturer under this section which is 
        terminated, another such agreement with the manufacturer (or a 
        successor manufacturer) may not be entered into until a period 
        of 1 calendar quarter has elapsed since the date of the 
        termination, unless the Secretary finds good cause for an 
        earlier reinstatement of such an agreement.
        ``(5) Settlement of disputes.--
            ``(A) Secretary.--The Secretary shall have the authority to 
        resolve, settle, and compromise disputes regarding the amounts 
        of rebates owed under this section and section 1927.
            ``(B) State.--Each State, with respect to covered 
        outpatient drugs paid for under the State's MediGrant plan, 
        shall have authority, independent of the Secretary's authority 
        under subparagraph (A), to resolve, settle, and compromise 
        disputes regarding the amounts of rebates owed under this 
        section. Any such action shall be deemed to comply with the 
        requirements of this title, and such covered outpatient drugs 
        shall be eligible for payment under the MediGrant plan under 
        this title.
            ``(C) Amount of rebate.--The Secretary shall limit the 
        amount of the rebate payable in any case in which the Secretary 
        determines that, because of unusual circumstances or 
        questionable data, the provisions of subsection (c) result in a 
        rebate amount that is inequitable or otherwise inconsistent 
        with the purposes of this section.
    ``(c) Determination of Amount of Rebate.--
        ``(1) Basic rebate for single source drugs and innovator 
    multiple source drugs.--
            ``(A) In general.--Except as provided in paragraph (2), the 
        amount of the rebate specified in this subsection with respect 
        to a State participating in the MediGrant master rebate 
        agreement for a rebate period (as defined in subsection (i)(7)) 
        with respect to each dosage form and strength of a single 
        source drug or an innovator multiple source drug shall be equal 
        to the product of--
                ``(i) the total number of units of each dosage form and 
            strength paid for under the State MediGrant plan in the 
            rebate period (as reported by the State); and
                ``(ii) the greater of--

                    ``(I) the difference between the average 
                manufacturer price and the best price (as defined in 
                subparagraph (C)) for the dosage form and strength of 
                the drug, or
                    ``(II) the minimum rebate percentage (specified in 
                subparagraph (B)) of such average manufacturer price,

            for the rebate period.
            ``(B) Minimum rebate percentage.--For purposes of 
        subparagraph (A)(ii)(II), the `minimum rebate percentage' is 15 
        percent.
            ``(C) Best price defined.--For purposes of this section--
                ``(i) In general.--The term `best price' means, with 
            respect to a single source drug or innovator multiple 
            source drug of a manufacturer, the lowest price available 
            from the manufacturer during the rebate period to any 
            wholesaler, retailer, provider, health maintenance 
            organization, nonprofit entity, or governmental entity 
            within the United States, excluding--

                    ``(I) any prices charged on or after October 1, 
                1992, to the Indian Health Service, the Department of 
                Veterans Affairs, a State home receiving funds under 
                section 1741 of title 38, United States Code, the 
                Department of Defense, the Public Health Service, or a 
                covered entity described in section 340B(a)(4) of the 
                Public Health Service Act,
                    ``(II) any prices charged under the Federal Supply 
                Schedule of the General Services Administration,
                    ``(III) any prices used under a State 
                pharmaceutical assistance program, and
                    ``(IV) any depot prices and single award contract 
                prices, as defined by the Secretary, of any agency of 
                the Federal Government.

                ``(ii) Special rules.--The term `best price'--

                    ``(I) shall be inclusive of cash discounts, free 
                goods that are contingent on any purchase requirement, 
                volume discounts, and rebates (other than rebates under 
                this section),
                    ``(II) shall be determined without regard to 
                special packaging, labeling, or identifiers on the 
                dosage form or product or package,
                    ``(III) shall not take into account prices that are 
                merely nominal in amount, and
                    ``(IV) shall exclude rebates paid under this 
                section or any other rebates paid to a State 
                participating in the MediGrant master rebate agreement.

        ``(2) Additional rebate for single source and innovator 
    multiple source drugs.--
            ``(A) In general.--The amount of the rebate specified in 
        this subsection with respect to a State participating in the 
        MediGrant master rebate agreement for a rebate period, with 
        respect to each dosage form and strength of a single source 
        drug or an innovator multiple source drug, shall be increased 
        by an amount equal to the product of--
                ``(i) the total number of units of such dosage form and 
            strength dispensed after December 31, 1990, for which 
            payment was made under the MediGrant plan for the rebate 
            period; and
                ``(ii) the amount (if any) by which--

                    ``(I) the average manufacturer price for the dosage 
                form and strength of the drug for the period, exceeds
                    ``(II) the average manufacturer price for such 
                dosage form and strength for the calendar quarter 
                beginning July 1, 1990 (without regard to whether or 
                not the drug has been sold or transferred to an entity, 
                including a division or subsidiary of the manufacturer, 
                after the first day of such quarter), increased by the 
                percentage by which the Consumer Price Index for All 
                Urban Consumers (United States city average) for the 
                month before the month in which the rebate period 
                begins exceeds such index for September 1990.

            ``(B) Treatment of subsequently approved drugs.--In the 
        case of a covered outpatient drug approved by the Food and Drug 
        Administration after October 1, 1990, clause (ii)(II) of 
        subparagraph (A) shall be applied by substituting `the first 
        full calendar quarter after the day on which the drug was first 
        marketed' for `the calendar quarter beginning July 1, 1990' and 
        `the month prior to the first month of the first full calendar 
        quarter after the day on which the drug was first marketed' for 
        `September 1990'.
        ``(3) Rebate for other drugs.--
            ``(A) In general.--The amount of the rebate paid to a State 
        participating in the MediGrant master rebate agreement for a 
        rebate period with respect to each dosage form and strength of 
        covered outpatient drugs (other than single source drugs and 
        innovator multiple source drugs) shall be equal to the product 
        of--
                ``(i) the applicable percentage (as described in 
            subparagraph (B)) of the average manufacturer price for the 
            dosage form and strength for the rebate period, and
                ``(ii) the total number of units of such dosage form 
            and strength dispensed after December 31, 1990, for which 
            payment was made under the MediGrant plan for the rebate 
            period.
            ``(B) Applicable percentage defined.--For purposes of 
        subparagraph (A)(i), the `applicable percentage' is 11 percent.
        ``(4) Limitation on amount of rebate to amounts paid for 
    certain drugs.--
            ``(A) In general.--Upon request of the manufacturer of a 
        covered outpatient drug, the Secretary shall limit, in 
        accordance with subparagraph (B), the amount of the rebate 
        under this subsection with respect to a dosage form and 
        strength of such drug if the majority of the estimated number 
        of units of such dosage form and strength that are subject to 
        rebates under this section were dispensed to inpatients of 
        nursing facilities.
            ``(B) Amount of rebate.--In the case of a covered 
        outpatient drug subject to subparagraph (A), the amount of the 
        rebate specified in this subsection for a rebate period, with 
        respect to each dosage form and strength of such drug, shall 
        not exceed the amount paid under the MediGrant plan with 
        respect to such dosage form and strength of the drug in the 
        rebate period (without consideration of any dispensing fees 
        paid).
        ``(5) Supplemental rebates prohibited.--No rebates shall be 
    required to be paid by manufacturers with respect to covered 
    outpatient drugs furnished to individuals in any State that 
    provides for the collection of such rebates in excess of the rebate 
    amount payable under this section.
    ``(d) Limitations on Coverage of Drugs by States Participating in 
Master Agreement.--
        ``(1) Permissible restrictions.--A State participating in the 
    MediGrant master rebate agreement under this section may--
            ``(A) subject to prior authorization under its MediGrant 
        plan any covered outpatient drug so long as any such prior 
        authorization program complies with the requirements of 
        paragraph (5); and
            ``(B) exclude or otherwise restrict coverage under its plan 
        of a covered outpatient drug if--
                ``(i) the drug is contained in the list referred to in 
            paragraph (2);
                ``(ii) the drug is subject to such restrictions 
            pursuant to the MediGrant master rebate agreement or any 
            agreement described in subsection (a)(4); or
                ``(iii) the State has excluded coverage of the drug 
            from its formulary established in accordance with paragraph 
            (4).
        ``(2) List of drugs subject to restriction.--The following 
    drugs or classes of drugs, or their medical uses, may be excluded 
    from coverage or otherwise restricted by a State participating in 
    the MediGrant master rebate agreement:
            ``(A) Agents when used for anorexia, weight loss, or weight 
        gain.
            ``(B) Agents when used to promote fertility.
            ``(C) Agents when used for cosmetic purposes or hair 
        growth.
            ``(D) Agents when used for the symptomatic relief of cough 
        and colds.
            ``(E) Agents when used to promote smoking cessation.
            ``(F) Prescription vitamins and mineral products, except 
        prenatal vitamins and fluoride preparations.
            ``(G) Nonprescription drugs.
            ``(H) Covered outpatient drugs which the manufacturer seeks 
        to require as a condition of sale that associated tests or 
        monitoring services be purchased exclusively from the 
        manufacturer or its designee.
            ``(I) Barbiturates.
            ``(J) Benzodiazepines.
        ``(3) Additions to drug listings.--The Secretary shall, by 
    regulation, periodically update the list of drugs or classes of 
    drugs described in paragraph (2), or their medical uses, which the 
    Secretary has determined to be subject to clinical abuse or 
    inappropriate use.
        ``(4) Requirements for formularies.--A State participating in 
    the MediGrant master rebate agreement may establish a formulary if 
    the formulary meets the following requirements:
            ``(A) The formulary is developed by a committee consisting 
        of physicians, pharmacists, and other appropriate individuals 
        appointed by the Governor of the State.
            ``(B) Except as provided in subparagraph (C), the formulary 
        includes the covered outpatient drugs of any manufacturer which 
        has entered into and complies with the agreement under 
        subsection (a) (other than any drug excluded from coverage or 
        otherwise restricted under paragraph (2)).
            ``(C) A covered outpatient drug may be excluded with 
        respect to the treatment of a specific disease or condition for 
        an identified population (if any) only if, based on the drug's 
        labeling (or, in the case of a drug the prescribed use of which 
        is not approved under the Federal Food, Drug, and Cosmetic Act 
        but is a medically accepted indication, based on information 
        from the appropriate compendia described in subsection (i)(5)), 
        the excluded drug does not have a significant, clinically 
        meaningful therapeutic advantage in terms of safety, 
        effectiveness, or clinical outcome of such treatment for such 
        population over other drugs included in the formulary and there 
        is a written explanation (available to the public) of the basis 
        for the exclusion.
            ``(D) The State MediGrant plan permits coverage of a drug 
        excluded from the formulary (other than any drug excluded from 
        coverage or otherwise restricted under paragraph (2)) pursuant 
        to a prior authorization program that is consistent with 
        paragraph (5).
            ``(E) The formulary meets such other requirements as the 
        Secretary may impose in order to achieve program savings 
        consistent with protecting the health of program beneficiaries.
    A prior authorization program established by a State under 
    paragraph (5) is not a formulary subject to the requirements of 
    this paragraph.
        ``(5) Requirements of prior authorization programs.--The 
    MediGrant plan of a State participating in the MediGrant master 
    rebate agreement may require, as a condition of coverage or payment 
    for a covered outpatient drug for which Federal financial 
    participation is available in accordance with this section, the 
    approval of the drug before its dispensing for any medically 
    accepted indication (as defined in subsection (i)(5)) only if the 
    system providing for such approval--
            ``(A) provides response by telephone or other 
        telecommunication device within 24 hours of a request for prior 
        authorization, and
            ``(B) except with respect to the drugs on the list referred 
        to in paragraph (2), provides for the dispensing of at least a 
        72-hour supply of a covered outpatient prescription drug in an 
        emergency situation (as defined by the Secretary).
        ``(6) Other permissible restrictions.--A State participating in 
    the MediGrant master rebate agreement may impose limitations, with 
    respect to all such drugs in a therapeutic class, on the minimum or 
    maximum quantities per prescription or on the number of refills, if 
    such limitations are necessary to discourage waste, and may address 
    instances of fraud or abuse by individuals in any manner authorized 
    under this Act.
    ``(e) Drug Use Review.--
        ``(1) In general.--A State participating in the MediGrant 
    master rebate agreement may provide for a drug use review program 
    to educate physicians and pharmacists to identify and reduce the 
    frequency of patterns of fraud, abuse, gross overuse, or 
    inappropriate or medically unnecessary care, among physicians, 
    pharmacists, and patients, or associated with specific drugs or 
    groups of drugs, as well as potential and actual severe adverse 
    reactions to drugs.
        ``(2) Application of state standards.--Except as provided in 
    subparagraph (B), a State with a drug use review program under this 
    subsection shall establish and operate the program under such 
    standards as it may establish.
    ``(f) Electronic Claims Management.--In accordance with chapter 35 
of title 44, United States Code (relating to coordination of Federal 
information policy), the Secretary shall encourage each State to 
establish, as its principal means of processing claims for covered 
outpatient drugs under its MediGrant plan, a point-of-sale electronic 
claims management system, for the purpose of performing on-line, real 
time eligibility verifications, claims data capture, adjudication of 
claims, and assisting pharmacists (and other authorized persons) in 
applying for and receiving payment.
    ``(g) Annual Report.--
        ``(1) In general.--Not later than May 1 of each year, the 
    Secretary shall transmit to the Committee on Finance of the Senate, 
    and the Committee on Commerce of the House of Representatives, a 
    report on the operation of this section in the preceding fiscal 
    year.
        ``(2) Details.--Each report shall include information on--
            ``(A) ingredient costs paid under this title for single 
        source drugs, multiple source drugs, and nonprescription 
        covered outpatient drugs,
            ``(B) the total value of rebates received and number of 
        manufacturers providing such rebates,
            ``(C) the effect of inflation on the value of rebates 
        required under this section,
            ``(D) trends in prices paid under this title for covered 
        outpatient drugs, and
            ``(E) Federal and State administrative costs associated 
        with compliance with the provisions of this title.
    ``(h) Exemption for Capitated Health Care Organizations, Hospitals, 
and Nursing Facilities.--
        ``(1) In general.--Except as provided in paragraph (2), the 
    requirements of the MediGrant master rebate agreement under this 
    section shall not apply with respect to covered outpatient drugs 
    dispensed by or through--
            ``(A) a capitated health care organization (as defined in 
        section 2114(c)(1)), or
            ``(B) a hospital or nursing facility that dispenses covered 
        outpatient drugs using a drug formulary system and bills the 
        State no more than the hospital's or facility's purchasing 
        costs for covered outpatient drugs.
        ``(2) Construction in determining best price.--Nothing in 
    paragraph (1) shall be construed as excluding amounts paid by the 
    entities described in such paragraph for covered outpatient drugs 
    from the determination of the best price (as defined in subsection 
    (c)(1)(C)) for such drugs.
    ``(i) Definitions.--In the section--
        ``(1) Average manufacturer price.--The term `average 
    manufacturer price' means, with respect to a covered outpatient 
    drug of a manufacturer for a rebate period, the average price paid 
    to the manufacturer for the drug in the United States by 
    wholesalers for drugs distributed to the retail pharmacy class of 
    trade, after deducting customary prompt pay discounts.
        ``(2) Covered outpatient drug.--Subject to the exceptions in 
    paragraph (3), the term `covered outpatient drug' means--
            ``(A) of those drugs which are treated as prescribed drugs 
        for purposes of section 2171(a)(8), a drug which may be 
        dispensed only upon prescription (except as provided in 
        subparagraph (D)), and--
                ``(i) which is approved as a prescription drug under 
            section 505 or 507 of the Federal Food, Drug, and Cosmetic 
            Act;
                ``(ii)(I) which was commercially used or sold in the 
            United States before the date of the enactment of the Drug 
            Amendments of 1962 or which is identical, similar, or 
            related (within the meaning of section 310.6(b)(1) of title 
            21 of the Code of Federal Regulations) to such a drug, and 
            (II) which has not been the subject of a final 
            determination by the Secretary that it is a `new drug' 
            (within the meaning of section 201(p) of the Federal Food, 
            Drug, and Cosmetic Act) or an action brought by the 
            Secretary under section 301, 302(a), or 304(a) of such Act 
            to enforce section 502(f) or 505(a) of such Act; or
                ``(iii)(I) which is described in section 107(c)(3) of 
            the Drug Amendments of 1962 and for which the Secretary has 
            determined there is a compelling justification for its 
            medical need, or is identical, similar, or related (within 
            the meaning of section 310.6(b)(1) of title 21 of the Code 
            of Federal Regulations) to such a drug, and (II) for which 
            the Secretary has not issued a notice of an opportunity for 
            a hearing under section 505(e) of the Federal Food, Drug, 
            and Cosmetic Act on a proposed order of the Secretary to 
            withdraw approval of an application for such drug under 
            such section because the Secretary has determined that the 
            drug is less than effective for some or all conditions of 
            use prescribed, recommended, or suggested in its labeling;
            ``(B) a biological product, other than a vaccine which--
                ``(i) may only be dispensed upon prescription,
                ``(ii) is licensed under section 351 of the Public 
            Health Service Act, and
                ``(iii) is produced at an establishment licensed under 
            such section to produce such product;
            ``(C) insulin certified under section 506 of the Federal 
        Food, Drug, and Cosmetic Act; and
            ``(D) a drug which may be sold without a prescription 
        (commonly referred to as an `over-the-counter drug'), if the 
        drug is prescribed by a physician (or other person authorized 
        to prescribe under State law).
        ``(3) Limiting definition.--The term `covered outpatient drug' 
    does not include any drug, biological product, or insulin provided 
    as part of, or as incident to and in the same setting as, any of 
    the following (and for which payment may be made under a MediGrant 
    plan as part of payment for the following and not as direct 
    reimbursement for the drug):
            ``(A) Inpatient hospital services.
            ``(B) Hospice services.
            ``(C) Dental services, except that drugs for which the 
        MediGrant plan authorizes direct reimbursement to the 
        dispensing dentist are covered outpatient drugs.
            ``(D) Physicians' services.
            ``(E) Outpatient hospital services.
            ``(F) Nursing facility services and services provided by an 
        intermediate care facility for the mentally retarded.
            ``(G) Other laboratory and x-ray services.
            ``(H) Renal dialysis services.
    Such term also does not include any such drug or product for which 
    a National Drug Code number is not required by the Food and Drug 
    Administration or a drug or biological product used for a medical 
    indication which is not a medically accepted indication. Any drug, 
    biological product, or insulin excluded from the definition of such 
    term as a result of this paragraph shall be treated as a covered 
    outpatient drug for purposes of determining the best price (as 
    defined in subsection (c)(1)(C)) for such drug, biological product, 
    or insulin.
        ``(4) Manufacturer.--The term `manufacturer' means, with 
    respect to a covered outpatient drug, the entity holding legal 
    title to or possession of the National Drug Code number for such 
    drug.
        ``(5) Medically accepted indication.--The term `medically 
    accepted indication' means any use for a covered outpatient drug 
    which is approved under the Federal Food, Drug, and Cosmetic Act, 
    or the use of which is supported by one or more citations included 
    or approved for inclusion in any of the following compendia:
            ``(A) American Hospital Formulary Service Drug Information.
            ``(B) United States Pharmacopeia-Drug Information.
            ``(C) American Medical Association Drug Evaluations.
            ``(D) The DRUGDEX Information System.
            ``(E) The peer-reviewed medical literature.
        ``(6) Multiple source drug; innovator multiple source drug; 
    noninnovator multiple source drug; single source drug.--
            ``(A) Defined.--
                ``(i) Multiple source drug.--The term `multiple source 
            drug' means, with respect to a rebate period, a covered 
            outpatient drug (not including any drug described in 
            paragraph (2)(D)) for which there are 2 or more drug 
            products which--

                    ``(I) are rated as therapeutically equivalent 
                (under the Food and Drug Administration's most recent 
                publication of `Approved Drug Products with Therapeutic 
                Equivalence Evaluations'),
                    ``(II) except as provided in subparagraph (B), are 
                pharmaceutically equivalent and bioequivalent, as 
                defined in subparagraph (C) and as determined by the 
                Food and Drug Administration, and
                    ``(III) are sold or marketed in the State during 
                the period.

                ``(ii) Innovator multiple source drug.--The term 
            `innovator multiple source drug' means a multiple source 
            drug that was originally marketed under an original new 
            drug application or product licensing application approved 
            by the Food and Drug Administration.
                ``(iii) Noninnovator multiple source drug.--The term 
            `noninnovator multiple source drug' means a multiple source 
            drug that is not an innovator multiple source drug.
                ``(iv) Single source drug.--The term `single source 
            drug' means a covered outpatient drug which is produced or 
            distributed under an original new drug application approved 
            by the Food and Drug Administration, including a drug 
            product marketed by any cross-licensed producers or 
            distributors operating under the new drug application or 
            product licensing application.
            ``(B) Exception.--Subparagraph (A)(i)(II) shall not apply 
        if the Food and Drug Administration changes by regulation the 
        requirement that, for purposes of the publication described in 
        subparagraph (A)(i)(I), in order for drug products to be rated 
        as therapeutically equivalent, they must be pharmaceutically 
        equivalent and bioequivalent, as defined in subparagraph (C).
            ``(C) Definitions.--For purposes of this paragraph--
                ``(i) drug products are pharmaceutically equivalent if 
            the products contain identical amounts of the same active 
            drug ingredient in the same dosage form and meet compendial 
            or other applicable standards of strength, quality, purity, 
            and identity,
                ``(ii) drugs are bioequivalent if they do not present a 
            known or potential bioequivalence problem, or, if they do 
            present such a problem, they are shown to meet an 
            appropriate standard of bioequivalence, and
                ``(iii) a drug product is considered to be sold or 
            marketed in a State if it appears in a published national 
            listing of average wholesale prices selected by the 
            Secretary, if the listed product is generally available to 
            the public through retail pharmacies in that State.
        ``(7) Rebate period.--The term `rebate period' means, with 
    respect to an agreement under subsection (a), a calendar quarter or 
    other period specified by the Secretary with respect to the payment 
    of rebates under such agreement.''.

SEC. 7002. TERMINATION OF CURRENT PROGRAM AND TRANSITION.

    (a) Termination of Current Program; Limitation on Medicaid Payments 
in Fiscal Year 1996.--
        (1) Repeal of title.--Title XIX of the Social Security Act is 
    repealed effective October 1, 1996, except that the repeal of 
    section 1928 of such Act is effective on the date of the enactment 
    of this Act and the succeeding two sections of such title shall be 
    effective during fiscal year 1996 in the same manner and to the 
    same extent as such sections were effective during fiscal year 
    1995.
        (2) Limitation on obligation authority.--Notwithstanding any 
    other provision of such title--
            (A) Post-enactment, pre-medigrant.--Subject to subparagraph 
        (B), the Secretary of Health and Human Services (in this 
        section referred to as the ``Secretary'') may enter into 
        obligations under such title with any State (as defined for 
        purposes of such title) for expenses incurred after the date of 
        the enactment of this Act and during fiscal year 1996, but not 
        in excess of the obligation allotment for that State for fiscal 
        year 1996 under section 2121(a)(4) of the Social Security Act 
        (as added by section 7001).
            (B) None after medigrant.--The Secretary is not authorized 
        to enter into any obligation with any State under title XIX of 
        such Act for expenses incurred on or after the earlier of--
                (i) October 1, 1996, or
                (ii) the first day of the first quarter on which the 
            State MediGrant plan under title XXI of such Act (as added 
            by section 7001) is first effective.
            (C) Agreement.--A State's submission of claims for payment 
        under section 1903 of such Act after the date of the enactment 
        of this Act with respect to which the limitation described in 
        subparagraph (A) applies is deemed to constitute the State's 
        acceptance of the obligation limitation under such subparagraph 
        (including the formula for computing the amount of such 
        obligation limitation).
            (D) Effect on medical assistance.--Effective on the date of 
        the enactment of this section--
                (i) except as provided in this paragraph, the Federal 
            Government has no obligation to provide payment with 
            respect to items and services provided under title XIX of 
            the Social Security Act, and
                (ii) such title and title XXI of such Act shall not be 
            construed as providing for an entitlement, under Federal 
            law in relation to the Federal Government, in an individual 
            or person (including any provider) at the time of provision 
            or receipt of services.
        (3) Requirement for timely submittal of claims.--No payment 
    shall be made to a State under title XIX of such Act with respect 
    to an obligation incurred before the date of the enactment of this 
    Act, unless the State has submitted to the Secretary, by not later 
    than June 30, 1996, a claim for Federal financial participation for 
    expenses paid by the State with respect to such obligations. 
    Nothing in paragraph (2) shall be construed as affecting the 
    obligation of the Federal Government to pay claims described in the 
    previous sentence.
    (b) Medicaid-to-MediGrant Transition Provisions.--
        (1) Notwithstanding any provision of law, in the case where 
    payment has been made under section 1903(a) of the Social Security 
    Act to a State before October 1, 1995, and for which a disallowance 
    has not been taken as of such date (or, if so taken, has not been 
    completed, including judicial review, by such date), the Secretary 
    of Health and Human Services shall discontinue the disallowance 
    proceeding and, if such disallowance has been taken as of the date 
    of the enactment of this Act, any payment reductions effected shall 
    be rescinded and the payments returned to the State.
        (2) The repeal under subsection (a)(1) of section 1928 of the 
    Social Security Act shall not affect the distribution of vaccines 
    purchased and delivered to the States before the date of the 
    enactment of this Act. No vaccine may be purchased after such date 
    by the Federal Government or any State under any contract under 
    section 1928(d) of the Social Security Act.
        (3) No judicial or administrative decision rendered regarding 
    requirements imposed under title XIX of the Social Security Act 
    with respect to a State shall have any application to the MediGrant 
    plan of the State title under XXI of such Act. A State may, 
    pursuant to the previous sentence, seek the abrogation or 
    modification of any such decision after the date of termination of 
    the State plan under title XIX of such Act.
        (4) No cause of action under title XIX of the Social Security 
    Act which seeks to require a State to establish or maintain minimum 
    payment rates under such title or claim which seeks reimbursement 
    for any period before the date of the enactment of this Act based 
    on the alleged failure of the State to comply with such title and 
    which has not become final as of such date shall be brought or 
    continued.
        (5) Section 6408(a)(3) of the Omnibus Budget Reconciliation Act 
    of 1989 (as amended by section 13642 of the Omnibus Budget 
    Reconciliation Act of 1993) and section 2 of Public Law 102-276 (as 
    amended by section 13644 of the Omnibus Budget Reconciliation Act 
    of 1993) are each amended by striking ``December 31, 1995'' and 
    inserting ``October 1, 1996''.
    (c) Anti-Fraud Provisions.--Section 1128(h)(1) of the Social 
Security Act (42 U.S.C. 1320a-7(h)(1)) is amended by inserting ``or a 
MediGrant plan under title XXI'' after ``title XIX''.
    (d) Technical and Conforming Amendments.--
        (1) Secretarial submission of legislative proposal.--Not later 
    than 90 days after the date of the enactment of this Act, the 
    Secretary of Health and Human Services, in consultation, as 
    appropriate, with heads of other Federal agencies and the States 
    (as defined in section 1101(a)(8) of the Social Security Act for 
    purposes of title XIX of such Act), shall submit to the appropriate 
    committees of Congress a legislative proposal providing for such 
    technical and conforming amendments in the law as are required by 
    the provisions of, and amendments made by, this title.
        (2) Transitional rule.--Any reference in any provision of law 
    to title XIX of the Social Security Act or any provision thereof 
    shall be deemed to be a reference to such title or provision as in 
    effect on the day before the date of the enactment of this Act.

SEC. 7003. MEDICARE/MEDIGRANT INTEGRATION DEMONSTRATION PROJECT.

    (a) Description of Projects.--
        (1) In general.--The Secretary of Health and Human Services (in 
    this section referred to as the ``Secretary'') shall conduct 
    demonstration projects under this section to demonstrate the manner 
    in which States may use funds from the medicare program under title 
    XVIII of the Social Security Act and the MediGrant program under 
    title XXI of such Act (in this section referred to as the 
    ``medicare and MediGrant programs'') for the purpose of providing a 
    more cost-effective full continuum of care for delivering services 
    to meet the needs of chronically-ill elderly and disabled 
    beneficiaries who are eligible for items and services under such 
    programs, through integrated systems of care, with an emphasis on 
    case management, prevention, and interventions designed to avoid 
    institutionalization whenever possible. The Secretary shall use 
    funds from the amounts appropriated for the medicare and MediGrant 
    programs to make the payments required under subsection (d)(1).
        (2) Option to participate.--A State may not require an 
    individual eligible to receive items and services under the 
    medicare and MediGrant programs to participate in a demonstration 
    project under this section.
    (b) Establishment.--The Secretary shall make payments in accordance 
with subsection (d) for the conduct of demonstration projects that 
provide for integrated systems of care in accordance with subsection 
(a). Not more than 10 demonstration projects shall be conducted under 
this section.
    (c) Applications.--Each State, or a coalition of States, desiring 
to conduct a demonstration project under this section shall prepare and 
submit to the Secretary an application at such time, in such manner, 
and containing such information as the Secretary may require, including 
an explanation of a plan for evaluating the project. The Secretary 
shall approve or deny an application not later than 90 days after the 
receipt of such application.
    (d) Payments.--
        (1) In general.--For each calendar quarter occurring during a 
    demonstration project conducted under this section, the Secretary 
    shall pay to each entity designated under paragraph (3) an amount 
    equal to the Federal capitated payment rate determined under 
    paragraph (2).
        (2) Federal capitated payment rate.--The Secretary shall 
    determine the Federal capitated payment rate for purposes of this 
    section based on the anticipated Federal quarterly cost of 
    providing care to chronically-ill elderly and disabled 
    beneficiaries who are eligible for items and services under the 
    medicare and MediGrant programs and who have elected to participate 
    in a demonstration project under this section.
        (3) Designation of entity.--
            (A) In general.--Each State, or coalition of States, shall 
        designate entities to directly receive the payments described 
        in paragraph (1).
            (B) Requirement.--A State, or a coalition of States, may 
        not designate an entity under subparagraph (A) unless such 
        entity meets the quality, solvency, and coverage standards 
        applicable to providers of items and services under the 
        medicare and MediGrant programs.
        (4) State payments.--Each State conducting, or in the case of a 
    coalition of States, participating in a demonstration project under 
    this section shall pay to the entities designated under paragraph 
    (3) an amount equal to the product of (A) 100 percent minus the 
    applicable Federal medical assistance percentage (as defined in 
    section 2122(e) of the Social Security Act) for the State, and (B) 
    the expenditures under the project attributable to the MediGrant 
    program for items and services provided to chronically-ill elderly 
    and disabled beneficiaries who have elected to participate in the 
    demonstration.
        (5) Budget neutrality.--The aggregate amount of Federal 
    payments to entities designated by a State, or coalition of States, 
    under paragraph (3) for a fiscal year shall not exceed the 
    aggregate amount of such payments that would otherwise have been 
    made under the medicare and MediGrant programs for such fiscal year 
    for items and services provided to beneficiaries under such 
    programs but for the election of such beneficiaries to participate 
    in a demonstration project under this section.
    (e) Duration.--
        (1) In general.--The demonstration projects conducted under 
    this section shall be conducted for a 5-year period, subject to 
    annual review and approval by the Secretary.
        (2) Termination.--The Secretary may, with 90 days' notice, 
    terminate any demonstration project conducted under this section 
    that is not in substantial compliance with the terms of the 
    application approved by the Secretary under this section.
    (f) Oversight.--The Secretary shall establish quality standards for 
evaluating and monitoring the demonstration projects conducted under 
this section. Such quality standards shall include reporting 
requirements which contain the following:
        (1) A description of the demonstration project.
        (2) An analysis of beneficiary satisfaction under such project.
        (3) An analysis of the quality of the services delivered under 
    the project.
        (4) A description of the savings to the MediGrant and medicare 
    programs as a result of the demonstration project.

                          TITLE VIII--MEDICARE

SEC. 8000. SHORT TITLE OF TITLE; AMENDMENTS AND REFERENCES TO OBRA; 
              TABLE OF CONTENTS OF TITLE.

    (a) Short Title.--This title may be cited as the ``Medicare 
Preservation Act of 1995''.
    (b) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this title an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.
    (c) References to OBRA.--In this title, the terms ``OBRA-1986'', 
``OBRA-1987'', ``OBRA-1989'', ``OBRA-1990'', and ``OBRA-1993'' refer to 
the Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509), the 
Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203), the 
Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239), the 
Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508), and the 
Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66), 
respectively.
    (d) Table of Contents of Title.--The table of contents of this 
title is as follows:

Sec. 8000. Short title of title; amendments and references to OBRA; 
          table of contents of title.

                    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 Provider-
                         Sponsored 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.
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.

                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.

            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.

                    Subtitle A--MedicarePlus Program

                    CHAPTER 1--MEDICAREPLUS PROGRAM

SEC. 8001. ESTABLISHMENT OF MEDICAREPLUS PROGRAM.

    (a) In General.--Title XVIII is amended by redesignating part C as 
part D and by inserting after part B the following new part:

                     ``Part C--MedicarePlus Program

                 ``eligibility, election, and enrollment

    ``Sec. 1851. (a) Choice of Medicare Benefits Through MedicarePlus 
Plans.--
        ``(1) In general.--Subject to the provisions of this section, 
    every MedicarePlus eligible individual (as defined in paragraph 
    (3)) is entitled to elect to receive benefits under this title--
            ``(A) through the Medicare fee-for-service program under 
        parts A and B, or
            ``(B) through enrollment in a MedicarePlus plan under this 
        part.
        ``(2) Types of medicareplus plans that may be available.--A 
    MedicarePlus plan may be any of the following types of plans of 
    health insurance:
            ``(A) Coordinated care plans.--Private coordinated care 
        plans which provide health care services, including health 
        maintenance organization plans and preferred provider 
        organization plans.
            ``(B) Combination of high deductible plan and contributions 
        to high deductible medicare msa.--A high deductible plan, as 
        defined in section 1859(b)(2), and a contribution into a High 
        Deductible MedicarePlus medical savings account (MSA).
            ``(C) Plans offered by provider-sponsored organization.--A 
        MedicarePlus plan offered by a provider-sponsored organization, 
        as defined in section 1853(i).
            ``(D) Union, taft-hartley, and association plans.--A 
        MedicarePlus organization plan offered by a MedicarePlus 
        organization that is a union sponsor, Taft-Hartley sponsor, or 
        qualified association sponsor, as defined in section 1859(a).
            ``(E) Fee-for-service plans.--Plans that reimburse 
        hospitals, physicians, and other providers on the basis of a 
        privately determined fee schedule or other basis.
            ``(F) Other health care plans.--Any other private plan for 
        the delivery of health care items and services that is not 
        described in a previous subparagraph.
        ``(3) MedicarePlus eligible individual.--
            ``(A) In general.--In this title, subject to subparagraph 
        (B), the term `MedicarePlus eligible individual' means an 
        individual who is entitled to benefits under part A and 
        enrolled under part B.
            ``(B) Special rule for end-stage renal disease.--Such term 
        shall not include an individual medically determined to have 
        end-stage renal disease, except that an individual who develops 
        end-stage renal disease while enrolled in a MedicarePlus plan 
        may continue to be enrolled in that plan.
    ``(b) Special Rules.--
        ``(1) Residence requirement.--
            ``(A) In general.--Except as the Secretary may otherwise 
        provide, an individual is eligible to elect a MedicarePlus plan 
        offered by a MedicarePlus organization only if the organization 
        serves the geographic area in which the individual resides 
        under the plan.
            ``(B) Continuation of enrollment permitted.--Pursuant to 
        rules specified by the Secretary, the Secretary shall provide 
        that an individual may continue enrollment in a plan, 
        notwithstanding that the individual no longer resides in the 
        service area of the plan, so long as the plan provides benefits 
        for providers located in the area in which the individual 
        resides.
        ``(2) Affiliation requirements for certain plans.--
            ``(A) In general.--Subject to subparagraph (B), an 
        individual is eligible to elect a MedicarePlus plan offered 
        by--
                ``(i) a union sponsor only if (I) the individual is a 
            member of the sponsor and affiliated with the sponsor 
            through an employment relationship with any employer or is 
            the spouse of such a member, and (II) the individual 
            elected under this section a MedicarePlus plan offered by 
            the sponsor during the first enrollment period in which the 
            individual was eligible to make such election with respect 
            to such sponsor;
                ``(ii) a Taft-Hartley sponsor only if (I) the 
            individual is entitled to obtain benefits through such 
            plans under the terms of an applicable collective 
            bargaining agreement, and (II) the individual elected under 
            this section a MedicarePlus plan offered by the sponsor 
            during the first enrollment period in which the individual 
            was eligible to make such election with respect to such 
            sponsor; and
                ``(iii) a qualified association sponsor only if the 
            individual is a member of the association (or is a spouse 
            of such a member).
            ``(B) Limitation on enrollment.--Subject to subparagraph 
        (C)--
                ``(i) a union sponsor may not enroll an individual 
            under this part unless the individual is described in 
            subparagraph (A)(i)(I),
                ``(ii) a Taft-Hartley sponsor may not enroll an 
            individual under this part unless the individual is 
            described in subparagraph (A)(ii)(I), and
                ``(iii) a qualified association sponsor may not enroll 
            an individual under this part unless the individual is 
            described in subparagraph (A)(iii).
            ``(C) Limitation on termination of coverage.--A qualified 
        association sponsor offering a MedicarePlus plan to an 
        individual may not terminate coverage of the individual on the 
        basis that the individual is no longer a member of the 
        association except pursuant to a change of election during an 
        open election period occurring on or after the date of the 
        termination of membership.
        ``(3) Special rules for union, taft-hartley, and qualified 
    association sponsors.--
            ``(A) Unions.--Subject to subparagraph (D), a union sponsor 
        (as defined in section 1859(a)(5)) shall limit eligibility of 
        enrollees under this part for MedicarePlus plans it offers to 
        individuals who are members of the sponsor and affiliated with 
        the sponsor through an employment relationship with any 
        employer or are the spouses of such members.
            ``(B) Taft-hartley sponsors.--Subject to subparagraph (D), 
        a MedicarePlus organization that is a Taft-Hartley sponsor (as 
        defined in section 1859(a)(4)) shall limit eligibility of 
        enrollees under this part for MedicarePlus plans it offers to 
        individuals who are entitled to obtain benefits through such 
        plans under the terms of an applicable collective bargaining 
        agreement.
            ``(C) Qualified association sponsors.--
                ``(i) In general.--Subject to subparagraph (D), a 
            MedicarePlus organization that is a qualified association 
            sponsor (as defined in section 1859(a)(3)) shall limit 
            eligibility of individuals under this part for plans it 
            offers to individuals who are members of the association 
            (or who are spouses of such individuals).
                ``(ii) Limitation on termination of coverage.--Such a 
            qualifying association sponsor offering a MedicarePlus plan 
            to an individual may not terminate coverage of the 
            individual on the basis that the individual is no longer a 
            member of the association except pursuant to a change of 
            election during an open election period occurring on or 
            after the date of the termination of membership.
            ``(D) Limitation.--Rules of eligibility to carry out the 
        previous subparagraphs of this paragraph shall not have the 
        effect of denying eligibility to individuals on the basis of 
        health status, claims experience, receipt of health care, 
        medical history, or lack of evidence of insurability.
            ``(E) No reelection after disenrollment for certain 
        plans.--An individual is not eligible to elect a MedicarePlus 
        plan offered by a MedicarePlus organization that is a union 
        sponsor or a Taft-Hartley sponsor if the individual previously 
        had elected a MedicarePlus plan offered by the organization and 
        had subsequently discontinued election of such a plan offered 
        by the organization.
        ``(4) Special rule for certain individuals covered under 
    fehbp.--An individual who is enrolled in a health benefit plan 
    under chapter 89 of title 5, United States Code, is not eligible to 
    enroll in a high deductible plan until such time as the Director of 
    the Office of Management and Budget certifies to the Secretary that 
    the Office of Personnel Management has adopted policies which will 
    ensure that the enrollment of such individuals in such plans will 
    not result in increased expenditures for the Federal Government for 
    health benefit plans under such chapter.
    ``(c) Process for Exercising Choice.--
        ``(1) In general.--The Secretary shall establish a process 
    through which elections described in subsection (a) are made and 
    changed, including the form and manner in which such elections are 
    made and changed. Such elections shall be made or changed only 
    during coverage election periods specified under subsection (e) and 
    shall become effective as provided in subsection (f).
        ``(2) Expedited implementation.--The Secretary shall establish 
    the process of electing coverage under this section during the 
    transition period (as defined in subsection (e)(1)(B)) in such an 
    expedited manner as will permit such an election for MedicarePlus 
    plans in an area as soon as such plans become available in that 
    area.
        ``(3) Coordination through medicareplus organizations.--
            ``(A) Enrollment.--Such process shall permit an individual 
        who wishes to elect a MedicarePlus plan offered by a 
        MedicarePlus organization to make such election through the 
        filing of an appropriate election form with the organization.
            ``(B) Disenrollment.--Such process shall permit an 
        individual, who has elected a MedicarePlus plan offered by a 
        MedicarePlus organization and who wishes to terminate such 
        election, to terminate such election through the filing of an 
        appropriate election form with the organization.
        ``(4) Default.--
            ``(A) Initial election.--
                ``(i) In general.--Subject to clause (ii), an 
            individual who fails to make an election during an initial 
            election period under subsection (e)(1) is deemed to have 
            chosen the Medicare fee-for-service program option.
                ``(ii) Seamless continuation of coverage.--The 
            Secretary shall establish procedures under which 
            individuals who are enrolled with a MedicarePlus 
            organization at the time of the initial election period and 
            who fail to elect to receive coverage other than through 
            the organization are deemed to have elected the 
            MedicarePlus plan offered by the organization (or, if the 
            organization offers more than one such plan, the 
            MedicarePlus plan offered by the organization with the 
            lowest net monthly premium).
            ``(B) Continuing periods.--An individual who has made (or 
        is deemed to have made) an election under this section is 
        considered to have continued to make such election until such 
        time as--
                ``(i) the individual changes the election under this 
            section, or
                ``(ii) a MedicarePlus plan is discontinued, if the 
            individual had elected such plan at the time of the 
            discontinuation.
    ``(d) Providing Information To Promote Informed Choice.--
        ``(1) In general.--The Secretary shall provide for activities 
    under this subsection to broadly disseminate information to 
    medicare beneficiaries (and prospective medicare beneficiaries) on 
    the coverage options provided under this section in order to 
    promote an active, informed selection among such options.
        ``(2) Provision of notice.--
            ``(A) Open season notification.--At least 15 days before 
        the beginning of each annual, coordinated election period, the 
        Secretary shall mail to each MedicarePlus eligible individual 
        residing in an area the following:
                ``(i) General election information and information 
            about medicare fee-for-service program.--The general 
            information regarding election, benefits coverage, and 
            procedures described in paragraph (3).
                ``(ii) List of plans and comparison of plan options.--A 
            list identifying the MedicarePlus plans that are (or will 
            be) available to residents of the area (and their service 
            areas) and information, described in paragraph (4) and in 
            comparative form, concerning such plans.
                ``(iii) Medicareplus monthly capitation rate.--The 
            amount of the monthly MedicarePlus capitation rate for the 
            area.
                ``(iv) Additional information.--Any other information 
            that the Secretary determines will assist the individual in 
            making the election under this section.
        The mailing of such information shall be coordinated with the 
        mailing of any annual notice under section 1804.
            ``(B) Notification to newly medicareplus eligible 
        individuals.--To the extent practicable, the Secretary shall, 
        not later than 2 months before the beginning of the initial 
        MedicarePlus enrollment period for an individual described in 
        subsection (e)(1)(A), mail to the individual the information 
        described in subparagraph (A).
            ``(C) Form.--The information disseminated under this 
        paragraph shall be written and formatted in the most easily 
        understandable manner possible.
            ``(D) Periodic updating.--The information described in 
        subparagraph (A) shall be updated on at least an annual basis 
        to reflect changes in the availability of MedicarePlus plans 
        and the benefits and monthly premiums (and net monthly 
        premiums) for such plans.
        ``(3) General election information and information about 
    medicare fee-for-service program.--General information under this 
    paragraph, with respect to coverage under this part during a year, 
    shall include the following:
            ``(A) Benefits.--A general description of the benefits 
        covered (and not covered) under the medicare fee-for-service 
        program under parts A and B, including--
                ``(i) covered items and services, and
                ``(ii) beneficiary cost sharing, such as deductibles, 
            coinsurance, and copayment amounts, and the beneficiary 
            liability for balance billing.
            ``(B) Part b premium.--The part B premium rates that will 
        be charged for part B coverage.
            ``(C) Election procedures.--Information and instructions on 
        how to exercise election options under this section.
            ``(D) Procedural rights.--The general description of 
        procedural rights (including grievance procedures) of 
        beneficiaries under the medicare fee-for-service program and 
        the MedicarePlus program.
            ``(E) Right of organization to terminate contract.--The 
        right of each MedicarePlus organization by law to terminate or 
        refuse to renew its contract and the effect the termination or 
        nonrenewal of its contract may have on individuals enrolled 
        with the MedicarePlus plan under this part.
            ``(F) Use of 911 emergency number.--A statement that the 
        use of the 911 emergency telephone number is appropriate in 
        emergency situations and an explanation of what constitutes an 
        emergency situation.
        ``(4) Information comparing plan options.--Information under 
    this paragraph, with respect to a MedicarePlus plan for a year, 
    shall include the following:
            ``(A) Benefits.--The benefits covered under the plan, 
        including covered items and services beyond those provided 
        under the medicare fee-for-service program, any reductions in 
        beneficiary cost sharing, and any maximum limitations on out-
        of-pocket losses.
            ``(B) Premiums.--The monthly premium (and net monthly 
        premium, including any rebate) for the plan.
            ``(C) Quality.--(i) To the extent available, quality 
        indicators for the benefits under the plan (in comparison with 
        quality indicators under the Medicare fee-for-service program 
        under parts A and B in the area involved), including--
                ``(I) disenrollment rates for medicare enrollees 
            electing to receive benefits through the plan for the 
            previous 2 years (excluding disenrollment due to death or 
            moving outside the plan's service area),
                ``(II) information on medicare enrollee satisfaction 
            and health outcomes, and
                ``(III) whether the plan is out of compliance with any 
            requirements of this part (as determined by the Secretary).
            ``(D) Supplemental coverage options.--Whether the 
        organization offering the plan offers optional supplemental 
        coverage.
        ``(5) Maintaining a toll-free number.--The Secretary shall 
    maintain a toll-free number for inquiries regarding MedicarePlus 
    options and the operation of part C in all areas in which 
    MedicarePlus plans are offered.
        ``(6) Use of nonfederal entities.--The Secretary shall, to the 
    maximum extent feasible, enter into contracts with appropriate non-
    Federal entities to carry out activities under this subsection.
        ``(7) Provision of information.--A MedicarePlus organization 
    shall provide the Secretary with such information on the 
    organization and each MedicarePlus plan it offers as may be 
    required for the preparation of the information referred to in 
    paragraph (2)(A).
    ``(e) Coverage Election Periods.--
        ``(1) Initial choice upon eligibility to make election.--
            ``(A) In general.--In the case of an individual who first 
        becomes entitled to benefits under part A and enrolled under 
        part B after the beginning of the transition period (as defined 
        in subparagraph (B)), the individual shall make the election 
        under this section during a period (of a duration and beginning 
        at a time specified by the Secretary) at the first time the 
        individual both is entitled to benefits under part A and 
        enrolled under part B. Such period shall be specified in a 
        manner so that, in the case of an individual who elects a 
        MedicarePlus plan during the period, coverage under the plan 
        becomes effective as of the first date on which the individual 
        may receive such coverage.
            ``(B) Transition period defined.--In this subsection, the 
        term `transition period' means, with respect to an individual 
        in an area, the period beginning on the first day of the first 
        month in which a MedicarePlus plan is first made available to 
        individuals in the area and ending with the month preceding the 
        beginning of the first annual, coordinated election period 
        under paragraph (3).
        ``(2) During transition period.--Subject to paragraph (6)--
            ``(A) Continuous open enrollment into a medicareplus 
        option.--During the transition period, a MedicarePlus eligible 
        individual who has elected the Medicare fee-for-service program 
        option described in subsection (a)(1)(A) may change such 
        election to a MedicarePlus option described in subsection 
        (a)(1)(B) at any time.
            ``(B) Open disenrollment before end of transition period.--
                ``(i) In general.--During the transition period, an 
            individual who has elected a MedicarePlus option described 
            in subsection (a)(1)(B) for a MedicarePlus plan may change 
            such election to another MedicarePlus plan or to the 
            Medicare fee-for-service program option described in 
            subsection (a)(1)(A).
                ``(ii) Special rule.--During the transition period, an 
            individual who has elected a high deductible plan may not 
            change such election to a MedicarePlus plan that is not a 
            high deductible plan unless the individual has had such 
            election in effect for 12 consecutive months.
        ``(3) Annual, coordinated election period.--
            ``(A) In general.--Subject to paragraph (5), each 
        individual who is eligible to make an election under this 
        section may change such election during an annual, coordinated 
        election period.
            ``(B) Annual, coordinated election period.--For purposes of 
        this section, the term `annual, coordinated election period' 
        means, with respect to a calendar year (beginning with 1998), 
        the month of October before such year.
            ``(C) Medicareplus health fair during october, 1996.--In 
        the month of October, 1996, the Secretary shall provide for a 
        nationally coordinated educational and publicity campaign to 
        inform MedicarePlus eligible individuals about such plans and 
        the election process provided under this section (including the 
        annual, coordinated election periods that occur in subsequent 
        years).
        ``(4) Special 90-day disenrollment option.--
            ``(A) In general.--In the case of the first time an 
        individual elects any MedicarePlus plan (other than a high 
        deductible plan) offered by a particular MedicarePlus 
        organization under this section, the individual may change such 
        election through the filing of an appropriate notice during the 
        90-day period beginning on the first day on which the 
        individual's coverage under the MedicarePlus plan under such 
        option becomes effective.
            ``(B) Limitation.--Subparagraph (A)--
                ``(i) shall only apply once for an individual with 
            respect to any particular organization, and
                ``(ii) may not apply more than twice for any individual 
            in a calendar year.
            ``(C) Effect of discontinuation of election.--An individual 
        who discontinues an election under subparagraph (A) may, during 
        the period specified by the Secretary, make a new election 
        under this subsection (a) (or, in the absence of such an 
        election, is deemed at the time of such discontinuation to have 
        elected the Medicare fee-for-service program option described 
        in subsection (a)(1)(A)).
        ``(5) Special election periods.--An individual may discontinue 
    an election of a MedicarePlus plan offered by a MedicarePlus 
    organization other than during an annual, coordinated election 
    period and make a new election under this section if--
            ``(A) the organization's or plan's certification under part 
        C has been terminated or the organization has terminated or 
        otherwise discontinued providing the plan;
            ``(B) the individual is no longer eligible to elect the 
        plan because of a change in the individual's place of residence 
        or other change in circumstances (specified by the Secretary, 
        but not including termination of membership in a qualified 
        association in the case of a plan offered by a qualified 
        association sponsor or termination of the individual's 
        enrollment on the basis described in clause (i) or (ii) section 
        1851(g)(3)(B));
            ``(C) the individual demonstrates (in accordance with 
        guidelines established by the Secretary) that--
                ``(i) the organization offering the plan substantially 
            violated a material provision of the organization's 
            contract under part C in relation to the individual and the 
            plan; or
                ``(ii) the organization (or an agent or other entity 
            acting on the organization's behalf) materially 
            misrepresented the plan's provisions in marketing the plan 
            to the individual; or
            ``(D) the individual meets such other conditions as the 
        Secretary may provide.
        ``(6) Special rule for high deductible plans.--Notwithstanding 
    the previous provisions of this subsection, an individual may elect 
    a high deductible plan only during an annual, coordinated election 
    period described in paragraph (3)(B) or during the month of 
    October, 1996.
    ``(f) Effectiveness of Elections.--
        ``(1) During initial coverage election period.--An election of 
    coverage made during the initial coverage election period under 
    subsection (e)(1)(A) shall take effect upon the date the individual 
    becomes entitled to benefits under part A and enrolled under part 
    B, except as the Secretary may provide (consistent with section 
    1838) in order to prevent retroactive coverage.
        ``(2) During transition; 90-day disenrollment option.--An 
    election of coverage made under subsection (e)(2) and an election 
    to discontinue a MedicarePlus option under subsection (e)(4) at any 
    time shall take effect with the first calendar month following the 
    date on which the election is made.
        ``(3) Annual, coordinated election period and high deductible 
    plan election.--An election of coverage made during an annual, 
    coordinated election period (as defined in subsection (e)(3)(B)) in 
    a year or for a high deductible plan shall take effect as of the 
    first day of the following year.
        ``(4) Other periods.--An election of coverage made during any 
    other period under subsection (e)(5) shall take effect in such 
    manner as the Secretary provides in a manner consistent (to the 
    extent practicable) with protecting continuity of health benefit 
    coverage.
    ``(g) Guaranteed Issue and Renewal.--
        ``(1) In general.--Except as provided in this subsection, a 
    MedicarePlus organization shall provide that at any time during 
    which elections are accepted under this section with respect to a 
    MedicarePlus plan offered by the organization, the organization 
    will accept without restrictions individuals who are eligible to 
    make such election.
        ``(2) Priority.--If the Secretary determines that a 
    MedicarePlus organization, in relation to a MedicarePlus plan it 
    offers, has a capacity limit and the number of MedicarePlus 
    eligible individuals who elect the plan under this section exceeds 
    the capacity limit, the organization may limit the election of 
    individuals of the plan under this section but only if priority in 
    election is provided--
            ``(A) first to such individuals as have elected the plan at 
        the time of the determination, and
            ``(B) then to other such individuals in such a manner that 
        does not discriminate among the individuals (who seek to elect 
        the plan) on a basis described in section 1852(b).
    The preceding sentence shall not apply if it would result in the 
    enrollment of enrollees substantially nonrepresentative, as 
    determined in accordance with regulations of the Secretary, of the 
    medicare population in the service area of the plan.
        ``(3) Limitation on termination of election.--
            ``(A) In general.--Subject to subparagraph (B), a 
        MedicarePlus organization may not for any reason terminate the 
        election of any individual under this section for a 
        MedicarePlus plan it offers.
            ``(B) Basis for termination of election.--A MedicarePlus 
        organization may terminate an individual's election under this 
        section with respect to a MedicarePlus plan it offers if--
                ``(i) any net monthly premiums required with respect to 
            such plan are not paid on a timely basis (consistent with 
            standards under section 1856 that provide for a grace 
            period for late payment of net monthly premiums),
                ``(ii) the individual has engaged in disruptive 
            behavior (as specified in such standards), or
                ``(iii) the plan is terminated with respect to all 
            individuals under this part.
        Any individual whose election is so terminated is deemed to 
        have elected the Medicare fee-for-service program option 
        described in subsection (a)(1)(A).
            ``(C) Limitation on termination of coverage.--A qualified 
        association sponsor offering a MedicarePlus plan to an 
        individual may not terminate coverage of the individual on the 
        basis that the individual is no longer a member of the 
        association except pursuant to a change of election during an 
        open election period occurring on or after the date of the 
        termination of membership.
            ``(D) Organization obligation with respect to election 
        forms.--Pursuant to a contract under section 1857, each 
        MedicarePlus organization receiving an election form under 
        subsection (c)(3) shall transmit to the Secretary (at such time 
        and in such manner as the Secretary may specify) a copy of such 
        form or such other information respecting the election as the 
        Secretary may specify.
    ``(h) Approval of Marketing Materials.--
        ``(1) Submission.--No marketing materials may be distributed by 
    a MedicarePlus organization to (or for the use of) MedicarePlus 
    eligible individuals unless--
            ``(A) at least 45 days before the date of distribution the 
        organization has submitted the material to the Secretary for 
        review, and
            ``(B) the Secretary has not disapproved the distribution of 
        such material.
        ``(2) Review.--The standards established under section 1856 
    shall include guidelines for the review of all such material 
    submitted and under such guidelines the Secretary shall disapprove 
    such material if the material is materially inaccurate or 
    misleading or otherwise makes a material misrepresentation.
        ``(3) Deemed approval (1-stop shopping).--In the case of 
    material that is submitted under paragraph (1)(A) to the Secretary 
    or a regional office of the Department of Health and Human Services 
    and the Secretary or the office has not disapproved the 
    distribution of marketing materials under paragraph (1)(B) with 
    respect to a MedicarePlus plan in an area, the Secretary is deemed 
    not to have disapproved such distribution in all other areas 
    covered by the plan and organization.
        ``(4) Prohibition of certain marketing practices.--Each 
    MedicarePlus organization shall conform to fair marketing standards 
    in relation to MedicarePlus plans offered under this part, included 
    in the standards established under section 1856. Such standards 
    shall include a prohibition against an organization (or agent of 
    such an organization) completing any portion of any election form 
    used to carry out elections under this section on behalf of any 
    individual.
    ``(i) Effect of Election of MedicarePlus Plan Option.--Subject to 
section 1852(a)(5)--
        ``(1) payments under a contract with a MedicarePlus 
    organization under section 1854(a) with respect to an individual 
    electing a MedicarePlus plan offered by the organization shall be 
    instead of the amounts which (in the absence of the contract) would 
    otherwise be payable under parts A and B for items and services 
    furnished to the individual, and
        ``(2) subject to subsections (e) and (f) of section 1854, only 
    the MedicarePlus organization shall be entitled to receive payments 
    from the Secretary under this title for services furnished to the 
    individual.
    ``(j) Administration.--
        ``(1) In general.--This part and section 1876 shall be 
    administered through an operating division (A) that is established 
    or identified by the Secretary and is in the Department of Health 
    and Human Services, (B) that is separate from the Health Care 
    Financing Administration, and (C) the primary function of which is 
    the administration of this part and such section. The director of 
    such division shall be of equal pay and rank to that of the 
    individual responsible for overall administration of parts A and B.
        ``(2) Transfer authority.--The Secretary shall transfer such 
    personnel, administrative support systems, assets, records, funds, 
    and other resources in the Health Care Financing Administration to 
    the operating division referred to in paragraph (1) as are used in 
    the administration of section 1876 and as may be required to 
    implement the provisions of this part promptly and efficiently.

                  ``benefits and beneficiary protections

    ``Sec. 1852. (a) Basic Benefits.--
        ``(1) In general.--Except as provided in section 1859(b)(2) for 
    high deductible plans, each MedicarePlus plan shall provide to 
    members enrolled under this part, through providers and other 
    persons that meet the applicable requirements of this title and 
    part A of title XI--
            ``(A) those items and services for which benefits are 
        available under parts A and B to individuals residing in the 
        area served by the plan, and
            ``(B) additional health services as the Secretary may 
        approve.
    The Secretary shall approve any such additional health care 
    services which the plan proposes to offer to such members, unless 
    the Secretary determines that including such additional services 
    will substantially discourage enrollment by MedicarePlus eligible 
    individuals with the plan.
        ``(2) Satisfaction of requirement.--A MedicarePlus plan (other 
    than a high deductible plan) offered by a MedicarePlus organization 
    satisfies paragraph (1)(A) with respect to benefits for items and 
    services if the following requirements are met:
            ``(A) Fee for service providers.--In the case of benefits 
        furnished through a provider that does not have a contract with 
        the organization, the plan provides for at least the dollar 
        amount of payment for such items and services as would 
        otherwise be provided under parts A and B.
            ``(B) Participating providers.--In the case of benefits 
        furnished through a provider that has such a contract, the 
        individual's liability for payment for such items and services 
        does not exceed (after taking into account any deductible, 
        which does not exceed any deductible under parts A and B) the 
        lesser of the following:
                ``(i) Individual's liability under medicare fee-for-
            service program.--The amount of the liability that the 
            individual would have had (based on the provider being a 
            participating provider) if the individual had not elected 
            coverage under a MedicarePlus plan.
                ``(ii) Medicare coinsurance applied to plan payment 
            rates.--The applicable coinsurance or copayment rate (that 
            would have applied under theedicare fee-for-service program 
            option described in section 1851(a)(1)(A)) of the payment 
            rate provided under the contract.
        ``(3) Supplemental optional benefits.--Each MedicarePlus 
    organization may offer under a MedicarePlus plan optional 
    supplemental benefits to each individual enrolled in the plan under 
    this part for an additional premium amount. If the supplemental 
    benefits are offered only to individuals enrolled in the sponsor's 
    plan under this part, the additional premium amount shall be the 
    same for all enrolled individuals in the MedicarePlus payment area. 
    Such benefits may be marketed and sold by the MedicarePlus 
    organization outside of the enrollment process described in section 
    1851(c).
        ``(4) Organization as secondary payer.--Notwithstanding any 
    other provision of law, a MedicarePlus organization may (in the 
    case of the provision of items and services to an individual under 
    a MedicarePlus plan under circumstances in which payment under this 
    title is made secondary pursuant to section 1862(b)(2)) charge or 
    authorize the provider of such services to charge, in accordance 
    with the charges allowed under such a law, plan, or policy--
            ``(A) the insurance carrier, employer, or other entity 
        which under such law, plan, or policy is to pay for the 
        provision of such services, or
            ``(B) such individual to the extent that the individual has 
        been paid under such law, plan, or policy for such services.
        ``(5) National coverage determinations.--If there is a national 
    coverage determination made in the period beginning on the date of 
    an announcement under section 1854(b) and ending on the date of the 
    next announcement under such section and the Secretary projects 
    that the determination will result in a significant change in the 
    costs to a MedicarePlus organization of providing the benefits that 
    are the subject of such national coverage determination and that 
    such change in costs was not incorporated in the determination of 
    the annual MedicarePlus capitation rate under section 1854 included 
    in the announcement made at the beginning of such period--
            ``(A) such determination shall not apply to contracts under 
        this part until the first contract year that begins after the 
        end of such period, and
            ``(B) if such coverage determination provides for coverage 
        of additional benefits or coverage under additional 
        circumstances, section 1851(i) shall not apply to payment for 
        such additional benefits or benefits provided under such 
        additional circumstances until the first contract year that 
        begins after the end of such period,
    unless otherwise required by law.
    ``(b) Antidiscrimination.--A MedicarePlus organization may not 
deny, limit, or condition the coverage or provision of benefits under 
this part based on the health status, claims experience, receipt of 
health care, medical history, or lack of evidence of insurability, of 
an individual. A MedicarePlus organization shall notify each enrollee 
under this part of provisions of this subsection at the time of the 
individual's enrollment.
    ``(c) Detailed Description of Plan Provisions.--A MedicarePlus 
organization shall disclose, in clear, accurate, and standardized form 
to each enrollee with a MedicarePlus plan offered by the organization 
under this part at the time of enrollment and at least annually 
thereafter, the following information regarding such plan:
        ``(1) Service area.--The plan's service area.
        ``(2) Benefits.--Benefits under the plan offered, including 
    information described in section 1851(d)(3)(A) and exclusions from 
    coverage and, if it is a high deductible plan, a comparison of 
    benefits under such a plan with benefits under other MedicarePlus 
    plans.
        ``(3) Access.--The number, mix, and distribution of 
    participating providers.
        ``(4) Out-of-area coverage.--Out-of-area coverage provided by 
    the plan.
        ``(5) Emergency coverage.--Coverage of emergency services and 
    urgently needed care.
        ``(6) Optional supplemental coverage.--Optional supplemental 
    coverage available from the organization offering the plan, 
    including--
            ``(A) supplemental items and services covered, and
            ``(B) the premium price for the optional supplemental 
        benefits.
        ``(7) Prior authorization rules.--Rules regarding prior 
    authorization or other review requirements that could result in 
    nonpayment.
        ``(8) Plan grievance procedures.--Any plan-specific appeal or 
    grievance rights and procedures.
        ``(9) Quality assurance program.--A description of the 
    organization's quality assurance program under subsection (e).
    ``(d) Access to Services.--
        ``(1) In general.--A MedicarePlus organization offering a 
    MedicarePlus plan may restrict the providers from whom the benefits 
    under the plan are provided so long as--
            ``(A) the organization makes such benefits available and 
        accessible to each individual electing the plan within the plan 
        service area with reasonable promptness and in a manner which 
        assures continuity in the provision of benefits;
            ``(B) when medically necessary the organization makes such 
        benefits available and accessible 24 hours a day and 7 days a 
        week;
            ``(C) the plan provides for reimbursement with respect to 
        services which are covered under subparagraphs (A) and (B) and 
        which are provided to such an individual other than through the 
        organization, if--
                ``(i) the services were medically necessary and 
            immediately required because of an unforeseen illness, 
            injury, or condition, and
                ``(ii) it was not reasonable given the circumstances to 
            obtain the services through the organization;
            ``(D) the organization provides access to appropriate 
        providers, including credentialed specialists, for medically 
        necessary treatment and services, and
            ``(E) coverage is provided for emergency services (as 
        defined in paragraph (3)) without regard to prior authorization 
        or the emergency care provider's contractual relationship with 
        the organization.
        ``(2) Protection of enrollees for certain emergency services.--
            ``(A) Participating providers.--In the case of emergency 
        services described in subparagraph (C) which are furnished by a 
        participating physician or provider of services to an 
        individual enrolled with a MedicarePlus organization under this 
        section, the applicable participation agreement is deemed to 
        provide that the physician or provider of services will accept 
        as payment in full from the organization for such emergency 
        services described in subparagraph (C) the amount that would be 
        payable to the physician or provider of services under part B 
        and from the individual under such part, if the individual were 
        not enrolled with such an organization under this part.
            ``(B) Nonparticipating providers.--In the case of emergency 
        services described in subparagraph (C) which are furnished by a 
        nonparticipating physician, the limitations on actual charges 
        for such services otherwise applicable under part B (to 
        services furnished by individuals not enrolled with a 
        MedicarePlus organization under this section) shall apply in 
        the same manner as such limitations apply to services furnished 
        to individuals not enrolled with such an organization.
            ``(C) Emergency services described.--The emergency services 
        described in this subparagraph are emergency services which are 
        furnished to an enrollee of a MedicarePlus organization under 
        this part by a physician or provider of services that is not 
        under a contract with the organization.
            ``(D) Exception for unrestricted fee-for-service plans.--
        The previous provisions of this paragraph shall not apply in 
        the case of a MedicarePlus organization in relation to a 
        MedicarePlus unrestricted fee-for-service plan (as defined in 
        section 1859(b)(3)).
        ``(3) Definition of emergency services.--In this subsection, 
    the term `emergency services' means, with respect to an individual 
    enrolled with an organization, covered inpatient and outpatient 
    services that--
            ``(A) are furnished by an appropriate source other than the 
        organization,
            ``(B) are needed immediately because of an injury or sudden 
        illness, and
            ``(C) are needed because the time required to reach the 
        organization's providers or suppliers would have meant risk of 
        serious damage to the patient's health.
    ``(e) Quality Assurance Program.--
        ``(1) In general.--Each MedicarePlus organization must have 
    arrangements, established in accordance with regulations of the 
    Secretary, for an ongoing quality assurance program for health care 
    services it provides to individuals enrolled with MedicarePlus 
    plans of the organization.
        ``(2) Elements of program.--The quality assurance program 
    shall--
            ``(A) stress health outcomes;
            ``(B) provide for the establishment of written protocols 
        for utilization review, based on current standards of medical 
        practice;
            ``(C) provide review by physicians and other health care 
        professionals of the process followed in the provision of such 
        health care services;
            ``(D) monitor and evaluate high volume and high risk 
        services and the care of acute and chronic conditions;
            ``(E) evaluate the continuity and coordination of care that 
        enrollees receive;
            ``(F) have mechanisms to detect both underutilization and 
        overutilization of services;
            ``(G) after identifying areas for improvement, establish or 
        alter practice parameters;
            ``(H) take action to improve quality and assesses the 
        effectiveness of such action through systematic follow-up;
            ``(I) make available information on quality and outcomes 
        measures to facilitate beneficiary comparison and choice of 
        health coverage options (in such form and on such quality and 
        outcomes measures as the Secretary determines to be 
        appropriate); and
            ``(J) be evaluated on an ongoing basis as to its 
        effectiveness.
        ``(3) External review.--Each MedicarePlus organization shall, 
    for each MedicarePlus plan it operates, have an agreement with an 
    independent quality review and improvement organization approved by 
    the Secretary.
        ``(4) Exception for unrestricted fee-for-service plans.--
    Paragraphs (1) and (3) and subsection (h)(2) (relating to 
    maintaining medical records) shall not apply in the case of a 
    MedicarePlus organization in relation to a MedicarePlus 
    unrestricted fee-for-service plan.
        ``(5) Treatment of accreditation.--The Secretary shall provide 
    that a MedicarePlus organization is deemed to meet the requirements 
    of paragraphs (1) through (3) of this subsection and subsection (h) 
    (relating to confidentiality and accuracy of medical records) if 
    the organization is accredited (and periodically reaccredited) by a 
    private organization under a process that the Secretary has 
    determined assures that the organization meets standards that are 
    no less stringent than the standards established under section 1856 
    to carry out this subsection and such subsection.
    ``(f) Coverage Determinations.--
        ``(1) Decisions on nonemergency care.--A MedicarePlus 
    organization shall make determinations regarding authorization 
    requests for nonemergency care on a timely basis, depending on the 
    urgency of the situation.
        ``(2) Appeals.--
            ``(A) In general.--Appeals from a determination of an 
        organization denying coverage shall be decided within 30 days 
        of the date of receipt of medical information, but not later 
        than 60 days after the date of the decision.
            ``(B) Physician decision on certain appeals.--Appeal 
        decisions relating to a determination to deny coverage based on 
        a lack of medical necessity shall be made only by a physician.
            ``(C) Emergency cases.--Appeals from such a determination 
        involving a life-threatening or emergency situation shall be 
        decided on an expedited basis.
    ``(g) Grievances and Appeals.--
        ``(1) Grievance mechanism.--Each MedicarePlus organization must 
    provide meaningful procedures for hearing and resolving grievances 
    between the organization (including any entity or individual 
    through which the organization provides health care services) and 
    enrollees with MedicarePlus plans of the organization under this 
    part.
        ``(2) Appeals.--An enrollee with a MedicarePlus plan of a 
    MedicarePlus organization under this part who is dissatisfied by 
    reason of the enrollee's failure to receive any health service to 
    which the enrollee believes the enrollee is entitled and at no 
    greater charge than the enrollee believes the enrollee is required 
    to pay is entitled, if the amount in controversy is $100 or more, 
    to a hearing before the Secretary to the same extent as is provided 
    in section 205(b), and in any such hearing the Secretary shall make 
    the organization a party. If the amount in controversy is $1,000 or 
    more, the individual or organization shall, upon notifying the 
    other party, be entitled to judicial review of the Secretary's 
    final decision as provided in section 205(g), and both the 
    individual and the organization shall be entitled to be parties to 
    that judicial review. In applying sections 205(b) and 205(g) as 
    provided in this subparagraph, and in applying section 205(l) 
    thereto, any reference therein to the Commissioner of Social 
    Security or the Social Security Administration shall be considered 
    a reference to the Secretary or the Department of Health and Human 
    Services, respectively.
        ``(3) Independent review of certain coverage denials.--The 
    Secretary shall contract with an independent, outside entity to 
    review and resolve appeals of denials of coverage related to urgent 
    or emergency services with respect to MedicarePlus plans.
        ``(4) Coordination with secretary of labor.--The Secretary 
    shall consult with the Secretary of Labor so as to ensure that the 
    requirements of this subsection, as they apply in the case of 
    grievances referred to in paragraph (1) to which section 503 of the 
    Employee Retirement Income Security Act of 1974 applies, are 
    applied in a manner consistent with the requirements of such 
    section 503, so long as such requirements provide at least as much 
    protection for beneficiaries as would apply if this paragraph did 
    not apply.
    ``(h) Confidentiality and Accuracy of Enrollee Records.--Each 
MedicarePlus organization shall establish procedures--
        ``(1) to safeguard the privacy of individually identifiable 
    enrollee information, and
        ``(2) to maintain accurate and timely medical records for 
    enrollees.
    ``(i) Information on Advance Directives.--Each MedicarePlus 
organization shall meet the requirement of section 1866(f) (relating to 
maintaining written policies and procedures respecting advance 
directives).
    ``(j) Rules Regarding Physician Participation.--
        ``(1) Procedures.--Each MedicarePlus organization shall 
    establish reasonable procedures relating to the participation 
    (under an agreement between a physician and the organization) of 
    physicians under MedicarePlus plans offered by the organization 
    under this part. Such procedures shall include--
            ``(A) providing notice of the rules regarding 
        participation,
            ``(B) providing written notice of participation decisions 
        that are adverse to physicians, and
            ``(C) providing a process within the organization for 
        appealing adverse decisions, including the presentation of 
        information and views of the physician regarding such decision.
        ``(2) Consultation in medical policies.--A MedicarePlus 
    organization shall consult with physicians who have entered into 
    participation agreements with the organization regarding the 
    organization's medical policy, quality, and medical management 
    procedures.
        ``(3) Limitations on physician incentive plans.--
            ``(A) In general.--No MedicarePlus organization may operate 
        any physician incentive plan (as defined in subparagraph (B)) 
        unless the following requirements are met:
                ``(i) No specific payment is made directly or 
            indirectly under the plan to a physician or physician group 
            as an inducement to reduce or limit medically necessary 
            services provided with respect to a specific individual 
            enrolled with the organization.
                ``(ii) If the plan places a physician or physician 
            group at substantial financial risk (as determined by the 
            Secretary) for services not provided by the physician or 
            physician group, the organization--

                    ``(I) provides stop-loss protection for the 
                physician or group that is adequate and appropriate, 
                based on standards developed by the Secretary that take 
                into account the number of physicians placed at such 
                substantial financial risk in the group or under the 
                plan and the number of individuals enrolled with the 
                organization who receive services from the physician or 
                the physician group, and
                    ``(II) conducts periodic surveys of both 
                individuals enrolled and individuals previously 
                enrolled with the organization to determine the degree 
                of access of such individuals to services provided by 
                the organization and satisfaction with the quality of 
                such services.

                ``(iii) The organization provides the Secretary with 
            descriptive information regarding the plan, sufficient to 
            permit the Secretary to determine whether the plan is in 
            compliance with the requirements of this subparagraph.
            ``(B) Physician incentive plan defined.--In this paragraph, 
        the term `physician incentive plan' means any compensation 
        arrangement between a MedicarePlus organization and a physician 
        or physician group that may directly or indirectly have the 
        effect of reducing or limiting services provided with respect 
        to individuals enrolled with the organization under this part.
        ``(4) Limitation on provider indemnification.--A MedicarePlus 
    organization may not provide (directly or indirectly) for a 
    provider (or group of providers) to indemnify the organization 
    against any liability resulting from a civil action brought by or 
    on behalf of an enrollee under this part for any damage caused to 
    an enrollee with a MedicarePlus plan of the organization by the 
    organization's denial of medically necessary care.
        ``(5) Exception for unrestricted fee-for-service plans.--The 
    previous provisions of this subsection shall not apply in the case 
    of a MedicarePlus organization in relation to a MedicarePlus 
    unrestricted fee-for-service plan.

      ``organizational and financial requirements for medicareplus 
            organizations; provider-sponsored organizations

    ``Sec. 1853. (a) Organized and Licensed Under State Law.--
        ``(1) In general.--A MedicarePlus organization shall be 
    organized and licensed under State law as a risk-bearing entity 
    eligible to offer health insurance or health benefits coverage in 
    each State in which it offers a MedicarePlus plan.
        ``(2) Exception for certain union sponsors and taft-hartley 
    sponsors.--Paragraph (1) shall not apply to a MedicarePlus 
    organization that is a union sponsor or Taft-Hartley sponsor.
        ``(3) Exception for qualified associations sponsor.--Paragraph 
    (1) shall not apply to a MedicarePlus organization that is a 
    qualified association sponsor.
        ``(4) Special rules for provider-sponsored organizations.--
            ``(A) In general.--A provider-sponsored organization that 
        seeks to offer a MedicarePlus plan in a State may apply for a 
        waiver of the requirement of paragraph (1) for that 
        organization operating in that State.
            ``(B) Standard.--The Secretary shall act on such an 
        application within 60 days after the date it is filed and shall 
        grant such a waiver for an organization with respect to a State 
        if the Secretary determines that--
                ``(i) the State has failed to complete action on a 
            licensing application of the organization within 90 days of 
            the date of the State's receipt of the completed 
            application; or
                ``(ii) the State denied such a licensing application 
            and--

                    ``(I) the State's licensing standards or review 
                process imposes any requirements, procedures, or other 
                standards to such organizations that are not generally 
                applicable to any other entities engaged in 
                substantially similar business,
                    ``(II) such standards or review process applies 
                solvency standards for the organization and the State 
                is not approved under subsection (e)(2)(B), or
                    ``(III) the State has used solvency standards to 
                deny or discriminate against such an organization that 
                has been provided a certificate of solvency under 
                subsection (e)(2).

        No period before the date of the enactment of this section 
        shall be included in determining the 90-day period described in 
        clause (i).
            ``(C) Treatment of waiver.--In the case of a waiver granted 
        under this paragraph for a provider-sponsored organization--
                ``(i) the waiver shall be effective for a 36-month 
            period, except it may be renewed based on a subsequent 
            application filed during the last 6 months of such period,
                ``(ii) the waiver is conditioned upon the pendency of 
            the licensure application during the period the waiver is 
            in effect, and
                ``(iii) any provisions of State law which relate to the 
            licensing of the organization and which prohibit the 
            organization from providing coverage pursuant to a contract 
            under this part shall be superseded.
        Nothing in this subparagraph shall be construed as limiting the 
        number of times such a waiver may be renewed.
            ``(D) Construction.--Nothing in this paragraph shall be 
        construed as affecting the operation of section 514 of the 
        Employee Retirement Income Security Act of 1974.
        ``(5) Exception if required to offer more than medicareplus 
    plans.--Paragraph (1) shall not apply to a MedicarePlus 
    organization in a State if the State requires the organization, as 
    a condition of licensure, to offer any product or plan other than a 
    MedicarePlus plan.
        ``(6) Exception in cases of unreasonable barriers to market 
    entry.--
            ``(A) In general.--A MedicarePlus organization that seeks 
        to offer a MedicarePlus plan in a State may apply for a waiver 
        of the requirement of paragraph (1) for that organization 
        operating in that State.
            ``(B) Standard.--The Secretary shall act on such an 
        application within 60 days after the date it is filed and shall 
        grant such a waiver for an organization with respect to a State 
        if the Secretary determines that--
                ``(i) the State (I) denied such a licensing application 
            or (II) unreasonably delayed in acting upon the 
            application, and
                ``(ii) the State's licensing standards or review 
            process imposes unreasonable barriers to market entry, 
            including through the imposition of any requirements, 
            procedures, or other standards to such organizations that 
            are not generally applicable to any other entities engaged 
            in substantially similar business.
            ``(C) Application of certain rules.--The provisions of 
        subparagraphs (C) and (D) of paragraph (4) shall apply to this 
        paragraph in the same manner as they apply under such 
        paragraph, except that for this purpose any reference in 
        paragraph (4)(C)(i) to a 36-month period is deemed a reference 
        to a 24-month period.
    ``(b) Prepaid Payment.--A MedicarePlus organization shall be 
compensated (except for deductibles, coinsurance, and copayments) for 
the provision of health care services to enrolled members by a payment 
which is paid on a periodic basis without regard to the date the health 
care services are provided and which is fixed without regard to the 
frequency, extent, or kind of health care service actually provided to 
a member.
    ``(c) Assumption of Full Financial Risk.--The MedicarePlus 
organization shall assume full financial risk on a prospective basis 
for the provision of the health care services (except, at the election 
of the organization, hospice care) for which benefits are required to 
be provided under section 1852(a)(1), except that the organization--
        ``(1) may obtain insurance or make other arrangements for the 
    cost of providing to any enrolled member such services the 
    aggregate value of which exceeds $5,000 in any year,
        ``(2) may obtain insurance or make other arrangements for the 
    cost of such services provided to its enrolled members other than 
    through the organization because medical necessity required their 
    provision before they could be secured through the organization,
        ``(3) may obtain insurance or make other arrangements for not 
    more than 90 percent of the amount by which its costs for any of 
    its fiscal years exceed 115 percent of its income for such fiscal 
    year, and
        ``(4) may make arrangements with physicians or other health 
    professionals, health care institutions, or any combination of such 
    individuals or institutions to assume all or part of the financial 
    risk on a prospective basis for the provision of basic health 
    services by the physicians or other health professionals or through 
    the institutions.
In the case of a MedicarePlus organization that is a union sponsor, 
Taft-Hartley sponsor, or a qualified association sponsor, this 
subsection shall not apply with respect to MedicarePlus plans offered 
by such organization and issued by an organization to which subsection 
(b)(1) applies or by a provider-sponsored organization (as defined in 
section 1854(a)).
    ``(d) Provision Against Risk of Insolvency.--
        ``(1) In general.--Each MedicarePlus organization shall meet 
    standards under section 1856 relating to the financial solvency and 
    capital adequacy of the organization and including provision to 
    prevent enrollees from being held liable to any person or entity 
    for the plan sponsor's debts in the event of the plan sponsor's 
    insolvency. Such standards shall take into account the nature and 
    type of MedicarePlus plans offered by the organization.
        ``(2) Treatment of provider-sponsored organizations.--
            ``(A) In general.--In the case of an entity that is a 
        provider-sponsored organization that is operating--
                ``(i) in a State approved under subparagraph (B), the 
            organization shall meet the standards described in 
            paragraph (1) through licensure by the State, or
                ``(ii) in a State that is not so approved, the 
            organization shall meet the standards described in 
            paragraph (1) through application and certification 
            licensure by the Secretary.
            ``(B) Approved states.--
                ``(i) Application process.--For purposes of 
            subparagraph (A), the Secretary shall establish a process 
            under which a State may apply to the Secretary for a 
            determination that the State is applying to provider-
            sponsored organizations, through its process for licensing 
            provider-sponsored organizations, solvency standards that 
            are identical with the solvency standards established under 
            section 1856(c) for such organizations.
                ``(ii) Determination.--The Secretary shall approve such 
            a State if the Secretary determines that the State is so 
            applying such standards. If the Secretary denies such an 
            approval, the State may reapply for such a determination.
                ``(iii) Publication.--The Secretary shall publish a 
            list of States that are approved under this subparagraph.
        ``(3) Treatment of union and taft-hartley sponsors.--An entity 
    that is a union sponsor or a Taft-Hartley sponsor is deemed to meet 
    the requirement of paragraph (1).
        ``(4) Treatment of certain qualified association sponsors.--An 
    entity that is a qualified association sponsor is deemed to meet 
    the requirement of paragraph (1) with respect to MedicarePlus plans 
    offered by such association and issued by an organization to which 
    subsection (b)(1) applies or by a provider-sponsored organization.
    ``(e) Provider-Sponsored Organization Defined.--
        ``(1) In general.--In this part, the term `provider-sponsored 
    organization' means a public or private entity--
            ``(A) that is established or organized by a health care 
        provider, or group of affiliated health care providers,
            ``(B) that provides a substantial proportion (as defined by 
        the Secretary) of the health care items and services under the 
        contract under this part directly through the provider or 
        affiliated group of providers, and
            ``(C) with respect to which those affiliated providers that 
        share, directly or indirectly, substantial financial risk with 
        respect to the provision of such items and services have at 
        least a majority financial interest in the entity.
        ``(2) Substantial proportion.--In defining what is a 
    `substantial proportion' for purposes of paragraph (1)(A), the 
    Secretary--
            ``(A) shall take into account the need for such an 
        organization to assume responsibility for a substantial 
        proportion of services in order to assure financial stability 
        and the practical difficulties in such an organization 
        integrating a very wide range of service providers; and
            ``(B) may vary such proportion based upon relevant 
        differences among organizations, such as their location in an 
        urban or rural area.
        ``(3) Affiliation.--For purposes of this subsection, a provider 
    is `affiliated' with another provider if, through contract, 
    ownership, or otherwise--
            ``(A) one provider, directly or indirectly, controls, is 
        controlled by, or is under common control with the other,
            ``(B) both providers are part of a controlled group of 
        corporations under section 1563 of the Internal Revenue Code of 
        1986, or
            ``(C) both providers are part of an affiliated service 
        group under section 414 of such Code.
        ``(4) Control.--For purposes of paragraph (3), control is 
    presumed to exist if one party, directly or indirectly, owns, 
    controls, or holds the power to vote, or proxies for, not less than 
    51 percent of the voting rights or governance rights of another.
        ``(5) Health care provider defined.--In this subsection and 
    subsection (f), the term `health care provider' means--
            ``(A) any individual who is engaged in the delivery of 
        health care services in a State and who is required by State 
        law or regulation to be licensed or certified by the State to 
        engage in the delivery of such services in the State, and
            ``(B) any entity that is engaged in the delivery of health 
        care services in a State and that, if it is required by State 
        law or regulation to be licensed or certified by the State to 
        engage in the delivery of such services in the State, is so 
        licensed.
        ``(6) Regulations.--The Secretary shall issue regulations to 
    carry out this subsection.
    ``(f) Organizations Treated as MedicarePlus Organizations During 
Transition.--Any of the following organizations shall be considered to 
qualify as a MedicarePlus organization for contract years beginning 
before January 1, 1998:
        ``(1) Health maintenance organizations.--An organization that 
    is organized under the laws of any State and that is a qualified 
    health maintenance organization (as defined in section 1310(d) of 
    the Public Health Service Act), an organization recognized under 
    State law as a health maintenance organization, or a similar 
    organization regulated under State law for solvency in the same 
    manner and to the same extent as such a health maintenance 
    organization.
        ``(2) Licensed insurers.--An organization that is organized 
    under the laws of any State and--
            ``(A) is licensed by a State agency as an insurer for the 
        offering of health benefit coverage, or
            ``(B) is licensed by a State agency as a service benefit 
        plan,
    but only for individuals residing in an area in which the 
    organization is licensed to offer health insurance coverage.
        ``(3) Current risk-contractors.--An organization that is an 
    eligible organization (as defined in section 1876(b)) and that has 
    a risk-sharing contract in effect under section 1876 as of the date 
    of the enactment of this section.

                 ``payments to medicareplus organizations

    ``Sec. 1854. (a) Payments to Organizations.--
        ``(1) Monthly payments.--
            ``(A) In general.--Under a contract under section 1857 and 
        subject to subsections (e) and (f), the Secretary shall make 
        monthly payments under this section in advance to each 
        MedicarePlus organization, with respect to coverage of an 
        individual under this part in a MedicarePlus payment area for a 
        month, in an amount equal to \1/12\ of the annual MedicarePlus 
        capitation rate (as calculated under subsection (c)) with 
        respect to that individual for that area, adjusted for such 
        risk factors as age, disability status, gender, institutional 
        status, and such other factors as the Secretary determines to 
        be appropriate, so as to ensure actuarial equivalence. The 
        Secretary may add to, modify, or substitute for such factors, 
        if such changes will improve the determination of actuarial 
        equivalence.
            ``(B) Special rule for end-stage renal disease.--The 
        Secretary shall establish a separate rate of payment to a 
        MedicarePlus organization with respect to any individual 
        determined to have end-stage renal disease and enrolled in a 
        MedicarePlus plan of the organization. Such rate of payment 
        shall be actuarially equivalent to rates paid to other 
        enrollees in the MedicarePlus payment area (or such other area 
        as specified by the Secretary).
        ``(2) Adjustment to reflect number of enrollees.--
            ``(A) In general.--The amount of payment under this 
        subsection may be retroactively adjusted to take into account 
        any difference between the actual number of individuals 
        enrolled with an organization under this part and the number of 
        such individuals estimated to be so enrolled in determining the 
        amount of the advance payment.
            ``(B) Special rule for certain enrollees.--
                ``(i) In general.--Subject to clause (ii), the 
            Secretary may make retroactive adjustments under 
            subparagraph (A) to take into account individuals enrolled 
            during the period beginning on the date on which the 
            individual enrolls with a MedicarePlus organization under a 
            plan operated, sponsored, or contributed to by the 
            individual's employer or former employer (or the employer 
            or former employer of the individual's spouse) and ending 
            on the date on which the individual is enrolled in the 
            organization under this part, except that for purposes of 
            making such retroactive adjustments under this 
            subparagraph, such period may not exceed 90 days.
                ``(ii) Exception.--No adjustment may be made under 
            clause (i) with respect to any individual who does not 
            certify that the organization provided the individual with 
            the disclosure statement described in section 1852(c) at 
            the time the individual enrolled with the organization.
    ``(b) Annual Announcement of Payment Rates.--
        ``(1) Annual announcement.--The Secretary shall annually 
    determine, and shall announce (in a manner intended to provide 
    notice to interested parties) not later than August 1 before the 
    calendar year concerned--
            ``(A) the annual MedicarePlus capitation rate for each 
        MedicarePlus payment area for the year, and
            ``(B) the risk and other factors to be used in adjusting 
        such rates under subsection (a)(1)(A) for payments for months 
        in that year.
        ``(2) Advance notice of methodological changes.--At least 45 
    days before making the announcement under paragraph (2) for a year, 
    the Secretary shall provide for notice to MedicarePlus 
    organizations of proposed changes to be made in the methodology 
    from the methodology and assumptions used in the previous 
    announcement and shall provide such organizations an opportunity to 
    comment on such proposed changes.
        ``(3) Explanation of assumptions.--In each announcement made 
    under paragraph (1) for a year, the Secretary shall include an 
    explanation of the assumptions and changes in methodology used in 
    the announcement in sufficient detail so that MedicarePlus 
    organizations can compute monthly adjusted MedicarePlus capitation 
    rates for individuals in each MedicarePlus payment area which is in 
    whole or in part within the service area of such an organization.
    ``(c) Calculation of Annual MedicarePlus Capitation Rates.--
        ``(1) In General.--For purposes of this part, the annual 
    MedicarePlus capitation rate, for a MedicarePlus payment area for a 
    contract year consisting of a calendar year, is equal to the 
    greatest of the following:
            ``(A) Blended capitation rate.--The sum of--
                ``(i) area-specific percentage for the year (as 
            specified under paragraph (2) for the year) of the annual 
            area-specific MedicarePlus capitation rate for the year for 
            the MedicarePlus payment area, as determined under 
            paragraph (3), and
                ``(ii) national percentage (as specified under 
            paragraph (2) for the year) of the input-price-adjusted 
            annual national MedicarePlus capitation rate for the year, 
            as determined under paragraph (4),
        multiplied by a budget neutrality adjustment factor determined 
        under paragraph (5).
            ``(B) Minimum amount.--
                ``(i) For 1996, $300.
                ``(ii) For 1997, $350.
                ``(iii) For a succeeding year, is the minimum amount 
            specified in this subparagraph for the preceding year 
            increased by national average per capita growth percentage, 
            specified under paragraph (6) for that succeeding year.
            ``(C) Minimum increase of 2 percent over previous year's 
        rate.--
                ``(i) For 1996, 102 percent of the annual per capita 
            rate of payment for 1995 determined under section 
            1876(a)(1)(C) for the MedicarePlus payment area.
                ``(ii) For a subsequent year, 102 percent of the annual 
            MedicarePlus capitation rate under this subsection for the 
            area for the previous year.
        ``(2) Area-specific and national percentages.--For purposes of 
    paragraph (1)(A)--
            ``(A) for 1996 and 1997, the `area-specific percentage' is 
        90 percent and the `national percentage' is 10 percent,
            ``(B) for 1998, the `area-specific percentage' is 85 
        percent and the `national percentage' is 15 percent,
            ``(C) for 1999, the `area-specific percentage' is 80 
        percent and the `national percentage' is 20 percent,
            ``(D) for 2000, the `area-specific percentage' is 75 
        percent and the `national percentage' is 25 percent, and
            ``(E) for a year after 2000, the `area-specific percentage' 
        is 70 percent and the `national percentage' is 30 percent.
        ``(3) Annual area-specific medicareplus capitation rate.--For 
    purposes of paragraph (1)(A), the annual area-specific MedicarePlus 
    capitation rate for a MedicarePlus payment area--
            ``(A) for 1996 is the annual per capita rate of payment for 
        1995 determined under section 1876(a)(1)(C) for the 
        MedicarePlus payment area, increased by the national average 
        per capita growth percentage for 1996 (as defined in paragraph 
        (6)); or
            ``(B) for a subsequent year is the annual area-specific 
        MedicarePlus capitation rate for the previous year determined 
        under this paragraph for the MedicarePlus payment area, 
        increased by the national average per capita growth percentage 
        for such subsequent year.
        ``(4) Input-price-adjusted annual national MedicarePlus 
    capitation rate.--
            ``(A) In general.--For purposes of paragraph (1)(A), the 
        input-price-adjusted annual national MedicarePlus capitation 
        rate for a MedicarePlus payment area for a year is equal to the 
        sum, for all the types of medicare services (as classified by 
        the Secretary), of the plan (for each such type) of--
                ``(i) the national standardized annual MedicarePlus 
            capitation rate (determined under subparagraph (B)) for the 
            year,
                ``(ii) the proportion of such rate for the year which 
            is attributable to such type of services, and
                ``(iii) an index that reflects (for that year and that 
            type of services) the relative input price of such services 
            in the area compared to the national average input price of 
            such services.
        In applying clause (iii), the Secretary shall, subject to 
        subparagraph (C), apply those indices under this title that are 
        used in applying (or updating) national payment rates for 
        specific areas and localities.
            ``(B) National standardized annual medicareplus capitation 
        rate.--In subparagraph (A)(i), the `national standardized 
        annual MedicarePlus capitation rate' for a year is equal to--
                ``(i) the sum (for all MedicarePlus payment areas) of 
            the product of (I) the annual area-specific MedicarePlus 
            capitation rate for that year for the area under paragraph 
            (3), and (II) the average number of medicare beneficiaries 
            residing in that area in the year; divided by
                ``(ii) the total average number of medicare 
            beneficiaries residing in all the MedicarePlus payment 
            areas for that year.
            ``(C) Special rules for 1996.--In applying this paragraph 
        for 1996--
                ``(i) medicare services shall be divided into 2 types 
            of services: part A services and part B services;
                ``(ii) the proportions described in subparagraph 
            (A)(ii) for such types of services shall be--

                    ``(I) for part A services, the ratio (expressed as 
                a percentage) of the average annual per capita rate of 
                payment for the area for part A for 1995 to the total 
                average annual per capita rate of payment for the area 
                for parts A and B for 1995, and
                    ``(II) for part B services, 100 percent minus the 
                ratio described in subclause (I);

                ``(iii) for the part A services, 70 percent of payments 
            attributable to such services shall be adjusted by the 
            index used under section 1886(d)(3)(E) to adjust payment 
            rates for relative hospital wage levels for hospitals 
            located in the payment area involved;
                ``(iv) for part B services--

                    ``(I) 66 percent of payments attributable to such 
                services shall be adjusted by the index of the 
                geographic area factors under section 1848(e) used to 
                adjust payment rates for physicians' services furnished 
                in the payment area, and
                    ``(II) of the remaining 34 percent of the amount of 
                such payments, 70 percent shall be adjusted by the 
                index described in clause (iii);

                ``(v) the index values shall be computed based only on 
            the beneficiary population who are 65 years of age or older 
            who are not determined to have end stage renal disease.
        The Secretary may continue to apply the rules described in this 
        subparagraph (or similar rules) for 1997.
        ``(5) Budget neutrality adjustment factor.--For each year, the 
    Secretary shall compute a budget neutrality adjustment factor so 
    that the aggregate of the payments under this part shall not exceed 
    the aggregate payments that would have been made under this part if 
    the area-specific percentage for the year had been 100 percent and 
    the national percentage had been 0 percent.
        ``(6) National average per capita growth percentage defined.--
    In this part, the `national average per capita growth percentage' 
    for--
            ``(A) 1996 is 8.0 percent,
            ``(B) 1997 is 3.8 percent,
            ``(C) 1998 is 4.6 percent,
            ``(D) 1999 is 4.3 percent,
            ``(E) 2000 is 3.8 percent,
            ``(F) 2001 is 5.5 percent,
            ``(G) 2002 is 5.6 percent, and
            ``(H) each subsequent year is 5.0 percent.
    ``(d) MedicarePlus Payment Area Defined.--
        ``(1) In general.--In this part, except as provided in 
    paragraph (3), the term `MedicarePlus payment area' means a county, 
    or equivalent area specified by the Secretary.
        ``(2) Rule for esrd beneficiaries.--In the case of individuals 
    who are determined to have end stage renal disease, the 
    MedicarePlus payment area shall be each State.
        ``(3) Geographic adjustment.--
            ``(A) In general.--Upon request of a State for a contract 
        year (beginning after 1996) made at least 7 months before the 
        beginning of the year, the Secretary shall make a geographic 
        adjustment to a MedicarePlus payment area in the State 
        otherwise determined under paragraph (1)--
                ``(i) to a single statewide MedicarePlus payment area,
                ``(ii) to the metropolitan based system described in 
            subparagraph (C), or
                ``(iii) to consolidating into a single MedicarePlus 
            payment area noncontiguous counties (or equivalent areas 
            described in paragraph (1)) within a State.
        Such adjustment shall be effective for payments for months 
        beginning with January of the year following the year in which 
        the request is received.
            ``(B) Budget neutrality adjustment.--In the case of a State 
        requesting an adjustment under this paragraph, the Secretary 
        shall adjust the payment rates otherwise established under this 
        paragraph for MedicarePlus payment areas in the State in a 
        manner so that the aggregate of the payments under this section 
        in the State shall not exceed the aggregate payments that would 
        have been made under this section for MedicarePlus payment 
        areas in the State in the absence of the adjustment under this 
        paragraph.
            ``(C) Metropolitan based system.--The metropolitan based 
        system described in this subparagraph is one in which--
                ``(i) all the portions of each metropolitan statistical 
            area in the State or in the case of a consolidated 
            metropolitan statistical area, all of the portions of each 
            primary metropolitan statistical area within the 
            consolidated area within the State, are treated as a single 
            MedicarePlus payment area, and
                ``(ii) all areas in the State that do not fall within a 
            metropolitan statistical area are treated as a single 
            MedicarePlus payment area.
            ``(D) Areas.--In subparagraph (C), the terms `metropolitan 
        statistical area', `consolidated metropolitan statistical 
        area', and `primary metropolitan statistical area' mean any 
        area designated as such by the Secretary of Commerce.
    ``(e) Special Rules for Individuals Electing High Deductible 
Plans.--
        ``(1) In general.--In the case of an individual who has elected 
    a high deductible plan, notwithstanding the preceding provisions of 
    this section--
            ``(A) the amount of the monthly payment to the MedicarePlus 
        organization offering the high deductible plan shall not exceed 
        the monthly premium for the plan, and
            ``(B) subject to paragraph (2), the difference between the 
        amount of payment that would otherwise be made and the amount 
        of payment to such organization shall be made directly into a 
        High Deductible MedicarePlus MSA established (and, if 
        applicable, designated) by the individual under paragraph (2).
        ``(2) Establishment and designation of medicareplus medical 
    savings account as requirement for payment of contribution.--In the 
    case of an individual who has elected coverage under a high 
    deductible plan, no payment shall be made under paragraph (1)(B) on 
    behalf of an individual for a month unless the individual--
            ``(A) has established before the beginning of the month (or 
        by such other deadline as the Secretary may specify) a High 
        Deductible MedicarePlus MSA (as defined in section 137(b)(2) of 
        the Internal Revenue Code of 1986), and
            ``(B) if the individual has established more than one High 
        Deductible MedicarePlus MSA, has designated one of such 
        accounts as the individual's High Deductible MedicarePlus MSA 
        for purposes of this part.
    Under rules under this section, such an individual may change the 
    designation of such account under subparagraph (B) for purposes of 
    this part.
        ``(3) Lump sum deposit of medical savings account 
    contribution.--In the case of an individual electing a high 
    deductible plan effective beginning with a month in a year, the 
    amount of the contribution to the High Deductible MedicarePlus MSA 
    on behalf of the individual for that month and all successive 
    months in the year shall be deposited during that first month. In 
    the case of a termination of such an election as of a month before 
    the end of a year, the Secretary shall provide for a procedure for 
    the recovery of deposits attributable to the remaining months in 
    the year.
        ``(4) Permitting contributions into medicareplus msa.--
    Effective January 1, 1997, if a member of a federally-qualified 
    health maintenance organization certifies that a Rebate 
    MedicarePlus MSA (as defined in section 137(c) of the Internal 
    Revenue Code of 1986) has been established for the benefit of such 
    member, the health maintenance organization may reduce the basic 
    health services payment otherwise determined under otherwise 
    applicable law by requiring the payment of a deductible by the 
    member for basic health services.
    ``(f) Payments of Rebates.--
        ``(1) In general.--If the amount of the monthly premium for a 
    MedicarePlus plan (other than a high deductible plan) for a 
    MedicarePlus payment area for a year is less than \1/12\ of the 
    annual MedicarePlus capitation rate applied under this section 1854 
    for the area and year involved, at the election of an individual 
    enrolled under the plan the Secretary shall either--
            ``(A) in the case of an individual who has a Rebate 
        MedicarePlus MSA account (as defined in section 137(b)(3) of 
        the Internal Revenue Code of 1986), to deposit 100 percent of 
        such difference in such an account specified by the individual; 
        or
            ``(B)(i) pay to the MedicarePlus organization on behalf of 
        such individual the monthly amount equal to 100 percent of such 
        difference up to the amount of the premium amount of such 
        individual for supplemental benefits described in section 
        1895H(b),
            ``(ii) pay to such individual an amount equal to 75 percent 
        of the remainder of such difference, and
            ``(iii) deposit any remainder of such difference in the 
        Federal Hospital Insurance Trust Fund.
        ``(2) Time for payment.--
            ``(A) In general.--Subject to subparagraph (B), payments 
        and deposits described in paragraph (1) shall be made on a 
        monthly basis.
            ``(B) Cash rebates.--A rebate under paragraph (1)(B)(ii) 
        shall be paid as of the close of the calendar year to which the 
        enrollment applied.
    ``(g) Payments From Trust Fund.--The payment to a MedicarePlus 
organization under this section for individuals enrolled under this 
part with the organization, and payments to a High Deductible or Rebate 
MedicarePlus MSA under subsection (e)(1)(B) or subsection (f), shall be 
made from the Federal Hospital Insurance Trust Fund and the Federal 
Supplementary Medical Insurance Trust Fund in such proportion as the 
Secretary determines reflects the relative weight that benefits under 
part A and under part B represents of the actuarial value of the total 
benefits under this title.
    ``(h) Special Rule for Certain Inpatient Hospital Stays.--In the 
case of an individual who is receiving inpatient hospital services from 
a subsection (d) hospital (as defined in section 1886(d)(1)(B)) as of 
the effective date of the individual's--
        ``(1) election under this part of a MedicarePlus plan offered 
    by a MedicarePlus organization--
            ``(A) payment for such services until the date of the 
        individual's discharge shall be made under this title through 
        the MedicarePlus plan or the Medicare fee-for-service program 
        option described in section 1851(a)(1)(A) (as the case may be) 
        elected before the election with such organization,
            ``(B) the elected organization shall not be financially 
        responsible for payment for such services until the date after 
        the date of the individual's discharge, and
            ``(C) the organization shall nonetheless be paid the full 
        amount otherwise payable to the organization under this part; 
        or
        ``(2) termination of election with respect to a MedicarePlus 
    organization under this part--
            ``(A) the organization shall be financially responsible for 
        payment for such services after such date and until the date of 
        the individual's discharge,
            ``(B) payment for such services during the stay shall not 
        be made under section 1886(d) or by any succeeding MedicarePlus 
        organization, and
            ``(C) the terminated organization shall not receive any 
        payment with respect to the individual under this part during 
        the period the individual is not enrolled.

                          ``premiums and rebates

    ``Sec. 1855. (a) Submission and Charging of Premiums.--
        ``(1) In general.--Subject to paragraph (3), each MedicarePlus 
    organization shall file with the Secretary each year, in a form and 
    manner and at a time specified by the Secretary--
            ``(A) the amount of the monthly premium for coverage for 
        services under section 1852(a) under each MedicarePlus plan it 
        offers under this part in each MedicarePlus payment area (as 
        defined in section 1854(d)) in which the plan is being offered; 
        and
            ``(B) the enrollment capacity in relation to the plan in 
        each such area.
        ``(2) Terminology.--In this part--
            ``(A) the term `monthly premium' means, with respect to a 
        MedicarePlus plan offered by a MedicarePlus organization, the 
        monthly premium filed under paragraph (1), not taking into 
        account the amount of any payment made toward the premium under 
        section 1854; and
            ``(B) the term `net monthly premium' means, with respect to 
        such a plan and an individual enrolled with the plan, the 
        premium (as defined in subparagraph (A)) for the plan reduced 
        by the amount of payment made toward such premium under section 
        1854.
        ``(3) Limitation on portion of monthly premium attributable to 
    required coverage.--In no case may the portion of the monthly 
    premium for a MedicarePlus plan for an area and year attributable 
    to required services under section 1852(a)(1) exceed the adjusted 
    community rate for the plan (as defined in subsection (f)(5)).
    ``(b) Net Monthly Premium.--The amount of the net monthly premium 
charged by a MedicarePlus organization for a MedicarePlus plan offered 
in a MedicarePlus payment area to an individual under this part shall 
be equal to the amount (if any) by which--
        ``(1) the amount of the monthly premium for the plan for the 
    period involved, exceeds
        ``(2) \1/12\ of the annual MedicarePlus capitation rate applied 
    under section 1854 for the area and year involved.
    ``(c) Uniform Premium.--The monthly premium and net monthly premium 
(including rebates offered) by a MedicarePlus organization under this 
part may not vary among individuals who reside in the same MedicarePlus 
payment area.
    ``(d) Terms and Conditions of Imposing Premiums.--Each MedicarePlus 
organization shall permit the payment of net monthly premiums on a 
monthly basis and may terminate election of individuals for a 
MedicarePlus plan for failure to make premium payments only in 
accordance with section 1851(g)(3)(B)(i).
    ``(e) Relation of Premiums and Cost-Sharing to Benefits.--In no 
case may the portion of a MedicarePlus organization's monthly premium 
and the actuarial value of its deductibles, coinsurance, and copayments 
charged for (to the extent attributable to the required benefits 
described in section 1852(a)(1) and not counting any amount 
attributable to balance billing) to individuals who are enrolled under 
this part with the organization exceed the actuarial value of the 
coinsurance and deductibles that would be applicable on the average to 
individuals enrolled under this part with the organization (or, if the 
Secretary finds that adequate data are not available to determine that 
actuarial value, the actuarial value of the coinsurance and deductibles 
applicable on the average to individuals in the area, in the State, or 
in the United States, eligible to enroll under this part with the 
organization, or other appropriate data) and entitled to benefits under 
part A and enrolled under part B if they were not members of a 
MedicarePlus organization.
    ``(f) Requirement for Additional Benefits, Rebates, or Both.--
        ``(1) Requirement.--
            ``(A) In general.--Each MedicarePlus organization (in 
        relation to a MedicarePlus plan it offers) shall provide that 
        if there is an excess amount (as defined in subparagraph (B)) 
        for the plan for a contract year, subject to the succeeding 
        provisions of this subsection, the organization shall provide 
        to individuals such additional benefits (as the organization 
        may specify), a monetary rebate (paid on a monthly basis), or a 
        combination thereof, in a total value which is at least equal 
        to the adjusted excess amount (as defined in subparagraph (C)).
            ``(B) Excess amount.--For purposes of this paragraph, the 
        `excess amount', for an organization for a plan, is the amount 
        (if any) by which--
                ``(i) the average of the capitation payments made to 
            the organization under section 1854 for the plan at the 
            beginning of contract year, exceeds
                ``(ii) the actuarial value of the required benefits 
            described in section 1852(a)(1) under the plan for 
            individuals under this part, as determined based upon an 
            adjusted community rate described in paragraph (5) (as 
            reduced for the actuarial value of the coinsurance and 
            deductibles under parts A and B).
            ``(C) Adjusted excess amount.--For purposes of this 
        paragraph, the `adjusted excess amount', for an organization 
        for a plan, is the excess amount reduced to reflect any amount 
        withheld and reserved for the organization for the year under 
        paragraph (3).
            ``(D) No application to high deductible plans.--
        Subparagraph (A) shall not apply to a high deductible plan.
            ``(E) Uniform application.--This paragraph shall be applied 
        uniformly for all enrollees for a plan in a MedicarePlus 
        payment area.
            ``(F) Construction.--Nothing in this subsection shall be 
        construed as preventing a MedicarePlus organization from 
        providing health care benefits that are in addition to the 
        benefits otherwise required to be provided under this paragraph 
        and from imposing a premium for such additional benefits.
        ``(2) Rules in relation to rebates.--To the extent that the 
    adjusted excess amount for a plan exceeds the value of additional 
    benefits provided under subparagraph (A) by the MedicarePlus 
    organization in relation to the plan for a month, then the 
    organization shall provide for payment of the amount of such excess 
    as follows:
            ``(A) Rebate medicareplus msa.--If the individual has a 
        Rebate MedicarePlus MSA and elects treatment under this 
        subparagraph, the organization shall provide for payment of 
        such excess into such MSA.
            ``(B) Additional amount.--The organization shall provide 
        for payment of the amount of any additional excess as follows:
                ``(i) 75 percent of such excess to the individual.
                ``(ii) 25 percent to the Federal Hospital Insurance 
            Trust Fund.
        ``(3) Stabilization fund.--A MedicarePlus organization may 
    provide that a part of the value of an excess actuarial amount 
    described in paragraph (1) be withheld and reserved in the Federal 
    Hospital Insurance Trust Fund and in the Federal Supplementary 
    Medical Insurance Trust Fund (in such proportions as the Secretary 
    determines to be appropriate) by the Secretary for subsequent 
    annual contract periods, to the extent required to stabilize and 
    prevent undue fluctuations in the additional benefits and rebates 
    offered in those subsequent periods by the organization in 
    accordance with such paragraph. Any of such value of the amount 
    reserved which is not provided as additional benefits described in 
    paragraph (1)(A) to individuals electing the MedicarePlus plan of 
    the organization in accordance with such paragraph prior to the end 
    of such periods, shall revert for the use of such trust funds.
        ``(4) Determination based on insufficient data.--For purposes 
    of this subsection, if the Secretary finds that there is 
    insufficient enrollment experience (including no enrollment 
    experience in the case of a provider-sponsored organization) to 
    determine an average of the capitation payments to be made under 
    this part at the beginning of a contract period, the Secretary may 
    determine such an average based on the enrollment experience of 
    other contracts entered into under this part.
        ``(5) Adjusted community rate.--
            ``(A) In general.--For purposes of this subsection, subject 
        to subparagraph (B), the term `adjusted community rate' for a 
        service or services means, at the election of a MedicarePlus 
        organization, either--
                ``(i) the rate of payment for that service or services 
            which the Secretary annually determines would apply to an 
            individual electing a MedicarePlus plan under this part if 
            the rate of payment were determined under a `community 
            rating system' (as defined in section 1302(8) of the Public 
            Health Service Act, other than subparagraph (C)), or
                ``(ii) such portion of the weighted aggregate premium, 
            which the Secretary annually estimates would apply to such 
            an individual, as the Secretary annually estimates is 
            attributable to that service or services,
        but adjusted for differences between the utilization 
        characteristics of the individuals electing coverage under this 
        part and the utilization characteristics of the other enrollees 
        with the organization (or, if the Secretary finds that adequate 
        data are not available to adjust for those differences, the 
        differences between the utilization characteristics of 
        individuals selecting other MedicarePlus coverage, or 
        MedicarePlus eligible individuals in the area, in the State, or 
        in the United States, eligible to elect MedicarePlus coverage 
        under this part and the utilization characteristics of the rest 
        of the population in the area, in the State, or in the United 
        States, respectively).
            ``(B) Special rule for provider-sponsored organizations.--
        In the case of a MedicarePlus organization that is a provider-
        sponsored organization, the adjusted community rate under 
        subparagraph (A) for a MedicarePlus plan of the organization 
        may be computed (in a manner specified by the Secretary) using 
        data in the general commercial marketplace or (during a 
        transition period) based on the costs incurred by the 
        organization in providing such a plan.
    ``(g) Transitional File and Use for Certain Requirements.--
        ``(1) In general.--In the case of a MedicarePlus plan proposed 
    to be offered before the end of the transition period (as defined 
    in section 1851(e)(1)(B)) by a MedicarePlus organization described 
    in section 1853(f)(3) or by a MedicarePlus organization with a 
    contract in effect under section 1857, if the organization submits 
    complete information to the Secretary regarding the plan 
    demonstrating that the plan meets the requirements and standards 
    under section 1852(a) and subsections (a) through (f) of this 
    section (relating to benefits and premiums), the plan shall be 
    deemed as meeting such requirements and standards under such 
    provisions unless the Secretary disapproves the plan within 60 days 
    after the date of submission of the complete information.
        ``(2) Construction.--Nothing in paragraph (1) shall be 
    construed as waiving the requirement of a contract under section 
    1857 or waiving requirements and standards not referred to in 
    paragraph (1).

    ``establishment of standards; certification of organizations and 
                                 plans

    ``Sec. 1856. (a) Establishment of Standards.--
        ``(1)  Standards applicable to state-regulated organizations 
    and plans and non-solvency standards for provider-sponsored 
    organizations.--
            ``(A) Recommendations of naic.--The Secretary shall request 
        the National Association of Insurance Commissioners to develop 
        and submit to the Secretary, not later than 12 months after the 
        date of the enactment of the Medicare Preservation Act of 1995, 
        proposed standards consistent with the requirements of this 
        part for MedicarePlus organizations (other than union sponsors 
        and Taft-Hartley sponsors, and other than solvency standards 
        described in subsection (b) for provider-sponsored 
        organizations) and MedicarePlus plans offered by such 
        organizations, except that such proposed standards may relate 
        to MedicarePlus organizations that are qualified association 
        sponsors only with respect to MedicarePlus plans offered by 
        them and only if such plans are issued by organizations to 
        which section 1853(a)(1) applies.
            ``(B) Review.--If the Association submits such standards on 
        a timely basis, the Secretary shall review such standards to 
        determine if the standards meet the requirements of this part. 
        The Secretary shall complete the review of the standards not 
        later than 90 days after the date of their submission. The 
        Secretary shall promulgate such proposed standards to apply to 
        organizations and plans described in subparagraph (A) except to 
        the extent that the Secretary modifies such proposed standards 
        because they do not meet such requirements.
            ``(C) Failure to submit.--If the Association does not 
        submit such standards on a timely basis, the Secretary shall 
        promulgate such standards by not later than the date the 
        Secretary would otherwise have been required to promulgate 
        standards under subparagraph (B).
            ``(D) Use of interim rules.--For the period in which this 
        part is in effect and standards are being developed and 
        established under the preceding provisions of this subsection, 
        the Secretary shall provide by not later than June 1, 1996, for 
        the application of such interim standards (without regard to 
        any requirements for notice and public comment) as may be 
        appropriate to provide for the expedited implementation of this 
        part. Such interim standards shall not apply after the date 
        standards are established under the preceding provisions of 
        this paragraph.
        ``(2) Establishment of standards for union and taft-hartley 
    sponsors, qualified association sponsors, and plans.--
            ``(A) In general.--The Secretary shall develop and 
        promulgate by regulation standards consistent with the 
        requirements of this part for union and Taft-Hartley sponsors, 
        for qualified association sponsors, and for MedicarePlus plans 
        offered by such organizations (other than MedicarePlus plans 
        offered by qualified association sponsors that are issued by 
        organizations to which section 1853(a)(1) applies).
            ``(B) Consultation with secretary of labor.--The Secretary 
        shall consult with the Secretary of Labor with respect to such 
        standards for such sponsors and plans.
            ``(C) Timing.--Standards under this paragraph shall be 
        promulgated at or about the time standards are promulgated 
        under paragraph (1).
        ``(3) Coordination among final standards.--In establishing 
    standards (other than on an interim basis) under this subsection 
    and subsection (b), the Secretary shall seek to provide for 
    consistency (as appropriate) across the different types of 
    MedicarePlus organizations, in order to promote equitable treatment 
    of different types of organizations and consistent protection for 
    individuals who elect plans offered by the different types of 
    MedicarePlus organizations.
        ``(4) Use of current standards for interim standards.--To the 
    extent practicable and consistent with the requirements of this 
    part, standards established on an interim basis to carry out 
    requirements of this part may be based on currently applicable 
    standards, such as the rules established under section 1876 (as in 
    effect as of the date of the enactment of this section) to carry 
    out analogous provisions of such section or standards established 
    or developed for application in the private health insurance 
    market.
        ``(5) Application of new standards to entities with a 
    contract.--In the case of a MedicarePlus organization with a 
    contract in effect under this part at the time standards applicable 
    to the organization under this section are changed, the 
    organization may elect not to have such changes apply to the 
    organization until the end of the current contract year (or, if 
    there is less than 6 months remaining in the contract year, until 1 
    year after the end of the current contract year).
        ``(6) Relation to state laws.--The standards established under 
    this subsection shall supersede any State law or regulation with 
    respect to MedicarePlus plans which are offered by MedicarePlus 
    organizations under this part and are issued by organizations to 
    which section 1853(a)(1) applies, to the extent such law or 
    regulation is inconsistent with such standards.
    ``(b) Establishment of Solvency Standards for Provider-Sponsored 
Organizations.--
        ``(1) Establishment.--
            ``(A) In general.--The Secretary shall establish, on an 
        expedited basis and using a negotiated rulemaking process under 
        subchapter 3 of chapter 5 of title 5, United States Code, 
        standards described in section 1853(e) (relating to the 
        financial solvency and capital adequacy of the organization) 
        that entities must meet to qualify as provider-sponsored 
        organizations under this part.
            ``(B) Factors to consider.--In establishing solvency 
        standards under subparagraph (A) for provider-sponsored 
        organizations, the Secretary shall consult with interested 
        parties and shall take into account--
                ``(i) the delivery system assets of such an 
            organization and ability of such an organization to provide 
            services directly to enrollees through affiliated 
            providers, and
                ``(ii) alternative means of protecting against 
            insolvency, including reinsurance, unrestricted surplus, 
            letters of credit, guarantees, organizational insurance 
            coverage, partnerships with other licensed entities, and 
            valuation attributable to the ability of such an 
            organization to meet its service obligations through direct 
            delivery of care.
        ``(2) Publication of notice.--In carrying out the rulemaking 
    process under this subsection, the Secretary, after consultation 
    with the National Association of Insurance Commissioners, the 
    American Academy of Actuaries, organizations representative of 
    medicare beneficiaries, and other interested parties, shall publish 
    the notice provided for under section 564(a) of title 5, United 
    States Code, by not later than 45 days after the date of the 
    enactment of the Medicare Preservation Act of 1995.
        ``(3) Target date for publication of rule.--As part of the 
    notice under paragraph (2), and for purposes of this subsection, 
    the `target date for publication' (referred to in section 564(a)(5) 
    of such title) shall be September 1, 1996.
        ``(4) Abbreviated period for submission of comments.--In 
    applying section 564(c) of such title under this subsection, `15 
    days' shall be substituted for `30 days'.
        ``(5) Appointment of negotiated rulemaking committee and 
    facilitator.--The Secretary shall provide for--
            ``(A) the appointment of a negotiated rulemaking committee 
        under section 565(a) of such title by not later than 30 days 
        after the end of the comment period provided for under section 
        564(c) of such title (as shortened under paragraph (4)), and
            ``(B) the nomination of a facilitator under section 566(c) 
        of such title by not later than 10 days after the date of 
        appointment of the committee.
        ``(6) Preliminary committee report.--The negotiated rulemaking 
    committee appointed under paragraph (5) shall report to the 
    Secretary, by not later than June 1, 1996, regarding the 
    committee's progress on achieving a consensus with regard to the 
    rulemaking proceeding and whether such consensus is likely to occur 
    before one month before the target date for publication of the 
    rule. If the committee reports that the committee has failed to 
    make significant progress towards such consensus or is unlikely to 
    reach such consensus by the target date, the Secretary may 
    terminate such process and provide for the publication of a rule 
    under this subsection through such other methods as the Secretary 
    may provide.
        ``(7) Final committee report.--If the committee is not 
    terminated under paragraph (6), the rulemaking committee shall 
    submit a report containing a proposed rule by not later than one 
    month before the target publication date.
        ``(8) Interim, final effect.--The Secretary shall publish a 
    rule under this subsection in the Federal Register by not later 
    than the target publication date. Such rule shall be effective and 
    final immediately on an interim basis, but is subject to change and 
    revision after public notice and opportunity for a period (of not 
    less than 60 days) for public comment. In connection with such 
    rule, the Secretary shall specify the process for the timely review 
    and approval of applications of entities to be certified as 
    provider-sponsored organizations pursuant to such rules and 
    consistent with this subsection.
        ``(9) Publication of rule after public comment.--The Secretary 
    shall provide for consideration of such comments and republication 
    of such rule by not later than 1 year after the target publication 
    date.
        ``(10) Process for approval of applications for certification 
    of solvency.--
            ``(A) In general.--The Secretary shall establish a process 
        for the receipt and approval of applications of entities for 
        certification of solvency of provider-sponsored organizations 
        under this part. Under such process, the Secretary shall act 
        upon a complete application submitted within 60 days after the 
        date it is received.
            ``(B) Circulation of proposed application form.--By March 
        1, 1996, the Secretary, after consultation with the negotiated 
        rulemaking committee, shall circulate a proposed application 
        form that could be used by entities considering being certified 
        for solvency under this part.
    ``(c) Certification Process.--
        ``(1) State certification process for state-regulated 
    organizations and non-solvency standards for provider-sponsored 
    organizations.--
            ``(A) Approval of state process.--The Secretary shall 
        approve a MedicarePlus certification and enforcement program 
        established by a State for applying the standards established 
        under this section to MedicarePlus organizations (other than 
        union sponsors and Taft-Hartley sponsors and other than 
        solvency standards for provider-sponsored organizations) and 
        MedicarePlus plans offered by such organizations if the 
        Secretary determines that the program effectively provides for 
        the application and enforcement of such standards in the State 
        with respect to such organizations and plans and does not 
        discriminate in its application by type of organization or 
        plan. Such program shall provide for certification of 
        compliance of MedicarePlus organizations and plans with the 
        applicable requirements of this part not less often than once 
        every 3 years.
            ``(B) Effect of certification under state process.--A 
        MedicarePlus organization and MedicarePlus plan offered by such 
        an organization that is certified under such program is 
        considered to have been certified under this paragraph with 
        respect to the offering of the plan to individuals residing in 
        the State.
            ``(C) User fees.--The State may impose user fees on 
        organizations seeking certification under this paragraph in 
        such amounts as the State deems sufficient to finance the costs 
        of such certification. Nothing in this subparagraph shall be 
        construed as restricting a State's authority to impose premium 
        taxes, other taxes, or other levies.
            ``(D) Review.--The Secretary periodically shall review 
        State programs approved under subparagraph (A) to determine if 
        they continue to provide for certification and enforcement 
        described in such paragraph. If the Secretary finds that a 
        State program no longer so provides, before making a final 
        determination, the Secretary shall provide the State an 
        opportunity to adopt such a plan of correction as would permit 
        the State program to meet the requirements of paragraph (1). If 
        the Secretary makes a final determination that the State 
        program, after such an opportunity, fails to meet such 
        requirements, the provisions of subsection (b) shall apply to 
        MedicarePlus organizations and plans in the State.
            ``(E) Effect of no state program.--Beginning on the date 
        standards are established under section 1856, in the case of 
        organizations and plans in States in which a certification 
        program has not been approved and in operation under 
        subparagraph (A), the Secretary shall establish a process for 
        the certification of MedicarePlus organizations (other than 
        union sponsors and Taft-Hartley sponsors and other than 
        solvency standards for provider-sponsored organizations) and 
        plans of such organizations as meeting such standards.
            ``(F) Publication of list of approved state programs.--The 
        Secretary shall publish (and periodically update) a list of 
        those State programs which are approved for purposes of this 
        paragraph.
        ``(2) Federal certification process for union sponsors and 
    taft-hartley sponsors.--
            ``(A) Establishment.--The Secretary shall establish a 
        process for the certification of union sponsors and Taft-
        Hartley sponsors and MedicarePlus plans offered by such 
        sponsors and organizations as meeting the applicable standards 
        established under this section.
            ``(B) Involvement of secretary of labor.--Such process 
        shall be established and operated in cooperation with the 
        Secretary of Labor with respect to union sponsors and Taft-
        Hartley sponsors.
            ``(C) Use of state licensing and private accreditation 
        processes.--
                ``(i) In general.--The process under this paragraph 
            shall, to the maximum extent practicable, provide that 
            MedicarePlus organizations and plans that are licensed or 
            certified through a qualified private accreditation process 
            that the Secretary finds applies standards that are no less 
            stringent than the requirements of this part are deemed to 
            meet the corresponding requirements of this part for such 
            an organization or plan.
                ``(ii) Periodic accreditation.--The use of an 
            accreditation under clause (i) shall be valid only for such 
            period as the Secretary specifies.
            ``(D) User fees.--The Secretary may impose user fees on 
        entities seeking certification under this paragraph in such 
        amounts as the Secretary deems sufficient to finance the costs 
        of such certification.
        ``(3) Notice to enrollees in case of decertification.--If a 
    MedicarePlus organization or plan is decertified under this 
    subsection, the organization shall notify each enrollee with the 
    organization and plan under this part of such decertification.
        ``(4) Qualified association sponsors.--In the case of 
    MedicarePlus plans offered by a MedicarePlus organization that is a 
    qualified association sponsor and issued by an organization to 
    which section 1853(a)(1) applies or by a provider-sponsored 
    organization, nothing in this subsection shall be construed as 
    limiting the authority of States to regulate such plans.

               ``contracts with medicareplus organizations

    ``Sec. 1857. (a) In General.--The Secretary shall not permit the 
election under section 1851 of a MedicarePlus plan offered by a 
MedicarePlus organization under this part, and no payment shall be made 
under section 1854 to an organization, unless the Secretary has entered 
into a contract under this section with an organization with respect to 
the offering of such plan. Such a contract with an organization may 
cover more than one MedicarePlus plan. Such contract shall provide that 
the organization agrees to comply with the applicable requirements and 
standards of this part and the terms and conditions of payment as 
provided for in this part.
    ``(b) Minimum Enrollment Requirements.--
        ``(1) In general.--Subject to paragraphs (2) and (3), the 
    Secretary may not enter into a contract under this section with a 
    MedicarePlus organization (other than a union sponsor or Taft-
    Hartley sponsor) unless the organization has at least 5,000 
    individuals (or 1,500 individuals in the case of an organization 
    that is a provider-sponsored organization) who are receiving health 
    benefits through the organization, except that the standards under 
    section 1856 may permit the organization to have a lesser number of 
    beneficiaries (but not less than 500 in the case of an organization 
    that is a provider-sponsored organization) if the organization 
    primarily serves individuals residing outside of urbanized areas.
        ``(2) Exception for high deductible plan.--Paragraph (1) shall 
    not apply with respect to a contract that relates only to a high 
    deductible plan.
        ``(3) Allowing transition.--The Secretary may waive the 
    requirement of paragraph (1) during the first 3 contract years with 
    respect to an organization.
    ``(c) Contract Period and Effectiveness.--
        ``(1) Period.--Each contract under this section shall be for a 
    term of at least one year, as determined by the Secretary, and may 
    be made automatically renewable from term to term in the absence of 
    notice by either party of intention to terminate at the end of the 
    current term.
        ``(2) Termination authority.--In accordance with procedures 
    established under subsection (h), the Secretary may at any time 
    terminate any such contract or may impose the intermediate 
    sanctions described in an applicable paragraph of subsection (g) on 
    the MedicarePlus organization if the Secretary determines that the 
    organization--
            ``(A) has failed substantially to carry out the contract;
            ``(B) is carrying out the contract in a manner inconsistent 
        with the efficient and effective administration of this part; 
        and
            ``(C) no longer substantially meets the applicable 
        conditions of this part.
        ``(3) Effective date of contracts.--The effective date of any 
    contract executed pursuant to this section shall be specified in 
    the contract, except that in no case shall a contract under this 
    section which provides for coverage under a high deductible account 
    be effective before January 1997 with respect to such coverage.
        ``(4) Previous terminations.--The Secretary may not enter into 
    a contract with a MedicarePlus organization if a previous contract 
    with that organization under this section was terminated at the 
    request of the organization within the preceding five-year period, 
    except in circumstances which warrant special consideration, as 
    determined by the Secretary.
        ``(5) No contracting authority.--The authority vested in the 
    Secretary by this part may be performed without regard to such 
    provisions of law or regulations relating to the making, 
    performance, amendment, or modification of contracts of the United 
    States as the Secretary may determine to be inconsistent with the 
    furtherance of the purpose of this title.
    ``(d) Protections Against Fraud and Beneficiary Protections.--
        ``(1) Inspection and audit.--Each contract under this section 
    shall provide that the Secretary, or any person or organization 
    designated by the Secretary--
            ``(A) shall have the right to inspect or otherwise evaluate 
        (i) the quality, appropriateness, and timeliness of services 
        performed under the contract and (ii) the facilities of the 
        organization when there is reasonable evidence of some need for 
        such inspection, and
            ``(B) shall have the right to audit and inspect any books 
        and records of the MedicarePlus organization that pertain (i) 
        to the ability of the organization to bear the risk of 
        potential financial losses, or (ii) to services performed or 
        determinations of amounts payable under the contract.
        ``(2) Enrollee notice at time of termination.--Each contract 
    under this section shall require the organization to provide (and 
    pay for) written notice in advance of the contract's termination, 
    as well as a description of alternatives for obtaining benefits 
    under this title, to each individual enrolled with the organization 
    under this part.
        ``(3) Disclosure.--
            ``(A) In general.--Each MedicarePlus organization shall, in 
        accordance with regulations of the Secretary, report to the 
        Secretary financial information which shall include the 
        following:
                ``(i) Such information as the Secretary may require 
            demonstrating that the organization has a fiscally sound 
            operation.
                ``(ii) A copy of the report, if any, filed with the 
            Health Care Financing Administration containing the 
            information required to be reported under section 1124 by 
            disclosing entities.
                ``(iii) A description of transactions, as specified by 
            the Secretary, between the organization and a party in 
            interest. Such transactions shall include--

                    ``(I) any sale or exchange, or leasing of any 
                property between the organization and a party in 
                interest;
                    ``(II) any furnishing for consideration of goods, 
                services (including management services), or facilities 
                between the organization and a party in interest, but 
                not including salaries paid to employees for services 
                provided in the normal course of their employment and 
                health services provided to members by hospitals and 
                other providers and by staff, medical group (or 
                groups), individual practice association (or 
                associations), or any combination thereof; and
                    ``(III) any lending of money or other extension of 
                credit between an organization and a party in interest.

        The Secretary may require that information reported respecting 
        an organization which controls, is controlled by, or is under 
        common control with, another entity be in the form of a 
        consolidated financial statement for the organization and such 
        entity.
            ``(B) Party in interest defined.--For the purposes of this 
        paragraph, the term `party in interest' means--
                ``(i) any director, officer, partner, or employee 
            responsible for management or administration of a 
            MedicarePlus organization, any person who is directly or 
            indirectly the beneficial owner of more than 5 percent of 
            the equity of the organization, any person who is the 
            beneficial owner of a mortgage, deed of trust, note, or 
            other interest secured by, and valuing more than 5 percent 
            of the organization, and, in the case of a MedicarePlus 
            organization organized as a nonprofit corporation, an 
            incorporator or member of such corporation under applicable 
            State corporation law;
                ``(ii) any entity in which a person described in clause 
            (i)--

                    ``(I) is an officer or director;
                    ``(II) is a partner (if such entity is organized as 
                a partnership);
                    ``(III) has directly or indirectly a beneficial 
                interest of more than 5 percent of the equity; or
                    ``(IV) has a mortgage, deed of trust, note, or 
                other interest valuing more than 5 percent of the 
                assets of such entity;

                ``(iii) any person directly or indirectly controlling, 
            controlled by, or under common control with an 
            organization; and
                ``(iv) any spouse, child, or parent of an individual 
            described in clause (i).
            ``(C) Access to information.--Each MedicarePlus 
        organization shall make the information reported pursuant to 
        subparagraph (A) available to its enrollees upon reasonable 
        request.
        ``(4) Loan information.--The contract shall require the 
    organization to notify the Secretary of loans and other special 
    financial arrangements which are made between the organization and 
    subcontractors, affiliates, and related parties.
    ``(e) Additional Contract Terms.--The contract shall contain such 
other terms and conditions not inconsistent with this part (including 
requiring the organization to provide the Secretary with such 
information) as the Secretary may find necessary and appropriate.
    ``(f) Intermediate Sanctions.--
        ``(1) In general.--If the Secretary determines that a 
    MedicarePlus organization with a contract under this section--
            ``(A) fails substantially to provide medically necessary 
        items and services that are required (under law or under the 
        contract) to be provided to an individual covered under the 
        contract, if the failure has adversely affected (or has 
        substantial likelihood of adversely affecting) the individual;
            ``(B) imposes net monthly premiums on individuals enrolled 
        under this part in excess of the net monthly premiums 
        permitted;
            ``(C) acts to expel or to refuse to re-enroll an individual 
        in violation of the provisions of this part;
            ``(D) engages in any practice that would reasonably be 
        expected to have the effect of denying or discouraging 
        enrollment (except as permitted by this part) by eligible 
        individuals with the organization whose medical condition or 
        history indicates a need for substantial future medical 
        services;
            ``(E) misrepresents or falsifies information that is 
        furnished--
                ``(i) to the Secretary under this part, or
                ``(ii) to an individual or to any other entity under 
            this part;
            ``(F) fails to comply with the requirements of section 
        1852(j)(3); or
            ``(G) employs or contracts with any individual or entity 
        that is excluded from participation under this title under 
        section 1128 or 1128A for the provision of health care, 
        utilization review, medical social work, or administrative 
        services or employs or contracts with any entity for the 
        provision (directly or indirectly) through such an excluded 
        individual or entity of such services;
    the Secretary may provide, in addition to any other remedies 
    authorized by law, for any of the remedies described in paragraph 
    (2).
        ``(2) Remedies.--The remedies described in this paragraph are--
            ``(A) civil money penalties of not more than $25,000 for 
        each determination under paragraph (1) or, with respect to a 
        determination under subparagraph (D) or (E)(i) of such 
        paragraph, of not more than $100,000 for each such 
        determination, plus, with respect to a determination under 
        paragraph (1)(B), double the excess amount charged in violation 
        of such paragraph (and the excess amount charged shall be 
        deducted from the penalty and returned to the individual 
        concerned), and plus, with respect to a determination under 
        paragraph (1)(D), $15,000 for each individual not enrolled as a 
        result of the practice involved,
            ``(B) suspension of enrollment of individuals under this 
        part after the date the Secretary notifies the organization of 
        a determination under paragraph (1) and until the Secretary is 
        satisfied that the basis for such determination has been 
        corrected and is not likely to recur, or
            ``(C) suspension of payment to the organization under this 
        part for individuals enrolled after the date the Secretary 
        notifies the organization of a determination under paragraph 
        (1) and until the Secretary is satisfied that the basis for 
        such determination has been corrected and is not likely to 
        recur.
        ``(3) Other intermediate sanctions.--In the case of a 
    MedicarePlus organization for which the Secretary makes a 
    determination under subsection (c)(2) the basis of which is not 
    described in paragraph (1), the Secretary may apply the following 
    intermediate sanctions:
            ``(A) civil money penalties of not more than $25,000 for 
        each determination under subsection (c)(2) if the deficiency 
        that is the basis of the determination has directly adversely 
        affected (or has the substantial likelihood of adversely 
        affecting) an individual covered under the organization's 
        contract;
            ``(B) civil money penalties of not more than $10,000 for 
        each week beginning after the initiation of procedures by the 
        Secretary under subsection (h) during which the deficiency that 
        is the basis of a determination under subsection (c)(2) exists; 
        and
            ``(C) suspension of enrollment of individuals under this 
        part after the date the Secretary notifies the organization of 
        a determination under subsection (c)(2) and until the Secretary 
        is satisfied that the deficiency that is the basis for the 
        determination has been corrected and is not likely to recur.
        ``(4) Proceedings.--The provisions of section 1128A (other than 
    subsections (a) and (b)) shall apply to a civil money penalty under 
    paragraph (1) or (2) in the same manner as they apply to a civil 
    money penalty or proceeding under section 1128A(a).
    ``(g) Procedures for Imposing Sanctions.--The Secretary may 
terminate a contract with a MedicarePlus organization under this 
section or may impose the intermediate sanctions described in 
subsection (f) on the organization in accordance with formal 
investigation and compliance procedures established by the Secretary 
under which--
        ``(1) the Secretary provides the organization with the 
    reasonable opportunity to develop and implement a corrective action 
    plan to correct the deficiencies that were the basis of the 
    Secretary's determination under subsection (c)(2);
        ``(2) the Secretary shall impose more severe sanctions on 
    organizations that have a history of deficiencies or that have not 
    taken steps to correct deficiencies the Secretary has brought to 
    their attention;
        ``(3) there are no unreasonable or unnecessary delays between 
    the finding of a deficiency and the imposition of sanctions; and
        ``(4) the Secretary provides the organization with reasonable 
    notice and opportunity for hearing (including the right to appeal 
    an initial decision) before imposing any sanction or terminating 
    the contract.

   ``standards for medicareplus and medicare information transactions 
                           and data elements

    ``Sec. 1858. (a) Adoption of Standards for Data Elements.--
        ``(1) In general.--Pursuant to subsection (b), the Secretary 
    shall adopt standards for information transactions and data 
    elements of MedicarePlus and medicare information and modifications 
    to the standards under this section that are--
            ``(A) consistent with the objective of reducing the 
        administrative costs of providing and paying for health care; 
        and
            ``(B) developed or modified by a standard setting 
        organization (as defined in subsection (h)(8)).
        ``(2) Special rule relating to data elements.--The Secretary 
    may adopt or modify a standard relating to data elements that is 
    different from the standard developed by a standard setting 
    organization, if--
            ``(A) the different standard or modification will 
        substantially reduce administrative costs to health care 
        providers and health plans compared to the alternative; and
            ``(B) the standard or modification is promulgated in 
        accordance with the rulemaking procedures of subchapter III of 
        chapter 5 of title 5, United States Code.
        ``(3) Security standards for health information network.--
            ``(A) In general.--Each person, who maintains or transmits 
        MedicarePlus and medicare information or data elements of 
        MedicarePlus and medicare information and is subject to this 
        section, shall maintain reasonable and appropriate 
        administrative, technical, and physical safeguards--
                ``(i) to ensure the integrity and confidentiality of 
            the information;
                ``(ii) to protect against any reasonably anticipated--

                    ``(I) threats or hazards to the security or 
                integrity of the information; and
                    ``(II) unauthorized uses or disclosures of the 
                information; and

                ``(iii) to otherwise ensure compliance with this 
            section by the officers and employees of such person.
            ``(B) Security standards.--The Secretary shall establish 
        security standards and modifications to such standards with 
        respect to MedicarePlus and medicare information network 
        services, health plans, and health care providers that--
                ``(i) take into account--

                    ``(I) the technical capabilities of record systems 
                used to maintain MedicarePlus and medicare information;
                    ``(II) the costs of security measures;
                    ``(III) the need for training persons who have 
                access to MedicarePlus and medicare information; and
                    ``(IV) the value of audit trails in computerized 
                record systems; and

                ``(ii) ensure that a MedicarePlus and medicare 
            information network service, if it is part of a larger 
            organization, has policies and security procedures which 
            isolate the activities of such service with respect to 
            processing information in a manner that prevents 
            unauthorized access to such information by such larger 
            organization.
        The security standards established by the Secretary shall be 
        based on the standards developed or modified by standard 
        setting organizations. If such standards do not exist, the 
        Secretary shall rely on the recommendations of the MedicarePlus 
        and Medicare Information Advisory Committee (established under 
        subsection (g)) and shall consult with appropriate government 
        agencies and private organizations in accordance with paragraph 
        (5).
        ``(4) Implementation specifications.--The Secretary shall 
    establish specifications for implementing each of the standards and 
    the modifications to the standards adopted pursuant to paragraph 
    (1) or (3).
        ``(5) Assistance to the secretary.--In complying with the 
    requirements of this section, the Secretary shall rely on 
    recommendations of the MedicarePlus and Medicare Information 
    Advisory Committee established under subsection (g) and shall 
    consult with appropriate Federal and State agencies and private 
    organizations. The Secretary shall publish in the Federal Register 
    the recommendations of the MedicarePlus and Medicare Information 
    Advisory Committee regarding the adoption of a standard under this 
    section.
    ``(b) Standards for Information Transactions and Data Elements.--
        ``(1) In general.--The Secretary shall adopt standards for 
    transactions and data elements to make MedicarePlus and medicare 
    information uniformly available to be exchanged electronically, 
    that is--
            ``(A) appropriate for the following financial and 
        administrative transactions: claims (including coordination of 
        benefits) or equivalent encounter information, enrollment and 
        disenrollment, eligibility, premium payments, and referral 
        certification and authorization; and
            ``(B) related to other financial and administrative 
        transactions determined appropriate by the Secretary consistent 
        with the goals of improving the operation of the health care 
        system and reducing administrative costs.
        ``(2) Unique health identifiers.--
            ``(A) Adoption of standards.--The Secretary shall adopt 
        standards providing for a standard unique health identifier for 
        each individual, employer, health plan, and health care 
        provider for use in the MedicarePlus and medicare information 
        system. In developing unique health identifiers for each health 
        plan and health care provider, the Secretary shall take into 
        account multiple uses for identifiers and multiple locations 
        and specialty classifications for health care providers.
            ``(B) Penalty for improper disclosure.--A person who 
        knowingly uses or causes to be used a unique health identifier 
        under subparagraph (A) for a purpose that is not authorized by 
        the Secretary shall--
                ``(i) be fined not more than $50,000, imprisoned not 
            more than 1 year, or both; or
                ``(ii) if the offense is committed under false 
            pretenses, be fined not more than $100,000, imprisoned not 
            more than 5 years, or both.
        ``(3) Code sets.--
            ``(A) In general.--The Secretary, in consultation with the 
        MedicarePlus and Medicare Information Advisory Committee, 
        experts from the private sector, and Federal and State 
        agencies, shall--
                ``(i) select code sets for appropriate data elements 
            from among the code sets that have been developed by 
            private and public entities; or
                ``(ii) establish code sets for such data elements if no 
            code sets for the data elements have been developed.
            ``(B) Distribution.--The Secretary shall establish 
        efficient and low-cost procedures for distribution (including 
        electronic distribution) of code sets and modifications made to 
        such code sets under subsection (c)(2).
        ``(4) Electronic signature.--
            ``(A) In general.--The Secretary, after consultation with 
        the MedicarePlus and Medicare Information Advisory Committee, 
        shall promulgate regulations specifying procedures for the 
        electronic transmission and authentication of signatures, 
        compliance with which will be deemed to satisfy Federal and 
        State statutory requirements for written signatures with 
        respect to information transactions required by this section 
        and written signatures on enrollment and disenrollment forms.
            ``(B) Payments for services and premiums.--Nothing in this 
        section shall be construed to prohibit the payment of health 
        care services or health plan premiums by debit, credit, payment 
        card or numbers, or other electronic means.
        ``(5) Transfer of information between health plans.--The 
    Secretary shall develop rules and procedures--
            ``(A) for determining the financial liability of health 
        plans when health care benefits are payable under two or more 
        health plans; and
            ``(B) for transferring among health plans appropriate 
        standard data elements needed for the coordination of benefits, 
        the sequential processing of claims, and other data elements 
        for individuals who have more than one health plan.
        ``(6) Coordination of benefits.--If, at the end of the 5-year 
    period beginning on the date of the enactment of this section, the 
    Secretary determines that additional transaction standards for 
    coordinating benefits are necessary to reduce administrative costs 
    or duplicative (or inappropriate) payment of claims, the Secretary 
    shall establish further transaction standards for the coordination 
    of benefits between health plans.
        ``(7) Protection of trade secrets.--Except as otherwise 
    required by law, the standards adopted under this section shall not 
    require disclosure of trade secrets or confidential commercial 
    information by an entity operating a MedicarePlus and medicare 
    information network.
    ``(c) Timetables for Adoption of Standards.--
        ``(1) Initial standards.--Not later than 18 months after the 
    date of the enactment of this section, the Secretary shall adopt 
    standards relating to the information transactions, data elements 
    of MedicarePlus and medicare information and security described in 
    subsections (a) and (b).
        ``(2) Additions and modifications to standards.--
            ``(A) In general.--The Secretary shall review the standards 
        adopted under this section and shall adopt additional or 
        modified standards, that have been developed or modified by a 
        standard setting organization, as determined appropriate, but 
        not more frequently than once every 12 months. Any addition or 
        modification to such standards shall be completed in a manner 
        which minimizes the disruption and cost of compliance.
            ``(B) Additions and modifications to code sets.--
                ``(i) In general.--The Secretary shall ensure that 
            procedures exist for the routine maintenance, testing, 
            enhancement, and expansion of code sets.
                ``(ii) Additional rules.--If a code set is modified 
            under this paragraph, the modified code set shall include 
            instructions on how data elements of MedicarePlus and 
            medicare information that were encoded prior to the 
            modification may be converted or translated so as to 
            preserve the informational value of the data elements that 
            existed before the modification. Any modification to a code 
            set under this paragraph shall be implemented in a manner 
            that minimizes the disruption and cost of complying with 
            such modification.
    ``(d) Requirements for Health Plans.--
        ``(1) In general.--If a person desires to conduct any of the 
    information transactions described in subsection (b)(1) with a 
    health plan as a standard transaction, the health plan shall 
    conduct such standard transaction in a timely manner and the 
    information transmitted or received in connection with such 
    transaction shall be in the form of standard data elements of 
    MedicarePlus and medicare information.
        ``(2) Satisfaction of requirements.--A health plan may satisfy 
    the requirement imposed on such plan under paragraph (1) by 
    directly transmitting standard data elements of MedicarePlus and 
    medicare information or submitting nonstandard data elements to a 
    MedicarePlus and medicare information network service for 
    processing into standard data elements and transmission.
        ``(3) Timetables for compliance with requirements.--Not later 
    than 24 months after the date on which standards are adopted under 
    subsections (a) and (b) with respect to any type of information 
    transaction or data element of MedicarePlus and medicare 
    information or with respect to security, a health plan shall comply 
    with the requirements of this section with respect to such 
    transaction or data element.
        ``(4) Compliance with modified standards.--If the Secretary 
    adopts a modified standard under subsection (a) or (b), a health 
    plan shall be required to comply with the modified standard at such 
    time as the Secretary determines appropriate taking into account 
    the time needed to comply due to the nature and extent of the 
    modification. However, the time determined appropriate under the 
    preceding sentence shall be not earlier than the last day of the 
    180-day period beginning on the date such modified standard is 
    adopted. The Secretary may extend the time for compliance for small 
    health plans, if the Secretary determines such extension is 
    appropriate.
    ``(e) General Penalty for Failure To Comply With Requirements and 
Standards.--
        ``(1) General penalty.--
            ``(A) In general.--Except as provided in paragraph (2), the 
        Secretary shall impose on any person that violates a 
        requirement or standard--
                ``(i) with respect to MedicarePlus and medicare 
            information transactions, data elements of MedicarePlus and 
            medicare information, or security imposed under subsection 
            (a) or (b); or
                ``(ii) with respect to health plans imposed under 
            subsection (d);
        a penalty of not more than $100 for each such violation of a 
        specific standard or requirement, but the total amount imposed 
        for all such violations of a specific standard or requirement 
        during the calendar year shall not exceed $25,000.
            ``(B) Procedures.--The provisions of section 1128A (other 
        than subsections (a) and (b) and the second sentence of 
        subsection (f)) shall apply to the imposition of a civil money 
        penalty under this paragraph in the same manner as such 
        provisions apply to the imposition of a penalty under such 
        section 1128A.
            ``(C) Denial of payment.--Except as provided in paragraph 
        (2), the Secretary may deny payment under this title for an 
        item or service furnished by a person if the person fails to 
        comply with an applicable requirement or standard for 
        MedicarePlus and medicare information relating to that item or 
        service.
        ``(2) Limitations.--
            ``(A) Noncompliance not discovered.--A penalty may not be 
        imposed under paragraph (1) if it is established to the 
        satisfaction of the Secretary that the person liable for the 
        penalty did not know, and by exercising reasonable diligence 
        would not have known, that such person failed to comply with 
        the requirement or standard described in paragraph (1).
            ``(B) Failures due to reasonable cause.--
                ``(i) In general.--Except as provided in clause (ii), a 
            penalty may not be imposed under paragraph (1) if--

                    ``(I) the failure to comply was due to reasonable 
                cause and not to willful neglect; and
                    ``(II) the failure to comply is corrected during 
                the 30-day period beginning on the first date the 
                person liable for the penalty knew, or by exercising 
                reasonable diligence would have known, that the failure 
                to comply occurred.

                ``(ii) Extension of period.--

                    ``(I) No penalty.--The period referred to in clause 
                (i)(II) may be extended as determined appropriate by 
                the Secretary based on the nature and extent of the 
                failure to comply.
                    ``(II) Assistance.--If the Secretary determines 
                that a health plan failed to comply because such plan 
                was unable to comply, the Secretary may provide 
                technical assistance to such plan during the period 
                described in clause (i)(II). Such assistance shall be 
                provided in any manner determined appropriate by the 
                Secretary.

            ``(C) Reduction.--In the case of a failure to comply which 
        is due to reasonable cause and not to willful neglect, any 
        penalty under paragraph (1) that is not entirely waived under 
        subparagraph (B) may be waived to the extent that the payment 
        of such penalty would be excessive relative to the compliance 
        failure involved.
    ``(f) Effect on State Law.--
        ``(1) General effect.--
            ``(A) General rule.--Except as provided in subparagraph 
        (B), a provision, requirement, or standard under this section 
        shall supersede any contrary provision of State law, including 
        a provision of State law that requires medical or health plan 
        records (including billing information) to be maintained or 
        transmitted in written rather than electronic form.
            ``(B) Exceptions.--A provision, requirement, or standard 
        under this section shall not supersede a contrary provision of 
        State law if the Secretary determines that the provision of 
        State law should be continued for any reason, including for 
        reasons relating to prevention of fraud and abuse or regulation 
        of controlled substances.
        ``(2) Public health reporting.--Nothing in this section shall 
    be construed to invalidate or limit the authority, power, or 
    procedures established under any law providing for the reporting of 
    disease or injury, child abuse, birth, or death, public health 
    surveillance, or public health investigation or intervention.
    ``(g) MedicarePlus and Medicare Information Advisory Committee.--
        ``(1) Establishment.--There is established a committee to be 
    known as the MedicarePlus and Medicare Information Advisory 
    Committee (in this subsection referred to as the `committee').
        ``(2) Duties.--The committee shall--
            ``(A) advise the Secretary in the development of standards 
        under this section; and
            ``(B) be generally responsible for advising the Secretary 
        and the Congress on the status and the future of the 
        MedicarePlus and medicare information network.
        ``(3) Membership.--
            ``(A) In general.--The committee shall consist of 9 members 
        of whom--
                ``(i) 3 shall be appointed by the President;
                ``(ii) 3 shall be appointed by the Speaker of the House 
            of Representatives after consultation with the minority 
            leader of the House of Representatives; and
                ``(iii) 3 shall be appointed by the President pro 
            tempore of the Senate after consultation with the minority 
            leader of the Senate.
        The appointments of the members shall be made not later than 60 
        days after the date of the enactment of this section. The 
        President shall designate 1 member as the Chair.
            ``(B) Expertise.--The membership of the committee shall 
        consist of individuals who are of recognized standing and 
        distinction in the areas of information systems, information 
        networking and integration, consumer health, or health care 
        financial management, and who possess the demonstrated capacity 
        to discharge the duties imposed on the committee.
            ``(C) Terms.--Each member of the committee shall be 
        appointed for a term of 5 years, except that the members first 
        appointed shall serve staggered terms such that the terms of 
        not more than 3 members expire at one time.
            ``(D) Initial meeting.--Not later than 30 days after the 
        date on which a majority of the members have been appointed, 
        the committee shall hold its first meeting.
        ``(4) Reports.--Not later than 1 year after the date of the 
    enactment of this section, and annually thereafter, the committee 
    shall submit to Congress and the Secretary a report regarding--
            ``(A) the extent to which entities using the MedicarePlus 
        and medicare information network are meeting the standards 
        adopted under this section and working together to form an 
        integrated network that meets the needs of its users;
            ``(B) the extent to which such entities are meeting the 
        security standards established pursuant to this section and the 
        types of penalties assessed for noncompliance with such 
        standards;
            ``(C) any problems that exist with respect to 
        implementation of the MedicarePlus and medicare information 
        network; and
            ``(D) the extent to which timetables under this section are 
        being met.
    Reports made under this subsection shall be made available to 
    health care providers, health plans, and other entities that use 
    the MedicarePlus and medicare information network to exchange 
    MedicarePlus and medicare information.
    ``(h) Definitions.--For purposes of this section:
        ``(1) Code set.--The term `code set' means any set of codes 
    used for encoding data elements, such as tables of terms, 
    enrollment information, and encounter data.
        ``(2) Coordination of benefits.--The term `coordination of 
    benefits' means determining and coordinating the financial 
    obligations of health plans when health care benefits are payable 
    under such a plan and under this title (including under a 
    MedicarePlus plan).
        ``(3) MedicarePlus and medicare information.--The term 
    `MedicarePlus and medicare information' means any information that 
    relates to the enrollment of individuals under this title 
    (including information relating to elections of MedicarePlus plans 
    under section 1851) and the provision of health benefits (including 
    benefits provided under such plans) under this title.
        ``(4) MedicarePlus and medicare information network.--The term 
    `MedicarePlus and medicare information network' means the 
    MedicarePlus and medicare information system that is formed through 
    the application of the requirements and standards established under 
    this section.
        ``(5) MedicarePlus and medicare information network service.--
    The term `MedicarePlus and medicare information network service' 
    means a public or private entity that--
            ``(A) processes or facilitates the processing of 
        nonstandard data elements of MedicarePlus and medicare 
        information into standard data elements;
            ``(B) provides the means by which persons may meet the 
        requirements of this section; or
            ``(C) provides specific information processing services.
        ``(6) Health plan.--The term `health plan' means a plan which 
    provides, or pays the cost of, health benefits. Such term includes 
    the following, or any combination thereof:
            ``(A) Part A or part B of this title, and includes a 
        MedicarePlus plan.
            ``(B) The medicaid program under title XIX and the 
        MediGrant program under title XXI.
            ``(C) A medicare supplemental policy (as defined in section 
        1882(g)(1)).
            ``(D) Worker's compensation or similar insurance.
            ``(E) Automobile or automobile medical-payment insurance.
            ``(F) A long-term care policy, other than a fixed indemnity 
        policy.
            ``(G) The Federal Employees Health Benefit Plan under 
        chapter 89 of title 5, United States Code.
            ``(H) An employee welfare benefit plan, as defined in 
        section 3(1) of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1002(1)), but only to the extent the plan is 
        established or maintained for the purpose of providing health 
        benefits.
        ``(7) Individually identifiable MedicarePlus and medicare 
    information.--The term `individually identifiable MedicarePlus and 
    medicare information' means MedicarePlus and medicare enrollment 
    information, including demographic information collected from an 
    individual, that--
            ``(A) is created or received by a health care provider, 
        health plan, employer, or MedicarePlus and medicare information 
        network service, and
            ``(B) identifies an individual.
        ``(8) Standard setting organization.--The term `standard 
    setting organization' means a standard setting organization 
    accredited by the American National Standards Institute and 
    includes the National Council for Prescription Drug Program.
        ``(9) Standard transaction.--The term `standard transaction' 
    means, when referring to an information transaction or to data 
    elements of MedicarePlus and medicare information, any transaction 
    that meets the requirements and implementation specifications 
    adopted by the Secretary under subsections (a) and (b).

                 ``definitions; miscellaneous provisions

    ``Sec. 1859. (a) Definitions Relating to MedicarePlus 
Organizations.--In this part--
        ``(1) MedicarePlus organization.--The term `MedicarePlus 
    organization' means a public or private entity that is certified 
    under section 1857 as meeting the requirements and standards of 
    this part for such an organization.
        ``(2) Provider-sponsored organization.--The term `provider-
    sponsored organization' is defined in section 1853(e).
        ``(3) Qualified association sponsor.--The term `qualified 
    association sponsor' means an association, religious fraternal 
    organization, or other organization (which may be a trade, 
    industry, or professional association, a chamber of commerce, or a 
    public entity association) that the Secretary finds--
            ``(A) is organized for purposes other than to market a 
        health plan,
            ``(B) may not condition its membership on health status, 
        health claims experience, receipt of health care, medical 
        history, or lack of evidence of insurability of a potential 
        member,
            ``(C) may not exclude a member or spouse of a member from 
        health plan coverage based on factors described in clause (ii);
            ``(D) does not exist solely or principally for the purpose 
        of selling insurance,
            ``(E) has at least 1,000 individual members or 200 employer 
        members,
            ``(F) is a permanent entity which receives a substantial 
        proportion of its financial support from active members; and
            ``(G) is not owned or controlled by an insurance company.
    Such term includes a subsidiary or corporation that is wholly owned 
    by one or more qualified organizations.
        ``(4) Taft-hartley sponsor.--The term `Taft-Hartley sponsor' 
    means, in relation to a group health plan that is established or 
    maintained by two or more employers or jointly by one or more 
    employers and one or more employee organizations, the association, 
    committee, joint board of trustees, or other similar group of 
    representatives of parties who establish or maintain the plan.
        ``(5) Union sponsor.--The term `union sponsor' means an 
    employee organization in relation to a group health plan that is 
    established or maintained by the organization other than pursuant 
    to a collective bargaining agreement.
        ``(6) Employer, etc.--In this subsection and section 1851(b), 
    the terms `employer', `employee organization', and `group health 
    plan' have the meanings given such terms for purposes of part 6 of 
    subtitle B of title I of the Employee Retirement Income Security 
    Act of 1974.
    ``(b) Definitions Relating to MedicarePlus Plans.--
        ``(1) MedicarePlus plan.--The term `MedicarePlus plan' means 
    health benefits coverage offered under a policy, contract, or plan 
    by a MedicarePlus organization pursuant to and in accordance with a 
    contract under section 1857.
        ``(2) High deductible plan.--
            ``(A) In general.--The term `high deductible plan' means a 
        MedicarePlus plan that--
                ``(i) provides reimbursement for at least the items and 
            services described in section 1852(a)(1) in a year but only 
            after the enrollee incurs countable expenses (as specified 
            under the plan) equal to the amount of a deductible 
            (described in subparagraph (B));
                ``(ii) counts as such expenses (for purposes of such 
            deductible) at least all amounts that would have been 
            payable under parts A and B or by the enrollee if the 
            enrollee had elected to receive benefits through the 
            provisions of such parts; and
                ``(iii) provides, after such deductible is met for a 
            year and for all subsequent expenses for benefits referred 
            to in clause (i) in the year, for a level of reimbursement 
            that is not less than--

                    ``(I) 100 percent of such expenses, or
                    ``(II) 100 percent of the amounts that would have 
                been paid (without regard to any deductibles or 
                coinsurance) under parts A and B with respect to such 
                expenses,

            whichever is less.
            ``(B) Deductible.--The amount of deductible under a high 
        deductible plan--
                ``(i) for contract year 1997 shall be not more than 
            $6,000; and
                ``(ii) for a subsequent contract year shall be not more 
            than the maximum amount of such deductible for the previous 
            contract year under this subparagraph increased by the 
            national average per capita growth percentage under section 
            1854(c)(6) for the year.
        If the amount of the deductible under clause (ii) is not a 
        multiple of $50, the amount shall be rounded to the nearest 
        multiple of $50.
        ``(3) MedicarePlus unrestricted fee-for-service plan.--The term 
    `MedicarePlus unrestricted fee-for-service plan' means a 
    MedicarePlus plan that provides for coverage of benefits without 
    restrictions relating to utilization and without regard to whether 
    the provider has a contract or other arrangement with the 
    organization offering the plan for the provision of such benefits.
    ``(c) Other References to Other Terms.--
        ``(1) MedicarePlus eligible individual.--The term `MedicarePlus 
    eligible individual' is defined in section 1851(a)(3).
        ``(2) MedicarePlus payment area.--The term `MedicarePlus 
    payment area' is defined in section 1854(d).
        ``(3) National average per capita growth percentage.--The 
    `national average per capita growth percentage' is defined in 
    section 1854(c)(6).
        ``(4) Monthly premium; net monthly premium.--The terms `monthly 
    premium' and `net monthly premium' are defined in section 
    1855(a)(2).
    ``(d) Coordinated Acute and Long-term Care Benefits Under a 
MedicarePlus Plan.--Nothing in this part shall be construed as 
preventing a State from coordinating benefits under its MediGrant 
program under title XXI with those provided under a MedicarePlus plan 
in a manner that assures continuity of a full-range of acute care and 
long-term care services to poor elderly or disabled individuals 
eligible for benefits under this title and under such program.''.
    (b) Conforming References to Previous Part C.--Any reference in law 
(in effect before the date of the enactment of this Act) to part C of 
title XVIII of the Social Security Act is deemed a reference to part D 
of such title (as in effect after such date).
    (c) Use of Interim, Final Regulations.--In order to carry out the 
amendment made by subsection (a) in a timely manner, the Secretary of 
Health and Human Services may promulgate regulations that take effect 
on an interim basis, after notice and pending opportunity for public 
comment.
    (d) Advance Directives.--Section 1866(f)(1) (42 U.S.C. 
1395cc(f)(1)) is amended--
        (1) by inserting ``1853(g),'' after ``1833(s),'', and
        (2) by inserting ``, MedicarePlus organization,'' after 
    ``provider of services''.
    (e) Conforming Amendment.--Section 1866(a)(1)(O) (42 U.S.C. 
1395cc(a)(1)(O)) is amended by inserting before the semicolon at the 
end the following: ``and in the case of hospitals to accept as payment 
in full for inpatient hospital services that are emergency services (as 
defined in section 1853(b)(4)) that are covered under this title and 
are furnished to any individual enrolled under part C with a 
MedicarePlus organization which does not have a contract establishing 
payment amounts for services furnished to members of the organization 
the amounts that would be made as a payment in full under this title if 
the individuals were not so enrolled''.
    (f) Secretarial Submission of Legislative Proposal.--Not later than 
90 days after the date of the enactment of this Act, the Secretary of 
Health and Human Services shall submit to the appropriate committees of 
Congress a legislative proposal providing for such technical and 
conforming amendments in the law as are required by the provisions of 
this chapter.

SEC. 8002. DUPLICATION AND COORDINATION OF MEDICARE-RELATED PLANS.

    (a) Treatment of Certain Health Insurance Policies as 
Nonduplicative.--
        (1) In general.--Section 1882(d)(3)(A) (42 U.S.C. 
    1395ss(d)(3)(A)) is amended--
            (A) by amending clause (i) to read as follows:
    ``(i) It is unlawful for a person to sell or issue to an individual 
entitled to benefits under part A or enrolled under part B of this 
title or electing a MedicarePlus plan under section 1851--
        ``(I) a health insurance policy (other than a medicare 
    supplemental policy) with knowledge that the policy duplicates 
    health benefits to which the individual is otherwise entitled under 
    this title or title XIX,
        ``(II) in the case of an individual not electing a MedicarePlus 
    plan, a medicare supplemental policy with knowledge that the 
    individual is entitled to benefits under another medicare 
    supplemental policy, or
        ``(III) in the case of an individual electing a MedicarePlus 
    plan, a medicare supplemental policy with knowledge that the policy 
    duplicates health benefits to which the individual is otherwise 
    entitled under this title or under another medicare supplemental 
    policy.'';
            (B) in clause (iii), by striking ``clause (i)'' and 
        inserting ``clause (i)(II)''; and
            (C) by adding at the end the following new clauses:
    ``(iv) For purposes of this subparagraph, a health insurance policy 
shall be considered to `duplicate' benefits under this title only when, 
under its terms, the policy provides specific reimbursement for 
identical items and services to the extent paid for under this title, 
and a health insurance policy providing for benefits which are payable 
to or on behalf of an individual without regard to other health benefit 
coverage of such individual is not considered to `duplicate' any health 
benefits under this title.
    ``(v) For purposes of this subparagraph, a health insurance policy 
(or a rider to an insurance contract which is not a health insurance 
policy), including a policy (such as a qualified long-term care 
insurance contract described in section 7702B(b) of the Internal 
Revenue Code of 1986, as added by the Revenue Reconciliation Act of 
1995) providing benefits for long-term care, nursing home care, home 
health care, or community-based care, that coordinates against or 
excludes items and services available or paid for under this title and 
(for policies sold or issued after January 1, 1996) that discloses such 
coordination or exclusion in the policy's outline of coverage, is not 
considered to `duplicate' health benefits under this title. For 
purposes of this clause, the terms `coordinates' and `coordination' 
mean, with respect to a policy in relation to health benefits under 
this title, that the policy under its terms is secondary to, or 
excludes from payment, items and services to the extent available or 
paid for under this title.
    ``(vi) A State may not impose, with respect to the sale or issuance 
of a policy (or rider) that meets the requirements of this title 
pursuant to clause (iv) or (v) to an individual entitled to benefits 
under part A or enrolled under part B or enrolled under a MedicarePlus 
plan under part C, any requirement based on the premise that such a 
policy or rider duplicates health benefits to which the individual is 
otherwise entitled under this title.''.
        (2) Conforming amendments.--Section 1882(d)(3) (42 U.S.C. 
    1395ss(d)(3)) is amended--
            (A) in subparagraph (B), by inserting ``(including any 
        MedicarePlus plan)'' after ``health insurance policies'';
            (B) in subparagraph (C)--
                (i) by striking ``with respect to (i)'' and inserting 
            ``with respect to'', and
                (ii) by striking ``, (ii) the sale'' and all that 
            follows up to the period at the end; and
            (C) by striking subparagraph (D).
        (3) MedicarePlus plans not treated as medicare supplementary 
    policies.--Section 1882(g)(1) (42 U.S.C. 1395ss(g)(1)) is amended 
    by inserting ``a MedicarePlus plan or'' after ``and does not 
    include''.
    (b) Additional Rules Relating to Individuals Enrolled in 
MedicarePlus Plans.--Section 1882 (42 U.S.C. 1395ss) is further amended 
by adding at the end the following new subsection:
    ``(u)(1) Notwithstanding the previous provisions of this section, 
this section shall not apply to the sale or issuance of a medicare 
supplemental policy to an individual who has elected to enroll in a 
MedicarePlus plan under section 1851.
    ``(2)(A) It is unlawful for a person to sell or issue a policy 
described in subparagraph (B) to an individual with knowledge that the 
individual has in effect under section 1851 an election of a high 
deductible plan.
    ``(B) A policy described in this subparagraph is a health insurance 
policy that provides for coverage of expenses that are otherwise 
required to be counted toward meeting the annual deductible amount 
provided under the high deductible plan.''.

SEC. 8003. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO PROGRAM.

    (a) In General.--Section 1876 (42 U.S.C. 1395mm) is amended--
        (1) in subsection (c)(3)(A)(i), by striking ``would result in 
    failure to meet the requirements of subsection (f) or'';
        (2) by amending subsection (f) to read as follows:
    ``(f)(1) Except as provided in paragraph (3), the Secretary shall 
not enter into, renew, or continue any risk-sharing contract under this 
section with an eligible organization for any contract year beginning 
on or after--
        ``(A) the date standards for MedicarePlus organizations and 
    plans are first established under section 1856(a) with respect to 
    MedicarePlus organizations that are insurers or health maintenance 
    organizations, or
        ``(B) in the case of such an organization with such a contract 
    in effect as of the date such standards were first established, 1 
    year after such date.
    ``(2) The Secretary shall not enter into, renew, or continue any 
risk-sharing contract under this section with an eligible organization 
for any contract year beginning on or after January 1, 2000.
    ``(3) An individual who is enrolled in part B only and is enrolled 
in an eligible organization with a risk-sharing contract under this 
section on December 31, 1996, may continue enrollment in such 
organization. Not later then July 1, 1996, the Secretary shall issue 
regulations relating to such individuals and such organizations.
    ``(4) Notwithstanding subsection (a), the Secretary shall provide 
that payment amounts under risk-sharing contracts under this section 
for months in a year (beginning with January 1996) shall be computed--
        ``(A) with respect to individuals entitled to benefits under 
    both parts A and B, by substituting payment rates under section 
    1854(a) for the payment rates otherwise established under 
    subsection 1876(a), and
        ``(B) with respect to individuals only entitled to benefits 
    under part B, by substituting an appropriate proportion of such 
    rates (reflecting the relative proportion of payments under this 
    title attributable to such part) for the payment rates otherwise 
    established under subsection (a).
For purposes of carrying out this paragraph for payments for months in 
1996, the Secretary shall compute, announce, and apply the payment 
rates under section 1854(a) (notwithstanding any deadlines specified in 
such section) in as timely a manner as possible and may (to the extent 
necessary) provide for retroactive adjustment in payments made under 
this section not in accordance with such rates.''; and
        (3) in subsection (i)(1)(C), by striking ``(e), and (f)'' and 
    inserting ``and (e)''.

   CHAPTER 2--SPECIAL RULES FOR MEDICAREPLUS MEDICAL SAVINGS ACCOUNTS

SEC. 8011. MEDICAREPLUS MSA.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to amounts specifically 
excluded from gross income) is amended by redesignating section 137 as 
section 138 and by inserting after section 136 the following new 
section:

``SEC. 137. MEDICAREPLUS MSA.

    ``(a) Exclusion.--Gross income shall not include any payment to the 
MedicarePlus MSA of an individual by the Secretary of Health and Human 
Services under part C of title XVIII of the Social Security Act.
    ``(b) MedicarePlus MSA.--For purposes of this section--
        ``(1) MedicarePlus msa.--The term `MedicarePlus MSA' means a 
    medical savings account (as defined in section 222(d))--
            ``(A) which is designated as a MedicarePlus MSA,
            ``(B) notwithstanding section 222(f)(5), with respect to 
        which no contribution may be made other than--
                ``(i) a contribution made by the Secretary of Health 
            and Human Services pursuant to part C of title XVIII of the 
            Social Security Act, or
                ``(ii) a trustee-to-trustee transfer described in 
            subsection (c)(4), and
            ``(C) the governing instrument of which provides that 
        trustee-to-trustee transfers described in subsection (c)(4) may 
        be made to and from such account.
        ``(2) High deductible msa.--The term `High Deductible 
    MedicarePlus MSA' means a MedicarePlus MSA which is established in 
    connection with a high deductible plan described in section 
    1859(b)(2) of the Social Security Act.
        ``(3) Rebate medicareplus msa.--The term `Rebate MedicarePlus 
    MSA' means a MedicarePlus MSA other than a High Deductible 
    MedicarePlus MSA.
    ``(c) Special Rules for Distributions.--
        ``(1) Distributions for qualified medical expenses.--In 
    applying section 222--
            ``(A) to a High Deductible MedicarePlus MSA, qualified 
        medical expenses shall include only expenses for medical care 
        of the account holder, and
            ``(B) to a Rebate MedicarePlus MSA, qualified medical 
        expenses shall include only expenses for medical care of the 
        account holder and of the spouse of the account holder if such 
        spouse is entitled to benefits under part A of title XVIII of 
        the Social Security Act and is enrolled under part B of such 
        title.
        ``(2) Penalty for distributions from high deductible msa not 
    used for qualified medical expenses if minimum balance not 
    maintained.--
            ``(A) In general.--The tax imposed by this chapter for any 
        taxable year in which there is a payment or distribution from a 
        High Deductible MedicarePlus MSA which is not used exclusively 
        to pay the qualified medical expenses of the account holder 
        shall be increased by 50 percent of the excess (if any) of--
                ``(i) the amount of such payment or distribution, over
                ``(ii) the excess (if any) of--

                    ``(I) the fair market value of the assets in such 
                MSA as of the close of the calendar year preceding the 
                calendar year in which the taxable year begins, over
                    ``(II) an amount equal to 60 percent of the 
                deductible under the high deductible plan covering the 
                account holder as of January 1 of the calendar year in 
                which the taxable year begins.

        Section 222(f)(2) shall not apply to any payment or 
        distribution from a High Deductible MedicarePlus MSA.
            ``(B) Exceptions.--Subparagraph (A) shall not apply if the 
        payment or distribution is made on or after the date the 
        account holder--
                ``(i) becomes disabled within the meaning of section 
            72(m)(7), or
                ``(ii) dies.
            ``(C) Special rules.--For purposes of subparagraph (A)--
                ``(i) all High Deductible MedicarePlus MSAs of the 
            account holder shall be treated as 1 account,
                ``(ii) all payments and distributions not used 
            exclusively to pay the qualified medical expenses of the 
            account holder during any taxable year shall be treated as 
            1 distribution, and
                ``(iii) any distribution of property shall be taken 
            into account at its fair market value on the date of the 
            distribution.
        ``(3) Withdrawal of erroneous contributions.--Section 222(f)(2) 
    and paragraph (2) of this subsection shall not apply to any payment 
    or distribution from a MedicarePlus MSA to the Secretary of Health 
    and Human Services of an erroneous contribution to such MSA and of 
    the net income attributable to such contribution.
        ``(4) Trustee-to-Trustee transfers.--Section 222(f)(2) and 
    paragraph (2) of this subsection shall not apply to--
            ``(A) any trustee-to-trustee transfer from a High 
        Deductible MedicarePlus MSA of an account holder to another 
        High Deductible MedicarePlus MSA of such account holder, and
            ``(B) any trustee-to-trustee transfer from a Rebate 
        MedicarePlus MSA of an account holder to another Rebate 
        MedicarePlus MSA of such account holder.
    ``(d) Special Rules for Treatment of Account After Death of Account 
Holder.--Notwithstanding section 222(f)(1)(B), if, as of the date of 
the death of the account holder, the spouse of such holder is not 
entitled to benefits under title XVIII of the Social Security Act, then 
after the date of such death--
        ``(1) the Secretary of Health and Human Services may not make 
    any payments to such MedicarePlus MSA, other than payments 
    attributable to periods before such date, and
        ``(2) such MSA shall be treated as medical savings account 
    which is not a MedicarePlus MSA.
    ``(e) Reports.--In the case of a MedicarePlus MSA, the report under 
section 222(h)--
        ``(1) shall include the fair market value of the assets in such 
    MedicarePlus MSA as of the close of each calendar year, and
        ``(2) shall be furnished to the account holder--
            ``(A) not later than January 31 of the calendar year 
        following the calendar year to which such reports relate, and
            ``(B) in such manner as the Secretary prescribes in such 
        regulations.''
    (b) Conforming Amendments.--
        (1) The last sentence of section 4973(d) of such Code, as added 
    by section 11066(f)(4), is amended by ``or section 137(c)(3)'' 
    after ``section 222(f)(3)''.
        (2) The table of sections for part III of subchapter B of 
    chapter 1 of such Code is amended by striking the last item and 
    inserting the following:
        ``Sec. 137. MedicarePlus MSA.
        ``Sec. 138. Cross references to other Acts.''

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 8012. CERTAIN REBATES EXCLUDED FROM GROSS INCOME.

    (a) In General.--Section 105 of the Internal Revenue Code of 1986 
(relating to amounts received under accident and health plans) is 
amended by adding at the end the following new subsection:
    ``(j) Certain Rebates Under Social Security Act.--Gross income does 
not include any rebate received under part C of title XVIII of the 
Social Security Act during the taxable year.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to amounts received after the date of the enactment of this Act.

             CHAPTER 3--MEDICARE PAYMENT REVIEW COMMISSION

SEC. 8021. MEDICARE PAYMENT REVIEW COMMISSION.

    (a) In General.--Title XVIII is amended by inserting after section 
1804 the following new section:

                   ``medicare payment review commission

    ``Sec. 1805. (a) Establishment.--There is hereby established the 
Medicare Payment Review Commission (in this section referred to as the 
`Commission').
    ``(b) Duties.--
        ``(1) General duties and reports.--
            ``(A) In general.--The Commission shall review, and make 
        recommendations to Congress concerning payment policies under 
        this title.
            ``(B) Annual reports.--By not later than June 1 of each 
        year, the Commission shall submit a report to Congress 
        containing an examination of issues affecting the medicare 
        program, including the implications of changes in health care 
        delivery in the United States and in the market for health care 
        services on the medicare program.
            ``(C) Additional reports.--The Commission may submit to 
        Congress from time to time such other reports as the Commission 
        deems appropriate. By not later than May 1, 1997, the 
        Commission shall submit to Congress a report on the matter 
        described in paragraph (2)(G).
            ``(D) Availability of reports.--The Commission shall 
        transmit to the Secretary a copy of each report submitted to 
        Congress under this subsection and shall make such reports 
        available to the public.
        ``(2) Specific duties relating to medicareplus program.--
    Specifically, the Commission shall review, with respect to the 
    MedicarePlus program under part C--
            ``(A) the methodology for making payment to plans under 
        such program, including the making of differential payments and 
        the distribution of differential updates among different 
        payment areas;
            ``(B) the mechanisms used to adjust payments for risk and 
        the need to adjust such mechanisms to take into account health 
        status of beneficiaries;
            ``(C) the implications of risk selection both among 
        MedicarePlus organizations and between the MedicarePlus option 
        and the medicare fee-for-service option;
            ``(D) in relation to payment under part C, the development 
        and implementation of mechanisms to assure the quality of care 
        for those enrolled with MedicarePlus organizations;
            ``(E) the impact of the MedicarePlus program on access to 
        care for medicare beneficiaries;
            ``(F) the feasibility and desirability of extending the 
        rules for open enrollment that apply during the transition 
        period to apply in each county during the first 2 years in 
        which MedicarePlus plans are made available to individuals 
        residing in the county; and
            ``(G) other major issues in implementation and further 
        development of the MedicarePlus program.
        ``(3) Specific duties relating to the fee-for-service system.--
    Specifically, the Commission shall review payment policies under 
    parts A and B, including--
            ``(A) the factors affecting expenditures for services in 
        different sectors, including the process for updating hospital, 
        physician, and other fees,
            ``(B) payment methodologies; and
            ``(C) the impact of payment policies on access and quality 
        of care for medicare beneficiaries.
        ``(4) Specific duties relating to interaction of payment 
    policies with health care delivery generally.--Specifically the 
    Commission shall review the effect of payment policies under this 
    title on the delivery of health care services under this title and 
    assess the implications of changes in the health services market on 
    the medicare program.
    ``(c) Membership.--
        ``(1) Number and appointment.--The Commission shall be composed 
    of 15 members appointed by the Comptroller General.
        ``(2) Qualifications.--The membership of the Commission shall 
    include individuals with national recognition for their expertise 
    in health finance and economics, actuarial science, health facility 
    management, health plans and integrated delivery systems, 
    reimbursement of health facilities, allopathic and osteopathic 
    physicians, and other providers of services, and other related 
    fields, who provide a mix of different professionals, broad 
    geographic representation, and a balance between urban and rural 
    representatives, including physicians and other health 
    professionals, employers, third party payors, individuals skilled 
    in the conduct and interpretation of biomedical, health services, 
    and health economics research and expertise in outcomes and 
    effectiveness research and technology assessment. Such membership 
    shall also include representatives of consumers and the elderly.
        ``(3) Terms.--
            ``(A) In general.--The terms of members of the Commission 
        shall be for 3 years except that the Comptroller General shall 
        designate staggered terms for the members first appointed.
            ``(B) Vacancies.--Any member appointed to fill a vacancy 
        occurring before the expiration of the term for which the 
        member's predecessor was appointed shall be appointed only for 
        the remainder of that term. A member may serve after the 
        expiration of that member's term until a successor has taken 
        office. A vacancy in the Commission shall be filled in the 
        manner in which the original appointment was made.
        ``(4) Compensation.--While serving on the business of the 
    Commission (including traveltime), a member of the Commission shall 
    be entitled to compensation at the per diem equivalent of the rate 
    provided for level IV of the Executive Schedule under section 5315 
    of title 5, United States Code; and while so serving away from home 
    and member's regular place of business, a member may be allowed 
    travel expenses, as authorized by the Chairman of the Commission. 
    Physicians serving as personnel of the Commission may be provided a 
    physician comparability allowance by the Commission in the same 
    manner as Government physicians may be provided such an allowance 
    by an agency under section 5948 of title 5, United States Code, and 
    for such purpose subsection (i) of such section shall apply to the 
    Commission in the same manner as it applies to the Tennessee Valley 
    Authority. For purposes of pay (other than pay of members of the 
    Commission) and employment benefits, rights, and privileges, all 
    personnel of the Commission shall be treated as if they were 
    employees of the United States Senate.
        ``(5) Chairman; vice chairman.--The Comptroller General shall 
    designate a member of the Commission, at the time of appointment of 
    the member, as Chairman and a member as Vice Chairman for that term 
    of appointment.
        ``(6) Meetings.--The Commission shall meet at the call of the 
    Chairman.
    ``(d) Director and Staff; Experts and Consultants.--Subject to such 
review as the Comptroller General deems necessary to assure the 
efficient administration of the Commission, the Commission may--
        ``(1) employ and fix the compensation of an Executive Director 
    (subject to the approval of the Comptroller General) and such other 
    personnel as may be necessary to carry out its duties (without 
    regard to the provisions of title 5, United States Code, governing 
    appointments in the competitive service);
        ``(2) seek such assistance and support as may be required in 
    the performance of its duties from appropriate Federal departments 
    and agencies;
        ``(3) enter into contracts or make other arrangements, as may 
    be necessary for the conduct of the work of the Commission (without 
    regard to section 3709 of the Revised Statutes (41 U.S.C. 5));
        ``(4) make advance, progress, and other payments which relate 
    to the work of the Commission;
        ``(5) provide transportation and subsistence for persons 
    serving without compensation; and
        ``(6) prescribe such rules and regulations as it deems 
    necessary with respect to the internal organization and operation 
    of the Commission.
    ``(e) Powers.--
        ``(1) Obtaining official data.--The Commission may secure 
    directly from any department or agency of the United States 
    information necessary to enable it to carry out this section. Upon 
    request of the Chairman, the head of that department or agency 
    shall furnish that information to the Commission on an agreed upon 
    schedule.
        ``(2) Data collection.--In order to carry out its functions, 
    the Commission shall collect and assess information to--
            ``(A) utilize existing information, both published and 
        unpublished, where possible, collected and assessed either by 
        its own staff or under other arrangements made in accordance 
        with this section,
            ``(B) carry out, or award grants or contracts for, original 
        research and experimentation, where existing information is 
        inadequate, and
            ``(C) adopt procedures allowing any interested party to 
        submit information for the Commission's use in making reports 
        and recommendations.
        ``(3) Access of gao to information.--The Comptroller General 
    shall have unrestricted access to all deliberations, records, and 
    data of the Commission, immediately upon request.
        ``(4) Periodic audit.--The Commission shall be subject to 
    periodic audit by the General Accounting Office.
        ``(5) Open meetings, etc.--Pursuant to regulations of the 
    Comptroller General, rules based upon the requirements of section 
    10 of the Federal Advisory Committee Act shall apply with respect 
    to the Commission.
    ``(f) Authorization of Appropriations.--
        ``(1) Request for appropriations.--The Commission shall submit 
    requests for appropriations in the same manner as the Comptroller 
    General submits requests for appropriations, but amounts 
    appropriated for the Commission shall be separate from amounts 
    appropriated for the Comptroller General.
        ``(2) Authorization.--There are authorized to be appropriated 
    such sums as may be necessary to carry out the provisions of this 
    section. 60 percent of such appropriation shall be payable from the 
    Federal Hospital Insurance Trust Fund, and 40 percent of such 
    appropriation shall be payable from the Federal Supplementary 
    Medical Insurance Trust Fund.''.
    (b) Abolition of ProPAC and PPRC.--
        (1) Propac.--
            (A) In general.--Section 1886(e) (42 U.S.C. 1395ww(e)) is 
        amended--
                (i) by striking paragraphs (2) and (6); and
                (ii) in paragraph (3), by striking ``(A) The 
            Commission'' and all that follows through ``(B)''.
            (B) Conforming amendment.--Section 1862 (42 U.S.C. 1395y) 
        is amended by striking ``Prospective Payment Assessment 
        Commission'' each place it appears in subsection (a)(1)(D) and 
        subsection (i) and inserting ``Medicare Payment Review 
        Commission''.
        (2) PPRC.--
            (A) In general.--Title XVIII is amended by striking section 
        1845 (42 U.S.C. 1395w-1).
            (B) Conforming amendments.--
                (i) Section 1834(b)(2) (42 U.S.C. 1395m(b)(2)) is 
            amended by striking ``Physician Payment Review Commission'' 
            and inserting ``Medicare Payment Review Commission''.
                (ii) Section 1842(b) (42 U.S.C. 1395u(b)) is amended by 
            striking ``Physician Payment Review Commission'' each place 
            it appears in paragraphs (9)(D) and (14)(C)(i) and 
            inserting ``Medicare Payment Review Commission''.
                (iii) Section 1848 (42 U.S.C. 1395w-4) is amended by 
            striking ``Physician Payment Review Commission'' and 
            inserting ``Medicare Payment Review Commission'' each place 
            it appears in paragraph (2)(A)(ii), (2)(B)(iii), and (5) of 
            subsection (c), subsection (d)(2)(F), paragraphs (1)(B), 
            (3), and (4)(A) of subsection (f), and paragraphs (6)(C) 
            and (7)(C) of subsection (g).
    (c) Effective Date; Transition.--
        (1) In general.--The Comptroller General shall first provide 
    for appointment of members to the Medicare Payment Review 
    Commission (in this subsection referred to as ``MPRC'') by not 
    later than September 30, 1996.
        (2) Transition.--Effective January 1, 1997, the Prospective 
    Payment Assessment Commission (in this subsection referred to as 
    ``ProPAC'') and the Physician Payment Review Commission (in this 
    subsection referred to as ``PPRC'') are terminated and amendments 
    made by subsection (b) shall become effective. The Comptroller 
    General, to the maximum extent feasible, shall provide for the 
    transfer to the MPRC of assets and staff of ProPAC and PPRC, 
    without any loss of benefits or seniority by virtue of such 
    transfers. Fund balances available to the ProPAC or PPRC for any 
    period shall be available to the MPRC for such period for like 
    purposes.
        (3) Continuing responsibility for reports.--The MPRC shall be 
    responsible for the preparation and submission of reports required 
    by law to be submitted (and which have not been submitted by the 
    date of establishment of the MPRC) by the ProPAC and PPRC, and, for 
    this purpose, any reference in law to either such Commission is 
    deemed, after the appointment of the MPRC, to refer to the MPRC.

    CHAPTER 4--TREATMENT OF HOSPITALS WHICH PARTICIPATE IN PROVIDER-
                        SPONSORED ORGANIZATIONS

SEC. 8031. TREATMENT OF HOSPITALS WHICH PARTICIPATE IN PROVIDER-
              SPONSORED ORGANIZATIONS.

    (a) In General.--Section 501 of the Internal Revenue Code of 1986 
(relating to exemption from tax on corporations, certain trusts, etc.), 
as amended by title XI, is amended by redesignating subsection (o) as 
subsection (p) and by inserting after subsection (n) the following new 
subsection:
    ``(o) Treatment of Hospitals Participating in Provider-Sponsored 
Organizations.--An organization shall not fail to be treated as 
organized and operated exclusively for a charitable purpose for 
purposes of subsection (c)(3) solely because a hospital which is owned 
and operated by such organization participates in a provider-sponsored 
organization (as defined in section 1853 of the Social Security Act), 
whether or not the provider-sponsored organization is exempt from tax. 
For purposes of subsection (c)(3), any person with a material financial 
interest in such a provider-sponsored organization shall be treated as 
a private shareholder or individual with respect to the hospital.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

           Subtitle B--Health Care Fraud and Abuse Prevention

               CHAPTER 1--FRAUD AND ABUSE CONTROL PROGRAM

SEC. 8101. FRAUD AND ABUSE CONTROL PROGRAM.

    (a) Establishment of Program.--Title XI (42 U.S.C. 1301 et seq.) is 
amended by inserting after section 1128B the following new section:

                    ``FRAUD AND ABUSE CONTROL PROGRAM

    ``Sec. 1128C. (a) Establishment of Program.--
        ``(1) In general.--Not later than January 1, 1996, the 
    Secretary, acting through the Office of the Inspector General of 
    the Department of Health and Human Services, and the Attorney 
    General shall establish a program--
            ``(A) to coordinate Federal, State, and local law 
        enforcement programs to control fraud and abuse with respect to 
        health plans,
            ``(B) to conduct investigations, audits, evaluations, and 
        inspections relating to the delivery of and payment for health 
        care in the United States,
            ``(C) to facilitate the enforcement of the provisions of 
        sections 1128, 1128A, and 1128B and other statutes applicable 
        to health care fraud and abuse,
            ``(D) to provide for the modification and establishment of 
        safe harbors and to issue interpretative rulings and special 
        fraud alerts pursuant to section 1128D, and
            ``(E) to provide for the reporting and disclosure of 
        certain final adverse actions against health care providers, 
        suppliers, or practitioners pursuant to the data collection 
        system established under section 1128E.
        ``(2) Coordination with health plans.--In carrying out the 
    program established under paragraph (1), the Secretary and the 
    Attorney General shall consult with, and arrange for the sharing of 
    data with representatives of health plans.
        ``(3) Guidelines.--
            ``(A) In general.--The Secretary and the Attorney General 
        shall issue guidelines to carry out the program under paragraph 
        (1). The provisions of sections 553, 556, and 557 of title 5, 
        United States Code, shall not apply in the issuance of such 
        guidelines.
            ``(B) Information guidelines.--
                ``(i) In general.--Such guidelines shall include 
            guidelines relating to the furnishing of information by 
            health plans, providers, and others to enable the Secretary 
            and the Attorney General to carry out the program 
            (including coordination with health plans under paragraph 
            (2)).
                ``(ii) Confidentiality.--Such guidelines shall include 
            procedures to assure that such information is provided and 
            utilized in a manner that appropriately protects the 
            confidentiality of the information and the privacy of 
            individuals receiving health care services and items.
                ``(iii) Qualified immunity for providing information.--
            The provisions of section 1157(a) (relating to limitation 
            on liability) shall apply to a person providing information 
            to the Secretary or the Attorney General in conjunction 
            with their performance of duties under this section.
        ``(4) Ensuring access to documentation.--The Inspector General 
    of the Department of Health and Human Services is authorized to 
    exercise such authority described in paragraphs (3) through (9) of 
    section 6 of the Inspector General Act of 1978 (5 U.S.C. App.) as 
    necessary with respect to the activities under the fraud and abuse 
    control program established under this subsection.
        ``(5) Authority of inspector general.--Nothing in this Act 
    shall be construed to diminish the authority of any Inspector 
    General, including such authority as provided in the Inspector 
    General Act of 1978 (5 U.S.C. App.).
    ``(b) Additional Use of Funds by Inspector General.--
        ``(1) Reimbursements for investigations.--The Inspector General 
    of the Department of Health and Human Services is authorized to 
    receive and retain for current use reimbursement for the costs of 
    conducting investigations and audits and for monitoring compliance 
    plans when such costs are ordered by a court, voluntarily agreed to 
    by the payor, or otherwise.
        ``(2) Crediting.--Funds received by the Inspector General under 
    paragraph (1) as reimbursement for costs of conducting 
    investigations shall be deposited to the credit of the 
    appropriation from which initially paid, or to appropriations for 
    similar purposes currently available at the time of deposit, and 
    shall remain available for obligation for 1 year from the date of 
    the deposit of such funds.
    ``(c) Health Plan Defined.--For purposes of this section, the term 
`health plan' means a plan or program that provides health benefits, 
whether directly, through insurance, or otherwise, and includes--
        ``(1) a policy of health insurance;
        ``(2) a contract of a service benefit organization; and
        ``(3) a membership agreement with a health maintenance 
    organization or other prepaid health plan.''.
    (b) Establishment of Health Care Fraud and Abuse Control Account in 
Federal Hospital Insurance Trust Fund.--Section 1817 (42 U.S.C. 1395i) 
is amended by adding at the end the following new subsection:
    ``(k) Health Care Fraud and Abuse Control Account.--
        ``(1) Establishment.--There is hereby established in the Trust 
    Fund an expenditure account to be known as the `Health Care Fraud 
    and Abuse Control Account' (in this subsection referred to as the 
    `Account').
        ``(2) Appropriated amounts to trust fund.--
            ``(A) In general.--There are hereby appropriated to the 
        Trust Fund--
                ``(i) such gifts and bequests as may be made as 
            provided in subparagraph (B);
                ``(ii) such amounts as may be deposited in the Trust 
            Fund as provided in sections 8141(b) and 8142(c) of the 
            Medicare Preservation Act of 1995, and title XI; and
                ``(iii) such amounts as are transferred to the Trust 
            Fund under subparagraph (C).
            ``(B) Authorization to accept gifts.--The Trust Fund is 
        authorized to accept on behalf of the United States money gifts 
        and bequests made unconditionally to the Trust Fund, for the 
        benefit of the Account or any activity financed through the 
        Account.
            ``(C) Transfer of amounts.--The Managing Trustee shall 
        transfer to the Trust Fund, under rules similar to the rules in 
        section 9601 of the Internal Revenue Code of 1986, an amount 
        equal to the sum of the following:
                ``(i) Criminal fines recovered in cases involving a 
            Federal health care offense (as defined in section 
            982(a)(6)(B) of title 18, United States Code).
                ``(ii) Civil monetary penalties and assessments imposed 
            in health care cases, including amounts recovered under 
            titles XI, XVIII, and XXI, and chapter 38 of title 31, 
            United States Code (except as otherwise provided by law).
                ``(iii) Amounts resulting from the forfeiture of 
            property by reason of a Federal health care offense.
                ``(iv) Penalties and damages obtained and otherwise 
            creditable to miscellaneous receipts of the general fund of 
            the Treasury obtained under sections 3729 through 3733 of 
            title 31, United States Code (known as the False Claims 
            Act), in cases involving claims related to the provision of 
            health care items and services (other than funds awarded to 
            a relator, for restitution or otherwise authorized by law).
        ``(3) Appropriated amounts to account for fraud and abuse 
    control program, etc.--
            ``(A) Departments of health and human services and 
        justice.--
                ``(i) In general.--There are hereby appropriated to the 
            Account from the Trust Fund such sums as the Secretary and 
            the Attorney General certify are necessary to carry out the 
            purposes described in subparagraph (C), to be available 
            without further appropriation, in an amount not to exceed--

                    ``(I) for fiscal year 1996, $104,000,000, and
                    ``(II) for each of the fiscal years 1997 through 
                2002, the limit for the preceding fiscal year, 
                increased by 15 percent; and
                    ``(III) for each fiscal year after fiscal year 
                2002, the limit for fiscal year 2002.

                ``(ii) Medicare and medigrant activities.--For each 
            fiscal year, of the amount appropriated in clause (i), the 
            following amounts shall be available only for the purposes 
            of the activities of the Office of the Inspector General of 
            the Department of Health and Human Services with respect to 
            the medicare and MediGrant programs--

                    ``(I) for fiscal year 1996, not less than 
                $60,000,000 and not more than $70,000,000;
                    ``(II) for fiscal year 1997, not less than 
                $80,000,000 and not more than $90,000,000;
                    ``(III) for fiscal year 1998, not less than 
                $90,000,000 and not more than $100,000,000;
                    ``(IV) for fiscal year 1999, not less than 
                $110,000,000 and not more than $120,000,000;
                    ``(V) for fiscal year 2000, not less than 
                $120,000,000 and not more than $130,000,000;
                    ``(VI) for fiscal year 2001, not less than 
                $140,000,000 and not more than $150,000,000; and
                    ``(VII) for each fiscal year after fiscal year 
                2001, not less than $150,000,000 and not more than 
                $160,000,000.

            ``(B) Federal bureau of investigation.--There are hereby 
        appropriated from the general fund of the United States 
        Treasury and hereby appropriated to the Account for transfer to 
        the Federal Bureau of Investigation to carry out the purposes 
        described in subparagraph (C)(i), to be available without 
        further appropriation--
                ``(i) for fiscal year 1996, $47,000,000;
                ``(ii) for fiscal year 1997, $56,000,000;
                ``(iii) for fiscal year 1998, $66,000,000;
                ``(iv) for fiscal year 1999, $76,000,000;
                ``(v) for fiscal year 2000, $88,000,000;
                ``(vi) for fiscal year 2001, $101,000,000; and
                ``(vii) for each fiscal year after fiscal year 2001, 
            $114,000,000.
            ``(C) Use of funds.--The purposes described in this 
        subparagraph are as follows:
                ``(i) General use.--To cover the costs (including 
            equipment, salaries and benefits, and travel and training) 
            of the administration and operation of the health care 
            fraud and abuse control program established under section 
            1128C(a), including the costs of--

                    ``(I) prosecuting health care matters (through 
                criminal, civil, and administrative proceedings);
                    ``(II) investigations;
                    ``(III) financial and performance audits of health 
                care programs and operations;
                    ``(IV) inspections and other evaluations; and
                    ``(V) provider and consumer education regarding 
                compliance with the provisions of title XI.

            ``(ii) Use by state medigrant fraud control units for 
        investigation reimbursements.--To reimburse the various State 
        MediGrant fraud control units established under section 2134(a) 
        upon request to the Secretary for the costs of the activities 
        authorized under section 2134(b).
        ``(4) Appropriated amounts to account for medicare integrity 
    program.--
            ``(A) In general.--There are hereby appropriated to the 
        Account from the Trust Fund for each fiscal year such amounts 
        as are necessary to carry out the Medicare Integrity Program 
        under section 1893, subject to subparagraph (B) and to be 
        available without further appropriation.
            ``(B) Amounts specified.--The amount appropriated under 
        subparagraph (A) for a fiscal year is as follows:
                ``(i) For fiscal year 1996, such amount shall be not 
            less than $430,000,000 and not more than $440,000,000.
                ``(ii) For fiscal year 1997, such amount shall be not 
            less than $490,000,000 and not more than $500,000,000.
                ``(iii) For fiscal year 1998, such amount shall be not 
            less than $550,000,000 and not more than $560,000,000.
                ``(iv) For fiscal year 1999, such amount shall be not 
            less than $620,000,000 and not more than $630,000,000.
                ``(v) For fiscal year 2000, such amount shall be not 
            less than $670,000,000 and not more than $680,000,000.
                ``(vi) For fiscal year 2001, such amount shall be not 
            less than $690,000,000 and not more than $700,000,000.
                ``(vii) For each fiscal year after fiscal year 2001, 
            such amount shall be not less than $710,000,000 and not 
            more than $720,000,000.
        ``(5) Annual report.--The Secretary and the Attorney General 
    shall submit jointly an annual report to Congress on the amount of 
    revenue which is generated and disbursed, and the justification for 
    such disbursements, by the Account in each fiscal year.''.

SEC. 8102. MEDICARE INTEGRITY PROGRAM.

    (a) Establishment of Medicare Integrity Program.--Title XVIII is 
amended by adding at the end the following new section:

                       ``MEDICARE INTEGRITY PROGRAM

    ``Sec. 1893. (a) Establishment of Program.--There is hereby 
established the Medicare Integrity Program (in this section referred to 
as the `Program') under which the Secretary shall promote the integrity 
of the medicare program by entering into contracts in accordance with 
this section with eligible private entities to carry out the activities 
described in subsection (b).
    ``(b) Activities Described.--The activities described in this 
subsection are as follows:
        ``(1) Review of activities of providers of services or other 
    individuals and entities furnishing items and services for which 
    payment may be made under this title (including skilled nursing 
    facilities and home health agencies), including medical and 
    utilization review and fraud review (employing similar standards, 
    processes, and technologies used by private health plans, including 
    equipment and software technologies which surpass the capability of 
    the equipment and technologies used in the review of claims under 
    this title as of the date of the enactment of this section).
        ``(2) Audit of cost reports.
        ``(3) Determinations as to whether payment should not be, or 
    should not have been, made under this title by reason of section 
    1862(b), and recovery of payments that should not have been made.
        ``(4) Education of providers of services, beneficiaries, and 
    other persons with respect to payment integrity and benefit quality 
    assurance issues.
        ``(5) Developing (and periodically updating) a list of items of 
    durable medical equipment in accordance with section 1834(a)(15) 
    which are subject to prior authorization under such section.
    ``(c) Eligibility of Entities.--An entity is eligible to enter into 
a contract under the Program to carry out any of the activities 
described in subsection (b) if--
        ``(1) the entity has demonstrated capability to carry out such 
    activities;
        ``(2) in carrying out such activities, the entity agrees to 
    cooperate with the Inspector General of the Department of Health 
    and Human Services, the Attorney General of the United States, and 
    other law enforcement agencies, as appropriate, in the 
    investigation and deterrence of fraud and abuse in relation to this 
    title and in other cases arising out of such activities;
        ``(3) the entity demonstrates to the Secretary that the 
    entity's financial holdings, interests, or relationships will not 
    interfere with its ability to perform the functions to be required 
    by the contract in an effective and impartial manner; and
        ``(4) the entity meets such other requirements as the Secretary 
    may impose.
In the case of the activity described in subsection (b)(5), an entity 
shall be deemed to be eligible to enter into a contract under the 
Program to carry out the activity if the entity is a carrier with a 
contract in effect under section 1842.
    ``(d) Process for Entering Into Contracts.--The Secretary shall 
enter into contracts under the Program in accordance with such 
procedures as the Secretary shall by regulation establish, except that 
such procedures shall include the following:
        ``(1) The Secretary shall determine the appropriate number of 
    separate contracts which are necessary to carry out the Program and 
    the appropriate times at which the Secretary shall enter into such 
    contracts.
        ``(2)(A) Except as provided in subparagraph (B), the provisions 
    of section 1153(e)(1) shall apply to contracts and contracting 
    authority under this section.
        ``(B) Competitive procedures must be used when entering into 
    new contracts under this section, or at any other time considered 
    appropriate by the Secretary, except that the Secretary may 
    contract with entities that are carrying out the activities 
    described in this section pursuant to agreements under section 1816 
    or contracts under section 1842 in effect on the date of the 
    enactment of this section.
        ``(3) A contract under this section may be renewed without 
    regard to any provision of law requiring competition if the 
    contractor has met or exceeded the performance requirements 
    established in the current contract.
    ``(e) Limitation on Contractor Liability.--The Secretary shall by 
regulation provide for the limitation of a contractor's liability for 
actions taken to carry out a contract under the Program, and such 
regulation shall, to the extent the Secretary finds appropriate, employ 
the same or comparable standards and other substantive and procedural 
provisions as are contained in section 1157.''.
    (b) Elimination of FI and Carrier Responsibility for Carrying Out 
Activities Subject to Program.--
        (1) Responsibilities of fiscal intermediaries under part a.--
    Section 1816 (42 U.S.C. 1395h) is amended by adding at the end the 
    following new subsection:
    ``(l) No agency or organization may carry out (or receive payment 
for carrying out) any activity pursuant to an agreement under this 
section to the extent that the activity is carried out pursuant to a 
contract under the Medicare Integrity Program under section 1893.''.
        (2) Responsibilities of carriers under part b.--Section 1842(c) 
    (42 U.S.C. 1395u(c)) is amended by adding at the end the following 
    new paragraph:
    ``(6) No carrier may carry out (or receive payment for carrying 
out) any activity pursuant to a contract under this subsection to the 
extent that the activity is carried out pursuant to a contract under 
the Medicare Integrity Program under section 1893. The previous 
sentence shall not apply with respect to the activity described in 
section 1893(b)(5) (relating to prior authorization of certain items of 
durable medical equipment under section 1834(a)(15)).''.

SEC. 8103. BENEFICIARY INCENTIVE PROGRAMS.

    (a) Clarification of Requirement to Provide Explanation of Medicare 
Benefits.--The Secretary of Health and Human Services (in this section 
referred to as the ``Secretary'') shall provide an explanation of 
benefits under the medicare program under title XVIII of the Social 
Security Act with respect to each item or service for which payment may 
be made under the program which is furnished to an individual, without 
regard to whether or not a deductible or coinsurance may be imposed 
against the individual with respect to the item or service.
    (b) Program to Collect Information on Fraud and Abuse.--
        (1) Establishment of program.--Not later than 3 months after 
    the date of the enactment of this Act, the Secretary shall 
    establish a program under which the Secretary shall encourage 
    individuals to report to the Secretary information on individuals 
    and entities who are engaging or who have engaged in acts or 
    omissions which constitute grounds for the imposition of a sanction 
    under section 1128, section 1128A, or section 1128B of the Social 
    Security Act, or who have otherwise engaged in fraud and abuse 
    against the medicare program for which there is a sanction provided 
    under law. The program shall discourage provision of, and not 
    consider, information which is frivolous or otherwise not relevant 
    or material to the imposition of such a sanction.
        (2) Payment of portion of amounts collected.--If an individual 
    reports information to the Secretary under the program established 
    under paragraph (1) which serves as the basis for the collection by 
    the Secretary or the Attorney General of any amount of at least 
    $100 (other than any amount paid as a penalty under section 1128B 
    of the Social Security Act), the Secretary may pay a portion of the 
    amount collected to the individual (under procedures similar to 
    those applicable under section 7623 of the Internal Revenue Code of 
    1986 to payments to individuals providing information on violations 
    of such Code).
    (c) Program to Collect Information on Program Efficiency.--
        (1) Establishment of program.--Not later than 3 months after 
    the date of the enactment of this Act, the Secretary shall 
    establish a program under which the Secretary shall encourage 
    individuals to submit to the Secretary suggestions on methods to 
    improve the efficiency of the medicare program.
        (2) Payment of portion of program savings.--If an individual 
    submits a suggestion to the Secretary under the program established 
    under paragraph (1) which is adopted by the Secretary and which 
    results in savings to the program, the Secretary may make a payment 
    to the individual of such amount as the Secretary considers 
    appropriate.

SEC. 8104. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD AND ABUSE SANCTIONS 
              TO FRAUD AND ABUSE AGAINST FEDERAL HEALTH CARE PROGRAMS.

    (a) In General.--Section 1128B (42 U.S.C. 1320a-7b) is amended as 
follows:
        (1) In the heading, by striking ``medicare or state health care 
    programs'' and inserting ``federal health care programs''.
        (2) In subsection (a)(1), by striking ``a program under title 
    XVIII or a State health care program (as defined in section 
    1128(h))'' and inserting ``a Federal health care program''.
        (3) In subsection (a)(5), by striking ``a program under title 
    XVIII or a State health care program'' and inserting ``a Federal 
    health care program''.
        (4) In the second sentence of subsection (a)--
            (A) by striking ``a State plan approved under title XIX'' 
        and inserting ``a Federal health care program'', and
            (B) by striking ``the State may at its option 
        (notwithstanding any other provision of that title or of such 
        plan)'' and inserting ``the administrator of such program may 
        at its option (notwithstanding any other provision of such 
        program)''.
        (5) In subsection (b), by striking ``title XVIII or a State 
    health care program'' each place it appears and inserting ``a 
    Federal health care program''.
        (6) In subsection (c), by inserting ``(as defined in section 
    1128(h))'' after ``a State health care program''.
        (7) By adding at the end the following new subsection:
    ``(f) For purposes of this section, the term `Federal health care 
program' means--
        ``(1) any plan or program that provides health benefits, 
    whether directly, through insurance, or otherwise, which is funded 
    directly, in whole or in part, by the United States Government; or
        ``(2) any State health care program, as defined in section 
    1128(h).''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 8105. GUIDANCE REGARDING APPLICATION OF HEALTH CARE FRAUD AND 
              ABUSE SANCTIONS.

    Title XI (42 U.S.C. 1301 et seq.), as amended by section 8101, is 
amended by inserting after section 1128C the following new section:

     ``GUIDANCE REGARDING APPLICATION OF HEALTH CARE FRAUD AND ABUSE 
                               SANCTIONS

    ``Sec. 1128D. (a) Solicitation and Publication of Modifications to 
Existing Safe Harbors and New Safe Harbors.--
        ``(1) In general.--
            ``(A) Solicitation of proposals for safe harbors.--Not 
        later than January 1, 1996, and not less than annually 
        thereafter, the Secretary shall publish a notice in the Federal 
        Register soliciting proposals, which will be accepted during a 
        60-day period, for--
                ``(i) modifications to existing safe harbors issued 
            pursuant to section 14(a) of the Medicare and Medicaid 
            Patient and Program Protection Act of 1987 (42 U.S.C. 
            1320a-7b note);
                ``(ii) additional safe harbors specifying payment 
            practices that shall not be treated as a criminal offense 
            under section 1128B(b) and shall not serve as the basis for 
            an exclusion under section 1128(b)(7);
                ``(iii) interpretive rulings to be issued pursuant to 
            subsection (b); and
                ``(iv) special fraud alerts to be issued pursuant to 
            subsection (c).
            ``(B) Publication of proposed modifications and proposed 
        additional safe harbors.--After considering the proposals 
        described in clauses (i) and (ii) of subparagraph (A), the 
        Secretary, in consultation with the Attorney General, shall 
        publish in the Federal Register proposed modifications to 
        existing safe harbors and proposed additional safe harbors, if 
        appropriate, with a 60-day comment period. After considering 
        any public comments received during this period, the Secretary 
        shall issue final rules modifying the existing safe harbors and 
        establishing new safe harbors, as appropriate.
            ``(C) Report.--The Inspector General of the Department of 
        Health and Human Services (in this section referred to as the 
        `Inspector General') shall, in an annual report to Congress or 
        as part of the year-end semiannual report required by section 5 
        of the Inspector General Act of 1978 (5 U.S.C. App.), describe 
        the proposals received under clauses (i) and (ii) of 
        subparagraph (A) and explain which proposals were included in 
        the publication described in subparagraph (B), which proposals 
        were not included in that publication, and the reasons for the 
        rejection of the proposals that were not included.
        ``(2) Criteria for modifying and establishing safe harbors.--In 
    modifying and establishing safe harbors under paragraph (1)(B), the 
    Secretary may consider the extent to which providing a safe harbor 
    for the specified payment practice may result in any of the 
    following:
            ``(A) An increase or decrease in access to health care 
        services.
            ``(B) An increase or decrease in the quality of health care 
        services.
            ``(C) An increase or decrease in patient freedom of choice 
        among health care providers.
            ``(D) An increase or decrease in competition among health 
        care providers.
            ``(E) An increase or decrease in the ability of health care 
        facilities to provide services in medically underserved areas 
        or to medically underserved populations.
            ``(F) An increase or decrease in the cost to Federal health 
        care programs (as defined in section 1128B(f)).
            ``(G) An increase or decrease in the potential 
        overutilization of health care services.
            ``(H) The existence or nonexistence of any potential 
        financial benefit to a health care professional or provider 
        which may vary based on their decisions of--
                ``(i) whether to order a health care item or service; 
            or
                ``(ii) whether to arrange for a referral of health care 
            items or services to a particular practitioner or provider.
            ``(I) Any other factors the Secretary deems appropriate in 
        the interest of preventing fraud and abuse in Federal health 
        care programs (as so defined).
    ``(b) Interpretive Rulings.--
        ``(1) In general.--
            ``(A) Request for interpretive ruling.--Any person may 
        present, at any time, a request to the Inspector General for a 
        statement of the Inspector General's current interpretation of 
        the meaning of a specific aspect of the application of sections 
        1128A and 1128B (in this section referred to as an 
        `interpretive ruling').
            ``(B) Issuance and effect of interpretive ruling.--
                ``(i) In general.--If appropriate, the Inspector 
            General shall in consultation with the Attorney General, 
            issue an interpretive ruling not later than 90 days after 
            receiving a request described in subparagraph (A). 
            Interpretive rulings shall not have the force of law and 
            shall be treated as an interpretive rule within the meaning 
            of section 553(b) of title 5, United States Code. All 
            interpretive rulings issued pursuant to this clause shall 
            be published in the Federal Register or otherwise made 
            available for public inspection.
                ``(ii) Reasons for denial.--If the Inspector General 
            does not issue an interpretive ruling in response to a 
            request described in subparagraph (A), the Inspector 
            General shall notify the requesting party of such decision 
            not later than 60 days after receiving such a request and 
            shall identify the reasons for such decision.
        ``(2) Criteria for interpretive rulings.--
            ``(A) In general.--In determining whether to issue an 
        interpretive ruling under paragraph (1)(B), the Inspector 
        General may consider--
                ``(i) whether and to what extent the request identifies 
            an ambiguity within the language of the statute, the 
            existing safe harbors, or previous interpretive rulings; 
            and
                ``(ii) whether the subject of the requested 
            interpretive ruling can be adequately addressed by 
            interpretation of the language of the statute, the existing 
            safe harbor rules, or previous interpretive rulings, or 
            whether the request would require a substantive ruling (as 
            defined in section 552 of title 5, United States Code) not 
            authorized under this subsection.
            ``(B) No rulings on factual issues.--The Inspector General 
        shall not give an interpretive ruling on any factual issue, 
        including the intent of the parties or the fair market value of 
        particular leased space or equipment.
    ``(c) Special Fraud Alerts.--
        ``(1) In general.--
            ``(A) Request for special fraud alerts.--Any person may 
        present, at any time, a request to the Inspector General for a 
        notice which informs the public of practices which the 
        Inspector General considers to be suspect or of particular 
        concern under the medicare program or a State health care 
        program, as defined in section 1128(h) (in this subsection 
        referred to as a `special fraud alert').
            ``(B) Issuance and publication of special fraud alerts.--
        Upon receipt of a request described in subparagraph (A), the 
        Inspector General shall investigate the subject matter of the 
        request to determine whether a special fraud alert should be 
        issued. If appropriate, the Inspector General shall issue a 
        special fraud alert in response to the request. All special 
        fraud alerts issued pursuant to this subparagraph shall be 
        published in the Federal Register.
        ``(2) Criteria for special fraud alerts.--In determining 
    whether to issue a special fraud alert upon a request described in 
    paragraph (1), the Inspector General may consider--
            ``(A) whether and to what extent the practices that would 
        be identified in the special fraud alert may result in any of 
        the consequences described in subsection (a)(2); and
            ``(B) the volume and frequency of the conduct that would be 
        identified in the special fraud alert.''.

     CHAPTER 2--REVISIONS TO CURRENT SANCTIONS FOR FRAUD AND ABUSE

SEC. 8111. MANDATORY EXCLUSION FROM PARTICIPATION IN MEDICARE AND STATE 
              HEALTH CARE PROGRAMS.

    (a) Individual Convicted of Felony Relating to Health Care Fraud.--
        (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)) is 
    amended by adding at the end the following new paragraph:
        ``(3) Felony conviction relating to health care fraud.--Any 
    individual or entity that has been convicted after the date of the 
    enactment of the Medicare Preservation Act of 1995, under Federal 
    or State law, in connection with the delivery of a health care item 
    or service or with respect to any act or omission in a health care 
    program (other than those specifically described in paragraph (1)) 
    operated by or financed in whole or in part by any Federal, State, 
    or local government agency, of a criminal offense consisting of a 
    felony relating to fraud, theft, embezzlement, breach of fiduciary 
    responsibility, or other financial misconduct.''.
        (2) Conforming amendment.--Paragraph (1) of section 1128(b) (42 
    U.S.C. 1320a-7(b)) is amended to read as follows:
        ``(1) Conviction relating to fraud.--Any individual or entity 
    that has been convicted after the date of the enactment of the 
    Medicare Preservation Act of 1995, under Federal or State law--
            ``(A) of a criminal offense consisting of a misdemeanor 
        relating to fraud, theft, embezzlement, breach of fiduciary 
        responsibility, or other financial misconduct--
                ``(i) in connection with the delivery of a health care 
            item or service, or
                ``(ii) with respect to any act or omission in a health 
            care program (other than those specifically described in 
            subsection (a)(1)) operated by or financed in whole or in 
            part by any Federal, State, or local government agency; or
            ``(B) of a criminal offense relating to fraud, theft, 
        embezzlement, breach of fiduciary responsibility, or other 
        financial misconduct with respect to any act or omission in a 
        program (other than a health care program) operated by or 
        financed in whole or in part by any Federal, State, or local 
        government agency.''.
    (b) Individual Convicted of Felony Relating to Controlled 
Substance.--
        (1) In general.--Section 1128(a) (42 U.S.C. 1320a-7(a)), as 
    amended by subsection (a), is amended by adding at the end the 
    following new paragraph:
        ``(4) Felony conviction relating to controlled substance.--Any 
    individual or entity that has been convicted after the date of the 
    enactment of the Medicare Preservation Act of 1995, under Federal 
    or State law, of a criminal offense consisting of a felony relating 
    to the unlawful manufacture, distribution, prescription, or 
    dispensing of a controlled substance.''.
        (2) Conforming amendment.--Section 1128(b)(3) (42 U.S.C. 1320a-
    7(b)(3)) is amended--
            (A) in the heading, by striking ``Conviction'' and 
        inserting ``Misdemeanor conviction''; and
            (B) by striking ``criminal offense'' and inserting 
        ``criminal offense consisting of a misdemeanor''.

SEC. 8112. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLUSION FOR CERTAIN 
              INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE EXCLUSION 
              FROM MEDICARE AND STATE HEALTH CARE PROGRAMS.

    Section 1128(c)(3) (42 U.S.C. 1320a-7(c)(3)) is amended by adding 
at the end the following new subparagraphs:
    ``(D) In the case of an exclusion of an individual or entity under 
paragraph (1), (2), or (3) of subsection (b), the period of the 
exclusion shall be 3 years, unless the Secretary determines in 
accordance with published regulations that a shorter period is 
appropriate because of mitigating circumstances or that a longer period 
is appropriate because of aggravating circumstances.
    ``(E) In the case of an exclusion of an individual or entity under 
subsection (b)(4) or (b)(5), the period of the exclusion shall not be 
less than the period during which the individual's or entity's license 
to provide health care is revoked, suspended, or surrendered, or the 
individual or the entity is excluded or suspended from a Federal or 
State health care program.
    ``(F) In the case of an exclusion of an individual or entity under 
subsection (b)(6)(B), the period of the exclusion shall be not less 
than 1 year.''.

SEC. 8113. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH OWNERSHIP OR 
              CONTROL INTEREST IN SANCTIONED ENTITIES.

    Section 1128(b) (42 U.S.C. 1320a-7(b)) is amended by adding at the 
end the following new paragraph:
        ``(15) Individuals controlling a sanctioned entity.--(A) Any 
    individual--
            ``(i) who has a direct or indirect ownership or control 
        interest in a sanctioned entity and who knows or should know 
        (as defined in section 1128A(i)(6)) of the action constituting 
        the basis for the conviction or exclusion described in 
        subparagraph (B); or
            ``(ii) who is an officer or managing employee (as defined 
        in section 1126(b)) of such an entity.
        ``(B) For purposes of subparagraph (A), the term `sanctioned 
    entity' means an entity--
            ``(i) that has been convicted of any offense described in 
        subsection (a) or in paragraph (1), (2), or (3) of this 
        subsection; or
            ``(ii) that has been excluded from participation under a 
        program under title XVIII or under a State health care 
        program.''.

SEC. 8114. SANCTIONS AGAINST PRACTITIONERS AND PERSONS FOR FAILURE TO 
              COMPLY WITH STATUTORY OBLIGATIONS.

    (a) Minimum Period of Exclusion for Practitioners and Persons 
Failing To Meet Statutory Obligations.--
        (1) In general.--The second sentence of section 1156(b)(1) (42 
    U.S.C. 1320c-5(b)(1)) is amended by striking ``may prescribe)'' and 
    inserting ``may prescribe, except that such period may not be less 
    than 1 year)''.
        (2) Conforming amendment.--Section 1156(b)(2) (42 U.S.C. 1320c-
    5(b)(2)) is amended by striking ``shall remain'' and inserting 
    ``shall (subject to the minimum period specified in the second 
    sentence of paragraph (1)) remain''.
    (b) Repeal of ``Unwilling or Unable'' Condition for Imposition of 
Sanction.--Section 1156(b)(1) (42 U.S.C. 1320c-5(b)(1)) is amended--
        (1) in the second sentence, by striking ``and determines'' and 
    all that follows through ``such obligations,''; and
        (2) by striking the third sentence.

SEC. 8115. INTERMEDIATE SANCTIONS FOR MEDICARE HEALTH MAINTENANCE 
              ORGANIZATIONS.

    (a) Application of Intermediate Sanctions for any Program 
Violations.--
        (1) In general.--Section 1876(i)(1) (42 U.S.C. 1395mm(i)(1)) is 
    amended by striking ``the Secretary may terminate'' and all that 
    follows and inserting ``in accordance with procedures established 
    under paragraph (9), the Secretary may at any time terminate any 
    such contract or may impose the intermediate sanctions described in 
    paragraph (6)(B) or (6)(C) (whichever is applicable) on the 
    eligible organization if the Secretary determines that the 
    organization--
            ``(A) has failed substantially to carry out the contract;
            ``(B) is carrying out the contract in a manner 
        substantially inconsistent with the efficient and effective 
        administration of this section; or
            ``(C) no longer substantially meets the applicable 
        conditions of subsections (b), (c), (e), and (f).''.
        (2) Other intermediate sanctions for miscellaneous program 
    violations.--Section 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended 
    by adding at the end the following new subparagraph:
    ``(C) In the case of an eligible organization for which the 
Secretary makes a determination under paragraph (1) the basis of which 
is not described in subparagraph (A), the Secretary may apply the 
following intermediate sanctions:
        ``(i) Civil money penalties of not more than $25,000 for each 
    determination under paragraph (1) if the deficiency that is the 
    basis of the determination has directly adversely affected (or has 
    the substantial likelihood of adversely affecting) an individual 
    covered under the organization's contract.
        ``(ii) Civil money penalties of not more than $10,000 for each 
    week beginning after the initiation of procedures by the Secretary 
    under paragraph (9) during which the deficiency that is the basis 
    of a determination under paragraph (1) exists.
        ``(iii) Suspension of enrollment of individuals under this 
    section after the date the Secretary notifies the organization of a 
    determination under paragraph (1) and until the Secretary is 
    satisfied that the deficiency that is the basis for the 
    determination has been corrected and is not likely to recur.''.
        (3) Procedures for imposing sanctions.--Section 1876(i) (42 
    U.S.C. 1395mm(i)) is amended by adding at the end the following new 
    paragraph:
    ``(9) The Secretary may terminate a contract with an eligible 
organization under this section or may impose the intermediate 
sanctions described in paragraph (6) on the organization in accordance 
with formal investigation and compliance procedures established by the 
Secretary under which--
        ``(A) the Secretary first provides the organization with the 
    reasonable opportunity to develop and implement a corrective action 
    plan to correct the deficiencies that were the basis of the 
    Secretary's determination under paragraph (1) and the organization 
    fails to develop or implement such a plan;
        ``(B) in deciding whether to impose sanctions, the Secretary 
    considers aggravating factors such as whether an organization has a 
    history of deficiencies or has not taken action to correct 
    deficiencies the Secretary has brought to the organization's 
    attention;
        ``(C) there are no unreasonable or unnecessary delays between 
    the finding of a deficiency and the imposition of sanctions; and
        ``(D) the Secretary provides the organization with reasonable 
    notice and opportunity for hearing (including the right to appeal 
    an initial decision) before imposing any sanction or terminating 
    the contract.''.
        (4) Conforming amendments.--Section 1876(i)(6)(B) (42 U.S.C. 
    1395mm(i)(6)(B)) is amended by striking the second sentence.
    (b) Agreements With Peer Review Organizations.--Section 
1876(i)(7)(A) (42 U.S.C. 1395mm(i)(7)(A)) is amended by striking ``an 
agreement'' and inserting ``a written agreement''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to contract years beginning on or after January 1, 
1996.

SEC. 8116. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PENALTIES FOR 
              DISCOUNTING AND MANAGED CARE ARRANGEMENTS.

    (a) In General.--Section 1128B(b)(3) (42 U.S.C. 1320a-7b(b)(3)) is 
amended--
        (1) by striking ``and'' at the end of subparagraph (D);
        (2) by striking the period at the end of subparagraph (E) and 
    inserting ``; and''; and
        (3) by adding at the end the following new subparagraph:
        ``(F) any remuneration between an organization and an 
    individual or entity providing items or services, or a combination 
    thereof, pursuant to a written agreement between the organization 
    and the individual or entity if the organization is a MedicarePlus 
    organization under part C of title XVIII or if the written 
    agreement places the individual or entity at substantial financial 
    risk for the cost or utilization of the items or services, or a 
    combination thereof, which the individual or entity is obligated to 
    provide, whether through a withhold, capitation, incentive pool, 
    per diem payment, or any other similar risk arrangement which 
    places the individual or entity at substantial financial risk.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to written agreements entered into on or after January 1, 1996.

SEC. 8117. PENALTIES FOR THE FRAUDULENT CONVERSION OF ASSETS IN ORDER 
              TO OBTAIN STATE HEALTH CARE PROGRAM BENEFITS.

    Section 1128B(a) (42 U.S.C. 1320a-7b(a)) is amended by striking 
``or'' at the end of paragraph (4), by inserting ``or'' at the end of 
paragraph (5), and by inserting after paragraph (5) the following new 
paragraph:
        ``(6) knowingly and willfully converts assets, by transfer 
    (including any transfer in trust), aiding in such a transfer, or 
    otherwise, in order for an individual to become eligible for 
    benefits under a State health care program,''.

SEC. 8118. EFFECTIVE DATE.

    Except as otherwise provided, the amendments made by this chapter 
shall take effect January 1, 1996.

         CHAPTER 3--ADMINISTRATIVE AND MISCELLANEOUS PROVISIONS

SEC. 8121. ESTABLISHMENT OF THE HEALTH CARE FRAUD AND ABUSE DATA 
              COLLECTION PROGRAM.

    (a) In General.--Title XI (42 U.S.C. 1301 et seq.), as amended by 
sections 8101 and 8105, is amended by inserting after section 1128D the 
following new section:

          ``HEALTH CARE FRAUD AND ABUSE DATA COLLECTION PROGRAM

    ``Sec. 1128E. (a) General Purpose.--Not later than January 1, 1996, 
the Secretary shall establish a national health care fraud and abuse 
data collection program for the reporting of final adverse actions (not 
including settlements in which no findings of liability have been made) 
against health care providers, suppliers, or practitioners as required 
by subsection (b), with access as set forth in subsection (c).
    ``(b) Reporting of Information.--
        ``(1) In general.--Each Government agency and health plan shall 
    report any final adverse action (not including settlements in which 
    no findings of liability have been made) taken against a health 
    care provider, supplier, or practitioner.
        ``(2) Information to be reported.--The information to be 
    reported under paragraph (1) includes:
            ``(A) The name and TIN (as defined in section 7701(a)(41) 
        of the Internal Revenue Code of 1986) of any health care 
        provider, supplier, or practitioner who is the subject of a 
        final adverse action.
            ``(B) The name (if known) of any health care entity with 
        which a health care provider, supplier, or practitioner is 
        affiliated or associated.
            ``(C) The nature of the final adverse action and whether 
        such action is on appeal.
            ``(D) A description of the acts or omissions and injuries 
        upon which the final adverse action was based, and such other 
        information as the Secretary determines by regulation is 
        required for appropriate interpretation of information reported 
        under this section.
        ``(3) Confidentiality.--In determining what information is 
    required, the Secretary shall include procedures to assure that the 
    privacy of individuals receiving health care services is 
    appropriately protected.
        ``(4) Timing and form of reporting.--The information required 
    to be reported under this subsection shall be reported regularly 
    (but not less often than monthly) and in such form and manner as 
    the Secretary prescribes. Such information shall first be required 
    to be reported on a date specified by the Secretary.
        ``(5) To whom reported.--The information required to be 
    reported under this subsection shall be reported to the Secretary.
    ``(c) Disclosure and Correction of Information.--
        ``(1) Disclosure.--With respect to the information about final 
    adverse actions (not including settlements in which no findings of 
    liability have been made) reported to the Secretary under this 
    section respecting a health care provider, supplier, or 
    practitioner, the Secretary shall, by regulation, provide for--
            ``(A) disclosure of the information, upon request, to the 
        health care provider, supplier, or licensed practitioner, and
            ``(B) procedures in the case of disputed accuracy of the 
        information.
        ``(2) Corrections.--Each Government agency and health plan 
    shall report corrections of information already reported about any 
    final adverse action taken against a health care provider, 
    supplier, or practitioner, in such form and manner that the 
    Secretary prescribes by regulation.
    ``(d) Access to Reported Information.--
        ``(1) Availability.--The information in this database shall be 
    available to Federal and State government agencies and health plans 
    pursuant to procedures that the Secretary shall provide by 
    regulation.
        ``(2) Fees for disclosure.--The Secretary may establish or 
    approve reasonable fees for the disclosure of information in this 
    database (other than with respect to requests by Federal agencies). 
    The amount of such a fee shall be sufficient to recover the full 
    costs of operating the database. Such fees shall be available to 
    the Secretary or, in the Secretary's discretion to the agency 
    designated under this section to cover such costs.
    ``(e) Protection From Liability for Reporting.--No person or 
entity, including the agency designated by the Secretary in subsection 
(b)(5) shall be held liable in any civil action with respect to any 
report made as required by this section, without knowledge of the 
falsity of the information contained in the report.
    ``(f) Definitions and Special Rules.--For purposes of this section:
        ``(1) Final adverse action.--
            ``(A) In general.--The term `final adverse action' 
        includes:
                ``(i) Civil judgments against a health care provider, 
            supplier, or practitioner in Federal or State court related 
            to the delivery of a health care item or service.
                ``(ii) Federal or State criminal convictions related to 
            the delivery of a health care item or service.
                ``(iii) Actions by Federal or State agencies 
            responsible for the licensing and certification of health 
            care providers, suppliers, and licensed health care 
            practitioners, including--

                    ``(I) formal or official actions, such as 
                revocation or suspension of a license (and the length 
                of any such suspension), reprimand, censure or 
                probation,
                    ``(II) any other loss of license or the right to 
                apply for, or renew, a license of the provider, 
                supplier, or practitioner, whether by operation of law, 
                voluntary surrender, non-renewability, or otherwise, or
                    ``(III) any other negative action or finding by 
                such Federal or State agency that is publicly available 
                information.

                ``(iv) Exclusion from participation in Federal or State 
            health care programs.
                ``(v) Any other adjudicated actions or decisions that 
            the Secretary shall establish by regulation.
            ``(B) Exception.--The term does not include any action with 
        respect to a malpractice claim.
        ``(2) Practitioner.--The terms `licensed health care 
    practitioner', `licensed practitioner', and `practitioner' mean, 
    with respect to a State, an individual who is licensed or otherwise 
    authorized by the State to provide health care services (or any 
    individual who, without authority holds himself or herself out to 
    be so licensed or authorized).
        ``(3) Government agency.--The term `Government agency' shall 
    include:
            ``(A) The Department of Justice.
            ``(B) The Department of Health and Human Services.
            ``(C) Any other Federal agency that either administers or 
        provides payment for the delivery of health care services, 
        including, but not limited to the Department of Defense and the 
        Veterans' Administration.
            ``(D) State law enforcement agencies.
            ``(E) State MediGrant fraud control units.
            ``(F) Federal or State agencies responsible for the 
        licensing and certification of health care providers and 
        licensed health care practitioners.
        ``(4) Health plan.--The term `health plan' has the meaning 
    given such term by section 1128C(c).
        ``(5) Determination of conviction.--For purposes of paragraph 
    (1), the existence of a conviction shall be determined under 
    paragraph (4) of section 1128(i).''.
    (b) Improved Prevention in Issuance of Medicare Provider Numbers.--
Section 1842(r) (42 U.S.C. 1395u(r)) is amended by adding at the end 
the following new sentence: ``Under such system, the Secretary may 
impose appropriate fees on such physicians to cover the costs of 
investigation and recertification activities with respect to the 
issuance of the identifiers.''.

                  CHAPTER 4--CIVIL MONETARY PENALTIES

SEC. 8131. SOCIAL SECURITY ACT CIVIL MONETARY PENALTIES.

    (a) General Civil Monetary Penalties.--Section 1128A (42 U.S.C. 
1320a-7a) is amended as follows:
        (1) In the third sentence of subsection (a), by striking 
    ``programs under title XVIII'' and inserting ``Federal health care 
    programs (as defined in section 1128B(f)(1))''.
        (2) In subsection (f)--
            (A) by redesignating paragraph (3) as paragraph (4); and
            (B) by inserting after paragraph (2) the following new 
        paragraph:
        ``(3) With respect to amounts recovered arising out of a claim 
    under a Federal health care program (as defined in section 
    1128B(f)), the portion of such amounts as is determined to have 
    been paid by the program shall be repaid to the program, and the 
    portion of such amounts attributable to the amounts recovered under 
    this section by reason of the amendments made by the Medicare 
    Preservation Act of 1995 (as estimated by the Secretary) shall be 
    deposited into the Federal Hospital Insurance Trust Fund pursuant 
    to section 1817(k)(2)(C).''.
        (3) In subsection (i)--
            (A) in paragraph (2), by striking ``title V, XVIII, XIX, or 
        XX of this Act'' and inserting ``a Federal health care program 
        (as defined in section 1128B(f))'',
            (B) in paragraph (4), by striking ``a health insurance or 
        medical services program under title XVIII or XIX of this Act'' 
        and inserting ``a Federal health care program (as so 
        defined)'', and
            (C) in paragraph (5), by striking ``title V, XVIII, XIX, or 
        XX'' and inserting ``a Federal health care program (as so 
        defined)''.
        (4) By adding at the end the following new subsection:
    ``(m)(1) For purposes of this section, with respect to a Federal 
health care program not contained in this Act, references to the 
Secretary in this section shall be deemed to be references to the 
Secretary or Administrator of the department or agency with 
jurisdiction over such program and references to the Inspector General 
of the Department of Health and Human Services in this section shall be 
deemed to be references to the Inspector General of the applicable 
department or agency.
    ``(2)(A) The Secretary and Administrator of the departments and 
agencies referred to in paragraph (1) may include in any action 
pursuant to this section, claims within the jurisdiction of other 
Federal departments or agencies as long as the following conditions are 
satisfied:
        ``(i) The case involves primarily claims submitted to the 
    Federal health care programs of the department or agency initiating 
    the action.
        ``(ii) The Secretary or Administrator of the department or 
    agency initiating the action gives notice and an opportunity to 
    participate in the investigation to the Inspector General of the 
    department or agency with primary jurisdiction over the Federal 
    health care programs to which the claims were submitted.
    ``(B) If the conditions specified in subparagraph (A) are 
fulfilled, the Inspector General of the department or agency initiating 
the action is authorized to exercise all powers granted under the 
Inspector General Act of 1978 with respect to the claims submitted to 
the other departments or agencies to the same manner and extent as 
provided in that Act with respect to claims submitted to such 
departments or agencies.''.
    (b) Excluded Individual Retaining Ownership or Control Interest in 
Participating Entity.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is 
amended--
        (1) by striking ``or'' at the end of paragraph (1)(D);
        (2) by striking ``, or'' at the end of paragraph (2) and 
    inserting a semicolon;
        (3) by striking the semicolon at the end of paragraph (3) and 
    inserting ``; or''; and
        (4) by inserting after paragraph (3) the following new 
    paragraph:
        ``(4) in the case of a person who is not an organization, 
    agency, or other entity, is excluded from participating in a 
    program under title XVIII or a State health care program in 
    accordance with this subsection or under section 1128 and who, at 
    the time of a violation of this subsection--
            ``(i) retains a direct or indirect ownership or control 
        interest in an entity that is participating in a program under 
        title XVIII or a State health care program, and who knows or 
        should know of the action constituting the basis for the 
        exclusion; or
            ``(ii) is an officer or managing employee (as defined in 
        section 1126(b)) of such an entity;''.
    (c) Modifications of Amounts of Penalties and Assessments.--Section 
1128A(a) (42 U.S.C. 1320a-7a(a)), as amended by subsection (b), is 
amended in the matter following paragraph (4)--
        (1) by striking ``$2,000'' and inserting ``$10,000'';
        (2) by inserting ``; in cases under paragraph (4), $10,000 for 
    each day the prohibited relationship occurs'' after ``false or 
    misleading information was given''; and
        (3) by striking ``twice the amount'' and inserting ``3 times 
    the amount''.
    (d) Claim for Item or Service Based on Incorrect Coding or 
Medically Unnecessary Services.--Section 1128A(a)(1) (42 U.S.C. 1320a-
7a(a)(1)) is amended--
        (1) in subparagraph (A) by striking ``claimed,'' and inserting 
    ``claimed, including any person who engages in a pattern or 
    practice of presenting or causing to be presented a claim for an 
    item or service that is based on a code that the person knows or 
    should know will result in a greater payment to the person than the 
    code the person knows or should know is applicable to the item or 
    service actually provided,'';
        (2) in subparagraph (C), by striking ``or'' at the end;
        (3) in subparagraph (D), by striking ``; or'' and inserting ``, 
    or''; and
        (4) by inserting after subparagraph (D) the following new 
    subparagraph:
            ``(E) is for a medical or other item or service that a 
        person knows or should know is not medically necessary; or''.
    (e) Sanctions Against Practitioners and Persons for Failure To 
Comply With Statutory Obligations.--Section 1156(b)(3) (42 U.S.C. 
1320c-5(b)(3)) is amended by striking ``the actual or estimated cost'' 
and inserting ``up to $10,000 for each instance''.
    (f) Procedural Provisions.--Section 1876(i)(6) (42 U.S.C. 
1395mm(i)(6)), as amended by section 8115(a)(2), is amended by adding 
at the end the following new subparagraph:
    ``(D) The provisions of section 1128A (other than subsections (a) 
and (b)) shall apply to a civil money penalty under subparagraph (B)(i) 
or (C)(i) in the same manner as such provisions apply to a civil money 
penalty or proceeding under section 1128A(a).''.
    (g) Prohibition Against Offering Inducements to Individuals 
Enrolled Under Programs or Plans.--
        (1) Offer of remuneration.--Section 1128A(a) (42 U.S.C. 1320a-
    7a(a)) is amended--
            (A) by striking ``or'' at the end of paragraph (1)(D);
            (B) by striking ``, or'' at the end of paragraph (2) and 
        inserting a semicolon;
            (C) by striking the semicolon at the end of paragraph (3) 
        and inserting ``; or''; and
            (D) by inserting after paragraph (3) the following new 
        paragraph:
        ``(4) offers to or transfers remuneration to any individual 
    eligible for benefits under title XVIII of this Act, or under a 
    State health care program (as defined in section 1128(h)) that such 
    person knows or should know is likely to influence such individual 
    to order or receive from a particular provider, practitioner, or 
    supplier any item or service for which payment may be made, in 
    whole or in part, under title XVIII, or a State health care program 
    (as so defined);''.
        (2) Remuneration defined.--Section 1128A(i) (42 U.S.C. 1320a-
    7a(i)) is amended by adding the following new paragraph:
        ``(6) The term `remuneration' includes the waiver of 
    coinsurance and deductible amounts (or any part thereof), and 
    transfers of items or services for free or for other than fair 
    market value. The term `remuneration' does not include--
            ``(A) the waiver of coinsurance and deductible amounts by a 
        person, if--
                ``(i) the waiver is not offered as part of any 
            advertisement or solicitation;
                ``(ii) the person does not routinely waive coinsurance 
            or deductible amounts; and
                ``(iii) the person--

                    ``(I) waives the coinsurance and deductible amounts 
                after determining in good faith that the individual is 
                in financial need;
                    ``(II) fails to collect coinsurance or deductible 
                amounts after making reasonable collection efforts; or
                    ``(III) provides for any permissible waiver as 
                specified in section 1128B(b)(3) or in regulations 
                issued by the Secretary;

            ``(B) differentials in coinsurance and deductible amounts 
        as part of a benefit plan design as long as the differentials 
        have been disclosed in writing to all beneficiaries, third 
        party payers, and providers, to whom claims are presented and 
        as long as the differentials meet the standards as defined in 
        regulations promulgated by the Secretary not later than 180 
        days after the date of the enactment of the Medicare 
        Preservation Act of 1995; or
            ``(C) incentives given to individuals to promote the 
        delivery of preventive care as determined by the Secretary in 
        regulations so promulgated.''.
    (h) Effective Date.--The amendments made by this section shall take 
effect January 1, 1996.

SEC. 8132. CLARIFICATION OF LEVEL OF INTENT REQUIRED FOR IMPOSITION OF 
              SANCTIONS.

    (a) Clarification of Level of Knowledge Required for Imposition of 
Civil Monetary Penalties.--
        (1) In general.--Section 1128A(a) (42 U.S.C. 1320a-7a(a)) is 
    amended--
            (A) in paragraphs (1) and (2), by inserting ``knowingly'' 
        before ``presents'' each place it appears; and
            (B) in paragraph (3), by striking ``gives'' and inserting 
        ``knowingly gives or causes to be given''.
        (2) Definition of standard.--Section 1128A(i) (42 U.S.C. 1320a-
    7a(i)) is amended by adding at the end the following new paragraph:
        ``(6) The term `should know' means that a person, with respect 
    to information--
            ``(A) acts in deliberate ignorance of the truth or falsity 
        of the information; or
            ``(B) acts in reckless disregard of the truth or falsity of 
        the information,
    and no proof of specific intent to defraud is required.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to acts or omissions occurring on or after January 1, 1996.

SEC. 8133. PENALTY FOR FALSE CERTIFICATION FOR HOME HEALTH SERVICES.

    (a) In General.--Section 1128A(b) (42 U.S.C. 1320a-7a(b)) is 
amended by adding at the end the following new paragraph:
    ``(3)(A) Any physician who executes a document described in 
subparagraph (B) with respect to an individual knowing that all of the 
requirements referred to in such subparagraph are not met with respect 
to the individual shall be subject to a civil monetary penalty of not 
more than the greater of--
        ``(i) $5,000, or
        ``(ii) three times the amount of the payments under title XVIII 
    for home health services which are made pursuant to such 
    certification.
    ``(B) A document described in this subparagraph is any document 
that certifies, for purposes of title XVIII, that an individual meets 
the requirements of section 1814(a)(2)(C) or 1835(a)(2)(A) in the case 
of home health services furnished to the individual.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to certifications made on or after the date of the enactment of 
this Act.

                 CHAPTER 5--AMENDMENTS TO CRIMINAL LAW

SEC. 8141. HEALTH CARE FRAUD.

    (a) In General.--
        (1)  Fines and imprisonment for health care fraud violations.--
    Chapter 63 of title 18, United States Code, is amended by adding at 
    the end the following new section:

``Sec. 1347. Health care fraud

    ``(a) Whoever knowingly and willfully executes, or attempts to 
execute, a scheme or artifice--
        ``(1) to defraud any Federal health care program, in connection 
    with the delivery of or payment for health care benefits, items, or 
    services; or
        ``(2) to obtain, by means of false or fraudulent pretenses, 
    representations, or promises, any of the money or property owned 
    by, or under the custody or control of, any Federal health care 
    program in connection with the delivery of or payment for health 
    care benefits, items, or services;
shall be fined under this title or imprisoned not more than 10 years, 
or both. If the violation results in serious bodily injury (as defined 
in section 1365(g)(3) of this title), such person may be imprisoned for 
any term of years.
    ``(b) For purposes of this section, the term `Federal health care 
program' has the same meaning given such term in section 1128B(f) of 
the Social Security Act.''.
        (2) Clerical amendment.--The table of sections at the beginning 
    of chapter 63 of title 18, United States Code, is amended by adding 
    at the end the following:
``1347. Health care fraud.''.

    (b) Criminal Fines Deposited in Federal Hospital Insurance Trust 
Fund.--The Secretary of the Treasury shall deposit into the Federal 
Hospital Insurance Trust Fund pursuant to section 1817(k)(2)(C) of the 
Social Security Act, as added by section 8101(b), an amount equal to 
the criminal fines imposed under section 1347 of title 18, United 
States Code (relating to health care fraud).

SEC. 8142. FORFEITURES FOR FEDERAL HEALTH CARE OFFENSES.

    (a) In General.--Section 982(a) of title 18, United States Code, is 
amended by adding after paragraph (5) the following new paragraph:
    ``(6)(A) The court, in imposing sentence on a person convicted of a 
Federal health care offense, shall order the person to forfeit 
property, real or personal, that constitutes or is derived, directly or 
indirectly, from gross proceeds traceable to the commission of the 
offense.
    ``(B) For purposes of this paragraph, the term `Federal health care 
offense' means a violation of, or a criminal conspiracy to violate--
        ``(i) section 1347 of this title;
        ``(ii) section 1128B of the Social Security Act; and
        ``(iii) sections 287, 371, 664, 666, 669, 1001, 1027, 1341, 
    1343, 1920, or 1954 of this title if the violation or conspiracy 
    relates to health care fraud.''.
    (b) Conforming Amendment.--Section 982(b)(1)(A) of title 18, United 
States Code, is amended by inserting ``or (a)(6)'' after ``(a)(1)''.
    (c) Property Forfeited Deposited in Federal Hospital Insurance 
Trust Fund.--
        (1) In general.--After the payment of the costs of asset 
    forfeiture has been made, and notwithstanding any other provision 
    of law, the Secretary of the Treasury shall deposit into the 
    Federal Hospital Insurance Trust Fund pursuant to section 
    1817(k)(2)(C) of the Social Security Act, as added by section 
    8101(b), an amount equal to the net amount realized from the 
    forfeiture of property by reason of a Federal health care offense 
    pursuant to section 982(a)(6) of title 18, United States Code.
        (2) Costs of asset forfeiture.--For purposes of paragraph (1), 
    the term ``payment of the costs of asset forfeiture'' means--
            (A) the payment, at the discretion of the Attorney General, 
        of any expenses necessary to seize, detain, inventory, 
        safeguard, maintain, advertise, sell, or dispose of property 
        under seizure, detention, or forfeited, or of any other 
        necessary expenses incident to the seizure, detention, 
        forfeiture, or disposal of such property, including payment 
        for--
                (i) contract services,
                (ii) the employment of outside contractors to operate 
            and manage properties or provide other specialized services 
            necessary to dispose of such properties in an effort to 
            maximize the return from such properties; and
                (iii) reimbursement of any Federal, State, or local 
            agency for any expenditures made to perform the functions 
            described in this subparagraph;
            (B) at the discretion of the Attorney General, the payment 
        of awards for information or assistance leading to a civil or 
        criminal forfeiture involving any Federal agency participating 
        in the Health Care Fraud and Abuse Control Account;
            (C) the compromise and payment of valid liens and mortgages 
        against property that has been forfeited, subject to the 
        discretion of the Attorney General to determine the validity of 
        any such lien or mortgage and the amount of payment to be made, 
        and the employment of attorneys and other personnel skilled in 
        State real estate law as necessary;
            (D) payment authorized in connection with remission or 
        mitigation procedures relating to property forfeited; and
            (E) the payment of State and local property taxes on 
        forfeited real property that accrued between the date of the 
        violation giving rise to the forfeiture and the date of the 
        forfeiture order.

SEC. 8143. INJUNCTIVE RELIEF RELATING TO FEDERAL HEALTH CARE OFFENSES.

    (a) In General.--Section 1345(a)(1) of title 18, United States 
Code, is amended--
        (1) by striking ``or'' at the end of subparagraph (A);
        (2) by inserting ``or'' at the end of subparagraph (B); and
        (3) by adding at the end the following new subparagraph:
            ``(C) committing or about to commit a Federal health care 
        offense (as defined in section 982(a)(6)(B) of this title);''.
    (b) Freezing of Assets.--Section 1345(a)(2) of title 18, United 
States Code, is amended by inserting ``or a Federal health care offense 
(as defined in section 982(a)(6)(B))'' after ``title)''.

SEC. 8144. FALSE STATEMENTS.

    (a) In General.--Chapter 47 of title 18, United States Code, is 
amended by adding at the end the following new section:

``Sec. 1033. False statements relating to health care matters

    ``(a) Whoever, in any matter involving a Federal health care 
program, knowingly and willfully--
        ``(1) falsifies, conceals, or covers up by any trick, scheme, 
    or device a material fact, or
        ``(2) makes any materially false, fictitious, or fraudulent 
    statement or representation, or makes or uses any materially false 
    writing or document knowing the same to contain any materially 
    false, fictitious, or fraudulent statement or entry,
shall be fined under this title or imprisoned not more than 5 years, or 
both.
    ``(b) For purposes of this section, the term `Federal health care 
program' has the same meaning given such term in section 1128B(f) of 
the Social Security Act.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 47 of title 18, United States Code, is amended by adding at the 
end the following:

``1033. False statements relating to health care matters.''.

SEC. 8145. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF FEDERAL HEALTH 
              CARE OFFENSES.

    (a) In General.--Chapter 73 of title 18, United States Code, is 
amended by adding at the end the following new section:

``Sec. 1518. Obstruction of criminal investigations of Federal health 
            care offenses

    ``(a) Whoever willfully prevents, obstructs, misleads, delays or 
attempts to prevent, obstruct, mislead, or delay the communication of 
information or records relating to a Federal health care offense to a 
criminal investigator shall be fined under this title or imprisoned not 
more than 5 years, or both.
    ``(b) As used in this section the term `Federal health care 
offense' has the same meaning given such term in section 982(a)(6)(B) 
of this title.
    ``(c) As used in this section the term `criminal investigator' 
means any individual duly authorized by a department, agency, or armed 
force of the United States to conduct or engage in investigations for 
prosecutions for violations of health care offenses.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 73 of title 18, United States Code, is amended by adding at the 
end the following:

``1518. Obstruction of Criminal Investigations of Federal Health Care 
          Offenses.''.

SEC. 8146. THEFT OR EMBEZZLEMENT.

    (a) In General.--Chapter 31 of title 18, United States Code, is 
amended by adding at the end the following new section:

``Sec. 669. Theft or embezzlement in connection with health care

    ``(a) Whoever willfully embezzles, steals, or otherwise willfully 
and unlawfully converts to the use of any person other than the 
rightful owner, or intentionally misapplies any of the moneys, funds, 
securities, premiums, credits, property, or other assets of a Federal 
health care program, shall be fined under this title or imprisoned not 
more than 10 years, or both.
    ``(b) As used in this section the term `Federal health care 
program' has the same meaning given such term in section 1128B(f) of 
the Social Security Act.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 31 of title 18, United States Code, is amended by adding at the 
end the following:

``669. Theft or Embezzlement in Connection with Health Care.''.

SEC. 8147. LAUNDERING OF MONETARY INSTRUMENTS.

    Section 1956(c)(7) of title 18, United States Code, is amended by 
adding at the end the following new subparagraph:
            ``(F) Any act or activity constituting an offense involving 
        a Federal health care offense as that term is defined in 
        section 982(a)(6)(B) of this title.''.

SEC. 8148. AUTHORIZED INVESTIGATIVE DEMAND PROCEDURES.

    (a) In General.--Chapter 233 of title 18, United States Code, is 
amended by adding after section 3485 the following new section:

``Sec. 3486. Authorized investigative demand procedures

    ``(a)(1)(A) In any investigation relating to functions set forth in 
paragraph (2), the Attorney General or designee may issue in writing 
and cause to be served a subpoena compelling production of any records 
(including any books, papers, documents, electronic media, or other 
objects or tangible things), which may be relevant to an authorized law 
enforcement inquiry, that a person or legal entity may possess or have 
care, custody, or control.
    ``(B) A custodian of records may be required to give testimony 
concerning the production and authentication of such records.
    ``(C) The production of records may be required from any place in 
any State or in any territory or other place subject to the 
jurisdiction of the United States at any designated place; except that 
such production shall not be required more than 500 miles distant from 
the place where the subpoena is served.
    ``(D) Witnesses summoned under this section shall be paid the same 
fees and mileage that are paid witnesses in the courts of the United 
States.
    ``(E) A subpoena requiring the production of records shall describe 
the objects required to be produced and prescribe a return date within 
a reasonable period of time within which the objects can be assembled 
and made available.
    ``(2) Investigative demands utilizing an administrative subpoena 
are authorized for any investigation with respect to any act or 
activity constituting or involving health care fraud, including a 
scheme or artifice--
        ``(A) to defraud any Federal health care program, in connection 
    with the delivery of or payment for health care benefits, items, or 
    services; or
        ``(B) to obtain, by means of false or fraudulent pretenses, 
    representations, or promises, any of the money or property owned 
    by, or under the custody or control of, any Federal health care 
    program in connection with the delivery of or payment for health 
    care benefits, items, or services.
    ``(b)(1) A subpoena issued under this section may be served by any 
person designated in the subpoena to serve it.
    ``(2) Service upon a natural person may be made by personal 
delivery of the subpoena to such person.
    ``(3) Service may be made upon a domestic or foreign association 
which is subject to suit under a common name, by delivering the 
subpoena to an officer, to a managing or general agent, or to any other 
agent authorized by appointment or by law to receive service of 
process.
    ``(4) The affidavit of the person serving the subpoena entered on a 
true copy thereof by the person serving it shall be proof of service.
    ``(c)(1) In the case of contumacy by or refusal to obey a subpoena 
issued to any person, the Attorney General may invoke the aid of any 
court of the United States within the jurisdiction of which the 
investigation is carried on or of which the subpoenaed person is an 
inhabitant, or in which such person carries on business or may be 
found, to compel compliance with the subpoena.
    ``(2) The court may issue an order requiring the subpoenaed person 
to appear before the Attorney General to produce records, if so 
ordered, or to give testimony required under subsection (a)(1)(B).
    ``(3) Any failure to obey the order of the court may be punished by 
the court as a contempt thereof.
    ``(4) All process in any such case may be served in any judicial 
district in which such person may be found.
    ``(d) Notwithstanding any Federal, State, or local law, any person, 
including officers, agents, and employees, receiving a subpoena under 
this section, who complies in good faith with the subpoena and thus 
produces the materials sought, shall not be liable in any court of any 
State or the United States to any customer or other person for such 
production or for nondisclosure of that production to the customer.
    ``(e)(1) Health information about an individual that is disclosed 
under this section may not be used in, or disclosed to any person for 
use in, any administrative, civil, or criminal action or investigation 
directed against the individual who is the subject of the information 
unless the action or investigation arises out of and is directly 
related to receipt of health care or payment for health care or action 
involving a fraudulent claim related to health; or if authorized by an 
appropriate order of a court of competent jurisdiction, granted after 
application showing good cause therefor.
    ``(2) In assessing good cause, the court shall weigh the public 
interest and the need for disclosure against the injury to the patient, 
to the physician-patient relationship, and to the treatment services.
    ``(3) Upon the granting of such order, the court, in determining 
the extent to which any disclosure of all or any part of any record is 
necessary, shall impose appropriate safeguards against unauthorized 
disclosure.
    ``(f) As used in this section the term `Federal health care 
program' has the same meaning given such term in section 1128B(f) of 
the Social Security Act.''.
    (b) Clerical Amendment.--The table of sections for chapter 223 of 
title 18, United States Code, is amended by inserting after the item 
relating to section 3405 the following new item:

``3486. Authorized investigative demand procedures''.

    (c) Conforming Amendment.--Section 1510(b)(3)(B) of title 18, 
United States Code, is amended by inserting ``or a Department of 
Justice subpoena (issued under section 3486),'' after ``subpoena''.

            CHAPTER 6--STATE HEALTH CARE FRAUD CONTROL UNITS

SEC. 8151. STATE HEALTH CARE FRAUD CONTROL UNITS.

    (a) Extension of Concurrent Authority To Investigate and Prosecute 
Fraud in Other Federal Programs.--Paragraph (3) of section 2134(b), as 
added by section 7001 of this Act, is amended--
        (1) by inserting ``(A)'' after ``in connection with''; and
        (2) by striking ``plan.'' and inserting ``plan; and (B) upon 
    the approval of the relevant Federal agency and the chief executive 
    officer of the State or such officer's designee, any aspect of the 
    provision of health care services and activities of providers of 
    such services under any Federal health care program (as defined in 
    section 1128B(f)(1)).''.
    (b) Extension of Authority To Investigate and Prosecute Patient 
Abuse in Non-MediGrant Board and Care Facilities.--Paragraph (4) of 
section 2134(b), as added by section 7001 of this Act, is amended to 
read as follows:
        ``(4)(A) The entity has--
            ``(i) procedures for reviewing complaints of abuse or 
        neglect of patients in health care facilities which receive 
        payments under the MediGrant plan funded under this title;
            ``(ii) at the option of the entity, procedures for 
        reviewing complaints of abuse or neglect of patients residing 
        in board and care facilities; and
            ``(iii) where appropriate, procedures for acting upon such 
        complaints under the criminal laws of the State or for 
        referring such complaints to other State agencies for action.
        ``(B) For purposes of this paragraph, the term `board and care 
    facility' means a residential setting which receives payment from 
    or on behalf of two or more unrelated adults who reside in such 
    facility, and for whom one or both of the following is provided:
            ``(i) Nursing care services provided by, or under the 
        supervision of, a registered nurse, licensed practical nurse, 
        or licensed nursing assistant.
            ``(ii) Personal care services that assist residents with 
        the activities of daily living, including personal hygiene, 
        dressing, bathing, eating, toileting, ambulation, transfer, 
        positioning, self-medication, body care, travel to medical 
        services, essential shopping, meal preparation, laundry, and 
        housework.''.

                     Subtitle C--Regulatory Relief

SEC. 8201. REPEAL OF PHYSICIAN OWNERSHIP REFERRAL PROHIBITIONS BASED ON 
              COMPENSATION ARRANGEMENTS.

    (a) In General.--Section 1877(a)(2) (42 U.S.C. 1395nn(a)(2)) is 
amended by striking ``is--'' and all that follows through ``equity,'' 
and inserting the following: ``is (except as provided in subsection 
(c)) an ownership or investment interest in the entity through 
equity,''.
    (b) Conforming Amendments.--Section 1877 (42 U.S.C. 1395nn) is 
amended as follows:
        (1) In subsection (b)--
            (A) in the heading, by striking ``to Both Ownership and 
        Compensation Arrangement Prohibitions'' and inserting ``Where 
        Financial Relationship Exists''; and
            (B) by redesignating paragraph (4) as paragraph (7).
        (2) In subsection (c)--
            (A) by amending the heading to read as follows: ``Exception 
        for Ownership or Investment Interest in Publicly Traded 
        Securities and Mutual Funds''; and
            (B) in the matter preceding paragraph (1), by striking 
        ``subsection (a)(2)(A)'' and inserting ``subsection (a)(2)''.
        (3) In subsection (d)--
            (A) by striking the matter preceding paragraph (1);
            (B) in paragraph (3), by striking ``paragraph (1)'' and 
        inserting ``paragraph (4)''; and
            (C) by redesignating paragraphs (1), (2), and (3) as 
        paragraphs (4), (5), and (6), and by transferring and inserting 
        such paragraphs after paragraph (3) of subsection (b).
        (4) By striking subsection (e).
        (5) In subsection (f)(2)--
            (A) in the matter preceding paragraph (1), by striking 
        ``ownership, investment, and compensation'' and inserting 
        ``ownership and investment'';
            (B) in paragraph (2), by striking ``subsection (a)(2)(A)'' 
        and all that follows through ``subsection (a)(2)(B)),'' and 
        inserting ``subsection (a)(2),''; and
            (C) in paragraph (2), by striking ``or who have such a 
        compensation relationship with the entity''.
        (6) In subsection (h)--
            (A) by striking paragraphs (1), (2), and (3);
            (B) in paragraph (4)(A), by striking clauses (iv) and (vi);
            (C) in paragraph (4)(B), by striking ``rules.--'' and all 
        that follows through ``(ii) Faculty'' and inserting ``rules for 
        faculty''; and
            (D) by adding at the end of paragraph (4) the following new 
        subparagraph:
            ``(C) Member of a group.--A physician is a `member' of a 
        group if the physician is an owner or a bona fide employee, or 
        both, of the group.''.

SEC. 8202. REVISION OF DESIGNATED HEALTH SERVICES SUBJECT TO OWNERSHIP 
              REFERRAL PROHIBITION.

    (a) In General.--Section 1877(h)(6) (42 U.S.C. 1395nn(h)(6)) is 
amended by striking subparagraphs (B) through (K) and inserting the 
following:
            ``(B) Parenteral and enteral nutrients, equipment, and 
        supplies.
            ``(C) Radiology services, including magnetic resonance 
        imaging, computerized tomography, and ultrasound services.
            ``(D) Outpatient physical or occupational therapy 
        services.''.
    (b) Conforming Amendments.--
        (1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended in 
    the matter preceding subparagraph (A) by striking ``services'' and 
    all that follows through ``supplies)--'' and inserting ``services--
    ''.
        (2) Section 1877(h)(5)(C) (42 U.S.C. 1395nn(h)(5)(C)) is 
    amended--
            (A) by striking ``, a request by a radiologist for 
        diagnostic radiology services, and a request by a radiation 
        oncologist for radiation therapy,'' and inserting ``and a 
        request by a radiologist for magnetic resonance imaging or for 
        computerized tomography'', and
            (B) by striking ``radiologist, or radiation oncologist'' 
        and inserting ``or radiologist''.

SEC. 8203. DELAY IN IMPLEMENTATION OF 1993 OWNERSHIP REFERRAL CHANGES 
              UNTIL PROMULGATION OF REGULATIONS.

    (a) In General.--Section 13562(b) of OBRA-1993 (42 U.S.C. 1395nn 
note) is amended--
        (1) in paragraph (1), by striking ``paragraph (2)'' and 
    inserting ``paragraphs (2) and (3)''; and
        (2) by adding at the end the following new paragraph:
        ``(3) Promulgation of regulations.--Notwithstanding paragraphs 
    (1) and (2), the amendments made by this section shall not apply to 
    any referrals made before the effective date of final regulations 
    promulgated by the Secretary of Health and Human Services to carry 
    out such amendments.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect as if included in the enactment of OBRA-1993.

SEC. 8204. EXCEPTIONS TO OWNERSHIP REFERRAL PROHIBITIONS.

    (a) Revisions to Exception for In-Office Ancillary Services.--
        (1) Repeal of site-of-service requirement.--Section 1877 (42 
    U.S.C. 1395nn) is amended--
            (A) by amending subparagraph (A) of subsection (b)(2) to 
        read as follows:
            ``(A) that are furnished personally by the referring 
        physician, personally by a physician who is a member of the 
        same group practice as the referring physician, or personally 
        by individuals who are under the general supervision of the 
        physician or of another physician in the group practice, and'', 
        and
            (B) by adding at the end of subsection (h) the following 
        new paragraph:
        ``(7) General supervision.--An individual is considered to be 
    under the `general supervision' of a physician if the physician (or 
    group practice of which the physician is a member) is legally 
    responsible for the services performed by the individual and for 
    ensuring that the individual meets licensure and certification 
    requirements, if any, applicable under other provisions of law, 
    regardless of whether or not the physician is physically present 
    when the individual furnishes an item or service.''.
        (2) Clarification of treatment of physician owners of group 
    practice.--Section 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is 
    amended by striking ``physician or such group practice'' and 
    inserting ``physician, such group practice, or the physician owners 
    of such group practice''.
        (3) Conforming amendment.--Section 1877(b)(2) (42 U.S.C. 
    1395nn(b)(2)) is amended by amending the heading to read as 
    follows: ``Ancillary services furnished personally or through group 
    practice.--''.
    (b) Clarification of Exception for Services Furnished in a Rural 
Area.--Paragraph (5) of section 1877(b) (42 U.S.C. 1395nn(b)), as 
transferred by section 8201(b)(3)(C), is amended by striking 
``substantially all'' and inserting ``not less than 75 percent''.
    (c) Revision of Exception for Certain Managed Care Arrangements.--
Section 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is amended--
        (1) in the heading by inserting ``managed care arrangements'' 
    after ``Prepaid plans'';
        (2) in the matter preceding subparagraph (A), by striking 
    ``organization--'' and inserting ``organization, directly or 
    through contractual arrangements with other entities, to 
    individuals enrolled with the organization--'';
        (3) in subparagraph (A), by inserting ``or part C'' after 
    ``section 1876'';
        (4) by striking ``or'' at the end of subparagraph (C);
        (5) by striking the period at the end of subparagraph (D) and 
    inserting a comma; and
        (6) by adding at the end the following new subparagraphs:
            ``(E) with a contract with a State to provide services 
        under the State plan under title XIX (in accordance with 
        section 1903(m)) or a State MediGrant plan under title XXI; or
            ``(F) which is a MedicarePlus organization under part C or 
        which provides or arranges for the provision of health care 
        items or services pursuant to a written agreement between the 
        organization and an individual or entity if the written 
        agreement places the individual or entity at substantial 
        financial risk for the cost or utilization of the items or 
        services which the individual or entity is obligated to 
        provide, whether through a withhold, capitation, incentive 
        pool, per diem payment, or any other similar risk arrangement 
        which places the individual or entity at substantial financial 
        risk.''.
    (d) New Exception for Shared Facility Services.--
        (1) In general.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
    amended by section 8201(b)(3)(C), is amended--
            (A) by redesignating paragraphs (4) through (7) as 
        paragraphs (5) through (8); and
            (B) by inserting after paragraph (3) the following new 
        paragraph:
        ``(4) Shared facility services.--In the case of a designated 
    health service consisting of a shared facility service of a shared 
    facility--
            ``(A) that is furnished--
                ``(i) personally by the referring physician who is a 
            shared facility physician or personally by an individual 
            directly employed or under the general supervision of such 
            a physician,
                ``(ii) by a shared facility in a building in which the 
            referring physician furnishes substantially all of the 
            services of the physician that are unrelated to the 
            furnishing of shared facility services, and
                ``(iii) to a patient of a shared facility physician; 
            and
            ``(B) that is billed by the referring physician or a group 
        practice of which the physician is a member.''.
        (2) Definitions.--Section 1877(h) (42 U.S.C. 1395nn(h)), as 
    amended by section 8201(b)(6), is amended by inserting before 
    paragraph (4) the following new paragraph:
        ``(1) Shared facility related definitions.--
            ``(A) Shared facility service.--The term `shared facility 
        service' means, with respect to a shared facility, a designated 
        health service furnished by the facility to patients of shared 
        facility physicians.
            ``(B) Shared facility.--The term `shared facility' means an 
        entity that furnishes shared facility services under a shared 
        facility arrangement.
            ``(C) Shared facility physician.--The term `shared facility 
        physician' means, with respect to a shared facility, a 
        physician (or a group practice of which the physician is a 
        member) who has a financial relationship under a shared 
        facility arrangement with the facility.
            ``(D) Shared facility arrangement.--The term `shared 
        facility arrangement' means, with respect to the provision of 
        shared facility services in a building, a financial 
        arrangement--
                ``(i) which is only between physicians who are 
            providing services (unrelated to shared facility services) 
            in the same building,
                ``(ii) in which the overhead expenses of the facility 
            are shared, in accordance with methods previously 
            determined by the physicians in the arrangement, among the 
            physicians in the arrangement, and
                ``(iii) which, in the case of a corporation, is wholly 
            owned and controlled by shared facility physicians.''.
    (e) New Exception for Services Furnished in Communities With No 
Alternative Providers.--Section 1877(b) (42 U.S.C. 1395nn(b)), as 
amended by section 8201(b)(3)(C) and subsection (d)(1), is amended--
        (1) by redesignating paragraphs (5) through (8) as paragraphs 
    (6) through (9); and
        (2) by inserting after paragraph (4) the following new 
    paragraph:
        ``(5) No alternative providers in area.--In the case of a 
    designated health service furnished in any area with respect to 
    which the Secretary determines that individuals residing in the 
    area do not have reasonable access to such a designated health 
    service for which subsection (a)(1) does not apply.''.
    (f) New Exception for Services Furnished in Ambulatory Surgical 
Centers.--Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 
8201(b)(3)(C), subsection (d)(1), and subsection (e)(1), is amended--
        (1) by redesignating paragraphs (6) through (9) as paragraphs 
    (7) through (10); and
        (2) by inserting after paragraph (5) the following new 
    paragraph:
        ``(6) Services furnished in ambulatory surgical centers.--In 
    the case of a designated health service furnished in an ambulatory 
    surgical center described in section 1832(a)(2)(F)(i).''.
    (g) New Exception for Services Furnished in Renal Dialysis 
Facilities.--Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by 
section 8201(b)(3)(C), subsection (d)(1), subsection (e)(1), and 
subsection (f), is amended--
        (1) by redesignating paragraphs (7) through (10) as paragraphs 
    (8) through (11); and
        (2) by inserting after paragraph (6) the following new 
    paragraph:
        ``(7) Services furnished in renal dialysis facilities.--In the 
    case of a designated health service furnished in a renal dialysis 
    facility under section 1881.''.
    (h) New Exception for Services Furnished in a Hospice.--Section 
1877(b) (42 U.S.C. 1395nn(b)), as amended by section 8201(b)(3)(C), 
subsection (d)(1), subsection (e)(1), subsection (f), and subsection 
(g), is amended--
        (1) by redesignating paragraphs (8) through (11) as paragraphs 
    (9) through (12); and
        (2) by inserting after paragraph (7) the following new 
    paragraph:
        ``(8) Services furnished by a hospice program.--In the case of 
    a designated health service furnished by a hospice program under 
    section 1861(dd)(2).''.
    (i) New Exception for Services Furnished in a Comprehensive 
Outpatient Rehabilitation Facility.--Section 1877(b) (42 U.S.C. 
1395nn(b)), as amended by section 8201(b)(3)(C), subsection (d)(1), 
subsection (e)(1), subsection (f), subsection (g), and subsection (h), 
is amended--
        (1) by redesignating paragraphs (9) through (12) as paragraphs 
    (10) through (13); and
        (2) by inserting after paragraph (8) the following new 
    paragraph:
        ``(9) Services furnished in a comprehensive outpatient 
    rehabilitation facility.--In the case of a designated health 
    service furnished in a comprehensive outpatient rehabilitation 
    facility (as defined in section 1861(cc)(2)).''.
    (j) Definition of Referral.--Section 1877(h)(5)(A) (42 U.S.C. 
1395nn(h)(5)(A)) is amended--
        (1) by striking ``an item or service'' and inserting ``a 
    designated health service'', and
        (2) by striking ``the item or service'' and inserting ``the 
    designated health service''.

SEC. 8205. EFFECTIVE DATE.

    Except as provided in section 8203(b), the amendments made by this 
subtitle shall apply to referrals made on or after the date of the 
enactment of this Act, regardless of whether or not regulations are 
promulgated to carry out such amendments.

Subtitle D--Modification in Payment Policies Regarding Graduate Medical 
                               Education

SEC. 8301. INDIRECT MEDICAL EDUCATION PAYMENTS.

    (a) Multiyear Transition Regarding Percentages; 6.7 for 1996 to 5.0 
for 2001 and Afterwards.--Section 1886(d)(5)(B)(ii) (42 U.S.C. 
1395ww(d)(5)(B)(ii)) is amended to read as follows:
        ``(ii) For purposes of clause (i)(II), the indirect teaching 
    adjustment factor is equal to c <greek-e> (((1+r) to the nth power) 
    - 1), where `r' is the ratio of the hospital's full-time equivalent 
    interns and residents to beds and `n' equals .405. For discharges 
    occurring on or after--
            ``(I) May 1, 1986, and before October 1, 1995, `c' is equal 
        to 1.89;
            ``(II) October 1, 1995, and before October 1, 1996, `c' is 
        equal to 1.654;
            ``(III) October 1, 1996, and before October 1, 1998, `c' is 
        equal to 1.481;
            ``(IV) October 1, 1998, and before October 1, 1999, `c' is 
        equal to 1.383;
            ``(V) October 1, 1999, and before October 1, 2000, `c' is 
        equal to 1.309; and
            ``(VI) October 1, 2000, `c' is equal to 1.235.''.
    (b) No Restandardization of Payment Amounts Required.--Section 
1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is amended by striking 
``of 1985'' and inserting ``of 1985, but not taking into account the 
amendments made by section 8301(a) of Medicare Preservation Act of 
1995''.

SEC. 8302. DIRECT GRADUATE MEDICAL EDUCATION.

    (a) Weighting Factors For Residents.--
        (1) In general.--Section 1886(h)(4)(C)(iv) (42 U.S.C. 
    1395ww(h)(4)(C)(iv)) is amended by striking ``.50'' and inserting 
    ``0.25''.
        (2) Effective date.--The amendment made by paragraph (1) shall 
    apply with respect to cost reporting periods beginning on or after 
    October 1, 1997.
    (b) Limitation on Aggregate Number of Full-Time Residents.--
    Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is amended by adding at 
the end the following new subparagraph:
            ``(F) Adjustments for certain fiscal years in payments for 
        programs in allopathic and osteopathic medicine.--
                ``(i) In general.--With respect to a cost reporting 
            period, the Secretary shall in accordance with clause (ii) 
            adjust the payments for approved medical residency training 
            programs in the fields of allopathic medicine and 
            osteopathic medicine if, in the fiscal year in which such 
            cost reporting period begins, the number of full-time-
            equivalent residents determined under this paragraph with 
            respect to all such programs exceeds the number of full-
            time-equivalent residents determined with respect to all 
            such programs as of August 1, 1995.
                ``(ii) Adjustment described.--Adjustments under clause 
            (i) shall be made with respect to cost reporting periods 
            such that the total amount of payments under this 
            subsection for the fiscal year involved does not exceed the 
            amount that would have been paid under this subsection for 
            such year if the number of full-time-equivalent residents 
            determined under clause (i) for the year had not exceeded 
            the number of full-time-equivalent residents with respect 
            to all such programs as of August 1, 1995.
                ``(iii) Hold harmless.--The Secretary may provide that 
            approved medical residency training programs that reduced 
            or did not expand the number of full-time-equivalent 
            residents determined under this paragraph for a cost 
            reporting period shall not be subject to the adjustment 
            described in clause (i).
                ``(iv) Effective date.--The adjustment described in 
            clause (i) shall apply with respect to cost reporting 
            periods beginning on or after October 1, 1995, and on or 
            before September 30, 2002.''.

               Subtitle E--Provisions Relating to Part A

            CHAPTER 1--GENERAL PROVISIONS RELATING TO PART A

SEC. 8401. PPS HOSPITAL PAYMENT UPDATE.

    Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is amended 
by striking subclauses (XI), (XII), and (XIII) and inserting the 
following new subclauses:
        ``(XI) for fiscal year 1996 for hospitals in all areas, the 
    market basket percentage increase minus 2.5 percentage points,
        ``(XII) for fiscal years 1997 through 2002 for hospitals in all 
    areas, the market basket percentage increase minus 2.0 percentage 
    points, and
        ``(XIII) for fiscal year 2003 and each subsequent fiscal year 
    for hospitals in all areas, the market basket percentage 
    increase.''.

SEC. 8402. PPS-EXEMPT HOSPITAL PAYMENTS.

    (a) Update.--
        (1) In general.--Section 1886(b)(3)(B)(ii) (42 U.S.C. 
    1395ww(b)(3)(B)(ii)) is amended--
            (A) in subclause (V)--
                (i) by striking ``1997'' and inserting ``1995'', and
                (ii) by striking ``and'' at the end,
            (B) by redesignating subclause (VI) as subclause (VII); and
            (C) by inserting after subclause (V), the following 
        subclause:
        ``(VI) except as provided in clause (vi), for fiscal years 1996 
    through 2002, the market basket percentage increase minus the 
    applicable reduction (as defined in clause (vii)(II)); and''.
        (2) Special rules for certain hospitals.--Section 1886(b)(3)(B) 
    (42 U.S.C. 1395ww(b)(3)(B)) is amended by adding at the end the 
    following new clause:
    ``(vi) For purposes of clause (ii)(VI), the `applicable percentage 
increase' for a hospital--
        ``(I) for a fiscal year for which the hospital's update 
    adjustment percentage (as defined in clause (vii)(I)) is at least 
    10 percent, is the market basket percentage increase, and
        ``(II) for which 150 percent of the hospital's allowable 
    operating costs of inpatient hospital services recognized under 
    this title for the most recent cost reporting period for which 
    information is available is less than the hospital's target amount 
    (as determined under subparagraph (A)) for such cost reporting 
    period, is 0 percent.''.
        (3) Definitions.--Section 1886(b)(3)(B) (42 U.S.C. 
    1395ww(b)(3)(B)), as amended by paragraph (2), is amended by adding 
    at the end the following new clause:
    ``(vii) For purposes of clauses (ii)(VI) and (vi)--
        ``(I) a hospital's `update adjustment percentage' for a fiscal 
    year is the percentage by which the hospital's allowable operating 
    costs of inpatient hospital services recognized under this title 
    for the most recent cost reporting period for which information is 
    available exceeds the hospital's target amount (as determined under 
    subparagraph (A)) for such cost reporting period, and
        ``(II) the `applicable reduction' with respect to a hospital 
    for a fiscal year is 2.5 percentage points, reduced by 0.25 
    percentage point for each percentage point (if any) the hospital's 
    update adjustment percentage for the fiscal year is less than 10 
    percentage points.''.
        (3) Effect of payment reduction on exceptions and 
    adjustments.--Section 1886(b)(4)(A)(ii) (42 U.S.C. 
    1395ww(b)(4)(A)(ii)) is amended by striking ``paragraph 
    (3)(B)(ii)(V)'' and inserting ``subclause (V) or (VI) of paragraph 
    (3)(B)(ii)''.
    (b) Target Amounts for Rehabilitation Hospitals and Long-Term Care 
Hospitals.--Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)) is amended--
        (1) in subparagraph (A), in the matter preceding clause (i), by 
    striking ``and (E)'' and inserting ``(E), (F), and (G)''; and
        (2) by adding at the end the following new subparagraphs:
    ``(F) In the case of a rehabilitation hospital (or unit thereof) 
(as described in clause (ii) of subsection (d)(1)(B)), for cost 
reporting periods beginning on or after October 1, 1995--
        ``(i) in the case of a hospital which first receives payments 
    under this section before October 1, 1995, the target amount 
    determined under subparagraph (A) for such hospital or unit for a 
    cost reporting period beginning during a fiscal year shall not be 
    less than 50 percent of the national mean of the target amounts 
    determined under this paragraph for all such hospitals for cost 
    reporting periods beginning during such fiscal year (determined 
    without regard to this subparagraph); and
        ``(ii) in the case of a hospital which first receives payments 
    under this section on or after October 1, 1995, such target amount 
    may not be greater than 130 percent of the national mean of the 
    target amounts for such hospitals (and units thereof) for cost 
    reporting periods beginning during fiscal year 1991.
    ``(G) In the case of a hospital which has an average inpatient 
length of stay of greater than 25 days (as described in clause (iv) of 
subsection (d)(1)(B)), for cost reporting periods beginning on or after 
October 1, 1995--
        ``(i) in the case of a hospital which first receives payments 
    under this section as a hospital that is not a subsection (d) 
    hospital or a subsection (d) Puerto Rico hospital before October 1, 
    1995, the target amount determined under subparagraph (A) for such 
    hospital for a cost reporting period beginning during a fiscal year 
    shall not be less than 50 percent of the national mean of the 
    target amounts determined under such subparagraph for all such 
    hospitals for cost reporting periods beginning during such fiscal 
    year (determined without regard to this subparagraph); and
        ``(ii) in the case of any other hospital which first receives 
    payment under this section as a hospital described in clause (i) on 
    or after October 1, 1995, such target amount may not be greater 
    than 130 percent (or, if the Secretary determines it is 
    appropriate, such alternative percentage based on case-mix and DRG 
    category) of such national mean of the target amounts for such 
    hospitals for cost reporting periods beginning during fiscal year 
    1991.''.
    (c) Rebasing for Certain Long-Term Care Hospitals.--
        (1) In general.--Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), 
    as amended by subsection (b), is amended--
            (A) in subparagraph (A) in the matter preceding clause (i), 
        by striking ``and (G)'' and inserting ``(G), and (H)'';
            (B) in subparagraph (B)(ii), by striking ``(A) and (E)'' 
        and inserting ``(A), (E), and (G)''; and
            (C) by adding at the end the following new subparagraph:
    ``(H)(i) In the case of a qualified long-term care hospital (as 
defined in clause (ii)), the term `target amount' means--
        ``(I) with respect to the first 12-month cost reporting period 
    in which this subparagraph is applied to the hospital, the 
    allowable operating costs of inpatient hospital services (as 
    defined in subsection (a)(4)) recognized under this title for the 
    hospital for the 12-month cost reporting period beginning during 
    fiscal year 1994; or
        ``(II) with respect to a later cost reporting period, the 
    target amount for the preceding cost reporting period, increased by 
    the applicable percentage increase under subparagraph (B)(ii) for 
    that later cost reporting period.
    ``(ii) In clause (i), a `qualified long-term care hospital' means, 
with respect to a cost reporting period, a hospital described in clause 
(iv) of subsection (d)(1)(B) during fiscal year 1995 for which the 
hospital's allowable operating costs of inpatient hospital services 
recognized under this title for each of the two most recent previous 
12-month cost reporting periods exceeded 115 percent of the hospital's 
target amount determined under this paragraph for such cost reporting 
periods, if the hospital has a disproportionate patient percentage 
during such cost reporting period (as determined by the Secretary under 
subsection (d)(5)(F)(vi) as if the hospital were a subsection (d) 
hospital) of at least 70 percent.''.
        (2) Effective date.--The amendment made by paragraph (1) shall 
    apply to discharges occurring during cost reporting periods 
    beginning on or after October 1, 1995.
    (d) Treatment of Certain Long-Term Care Hospitals Located Within 
Other Hospitals.--
        (1) In general.--Section 1886(d)(1)(B) (42 U.S.C. 
    1395ww(d)(1)(B)) is amended in the matter following clause (v) by 
    striking the period and inserting the following: ``, or a hospital 
    classified by the Secretary as a long-term care hospital on or 
    before September 30, 1995, and located in the same building as, or 
    on the same campus as, another hospital.''.
        (2) Effective date.--The amendment made by paragraph (1) shall 
    apply to discharges occurring on or after October 1, 1995.
    (e) Capital Payments for PPS-Exempt Hospitals.--Section 1886(g) (42 
U.S.C. 1395ww(g)) is amended by adding at the end the following new 
paragraph:
    ``(4) In determining the amount of the payments that may be made 
under this title with respect to all the capital-related costs of 
inpatient hospital services furnished during fiscal years 1996 through 
2002 of a hospital which is not a subsection (d) hospital or a 
subsection (d) Puerto Rico hospital, the Secretary shall reduce the 
amounts of such payments otherwise determined under this title by 10 
percent.''.

SEC. 8403. REDUCTIONS IN DISPROPORTIONATE SHARE PAYMENT ADJUSTMENTS.

    (a) In General.--Section 1886(d)(5)(F) (42 U.S.C. 1395ww(d)(5)(F)) 
is amended--
        (1) in clause (ii), by striking ``The amount'' and inserting 
    ``Subject to clause (ix), the amount''; and
        (2) by adding at the end the following new clause:
    ``(ix) In the case of discharges occurring on or after October 1, 
1995, the additional payment amount otherwise determined under clause 
(ii) shall be reduced as follows:
        ``(I) For discharges occurring on or after October 1, 1995, and 
    on or before September 30, 1996, by 5 percent.
        ``(II) For discharges occurring on or after October 1, 1996, 
    and on or before September 30, 1997, by 10 percent.
        ``(III) For discharges occurring on or after October 1, 1997, 
    and on or before September 30, 1998, by 17.5 percent.
        ``(IV) For discharges occurring on or after October 1, 1998, 
    and on or before September 30, 1999, by 25 percent.
        ``(V) For discharges occurring on or after October 1, 1999, and 
    on or before September 30, 2002, by 30 percent.
    (b) Conforming Amendment Relating to Determination of Standardized 
Amounts.--Section 1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is 
amended by striking the period at the end and inserting the following: 
``, and the Secretary shall not take into account any reductions in the 
amount of such additional payments resulting from the amendments made 
by section 8403(a) of the Medicare Preservation Act of 1995.''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to discharges occurring on or after October 1, 1995.

SEC. 8404. CAPITAL PAYMENTS FOR PPS HOSPITALS.

    (a) Reduction in Payments.--
        (1) Continuation of current reductions.--Section 1886(g)(1)(A) 
    (42 U.S.C. 1395ww(g)(1)(A)) is amended in the second sentence--
            (A) by striking ``through 1995'' and inserting ``through 
        2002''; and
            (B) by inserting after ``10 percent reduction'' the 
        following: ``(or a 15 percent reduction in the case of payments 
        during fiscal years 1996 through 2002)''.
        (2) Reduction in base payment rates.--Section 1886(g)(1)(A) (42 
    U.S.C. 1395ww(g)(1)(A)) is amended by adding at the end the 
    following new sentence: ``In addition to the reduction described in 
    the preceding sentence, for discharges occurring after September 
    30, 1995, the Secretary shall reduce by 7.47 percent the unadjusted 
    standard Federal capital payment rate (as described in 42 CFR 
    412.308(c), as in effect on the date of the enactment of the 
    Medicare Preservation Act of 1995) and shall reduce by 8.27 percent 
    the unadjusted hospital-specific rate (as described in 42 CFR 
    412.328(e)(1), as in effect on such date of enactment).''.
    (b) Hospital-Specific Adjustment for Capital-Related Tax Costs.--
Section 1886(g)(1) (42 U.S.C. 1395ww(g)(1)) is amended--
        (1) by redesignating subparagraph (C) as subparagraph (D), and
        (2) by inserting after subparagraph (B) the following 
    subparagraph:
            ``(C)(i) For discharges occurring after September 30, 1995, 
        such system shall provide for an adjustment in an amount equal 
        to the amount determined under clause (iv) for capital-related 
        tax costs for each hospital that is eligible for such 
        adjustment.
            ``(ii) Subject to clause (iii), a hospital is eligible for 
        an adjustment under this subparagraph, with respect to 
        discharges occurring in a fiscal year, if the hospital--
                ``(I) is a hospital that may otherwise receive payments 
            under this subsection,
                ``(II) is not a public hospital, and
                ``(III) incurs capital-related tax costs for the fiscal 
            year.
            ``(iii)(I) In the case of a hospital that first incurs 
        capital-related tax costs in a fiscal year after fiscal year 
        1992 because of a change from nonproprietary to proprietary 
        status or because the hospital commenced operation after such 
        fiscal year, the first fiscal year for which the hospital shall 
        be eligible for such adjustment is the second full fiscal year 
        following the fiscal year in which the hospital first incurs 
        such costs.
            ``(II) In the case of a hospital that first incurs capital-
        related tax costs in a fiscal year after fiscal year 1992 
        because of a change in State or local tax laws, the first 
        fiscal year for which the hospital shall be eligible for such 
        adjustment is the fourth full fiscal year following the fiscal 
        year in which the hospital first incurs such costs.
            ``(iv) The per discharge adjustment under this clause shall 
        be equal to the hospital-specific capital-related tax costs per 
        discharge of a hospital for fiscal year 1992 (or, in the case 
        of a hospital that first incurs capital-related tax costs for a 
        fiscal year after fiscal year 1992, for the first full fiscal 
        year for which such costs are incurred), updated to the fiscal 
        year to which the adjustment applies. Such per discharge 
        adjustment shall be added to the Federal capital rate, after 
        such rate has been adjusted as described in 42 CFR 412.312 (as 
        in effect on the date of the enactment of the Medicare 
        Preservation Act of 1995), and before such rate is multiplied 
        by the applicable Federal rate percentage.
            ``(v) For purposes of this subparagraph, capital-related 
        tax costs include--
                ``(I) the costs of taxes on land and depreciable assets 
            owned by a hospital and used for patient care,
                ``(II) payments in lieu of such taxes (made by 
            hospitals that are exempt from taxation), and
                ``(III) the costs of taxes paid by a hospital as lessee 
            of land, buildings, or fixed equipment from a lessor that 
            is unrelated to the hospital under the terms of a lease 
            that requires the lessee to pay all expenses (including 
            mortgage, interest, and amortization) and leaves the lessor 
            with an amount free of all claims (sometimes referred to as 
            a `net net net' or `triple net' lease).
        In determining the adjustment required under clause (i), the 
        Secretary shall not take into account any capital-related tax 
        costs of a hospital to the extent that such costs are based on 
        tax rates and assessments that exceed those for similar 
        commercial properties.
            ``(vi) The system shall provide that the Federal capital 
        rate for any fiscal year after September 30, 1995, shall be 
        reduced by a percentage sufficient to ensure that the 
        adjustments required to be paid under clause (i) for a fiscal 
        year neither increase nor decrease the total amount that would 
        have been paid under this system but for the payment of such 
        adjustments for such fiscal year.''.
    (d) Revision of Exceptions Process Under Prospective Payment System 
for Certain Projects.--
        (1) In general.--Section 1886(g)(1) (42 U.S.C. 1395ww(g)(1)), 
    as amended by subsection (c), is amended--
            (A) by redesignating subparagraph (D) as subparagraph (E), 
        and
            (B) by inserting after subparagraph (C) the following 
        subparagraph:
    ``(D) The exceptions under the system provided by the Secretary 
under subparagraph (B)(iii) shall include the provision of exception 
payments under the special exceptions process provided under 42 CFR 
412.348(g) (as in effect on September 1, 1995), except that the 
Secretary shall revise such process as follows:
        ``(i) A hospital with at least 100 beds which is located in an 
    urban area shall be eligible under such process without regard to 
    its disproportionate patient percentage under subsection (d)(5)(F) 
    or whether it qualifies for additional payment amounts under such 
    subsection.
        ``(ii) The minimum payment level for qualifying hospitals shall 
    be 85 percent.
        ``(iii) A hospital shall be considered to meet the requirement 
    that it completes the project involved no later than the end of the 
    hospital's last cost reporting period beginning after October 1, 
    2001, if--
            ``(I) the hospital has obtained a certificate of need for 
        the project approved by the State or a local planning authority 
        by September 1, 1995, and
            ``(II) by September 1, 1995, the hospital has expended on 
        the project at least $750,000 or 10 percent of the estimated 
        cost of the project.
        ``(iv) Offsetting amounts, as described in 42 CFR 
    412.348(g)(8)(ii), shall apply except that subparagraph (B) of such 
    section shall be revised to require that the additional payment 
    that would otherwise be payable for the cost reporting period shall 
    be reduced by the amount (if any) by which the hospital's current 
    year medicare capital payments (excluding, if applicable, 75 
    percent of the hospital's capital-related disproportionate share 
    payments) exceeds its medicare capital costs for such year.''.
        (2) Limit to additional payments.--The amendment made by 
    paragraph (1) shall not result in aggregate additional payments 
    under the special exception process described in section 
    1886(b)(1)(D) for fiscal years 1996 through 2000 in excess of an 
    amount equal to the sum of $50,000,000 per year more than would 
    have been paid in such fiscal years if such amendment had not been 
    enacted.
        (3) Conforming amendment.--Section 1886(g)(1)(B)(iii) (42 
    U.S.C. 1395ww(g)(1)(B)(iii)) is amended by striking ``may provide'' 
    and inserting ``shall provide (in accordance with subparagraph 
    (D)''.

SEC. 8405. REDUCTION IN PAYMENTS TO HOSPITALS FOR ENROLLEES' BAD DEBTS.

    (a) In General.--Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is 
amended by adding at the end the following new subparagraph:
    ``(T)(i) In determining such reasonable costs for hospitals, the 
amount of bad debts otherwise treated as allowable costs which are 
attributable to the deductibles and coinsurance amounts under this 
title shall be reduced by--
        ``(I) 75 percent for cost reporting periods beginning during 
    fiscal year 1996,
        ``(II) 60 percent for cost reporting periods beginning during 
    fiscal year 1997, and
        ``(III) 50 percent for subsequent cost reporting periods.
    ``(ii) Clause (i) shall not apply with respect to bad debt of a 
hospital described in section 1886(d)(1)(B)(iv) if the debt is 
attributable to uncollectable deductible and coinsurance payments owed 
by individuals enrolled in a State plan under title XIX or under the 
MediGrant program under title XXI.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to hospital cost reporting periods beginning on or after October 
1, 1995.

SEC. 8406. INCREASE IN UPDATE FOR CERTAIN HOSPITALS WITH A HIGH 
              PROPORTION OF MEDICARE PATIENTS.

    Section 1886(b)(3) (42 U.S.C. 1395ww(b)(3)), as amended by 
subsections (b) and (c)(1) of section 8402, is amended by adding at the 
end the following new subparagraph:
    ``(I)(i) For purposes of subsection (d), in the case of a medicare-
dependent hospital described in clause (ii), the applicable percentage 
increase otherwise determined under subparagraph (B)(i) shall be 
increased by--
        ``(I) 0.5 percentage points for discharges occurring during 
    cost reporting periods beginning during fiscal year 1996, and
        ``(II) 0.3 percentage points for discharges occurring during 
    cost reporting periods beginning during fiscal year 1997.
    ``(ii) A hospital described in this clause with respect to a cost 
reporting period is a subsection (d) hospital meeting the following 
requirements:
        ``(I) Not less than 60 percent of the hospital's inpatient days 
    during the most recent cost reporting period for which data is 
    available were attributable to inpatients entitled to benefits 
    under part A.
        ``(II) The hospital does not receive any additional payment 
    amount under subsection (d)(5)(F) (relating to payments for 
    hospitals serving a disproportionate number of low-income patients) 
    with respect to discharges occurring during the fiscal year.
        ``(III) The hospital does not receive any additional payment 
    amount under subsection (d)(5)(B) (relating to payment for the 
    indirect costs of medical education) or subsection (h) (relating to 
    payment for direct medical education costs).
        ``(IV) In the case of a hospital located in a rural area, the 
    hospital has more than 100 beds.''.

           CHAPTER 2--PAYMENTS TO SKILLED NURSING FACILITIES

                Subchapter A--Prospective Payment System

SEC. 8410. PROSPECTIVE PAYMENT SYSTEM FOR SKILLED NURSING FACILITIES.

    Title XVIII (42 U.S.C. 1395 et seq.) is amended by adding the 
following new section after section 1888:

       ``prospective payment system for skilled nursing facilities

    ``Sec. 1889. (a) Establishment of System.--Notwithstanding any 
other provision of this title, the Secretary shall establish a 
prospective payment system under which fixed payments for episodes of 
care shall be made, instead of payments determined under section 
1861(v), section 1888, or section 1888A, to skilled nursing facilities 
for all extended care services furnished during the benefit period 
established under section 1812(a)(2). Such payments shall constitute 
payment for capital costs and all routine and non-routine service costs 
covered under this title that are furnished to individuals who are 
inpatients of skilled nursing facilities during such benefit period, 
except for physicians' services. The payment amounts shall vary 
depending on case-mix, patient acuity, and such other factors as the 
Secretary determines are appropriate. The prospective payment system 
shall apply for cost reporting periods (or portions of cost reporting 
periods) beginning on or after October 1, 1997.
    ``(b) 90 Percent of Levels Otherwise In Effect.--The Secretary 
shall establish the prospective payment amounts under subsection (a) at 
levels such that, in the Secretary's estimation, the amount of total 
payments under this title shall not exceed 90 percent of the amount of 
payments that would have been made under this title for all routine and 
non-routine services and capital expenditures if this section had not 
been enacted.
    ``(c) Adjustment in Rates To Take Into Account Beneficiary Cost-
Sharing.--The Secretary shall reduce the prospective payment rates 
established under this section to take into account the beneficiary 
coinsurance amount required under section 1813(a)(3).''.

                  Subchapter B--Interim Payment System

SEC. 8411. PAYMENTS FOR ROUTINE SERVICE COSTS.

    (a) Clarification of Definition of Routine Service Costs.--Section 
1888 (42 U.S.C. 1395yy) is amended by adding at the end the following 
new subsection:
    ``(e) For purposes of this section, the `routine service costs' of 
a skilled nursing facility are all costs which are attributable to 
nursing services, room and board, administrative costs, other overhead 
costs, and all other ancillary services (including supplies and 
equipment), excluding costs attributable to covered non-routine 
services subject to payment amounts under section 1888A.''.
    (b) Conforming Amendment.--Section 1888 (42 U.S.C. 1395yy) is 
amended in the heading by inserting ``and certain ancillary'' after 
``service''.

SEC. 8412. COST-EFFECTIVE MANAGEMENT OF COVERED NON-ROUTINE SERVICES.

    (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) is amended by 
inserting after section 1888 the following new section:

     ``cost-effective management of covered non-routine services of 
                       skilled nursing facilities

    ``Sec. 1888A. (a) Definitions.--For purposes of this section:
        ``(1) Covered non-routine services.--The term `covered non-
    routine services' means post-hospital extended care services 
    consisting of any of the following:
            ``(A) Physical or occupational therapy or speech-language 
        pathology services, or respiratory therapy, including supplies 
        and support services directly related to such services and 
        therapy.
            ``(B) Prescription drugs.
            ``(C) Complex medical equipment.
            ``(D) Intravenous therapy and solutions (including enteral 
        and parenteral nutrients, supplies, and equipment).
            ``(E) Radiation therapy.
            ``(F) Diagnostic services, including laboratory, radiology 
        (including computerized tomography services and imaging 
        services), and pulmonary services.
        ``(2) SNF market basket percentage increase.--The term `SNF 
    market basket percentage increase' for a fiscal year means a 
    percentage equal to input price changes in routine service costs 
    for the year under section 1888(a).
        ``(3) Stay.--The term `stay' means, with respect to an 
    individual who is a resident of a skilled nursing facility, a 
    period of continuous days during which the facility provides 
    extended care services for which payment may be made under this 
    title for the individual during the individual's spell of illness.
    ``(b) New Payment Method for Covered Non-Routine Services Beginning 
in Fiscal Year 1996.--
        ``(1) In general.--The payment method established under this 
    section shall apply with respect to covered non-routine services 
    furnished during cost reporting periods (or portions of cost 
    reporting periods) beginning on or after October 1, 1995.
        ``(2) Interim payments.--Subject to subsection (c), a skilled 
    nursing facility shall receive interim payments under this title 
    for covered non-routine services furnished to an individual during 
    cost reporting periods (or portions of cost reporting periods) 
    described in paragraph (1) in an amount equal to the reasonable 
    cost of providing such services in accordance with section 1861(v). 
    The Secretary may adjust such payments if the Secretary determines 
    (on the basis of such estimated information as the Secretary 
    considers appropriate) that payments to the facility under this 
    paragraph for a cost reporting period would substantially exceed 
    the cost reporting period amount determined under subsection 
    (c)(2).
        ``(3) Responsibility of skilled nursing facility to manage 
    billings.--
            ``(A) Clarification relating to part a billing.--In the 
        case of a covered non-routine service furnished to an 
        individual who (at the time the service is furnished) is a 
        resident of a skilled nursing facility who is entitled to 
        coverage under section 1812(a)(2) for such service, the skilled 
        nursing facility shall submit a claim for payment under this 
        title for such service under part A (without regard to whether 
        or not the item or service was furnished by the facility, by 
        others under arrangement with them made by the facility, under 
        any other contracting or consulting arrangement, or otherwise).
            ``(B) Part b billing.--In the case of a covered non-routine 
        service other than a portable X-ray or portable 
        electrocardiogram treated as a physician's service for purposes 
        of section 1848(j)(3) furnished to an individual who (at the 
        time the service is furnished) is a resident of a skilled 
        nursing facility who is not entitled to coverage under section 
        1812(a)(2) for such service but is entitled to coverage under 
        part B for such service, the skilled nursing facility shall 
        submit a claim for payment under this title for such service 
        under part B (without regard to whether or not the item or 
        service was furnished by the facility, by others under 
        arrangement with them made by the facility, under any other 
        contracting or consulting arrangement, or otherwise). This 
        subparagraph shall not apply to physician's services furnished 
        by a physician (as defined in section 1861(r)(1)) to a resident 
        of a skilled nursing facility if such services are not covered 
        non-routine services (as defined in section 1888A(a)(1)) or 
        services for which routine service costs (as defined in section 
        1888(e)) are determined.
            ``(C) Maintaining records on services furnished to 
        residents.--Each skilled nursing facility receiving payments 
        for extended care services under this title shall document on 
        the facility's cost report all covered non-routine services 
        furnished to all residents of the facility to whom the facility 
        provided extended care services for which payment was made 
        under part A or B (including a portable X-ray or portable 
        electrocardiogram treated as a physician's service for purposes 
        of section 1848(j)(3)) during a fiscal year (beginning with 
        fiscal year 1996) (without regard to whether or not the 
        services were furnished by the facility, by others under 
        arrangement with them made by the facility, under any other 
        contracting or consulting arrangement, or otherwise).
    ``(c) No Payment in Excess of Product of Per Stay Amount and Number 
of Stays.--
        ``(1) In general.--If a skilled nursing facility has received 
    aggregate payments under subsection (b) for covered non-routine 
    services during a cost reporting period beginning during a fiscal 
    year in excess of an amount equal to the cost reporting period 
    amount determined under paragraph (2), the Secretary shall reduce 
    the payments made to the facility with respect to such services for 
    cost reporting periods beginning during the following fiscal year 
    in an amount equal to such excess. The Secretary shall reduce 
    payments under this subparagraph at such times and in such manner 
    during a fiscal year as the Secretary finds necessary to meet the 
    requirement of this subparagraph.
        ``(2) Cost reporting period amount.--The cost reporting period 
    amount determined under this subparagraph is an amount equal to the 
    product of--
            ``(A) the per stay amount applicable to the facility under 
        subsection (d) for the period; and
            ``(B) the number of stays beginning during the period for 
        which payment was made to the facility for such services.
        ``(3) Prospective reduction in payments.--In addition to the 
    process for reducing payments described in paragraph (1), the 
    Secretary may reduce payments made to a facility under this section 
    during a cost reporting period if the Secretary determines (on the 
    basis of such estimated information as the Secretary considers 
    appropriate) that payments to the facility under this section for 
    the period will substantially exceed the cost reporting period 
    amount for the period determined under this paragraph.
    ``(d) Determination of Facility Per Stay Amount.--
        ``(1) Amount for fiscal year 1996.--
            ``(A) In general.--
                ``(i) Establishment.--Except as provided in 
            subparagraph (B) and clause (ii), the Secretary shall 
            establish a per stay amount for each nursing facility for 
            the 12-month cost reporting period beginning during fiscal 
            year 1996 that is the facility-specific stay amount for the 
            facility (as determined under subsection (e)) for the last 
            12-month cost reporting period ending on or before December 
            31, 1994, increased (in a compounded manner) by the SNF 
            market basket percentage increase (as defined in subsection 
            (a)(2)) for each fiscal year through fiscal year 1996.
                ``(ii) Adjustment if implementation delayed.--If the 
            amount under clause (i) is not established prior to the 
            cost reporting period described in clause (i), the 
            Secretary shall adjust such amount for stays after such 
            amount is established in such a manner so as to recover any 
            amounts in excess of the amounts which would have been paid 
            for stays before such date if the amount had been in effect 
            for such stays.
            ``(B) Facilities not having 1994 cost reporting period.--In 
        the case of a skilled nursing facility for which payments were 
        not made under this title for covered non-routine services for 
        the last 12-month cost reporting period ending on or before 
        December 31, 1994, the per stay amount for the 12-month cost 
        reporting period beginning during fiscal year 1996 shall be the 
        average of all per stay amounts determined under subparagraph 
        (A).
        ``(2) Amount for fiscal year 1997 and subsequent fiscal 
    years.--The per stay amount for a skilled nursing facility for a 
    12-month cost reporting period beginning during a fiscal year after 
    1996 is equal to the per stay amount established under this 
    subsection for the 12-month cost reporting period beginning during 
    the preceding fiscal year (without regard to any adjustment under 
    paragraph (1)(A)(ii)), increased by the SNF market basket 
    percentage increase for such subsequent fiscal year minus 2.0 
    percentage points.
    ``(e) Determination of Facility-Specific Stay Amounts.--The 
`facility-specific stay amount' for a skilled nursing facility for a 
cost reporting period is--
        ``(1) the sum of--
            ``(A) the amount of payments made to the facility under 
        part A during the period which are attributable to covered non-
        routine services furnished during a stay; and
            ``(B) the Secretary's best estimate of the amount of 
        payments made under part B during the period for covered non-
        routine services furnished to all residents of the facility to 
        whom the facility provided extended care services for which 
        payment was made under part A during the period (without regard 
        to whether or not the services were furnished by the facility, 
        by others under arrangement with them made by the facility 
        under any other contracting or consulting arrangement, or 
        otherwise), as estimated by the Secretary; divided by
        ``(2) the average number of days per stay for all residents of 
    the skilled nursing facility receiving extended care services 
    furnished during the benefit period established under section 
    1812(a)(2).
    ``(f) Intensive Nursing or Therapy Needs.--
        ``(1) In general.--In applying subsection (b) to covered non-
    routine services furnished during a stay beginning during a cost 
    reporting period to a resident of a skilled nursing facility who 
    requires intensive nursing or therapy services, the per stay amount 
    for such resident shall be the per stay amount developed under 
    paragraph (2) instead of the per stay amount determined under 
    subsection (d)(1)(A).
        ``(2) Per stay amount for intensive need residents.--Upon the 
    implementation of the payment method established under this 
    section, the Secretary, after consultation with the Medicare 
    Payment Review Commission and skilled nursing facility experts, 
    shall develop and publish a per stay amount for residents of a 
    skilled nursing facility who require intensive nursing or therapy 
    services..
        ``(3) Budget neutrality.--The Secretary shall adjust payments 
    under subsection (b) in a manner that ensures that total payments 
    for covered non-routine services under this section are not greater 
    or less than total payments for such services would have been but 
    for the application of paragraph (1).
    ``(g) Exceptions and Adjustments to Amounts.--
        ``(1) In general.--The Secretary may make exceptions and 
    adjustments to the cost reporting period amounts applicable to a 
    skilled nursing facility under subsection (c)(2) for a cost 
    reporting period, except that the total amount of any additional 
    payments made under this section for covered non-routine services 
    during the cost reporting period as a result of such exceptions and 
    adjustments may not exceed 5 percent of the aggregate payments made 
    to all skilled nursing facilities for covered non-routine services 
    during the cost reporting period (determined without regard to this 
    paragraph).
        ``(2) Budget neutrality.--The Secretary shall adjust payments 
    under subsection (b) in a manner that ensures that total payments 
    for covered non-routine services under this section are not greater 
    or less than total payments for such services would have been but 
    for the application of paragraph (1).
    ``(h) Special Treatment for Medicare Low Volume Skilled Nursing 
Facilities.--The Secretary shall determine an appropriate manner in 
which to apply this section, taking into account the purposes of this 
section, to non-routine costs of a skilled nursing facility for which 
payment is made for routine service costs during a cost reporting 
period on the basis of prospective payments under section 1888(d).
    ``(i) Special Rule for X-Ray Services.--Before furnishing a covered 
non-routine service consisting of an X-ray service for which payment 
may be made under part A or part B to a resident, a skilled nursing 
facility shall consider whether furnishing the service through a 
provider of portable X-ray services would be appropriate, taking into 
account the cost effectiveness of the service and the convenience to 
the resident.
    ``(j) Maintaining Savings From Payment System.--The prospective 
payment system established under section 1889 shall reflect the payment 
methodology established under this section for covered non-routine 
services.''.
    (b) Conforming Amendment.--Section 1814(b) (42 U.S.C. 1395f(b)) is 
amended in the matter preceding paragraph (1) by striking ``1813 and 
1886'' and inserting ``1813, 1886, 1888, 1888A, and 1889''.

SEC. 8413. PAYMENTS FOR ROUTINE SERVICE COSTS.

    (a) Maintaining Savings Resulting From Temporary Freeze on Payment 
Increases.--
        (1) Basing updates to per diem cost limits on limits for fiscal 
    year 1993.--
            (A) In general.--The last sentence of section 1888(a) (42 
        U.S.C. 1395yy(a)) is amended by adding at the end the 
        following: ``(except that such updates may not take into 
        account any changes in the routine service costs of skilled 
        nursing facilities occurring during cost reporting periods 
        which began during fiscal year 1994 or fiscal year 1995)''.
            (B) No exceptions permitted based on amendment.--The 
        Secretary of Health and Human Services shall not consider the 
        amendment made by subparagraph (A) in making any adjustments 
        pursuant to section 1888(c) of the Social Security Act.
        (2) Payments to low medicare volume skilled nursing 
    facilities.--Any change made by the Secretary of Health and Human 
    Services in the amount of any prospective payment paid to a skilled 
    nursing facility under section 1888(d) of the Social Security Act 
    for cost reporting periods beginning on or after October 1, 1995, 
    may not take into account any changes in the costs of services 
    occurring during cost reporting periods which began during fiscal 
    year 1994 or fiscal year 1995.
    (b) Basing 1996 Limits on New Definition of Routine Costs.--The 
Secretary of Health and Human Services shall take into account the new 
definition of routine service costs under section 1888(e) of the Social 
Security Act, as added by section 8411, in determining the routine per 
diem cost limits under section 1888(a) for fiscal year 1996 and each 
fiscal year thereafter.
    (c) Establishment of Schedule for Making Adjustments to Limits.--
Section 1888(c) (42 U.S.C. 1395yy(c)) is amended by striking the period 
at the end of the second sentence and inserting ``, and may only make 
adjustments under this subsection with respect to a facility which 
applies for an adjustment during an annual application period 
established by the Secretary.''.
    (d) Limitation to Exceptions Process of the Secretary.--Section 
1888(c) (42 U.S.C. 1395yy(c)) is amended--
        (1) by striking ``(c) The Secretary'' and inserting ``(c)(1) 
    Subject to paragraph (2), the Secretary''; and
        (2) by adding at the end the following new paragraph:
    ``(2) The Secretary may not make any adjustments under this 
subsection in the limits set forth in subsection (a) for a cost 
reporting period beginning during a fiscal year to the extent that the 
total amount of the additional payments made under this title as a 
result of such adjustments is greater than an amount equal to--
        ``(A) for cost reporting periods beginning during fiscal year 
    1996, the total amount of the additional payments made under this 
    title as a result of adjustments under this subsection for cost 
    reporting periods beginning during fiscal year 1994 increased (on a 
    compounded basis) by the SNF market basket percentage increase (as 
    defined in section 1888A(a)(2)) for each fiscal year; and
        ``(B) for cost reporting periods beginning during a subsequent 
    fiscal year, the amount determined under this paragraph for the 
    preceding fiscal year, increased by the SNF market basket 
    percentage increase (as defined in section 1888A(a)(2)) for each 
    fiscal year.''.
    (e) Maintaining Savings From Payment System.--The prospective 
payment system established under section 1889 of the Social Security 
Act, as added by section 8410, shall reflect the routine per diem cost 
limits under section 1888(a) of such Act.

SEC. 8414. REDUCTIONS IN PAYMENT FOR CAPITAL-RELATED COSTS.

    (a) In General.--Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as 
amended by section 8405(a), is amended by adding at the end the 
following new subparagraph:
    ``(U) Such regulations shall provide that, in determining the 
amount of the payments that may be made under this title with respect 
to all the capital-related costs of skilled nursing facilities, the 
Secretary shall reduce the amounts of such payments otherwise 
established under this title by 10 percent for payments attributable to 
portions of cost reporting periods occurring beginning in fiscal years 
1996 through 2002.''.
    (b) Maintaining Savings Resulting From 10 Percent Capital 
Reduction.--The prospective payment system established under section 
1889 of the Social Security Act, as added by section 8410 of this Act, 
shall reflect the 10 percent reduction in payments for capital-related 
costs of skilled nursing facilities as such reduction is in effect 
under section 1861(v)(1)(U) of the Social Security Act, as added by 
subsection (a).

SEC. 8415. TREATMENT OF ITEMS AND SERVICES PAID FOR UNDER PART B.

    (a) Requiring Payment for All Items and Services To Be Made to 
Facility.--
        (1) In general.--The first sentence of section 1842(b)(6) (42 
    U.S.C. 1395u(b)(6)) is amended--
            (A) by striking ``and (D)'' and inserting ``(D)''; and
            (B) by striking the period at the end and inserting the 
        following: ``, and (E) in the case of an item or service (other 
        than a portable X-ray or portable electrocardiogram treated as 
        a physician's service for purposes of section 1848(j)(3)) 
        furnished to an individual who (at the time the item or service 
        is furnished) is a resident of a skilled nursing facility, 
        payment shall be made to the facility (without regard to 
        whether or not the item or service was furnished by the 
        facility, by others under arrangement with them made by the 
        facility, under any other contracting or consulting 
        arrangement, or otherwise), except that this subparagraph shall 
        not preclude a physician (as defined in section 1861(r)(1)) 
        from receiving payment for physician's services provided to a 
        resident of a skilled nursing facility if such services are not 
        covered non-routine services (as defined in section 
        1888A(a)(1)) or services for which routine service costs (as 
        defined in section 1888(e)) are determined.''.
        (2) Exclusion for items and services not billed by facility.--
    Section 1862(a) (42 U.S.C. 1395y(a)) is amended--
            (A) by striking ``or'' at the end of paragraph (14);
            (B) by striking the period at the end of paragraph (15) and 
        inserting ``; or''; and
            (C) by inserting after paragraph (15) the following new 
        paragraph:
        ``(16) where such expenses are for covered non-routine services 
    (as defined in section 1888A(a)(1)) (other than a portable X-ray or 
    portable electrocardiogram treated as a physician's service for 
    purposes of section 1848(j)(3)) furnished to an individual who is a 
    resident of a skilled nursing facility and for which the claim for 
    payment under this title is not submitted by the facility.''.
        (3) Conforming amendment.--Section 1832(a)(1) (42 U.S.C. 
    1395k(a)(1)) is amended by striking ``(2);'' and inserting ``(2) 
    and section 1842(b)(6)(E);''.
    (b) Reduction in Payments for Items and Services Furnished by or 
Under Arrangements With Facilities.--Section 1861(v)(1) (42 U.S.C. 
1395x(v)(1)), as amended by section 8405(a) and section 8414(a), is 
amended by adding at the end the following new subparagraph:
    ``(V) In the case of an item or service furnished by a skilled 
nursing facility (or by others under arrangement with them made by a 
skilled nursing facility or under any other contracting or consulting 
arrangement or otherwise) for which payment is made under part B in an 
amount determined in accordance with section 1833(a)(2)(B), the 
Secretary shall reduce the reasonable cost for such item or service 
otherwise determined under clause (i)(I) of such section by 5.8 percent 
for payments attributable to portions of cost reporting periods 
occurring during fiscal years 1996 through 2002.''.

SEC. 8416. MEDICAL REVIEW PROCESS.

    In order to ensure that medicare beneficiaries are furnished 
appropriate extended care services, the Secretary of Health and Human 
Services shall establish and implement a thorough medical review 
process to examine the effects of the amendments made by this 
subchapter on the quality of extended care services furnished to 
medicare beneficiaries. In developing such a medical review process, 
the Secretary shall place a particular emphasis on the quality of non-
routine covered services for which payment is made under section 1888A 
of the Social Security Act.

SEC. 8417. REPORT BY MEDICARE PAYMENT REVIEW COMMISSION.

    Not later than October 1, 1997, the Medicare Payment Review 
Commission shall submit to Congress a report on the system under which 
payment is made under the medicare program for extended care services 
furnished by skilled nursing facilities, and shall include in the 
report the following:
        (1) An analysis of the effect of the methodology established 
    under section 1888A of the Social Security Act (as added by section 
    8412) on the payments for, and the quality of, extended care 
    services under the medicare program.
        (2) An analysis of the advisability of determining the amount 
    of payment for covered non-routine services of facilities (as 
    described in such section) on the basis of the amounts paid for 
    such services when furnished by suppliers under part B of the 
    medicare program.
        (3) An analysis of the desirability of maintaining separate 
    routine cost-limits for hospital-based and freestanding facilities 
    in the costs of extended care services recognized as reasonable 
    under the medicare program.
        (4) An analysis of the quality of services furnished by skilled 
    nursing facilities.
        (5) An analysis of the adequacy of the process and standards 
    used to provide exceptions to the limits described in paragraph 
    (3).
        (6) An analysis of the effect of the prospective payment 
    methodology established under section 1889 of the Social Security 
    Act (as added by section 8410) on the payments for, and the quality 
    of, extended care services under the medicare program, including an 
    evaluation of the baseline used in establishing a system for 
    payment for extended care services furnished by skilled nursing 
    facilities.

SEC. 8418. EFFECTIVE DATE.

    Except as otherwise provided in this subchapter, the amendments 
made by this subchapter shall apply to services furnished during cost 
reporting periods (or portions of cost reporting periods) beginning on 
or after October 1, 1995.

             CHAPTER 3--OTHER PROVISIONS RELATING TO PART A

SEC. 8421. PAYMENTS FOR HOSPICE SERVICES.

    Section 1814(i)(1)(C)(ii) (42 U.S.C. 1395f(i)(1)(C)(ii)) is amended 
by striking subclauses (IV), (V), and (VI), and inserting the following 
subclauses:
        ``(IV) for fiscal years 1996 through 2002, the market basket 
    percentage increase for the fiscal year minus 2.0 percentage 
    points; and
        ``(V) for a subsequent fiscal year, the market basket 
    percentage increase for the fiscal year.''.

SEC. 8422. PERMANENT EXTENSION OF HEMOPHILIA PASS-THROUGH.

    Effective as if included in the enactment of OBRA-1989, section 
6011(d) of such Act (as amended by section 13505 of OBRA-1993) is 
amended by striking ``and shall expire September 30, 1994''.

               Subtitle F--Provisions Relating to Part B

                       CHAPTER 1--PAYMENT REFORMS

SEC. 8501. PAYMENTS FOR PHYSICIANS' SERVICES.

    (a) Establishing Update to Conversion Factor To Match Spending 
Under Sustainable Growth Rate.--
        (1) Update.--
            (A) In general.--Section 1848(d)(3) (42 U.S.C. 1395w-
        4(d)(3)) is amended to read as follows:
        ``(3) Update.--
            ``(A) In general.--Unless Congress otherwise provides, 
        subject to subparagraph (E), for purposes of this section the 
        update for a year (beginning with 1997) is equal to the product 
        of--
                ``(i) 1 plus the Secretary's estimate of the percentage 
            increase in the medicare economic index (described in the 
            fourth sentence of section 1842(b)(3)) for the year 
            (divided by 100), and
                ``(ii) 1 plus the Secretary's estimate of the update 
            adjustment factor for the year (divided by 100),
        minus 1 and multiplied by 100.
            ``(B) Update adjustment factor.--The `update adjustment 
        factor' for a year is equal to the quotient of--
                ``(i) the difference between (I) the sum of the allowed 
            expenditures for physicians' services furnished during each 
            of the years 1995 through the year involved and (II) the 
            sum of the amount of actual expenditures for physicians' 
            services furnished during each of the years 1995 through 
            the previous year; divided by
                ``(ii) the Secretary's estimate of allowed expenditures 
            for physicians' services furnished during the year.
            ``(C) Determination of allowed expenditures.--For purposes 
        of subparagraph (B), allowed expenditures for physicians' 
        services shall be determined as follows (as estimated by the 
        Secretary):
                ``(i) In the case of allowed expenditures for 1995, 
            such expenditures shall be equal to actual expenditures for 
            services furnished during the 12-month period ending with 
            June 30, 1995.
                ``(ii) In the case of allowed expenditures for 1996 and 
            each subsequent year, such expenditures shall be equal to 
            allowed expenditures for the previous year, increased by 
            the sustainable growth rate under subsection (f) for the 
            fiscal year which begins during the year.
            ``(D) Determination of actual expenditures.--For purposes 
        of subparagraph (B), the amount of actual expenditures for 
        physicians' services furnished during a year shall be equal to 
        the amount of expenditures for such services during the 12-
        month period ending with June of the previous year.
            ``(E) Restriction on variation from medicare economic 
        index.--Notwithstanding the amount of the update adjustment 
        factor determined under subparagraph (B) for a year, the update 
        in the conversion factor under this paragraph for the year may 
        not be--
                ``(i) greater than 103 percent of 1 plus the 
            Secretary's estimate of the percentage increase in the 
            medicare economic index (described in the fourth sentence 
            of section 1842(b)(3)) for the year (divided by 100), minus 
            1 and multiplied by 100; or
                ``(ii) less than 93 percent of 1 plus the Secretary's 
            estimate of the percentage increase in the medicare 
            economic index (described in the fourth sentence of section 
            1842(b)(3)) for the year (divided by 100), minus 1 and 
            multiplied by 100.''.
            (B) Effective date.--The amendments made by subparagraph 
        (A) shall apply to physicians' services furnished on or after 
        January 1, 1997.
        (2) Conforming amendments.--(A) Section 1848(d)(2)(A) (42 
    U.S.C. 1395w-4(d)(2)(A)) is amended--
            (i) in the matter preceding clause (i)--
                (I) by striking ``(or updates) in the conversion factor 
            (or factors)'' and inserting ``in the conversion factor'';
                (II) by striking ``(beginning with 1991)'' and 
            inserting ``(beginning with 1996)''; and
                (III) by striking the second sentence;
            (ii) by amending clause (ii) to read as follows:
                ``(ii) such factors as enter into the calculation of 
            the update adjustment factor as described in paragraph 
            (3)(B); and'';
            (iii) by amending clause (iii) to read as follows:
                ``(iii) access to services.'';
            (iv) by striking clauses (iv), (v), and (vi); and
            (v) by striking the last sentence.
        (B) Section 1848(d)(2)(B) (42 U.S.C. 1395w-4(d)(2)(B)) is 
    amended--
            (i) by striking ``and'' at the end of clause (iii);
            (ii) by striking the period at the end of clause (iv) and 
        inserting ``; and''; and
            (iii) by adding at the end the following new clause:
                ``(v) changes in volume or intensity of services.''.
        (C) Section 1848(d)(2) (42 U.S.C. 1395w4-(d)(2)) is further 
    amended--
            (i) by striking subparagraphs (C), (D), and (E);
            (ii) by redesignating subparagraph (F) as subparagraph (C); 
        and
            (iii) in subparagraph (C), as redesignated, by striking 
        ``(or updates) in the conversion factor (or factors)'' and 
        inserting ``in the conversion factor''.
    (b) Replacement of Volume Performance Standard With Sustainable 
Growth Rate.--
        (1) In general.--Section 1848(f) (42 U.S.C. 1395w-4(f)) is 
    amended by striking paragraphs (2) through (5) and inserting the 
    following:
        ``(2) Specification of growth rate.--
            ``(A) Fiscal year 1996.--The sustainable growth rate for 
        all physicians' services for fiscal year 1996 shall be equal to 
        the product of--
                ``(i) 1 plus the Secretary's estimate of the percentage 
            change in the medicare economic index for 1996 (described 
            in the fourth sentence of section 1842(b)(3)) (divided by 
            100),
                ``(ii) 1 plus the Secretary's estimate of the 
            percentage change (divided by 100) in the average number of 
            individuals enrolled under this part (other than private 
            plan enrollees) from fiscal year 1995 to fiscal year 1996,
                ``(iii) 1 plus the Secretary's estimate of the 
            projected percentage growth in real gross domestic product 
            per capita (divided by 100) from fiscal year 1995 to fiscal 
            year 1996, plus 2 percentage points, and
                ``(iv) 1 plus the Secretary's estimate of the 
            percentage change (divided by 100) in expenditures for all 
            physicians' services in fiscal year 1996 (compared with 
            fiscal year 1995) which will result from changes in law 
            (including the Medicare Preservation Act of 1995), 
            determined without taking into account estimated changes in 
            expenditures due to changes in the volume and intensity of 
            physicians' services or changes in expenditures resulting 
            from changes in the update to the conversion factor under 
            subsection (d),
        minus 1 and multiplied by 100.
            ``(B) Subsequent fiscal years.--The sustainable growth rate 
        for all physicians' services for fiscal year 1997 and each 
        subsequent fiscal year shall be equal to the product of--
                ``(i) 1 plus the Secretary's estimate of the percentage 
            change in the medicare economic index for the fiscal year 
            involved (described in the fourth sentence of section 
            1842(b)(3)) (divided by 100),
                ``(ii) 1 plus the Secretary's estimate of the 
            percentage change (divided by 100) in the average number of 
            individuals enrolled under this part (other than private 
            plan enrollees) from the previous fiscal year to the fiscal 
            year involved,
                ``(iii) 1 plus the Secretary's estimate of the 
            projected percentage growth in real gross domestic product 
            per capita (divided by 100) from the previous fiscal year 
            to the fiscal year involved, plus 2 percentage points, and
                ``(iv) 1 plus the Secretary's estimate of the 
            percentage change (divided by 100) in expenditures for all 
            physicians' services in the fiscal year (compared with the 
            previous fiscal year) which will result from changes in law 
            (including changes made by the Secretary in response to 
            section 1895), determined without taking into account 
            estimated changes in expenditures due to changes in the 
            volume and intensity of physicians' services or changes in 
            expenditures resulting from changes in the update to the 
            conversion factor under subsection (d)(3),
        minus 1 and multiplied by 100.
        ``(3) Definitions.--In this subsection:
            ``(A) Services included in physicians' services.--The term 
        `physicians' services' includes other items and services (such 
        as clinical diagnostic laboratory tests and radiology 
        services), specified by the Secretary, that are commonly 
        performed or furnished by a physician or in a physician's 
        office, but does not include services furnished to a private 
        plan enrollee.
            ``(B) Private plan enrollee.--The term `private plan 
        enrollee' means, with respect to a fiscal year, an individual 
        enrolled under this part who has elected to receive benefits 
        under this title for the fiscal year through a MedicarePlus 
        plan offered under part C or through enrollment with an 
        eligible organization with a risk-sharing contract under 
        section 1876.''.
        (2) Conforming amendments.--Section 1848(f) (42 U.S.C. 1395w-
    4(f)) is amended--
            (A) in the heading, by striking ``Volume Performance 
        Standard Rates of Increase'' and inserting ``Sustainable Growth 
        Rate'';
            (B) in paragraph (1)--
                (i) in the heading, by striking ``volume performance 
            standard rates of increase'' and inserting ``sustainable 
            growth rate'';
                (ii) in subparagraph (A), in the matter preceding 
            clause (i), by striking ``performance standard rates of 
            increase'' and inserting ``sustainable growth rate''; and
                (iii) in subparagraph (A), by striking ``HMO 
            enrollees'' each place such term appears and inserting 
            ``private plan enrollees'';
            (C) in subparagraph (B), by striking ``performance standard 
        rates of increase'' and inserting ``sustainable growth rate''; 
        and
            (D) in subparagraph (C)--
                (i) in the heading, by striking ``performance standard 
            rates of increase'' and inserting ``sustainable growth 
            rate'';
                (ii) in the first sentence, by striking ``with 1991), 
            the performance standard rates of increase'' and all that 
            follows through the first period and inserting ``with 
            1997), the sustainable growth rate for the fiscal year 
            beginning in that year.''; and
                (iii) in the second sentence, by striking ``January 1, 
            1990, the performance standard rate of increase under 
            subparagraph (D) for fiscal year 1990'' and inserting 
            ``January 1, 1997, the sustainable growth rate for fiscal 
            year 1997''.
    (c) Establishment of Single Conversion Factor for 1996.--
        (1) In general.--Section 1848(d)(1) (42 U.S.C. 1395w-4(d)(1)) 
    is amended--
            (A) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (B) by inserting after subparagraph (B) the following new 
        subparagraph:
            ``(C) Special rule for 1996.--For 1996, the conversion 
        factor under this subsection shall be $35.42 for all 
        physicians' services.''.
        (2) Conforming amendments.--Section 1848 (42 U.S.C. 1395w-4) is 
    amended--
            (A) by striking ``(or factors)'' each place it appears in 
        subsection (d)(1)(A) and (d)(1)(D)(ii) (as redesignated by 
        paragraph (1)(a));
            (B) in subsection (d)(1)(A), by striking ``or updates'';
            (C) in subsection (d)(1)(D)(ii) (as redesignated by 
        paragraph (1)(a)), by striking ``(or updates)''; and
            (D) in subsection (i)(1)(C), by striking ``conversion 
        factors'' and inserting ``the conversion factor''.

SEC. 8502. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN 
              OUTPATIENT HOSPITAL SERVICES.

    (a) Ambulatory Surgical Center Procedures.--Section 
1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended--
        (1) by striking ``of 80 percent''; and
        (2) by striking the period at the end and inserting the 
    following: ``, less the amount a provider may charge as described 
    in clause (ii) of section 1866(a)(2)(A).''.
    (b) Radiology Services and Diagnostic Procedures.--Section 
1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended--
        (1) by striking ``of 80 percent''; and
        (2) by striking the period at the end and inserting the 
    following: ``, less the amount a provider may charge as described 
    in clause (ii) of section 1866(a)(2)(A).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to services furnished during portions of cost reporting periods 
occurring on or after October 1, 1995.

SEC. 8503. EXTENSION OF REDUCTIONS IN PAYMENTS FOR COSTS OF HOSPITAL 
              OUTPATIENT SERVICES.

    (a) Reduction in Payments for Capital-Related Costs.--Section 
1861(v)(1)(S)(ii)(I) (42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is amended by 
striking ``through 1998'' and inserting ``through 2002''.
    (b) Reduction in Payments for Other Costs.--Section 
1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is amended by 
striking ``through 1998'' and inserting ``through 2002''.

SEC. 8504. REDUCTION IN UPDATES TO PAYMENT AMOUNTS FOR CLINICAL 
              DIAGNOSTIC LABORATORY TESTS.

    (a) Change in Update.--Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 
1395l(h)(2)(A)(ii)(IV)) is amended by striking ``1994 and 1995'' and 
inserting ``1994 through 2002''.
    (b) Lowering Cap on Payment Amounts.--Section 1833(h)(4)(B) (42 
U.S.C. 1395l(h)(4)(B)) is amended--
        (1) in clause (vi), by striking ``and'' at the end;
        (2) in clause (vii)--
            (A) by inserting ``and before January 1, 1997,'' after 
        ``1995,'', and
            (B) by striking the period at the end and inserting ``, 
        and''; and
        (3) by adding at the end the following new clause:
        ``(viii) after December 31, 1996, is equal to 65 percent of 
    such median.''.

SEC. 8505. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT.

    (a) Reduction in Payment Amounts for Items of Durable Medical 
Equipment.--
        (1) Freeze in update for covered items.--Section 1834(a)(14) 
    (42 U.S.C. 1395m(a)(14)) is amended--
            (A) by striking ``and'' at the end of subparagraph (A);
            (B) in subparagraph (B)--
                (i) by striking ``a subsequent year'' and inserting 
            ``1993, 1994, and 1995'', and
                (ii) by striking the period at the end and inserting a 
            semicolon; and
            (C) by adding at the end the following:
            ``(C) for each of the years 1996 through 2002, 0 percentage 
        points; and
            ``(D) for a subsequent year, the percentage increase in the 
        consumer price index for all urban consumers (U.S. urban 
        average) for the 12-month period ending with June of the 
        previous year.''.
        (2) Update for orthotics and prosthetics.--Section 
    1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended--
            (A) by striking ``and'' at the end of clause (iii);
            (B) by redesignating clause (iv) as clause (v); and
            (C) by inserting after clause (iii) the following new 
        clause:
                ``(iv) for each of the years 1996 through 2002, 1 
            percent, and''.
    (b) Oxygen and Oxygen Equipment.--
        (1) In general.--Section 1834(a)(9)(C) (42 U.S.C. 
    1395m(a)(9)(C)) is amended--
            (A) by striking ``and'' at the end of clause (iii);
            (B) in clause (iv)--
                (i) by striking ``a subsequent year'' and inserting 
            ``1993, 1994, and 1995'', and
                (ii) by striking the period at the end and inserting a 
            semicolon; and
            (C) by adding at the end the following new clauses:
                ``(v) in each of the years 1996 through 2002, is the 
            national limited monthly payment rate computed under 
            subparagraph (B) for the item for the year reduced by the 
            applicable percentage described in subparagraph (D) (but in 
            no case may the amount determined under this clause be less 
            than 70 percent of such national limited payment rate); and
                ``(vi) in a subsequent year, is the national limited 
            monthly payment rate computed under subparagraph (B) for 
            the item for the year.''.
        (2) Applicable percentage described.--Section 1834(a)(9) (42 
    U.S.C. 1395m(a)(9)) is amended by adding at the end the following 
    new subparagraph:
            ``(D) Applicable percentage described.--In clause (v) of 
        subparagraph (C), the `applicable percentage' with respect to a 
        year described in such clause is--
                ``(i) for 1996, 20 percent,
                ``(ii) for 1997, 21\2/3\ percent,
                ``(iii) for 1998, 23\1/3\ percent,
                ``(iv) for 1999, 25 percent,
                ``(v) for 2000, 26\2/3\ percent,
                ``(vi) for 2001, 28\1/3\ percent, and
                ``(vii) for 2002, 30 percent.''.
    (c) Payment Freeze for Parenteral and Enteral Nutrients, Supplies, 
and Equipment.--In determining the amount of payment under part B of 
title XVIII of the Social Security Act with respect to parenteral and 
enteral nutrients, supplies, and equipment during each of the years 
1996 through 2002, the charges determined to be reasonable with respect 
to such nutrients, supplies, and equipment may not exceed the charges 
determined to be reasonable with respect to such nutrients, supplies, 
and equipment during 1993.

SEC. 8506. UPDATES FOR AMBULATORY SURGICAL SERVICES.

    Section 1833(i)(2)(C) (42 U.S.C. 1395l(i)(2)(C)) is amended--
        (1) by striking ``1996'' and inserting ``2003''; and
        (2) by inserting before the first sentence the following new 
    sentence: ``Notwithstanding the second sentence of subparagraph (A) 
    or the second sentence of subparagraph (B), the Secretary shall not 
    update amounts established under such subparagraphs for fiscal 
    years 1996 through 2002.''

SEC. 8507. PAYMENTS FOR AMBULANCE SERVICES.

    Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)), as amended by section 
8405(a), section 8414(a), and section 8415(b), is amended by adding at 
the end the following new subparagraph:
        ``(W) In determining the reasonable cost or charge of ambulance 
    services for fiscal years 1996 through 2002, the Secretary shall 
    not recognize any costs in excess of costs recognized as reasonable 
    for fiscal year 1995.''.

SEC. 8508. ENSURING PAYMENT FOR PHYSICIAN AND NURSE FOR JOINTLY 
              FURNISHED ANESTHESIA SERVICES.

    (a) Payment for Jointly Furnished Single Case.--
        (1) Payment to physician.--Section 1848(a)(4) (42 U.S.C. 1395w-
    4(a)(4)) is amended by adding at the end the following new 
    subparagraph:
            ``(C) Payment for single case.--Notwithstanding section 
        1862(a)(1)(A), with respect to physicians' services consisting 
        of the furnishing of anesthesia services for a single case that 
        are furnished jointly with a certified registered nurse 
        anesthetist, if the carrier determines that the use of both the 
        physician and the nurse anesthetist to furnish the anesthesia 
        service was not medically necessary, the fee schedule amount 
        for the physicians' services shall be equal to 50 percent (or 
        55 percent, in the case of services furnished during 1996 or 
        1997) of the fee schedule amount applicable under this section 
        for anesthesia services personally performed by the physician 
        alone (without regard to this subparagraph). Nothing in this 
        subparagraph may be construed to affect the application of any 
        provision of law regarding balance billing.''.
        (2) Payment to crna.--Section 1833(l)(4)(B) (42 U.S.C. 
    1395l(l)(4)(B)) is amended by adding at the end the following new 
    clause:
    ``(iv) Notwithstanding section 1862(a)(1)(A), in the case of 
services of a certified registered nurse anesthetist consisting of the 
furnishing of anesthesia services for a single case that are furnished 
jointly with a physician, if the carrier determines that the use of 
both the physician and the nurse anesthetist to furnish the anesthesia 
service was not medically necessary, the fee schedule amount for the 
services furnished by the certified registered nurse anesthetist shall 
be equal to 50 percent (or 40 percent, in the case of services 
furnished during 1996 or 1997) of the fee schedule amount applicable 
under section 1848 for anesthesia services personally performed by the 
physician alone (without regard to this clause).''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to services furnished on or after July 1, 1996.

                       CHAPTER 2--PART B PREMIUM

SEC. 8511. PROMOTING SOLVENCY OF PART A TRUST FUND THROUGH PART B 
              PREMIUM.

    (a) In General.--Section 1839(e)(1) (42 U.S.C. 1395r(e)(1)) is 
amended--
        (1) in subparagraph (A), by striking ``1999'' and inserting 
    ``2003'', and
        (2) by adding at the end the following new subparagraph:
    ``(C)(i) For each month beginning with January 1996 through 
December 2002, the amount of the monthly premium under this part shall 
be increased by an amount equal to 13 percent of the monthly actuarial 
rate for enrollees age 65 and over, as determined under subsection 
(a)(1) and applicable to such month.
    ``(ii) The Secretary shall transfer amounts received pursuant to 
clause (i) to the Federal Hospital Insurance Trust Fund.
    ``(iii) In applying section 1844(a), amounts attributable to clause 
(i) shall not be counted in determining the dollar amount of the 
premium per enrollee under paragraph (1)(A) or (1)(B).''.
    (b) Effective Date.--The amendments made by subsection (a) apply to 
premiums for months beginning with January 1996.

SEC. 8512. INCOME-RELATED REDUCTION IN MEDICARE SUBSIDY.

    (a) In General.--Section 1839 (42 U.S.C. 1395r) is amended by 
adding at the end the following:
    ``(h)(1) Notwithstanding the previous subsections of this section, 
in the case of an individual whose modified adjusted gross income for a 
taxable year ending with or within a calendar year (as initially 
determined by the Secretary in accordance with paragraph (3)) exceeds 
the threshold amount described in paragraph (5)(B), the Secretary shall 
increase the amount of the monthly premium for months in the calendar 
year by an amount equal to the difference between--
        ``(A) 200 percent of the monthly actuarial rate for enrollees 
    age 65 and over as determined under subsection (a)(1) for that 
    calendar year; and
        ``(B) the total of the monthly premiums paid by the individual 
    under this section (determined without regard to subsection (b)) 
    during such calendar year.
    ``(2) In the case of an individual described in paragraph (1) whose 
modified adjusted gross income exceeds the threshold amount by less 
than $50,000, the amount of the increase in the monthly premium 
applicable under paragraph (1) shall be an amount which bears the same 
ratio to the amount of the increase described in paragraph (1) 
(determined without regard to this paragraph) as such excess bears to 
$50,000. In the case of a joint return filed under section 6013 of the 
Internal Revenue Code of 1986 by spouses both of whom are enrolled 
under this part, the previous sentence shall be applied by substituting 
`$60,000' for `$50,000'. The preceding provisions of this paragraph 
shall not apply to any individual whose threshold amount is zero.
    ``(3) The Secretary shall make an initial determination of the 
amount of an individual's modified adjusted gross income for a taxable 
year ending with or within a calendar year for purposes of this 
subsection as follows:
        ``(A) Not later than September 1 of the year preceding the 
    year, the Secretary shall provide notice to each individual whom 
    the Secretary finds (on the basis of the individual's actual 
    modified adjusted gross income for the most recent taxable year for 
    which such information is available or other information provided 
    to the Secretary by the Secretary of the Treasury) will be subject 
    to an increase under this subsection that the individual will be 
    subject to such an increase, and shall include in such notice the 
    Secretary's estimate of the individual's modified adjusted gross 
    income for the year.
        ``(B) If, during the 30-day period beginning on the date notice 
    is provided to an individual under subparagraph (A), the individual 
    provides the Secretary with information on the individual's 
    anticipated modified adjusted gross income for the year, the amount 
    initially determined by the Secretary under this paragraph with 
    respect to the individual shall be based on the information 
    provided by the individual.
        ``(C) If an individual does not provide the Secretary with 
    information under subparagraph (B), the amount initially determined 
    by the Secretary under this paragraph with respect to the 
    individual shall be the amount included in the notice provided to 
    the individual under subparagraph (A).
    ``(4)(A) If the Secretary determines (on the basis of final 
information provided by the Secretary of the Treasury) that the amount 
of an individual's actual modified adjusted gross income for a taxable 
year ending with or within a calendar year is less than or greater than 
the amount initially determined by the Secretary under paragraph (3), 
the Secretary shall increase or decrease the amount of the individual's 
monthly premium under this section (as the case may be) for months 
during the following calendar year by an amount equal to \1/12\ of the 
difference between--
        ``(i) the total amount of all monthly premiums paid by the 
    individual under this section during the previous calendar year; 
    and
        ``(ii) the total amount of all such premiums which would have 
    been paid by the individual during the previous calendar year if 
    the amount of the individual's modified adjusted gross income 
    initially determined under paragraph (3) were equal to the actual 
    amount of the individual's modified adjusted gross income 
    determined under this paragraph.
    ``(B)(i) In the case of an individual for whom the amount initially 
determined by the Secretary under paragraph (3) is based on information 
provided by the individual under subparagraph (B) of such paragraph, if 
the Secretary determines under subparagraph (A) that the amount of the 
individual's actual modified adjusted gross income for a taxable year 
is greater than the amount initially determined under paragraph (3), 
the Secretary shall increase the amount otherwise determined for the 
year under subparagraph (A) by interest in an amount equal to the sum 
of the amounts determined under clause (ii) for each of the months 
described in clause (ii).
    ``(ii) Interest shall be computed for any month in an amount 
determined by applying the underpayment rate established under section 
6621 of the Internal Revenue Code of 1986 (compounded daily) to any 
portion of the difference between the amount initially determined under 
paragraph (3) and the amount determined under subparagraph (A) for the 
period beginning on the first day of the month beginning after the 
individual provided information to the Secretary under subparagraph (B) 
of paragraph (3) and ending 30 days before the first month for which 
the individual's monthly premium is increased under this paragraph.
    ``(iii) Interest shall not be imposed under this subparagraph if 
the amount of the individual's modified adjusted gross income provided 
by the individual under subparagraph (B) of paragraph (3) was not less 
than the individual's modified adjusted gross income determined on the 
basis of information shown on the return of tax imposed by chapter 1 of 
the Internal Revenue Code of 1986 for the taxable year involved.
    ``(C) In the case of an individual who is not enrolled under this 
part for any calendar year for which the individual's monthly premium 
under this section for months during the year would be increased 
pursuant to subparagraph (A) if the individual were enrolled under this 
part for the year, the Secretary may take such steps as the Secretary 
considers appropriate to recover from the individual the total amount 
by which the individual's monthly premium for months during the year 
would have been increased under subparagraph (A) if the individual were 
enrolled under this part for the year.
    ``(D) In the case of a deceased individual for whom the amount of 
the monthly premium under this section for months in a year would have 
been decreased pursuant to subparagraph (A) if the individual were not 
deceased, the Secretary shall make a payment to the individual's 
surviving spouse (or, in the case of an individual who does not have a 
surviving spouse, to the individual's estate) in an amount equal to the 
difference between--
        ``(i) the total amount by which the individual's premium would 
    have been decreased for all months during the year pursuant to 
    subparagraph (A); and
        ``(ii) the amount (if any) by which the individual's premium 
    was decreased for months during the year pursuant to subparagraph 
    (A).
    ``(5) In this subsection, the following definitions apply:
        ``(A) The term `modified adjusted gross income' means adjusted 
    gross income (as defined in section 62 of the Internal Revenue Code 
    of 1986)--
            ``(i) determined without regard to sections 135, 911, 931, 
        and 933 of such Code, and
            ``(ii) increased by the amount of interest received or 
        accrued by the taxpayer during the taxable year which is exempt 
        from tax under such Code.
        ``(B) The term `threshold amount' means--
            ``(i) except as otherwise provided in this paragraph, 
        $60,000,
            ``(ii) $90,000, in the case of a joint return (as defined 
        in section 7701(a)(38) of such Code), and
            ``(iii) zero in the case of a taxpayer who--
                ``(I) is married at the close of the taxable year but 
            does not file a joint return (as so defined) for such year, 
            and
                ``(II) does not live apart from his spouse at all times 
            during the taxable year.
    ``(6)(A) The Secretary shall transfer amounts received pursuant to 
this subsection to the Federal Hospital Insurance Trust Fund.
    ``(B) In applying section 1844(a), amounts attributable to clause 
(i) shall not be counted in determining the dollar amount of the 
premium per enrollee under paragraph (1)(A) or (1)(B).''.
    (b) Conforming Amendments.--(1) Section 1839 (42 U.S.C. 1395r) is 
amended--
        (A) in subsection (a)(2), by inserting ``or section 1839A'' 
    after ``subsections (b) and (e)'';
        (B) in subsection (a)(3) of section 1839(a), by inserting ``or 
    section 1839A'' after ``subsection (e)'';
        (C) in subsection (b), inserting ``(and as increased under 
    section 1839A)'' after ``subsection (a) or (e)''; and
        (D) in subsection (f), by striking ``if an individual'' and 
    inserting the following: ``if an individual (other than an 
    individual subject to an increase in the monthly premium under this 
    section pursuant to subsection (h))''.
    (2) Section 1840(c) (42 U.S.C. 1395r(c)) is amended by inserting 
``or an individual determines that the estimate of modified adjusted 
gross income used in determining whether the individual is subject to 
an increase in the monthly premium under section 1839 pursuant to 
subsection (h) of such section (or in determining the amount of such 
increase) is too low and results in a portion of the premium not being 
deducted,'' before ``he may''.
    (c) Reporting Requirements for Secretary of the Treasury.--
        (1) In general.--Subsection (l) of section 6103 of the Internal 
    Revenue Code of 1986 (relating to confidentiality and disclosure of 
    returns and return information) is amended by adding at the end the 
    following new paragraph:
        ``(15) Disclosure of return information to carry out income-
    related reduction in medicare part b premium.--
            ``(A) In general.--The Secretary may, upon written request 
        from the Secretary of Health and Human Services, disclose to 
        officers and employees of the Health Care Financing 
        Administration return information with respect to a taxpayer 
        who is required to pay a monthly premium under section 1839 of 
        the Social Security Act. Such return information shall be 
        limited to--
                ``(i) taxpayer identity information with respect to 
            such taxpayer,
                ``(ii) the filing status of such taxpayer,
                ``(iii) the adjusted gross income of such taxpayer,
                ``(iv) the amounts excluded from such taxpayer's gross 
            income under sections 135 and 911,
                ``(v) the interest received or accrued during the 
            taxable year which is exempt from the tax imposed by 
            chapter 1 to the extent such information is available, and
                ``(vi) the amounts excluded from such taxpayer's gross 
            income by sections 931 and 933 to the extent such 
            information is available.
            ``(B) Restriction on use of disclosed information.--Return 
        information disclosed under subparagraph (A) may be used by 
        officers and employees of the Health Care Financing 
        Administration only for the purposes of, and to the extent 
        necessary in, establishing the appropriate monthly premium 
        under section 1839 of the Social Security Act.''
        (2) Conforming amendment.--Paragraphs (3)(A) and (4) of section 
    6103(p) of such Code are each amended by striking ``or (14)'' each 
    place it appears and inserting ``(14), or (15)''.
    (d) Effective Date.--
        (1) In general.--The amendments made by subsections (a) and (b) 
    shall apply to the monthly premium under section 1839 of the Social 
    Security Act for months beginning with January 1997.
        (2) Information for prior years.--The Secretary of Health and 
    Human Services may request information under section 6013(l)(15) of 
    the Social Security Act (as added by subsection (c)) for taxable 
    years beginning after December 31, 1993.

            Subtitle G--Provisions Relating to Parts A and B

              CHAPTER 1--PAYMENTS FOR HOME HEALTH SERVICES

SEC. 8601. PAYMENT FOR HOME HEALTH SERVICES.

    (a) In General.--Title XVIII (42 U.S.C. 1395x et seq.), as amended 
by section 8102, is amended by adding at the end the following new 
section:

                    ``payment for home health services

    ``Sec. 1894. (a) In General.--
        ``(1) Per visit payments.--Subject to subsection (c), the 
    Secretary shall make per visit payments beginning with fiscal year 
    1997 to a home health agency in accordance with this section for 
    each type of home health service described in paragraph (2) 
    furnished to an individual who at the time the service is furnished 
    is under a plan of care by the home health agency under this title 
    (without regard to whether or not the item or service was furnished 
    by the agency or by others under arrangement with them made by the 
    agency, under any other contracting or consulting arrangement, or 
    otherwise).
        ``(2) Types of services.--The types of home health services 
    described in this paragraph are the following:
            ``(A) Part-time or intermittent nursing care provided by or 
        under the supervision of a registered professional nurse.
            ``(B) Physical therapy.
            ``(C) Occupational therapy.
            ``(D) Speech-language pathology services.
            ``(E) Medical social services under the direction of a 
        physician.
            ``(F) To the extent permitted in regulations, part-time or 
        intermittent services of a home health aide who has 
        successfully completed a training program approved by the 
        Secretary.
    ``(b) Establishment of Per Visit Rate for Each Type of Service.--
        ``(1) In general.--The Secretary shall, subject to paragraph 
    (3), establish a per visit payment rate for a home health agency in 
    an area (which shall be the same area used to determine the area 
    wage index applicable to hospitals under section 1886(d)(3)(E)) for 
    each type of home health service described in subsection (a)(2). 
    Such rate shall be equal to the national per visit payment rate 
    determined under paragraph (2) for each such type, except that the 
    labor-related portion of such rate shall be adjusted by the area 
    wage index applicable under section 1886(d)(3)(E) for the area in 
    which the agency is located (as determined without regard to any 
    reclassification of the area under section 1886(d)(8)(B) or a 
    decision of the Medicare Geographic Classification Review Board or 
    the Secretary under section 1886(d)(10) for cost reporting periods 
    beginning after October 1, 1995).
        ``(2) National per visit payment rate.--The national per visit 
    payment rate for each type of service described in subsection 
    (a)(2)--
            ``(A) for fiscal year 1997, is an amount equal to the 
        national average amount paid per visit under this title to home 
        health agencies for such type of service during the most recent 
        12-month cost reporting period ending on or before June 30, 
        1994; and
            ``(B) for each subsequent fiscal year, is an amount equal 
        to the national per visit payment rate in effect for the 
        preceding fiscal year, increased by the home health market 
        basket percentage increase for such subsequent fiscal year 
        minus 2.0 percentage points.
        ``(3) Rebasing of rates.--The Secretary shall adjust the 
    national per visit payment rates under this subsection for cost 
    reporting periods beginning on or after October 1, 1999, and every 
    5 years thereafter, to reflect the most recent available data.
        ``(4) Home health market basket percentage increase.--For 
    purposes of this subsection, the term `home health market basket 
    percentage increase' means, with respect to a fiscal year, a 
    percentage (estimated by the Secretary before the beginning of the 
    fiscal year) determined and applied with respect to the types of 
    home health services described in subsection (a)(2) in the same 
    manner as the market basket percentage increase under section 
    1886(b)(3)(B)(iii) is determined and applied to inpatient hospital 
    services for the fiscal year.
    ``(c) Per Episode Limit.--
        ``(1) Aggregate limit.--
            ``(A) In general.--Except as provided in paragraph (2), a 
        home health agency may not receive aggregate per visit payments 
        under subsection (a) for a fiscal year in excess of an amount 
        equal to the sum of the following products determined for each 
        case-mix category for which the agency receives payments:
                ``(i) The number of episodes of each such case-mix 
            category during the fiscal year; multiplied by
                ``(ii) the per episode limit determined for such case-
            mix category for such fiscal year.
            ``(B) Establishment of per episode limits.--
                ``(i) In general.--The per episode limit for a fiscal 
            year for any case-mix category for the area in which a home 
            health agency is located (which shall be the same area used 
            to determine the area wage index applicable to hospitals 
            under section 1886(d)(3)(E)) is equal to--

                    ``(I) the mean number of visits for each type of 
                home health service described in subsection (a)(2) 
                furnished during an episode of such case-mix category 
                in such area during fiscal year 1994, adjusted by the 
                case-mix adjustment factor determined in clause (ii) 
                for the fiscal year involved; multiplied by
                    ``(II) the per visit payment rate established under 
                subsection (b) for such type of home health service for 
                the fiscal year for which the determination is being 
                made.

                ``(ii) Case-mix adjustment factor.--For purposes of 
            clause (i), the case-mix adjustment factor for a year for--

                    ``(I) each of fiscal years 1997 through 2000 is the 
                factor determined by the Secretary to assure that 
                aggregate payments for home health services under this 
                section during the year will not exceed the payment for 
                such services during the previous year as a result of 
                changes in the number and type of home health visits 
                within case-mix categories over the previous year; and
                    ``(II) each subsequent fiscal year, is the factor 
                determined by the Secretary necessary to remove the 
                effects of case-mix increases due to reporting 
                improvements instead of real changes in patients' 
                resource usage.

                ``(iii) Rebasing of per episode limits.--Beginning with 
            fiscal year 1999 and every 5 years thereafter, the 
            Secretary shall revise the mean number of home health 
            visits determined under clause (i)(I) for each type of home 
            health service visit described in subsection (a)(2) 
            furnished during an episode in a case-mix category to 
            reflect the most recently available data on the number of 
            visits.
                ``(iv) Determination of area.--In the case of an area 
            which the Secretary determines has an insufficient number 
            of home health agencies to establish an appropriate per 
            episode limit, the Secretary may establish an area other 
            than the area used to determine the area wage under section 
            1886(d)(3)(E)) for purposes of establishing an appropriate 
            per episode limit.
            ``(C) Case-mix category.--For purposes of this paragraph, 
        the term `case-mix category' means each of the 18 case-mix 
        categories established under the Home Health Agency Prospective 
        Payment Demonstration Project conducted by the Health Care 
        Financing Administration. The Secretary may develop an 
        alternate methodology for determining case-mix categories.
            ``(D) Episode.--
                ``(i) In general.--For purposes of this paragraph, the 
            term `episode' means the continuous 120-day period that--

                    ``(I) begins on the date of an individual's first 
                visit for a type of home health service described in 
                subsection (a)(2) for a case-mix category, and
                    ``(II) is immediately preceded by a 60-day period 
                in which the individual did not receive visits for a 
                type of home health service described in subsection 
                (a)(2).

                ``(ii) Treatment of episodes spanning cost reporting 
            periods.--The Secretary shall provide for such rules as the 
            Secretary considers appropriate regarding the treatment of 
            episodes under this paragraph which begin during a cost 
            reporting period and end in a subsequent cost reporting 
            period.
            ``(E) Exemptions and exceptions.--The Secretary may provide 
        for exemptions and exceptions to the limits established under 
        this paragraph for a fiscal year as the Secretary deems 
        appropriate, to the extent such exemptions and exceptions do 
        not result in greater payments under this section than the 
        exemptions and exceptions provided under section 
        1861(v)(1)(L)(ii) in fiscal year 1994, increased by the home 
        health market basket percentage increase for the fiscal year 
        involved (as defined in subsection (b)(4)).
        ``(2) Reconciliation of amounts.--
            ``(A) Payments in excess of limits.--Subject to 
        subparagraph (B), if a home health agency has received 
        aggregate per visit payments under subsection (a) for a fiscal 
        year in excess of the amount determined under paragraph (1) 
        with respect to such home health agency for such fiscal year, 
        the Secretary shall reduce payments under this section to the 
        home health agency in the following fiscal year in such manner 
        as the Secretary considers appropriate (including on an 
        installment basis) to recapture the amount of such excess.
            ``(B) Exception for home health services furnished over a 
        period greater than 165 days.--
                ``(i) In general.--For purposes of subparagraph (A), 
            the amount of aggregate per visit payments determined under 
            subsection (a) shall not include payments for home health 
            visits furnished to an individual on or after a continuous 
            period of more than 165 days after an individual begins an 
            episode described in subsection (c)(1)(D) (if such period 
            is not interrupted by the beginning of a new episode).
                ``(ii) Requirement of certification.--Clause (i) shall 
            not apply if the agency has not obtained a physician's 
            certification with respect to the individual requiring such 
            visits that includes a statement that the individual 
            requires such continued visits, the reason for the need for 
            such visits, and a description of such services furnished 
            during such visits.
            ``(C) Share of savings.--
                ``(i) Bonus payments.--If a home health agency has 
            received aggregate per visit payments under subsection (a) 
            for a fiscal year in an amount less than the amount 
            determined under paragraph (1) with respect to such home 
            health agency for such fiscal year, the Secretary shall pay 
            such home health agency a bonus payment equal to 50 percent 
            of the difference between such amounts in the following 
            fiscal year, except that the bonus payment may not exceed 5 
            percent of the aggregate per visit payments made to the 
            agency for the year.
                ``(ii) Installment bonus payments.--The Secretary may 
            make installment payments during a fiscal year to a home 
            health agency based on the estimated bonus payment that the 
            agency would be eligible to receive with respect to such 
            fiscal year.
    ``(d) Medical Review Process.--The Secretary shall implement a 
medical review process (with a particular emphasis on fiscal years 1997 
and 1998) for the system of payments described in this section that 
shall provide an assessment of the pattern of care furnished to 
individuals receiving home health services for which payments are made 
under this section to ensure that such individuals receive appropriate 
home health services. Such review process shall focus on low-cost 
episodes (as defined by the Secretary under section (e)(3)(C)) and 
cases described in subsection (c)(2)(B) and shall require 
recertification by intermediaries at 60 and 165 days into an episode 
described in subsection (c)(1)(D).
    ``(e) Adjustment of Payments to Avoid Circumvention of Limits.--
        ``(1) In general.--The Secretary shall provide for appropriate 
    adjustments to payments to home health agencies under this section 
    to ensure that agencies do not circumvent the purpose of this 
    section by--
            ``(A) discharging patients to another home health agency or 
        similar provider;
            ``(B) altering corporate structure or name to avoid being 
        subject to this section or for the purpose of increasing 
        payments under this title; or
            ``(C) undertaking other actions considered unnecessary for 
        effective patient care and intended to achieve maximum payments 
        under this title.
        ``(2) Tracking of patients that switch home health agencies 
    during episode.--
            ``(A) Development of system.--The Secretary shall develop a 
        system that tracks home health patients that receive home 
        health services described in subsection (a)(2) from more than 1 
        home health agency during an episode described in subsection 
        (c)(1)(D).
            ``(B) Adjustment of payments.--The Secretary shall adjust 
        payments under this section to each home health agency that 
        furnishes an individual with a type of home health service 
        described in subsection (a)(2) to ensure that aggregate 
        payments on behalf of such individual during such episode do 
        not exceed the amount that would be paid under this section if 
        the individual received such services from a single home health 
        agency.
        ``(3) Low-cost cases.--
            ``(A) In general.--The Secretary shall develop and 
        implement a system designed to adjust payments to a home health 
        agency for a fiscal year to eliminate any increase in growth of 
        the percentage distribution of low-cost episodes for which home 
        health services are furnished by the agency over such 
        percentage distribution determined for the agency under 
        subparagraph (B).
            ``(B) Distribution.--The Secretary shall profile each home 
        health agency to determine the distribution of all episodes by 
        length of stay for each agency during the agency's first 12-
        month cost reporting period beginning during fiscal year 1994.
            ``(C) Low-cost episode.--For purposes of this paragraph, 
        the Secretary shall define a low-cost episode in a manner that 
        provides that a home health agency has an incentive to be cost 
        efficient in delivering home health services and that the 
        volume of such services does not increase as a result of 
        factors other than patient needs.
    ``(f) Special Rule for Christian Science Providers.--
        ``(1) Payment permitted for services.--Notwithstanding any 
    other provision of this title, payment shall be made under this 
    title for home health services furnished by Christian Science 
    providers who meet applicable requirements of the First Church of 
    Christ, Scientist, Boston, Massachusetts, and are certified for 
    purposes of this title under criteria established by the Secretary, 
    in accordance with a payment methodology established by the 
    Secretary.
        ``(2) Effective date.--Paragraph (1) shall apply to services 
    furnished during cost reporting periods which begin after the 
    earlier of--
            ``(A) the date on which the Secretary establishes the 
        payment methodology and the certification criteria described in 
        paragraph (1), or
            ``(B) July 1, 1996.
    ``(g) Report by Medicare Payment Review Commission.--During the 
first 3 years in which payments are made under this section, the 
Medicare Payment Review Commission shall annually submit a report to 
Congress on the effectiveness of the payment methodology established 
under this section that shall include recommendations regarding the 
following:
        ``(1) Case-mix and volume increases.
        ``(2) Quality monitoring of home health agency practices.
        ``(3) Whether a capitated payment for home care patients 
    receiving care during a continuous period exceeding 165 days is 
    warranted.
        ``(4) Whether public providers of service are adequately 
    reimbursed.
        ``(5) On the adequacy of the exemptions and exceptions to the 
    limits provided under subsection (c)(1)(E).
        ``(6) The appropriateness of the methods provided under this 
    section to adjust the per episode limits and annual payment updates 
    to reflect changes in the mix of services, number of visits, and 
    assignment to case categories to reflect changing patterns of home 
    health care.
        ``(7) The geographic areas used to determine the per episode 
    limits.''.
    (b) Payment for Prosthetics and Orthotics Under Part A.--Section 
1814(k) (42 U.S.C. 1395f(k)) is amended--
        (1) by inserting ``and prosthetics and orthotics'' after 
    ``durable medical equipment''; and
        (2) by inserting ``and 1834(h), respectively'' after 
    ``1834(a)(1)''.
    (c) Conforming Amendments.--
        (1) Payments under part a.--Section 1814(b) (42 U.S.C. 
    1395f(b)), as amended by section 8412(b), is amended in the matter 
    preceding paragraph (1) by striking ``1888 and 1888A'' and 
    inserting ``1888, 1888A, and 1894''.
        (2) Treatment of items and services paid under part b.--
            (A) Payments under part b.--Section 1833(a)(2) (42 U.S.C. 
        1395l(a)(2)) is amended--
                (i) by amending subparagraph (A) to read as follows:
            ``(A) with respect to home health services--
                ``(i) that are a type of home health service described 
            in section 1894(a)(2), and which are furnished to an 
            individual who (at the time the item or service is 
            furnished) is under a plan of care of a home health agency, 
            the amount determined under section 1894;
                ``(ii) that are not described in clause (i) (other than 
            a covered osteoporosis drug) (as defined in section 
            1861(kk)), the lesser of--

                    ``(I) the reasonable cost of such services, as 
                determined under section 1861(v), or
                    ``(II) the customary charges with respect to such 
                services;''.

                (ii) by striking ``and'' at the end of subparagraph 
            (E);
                (iii) by adding ``and'' at the end of subparagraph (F); 
            and
                (iv) by adding at the end the following new 
            subparagraph:
            ``(G) with respect to items and services described in 
        section 1861(s)(10)(A), the lesser of--
                ``(i) the reasonable cost of such services, as 
            determined under section 1861(v), or
                ``(ii) the customary charges with respect to such 
            services,
        or, if such services are furnished by a public provider of 
        services, or by another provider which demonstrates to the 
        satisfaction of the Secretary that a significant portion of its 
        patients are low-income (and requests that payment be made 
        under this provision), free of charge or at nominal charges to 
        the public, the amount determined in accordance with section 
        1814(b)(2);''.
            (B) Requiring payment for all items and services to be made 
        to agency.--
                (i) In general.--The first sentence of section 
            1842(b)(6) (42 U.S.C. 1395u(b)(6)), as amended by section 
            8415(a)(1), is amended--

                    (I) by striking ``and (E)'' and inserting ``(E)''; 
                and
                    (II) by striking the period at the end and 
                inserting the following: ``, and (F) in the case of 
                types of home health services described in section 
                1894(a)(2) furnished to an individual who (at the time 
                the item or service is furnished) is under a plan of 
                care of a home health agency, payment shall be made to 
                the agency (without regard to whether or not the item 
                or service was furnished by the agency, by others under 
                arrangement with them made by the agency, or when any 
                other contracting or consulting arrangement, or 
                otherwise).''.

                (ii) Conforming amendment.--Section 1832(a)(1) (42 
            U.S.C. 1395k(a)(1)) is amended by striking ``(2);'' and 
            inserting ``(2) and section 1842(b)(6)(F);''.
            (C) Exclusions from coverage.--Section 1862(a) (42 U.S.C. 
        1395y(a)), as amended by section 8415(a)(2), is amended--
                (i) by striking ``or'' at the end of paragraph (15);
                (ii) by striking the period at the end of paragraph 
            (16) and inserting ``or''; and
                (iii) by adding at the end the following new paragraph:
        ``(17) where such expenses are for home health services 
    furnished to an individual who is under a plan of care of the home 
    health agency if the claim for payment for such services is not 
    submitted by the agency.''.
        (3) Sunset of reasonable cost limitations.--Section 
    1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended by adding at 
    the end the following new clause:
    ``(iv) This subparagraph shall apply only to services furnished by 
home health agencies during cost reporting periods ending on or before 
September 30, 1996.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to cost reporting periods beginning on or after October 1, 1996.

SEC. 8602. MAINTAINING SAVINGS RESULTING FROM TEMPORARY FREEZE ON 
              PAYMENT INCREASES FOR HOME HEALTH SERVICES.

    (a) Basing Updates to Per Visit Cost Limits on Limits for Fiscal 
Year 1993.--Section 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) 
is amended by adding at the end the following sentence: ``In 
establishing limits under this subparagraph, the Secretary may not take 
into account any changes in the costs of the provision of services 
furnished by home health agencies with respect to cost reporting 
periods which began on or after July 1, 1994, and before July 1, 
1996.''.
    (b) No Exceptions Permitted Based on Amendment.--The Secretary of 
Health and Human Services shall not consider the amendment made by 
subsection (a) in making any exemptions and exceptions pursuant to 
section 1861(v)(1)(L)(ii) of the Social Security Act.

SEC. 8603. EXTENSION OF WAIVER OF PRESUMPTION OF LACK OF KNOWLEDGE OF 
              EXCLUSION FROM COVERAGE FOR HOME HEALTH AGENCIES.

    Section 9305(g)(3) of OBRA-1986, as amended by section 426(d) of 
the Medicare Catastrophic Coverage Act of 1988 and section 4207(b)(3) 
of the OBRA-1990 (as renumbered by section 160(d)(4) of the Social 
Security Act Amendments of 1994), is amended by striking ``December 31, 
1995'' and inserting ``September 30, 1996.''.

SEC. 8604. EXTENSION OF PERIOD OF HOME HEALTH AGENCY CERTIFICATION.

    Section 1891(c)(2)(A) (42 U.S.C. 1395bbb(c)(2)(A)) is amended--
        (1) by striking ``15 months'' and inserting ``36 months''; and
        (2) by striking the second sentence and inserting the 
    following: ``The Secretary shall establish a frequency for surveys 
    of home health agencies within this 36-month interval commensurate 
    with the need to assure the delivery of quality home health 
    services.''.

             PART 2--MEDICARE SECONDARY PAYER IMPROVEMENTS

SEC. 8611. EXTENSION AND EXPANSION OF EXISTING REQUIREMENTS.

    (a) Data Match.--
        (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is amended 
    by striking clause (iii).
        (2) Section 6103(l)(12) of the Internal Revenue Code of 1986 is 
    amended by striking subparagraph (F).
    (b) Application to Disabled Individuals in Large Group Health 
Plans.--
        (1) In general.--Section 1862(b)(1)(B) (42 U.S.C. 
    1395y(b)(1)(B)) is amended--
            (A) in clause (i), by striking ``clause (iv)'' and 
        inserting ``clause (iii)'',
            (B) by striking clause (iii), and
            (C) by redesignating clause (iv) as clause (iii).
        (2) Conforming amendments.--Paragraphs (1) through (3) of 
    section 1837(i) (42 U.S.C. 1395p(i)) and the second sentence of 
    section 1839(b) (42 U.S.C. 1395r(b)) are each amended by striking 
    ``1862(b)(1)(B)(iv)'' each place it appears and inserting 
    ``1862(b)(1)(B)(iii)''.
    (c) Individuals With End Stage Renal Disease.--Section 
1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended--
        (1) in the last sentence by striking ``October 1, 1998'' and 
    inserting ``the date of the enactment of the Medicare Preservation 
    Act of 1995''; and
        (2) by adding at the end the following new sentence: 
    ``Effective for items and services furnished on or after the date 
    of the enactment of the Medicare Preservation Act of 1995, (with 
    respect to periods beginning on or after the date that is 18 months 
    prior to such date), clauses (i) and (ii) shall be applied by 
    substituting `30-month' for `12-month' each place it appears.''.

SEC. 8612. IMPROVEMENTS IN RECOVERY OF PAYMENTS.

    (a) Permitting Recovery Against Third Party Administrators of 
Primary Plans.--Section 1862(b)(2)(B)(ii) (42 U.S.C. 
1395y(b)(2)(B)(ii)) is amended--
        (1) by striking ``under this subsection to pay'' and inserting 
    ``(directly, as a third-party administrator, or otherwise) to make 
    payment'', and
        (2) by adding at the end the following: ``The United States may 
    not recover from a third-party administrator under this clause in 
    cases where the third-party administrator would not be able to 
    recover the amount at issue from the employer or group health plan 
    for whom it provides administrative services due to the insolvency 
    or bankruptcy of the employer or plan.''.
    (b) Extension of Claims Filing Period.--Section 1862(b)(2)(B) (42 
U.S.C. 1395y(b)(2)(B)) is amended by adding at the end the following 
new clause:
                ``(v) Claims-filing period.--Notwithstanding any other 
            time limits that may exist for filing a claim under an 
            employer group health plan, the United States may seek to 
            recover conditional payments in accordance with this 
            subparagraph where the request for payment is submitted to 
            the entity required or responsible under this subsection to 
            pay with respect to the item or service (or any portion 
            thereof) under a primary plan within the 3-year period 
            beginning on the date on which the item or service was 
            furnished.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to items and services furnished on or after the date of the 
enactment of this Act.

        CHAPTER 3--OTHER ITEMS AND SERVICES UNDER PARTS A AND B

SEC. 8621. MEDICARE COVERAGE OF CERTAIN ANTI-CANCER DRUG TREATMENTS.

    (a) Coverage of Certain Self-Administered Anticancer Drugs.--
Section 1861(s)(2)(Q) (42 U.S.C. 1395x(s)(2)(Q)) is amended--
        (1) by striking ``(Q)'' and inserting ``(Q)(i)'';
        (2) by striking the semicolon at the end and inserting ``, 
    and''; and
        (3) by adding at the end the following:
    ``(ii) an oral drug (which is approved by the Federal Food and Drug 
Administration) prescribed for use as an anticancer nonsteroidal 
antiestrogen for the treatment of breast cancer, but only if the 
manufacturer of such drug has in effect a rebate agreement with the 
Secretary with respect to such drug which has substantially similar 
terms and conditions to the terms and conditions for such agreements 
under section 1927 (as such section is in effect on the date of the 
enactment of this clause);''.
    (b) Uniform Coverage of Anticancer Drugs in All Settings.--Section 
1861(t)(2)(A) (42 U.S.C. 1395x(t)(2)(A)) is amended by inserting 
``(including a nonsteroidal antiestrogen regimen)'' after ``regimen''.
    (c) Conforming Amendment.--Section 1834(j)(5)(F)(iv) (42 U.S.C. 
1395m(j)(5)(F)(iv)) is amended by striking ``prescribed for use'' and 
all that follows through ``1861(s)(2)(Q))'' and inserting ``described 
in section 1861(s)(2)(Q)''.
    (d) Effective Date.--The amendments made by this section shall 
apply to drugs furnished on or after January 1, 1996.

SEC. 8622. ADMINISTRATIVE PROVISIONS.

    (a) Indian Health Service Facilities.--Nothing in this Act shall be 
construed to change the status under title XVIII of the Social Security 
Act (42 U.S.C. 1395 et seq.) of--
        (1) a federally qualified health center (as defined in section 
    1861(aa)(4) of such Act) which is an outpatient health program or 
    facility operated by a tribe or tribal organization under the 
    Indian Self-Determination Act or by an urban Indian organization 
    receiving funds under title V of the Indian Health Care Improvement 
    Act; or
        (2) hospitals or skilled nursing facilities of the Indian 
    Health Service, whether operated by such Service or by an Indian 
    tribe or tribal organization (as those terms are defined in section 
    4 of the Indian Health Care Improvement Act), that are eligible for 
    payments under title XVIII of the Social Security Act, in 
    accordance with section 1880 of such Act (42 U.S.C. 1395qq).
    (b) Conforming Amendment to Certification of Christian Science 
Providers.--
        (1) Hospitals.--Section 1861(e) (42 U.S.C. 1395x(e)) is amended 
    in the sixth sentence by striking ``the First Church of Christ, 
    Scientist, Boston, Massachusetts,'' and inserting ``the Commission 
    for Accreditation of Christian Science Nursing Organizations/
    Facilities, Inc.,''.
        (2) Skilled nursing facilities.--Section 1861(y)(1) (42 U.S.C. 
    1395x(y)(1)) is amended by striking ``the First Church of Christ, 
    Scientist, Boston, Massachusetts,'' and inserting ``the Commission 
    for Accreditation of Christian Science Nursing Organizations/
    Facilities, Inc.,''.
        (3) General provisions.--
            (A) Uniform reporting systems.--Section 1122(h) (42 U.S.C. 
        1320a-1(h)) is amended by striking ``the First Church of 
        Christ, Scientist, Boston, Massachusetts'' and inserting ``the 
        Commission for Accreditation of Christian Science Nursing 
        Organizations/Facilities, Inc.''.
            (B) Peer review.--Section 1162 (42 U.S.C. 1320c-11) is 
        amended by striking ``the First Church of Christ, Scientist, 
        Boston, Massachusetts'' and inserting ``the Commission for 
        Accreditation of Christian Science Nursing Organizations/
        Facilities, Inc.''.
        (4) Effective date.--The amendments made by this subsection 
    shall take effect on January 1, 1997.

                          CHAPTER 4--FAILSAFE

SEC. 8631. FAILSAFE BUDGET MECHANISM.

    (a) In General.--Title XVIII, as amended by sections 8102(a) and 
8601(a), is amended by adding at the end the following new section:

                       ``failsafe budget mechanism

    ``Sec. 1895. (a) Requirement of Payment Adjustments to Achieve 
Medicare Budget Targets.--
        ``(1) In general.--If the Secretary determines under subsection 
    (e)(3)(C) before a fiscal year (beginning with fiscal year 1998) 
    that--
            ``(A) the fee-for-service expenditures (as defined in 
        subsection (f)) for all sectors of medicare services (as 
        defined in subsection (b)) for the fiscal year, will exceed
            ``(B) the sum of the allotments specified under subsection 
        (c)(2) for such fiscal year (taking into account any adjustment 
        in the allotment under subsection (g) for that fiscal year) for 
        all sectors,
    then, notwithstanding any other provision of this title, there 
    shall be an adjustment (consistent with subsection (d)) in 
    applicable payment rates or payments for items and services 
    included in each excess spending sector in the fiscal year. In this 
    section, the term `aggregate excess spending' means, for a fiscal 
    year, the amount by which the amount described in subparagraph (A) 
    (for the fiscal year) exceeds the amount described in subparagraph 
    (B) for such year.
        ``(2) Excess spending sector.--In this section, the term 
    `excess spending sector' means, for a fiscal year, a sector of 
    medicare services for which the Secretary determines under 
    subsection (e)(3)(C)--
            ``(A) the fee-for-service expenditures (as defined in 
        subsection (f)) for the fiscal year, will exceed
            ``(B) the allotment specified under subsection (c)(2) for 
        such fiscal year (taking into account any adjustment in the 
        allotment under subsection (g) for that fiscal year).
    In this section, the term `excess spending' means, for a fiscal 
    year with respect to such a sector, the amount by which the amount 
    described in subparagraph (A) (for the fiscal year and sector) 
    exceeds the amount described in subparagraph (B) for such year and 
    sector.
    ``(b) Sectors of Medicare Services Described.--
        ``(1) In general.--For purposes of this section, items and 
    services included under each of the following subparagraphs shall 
    be considered to be a separate `sector' of medicare services:
            ``(A) Inpatient hospital services.
            ``(B) Home health services.
            ``(C) Extended care services (for inpatients of skilled 
        nursing facilities).
            ``(D) Hospice care.
            ``(E) Physicians' services (including services and supplies 
        described in section 1861(s)(2)(A)) and services of other 
        health care professionals (including certified registered nurse 
        anesthetists, nurse practitioners, physician assistants, and 
        clinical psychologists) for which separate payment is made 
        under this title.
            ``(F) Outpatient hospital services and ambulatory facility 
        services.
            ``(G) Durable medical equipment and supplies, including 
        prosthetic devices and orthotics.
            ``(H) Diagnostic tests (including clinical laboratory 
        services and x-ray services).
            ``(I) Other items and services.
        ``(2) Classification of items and services.--The Secretary 
    shall classify each type of items and services covered and paid for 
    separately under this title into one of the sectors specified in 
    paragraph (1). After publication of such classification under 
    subsection (e)(1), the Secretary is not authorized to make 
    substantive changes in such classification.
    ``(c) Allotment.--
        ``(1) Allotments for each sector.--For purposes of this 
    section, subject to subsection (g)(1), the allotment for a sector 
    of medicare services for a fiscal year is equal to the product of--
            ``(A) the total allotment for the fiscal year established 
        under paragraph (2), and
            ``(B) the allotment proportion (specified under paragraph 
        (3)) for the sector and fiscal year involved.
        ``(2) Total allotment.--
            ``(A) In general.--For purposes of this section, the total 
        allotment for a fiscal year is equal to--
                ``(i) the medicare benefit budget for the fiscal year 
            (as specified under subparagraph (B)), reduced by
                ``(ii) the amount of payments the Secretary estimates 
            will be made in the fiscal year under the MedicarePlus 
            program under part C.
        In making the estimate under clause (ii), the Secretary shall 
        take into account estimated enrollment and demographic profile 
        of individuals electing MedicarePlus products.
            ``(B) Medicare benefit budget.--For purposes of this 
        subsection, subject to subparagraph (C), the `medicare benefit 
        budget'--
                ``(i) for fiscal year 1996 is $194.2 billion;
                ``(ii) for fiscal year 1997 is $206.3 billion;
                ``(iii) for fiscal year 1998 is $217.8 billion;
                ``(iv) for fiscal year 1999 is $229.2 billion;
                ``(v) for fiscal year 2000 is $247.2 billion;
                ``(vi) for fiscal year 2001 is $266.4 billion;
                ``(vii) for fiscal year 2002 is $289.0 billion; and
                ``(viii) for a subsequent fiscal year is equal to the 
            medicare benefit budget under this subparagraph for the 
            preceding fiscal year multiplied by the product of (I) 
            1.05, and (II) 1 plus the annual percentage increase in the 
            average number of medicare beneficiaries from the previous 
            fiscal year to the fiscal year involved.
        ``(3) Medicare allotment proportion defined.--
            ``(A) In general.--For purposes of this section and with 
        respect to a sector of medicare services for a fiscal year, the 
        term `medicare allotment proportion' means the ratio of--
                ``(i) the baseline-projected medicare expenditures (as 
            determined under subparagraph (B)) for the sector for the 
            fiscal year, to
                ``(ii) the sum of such baseline expenditures for all 
            such sectors for the fiscal year.
            ``(B) Baseline-projected medicare expenditures.--In this 
        paragraph, the `baseline, projected medicare expenditures' for 
        a sector of medicare services--
                ``(i) for fiscal year 1996 is equal to fee-for-service 
            expenditures for such sector during fiscal year 1995, 
            increased by the baseline annual growth rate for such 
            sector of medicare services for fiscal year 1996 (as 
            specified in table in subparagraph (C)); and
                ``(ii) for a subsequent fiscal year is equal to the 
            baseline-projected medicare expenditures under this 
            subparagraph for the sector for the previous fiscal year 
            increased by the baseline annual growth rate for such 
            sector for the fiscal year involved (as specified in such 
            table).
            ``(C) Baseline annual growth rates.--The following table 
        specifies the baseline annual growth rates for each of the 
        sectors for different fiscal years:
  

----------------------------------------------------------------------------------------------------------------
                                                         Baseline annual growth rates for fiscal year--         
                                               -----------------------------------------------------------------
         ``For the following sector--                                                                  2002 and 
                                                  1996     1997     1998     1999     2000     2001   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% 
(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% 
----------------------------------------------------------------------------------------------------------------

    ``(d) Manner of Payment Adjustment.--
        ``(1) Payment reductions.--
            ``(A) In general.--Subject to the succeeding provisions of 
        this subsection, the Secretary shall apply a payment reduction 
        for each excess spending sector for a fiscal year in such a 
        manner as to--
                ``(i) make a change in payment rates (to the maximum 
            extent practicable) at the time payment rates are otherwise 
            changed or subject to change for that fiscal year; and
                ``(ii) provide for the full appropriate adjustment so 
            that the fee-for-service expenditures for the sector for 
            the fiscal year will be reduced by 133\1/3\ percent of the 
            amount of the sector reduction target for that sector.
            ``(B) Sector reduction target.--In paragraph (1), the 
        `sector reduction target' for an excess spending sector for a 
        fiscal year is equal to the product of--
                ``(i) the amount of the excess spending for such sector 
            and year (as defined in subsection (a)(2)); and
                ``(ii) the ratio of--

                    ``(I) the aggregate excess spending for the year 
                (as defined in subsection (a)(1)), to
                    ``(II) the sum of the amounts of the excess 
                spending for all excess spending sectors.

        ``(2) Taking into account volume and cash flow.--In providing 
    for an adjustment in payments under this subsection for a sector 
    for a fiscal year, the Secretary shall take into account (in a 
    manner consistent with actuarial projections)--
            ``(A) the impact of such an adjustment on the volume or 
        type of services provided in such sector (and other sectors), 
        and
            ``(B) the fact that an adjustment may apply to items and 
        services furnished in a fiscal year (payment for which may 
        occur in a subsequent fiscal year),
    in a manner that is consistent with assuring that total fee-for-
    services expenditures for each sector for the fiscal year will not 
    exceed the allotment under subsection (c)(1) for such sector for 
    such year.
        ``(3) Proportionality of reductions within a sector.--In making 
    adjustments under this subsection in payment for items and services 
    included within a sector of medicare services for a fiscal year, 
    the Secretary shall provide for such an adjustment that results (to 
    the maximum extent feasible) in the same percentage reductions in 
    aggregate Federal payments under parts A and B for the different 
    classes of items and services included within the sector for the 
    fiscal year.
        ``(4) Application to payments made based on prospective payment 
    rates determined on a fiscal year basis.--
            ``(A) In general.--In applying subsection (a) with respect 
        to items and services for which payment is made under part A or 
        B on the basis of rates that are established on a prospective 
        basis for (and in advance of) a fiscal year, the Secretary 
        shall provide for the payment adjustment under such subsection 
        through an appropriate reduction in such rates established for 
        items and services furnished (or, in the case of payment for 
        operating costs of inpatient hospital services of subsection 
        (d) hospitals and subsection (d) Puerto Rico hospitals (as 
        defined in paragraphs (1)(B) and (9)(A) of section 1886(d)), 
        discharges occurring) during such year.
            ``(B) Description of application to specific services.--The 
        payment adjustment described in subparagraph (A) applies for a 
        fiscal year to at least the following:
                ``(i) Update factor for payment for operating costs of 
            inpatient hospital services of pps hospitals.--To the 
            computation of the applicable percentage increase specified 
            in section 1886(d)(3)(B)(i) for discharges occurring in the 
            fiscal year.
                ``(ii) Home health services.--To the extent payment 
            amounts for home health services are based on per visit 
            payment rates under section 1894, to the computation of the 
            increase in the national per visit payment rates 
            established for the year under section 1894(b)(2)(B).
                ``(iii) Hospice care.--To the update of payment rates 
            for hospice care under section 1814(i) for services 
            furnished during the fiscal year.
                ``(iv) Update factor for payment of operating costs of 
            inpatient hospital services of pps-exempt hospitals.--To 
            the computation of the target amount under section 
            1886(b)(3) for discharges occurring during the fiscal year.
                ``(v) Covered non-routine services of skilled nursing 
            facilities.--To the computation of the facility per stay 
            limits for the year under section 1888A(d) for covered non-
            routine services of a skilled nursing facility (as 
            described in such section).
        ``(5) Application to payments made based on prospective payment 
    rates determined on a calendar year basis.--
            ``(A) In general.--In applying subsection (a) for a fiscal 
        year with respect to items and services for which payment is 
        made under part A or B on the basis of rates that are 
        established on a prospective basis for (and in advance of) a 
        calendar year, the Secretary shall provide for the payment 
        adjustment under such subsection through an appropriate 
        reduction in such rates established for items and services 
        furnished at any time during such calendar year as follows:
                ``(i) For fiscal year 1997, the reduction shall be made 
            for payment rates during calendar year 1997 in a manner so 
            as to achieve the necessary payment reductions for such 
            fiscal year for items and services furnished during the 
            first 3 quarters of calendar year 1997.
                ``(ii) For a subsequent fiscal year, the reduction 
            shall be made for payment rates during the calendar year in 
            which the fiscal year ends in a manner so as to achieve the 
            necessary payment reductions for such fiscal year for items 
            and services furnished during the first 3 quarters of the 
            calendar year, but also taking into account the payment 
            reductions made in the first quarter of the fiscal year 
            resulting from payment reductions made under this paragraph 
            for the previous calendar year.
                ``(iii) Payment rate reductions effected under this 
            subparagraph for a calendar year and applicable to the last 
            3 quarters of the fiscal year in which the calendar year 
            ends shall continue to apply during the first quarter of 
            the succeeding fiscal year.
            ``(B) Application in specific cases.--The payment 
        adjustment described in subparagraph (A) applies for a fiscal 
        year to at least the following:
                ``(i) Update in conversion factor for physicians' 
            services.--To the computation of the conversion factor 
            under subsection (d) of section 1848 used in the fee 
            schedule established under subsection (b) of such section, 
            for items and services furnished during the calendar year 
            in which the fiscal year ends.
                ``(ii) Payment rates for other health care 
            professionals.--To the computation of payments for 
            professional services, furnished during the calendar year 
            in which the fiscal year ends, of certified registered 
            nurse anesthetists under section 1833(l), nurse midwives, 
            physician assistants, nurse practitioners and clinical 
            nurse specialists under section 1833(r), clinical 
            psychologists, clinical social workers, physical or 
            occupational therapists, and any other health professionals 
            for which payment rates are based (in whole or in part) on 
            payments for physicians' services.
                ``(iii) Update in lab fee schedule.--To the computation 
            of the fee schedule amount under section 1833(h)(2) for 
            clinical diagnostic laboratory services furnished during 
            the calendar year in which the fiscal year ends.
                ``(iv) Update in reasonable charges for vaccines.--To 
            the computation of the reasonable charge for vaccines 
            described in section 1861(s)(10) for vaccines furnished 
            during the calendar year in which the fiscal year ends.
                ``(v) Durable medical equipment-related items.--To the 
            computation of the payment basis under section 
            1834(a)(1)(B) for covered items described in section 
            1834(a)(13), for items furnished during the calendar year 
            in which the fiscal year ends.
                ``(vi) Radiologist services.--To the computation of 
            conversion factors for radiologist services under section 
            1834(b), for services furnished during the calendar year in 
            which the fiscal year ends.
                ``(vii) Screening mammography.--To the computation of 
            payment rates for screening mammography under section 
            1834(c)(1)(C)(ii), for screening mammography performed 
            during the calendar year in which the fiscal year ends.
                ``(viii) Prosthetics and orthotics.--To the computation 
            of the amount to be recognized under section 1834(h) for 
            payment for prosthetic devices and orthotics and 
            prosthetics, for items furnished during the calendar year 
            in which the fiscal year ends.
                ``(ix) Surgical dressings.--To the computation of the 
            payment amount referred to in section 1834(i)(1)(B) for 
            surgical dressings, for items furnished during the calendar 
            year in which the fiscal year ends.
                ``(x) Parenteral and enteral nutrition.--To the 
            computation of reasonable charge screens for payment for 
            parenteral and enteral nutrition under section 1834(h), for 
            nutrients furnished during the calendar year in which the 
            fiscal year ends.
                ``(xi) Ambulance services.--To the computation of 
            limits on reasonable charges for ambulance services, for 
            services furnished during the calendar year in which the 
            fiscal year ends.
        ``(6) Application to payments made based on costs during a cost 
    reporting period.--
            ``(A) In general.--In applying subsection (a) for a fiscal 
        year with respect to items and services for which payment is 
        made under part A or B on the basis of costs incurred for items 
        and services in a cost reporting period, the Secretary shall 
        provide for the payment adjustment under such subsection for a 
        fiscal year through an appropriate proportional reduction in 
        the payment for costs for such items and services incurred at 
        any time during each cost reporting period any part of which 
        occurs during the fiscal year involved, but only (for each such 
        cost reporting period) in the same proportion as the fraction 
        of the cost reporting period that occurs during the fiscal year 
        involved.
            ``(B) Application in specific cases.--The payment 
        adjustment described in subparagraph (A) applies for a fiscal 
        year to at least the following:
                ``(i) Capital-related costs of hospital services.--To 
            the computation of payment amounts for inpatient and 
            outpatient hospital services under sections 1886(g) and 
            1861(v) for portions of cost reporting periods occurring 
            during the fiscal year.
                ``(ii) Operating costs for pps-exempt hospitals.--To 
            the computation of payment amounts under section 1886(b) 
            for operating costs of inpatient hospital services of PPS-
            exempt hospitals for portions of cost reporting periods 
            occurring during the fiscal year.
                ``(iii) Direct graduate medical education.--To the 
            computation of payment amounts under section 1886(h) for 
            reasonable costs of direct graduate medical education costs 
            for portions of cost reporting periods occurring during the 
            fiscal year.
                ``(iv) Inpatient rural primary care hospital 
            services.--To the computation of payment amounts under 
            section 1814(j) for inpatient rural primary care hospital 
            services for portions of cost reporting periods occurring 
            during the fiscal year.
                ``(v) Extended care services of a skilled nursing 
            facility.--To the computation of payment amounts under 
            section 1861(v) for post-hospital extended care services of 
            a skilled nursing facility (other than covered non-routine 
            services subject to section 1888A) for portions of cost 
            reporting periods occurring during the fiscal year.
                ``(vi) Reasonable cost contracts.--To the computation 
            of payment amounts under section 1833(a)(1)(A) for 
            organizations for portions of cost reporting periods 
            occurring during the fiscal year.
                ``(vii) Home health services.--Subject to paragraph 
            (4)(B)(ii), for payment amounts for home health services, 
            for portions of cost reporting periods occurring during 
            such fiscal year.
        ``(7) Other.--In applying subsection (a) for a fiscal year with 
    respect to items and services for which payment is made under part 
    A or B on a basis not described in a previous paragraph of this 
    subsection, the Secretary shall provide for the payment adjustment 
    under such subsection through an appropriate proportional reduction 
    in the payments (or payment bases for items and services furnished) 
    during the fiscal year.
        ``(8) Adjustment of payment limits.--The Secretary shall 
    provide for such proportional adjustment in any limits on payment 
    established under part A or B for items and services within a 
    sector as may be appropriate based on (and in order to properly 
    carry out) the adjustment to the amount of payment under this 
    subsection in the sector.
        ``(9) References to payment rates.--Except as the Secretary may 
    provide, any reference in this title (other than this section) to a 
    payment rate is deemed a reference to such a rate as adjusted under 
    this subsection.
    ``(e) Publication of Determinations; Judicial Review.--
        ``(1) One-time publication of sectors and general payment 
    adjustment methodology.--Not later than October 1, 1996, the 
    Secretary shall publish in the Federal Register the classification 
    of medicare items and services into the sectors of medicare 
    services under subsection (b) and the general methodology to be 
    used in applying payment adjustments to the different classes of 
    items and services within the sectors.
        ``(2) Inclusion of information in president's budget.--
            ``(A) In general.--With respect to fiscal years beginning 
        with fiscal year 1999, the President shall include in the 
        budget submitted under section 1105 of title 31, United States 
        Code, information on--
                ``(i) the fee-for-service expenditures, within each 
            sector, for the second previous fiscal year, and how such 
            expenditures compare to the adjusted sector allotment for 
            that sector for that fiscal year; and
                ``(ii) actual annual growth rates for fee-for-service 
            expenditures in the different sectors in the second 
            previous fiscal year.
            ``(B) Recommendations regarding growth factors.--The 
        President may include in such budget for a fiscal year 
        (beginning with fiscal year 1998) recommendations regarding 
        percentages that should be applied (for one or more fiscal 
        years beginning with that fiscal year) instead of the baseline 
        annual growth rates under subsection (c)(3)(C). Such 
        recommendations shall take into account medically appropriate 
        practice patterns.
        ``(3) Determinations concerning payment adjustments.--
            ``(A) Recommendations of commission.--By not later than 
        March 1 of each year (beginning with 1997), the Medicare 
        Payment Review Commission shall submit to the Secretary and the 
        Congress a report that analyzes the previous operation (if any) 
        of this section and that includes recommendations concerning 
        the manner in which this section should be applied for the 
        following fiscal year.
            ``(B) Preliminary notice by secretary.--Not later than May 
        15 preceding the beginning of each fiscal year (beginning with 
        fiscal year 1998), the Secretary shall publish in the Federal 
        Register a notice containing the Secretary's preliminary 
        determination, for each sector of medicare services, concerning 
        the following:
                ``(i) The projected allotment under subsection (c) for 
            such sector for the fiscal year.
                ``(ii) Whether there will be a payment adjustment for 
            items and services included in such sector for the fiscal 
            year under subsection (a).
                ``(iii) If there will be such an adjustment, the size 
            of such adjustment and the methodology to be used in making 
            such a payment adjustment for classes of items and services 
            included in such sector.
                ``(iv) Beginning with fiscal year 1999, the fee-for-
            service expenditures for such sector for the second 
            preceding fiscal year.
        Such notice shall include an explanation of the basis for such 
        determination. Determinations under this subparagraph and 
        subparagraph (C) shall be based on the best data available at 
        the time of such determinations.
            ``(C) Final determination.--Not later than September 1 
        preceding the beginning of each fiscal year (beginning with 
        fiscal year 1998), the Secretary shall publish in the Federal 
        Register a final determination, for each sector of medicare 
        services, concerning the matters described in subparagraph (B) 
        and an explanation of the reasons for any differences between 
        such determination and the preliminary determination for such 
        fiscal year published under subparagraph (B).
        ``(4) Limitation on administrative or judicial review.--There 
    shall be no administrative or judicial review under section 1878 or 
    otherwise of--
            ``(A) the classification of items and services among the 
        sectors of medicare services under subsection (b),
            ``(B) the determination of the amounts of allotments for 
        the different sectors of medicare services under subsection 
        (c),
            ``(C) the determination of the amount (or method of 
        application) of any payment adjustment under subsection (d), or
            ``(D) any adjustment in an allotment effected under 
        subsection (g).
    ``(f) Fee-for-Service Expenditures Defined.--In this section, the 
term `fee-for-service expenditures', for items and services within a 
sector of medicare services in a fiscal year, means amounts payable for 
such items and services which are furnished during the fiscal year, 
and--
        ``(1) includes types of expenses otherwise reimbursable under 
    parts A and B (including administrative costs incurred by 
    organizations described in sections 1816 and 1842) with respect to 
    such items and services, and
        ``(2) does not include amounts paid under part C.
    ``(g) Look-Back Adjustment in Allotments To Reflect Actual 
Expenditures.--
        ``(1) Determinations.--
            ``(A) In general.--If the Secretary estimates under 
        subsection (e)(3)(B) with respect to a particular fiscal year 
        (beginning with fiscal year 1998) that--
                ``(i) the fee-for-service expenditures for all sectors 
            of medicare services for the second preceding fiscal year, 
            exceeded
                ``(ii) the sum of the adjusted allotments for all 
            sectors for such year (as defined in paragraph (2)),
        then the allotment for each final excess spending sector (as 
        defined in subparagraph (B)(i)) for the particular fiscal year 
        shall be reduced by the look-back sector reduction amount 
        determined under subparagraph (B)(ii) for such sector and year.
            ``(B) Final excess spending sectors.--
                ``(i) In general.--In this paragraph, the term `final 
            excess spending sector' means, for a fiscal year, a sector 
            of medicare services for which the Secretary determines 
            under subsection (e)(3)(B) that--

                    ``(I) the fee-for-service expenditures (as defined 
                in subsection (f)) for the fiscal year, exceeded
                    ``(II) the adjusted allotment for such fiscal year.

            For purposes of clause (ii), the term `final excess 
            spending' means, for a fiscal year with respect to such a 
            sector, the amount by which the amount described in 
            subclause (I) (for the fiscal year and sector) exceeds the 
            amount described in subclause (II) for such year and 
            sector.
                ``(ii) Look-back sector reduction amount.--In 
            subparagraph (A)(i), the `look-back sector reduction 
            amount' for a final excess spending sector for a fiscal 
            year is equal to the product of--

                    ``(I) the amount of the final excess spending for 
                such sector and year (as defined in clause (i)); and
                    ``(II) the ratio of--

                        ``(a) the aggregate final excess spending for 
                    the year (described in subparagraph (A)(i)), to
                        ``(b) the sum of the amounts of the final 
                    excess spending for all final excess spending 
                    sectors.
        ``(2) Adjusted allotment.--The adjusted allotment under this 
    paragraph for a sector for a fiscal year is--
            ``(A) the amount that would be computed as the allotment 
        under subsection (c) for the sector for the fiscal year if the 
        actual amount of payments made in the fiscal year under the 
        MedicarePlus program under part C in the fiscal year were 
        substituted for the amount described in subsection 
        (c)(2)(A)(ii) for that fiscal year,
            ``(B) adjusted to take into account the amount of any 
        adjustment under paragraph (1) for that fiscal year (based on 
        expenditures in the second preceding fiscal year).''.
    (b) Report of Trustees on Growth Rate in Part A Expenditures.--
Section 1817 (42 U.S.C. 1395i) is amended by adding at the end the 
following new subsection:
    ``(k) Each annual report provided in subsection (b)(2) shall 
include information regarding the annual rate of growth in program 
expenditures that would be required to maintain the financial solvency 
of the Trust Fund and the extent to which the provisions of section 
1895 restrain the rate of growth of expenditures under this part in 
order to achieve such solvency.''.

                        Subtitle H--Rural Areas

SEC. 8701. MEDICARE-DEPENDENT, SMALL, RURAL HOSPITAL PAYMENT EXTENSION.

    (a) Special Treatment Extended.--
        (1) Payment methodology.--Section 1886(d)(5)(G) (42 U.S.C. 
    1395ww(d)(5)(G)) is amended--
            (A) in clause (i), by striking ``October 1, 1994,'' and 
        inserting ``October 1, 1994, or beginning on or after September 
        1, 1995, and before October 1, 2000,''; and
            (B) in clause (ii)(II), by striking ``October 1, 1994,'' 
        and inserting ``October 1, 1994, or beginning on or after 
        September 1, 1995, and before October 1, 2000,''.
        (2) Extension of target amount.--Section 1886(b)(3)(D) (42 
    U.S.C. 1395ww(b)(3)(D)) is amended--
            (A) in the matter preceding clause (i), by striking 
        ``September 30, 1994,'' and inserting ``September 30, 1994, and 
        for cost reporting periods beginning on or after September 1, 
        1995, and before October 1, 2000,'';
            (B) in clause (ii), by striking ``and'' at the end;
            (C) in clause (iii), by striking the period at the end and 
        inserting ``, and''; and
            (D) by adding at the end the following new clause:
        ``(iv) with respect to discharges occurring during September 
    1995 through fiscal year 1999, the target amount for the preceding 
    year increased by the applicable percentage increase under 
    subparagraph (B)(iv).''.
        (3) Permitting hospitals to decline reclassification.--Section 
    13501(e)(2) of OBRA-93 (42 U.S.C. 1395ww note) is amended by 
    striking ``or fiscal year 1994'' and inserting ``, fiscal year 
    1994, fiscal year 1995, fiscal year 1996, fiscal year 1997, fiscal 
    year 1998, or fiscal year 1999''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to discharges occurring on or after September 1, 
1995.

SEC. 8702. MEDICARE RURAL HOSPITAL FLEXIBILITY PROGRAM.

    (a) Medicare Rural Hospital Flexibility Program.--Section 1820 (42 
U.S.C. 1395i-4) is amended to read as follows:

              ``medicare rural hospital flexibility program

    ``Sec. 1820. (a) Establishment.--Any State that submits an 
application in accordance with subsection (b) may establish a medicare 
rural hospital flexibility program described in subsection (c).
    ``(b) Application.--A State may establish a medicare rural hospital 
flexibility program described in subsection (c) if the State submits to 
the Secretary at such time and in such form as the Secretary may 
require an application containing--
        ``(1) assurances that the State--
            ``(A) has developed, or is in the process of developing, a 
        State rural health care plan that--
                ``(i) provides for the creation of one or more rural 
            health networks (as defined in subsection (d)) in the 
            State,
                ``(ii) promotes regionalization of rural health 
            services in the State, and
                ``(iii) improves access to hospital and other health 
            services for rural residents of the State;
            ``(B) has developed the rural health care plan described in 
        subparagraph (A) in consultation with the hospital association 
        of the State, rural hospitals located in the State, and the 
        State Office of Rural Health (or, in the case of a State in the 
        process of developing such plan, that assures the Secretary 
        that the State will consult with its State hospital 
        association, rural hospitals located in the State, and the 
        State Office of Rural Health in developing such plan);
        ``(2) assurances that the State has designated (consistent with 
    the rural health care plan described in paragraph (1)(A)), or is in 
    the process of so designating, rural nonprofit or public hospitals 
    or facilities located in the State as critical access hospitals; 
    and
        ``(3) such other information and assurances as the Secretary 
    may require.
    ``(c) Medicare Rural Hospital Flexibility Program Described.--
        ``(1) In general.--A State that has submitted an application in 
    accordance with subsection (b), may establish a medicare rural 
    hospital flexibility program that provides that--
            ``(A) the State shall develop at least one rural health 
        network (as defined in subsection (d)) in the State; and
            ``(B) at least one facility in the State shall be 
        designated as a critical access hospital in accordance with 
        paragraph (2).
        ``(2) State designation of facilities.--
            ``(A) In general.--A State may designate one or more 
        facilities as a critical access hospital in accordance with 
        subparagraph (B).
            ``(B) Criteria for designation as critical access 
        hospital.--A State may designate a facility as a critical 
        access hospital if the facility--
                ``(i) is located in a county (or equivalent unit of 
            local government) in a rural area (as defined in section 
            1886(d)(2)(D)) that--

                    ``(I) is located more than a 35-mile drive from a 
                hospital, or another facility described in this 
                subsection, or
                    ``(II) is certified by the State as being a 
                necessary provider of health care services to residents 
                in the area;

                ``(ii) makes available 24-hour emergency care services 
            that a State determines are necessary for ensuring access 
            to emergency care services in each area served by a 
            critical access hospital;
                ``(iii) provides not more than 6 acute care inpatient 
            beds (meeting such standards as the Secretary may 
            establish) for providing inpatient care for a period not to 
            exceed 72 hours (unless a longer period is required because 
            transfer to a hospital is precluded because of inclement 
            weather or other emergency conditions), except that a peer 
            review organization or equivalent entity may, on request, 
            waive the 72-hour restriction on a case-by-case basis;
                ``(iv) meets such staffing requirements as would apply 
            under section 1861(e) to a hospital located in a rural 
            area, except that--

                    ``(I) the facility need not meet hospital standards 
                relating to the number of hours during a day, or days 
                during a week, in which the facility must be open and 
                fully staffed, except insofar as the facility is 
                required to make available emergency care services as 
                determined under clause (ii) and must have nursing 
                services available on a 24-hour basis, but need not 
                otherwise staff the facility except when an inpatient 
                is present,
                    ``(II) the facility may provide any services 
                otherwise required to be provided by a full-time, on-
                site dietitian, pharmacist, laboratory technician, 
                medical technologist, and radiological technologist on 
                a part-time, off-site basis under arrangements as 
                defined in section 1861(w)(1), and
                    ``(III) the inpatient care described in clause 
                (iii) may be provided by a physician's assistant, nurse 
                practitioner, or clinical nurse specialist subject to 
                the oversight of a physician who need not be present in 
                the facility; and

                ``(v) meets the requirements of subparagraph (I) of 
            paragraph (2) of section 1861(aa).
    ``(d) Rural Health Network Defined.--
        ``(1) In general.--For purposes of this section, the term 
    `rural health network' means, with respect to a State, an 
    organization consisting of--
            ``(A) at least 1 facility that the State has designated or 
        plans to designate as a critical access hospital, and
            ``(B) at least 1 hospital that furnishes acute care 
        services.
        ``(2) Agreements.--
            ``(A) In general.--Each critical access hospital that is a 
        member of a rural health network shall have an agreement with 
        respect to each item described in subparagraph (B) with at 
        least 1 hospital that is a member of the network.
            ``(B) Items described.--The items described in this 
        subparagraph are the following:
                ``(i) Patient referral and transfer.
                ``(ii) The development and use of communications 
            systems including (where feasible)--

                    ``(I) telemetry systems, and
                    ``(II) systems for electronic sharing of patient 
                data.

                ``(iii) The provision of emergency and non-emergency 
            transportation among the facility and the hospital.
            ``(C) Credentialing and quality assurance.--Each critical 
        access hospital that is a member of a rural health network 
        shall have an agreement with respect to credentialing and 
        quality assurance with at least 1--
                ``(i) hospital that is a member of the network;
                ``(ii) peer review organization or equivalent entity; 
            or
                ``(iii) other appropriate and qualified entity 
            identified in the State rural health care plan.
    ``(e) Certification by the Secretary.--The Secretary shall certify 
a facility as a critical access hospital if the facility--
        ``(1) is located in a State that has established a medicare 
    rural hospital flexibility program in accordance with subsection 
    (c);
        ``(2) is designated as a critical access hospital by the State 
    in which it is located; and
        ``(3) meets such other criteria as the Secretary may require.
    ``(f) Permitting Maintenance of Swing Beds.--Nothing in this 
section shall be construed to prohibit a State from designating or the 
Secretary from certifying a facility as a critical access hospital 
solely because, at the time the facility applies to the State for 
designation as a critical access hospital, there is in effect an 
agreement between the facility and the Secretary under section 1883 
under which the facility's inpatient hospital facilities are used for 
the furnishing of extended care services, except that the number of 
beds used for the furnishing of such services may not exceed 12 beds 
(minus the number of inpatient beds used for providing inpatient care 
in the facility pursuant to subsection (c)(2)(B)(iii)). For purposes of 
the previous sentence, the number of beds of the facility used for the 
furnishing of extended care services shall not include any beds of a 
unit of the facility that is licensed as a distinct-part skilled 
nursing facility at the time the facility applies to the State for 
designation as a critical access hospital.
    ``(g) Waiver of Conflicting Part A Provisions.--The Secretary is 
authorized to waive such provisions of this part and part C as are 
necessary to conduct the program established under this section.''.
    (b) Part A Amendments Relating to Rural Primary Care Hospitals and 
Critical Access Hospitals.--
        (1) Definitions.--Section 1861(mm) (42 U.S.C. 1395x(mm)) is 
    amended to read as follows:

      ``critical access hospital; critical access hospital services

    ``(mm)(1) The term `critical access hospital' means a facility 
certified by the Secretary as a critical access hospital under section 
1820(e).
    ``(2) The term `inpatient critical access hospital services' means 
items and services, furnished to an inpatient of a critical access 
hospital by such facility, that would be inpatient hospital services if 
furnished to an inpatient of a hospital by a hospital.''.
        (2) Coverage and payment.--(A) Section 1812(a)(1) (42 U.S.C. 
    1395d(a)(1)) is amended by striking ``or inpatient rural primary 
    care hospital services'' and inserting ``or inpatient critical 
    access hospital services''.
        (B) Sections 1813(a) and section 1813(b)(3)(A) (42 U.S.C. 
    1395e(a), 1395e(b)(3)(A)) are each amended by striking ``inpatient 
    rural primary care hospital services'' each place it appears, and 
    inserting ``inpatient critical access hospital services''.
        (C) Section 1813(b)(3)(B) (42 U.S.C. 1395e(b)(3)(B)) is amended 
    by striking ``inpatient rural primary care hospital services'' and 
    inserting ``inpatient critical access hospital services''.
        (D) Section 1814 (42 U.S.C. 1395f) is amended--
            (i) in subsection (a)(8) by striking ``rural primary care 
        hospital'' each place it appears and inserting ``critical 
        access hospital''; and
            (ii) in subsection (b), by striking ``other than a rural 
        primary care hospital providing inpatient rural primary care 
        hospital services,'' and inserting ``other than a critical 
        access hospital providing inpatient critical access hospital 
        services,''; and
            (iii) by amending subsection (l) to read as follows:
    ``(l) Payment for Inpatient Critical Access Hospital Services.--The 
amount of payment under this part for inpatient critical access 
hospital services is the reasonable costs of the critical access 
hospital in providing such services.''.
        (3) Treatment of critical access hospitals as providers of 
    services.--(A) Section 1861(u) (42 U.S.C. 1395x(u)) is amended by 
    striking ``rural primary care hospital'' and inserting ``critical 
    access hospital''.
        (B) The first sentence of section 1864(a) (42 U.S.C. 1395aa(a)) 
    is amended by striking ``a rural primary care hospital'' and 
    inserting ``a critical access hospital''.
        (4) Conforming amendments.--(A) Section 1128A(b)(1) (42 U.S.C. 
    1320a-7a(b)(1)) is amended by striking ``rural primary care 
    hospital'' each place it appears and inserting ``critical access 
    hospital''.
        (B) Section 1128B(c) (42 U.S.C. 1320a-7b(c)) is amended by 
    striking ``rural primary care hospital'' and inserting ``critical 
    access hospital''.
        (C) Section 1134 (42 U.S.C. 1320b-4) is amended by striking 
    ``rural primary care hospitals'' each place it appears and 
    inserting ``critical access hospitals''.
        (D) Section 1138(a)(1) (42 U.S.C. 1320b-8(a)(1)) is amended--
            (i) in the matter preceding subparagraph (A), by striking 
        ``rural primary care hospital'' and inserting ``critical access 
        hospital''; and
            (ii) in the matter preceding clause (i) of subparagraph 
        (A), by striking ``rural primary care hospital'' and inserting 
        ``critical access hospital''.
        (E) Section 1816(c)(2)(C) (42 U.S.C. 1395h(c)(2)(C)) is amended 
    by striking ``rural primary care hospital'' and inserting 
    ``critical access hospital''.
        (F) Section 1833 (42 U.S.C. 1395l) is amended--
            (i) in subsection (h)(5)(A)(iii), by striking ``rural 
        primary care hospital'' and inserting ``critical access 
        hospital'';
            (ii) in subsection (i)(1)(A), by striking ``rural primary 
        care hospital'' and inserting ``critical access hospital'';
            (iii) in subsection (i)(3)(A), by striking ``rural primary 
        care hospital services'' and inserting ``critical access 
        hospital services'';
            (iv) in subsection (l)(5)(A), by striking ``rural primary 
        care hospital'' each place it appears and inserting ``critical 
        access hospital''; and
            (v) in subsection (l)(5)(B), by striking ``rural primary 
        care hospital'' each place it appears and inserting ``critical 
        access hospital''.
        (G) Section 1835(c) (42 U.S.C. 1395n(c)) is amended by striking 
    ``rural primary care hospital'' each place it appears and inserting 
    ``critical access hospital''.
        (H) Section 1842(b)(6)(A)(ii) (42 U.S.C. 1395u(b)(6)(A)(ii)) is 
    amended by striking ``rural primary care hospital'' and inserting 
    ``critical access hospital''.
        (I) Section 1861 (42 U.S.C. 1395x) is amended--
            (i) in subsection (a)--
                (I) in paragraph (1), by striking ``inpatient rural 
            primary care hospital services'' and inserting ``inpatient 
            critical access hospital services''; and
                (II) in paragraph (2), by striking ``rural primary care 
            hospital'' and inserting ``critical access hospital'';
            (ii) in the last sentence of subsection (e), by striking 
        ``rural primary care hospital'' and inserting ``critical access 
        hospital'';
            (iii) in subsection (v)(1)(S)(ii)(III), by striking ``rural 
        primary care hospital'' and inserting ``critical access 
        hospital'';
            (iv) in subsection (w)(1), by striking ``rural primary care 
        hospital'' and inserting ``critical access hospital''; and
            (v) in subsection (w)(2), by striking ``rural primary care 
        hospital'' each place it appears and inserting ``critical 
        access hospital''.
        (J) Section 1862(a)(14) (42 U.S.C. 1395y(a)(14)) is amended by 
    striking ``rural primary care hospital'' each place it appears and 
    inserting ``critical access hospital''.
        (K) Section 1866(a)(1) (42 U.S.C 1395cc(a)(1)) is amended--
            (i) in subparagraph (F)(ii), by striking ``rural primary 
        care hospitals'' and inserting ``critical access hospitals'';
            (ii) in subparagraph (H), in the matter preceding clause 
        (i), by striking ``rural primary care hospitals'' and ``rural 
        primary care hospital services'' and inserting ``critical 
        access hospitals'' and ``critical access hospital services'', 
        respectively;
            (iii) in subparagraph (I), in the matter preceding clause 
        (i), by striking ``rural primary care hospital'' and inserting 
        ``critical access hospital''; and
            (iv) in subparagraph (N)--
                (I) in the matter preceding clause (i), by striking 
            ``rural primary care hospitals'' and inserting ``critical 
            access hospitals'', and
                (II) in clause (i), by striking ``rural primary care 
            hospital'' and inserting ``critical access hospital''.
        (L) Section 1866(a)(3) (42 U.S.C. 1395cc(a)(3)) is amended--
            (i) by striking ``rural primary care hospital'' each place 
        it appears in subparagraphs (A) and (B) and inserting 
        ``critical access hospital''; and
            (ii) in subparagraph (C)(ii)(II), by striking ``rural 
        primary care hospitals'' each place it appears and inserting 
        ``critical access hospitals''.
        (M) Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is amended by 
    striking ``rural primary care hospital'' and inserting ``critical 
    access hospital''.
    (c) Payment Continued to Designated EACHs.--Section 1886(d)(5)(D) 
(42 U.S.C. 1395ww(d)(5)(D)) is amended--
        (1) in clause (iii)(III), by inserting ``as in effect on 
    September 30, 1995'' before the period at the end; and
        (2) in clause (v)--
            (A) by inserting ``as in effect on September 30, 1995'' 
        after ``1820 (i)(1)''; and
            (B) by striking ``1820(g)'' and inserting ``1820(e)''.
    (d) Part B Amendments Relating to Critical Access Hospitals.--
        (1) Coverage.--(A) Section 1861(mm) (42 U.S.C. 1395x(mm)) as 
    amended by subsection (d)(1), is amended by adding at the end the 
    following new paragraph:
    ``(3) The term `outpatient critical access hospital services' means 
medical and other health services furnished by a critical access 
hospital on an outpatient basis.''.
        (B) Section 1832(a)(2)(H) (42 U.S.C. 1395k(a)(2)(H)) is amended 
    by striking ``rural primary care hospital services'' and inserting 
    ``critical access hospital services''.
        (2) Payment.--(A) Section 1833(a) (42 U.S.C. 1395l(a)) is 
    amended in paragraph (6), by striking ``outpatient rural primary 
    care hospital services'' and inserting ``outpatient critical access 
    hospital services''.
        (B) Section 1834(g) (42 U.S.C. 1395m(g)) is amended to read as 
    follows:
    ``(g) Payment for Outpatient Critical Access Hospital Services.--
The amount of payment under this part for outpatient critical access 
hospital services is the reasonable costs of the critical access 
hospital in providing such services.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after October 1, 1995.

SEC. 8703. ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS.

    (a) In General.--Section 1861 (42 U.S.C. 1395x) is amended by 
adding at the end the following new subsection:

  ``Rural Emergency Access Care Hospital; Rural Emergency Access Care 
                           Hospital Services

    ``(oo)(1) The term `rural emergency access care hospital' means, 
for a fiscal year, a facility with respect to which the Secretary finds 
the following:
        ``(A) The facility is located in a rural area (as defined in 
    section 1886(d)(2)(D)).
        ``(B) The facility was a hospital under this title at any time 
    during the 5-year period that ends on the date of the enactment of 
    this subsection.
        ``(C) The facility is in danger of closing due to low inpatient 
    utilization rates and operating losses, and the closure of the 
    facility would limit the access to emergency services of 
    individuals residing in the facility's service area.
        ``(D) The facility has entered into (or plans to enter into) an 
    agreement with a hospital with a participation agreement in effect 
    under section 1866(a), and under such agreement the hospital shall 
    accept patients transferred to the hospital from the facility and 
    receive data from and transmit data to the facility.
        ``(E) There is a practitioner who is qualified to provide 
    advanced cardiac life support services (as determined by the State 
    in which the facility is located) on-site at the facility on a 24-
    hour basis.
        ``(F) A physician is available on-call to provide emergency 
    medical services on a 24-hour basis.
        ``(G) The facility meets such staffing requirements as would 
    apply under section 1861(e) to a hospital located in a rural area, 
    except that--
            ``(i) the facility need not meet hospital standards 
        relating to the number of hours during a day, or days during a 
        week, in which the facility must be open, except insofar as the 
        facility is required to provide emergency care on a 24-hour 
        basis under subparagraphs (E) and (F); and
            ``(ii) the facility may provide any services otherwise 
        required to be provided by a full-time, on-site dietitian, 
        pharmacist, laboratory technician, medical technologist, or 
        radiological technologist on a part-time, off-site basis.
        ``(H) The facility meets the requirements applicable to clinics 
    and facilities under subparagraphs (C) through (J) of paragraph (2) 
    of section 1861(aa) and of clauses (ii) and (iv) of the second 
    sentence of such paragraph (or, in the case of the requirements of 
    subparagraph (E), (F), or (J) of such paragraph, would meet the 
    requirements if any reference in such subparagraph to a `nurse 
    practitioner' or to `nurse practitioners' were deemed to be a 
    reference to a `nurse practitioner or nurse' or to `nurse 
    practitioners or nurses'); except that in determining whether a 
    facility meets the requirements of this subparagraph, subparagraphs 
    (E) and (F) of that paragraph shall be applied as if any reference 
    to a `physician' is a reference to a physician as defined in 
    section 1861(r)(1).
    ``(2) The term `rural emergency access care hospital services' 
means the following services provided by a rural emergency access care 
hospital and furnished to an individual over a continuous period not to 
exceed 24 hours (except that such services may be furnished over a 
longer period in the case of an individual who is unable to leave the 
hospital because of inclement weather):
        ``(A) An appropriate medical screening examination (as 
    described in section 1867(a)).
        ``(B) Necessary stabilizing examination and treatment services 
    for an emergency medical condition and labor (as described in 
    section 1867(b)).''.
    (b) Requiring Rural Emergency Access Care Hospitals To Meet 
Hospital Anti-Dumping Requirements.--Section 1867(e)(5) (42 U.S.C. 
1395dd(e)(5)) is amended by striking ``1861(mm)(1))'' and inserting 
``1861(mm)(1)) and a rural emergency access care hospital (as defined 
in section 1861(oo)(1))''.
    (c) Coverage and Payment for Services.--
        (1) Coverage.--Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is 
    amended--
            (A) by striking ``and'' at the end of subparagraph (I);
            (B) by striking the period at the end of subparagraph (J) 
        and inserting ``; and''; and
            (C) by adding at the end the following new subparagraph:
            ``(K) rural emergency access care hospital services (as 
        defined in section 1861(oo)(2)).''.
        (2) Payment based on payment for outpatient critical access 
    hospital services.--
            (A) In general.--Section 1833(a)(6) (42 U.S.C. 
        1395l(a)(6)), as amended by section 8702(f)(2), is amended by 
        striking ``services,'' and inserting ``services and rural 
        emergency access care hospital services,''.
            (B) Payment methodology described.--Section 1834(g) (42 
        U.S.C. 1395m(g)), as amended by section 8702(f)(2)(B), is 
        amended--
                (i) in the heading, by striking ``Services'' and 
            inserting ``Services and Rural Emergency Access Care 
            Hospital Services''; and
                (ii) by adding at the end the following new sentence: 
            ``The amount of payment for rural emergency access care 
            hospital services provided during a year shall be 
            determined using the applicable method provided under this 
            subsection for determining payment for outpatient rural 
            primary care hospital services during the year.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fiscal years beginning on or after October 1, 1995.

SEC. 8704. CLASSIFICATION OF RURAL REFERRAL CENTERS.

    (a) Prohibiting Denial of Request for Reclassification on Basis of 
Comparability of Wages.--
        (1) In general.--Section 1886(d)(10)(D) (42 U.S.C. 
    1395ww(d)(10)(D)) is amended--
            (A) by redesignating clause (iii) as clause (iv); and
            (B) by inserting after clause (ii) the following new 
        clause:
    ``(iii) Under the guidelines published by the Secretary under 
clause (i), in the case of a hospital which is classified by the 
Secretary as a rural referral center under paragraph (5)(C), the Board 
may not reject the application of the hospital under this paragraph on 
the basis of any comparison between the average hourly wage of the 
hospital and the average hourly wage of hospitals in the area in which 
it is located.''.
        (2) Effective date.--Notwithstanding section 1886(d)(10)(C)(ii) 
    of the Social Security Act, a hospital may submit an application to 
    the Medicare Geographic Classification Review Board during the 30-
    day period beginning on the date of the enactment of this Act 
    requesting a change in its classification for purposes of 
    determining the area wage index applicable to the hospital under 
    section 1886(d)(3)(D) of such Act for fiscal year 1997, if the 
    hospital would be eligible for such a change in its classification 
    under the standards described in section 1886(d)(10)(D) (as amended 
    by paragraph (1)) but for its failure to meet the deadline for 
    applications under section 1886(d)(10)(C)(ii).
    (b) Continuing Treatment of Previously Designated Centers.--Any 
hospital classified as a rural referral center by the Secretary of 
Health and Human Services under section 1886(d)(5)(C) of the Social 
Security Act for fiscal year 1994 shall be classified as such a rural 
referral center for fiscal year 1996 and each subsequent fiscal year.

SEC. 8705. FLOOR ON AREA WAGE INDEX.

    (a) In General.--For purposes of section 1886(d)(3)(E) of the 
Social Security Act for discharges occurring on or after October 1, 
1995, the area wage index applicable under such section to any hospital 
which is not located in a rural area (as defined in section 
1886(d)(2)(D) of such Act) may not be less than the average of the area 
wage indices applicable under such section to hospitals located in 
rural areas in the State in which the hospital is located.
    (b) Implementation.--The Secretary of Health and Human Services 
shall adjust the area wage indices referred to in subsection (a) for 
hospitals not described in such subsection in a manner which assures 
that the aggregate payments made under section 1886(d) of the Social 
Security Act in a fiscal year for the operating costs of inpatient 
hospital services are not greater or less than those which would have 
been made in the year if this section did not apply.

SEC. 8706. ADDITIONAL PAYMENTS FOR PHYSICIANS' SERVICES FURNISHED IN 
              SHORTAGE AREAS.

    (a) Increase in Amount of Additional Payment.--Section 1833(m) (42 
U.S.C. 1395l(m)) is amended by striking ``10 percent'' and inserting 
``20 percent''.
    (b) Restriction to Primary Care Services.--Section 1833(m) (42 
U.S.C. 1395l(m)) is amended by inserting after ``physicians' services'' 
the following: ``consisting of primary care services (as defined in 
section 1842(i)(4))''.
    (c) Extension of Payment for Former Shortage Areas.--
        (1) In general.--Section 1833(m) (42 U.S.C. 1395l(m)) is 
    amended by striking ``area,'' and inserting ``area (or, in the case 
    of an area for which the designation as a health professional 
    shortage area under such section is withdrawn, in the case of 
    physicians' services furnished to such an individual during the 3-
    year period beginning on the effective date of the withdrawal of 
    such designation),''.
        (2) Effective date.--The amendment made by paragraph (1) shall 
    apply to physicians' services furnished in an area for which the 
    designation as a health professional shortage area under section 
    332(a)(1)(A) of the Public Health Service Act is withdrawn on or 
    after January 1, 1996.
    (d) Requiring Carriers to Report on Services Provided.--Section 
1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended--
        (1) by striking ``and'' at the end of subparagraph (I); and
        (2) by inserting after subparagraph (I) the following new 
    subparagraph:
        ``(J) will provide information to the Secretary (on such 
    periodic basis as the Secretary may require) on the types of 
    providers to whom the carrier makes additional payments for certain 
    physicians' services pursuant to section 1833(m), together with a 
    description of the services furnished by such providers; and''.
    (e) Effective Date.--The amendments made by subsections (a), (b), 
and (d) shall apply to physicians' services furnished on or after 
October 1, 1995.

SEC. 8707. PAYMENTS TO PHYSICIAN ASSISTANTS AND NURSE PRACTITIONERS FOR 
              SERVICES FURNISHED IN OUTPATIENT OR HOME SETTINGS.

    (a) Coverage in Outpatient or Home Settings for Physician 
Assistants and Nurse Practitioners.--Section 1861(s)(2)(K) (42 U.S.C. 
1395x(s)(2)(K)) is amended--
        (1) in clause (i)--
            (A) by striking ``or'' at the end of subclause (II); and
            (B) by inserting ``or (IV) in an outpatient or home setting 
        as defined by the Secretary'' following ``shortage area,''; and
        (2) in clause (ii)--
            (A) by striking ``in a skilled'' and inserting ``in (I) a 
        skilled''; and
            (B) by inserting ``, or (II) in an outpatient or home 
        setting (as defined by the Secretary),'' after ``(as defined in 
        section 1919(a))''.
    (b) Payments to Physician Assistants and Nurse Practitioners in 
Outpatient or Home Settings.--
        (1) In general.--Section 1833(r)(1) (42 U.S.C. 1395l(r)(1)) is 
    amended--
            (A) by inserting ``services described in section 
        1861(s)(2)(K)(ii)(II) (relating to nurse practitioner services 
        furnished in outpatient or home settings), and services 
        described in section 1861(s)(2)(K)(i)(IV) (relating to 
        physician assistant services furnished in an outpatient or home 
        setting'' after ``rural area),''; and
            (B) by striking ``or clinical nurse specialist'' and 
        inserting ``clinical nurse specialist, or physician 
        assistant''.
        (2) Conforming amendment.--Section 1842(b)(6)(C) (42 U.S.C. 
    1395u(b)(6)(C)) is amended by striking ``clauses (i), (ii), or 
    (iv)'' and inserting ``subclauses (I), (II), or (III) of clause 
    (i), clause (ii)(I), or clause (iv)''.
    (c) Payment Under the Fee Schedule to Physician Assistants and 
Nurse Practitioners in Outpatient or Home Settings.--
        (1) Physician assistants.--Section 1842(b)(12) (42 U.S.C. 
    1395u(b)(12)) is amended by adding at the end the following new 
    subparagraph:
    ``(C) With respect to services described in clauses (i)(IV), 
(ii)(II), and (iv) of section 1861(s)(2)(K) (relating to physician 
assistants and nurse practitioners furnishing services in outpatient or 
home settings)--
        ``(i) payment under this part may only be made on an 
    assignment-related basis; and
        ``(ii) the amounts paid under this part shall be equal to 80 
    percent of (I) the lesser of the actual charge or 85 percent of the 
    fee schedule amount provided under section 1848 for the same 
    service provided by a physician who is not a specialist; or (II) in 
    the case of services as an assistant at surgery, the lesser of the 
    actual charge or 85 percent of the amount that would otherwise be 
    recognized if performed by a physician who is serving as an 
    assistant at surgery.''.
        (2) Conforming amendment.--Section 1842(b)(12)(A) (42 U.S.C. 
    1395u(b)(12)(A)) is amended in the matter preceding clause (i) by 
    striking ``(i), (ii),'' and inserting ``subclauses (I), (II), or 
    (III) of clause (i), or subclause (I) of clause (ii)''.
        (3) Technical amendment.--Section 1842(b)(12)(A) (42 U.S.C. 
    1395u(b)(12)(A)) is amended in the matter preceding clause (i) by 
    striking ``a physician assistants'' and inserting ``physician 
    assistants''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after October 1, 1995.

SEC. 8708. EXPANDING ACCESS TO NURSE AIDE TRAINING IN UNDERSERVED 
              AREAS.

    (a) In General.--Section 1819(f)(2)(B)(iii)(I) (42 U.S.C. 
1396r(f)(2)(B)(iii)(I)) is amended in the matter preceding item (a), by 
striking ``by or in a nursing facility'' and inserting ``by a nursing 
facility (or in such a facility, unless the State determines that there 
is no other such program offered within a reasonable distance, provides 
notice of the approval to the State long-term care ombudsman, and 
assures, through an oversight effort, that an adequate environment 
exists for such a program)''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to nurse aide training and competency evaluation programs under 
section 1819 of the Social Security Act which are offered on or after 
October 1, 1995.

            TITLE IX--TRANSPORTATION AND RELATED PROVISIONS

SEC. 9001. MINIMUM ALLOCATION FOR HIGHWAY PROGRAMS.

    (a) Technical Correction.--With respect to fiscal year 1996--
        (1) the Secretary of Transportation shall determine, in 
    accordance with the policies established by the Intermodal Surface 
    Transportation Efficiency Act of 1991 (105 Stat. 1914)--
            (A) which of the States will no longer require an 
        apportionment under section 157(a)(4) of title 23, United 
        States Code; and
            (B) which of the States will require decreased funding 
        under such section 157(a)(4);
    as a result of the termination of the Interstate construction 
    program; and
        (2) as a result of the reduced number of States that may 
    require an apportionment under such section 157(a)(4), and the 
    decrease in the amount of funds some States will require under such 
    section 157(a)(4), the maximum amount available for apportionment 
    under such section 157(a)(4) shall be reduced from the amount 
    apportioned under such section 157(a)(4) for fiscal year 1995 by 
    60.4 percent.
    (b) Effect on Certain Calculations.--The correction made by 
subsection (a) shall be made after the reduction required under section 
1003(c) of the Intermodal Surface Transportation Efficiency Act of 1991 
(105 Stat. 1921) and shall not be taken into account in making the 
calculations under sections 1003(c), 1013(c), and 1015 of such Act (105 
Stat. 1921, 1940, and 1943).

SEC. 9002. EXTENSION OF HIGHER VESSEL TONNAGE DUTIES.

    (a) Extension of Duties.--Section 36 of the Act of August 5, 1909 
(36 Stat. 111; 46 U.S.C. App. 121), is amended by striking ``for fiscal 
years 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998,'' each place it 
appears and inserting ``for fiscal years through fiscal year 2002,''.
    (b) Conforming Amendment.--The Act entitled ``An Act concerning 
tonnage duties on vessels entering otherwise than by sea'', approved 
March 8, 1910 (36 Stat. 234; 46 U.S.C. App. 132), is amended by 
striking ``for fiscal years 1991, 1992, 1993, 1994, 1995, 1996, 1997, 
and 1998,'' and inserting ``for fiscal years through fiscal year 
2002,''.

SEC. 9003. FEMA RADIOLOGICAL EMERGENCY PREPAREDNESS FEES.

    (a) In General.--The Director of the Federal Emergency Management 
Agency may assess and collect fees applicable to persons subject to 
radiological emergency preparedness regulations issued by the Director.
    (b) Requirements.--The assessment and collection of fees by the 
Director under subsection (a) shall be fair and equitable and shall 
reflect the full amount of costs to the Agency of providing 
radiological emergency planning, preparedness, response, and associated 
services. Such fees shall be assessed by the Director in a manner that 
reflects the use of resources of the Agency for classes of regulated 
persons and the administrative costs of collecting such fees.
    (c) Amount of Fees.--The aggregate amount of fees assessed under 
subsection (a) in a fiscal year shall approximate, but not be less 
than, 100 percent of the amounts anticipated by the Director to be 
obligated for the radiological emergency preparedness program of the 
Agency for such fiscal year.
    (d) Deposit of Fees in Treasury.--Fees received pursuant to 
subsection (a) shall be deposited in the general fund of the Treasury 
as offsetting receipts.
    (e) Expiration of Authority.--The authority of the Director to 
assess and collect fees under subsection (a) shall expire on September 
30, 2002.

                TITLE X--VETERANS AND RELATED PROVISIONS

SEC. 10001. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This title may be cited as the ``Veterans 
Reconciliation Act of 1995''.
    (b) Table of Contents.--The table of contents for 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.

             Subtitle A--Extension of Temporary Authorities

SEC. 10011. AUTHORITY TO REQUIRE THAT CERTAIN VETERANS MAKE COPAYMENTS 
              IN EXCHANGE FOR RECEIVING HEALTH-CARE BENEFITS.

    (a) Hospital and Medical Care.--Section 8013(e) of the Omnibus 
Budget Reconciliation Act of 1990 (38 U.S.C. 1710 note) is amended by 
striking out ``September 30, 1998'' and inserting in lieu thereof 
``September 30, 2002''.
    (b) Outpatient Medications.--Section 1722A(c) of title 38, United 
States Code, is amended by striking out ``September 30, 1998'' and 
inserting in lieu thereof ``September 30, 2002''.

SEC. 10012. MEDICAL CARE COST RECOVERY AUTHORITY.

    Section 1729(a)(2)(E) of title 38, United States Code, is amended 
by striking out ``before October 1, 1998,'' and inserting ``before 
October 1, 2002,''.

SEC. 10013. INCOME VERIFICATION AUTHORITY.

    Section 5317(g) of title 38, United States Code, is amended by 
striking out ``September 30, 1998'' and inserting in lieu thereof 
``September 30, 2002''.

SEC. 10014. LIMITATION ON PENSION FOR CERTAIN RECIPIENTS OF MEDICAID-
              COVERED NURSING HOME CARE.

    Section 5503(f)(7) of title 38, United States Code, is amended by 
striking out ``September 30, 1998'' and inserting in lieu thereof 
``September 30, 2002''.

SEC. 10015. HOME LOAN FEES.

    Section 3729(a) of title 38, United States Code, is amended--
        (1) in paragraph (4), by striking out ``October 1, 1998'' and 
    inserting in lieu thereof ``October 1, 2002''; and
        (2) in paragraph (5)(C), by striking out ``October 1, 1998'' 
    and inserting in lieu thereof ``October 1, 2002''.

SEC. 10016. PROCEDURES APPLICABLE TO LIQUIDATION SALES ON DEFAULTED 
              HOME LOANS GUARANTEED BY THE DEPARTMENT OF VETERANS 
              AFFAIRS.

    Section 3732(c)(11) of title 38, United States Code, is amended by 
striking out ``October 1, 1998'' and inserting ``October 1, 2002''.

SEC. 10017. ENHANCED LOAN ASSET SALE AUTHORITY.

    Section 3720(h)(2) of title 38, United States Code, is amended by 
striking out ``December 31, 1995'' and inserting in lieu thereof 
``September 30, 2002''.

                       Subtitle B--Other Matters

SEC. 10021. REVISION TO PRESCRIPTION DRUG COPAYMENT.

    (a) Increase in Amount of Copayment.--Section 1722A(a) of title 38, 
United States Code, is amended--
        (1) in paragraph (1), by striking out ``$2'' and inserting in 
    lieu thereof ``$4'';
        (2) by striking out paragraph (2); and
        (3) by redesignating paragraph (3) as paragraph (2) and in that 
    paragraph--
            (A) striking out ``or'' at the end of subparagraph (A);
            (B) striking out the period at the end of subparagraph (B) 
        and inserting in lieu thereof ``; or''; and
            (C) adding at the end the following new subparagraph:
        ``(C) to a veteran who is a former prisoner of war.''.
    (b) Recovery of Indebtedness.--(1) Section 5302 of such title is 
amended by adding at the end the following new subsection:
    ``(f) The Secretary may not waive under this section the recovery 
of any payment or the collection of any indebtedness owed under section 
1722A of this title.''.
    (2) The amendment made by paragraph (1) shall apply with respect to 
amounts that become due to the United States under section 1722A of 
title 38, United States Code, on or after the date of the enactment of 
this Act.

SEC. 10022. ROUNDING DOWN OF COST-OF-LIVING ADJUSTMENTS IN COMPENSATION 
              AND DIC RATES.

    (a) Fiscal Year 1996 COLA.--(1) Effective as of December 1, 1995, 
the Secretary of Veterans Affairs shall recompute any increase in an 
adjustment that is otherwise provided by law to be effective during 
fiscal year 1996 in the rates of disability compensation and dependency 
and indemnity compensation paid by the Secretary as such rates were in 
effect on November 30, 1995. The recomputation shall provide for the 
same percentage increase as provided under such law, but with amounts 
so recomputed (if not a whole dollar amount) rounded down to the next 
lower whole dollar amount (rather than to the nearest whole dollar 
amount) and with each old-law DIC rate increased by the amount by which 
the new-law DIC rate is increased (rather than by a uniform 
percentage).
    (2) For purposes of paragraph (1):
        (A) The term ``old-law DIC rate'' means a dollar amount in 
    effect under section 1311(a)(3) of title 38, United States Code.
        (B) The term ``new-law DIC rate'' means the dollar amount in 
    effect under section 1311(a)(1) of title 38, United States Code.
    (b) Out-Year Compensation COLAs.--(1) Chapter 11 of title 38, 
United States Code, is amended by inserting after section 1102 the 
following new section:

``Sec. 1103. Cost-of-living adjustments

    ``(a) In the computation of cost-of-living adjustments for fiscal 
years 1997 through 2002 in the rates of, and dollar limitations 
applicable to, compensation payable under this chapter, such 
adjustments shall be made by a uniform percentage that is no more than 
the percentage equal to the social security increase for that fiscal 
year, with all increased monthly rates and limitations (other than 
increased rates or limitations equal to a whole dollar amount) rounded 
down to the next lower whole dollar amount.
    ``(b) For purposes of this section, the term `social security 
increase' means the percentage by which benefit amounts payable under 
title II of the Social Security Act (42 U.S.C. 401 et seq.) are 
increased for any fiscal year as a result of a determination under 
section 215(i) of such Act (42 U.S.C. 415(i)).''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 1102 the 
following new item:
``1103. Cost-of-living adjustments.''.
    (c) Out-Year DIC COLAs.--(1) Chapter 13 of title 38, United States 
Code, is amended by inserting after section 1302 the following new 
section:

``Sec. 1303. Cost-of-living adjustments

    ``(a) In the computation of cost-of-living adjustments for fiscal 
years 1997 through 2002 in the rates of dependency and indemnity 
compensation payable under this chapter, such adjustments (except as 
provided in subsection (b)) shall be made by a uniform percentage that 
is no more than the percentage equal to the social security increase 
for that fiscal year, with all increased monthly rates (other than 
increased rates equal to a whole dollar amount) rounded down to the 
next lower whole dollar amount.
    ``(b)(1) Cost-of-living adjustments for each of fiscal years 1997 
through 2002 in old-law DIC rates shall be in a whole dollar amount 
that is no greater than the amount by which the new-law DIC rate is 
increased for that fiscal year as determined under subsection (a).
    ``(2) For purposes of paragraph (1):
        ``(A) The term `old-law DIC rates' means the dollar amounts in 
    effect under section 1311(a)(3) of this title.
        ``(B) The term `new-law DIC rate' means the dollar amount in 
    effect under section 1311(a)(1) of this title.
    ``(c) For purposes of this section, the term `social security 
increase' means the percentage by which benefit amounts payable under 
title II of the Social Security Act (42 U.S.C. 401 et seq.) are 
increased for any fiscal year as a result of a determination under 
section 215(i) of such Act (42 U.S.C. 415(i)).''.
    (2) The table of sections at the beginning of such chapter is 
amended by inserting after the item relating to section 1302 the 
following new item:
``1303. Cost-of-living adjustments.''.

SEC. 10023. REVISED STANDARD FOR LIABILITY FOR INJURIES RESULTING FROM 
              DEPARTMENT OF VETERANS AFFAIRS TREATMENT.

    (a) Revised Standard.--Section 1151 of title 38, United States 
Code, is amended--
        (1) by designating the second sentence as subsection (c);
        (2) by striking out the first sentence and inserting in lieu 
    thereof the following:
    ``(a) Compensation under this chapter and dependency and indemnity 
compensation under chapter 13 of this title shall be awarded for a 
qualifying additional disability of a veteran or the qualifying death 
of a veteran in the same manner as if such disability or death were 
service-connected.
    ``(b)(1) For purposes of this section, a disability or death is a 
qualifying additional disability or a qualifying death only if the 
disability or death--
        ``(A) was caused by Department health care and was a proximate 
    result of--
            ``(i) negligence on the part of the Department in 
        furnishing the Department health care; or
            ``(ii) an event not reasonably foreseeable; or
        ``(B) was incurred as a proximate result of the provision of 
    training and rehabilitation services by the Secretary (including by 
    a service-provider used by the Secretary for such purpose under 
    section 3115 of this title) as part of an approved rehabilitation 
    program under chapter 31 of this title.
    ``(2) For purposes of this section, the term `Department health 
care' means hospital care, medical or surgical treatment, or an 
examination that is furnished under any law administered by the 
Secretary to a veteran by a Department employee or in a facility over 
which the Secretary has direct jurisdiction.
    ``(3) A disability or death of a veteran which is the result of the 
veteran's willful misconduct is not a qualifying disability or death 
for purposes of this section.''; and
        (3) by adding at the end the following:
    ``(d) Effective with respect to injuries, aggravations of injuries, 
and deaths occurring after September 30, 2002, a disability or death is 
a qualifying additional disability or a qualifying death for purposes 
of this section (notwithstanding the provisions of subsection (b)(1)) 
if the disability or death--
        ``(1) was the result of Department health care; or
        ``(2) was the result of the pursuit of a course of vocational 
    rehabilitation under chapter 31 of this title.''.
    (b) Conforming Amendments.--Subsection (c) of such section, as 
designated by subsection (a)(1), is amended--
        (1) by striking out ``, aggravation,'' both places it appears; 
    and
        (2) by striking out ``sentence'' and inserting in lieu thereof 
    ``subsection''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any administrative or judicial determination of eligibility 
for benefits under section 1151 of title 38, United States Code, based 
on a claim that is received by the Secretary on or after October 1, 
1995, including any such determination based on an original application 
or an application seeking to reopen, revise, reconsider, or otherwise 
readjudicate any claim for benefits under section 1151 of that title or 
any predecessor provision of law.

SEC. 10024. WITHHOLDING OF PAYMENTS AND BENEFITS.

    (a) Notice Required in Lieu of Consent or Court Order.--Section 
3726 of title 38, United States Code, is amended by striking out 
``unless'' and all that follows and inserting in lieu thereof the 
following: ``unless the Secretary provides such veteran or surviving 
spouse with notice by certified mail with return receipt requested of 
the authority of the Secretary to waive the payment of indebtedness 
under section 5302(b) of this title. If the Secretary does not waive 
the entire amount of the liability, the Secretary shall then determine 
whether the veteran or surviving spouse should be released from 
liability under section 3713(b) of this title. If the Secretary 
determines that the veteran or surviving spouse should not be released 
from liability, the Secretary shall notify the veteran or surviving 
spouse of that determination and provide a notice of the procedure for 
appealing that determination, unless the Secretary has previously made 
such determination and notified the veteran or surviving spouse of the 
procedure for appealing the determination.''.
    (b) Conforming Amendment.--Section 5302(b) of such title is amended 
by inserting ``with return receipt requested'' after ``certified 
mail''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to any indebtedness to the United States arising 
pursuant to chapter 37 of title 38, United States Code, before, on, or 
after the date of the enactment of this Act.

                      TITLE XI--REVENUE PROVISIONS

SEC. 11000. SHORT TITLES; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

    (a) Revenue Reconciliation Act.--This title may be cited as the 
``Revenue Reconciliation Act of 1995''.
    (b) Contract With America.--Subtitles A, B, C, and D of this title 
may be cited as the ``Contract With America Tax Relief Act of 1995''.
    (c) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this title an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (d) Table of Contents.--The table of contents for 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.

                 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.
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.
Sec. 11144. Moratorium for excise tax on diesel fuel sold for use or 
          used in diesel-powered 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.
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 
          company-owned 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.

          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).

                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.

                 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.
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.
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.

                     Subtitle A--Family Tax Relief

SEC. 11001. CHILD TAX CREDIT.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits) is amended by inserting 
after section 22 the following new section:

``SEC. 23. CHILD TAX CREDIT.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this chapter for the taxable year an amount 
equal to $500 multiplied by the number of qualifying children of the 
taxpayer.
    ``(b) Limitation.--
        ``(1) In general.--The amount of the credit which would (but 
    for this subsection) be allowed by subsection (a) shall be reduced 
    (but not below zero) by $25 for each $1,000 (or fraction thereof) 
    by which the taxpayer's adjusted gross income exceeds the threshold 
    amount.
        ``(2) Threshold amount.--For purposes of paragraph (1), the 
    term `threshold amount' means--
            ``(A) $110,000 in the case of a joint return,
            ``(B) $75,000 in the case of an individual who is not 
        married, and
            ``(C) $55,000 in the case of a married individual filing a 
        separate return.
    For purposes of this paragraph, marital status shall be determined 
    under section 7703.
    ``(c) Qualifying Child.--For purposes of this section--
        ``(1) In general.--The term `qualifying child' means any 
    individual if--
            ``(A) the taxpayer is allowed a deduction under section 151 
        with respect to such individual for such taxable year,
            ``(B) such individual has not attained the age of 18 as of 
        the close of the calendar year in which the taxable year of the 
        taxpayer begins, and
            ``(C) such individual bears a relationship to the taxpayer 
        described in section 32(c)(3)(B) (determined without regard to 
        clause (ii) thereof).
        ``(2) Exception for certain noncitizens.--The term `qualifying 
    child' shall not include any individual who would not be a 
    dependent if the first sentence of section 152(b)(3) were applied 
    without regard to all that follows `resident of the United States'.
    ``(d) Taxable Year Must Be Full Taxable Year.--Except in the case 
of a taxable year closed by reason of the death of the taxpayer, no 
credit shall be allowable under this section in the case of a taxable 
year covering a period of less than 12 months.''.
    (b) Notice of Credit.--The Secretary of the Treasury shall transmit 
to all individual taxpayers by a separate mailing made on or before 
February 1, 1996, a notice which states only the following: ``The 
Balanced Budget Act of 1995 was recently passed by the Congress. The 
Act's child tax credit allows taxpayers to reduce their taxes by $500 
per child. The credit is effective October 1, 1995. You may wish to 
check with your employer about changing your tax withholding to take 
immediate advantage of the credit to which you are entitled for the 
current tax year. In addition, the Internal Revenue Service will be 
sending you a form in June of this year which you may use to claim the 
credit to which you are entitled for the period from October 1 through 
December 31, 1995 ($125 per child for 1995). In order to obtain your 
1995 credit, you should file this form by August 15, 1996. Your refund 
will be sent to you sometime after October 1, 1996.''
    (c) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amended by inserting after the 
item relating to section 22 the following new item:
        ``Sec. 23. Child tax credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.
    (e) Payment of 1995 Child Credit Amount.--
        (1) In general.--The Secretary shall take such actions as are 
    necessary to ensure that the 1995 child credit amount is paid to 
    taxpayers entitled to payment of such credit amount.
        (2) Payments generally during october 1996.--In the case of 
    taxpayers submitting the form referred to in paragraph (4) before 
    August 16, 1996, the Secretary shall take such actions as are 
    necessary to ensure that payments required by paragraph (1) are 
    mailed after September 30, 1996, and before October 16, 1996.
        (3) 1995 child credit amount.--For purposes of paragraph (1), 
    the 1995 child credit amount is an amount equal to 25 percent of 
    the amount of the credit which would be allowed to the taxpayer 
    under section 23 of the Internal Revenue Code of 1986 (as added by 
    this section) if such section were in effect for the taxpayer's 
    taxable year beginning in 1995.
        (4) Entitlement to credit.--A taxpayer shall be entitled to a 
    1995 child credit amount if (and only if) the taxpayer submits to 
    the Secretary a form which the Secretary shall prescribe for 
    purposes of determining such amount. The Secretary shall mail such 
    form to taxpayers on or before June 1, 1996.
        (5) Payment treated as overpayment.--The 1995 child credit 
    amount shall be treated for purposes of subtitle F of such Code as 
    a payment of tax for the taxpayer's taxable year beginning in 1995 
    which was made on August 15, 1996, or, if later, the date the form 
    referred to in paragraph (4) is filed, and shall be refunded or 
    credited in the same manner as if it were an overpayment of tax for 
    such taxable year. No interest shall be paid under section 6611 of 
    such Code on amounts paid under paragraph (1) before October 16, 
    1996.
        (6) Secretary.--For purposes of this subsection, the term 
    ``Secretary'' means the Secretary of the Treasury or his delegate.

SEC. 11002. REDUCTION IN MARRIAGE PENALTY.

    (a) Increase in Basic Standard Deduction for Married Individuals.--
Section 63(c) (relating to standard deduction) is amended--
        (1) by striking ``$5,000'' in paragraph (2)(A) and inserting 
    ``the applicable dollar amount'',
        (2) by striking ``$2,500'' in paragraph (2)(D) and inserting 
    ``\1/2\ of the applicable dollar amount'', and
        (3) by inserting after paragraph (6) the following new 
    paragraph:
        ``(7) Applicable dollar amount.--For purposes of paragraph (2), 
    the applicable dollar amount for any taxable year shall be the 
    product of the dollar amount in effect under paragraph (2)(C) for 
    such year multiplied by the applicable factor determined 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.

    If the amount determined under the preceding sentence is not a 
    multiple of $50, such amount shall be rounded to the nearest 
    multiple of $50.''
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11003. CREDIT FOR ADOPTION EXPENSES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
(relating to nonrefundable personal credits), as amended by section 
11001, is amended by inserting after section 23 the following new 
section:

``SEC. 24. ADOPTION EXPENSES.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year the amount of the qualified adoption expenses paid 
or incurred by the taxpayer during such taxable year.
    ``(b) Limitations.--
        ``(1) Dollar limitation.--The aggregate amount of qualified 
    adoption expenses which may be taken into account under subsection 
    (a) with respect to the adoption of a child shall not exceed 
    $5,000.
        ``(2) Income limitation.--The amount allowable as a credit 
    under subsection (a) for any taxable year shall be reduced (but not 
    below zero) by an amount which bears the same ratio to the amount 
    so allowable (determined without regard to this paragraph but with 
    regard to paragraph (1)) as--
            ``(A) the amount (if any) by which the taxpayer's adjusted 
        gross income (determined without regard to sections 911, 931, 
        and 933) exceeds $75,000, bears to
            ``(B) $40,000.
        ``(3) Denial of double benefit.--
            ``(A) In general.--No credit shall be allowed under 
        subsection (a) for any expense for which a deduction or credit 
        is allowable under any other provision of this chapter.
            ``(B) Grants.--No credit shall be allowed under subsection 
        (a) for any expense to the extent that funds for such expense 
        are received under any Federal, State, or local program. The 
        preceding sentence shall not apply to expenses for the adoption 
        of a child with special needs.
            ``(C) Reimbursement.--No credit shall be allowed under 
        subsection (a) for any expense to the extent that such expense 
        is reimbursed and the reimbursement is excluded from gross 
        income under section 138.
    ``(c) Carryforwards of Unused Credit.--If the credit allowable 
under subsection (a) for any taxable year exceeds the limitation 
imposed by section 26(a) for such taxable year reduced by the sum of 
the credits allowable under this subpart (other than this section), 
such excess shall be carried to the succeeding taxable year and added 
to the credit allowable under subsection (a) for such taxable year. No 
credit may be carried forward under this subsection to any taxable year 
following the fifth taxable year after the taxable year in which the 
credit arose. For purposes of the preceding sentence, credits shall be 
treated as used on a first-in first-out basis.
    ``(d) Definitions.--For purposes of this section--
        ``(1) Qualified adoption expenses.--The term `qualified 
    adoption expenses' means reasonable and necessary adoption fees, 
    court costs, attorney fees, and other expenses--
            ``(A) which are directly related to, and the principal 
        purpose of which is for, the legal adoption of an eligible 
        child by the taxpayer, and
            ``(B) which are not incurred in violation of State or 
        Federal law or in carrying out any surrogate parenting 
        arrangement.
    Such term shall not include expenses for a foreign adoption unless 
    the child is actually adopted.
        ``(2) Expenses for adoption of spouse's child not eligible.--
    The term `qualified adoption expenses' shall not include any 
    expenses in connection with the adoption by an individual of a 
    child who is the child of such individual's spouse.
        ``(3) Eligible child.--The term `eligible child' means any 
    individual--
            ``(A) who has not attained age 18 as of the time of the 
        adoption, or
            ``(B) who is physically or mentally incapable of caring for 
        himself.
        ``(4) Child with special needs.--The term `child with special 
    needs' means any child if--
            ``(A) a State has determined that the child cannot or 
        should not be returned to the home of his parents, and
            ``(B) such State has determined that there exists with 
        respect to the child a specific factor or condition (such as 
        his ethnic background, age, or membership in a minority or 
        sibling group, or the presence of factors such as medical 
        conditions or physical, mental, or emotional handicaps) because 
        of which it is reasonable to conclude that such child cannot be 
        placed with adoptive parents without providing adoption 
        assistance.
    ``(e) Married Couples Must File Joint Returns.--Rules similar to 
the rules of paragraphs (2), (3), and (4) of section 21(e) shall apply 
for purposes of this section.''.
    (b) Exclusion of Amounts Received Under Employer's Adoption 
Assistance Programs.--Part III of subchapter B of chapter 1 (relating 
to items specifically excluded from gross income), as amended by title 
VIII, is amended by redesignating section 138 as section 139 and by 
inserting after section 137 the following new section:

``SEC. 138. ADOPTION ASSISTANCE PROGRAMS.

    ``(a) In General.--Gross income of an employee does not include 
amounts paid or expenses incurred by the employer for qualified 
adoption expenses in connection with the adoption of a child by an 
employee if such amounts are furnished pursuant to an adoption 
assistance program.
    ``(b) Limitations.--
        ``(1) Dollar limitation.--The aggregate amount excludable from 
    gross income under subsection (a) for all taxable years with 
    respect to the adoption of any single child by the taxpayer shall 
    not exceed $5,000.
        ``(2) Income limitation.--The amount excludable from gross 
    income under subsection (a) for any taxable year shall be reduced 
    (but not below zero) by an amount which bears the same ratio to the 
    amount so excludable (determined without regard to this paragraph 
    but with regard to paragraph (1)) as--
            ``(A) the amount (if any) by which the taxpayer's adjusted 
        gross income (determined without regard to this section and 
        sections 911, 931, and 933) exceeds $75,000, bears to
            ``(B) $40,000.
    ``(c) Adoption Assistance Program.--For purposes of this section, 
an adoption assistance program is a plan of an employer--
        ``(1) under which the employer provides employees with adoption 
    assistance, and
        ``(2) which meets requirements similar to the requirements of 
    paragraphs (2), (3), and (5) of section 127(b).
An adoption reimbursement program operated under section 1052 of title 
10, United States Code (relating to armed forces) or section 514 of 
title 14, United States Code (relating to members of the Coast Guard) 
shall be treated as an adoption assistance program for purposes of this 
section.
    ``(d) Qualified Adoption Expenses.--For purposes of this section, 
the term `qualified adoption expenses' has the meaning given such term 
by section 24(d).''.
    (c) Conforming Amendments.--
        (1) The table of sections for subpart A of part IV of 
    subchapter A of chapter 1, as amended by section 11001, is amended 
    by inserting after the item relating to section 23 the following 
    new item:
        ``Sec. 24. Adoption expenses.''.

        (2) The table of sections for part III of subchapter B of 
    chapter 1 is amended by striking the item relating to section 138 
    and inserting the following:
        ``Sec. 138. Adoption assistance programs.
        ``Sec. 139. Cross reference to other Acts.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11004. DEDUCTION FOR INTEREST ON EDUCATION LOANS.

    (a) In General.--Part VII of subchapter B of chapter 1 (relating to 
additional itemized deductions for individuals) is amended by 
redesignating section 220 as section 221 and by inserting after section 
219 the following new section:

``SEC. 220. INTEREST ON EDUCATION LOANS.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction for the taxable year an amount equal to 
the interest paid by the taxpayer during the taxable year on any 
qualified education loan.
    ``(b) Maximum Deduction.--
        ``(1) In general.--Except as provided in paragraph (2), the 
    deduction allowed by subsection (a) for the taxable year shall not 
    exceed $2,500.
        ``(2) Limitation based on modified adjusted gross income.--
            ``(A) In general.--If the modified adjusted gross income of 
        the taxpayer for the taxable year exceeds $45,000 ($65,000 in 
        the case of a joint return), the amount which would (but for 
        this paragraph) be allowable as a deduction under this section 
        shall be reduced (but not below zero) by the amount which bears 
        the same ratio to the amount which would be so allowable as 
        such excess bears to $20,000.
            ``(B) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income determined--
                ``(i) without regard to this section and sections 135, 
            911, 931, and 933, and
                ``(ii) after application of sections 86, 219, and 469.
        For purposes of sections 86, 135, 219, and 469, adjusted gross 
        income shall be determined without regard to the deduction 
        allowed under this section.
            ``(C) Inflation adjustment.--In the case of any taxable 
        year beginning after 1996, the $45,000 and $65,000 amounts 
        referred to in subparagraph (A) shall be increased by an amount 
        equal to--
                ``(i) such dollar amount, multiplied by
                ``(ii) the cost-of-living adjustment determined under 
            section (1)(f)(3) for the calendar year in which the 
            taxable year begins, by substituting `1995' for `1992'.
            ``(D) Rounding.--If any amount as adjusted under 
        subparagraph (C) is not a multiple of $50, such amount shall be 
        rounded to the nearest multiple of $50.
    ``(c) Dependents Not Eligible for Deduction.--No deduction shall be 
allowed by this section to an individual for the taxable year if a 
deduction under section 151 with respect to such individual is allowed 
to another taxpayer for the taxable year beginning in the calendar year 
in which such individual's taxable year begins.
    ``(d) Limit on Period Deduction Allowed.--A deduction shall be 
allowed under this section only with respect to interest paid on any 
qualified education loan during the first 60 months (whether or not 
consecutive) in which interest payments are required. For purposes of 
this paragraph, any loan and all refinancings of such loan shall be 
treated as 1 loan.
    ``(e) Definitions.--For purposes of this section--
        ``(1) Qualified education loan.--The term `qualified education 
    loan' means any indebtedness incurred to pay qualified higher 
    education expenses--
            ``(A) which are incurred on behalf of the taxpayer or the 
        taxpayer's spouse,
            ``(B) which are paid or incurred within a reasonable period 
        of time before or after the indebtedness is incurred, and
            ``(C) which are attributable to education furnished during 
        a period during which the recipient was at least a half-time 
        student.
    Such term includes indebtedness used to refinance indebtedness 
    which qualifies as a qualified education loan. The term `qualified 
    education loan' shall not include any indebtedness owed to a person 
    who is related (within the meaning of section 267(b) or 707(b)(1)) 
    to the taxpayer.
        ``(2) Qualified higher education expenses.--The term `qualified 
    higher education expenses' means the cost of attendance (as defined 
    in section 472 of the Higher Education Act of 1965, 20 U.S.C. 
    1087ll, as in effect on the day before the date of the enactment of 
    this Act) of the taxpayer or the taxpayer's spouse at an eligible 
    educational institution, reduced by the sum of--
            ``(A) the amount excluded from gross income under section 
        135 by reason of such expenses, and
            ``(B) the amount of the reduction described in section 
        135(d)(1).
    For purposes of the preceding sentence, the term `eligible 
    educational institution' has the same meaning given such term by 
    section 135(c)(3), except that such term shall also include an 
    institution conducting an internship or residency program leading 
    to a degree or certificate awarded by an institution of higher 
    education, a hospital, or a health care facility which offers 
    postgraduate training.
        ``(3) Half-time student.--The term `half-time student' means 
    any individual who would be a student as defined in section 
    151(c)(4) if `half-time' were substituted for `full-time' each 
    place it appears in such section.
        ``(4) Dependent.--The term `dependent' has the meaning given 
    such term by section 152.
    ``(f) Special Rules.--
        ``(1) Denial of double benefit.--No deduction shall be allowed 
    under this section for any amount for which a deduction is 
    allowable under any other provision of this chapter.
        ``(2) Married couples must file joint return.--If the taxpayer 
    is married at the close of the taxable year, the deduction shall be 
    allowed under subsection (a) only if the taxpayer and the 
    taxpayer's spouse file a joint return for the taxable year.
        ``(3) Marital status.--Marital status shall be determined in 
    accordance with section 7703.''.
    (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other 
Deductions.--Subsection (a) of section 62 is amended by inserting after 
paragraph (15) the following new paragraph:
        ``(16) Interest on education loans.--The deduction allowed by 
    section 220.''
    (c) Reporting Requirement.--
        (1) In general.--Subpart B of part III of subchapter A of 
    chapter 61 (relating to information concerning transactions with 
    other persons) is amended by inserting after section 6050P the 
    following new section:

``SEC. 6050Q. RETURNS RELATING TO EDUCATION LOAN INTEREST RECEIVED IN 
              TRADE OR BUSINESS FROM INDIVIDUALS.

    ``(a) Education Loan Interest of $600 or More.--Any person--
        ``(1) who is engaged in a trade or business, and
        ``(2) who, in the course of such trade or business, receives 
    from any individual interest aggregating $600 or more for any 
    calendar year on 1 or more qualified education loans,
shall make the return described in subsection (b) with respect to each 
individual from whom such interest was received at such time as the 
Secretary may by regulations prescribe.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
        ``(1) is in such form as the Secretary may prescribe,
        ``(2) contains--
            ``(A) the name, address, and TIN of the individual from 
        whom the interest described in subsection (a)(2) was received,
            ``(B) the amount of such interest received for the calendar 
        year, and
            ``(C) such other information as the Secretary may 
        prescribe.
    ``(c) Application to Governmental Units.--For purposes of 
subsection (a)--
        ``(1) Treated as persons.--The term `person' includes any 
    governmental unit (and any agency or instrumentality thereof).
        ``(2) Special rules.--In the case of a governmental unit or any 
    agency or instrumentality thereof--
            ``(A) subsection (a) shall be applied without regard to the 
        trade or business requirement contained therein, and
            ``(B) any return required under subsection (a) shall be 
        made by the officer or employee appropriately designated for 
        the purpose of making such return.
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required to be set forth in such return a written statement showing--
        ``(1) the name and address of the person required to make such 
    return, and
        ``(2) the aggregate amount of interest described in subsection 
    (a)(2) received by the person required to make such return from the 
    individual to whom the statement is required to be furnished.
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) was required to be made.
    ``(e) Qualified Education Loan Defined.--For purposes of this 
section, except as provided in regulations prescribed by the Secretary, 
the term `qualified education loan' has the meaning given such term by 
section 220(e)(1).
    ``(f) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of interest received by any person on behalf 
of another person, only the person first receiving such interest shall 
be required to make the return under subsection (a).''.
        (2) Assessable penalties.--Section 6724(d) (relating to 
    definitions) is amended--
            (A) by redesignating clauses (ix) through (xiv) as clauses 
        (x) through (xv), respectively, in paragraph (1)(B) and by 
        inserting after clause (viii) of such paragraph the following 
        new clause:
                ``(ix) section 6050Q (relating to returns relating to 
            education loan interest received in trade or business from 
            individuals),'', and
            (B) by redesignating subparagraphs (Q) through (T) as 
        subparagraphs (R) through (U), respectively, in paragraph (2) 
        and by inserting after subparagraph (P) of such paragraph the 
        following new subparagraph:
            ``(Q) section 6050Q (relating to returns relating to 
        education loan interest received in trade or business from 
        individuals),''.
    (d) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 is amended by striking the last item and 
inserting the following new items:
        ``Sec. 220. Interest on education loans.
        ``Sec. 221. Cross reference.''.

    (e) Effective Date.--The amendments made by this section shall 
apply to any qualified education loan (as defined in section 220(e)(1) 
of the Internal Revenue Code of 1986, as added by this section) 
incurred on, before, or after the date of the enactment of this Act, 
but only with respect to any loan interest payment due after December 
31, 1995.

SEC. 11005. DEDUCTION FOR TAXPAYERS WITH CERTAIN PERSONS REQUIRING 
              CUSTODIAL CARE IN THEIR HOUSEHOLDS.

    (a) In General.--Part VII of subchapter B of chapter 1 is amended 
by redesignating section 221 as section 222 and by inserting after 
section 220 the following new section:

``SEC. 221. TAXPAYERS WITH CERTAIN PERSONS REQUIRING CUSTODIAL CARE IN 
              THEIR HOUSEHOLDS.

    ``(a) Allowance of Deduction.--In the case of an individual who 
maintains a household which includes as a member one or more qualified 
persons, there shall be allowed as a deduction for the taxable year an 
amount equal to $1,000 for each such person.
    ``(b) Qualified Person.--For purposes of this section, the term 
`qualified person' means any individual--
        ``(1) who is a father or mother of the taxpayer, his spouse, or 
    his former spouse or who is an ancestor of such a father or mother,
        ``(2) who is physically or mentally incapable of caring for 
    himself,
        ``(3) who has as his principal place of abode for more than 
    half of the taxable year the home of the taxpayer,
        ``(4) over half of whose support, for the calendar year in 
    which the taxable year of the taxpayer begins, was received from 
    the taxpayer, and
        ``(5) whose name and TIN are included on the taxpayer's return 
    for the taxable year.
For purposes of paragraph (1), a stepfather or stepmother shall be 
treated as a father or mother.
    ``(c) Special Rules.--For purposes of this section, rules similar 
to the rules of paragraphs (1), (2), (3), and (4) of section 21(e) 
shall apply.''
    (b) Deduction Allowed Whether or Not Taxpayer Itemizes Other 
Deductions.--Subsection (a) of section 62 is amended by inserting after 
paragraph (16) the following new paragraph:
        ``(17) Taxpayers with certain persons requiring custodial care 
    in their households.--The deduction allowed by section 221.''
    (c) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 is amended by striking 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.''

    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

             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.

    (a) Increase in Income Limits for Active Participants.--
        (1) In general.--Subparagraph (B) of section 219(g)(3) 
    (relating to applicable dollar amount) is amended to read as 
    follows:
            ``(B) Applicable dollar amount.--The term `applicable 
        dollar amount' means the following:
                ``(i) In the case of a taxpayer filing a 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.

                ``(ii) In the case of any other taxpayer (other than a 
            married individual filing a 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.

                ``(iii) In the case of a married individual filing a 
            separate return, zero.''
        (2) Increase in phaseout range for joint returns.--
            (A) In general.--Clause (ii) of section 219(g)(2)(A) is 
        amended by inserting ``(the phaseout amount in the case of a 
        joint return)'' after ``$10,000''.
            (B) Phaseout amount.--Paragraph (3) of section 219(g) is 
        amended--
                (i) by adding at the end the following new 
            subparagraph:
            ``(C) Phaseout amount.--The phaseout amount is:
                                                          The applicable
``For taxable years beginning in:
                                                       dollar amount is:
    1996......................................................

                                                                $12,500 

    1997......................................................

                                                                $15,000 

    1998......................................................

                                                                $17,500 

    1999 and thereafter.......................................

                                                             $20,000.'',

            and
                (ii) by inserting ``; phaseout amount'' after 
            ``amount'' in the heading.
        (3) Cost-of-living adjustments.--Section 219(h), as added by 
    section 11012(a), is amended--
            (A) by adding at the end the following new paragraph:
        ``(2) Phase-out ranges.--In the case of any taxable year 
    beginning in a calendar year after 2007, the $100,000 and $85,000 
    amounts in clauses (i) and (ii) of subsection (g)(3)(B) shall each 
    be increased by an amount equal to the product of such dollar 
    amount and the cost-of-living adjustment determined under section 
    1(f)(3) for the calendar year, except that subparagraph (B) thereof 
    shall be applied by substituting `2006' for `1992'. If any amount 
    to which either such amount is increased is not a multiple of 
    $1,000, such amount shall be rounded to the next lower multiple of 
    $1,000.'', and
            (B) by striking ``In the case'' and inserting:
        ``(1) Deductible amount.--In the case''.
    (b) Individual Not Disqualified by Spouse's Participation.--
Paragraph (1) of section 219(g) (relating to limitation on deduction 
for active participants in certain pension plans) is amended by 
striking ``or the individual's spouse''.
    (c) Reporting Requirements.--Section 408(i) is amended by striking 
``under regulations'' and ``in such regulations'' each place such terms 
appear.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11012. INFLATION ADJUSTMENT FOR DEDUCTIBLE AMOUNT.

    (a) In General.--Section 219 is amended by redesignating subsection 
(h) as subsection (i) and by inserting after subsection (g) the 
following new subsection:
    ``(h) Cost-of-Living Adjustments.--In the case of any taxable year 
beginning in a calendar year after 1996, the $2,000 amount under 
subsection (b)(1)(A) shall be increased by an amount equal to the 
product of $2,000 and the cost-of-living adjustment determined under 
section 1(f)(3) for the calendar year in which the taxable year begins, 
except that subparagraph (B) thereof shall be applied by substituting 
`1995' for `1992'. If the amount to which $2,000 would be increased 
under the preceding sentence is not a multiple of $500, such amount 
shall be rounded to the next lower multiple of $500.''
    (b) Conforming Amendments.--
        (1) Section 408(a)(1) is amended by striking ``in excess of 
    $2,000 on behalf of any individual'' and inserting ``on behalf of 
    any individual in excess of the amount in effect for such taxable 
    year under section 219(b)(1)(A)''.
        (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' and 
    inserting ``the dollar amount in effect under section 
    219(b)(1)(A)''.
        (3) Section 408(j) is amended by striking ``$2,000''.

SEC. 11013. HOMEMAKERS ELIGIBLE FOR FULL IRA DEDUCTION.

    (a) Spousal IRA Computed on Basis of Compensation of Both 
Spouses.--Subsection (c) of section 219 (relating to special rules for 
certain married individuals) is amended to read as follows:
    ``(c) Special Rules for Certain Married Individuals.--
        ``(1) In general.--In the case of an individual to whom this 
    paragraph applies for the taxable year, the limitation of paragraph 
    (1) of subsection (b) shall be equal to the lesser of--
            ``(A) the dollar amount in effect under subsection 
        (b)(1)(A) for the taxable year, or
            ``(B) the sum of--
                ``(i) the compensation includible in such individual's 
            gross income for the taxable year, plus
                ``(ii) the compensation includible in the gross income 
            of such individual's spouse for the taxable year reduced 
            by--

                    ``(I) the amount allowed as a deduction under 
                subsection (a) to such spouse for such taxable year, 
                and
                    ``(II) the amount of any contribution on behalf of 
                such spouse to an AD IRA under section 408A for such 
                taxable year.

        ``(2) Individuals to whom paragraph (1) applies.--Paragraph (1) 
    shall apply to any individual if--
            ``(A) such individual files a joint return for the taxable 
        year, and
            ``(B) the amount of compensation (if any) includible in 
        such individual's gross income for the taxable year is less 
        than the compensation includible in the gross income of such 
        individual's spouse for the taxable year.''
    (b) Conforming Amendments.--
        (1) Paragraph (2) of section 219(f) (relating to other 
    definitions and special rules) is amended by striking ``subsections 
    (b) and (c)'' and inserting ``subsection (b)''.
        (2) Section 408(d)(5) is amended by striking ``$2,250'' and 
    inserting ``the dollar amount in effect under section 
    219(b)(1)(A)''.
        (3) Section 219(g)(1) is amended by striking ``(c)(2)'' and 
    inserting ``(c)(1)(A)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                  PART II--NONDEDUCTIBLE TAX-FREE IRAS

SEC. 11015. ESTABLISHMENT OF AMERICAN DREAM IRA.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to pension, profit-sharing, stock bonus plans, etc.) is 
amended by inserting after section 408 the following new section:

``SEC. 408A. AMERICAN DREAM IRA.

    ``(a) General Rule.--Except as provided in this section, an 
American Dream IRA shall be treated for purposes of this title in the 
same manner as an individual retirement plan.
    ``(b) American Dream IRA.--For purposes of this title, the term 
`American Dream IRA' or `AD IRA' means an individual retirement plan 
(as defined in section 7701(a)(37)) which is designated at the time of 
the establishment of the plan as an American Dream IRA. Such 
designation shall be made in such manner as the Secretary may 
prescribe.
    ``(c) Treatment of Contributions.--
        ``(1) No deduction allowed.--No deduction shall be allowed 
    under section 219 for a contribution to an AD IRA.
        ``(2) Contribution limit.--The aggregate amount of 
    contributions for any taxable year to all AD IRAs maintained for 
    the benefit of an individual shall not exceed the excess (if any) 
    of--
            ``(A) the maximum amount allowable as a deduction under 
        section 219 with respect to such individual for such taxable 
        year (computed without regard to subsection (g) of such 
        section), over
            ``(B) the amount so allowed.
        ``(3) Contributions permitted after age 70\1/2\.--Contributions 
    to an AD IRA may be made even after the individual for whom the 
    account is maintained has attained age 70\1/2\.
        ``(4) Mandatory distribution rules not to apply, etc.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        subsections (a)(6) and (b)(3) of section 408 (relating to 
        required distributions) and section 4974 (relating to excise 
        tax on certain accumulations in qualified retirement plans) 
        shall not apply to any AD IRA.
            ``(B) Post-death distributions.--Rules similar to the rules 
        of section 401(a)(9) (other than subparagraph (A) thereof) 
        shall apply for purposes of this section.
        ``(5) Rules relating to rollover contributions.--
            ``(A) In general.--No rollover contribution may be made to 
        an AD IRA unless it is a qualified rollover contribution.
            ``(B) Coordination with limit.--A qualified rollover 
        contribution shall not be taken into account for purposes of 
        paragraph (2).
        ``(6) Time when contributions made.--For purposes of this 
    section, the rule of section 219(f)(3) shall apply.
    ``(d) Distribution Rules.--For purposes of this title--
        ``(1) General rules.--
            ``(A) Exclusions from gross income.--Any qualified 
        distribution from an AD IRA shall not be includible in gross 
        income.
            ``(B) Nonqualified distributions.--In applying section 72 
        to any distribution from an AD IRA which is not a qualified 
        distribution, such distribution shall be treated as made from 
        contributions to the AD IRA to the extent that such 
        distribution, when added to all previous distributions from the 
        AD IRA, does not exceed the aggregate amount of contributions 
        to the AD IRA. For purposes of the preceding sentence, all AD 
        IRAs maintained for the benefit of an individual shall be 
        treated as 1 account.
            ``(C) Exception from penalty tax.--Section 72(t) shall not 
        apply to--
                ``(i) any qualified distribution from an AD IRA, and
                ``(ii) any qualified special purpose distribution 
            (whether or not a qualified distribution) from an AD IRA.
        ``(2) Qualified distribution.--For purposes of this 
    subsection--
            ``(A) In general.--The term `qualified distribution' means 
        any payment or distribution--
                ``(i) made on or after the date on which the individual 
            attains age 59\1/2\,
                ``(ii) made to a beneficiary (or to the estate of the 
            individual) on or after the death of the individual,
                ``(iii) attributable to the individual's being disabled 
            (within the meaning of section 72(m)(7)), or
                ``(iv) which is a qualified special purpose 
            distribution.
            ``(B) Distributions within 5 years.--No payment or 
        distribution shall be treated as a qualified distribution if--
                ``(i) it is made within the 5-taxable year period 
            beginning with the 1st taxable year for which the 
            individual made a contribution to an AD IRA (or such 
            individual's spouse made a contribution to an AD IRA) 
            established for such individual, or
                ``(ii) in the case of a payment or distribution 
            properly allocable (as determined in the manner prescribed 
            by the Secretary) to a qualified rollover contribution (or 
            income allocable thereto), it is made within the 5-taxable 
            year period beginning with the taxable year in which the 
            rollover contribution was made.
        Clause (ii) shall not apply to a qualified rollover 
        contribution from an AD IRA.
        ``(3) Rollovers.--
            ``(A) In general.--Paragraph (1) shall not apply to any 
        distribution which is transferred in a qualified rollover 
        contribution to an AD IRA.
            ``(B) Income inclusion for rollovers from non-ad iras.--In 
        the case of any qualified rollover contribution from an 
        individual retirement plan (other than an AD IRA) to an AD IRA 
        established for the benefit of the payee or distributee, as the 
        case may be--
                ``(i) sections 72(t) and 408(d)(3) shall not apply, and
                ``(ii) in any case where such contribution is made 
            before January 1, 1998, any amount required to be included 
            in gross income by reason of this paragraph shall be so 
            included ratably over the 4-taxable year period beginning 
            with the taxable year in which the payment or distribution 
            is made.
            ``(C) Additional reporting requirements.--The Secretary 
        shall require that trustees of AD IRAs, trustees of individual 
        retirement plans, or both, whichever is appropriate, shall 
        include such additional information in reports required under 
        section 408(i) as is necessary to ensure that amounts required 
        to be included in gross income under subparagraph (B) are so 
        included.
        ``(4) Qualified special purpose distribution.--For purposes of 
    this section, the term `qualified special purpose distribution' 
    means any distribution to which subparagraph (B), (D), or (E) of 
    section 72(t)(2) applies.
    ``(e) Qualified Rollover Contribution.--For purposes of this 
section--
        ``(1) In general.--The term `qualified rollover contribution' 
    means a rollover contribution to an AD IRA from another such 
    account, or from an individual retirement plan, but only if such 
    rollover contribution meets the requirements of section 408(d)(3). 
    For purposes of section 408(d)(3)(B), there shall be disregarded 
    any qualified rollover contribution from an individual retirement 
    plan to an AD IRA.
        ``(2) Conversions.--The conversion of an individual retirement 
    plan to an AD IRA shall be treated as if it were a qualified 
    rollover contribution.''
    (b) Repeal of Nondeductible Contributions.--
        (1) Subsection (f) of section 219 is amended by striking 
    paragraph (7).
        (2) Paragraph (5) of section 408(d) is amended by striking the 
    last sentence.
        (3) Section 408(o) is amended by adding at the end the 
    following new paragraph:
        ``(5) Termination.--This subsection shall not apply to any 
    designated nondeductible contribution for any taxable year 
    beginning after December 31, 1995.''
        (4) Subsection (b) of section 4973 is amended by striking the 
    last sentence.
    (c) Excess Distributions Tax Not To Apply.--Subparagraph (B) of 
section 4980A(e)(1) is amended by inserting ``other than an AD IRA (as 
defined in section 408A(b))'' after ``retirement plan''.
    (d) Excess Contributions.--Section 4973(b) is amended to read as 
follows:
    ``(b) Excess Contributions.--For purposes of this section--
        ``(1) In general.--In the case of individual retirement 
    accounts or individual retirement annuities, the term `excess 
    contributions' means the sum of--
            ``(A) the amount determined under paragraph (2) for the 
        taxable year, plus
            ``(B) the carryover amount determined under paragraph (3) 
        for the taxable year.
        ``(2) Current year.--The amount determined under this paragraph 
    for any taxable year is an amount equal to the sum of--
            ``(A) the excess (if any) of--
                ``(i) the amount contributed for the taxable year to 
            the accounts or for the annuities or bonds (other than AD 
            IRAs), over
                ``(ii) the amount allowable as a deduction under 
            section 219 for the taxable year, plus
            ``(B) the excess (if any) of--
                ``(i) the amount described in clause (i) (taking into 
            account contributions to AD IRAs) contributed for the 
            taxable year, over
                ``(ii) the amount allowable as a deduction under 
            section 219 for the taxable year (computed without regard 
            to section 219(g)).
        ``(3) Carryover amount.--The carryover amount determined under 
    this paragraph for any taxable year is the amount determined under 
    paragraph (2) for the preceding taxable year, reduced by the sum 
    of--
            ``(A) the distributions out of the account for the taxable 
        year which were included in the gross income of the payee under 
        section 408(d)(1),
            ``(B) the distributions out of the account for the taxable 
        year to which section 408(d)(5) applies, and
            ``(C) the excess (if any) of the amount determined under 
        paragraph (2)(B)(ii) over the amount determined under paragraph 
        (2)(B)(i).
        ``(4) Special rules.--For purposes of this subsection--
            ``(A) Rollover contributions.--Rollover distributions 
        described in sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3), 
        and 408A(e) shall not be taken into account.
            ``(B) Contributions returned before due date.--Any 
        contribution which is distributed from an individual retirement 
        plan in a distribution to which section 408(d)(4) applies shall 
        not be taken into account.
            ``(C) Excess contributions treated as contributions.--In 
        applying paragraph (3)(C), the determination as to amounts 
        contributed for a taxable year shall be made without regard to 
        section 219(f)(6).''
    (e) Clerical Amendment.--The table of sections for subpart A of 
part I of subchapter D of chapter 1 is amended by inserting after the 
item relating to section 408 the following new item:
        ``Sec. 408A. American Dream IRA.''

    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                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.

    (a) In General.--Paragraph (2) of section 72(t) (relating to 
exceptions to 10-percent additional tax on early distributions from 
qualified retirement plans) is amended by adding at the end the 
following new subparagraph:
        ``(D) Distributions from individual retirement plans for first-
    time homebuyers or educational expenses.--Distributions to an 
    individual from an individual retirement plan--
            ``(i) which are qualified first-time homebuyer 
        distributions (as defined in paragraph (6)), or
            ``(ii) to the extent such distributions do not exceed the 
        qualified higher education expenses (as defined in paragraph 
        (7)) of the taxpayer for the taxable year.''
    (b) Financially Devastating Medical Expenses.--
        (1) In general.--Section 72(t)(3)(A) is amended by striking 
    ``(B),''.
        (2) Certain lineal descendants and ancestors treated as 
    dependents.--Subparagraph (B) of section 72(t)(2) is amended by 
    striking ``medical care'' and all that follows and inserting 
    ``medical care determined--
                ``(i) without regard to whether the employee itemizes 
            deductions for such taxable year, and
                ``(ii) in the case of an individual retirement plan, by 
            treating such employee's dependents as including--

                    ``(I) all children and grandchildren of the 
                employee or such employee's spouse, and
                    ``(II) all ancestors of the employee or such 
                employee's spouse.''

        (3) Conforming amendment.--Subparagraph (B) of section 72(t)(2) 
    is amended by striking ``or (C)'' and inserting ``, (C), (D), or 
    (E)''.
    (c) Definitions.--Section 72(t) is amended by adding at the end the 
following new paragraphs:
        ``(6) Qualified first-time homebuyer distributions.--For 
    purposes of paragraph (2)(D)(i)--
            ``(A) In general.--The term `qualified first-time homebuyer 
        distribution' means any payment or distribution received by an 
        individual to the extent such payment or distribution is used 
        by the individual before the close of the 60th day after the 
        day on which such payment or distribution is received to pay 
        qualified acquisition costs with respect to a principal 
        residence of a first-time homebuyer who is such individual, the 
        spouse of such individual, or any child, grandchild, or 
        ancestor of such individual or the individual's spouse.
            ``(B) Lifetime dollar limitation.--The aggregate amount of 
        payments or distributions received by an individual which may 
        be treated as qualified first-time homebuyer distributions for 
        any taxable year shall not exceed the excess (if any) of--
                ``(i) $10,000, over
                ``(ii) the aggregate amounts treated as qualified 
            first-time homebuyer distributions with respect to such 
            individual for all prior taxable years.
            ``(C) Qualified acquisition costs.--For purposes of this 
        paragraph, the term `qualified acquisition costs' means the 
        costs of acquiring, constructing, or reconstructing a 
        residence. Such term includes any usual or reasonable 
        settlement, financing, or other closing costs.
            ``(D) First-time homebuyer; other definitions.--For 
        purposes of this paragraph--
                ``(i) First-time homebuyer.--The term `first-time 
            homebuyer' means any individual if--

                    ``(I) such individual (and if married, such 
                individual's spouse) had no present ownership interest 
                in a principal residence during the 2-year period 
                ending on the date of acquisition of the principal 
                residence to which this paragraph applies, and
                    ``(II) subsection (h) or (k) of section 1034 did 
                not suspend the running of any period of time specified 
                in section 1034 with respect to such individual on the 
                day before the date the distribution is applied 
                pursuant to subparagraph (A).

                ``(ii) Principal residence.--The term `principal 
            residence' has the same meaning as when used in section 
            1034.
                ``(iii) Date of acquisition.--The term `date of 
            acquisition' means the date--

                    ``(I) on which a binding contract to acquire the 
                principal residence to which subparagraph (A) applies 
                is entered into, or
                    ``(II) on which construction or reconstruction of 
                such a principal residence is commenced.

            ``(E) Special rule where delay in acquisition.--If any 
        distribution from any individual retirement plan fails to meet 
        the requirements of subparagraph (A) solely by reason of a 
        delay or cancellation of the purchase or construction of the 
        residence, the amount of the distribution may be contributed to 
        an individual retirement plan as provided in section 
        408(d)(3)(A)(i) (determined by substituting `120 days' for `60 
        days' in such section), except that--
                ``(i) section 408(d)(3)(B) shall not be applied to such 
            contribution, and
                ``(ii) such amount shall not be taken into account in 
            determining whether section 408(d)(3)(A)(i) applies to any 
            other amount.
        ``(7) Qualified higher education expenses.--For purposes of 
    paragraph (2)(D)(ii)--
            ``(A) In general.--The term `qualified higher education 
        expenses' means tuition, fees, books, supplies, and equipment 
        required for the enrollment or attendance of--
                ``(i) the taxpayer,
                ``(ii) the taxpayer's spouse, or
                ``(iii) any child (as defined in section 151(c)(3)), 
            grandchild, or ancestor of the taxpayer or the taxpayer's 
            spouse,
        at an eligible educational institution (as defined in section 
        135(c)(3)).
            ``(B) Coordination with savings bond provisions.--The 
        amount of qualified higher education expenses for any taxable 
        year shall be reduced by any amount excludable from gross 
        income under section 135.''
    (d) Penalty-Free Distributions for Certain Unemployed 
Individuals.--Paragraph (2) of section 72(t) is amended by adding at 
the end the following new subparagraph:
            ``(E) Distributions to unemployed individuals.--A 
        distribution from an individual retirement plan to an 
        individual after separation from employment, if--
                ``(i) such individual has received unemployment 
            compensation for 12 consecutive weeks under any Federal or 
            State unemployment compensation law by reason of such 
            separation, and
                ``(ii) such distributions are made during any taxable 
            year during which such unemployment compensation is paid or 
            the succeeding taxable year.
        To the extent provided in regulations, a self-employed 
        individual shall be treated as meeting the requirements of 
        clause (i) if, under Federal or State law, the individual would 
        have received unemployment compensation but for the fact the 
        individual was self-employed.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                   Subchapter C--Simple Savings Plans

SEC. 11018. ESTABLISHMENT OF SAVINGS INCENTIVE MATCH PLANS FOR 
              EMPLOYEES OF SMALL EMPLOYERS.

    (a) In General.--Section 408 (relating to individual retirement 
accounts) is amended by redesignating subsection (p) as subsection (q) 
and by inserting after subsection (o) the following new subsection:
    ``(p) Simple Retirement Accounts.--
        ``(1) In general.--For purposes of this title, the term `simple 
    retirement account' means an individual retirement plan (as defined 
    in section 7701(a)(37))--
            ``(A) with respect to which the requirements of paragraphs 
        (3), (4), and (5) are met; and
            ``(B) with respect to which the only contributions allowed 
        are contributions under a qualified salary reduction 
        arrangement.
        ``(2) Qualified salary reduction arrangement.--
            ``(A) In general.--For purposes of this subsection, the 
        term `qualified salary reduction arrangement' means a written 
        arrangement of an eligible employer under which--
                ``(i) an employee eligible to participate in the 
            arrangement may elect to have the employer make payments--

                    ``(I) as elective employer contributions to a 
                simple retirement account on behalf of the employee, or
                    ``(II) to the employee directly in cash,

                ``(ii) the amount which an employee may elect under 
            clause (i) for any year is required to be expressed as a 
            percentage of compensation and may not exceed a total of 
            $6,000 for any year,
                ``(iii) the employer is required to make a matching 
            contribution to the simple retirement account for any year 
            in an amount equal to so much of the amount the employee 
            elects under clause (i)(I) as does not exceed the 
            applicable percentage of compensation for the year, and
                ``(iv) no contributions may be made other than 
            contributions described in clause (i) or (iii).
            ``(B) Definitions.--For purposes of this subsection--
                ``(i) Eligible employer.--The term `eligible employer' 
            means an employer who employs 100 or fewer employees on any 
            day during the year.
                ``(ii) Applicable percentage.--

                    ``(I) In general.--The term `applicable percentage' 
                means 3 percent.
                    ``(II) Election of lower percentage.--An employer 
                may elect to apply a lower percentage (not less than 1 
                percent) for any year for all employees eligible to 
                participate in the plan for such year if the employer 
                notifies the employees of such lower percentage within 
                a reasonable period of time before the 60-day election 
                period for such year under paragraph (5)(C). An 
                employer may not elect a lower percentage under this 
                subclause for any year if that election would result in 
                the applicable percentage being lower than 3 percent in 
                more than 2 of the years in the 5-year period ending 
                with such year.
                    ``(III) Special rule for years arrangement not in 
                effect.--If any year in the 5-year period described in 
                subclause (II) is a year prior to the first year for 
                which any qualified salary reduction arrangement is in 
                effect with respect to the employer (or any 
                predecessor), the employer shall be treated as if the 
                level of the employer matching contribution was at 3 
                percent of compensation for such prior year.

            ``(C) Arrangement may be only plan of employer.--
                ``(i) In general.--An arrangement shall not be treated 
            as a qualified salary reduction arrangement for any year if 
            the employer (or any predecessor employer) maintained a 
            qualified plan with respect to which contributions were 
            made, or benefits were accrued, for service in any year in 
            the period beginning with the year such arrangement became 
            effective and ending with the year for which the 
            determination is being made.
                ``(ii) Qualified plan.--For purposes of this 
            subparagraph, the term `qualified plan' means a plan, 
            contract, pension, or trust described in subparagraph (A) 
            or (B) of section 219(g)(5).
            ``(D) Cost-of-living adjustment.--The Secretary shall 
        adjust the $6,000 amount under subparagraph (A)(ii) at the same 
        time and in the same manner as under section 415(d), except 
        that the base period taken into account shall be the calendar 
        quarter ending September 30, 1995, and any increase under this 
        subparagraph which is not a multiple of $500 shall be rounded 
        to the next lower multiple of $500.
        ``(3) Vesting requirements.--The requirements of this paragraph 
    are met with respect to a simple retirement account if the 
    employee's rights to any contribution to the simple retirement 
    account are nonforfeitable. For purposes of this paragraph, rules 
    similar to the rules of subsection (k)(4) shall apply.
        ``(4) Participation requirements.--
            ``(A) In general.--The requirements of this paragraph are 
        met with respect to any simple retirement account for a year 
        only if, under the qualified salary reduction arrangement, all 
        employees of the employer who--
                ``(i) received at least $5,000 in compensation from the 
            employer during any 2 preceding years, and
                ``(ii) are reasonably expected to receive at least 
            $5,000 in compensation during the year,
        are eligible to make the election under paragraph (2)(A)(i).
            ``(B) Excludable employees.--An employer may elect to 
        exclude from the requirement under subparagraph (A) employees 
        described in section 410(b)(3).
        ``(5) Administrative requirements.--The requirements of this 
    paragraph are met with respect to any simplified retirement account 
    if, under the qualified salary reduction arrangement--
            ``(A) an employer must--
                ``(i) make the elective employer contributions under 
            paragraph (2)(A)(i) not later than the close of the 30-day 
            period following the last day of the month with respect to 
            which the contributions are to be made, and
                ``(ii) make the matching contributions under  paragraph 
             (2)(A)(iii)  not  later than the date described in section 
            404(m)(2)(B),
            ``(B) an employee may elect to terminate participation in 
        such arrangement at any time during the year, except that if an 
        employee so terminates, the arrangement may provide that the 
        employee may not elect to resume participation until the 
        beginning of the next year, and
            ``(C) each employee eligible to participate may elect, 
        during the 60-day period before the beginning of any year, to 
        participate in the arrangement, or to modify the amounts 
        subject to such arrangement, for such year.
        ``(6) Definitions.--For purposes of this subsection--
            ``(A) Compensation.--
                ``(i) In general.--The term `compensation' means 
            amounts described in paragraphs (3) and (8) of section 
            6051(a).
                ``(ii) Self-employed.--In the case of an employee 
            described in subparagraph (B), the term `compensation' 
            means net earnings from self-employment determined under 
            section 1402(a) without regard to any contribution under 
            this subsection.
            ``(B) Employee.--The term `employee' includes an employee 
        as defined in section 401(c)(1).
            ``(C) Year.--The term `year' means the calendar year.''
    (b) Tax Treatment of Simple Retirement Accounts.--
        (1) Deductibility of contributions by employees.--
            (A) Section 219(b) (relating to maximum amount of 
        deduction) is amended by adding at the end the following new 
        paragraph:
        ``(4) Special rule for simple retirement accounts.--This 
    section shall not apply with respect to any amount contributed to a 
    simple retirement account established under section 408(p).''
            (B) Section 219(g)(5)(A) (defining active participant) is 
        amended by striking ``or'' at the end of clause (iv) and by 
        adding at the end the following new clause:
                ``(vi) any simple retirement account (within the 
            meaning of section 408(p)), or''.
        (2) Deductibility of employer contributions.--Section 404 
    (relating to deductions for contributions of an employer to 
    pension, etc. plans) is amended by adding at the end the following 
    new subsection:
    ``(m) Special Rules for Simple Retirement Accounts.--
        ``(1) In general.--Employer contributions to a simple 
    retirement account shall be treated as if they are made to a plan 
    subject to the requirements of this section.
        ``(2) Timing.--
            ``(A) Deduction.--Contributions described in paragraph (1) 
        shall be deductible in the taxable year of the employer with or 
        within which the calendar year for which the contributions were 
        made ends.
            ``(B) Contributions after end of year.--For purposes of 
        this subsection, contributions shall be treated as made for a 
        taxable year if they are made on account of the taxable year 
        and are made not later than the time prescribed by law for 
        filing the return for the taxable year (including extensions 
        thereof).''
        (3) Contributions and distributions.--
            (A) Section 402 (relating to taxability of beneficiary of 
        employees' trust) is amended by adding at the end the following 
        new subsection:
    ``(k) Treatment of Simple Retirement Accounts.--Rules similar to 
the rules of paragraphs (1) and (3) of subsection (h) shall apply to 
contributions and distributions with respect to a simple retirement 
account under section 408(p).''
            (B) Section 408(d)(3) is amended by adding at the end the 
        following new subparagraph:
            ``(G) Simple retirement accounts.--This paragraph shall not 
        apply to any amount paid or distributed out of a simple 
        retirement account (as defined in section 408(p)) unless--
                ``(i) it is paid into another simple retirement 
            account, or
                ``(ii) in the case of any payment or distribution to 
            which section 72(t)(8) does not apply, it is paid into an 
            individual retirement plan.''
            (C) Clause (i) of section 457(c)(2)(B) is amended by 
        striking ``section 402(h)(1)(B)'' and inserting ``section 
        402(h)(1)(B) or (k)''.
        (4) Penalties.--
            (A) Early withdrawals.--Section 72(t) (relating to 
        additional tax in early distributions), as amended by this Act, 
        is amended by adding at the end the following new paragraph:
        ``(8) Special rules for simple retirement accounts.--In the 
    case of any amount received from a simple retirement account 
    (within the meaning of section 408(p)) during the 2-year period 
    beginning on the date such individual first participated in any 
    qualified salary reduction arrangement maintained by the 
    individual's employer under section 408(p)(2), paragraph (1) shall 
    be applied by substituting `25 percent' for `10 percent'.''
            (B) Failure to report.--Section 6693 is amended by 
        redesignating subsection (c) as subsection (d) and by inserting 
        after subsection (b) the following new subsection:
    ``(c) Penalties Relating to Simple Retirement Accounts.--
        ``(1) Employer penalties.--An employer who fails to provide 1 
    or more notices required by section 408(l)(2)(C) shall pay a 
    penalty of $50 for each day on which such failures continue.
        ``(2) Trustee penalties.--A trustee who fails--
            ``(A) to provide 1 or more statements required by the last 
        sentence of section 408(i) shall pay a penalty of $50 for each 
        day on which such failures continue, or
            ``(B) to provide 1 or more summary descriptions required by 
        section 408(l)(2)(B) shall pay a penalty of $50 for each day on 
        which such failures continue.
        ``(3) Reasonable cause exception.--No penalty shall be imposed 
    under this subsection with respect to any failure which the 
    taxpayer shows was due to reasonable cause.''
        (5) Reporting requirements.--
            (A)(i) Section 408(l) is amended by adding at the end the 
        following new paragraph:
        ``(2) Simple retirement accounts.--
            ``(A) No employer reports.--Except as provided in this 
        paragraph, no report shall be required under this section by an 
        employer maintaining a qualified salary reduction arrangement 
        under subsection (p).
            ``(B) Summary description.--The trustee of any simple 
        retirement account established pursuant to a qualified salary 
        reduction arrangement under subsection (p) shall provide to the 
        employer maintaining the arrangement, each year a description 
        containing the following information:
                ``(i) The name and address of the employer and the 
            trustee.
                ``(ii) The requirements for eligibility for 
            participation.
                ``(iii) The benefits provided with respect to the 
            arrangement.
                ``(iv) The time and method of making elections with 
            respect to the arrangement.
                ``(v) The procedures for, and effects of, withdrawals 
            (including rollovers) from the arrangement.
            ``(C) Employee notification.--The employer shall notify 
        each employee immediately before the period for which an 
        election described in subsection (p)(5)(C) may be made of the 
        employee's opportunity to make such election. Such notice shall 
        include a copy of the description described in subparagraph 
        (B).''
            (ii) Section 408(l) is amended by striking ``An employer'' 
        and inserting--
        ``(1) In general.--An employer''.
        (6) Reporting requirements.--Section 408(i) is amended by 
    adding at the end the following new flush sentence:
``In the case of a simple retirement account under subsection (p), only 
one report under this subsection shall be required to be submitted each 
calendar year to the Secretary (at the time provided under paragraph 
(2)) but, in addition to the report under this subsection, there shall 
be furnished, within 30 days after each calendar year, to the 
individual on whose behalf the account is maintained a statement with 
respect to the account balance as of the close of, and the account 
activity during, such calendar year.''
        (7) Exemption from top-heavy plan rules.--Section 416(g)(4) 
    (relating to special rules for top-heavy plans) is amended by 
    adding at the end the following new subparagraph:
            ``(G) Simple retirement accounts.--The term `top-heavy 
        plan' shall not include a simple retirement account under 
        section 408(p).''
        (8) Conforming amendments.--
            (A) Section 280G(b)(6) is amended by striking ``or'' at the 
        end of subparagraph (B), by striking the period at the end of 
        subparagraph (C) and inserting ``, or'' and by adding after 
        subparagraph (C) the following new subparagraph:
            ``(D) a simple retirement account described in section 
        408(p).''
            (B) Section 402(g)(3) is amended by striking ``and'' at the 
        end of subparagraph (B), by striking the period at the end of 
        subparagraph (C) and inserting ``, and'', and by adding after 
        subparagraph (C) the following new subparagraph:
            ``(D) any elective employer contribution under section 
        408(p)(2)(A)(i).''
            (C) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of 
        section 414 are each amended by inserting ``408(p),'' after 
        ``408(k),''.
            (D) Section 4972(d)(1)(A) is amended by striking ``and'' at 
        the end of clause (ii), by striking the period at the end of 
        clause (iii) and inserting ``, and'', and by adding after 
        clause (iii) the following new clause:
                ``(iv) any simple retirement account (within the 
            meaning of section 408(p)).''
    (c) Repeal of Simplified Employee Pensions.--Section 408(k) is 
amended by adding at the end the following new paragraph:
        ``(10) Termination.--This subsection shall not apply to any 
    years beginning after December 31, 1995. This paragraph shall not 
    apply to a simplified employee pension established before January 
    1, 1996.''
    (d) Modifications of ERISA.--
        (1) Reporting requirements.--Section 101 of the Employee 
    Retirement Income Security Act of 1974 (29 U.S.C. 1021) is amended 
    by redesignating subsection (g) as subsection (h) and by inserting 
    after subsection (f) the following new subsection:
    ``(g) Simple Retirement Accounts.--
        ``(1) No employer reports.--Except as provided in this 
    subsection, no report shall be required under this section by an 
    employer maintaining a qualified salary reduction arrangement under 
    section 408(p) of the Internal Revenue Code of 1986.
        ``(2) Summary description.--The trustee of any simple 
    retirement account established pursuant to a qualified salary 
    reduction arrangement under section 408(p) of such Code shall 
    provide to the employer maintaining the arrangement each year a 
    description containing the following information:
            ``(A) The name and address of the employer and the trustee.
            ``(B) The requirements for eligibility for participation.
            ``(C) The benefits provided with respect to the 
        arrangement.
            ``(D) The time and method of making elections with respect 
        to the arrangement.
            ``(E) The procedures for, and effects of, withdrawals 
        (including rollovers) from the arrangement.
        ``(3) Employee notification.--The employer shall notify each 
    employee immediately before the period for which an election 
    described in section 408(p)(5)(C) of such Code may be made of the 
    employee's opportunity to make such election. Such notice shall 
    include a copy of the description described in paragraph (2).''
        (2) Fiduciary duties.--Section 404(c) of such Act (29 U.S.C. 
    1104(c)) is amended by inserting ``(1)'' after ``(c)'', by 
    redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), 
    respectively, and by adding at the end the following new paragraph:
        ``(2) In the case of a simple retirement account established 
    pursuant to a qualified salary reduction arrangement under section 
    408(p) of the Internal Revenue Code of 1986, a participant or 
    beneficiary shall, for purposes of paragraph (1), be treated as 
    exercising control over the assets in the account upon the earliest 
    of--
            ``(A) an affirmative election with respect to the initial 
        investment of any contribution,
            ``(B) a rollover to any other simple retirement account or 
        individual retirement plan, or
            ``(C) one year after the simple retirement account is 
        established.
    No reports, other than those required under section 101(g), shall 
    be required with respect to a simple retirement account established 
    pursuant to such a qualified salary reduction arrangement.''
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11019. EXTENSION OF SIMPLE PLAN TO 401(k) ARRANGEMENTS.

    (a) Alternative Method of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements) is amended by adding at the end the following new 
paragraph:
        ``(11) Adoption of simple plan to meet nondiscrimination 
    tests.--
            ``(A) In general.--A cash or deferred arrangement 
        maintained by an eligible employer shall be treated as meeting 
        the requirements of paragraph (3)(A)(ii) if such arrangement 
        meets--
                ``(i) the contribution requirements of subparagraph 
            (B),
                ``(ii) the exclusive benefit requirements of 
            subparagraph (C), and
                ``(iii) the vesting requirements of section 408(p)(3).
            ``(B) Contribution requirements.--The requirements of this 
        subparagraph are met if, under the arrangement--
                ``(i) an employee may elect to have the employer make 
            elective contributions for the year on behalf of the 
            employee to a trust under the plan in an amount which is 
            expressed as a percentage of compensation of the employee 
            but which in no event exceeds $6,000,
                ``(ii) the employer is required to make a matching 
            contribution to the trust for the year in an amount equal 
            to so much of the amount the employee elects under clause 
            (i) as does not exceed 3 percent of compensation for the 
            year, and
                ``(iii) no other contributions may be made other than 
            contributions described in clause (i) or (ii).
            ``(C) Exclusive benefit.--The requirements of this 
        subparagraph are met for any year to which this paragraph 
        applies if no contributions were made, or benefits were 
        accrued, for services during such year under any qualified plan 
        of the employer on behalf of any employee eligible to 
        participate in the cash or deferred arrangement, other than 
        contributions described in subparagraph (B).
            ``(D) Definitions and special rule.--
                ``(i) Definitions.--For purposes of this paragraph, any 
            term used in this paragraph which is also used in section 
            408(p) shall have the meaning given such term by such 
            section.
                ``(ii) Coordination with top-heavy rules.--A plan 
            meeting the requirements of this paragraph for any year 
            shall not be treated as a top-heavy plan under section 416 
            for such year.''
    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions) is amended 
by redesignating paragraph (10) as paragraph (11) and by adding after 
paragraph (9) the following new paragraph:
        ``(10) Alternative method of satisfying tests.--A defined 
    contribution plan shall be treated as meeting the requirements of 
    paragraph (2) with respect to matching contributions if the plan--
            ``(A) meets the contribution requirements of subparagraph 
        (B) of subsection (k)(11),
            ``(B) meets the exclusive benefit requirements of 
        subsection (k)(11)(C), and
            ``(C) meets the vesting requirements of section 
        408(p)(3).''
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1995.

                    CHAPTER 2--CAPITAL GAINS REFORM

            Subchapter A--Taxpayers Other Than Corporations

SEC. 11021. CAPITAL GAINS DEDUCTION.

    (a) In General.--Part I of subchapter P of chapter 1 (relating to 
treatment of capital gains) is amended by redesignating section 1202 as 
section 1203 and by inserting after section 1201 the following new 
section:

``SEC. 1202. CAPITAL GAINS DEDUCTION.

    ``(a) General Rule.--If for any taxable year a taxpayer other than 
a corporation has a net capital gain, 50 percent of such gain shall be 
a deduction from gross income.
    ``(b) Estates and Trusts.--In the case of an estate or trust, the 
deduction shall be computed by excluding the portion (if any) of the 
gains for the taxable year from sales or exchanges of capital assets 
which, under sections 652 and 662 (relating to inclusions of amounts in 
gross income of beneficiaries of trusts), is includible by the income 
beneficiaries as gain derived from the sale or exchange of capital 
assets.
    ``(c) Coordination With Treatment of Capital Gain Under Limitation 
on Investment Interest.--For purposes of this section, the net capital 
gain for any taxable year shall be reduced (but not below zero) by the 
amount which the taxpayer takes into account as investment income under 
section 163(d)(4)(B)(iii).
    ``(d) Special Rule for Collectibles.--
        ``(1) In general.--The rate of tax imposed by section 1 on the 
    excess of--
            ``(A) the net capital gain for the taxable year determined 
        as if section 1222(12) had not applied to any collectible which 
        is sold or exchanged during the taxable year and the basis of 
        which was not adjusted under section 1022(a), over
            ``(B) the net capital gain for the taxable year,
    shall not exceed 28 percent.
        ``(2) Election.--A taxpayer may elect to treat any collectible 
    specified in such election as not being an indexed asset for 
    purposes of section 1022. Any such election, and any specification 
    therein, once made, shall be irrevocable.
    ``(e) Transitional Rule.--
        ``(1) In general.--In the case of a taxable year which includes 
    January 1, 1995--
            ``(A) the amount taken into account as the net capital gain 
        under subsection (a) shall not exceed the net capital gain 
        determined by only taking into account gains and losses 
        properly taken into account for the portion of the taxable year 
        on or after January 1, 1995, and
            ``(B) the amount of the net capital gain taken into account 
        in applying section 1(h) for such year shall be reduced by the 
        amount taken into account under subparagraph (A) for such year.
        ``(2) Special rules for pass-thru entities.--
            ``(A) In general.--In applying paragraph (1) with respect 
        to any pass-thru entity, the determination of when gains and 
        losses are properly taken into account shall be made at the 
        entity level.
            ``(B) Pass-thru entity defined.--For purposes of 
        subparagraph (A), the term `pass-thru entity' means--
                ``(i) a regulated investment company,
                ``(ii) a real estate investment trust,
                ``(iii) an S corporation,
                ``(iv) a partnership,
                ``(v) an estate or trust, and
                ``(vi) a common trust fund.''.
    (b) Deduction Allowable in Computing Adjusted Gross Income.--
Subsection (a) of section 62, as amended by sections 11004 and 11005, 
is amended by inserting after paragraph (17) the following new 
paragraph:
        ``(18) Long-term capital gains.--The deduction allowed by 
    section 1202.''.
    (c) Treatment of Collectibles.--
        (1) In general.--Section 1222 is amended by inserting after 
    paragraph (11) the following new paragraph:
        ``(12) Special rule for collectibles.--
            ``(A) In general.--Any gain or loss from the sale or 
        exchange of a collectible shall be treated as a short-term 
        capital gain or loss (as the case may be), without regard to 
        the period such asset was held. The preceding sentence shall 
        apply only to the extent the gain or loss is taken into account 
        in computing taxable income.
            ``(B) Treatment of certain sales of interest in 
        partnership, etc.--For purposes of subparagraph (A), any gain 
        from the sale or exchange of an interest in a partnership, S 
        corporation, or trust which is attributable to unrealized 
        appreciation in the value of collectibles held by such entity 
        shall be treated as gain from the sale or exchange of a 
        collectible. Rules similar to the rules of section 751(f) shall 
        apply for purposes of the preceding sentence.
            ``(C) Collectible.--For purposes of this paragraph, the 
        term `collectible' means any capital asset which is a 
        collectible (as defined in section 408(m) without regard to 
        paragraph (3) thereof).''.
        (2) Charitable deduction not affected.--
            (A) Paragraph (1) of section 170(e) is amended by adding at 
        the end the following new sentence: ``For purposes of this 
        paragraph, section 1222 shall be applied without regard to 
        paragraph (12) thereof (relating to special rule for 
        collectibles).''.
            (B) Clause (iv) of section 170(b)(1)(C) is amended by 
        inserting before the period at the end the following: ``and 
        section 1222 shall be applied without regard to paragraph (12) 
        thereof (relating to special rule for collectibles)''.
    (d) Technical and Conforming Changes.--
        (1) Section 1 is amended by striking subsection (h).
        (2) Paragraph (1) of section 170(e) is amended by striking 
    ``the amount of gain'' in the material following subparagraph 
    (B)(ii) and inserting ``50 percent (80 percent in the case of a 
    corporation) of the amount of gain''.
        (3) Subparagraph (B) of section 172(d)(2) is amended to read as 
    follows:
            ``(B) the deduction under section 1202 shall not be 
        allowed.''.
        (4) The last sentence of section 453A(c)(3) is amended by 
    striking all that follows ``long-term capital gain,'' and inserting 
    ``the maximum rate on net capital gain under section 1201 or the 
    deduction under section 1202 (whichever is appropriate) shall be 
    taken into account.''.
        (5) Paragraph (4) of section 642(c) is amended to read as 
    follows:
        ``(4) Adjustments.--To the extent that the amount otherwise 
    allowable as a deduction under this subsection consists of gain 
    from the sale or exchange of capital assets held for more than 1 
    year, proper adjustment shall be made for any deduction allowable 
    to the estate or trust under section 1202 (relating to capital 
    gains deduction). In the case of a trust, the deduction allowed by 
    this subsection shall be subject to section 681 (relating to 
    unrelated business income).''.
        (6) The last sentence of section 643(a)(3) is amended to read 
    as follows: ``The deduction under section 1202 (relating to capital 
    gains deduction) shall not be taken into account.''.
        (7) Subparagraph (C) of section 643(a)(6) is amended by 
    inserting ``(i)'' before ``there shall'' and by inserting before 
    the period ``, and (ii) the deduction under section 1202 (relating 
    to capital gains deduction) shall not be taken into account''.
        (8)(A) Paragraph (2) of section 904(b) is amended by striking 
    subparagraph (A), by redesignating subparagraph (B) as subparagraph 
    (A), and by inserting after subparagraph (A) (as so redesignated) 
    the following new subparagraph:
            ``(B) Other taxpayers.--In the case of a taxpayer other 
        than a corporation, taxable income from sources outside the 
        United States shall include gain from the sale or exchange of 
        capital assets only to the extent of foreign source capital 
        gain net income.''.
        (B) Subparagraph (A) of section 904(b)(2), as so redesignated, 
    is amended--
            (i) by striking all that precedes clause (i) and inserting 
        the following:
            ``(A) Corporations.--In the case of a corporation--'', and
            (ii) by striking in clause (i) ``in lieu of applying 
        subparagraph (A),''.
        (C) Paragraph (3) of section 904(b) is amended by striking 
    subparagraphs (D) and (E) and inserting the following new 
    subparagraph:
            ``(D) Rate differential portion.--The rate differential 
        portion of foreign source net capital gain, net capital gain, 
        or the excess of net capital gain from sources within the 
        United States over net capital gain, as the case may be, is the 
        same proportion of such amount as the excess of the highest 
        rate of tax specified in section 11(b) over the alternative 
        rate of tax under section 1201(a) bears to the highest rate of 
        tax specified in section 11(b).''.
        (D) Clause (v) of section 593(b)(2)(D) is amended--
            (i) by striking ``if there is a capital gain rate 
        differential (as defined in section 904(b)(3)(D)) for the 
        taxable year,'', and
            (ii) by striking ``section 904(b)(3)(E)'' and inserting 
        ``section 904(b)(3)(D)''.
        (9) The last sentence of section 1044(d) is amended by striking 
    ``1202'' and inserting ``1203''.
        (10)(A) Paragraph (2) of section 1211(b) is amended to read as 
    follows:
        ``(2) the sum of--
            ``(A) the excess of the net short-term capital loss over 
        the net long-term capital gain, and
            ``(B) one-half of the excess of the net long-term capital 
        loss over the net short-term capital gain.''.
        (B) So much of paragraph (2) of section 1212(b) as precedes 
    subparagraph (B) thereof is amended to read as follows:
        ``(2) Special rules.--
            ``(A) Adjustments.--
                ``(i) For purposes of determining the excess referred 
            to in paragraph (1)(A), there shall be treated as short-
            term capital gain in the taxable year an amount equal to 
            the lesser of--

                    ``(I) the amount allowed for the taxable year under 
                paragraph (1) or (2) of section 1211(b), or
                    ``(II) the adjusted taxable income for such taxable 
                year.

                ``(ii) For purposes of determining the excess referred 
            to in paragraph (1)(B), there shall be treated as short-
            term capital gain in the taxable year an amount equal to 
            the sum of--

                    ``(I) the amount allowed for the taxable year under 
                paragraph (1) or (2) of section 1211(b) or the adjusted 
                taxable income for such taxable year, whichever is the 
                least, plus
                    ``(II) the excess of the amount described in 
                subclause (I) over the net short-term capital loss 
                (determined without regard to this subsection) for such 
                year.''.

        (C) Subsection (b) of section 1212 is amended by adding at the 
    end the following new paragraph:
        ``(3) Transitional rule.--In the case of any amount which, 
    under this subsection and section 1211(b) (as in effect for taxable 
    years beginning before January 1, 1996), is treated as a capital 
    loss in the first taxable year beginning after December 31, 1995, 
    paragraph (2) and section 1211(b) (as so in effect) shall apply 
    (and paragraph (2) and section 1211(b) as in effect for taxable 
    years beginning after December 31, 1995, shall not apply) to the 
    extent such amount exceeds the total of any capital gain net income 
    (determined without regard to this subsection) for taxable years 
    beginning after December 31, 1995.''.
        (11) Paragraph (1) of section 1402(i) is amended by inserting 
    ``, and the deduction provided by section 1202 shall not apply'' 
    before the period at the end thereof.
        (12) Subsection (e) of section 1445 is amended--
            (A) in paragraph (1) by striking ``35 percent (or, to the 
        extent provided in regulations, 28 percent)'' and inserting 
        ``28 percent (or, to the extent provided in regulations, 19.8 
        percent)'', and
            (B) in paragraph (2) by striking ``35 percent'' and 
        inserting ``28 percent''.
        (13)(A) The second sentence of section 7518(g)(6)(A) is 
    amended--
            (i) by striking ``during a taxable year to which section 
        1(h) or 1201(a) applies'', and
            (ii) by striking ``28 percent (34 percent'' and inserting 
        ``19.8 percent (28 percent''.
        (B) The second sentence of section 607(h)(6)(A) of the Merchant 
    Marine Act, 1936 is amended--
            (i) by striking ``during a taxable year to which section 
        1(h) or 1201(a) of such Code applies'', and
            (ii) by striking ``28 percent (34 percent'' and inserting 
        ``19.8 percent (28 percent''.
    (e) Clerical Amendment.--The table of sections for part I of 
subchapter P of chapter 1 is amended by striking the item relating to 
section 1202 and by inserting after the item relating to section 1201 
the following new items:
        ``Sec. 1202. Capital gains deduction.
        ``Sec. 1203. Small business stock eligible for preferential 
                  rates.''.

    (f) Effective Date.--
        (1) In general.--Except as otherwise provided in this 
    subsection, the amendments made by this section shall apply to 
    taxable years ending after December 31, 1994.
        (2) Collectibles.--The amendments made by subsection (c) shall 
    apply to sales and exchanges after December 31, 1994.
        (3) Repeal of section 1(h).--The amendment made by subsection 
    (d)(1) shall apply to taxable years beginning after January 1, 
    1995.
        (4) Contributions.--The amendment made by subsection (d)(2) 
    shall apply to contributions after December 31, 1994.
        (5) Use of long-term losses.--The amendments made by subsection 
    (d)(10) shall apply to taxable years beginning after December 31, 
    1995.
        (6) Withholding.--The amendments made by subsection (d)(12) 
    shall apply only to amounts paid after the date of the enactment of 
    this Act.

SEC. 11022. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER DECEMBER 31, 
              2000, FOR PURPOSES OF DETERMINING GAIN.

    (a) In General.--Part II of subchapter O of chapter 1 (relating to 
basis rules of general application) is amended by inserting after 
section 1021 the following new section:

``SEC. 1022. INDEXING OF CERTAIN ASSETS ACQUIRED AFTER DECEMBER 31, 
              2000, FOR PURPOSES OF DETERMINING GAIN.

    ``(a) General Rule.--
        ``(1) Indexed basis substituted for adjusted basis.--Solely for 
    purposes of determining gain on the sale or other disposition by a 
    taxpayer (other than a corporation) of an indexed asset which has 
    been held for more than 3 years, the indexed basis of the asset 
    shall be substituted for its adjusted basis.
        ``(2) Exception for depreciation, etc.--The deductions for 
    depreciation, depletion, and amortization shall be determined 
    without regard to the application of paragraph (1) to the taxpayer 
    or any other person.
    ``(b) Indexed Asset.--
        ``(1) In general.--For purposes of this section, the term 
    `indexed asset' means--
            ``(A) common stock in a C corporation (other than a foreign 
        corporation), and
            ``(B) tangible property,
    which is a capital asset or property used in the trade or business 
    (as defined in section 1231(b)).
        ``(2) Stock in certain foreign corporations included.--For 
    purposes of this section--
            ``(A) In general.--The term `indexed asset' includes common 
        stock in a foreign corporation which is regularly traded on an 
        established securities market.
            ``(B) Exception.--Subparagraph (A) shall not apply to--
                ``(i) stock of a foreign investment company (within the 
            meaning of section 1246(b)),
                ``(ii) stock in a passive foreign investment company 
            (as defined in section 1296),
                ``(iii) stock in a foreign corporation held by a United 
            States person who meets the requirements of section 
            1248(a)(2), and
                ``(iv) stock in a foreign personal holding company (as 
            defined in section 552).
            ``(C) Treatment of american depository receipts.--An 
        American depository receipt for common stock in a foreign 
        corporation shall be treated as common stock in such 
        corporation.
    ``(c) Indexed Basis.--For purposes of this section--
        ``(1) General rule.--The indexed basis for any asset is--
            ``(A) the adjusted basis of the asset, increased by
            ``(B) the applicable inflation adjustment.
        ``(2) Applicable inflation adjustment.--The applicable 
    inflation adjustment for any asset is an amount equal to--
            ``(A) the adjusted basis of the asset, multiplied by
            ``(B) the percentage (if any) by which--
                ``(i) the gross domestic product deflator for the last 
            calendar quarter ending before the asset is disposed of, 
            exceeds
                ``(ii) the gross domestic product deflator for the last 
            calendar quarter ending before the asset was acquired by 
            the taxpayer.
    The percentage under subparagraph (B) shall be rounded to the 
    nearest \1/10\ of 1 percentage point.
        ``(3) Gross domestic product deflator.--The gross domestic 
    product deflator for any calendar quarter is the implicit price 
    deflator for the gross domestic product for such quarter (as shown 
    in the last revision thereof released by the Secretary of Commerce 
    before the close of the following calendar quarter).
    ``(d) Suspension of Holding Period Where Diminished Risk of Loss; 
Treatment of Short Sales.--
        ``(1) In general.--If the taxpayer (or a related person) enters 
    into any transaction which substantially reduces the risk of loss 
    from holding any asset, such asset shall not be treated as an 
    indexed asset for the period of such reduced risk.
        ``(2) Short sales.--
            ``(A) In general.--In the case of a short sale of an 
        indexed asset with a short sale period in excess of 3 years, 
        for purposes of this title, the amount realized shall be an 
        amount equal to the amount realized (determined without regard 
        to this paragraph) increased by the applicable inflation 
        adjustment. In applying subsection (c)(2) for purposes of the 
        preceding sentence, the date on which the property is sold 
        short shall be treated as the date of acquisition and the 
        closing date for the sale shall be treated as the date of 
        disposition.
            ``(B) Short sale period.--For purposes of subparagraph (A), 
        the short sale period begins on the day that the property is 
        sold and ends on the closing date for the sale.
    ``(e) Treatment of Regulated Investment Companies and Real Estate 
Investment Trusts.--
        ``(1) Adjustments at entity level.--
            ``(A) In general.--Except as otherwise provided in this 
        paragraph, the adjustment under subsection (a) shall be allowed 
        to any qualified investment entity (including for purposes of 
        determining the earnings and profits of such entity).
            ``(B) Exception for corporate shareholders.--Under 
        regulations--
                ``(i) in the case of a distribution by a qualified 
            investment entity (directly or indirectly) to a 
            corporation--

                    ``(I) the determination of whether such 
                distribution is a dividend shall be made without regard 
                to this section, and
                    ``(II) the amount treated as gain by reason of the 
                receipt of any capital gain dividend shall be increased 
                by the percentage by which the entity's net capital 
                gain for the taxable year (determined without regard to 
                this section) exceeds the entity's net capital gain for 
                such year determined with regard to this section, and

                ``(ii) there shall be other appropriate adjustments 
            (including deemed distributions) so as to ensure that the 
            benefits of this section are not allowed (directly or 
            indirectly) to corporate shareholders of qualified 
            investment entities.
        For purposes of the preceding sentence, any amount includible 
        in gross income under section 852(b)(3)(D) shall be treated as 
        a capital gain dividend and an S corporation shall not be 
        treated as a corporation.
            ``(C) Exception for qualification purposes.--This section 
        shall not apply for purposes of sections 851(b) and 856(c).
            ``(D) Exception for certain taxes imposed at entity 
        level.--
                ``(i) Tax on failure to distribute entire gain.--If any 
            amount is subject to tax under section 852(b)(3)(A) for any 
            taxable year, the amount on which tax is imposed under such 
            section shall be increased by the percentage determined 
            under subparagraph (B)(i)(II). A similar rule shall apply 
            in the case of any amount subject to tax under paragraph 
            (2) or (3) of section 857(b) to the extent attributable to 
            the excess of the net capital gain over the deduction for 
            dividends paid determined with reference to capital gain 
            dividends only. The first sentence of this clause shall not 
            apply to so much of the amount subject to tax under section 
            852(b)(3)(A) as is designated by the company under section 
            852(b)(3)(D).
                ``(ii) Other taxes.--This section shall not apply for 
            purposes of determining the amount of any tax imposed by 
            paragraph (4), (5), or (6) of section 857(b).
        ``(2) Adjustments to interests held in entity.--
            ``(A) Regulated investment companies.--Stock in a regulated 
        investment company (within the meaning of section 851) shall be 
        an indexed asset for any calendar quarter in the same ratio 
        as--
                ``(i) the average of the fair market values of the 
            indexed assets held by such company at the close of each 
            month during such quarter, bears to
                ``(ii) the average of the fair market values of all 
            assets held by such company at the close of each such 
            month.
            ``(B) Real estate investment trusts.--Stock in a real 
        estate investment trust (within the meaning of section 856) 
        shall be an indexed asset for any calendar quarter in the same 
        ratio as--
                ``(i) the fair market value of the indexed assets held 
            by such trust at the close of such quarter, bears to
                ``(ii) the fair market value of all assets held by such 
            trust at the close of such quarter.
            ``(C) Ratio of 80 percent or more.--If the ratio for any 
        calendar quarter determined under subparagraph (A) or (B) would 
        (but for this subparagraph) be 80 percent or more, such ratio 
        for such quarter shall be 100 percent.
            ``(D) Ratio of 20 percent or less.--If the ratio for any 
        calendar quarter determined under subparagraph (A) or (B) would 
        (but for this subparagraph) be 20 percent or less, such ratio 
        for such quarter shall be zero.
            ``(E) Look-thru of partnerships.--For purposes of this 
        paragraph, a qualified investment entity which holds a 
        partnership interest shall be treated (in lieu of holding a 
        partnership interest) as holding its proportionate share of the 
        assets held by the partnership.
        ``(3) Treatment of return of capital distributions.--Except as 
    otherwise provided by the Secretary, a distribution with respect to 
    stock in a qualified investment entity which is not a dividend and 
    which results in a reduction in the adjusted basis of such stock 
    shall be treated as allocable to stock acquired by the taxpayer in 
    the order in which such stock was acquired.
        ``(4) Qualified investment entity.--For purposes of this 
    subsection, the term `qualified investment entity' means--
            ``(A) a regulated investment company (within the meaning of 
        section 851), and
            ``(B) a real estate investment trust (within the meaning of 
        section 856).
    ``(f) Other Pass-Thru Entities.--
        ``(1) Partnerships.--
            ``(A) In general.--In the case of a partnership, the 
        adjustment made under subsection (a) at the partnership level 
        shall be passed through to the partners.
            ``(B) Special rule in the case of section 754 elections.--
        In the case of a transfer of an interest in a partnership with 
        respect to which the election provided in section 754 is in 
        effect--
                ``(i) the adjustment under section 743(b)(1) shall, 
            with respect to the transferor partner, be treated as a 
            sale of the partnership assets for purposes of applying 
            this section, and
                ``(ii) with respect to the transferee partner, the 
            partnership's holding period for purposes of this section 
            in such assets shall be treated as beginning on the date of 
            such adjustment.
        ``(2) S corporations.--In the case of an S corporation, the 
    adjustment made under subsection (a) at the corporate level shall 
    be passed through to the shareholders. This section shall not apply 
    for purposes of determining the amount of any tax imposed by 
    section 1374 or 1375.
        ``(3) Common trust funds.--In the case of a common trust fund, 
    the adjustment made under subsection (a) at the trust level shall 
    be passed through to the participants.
        ``(4) Indexing adjustment disregarded in determining loss on 
    sale of interest in entity.--Notwithstanding the preceding 
    provisions of this subsection, for purposes of determining the 
    amount of any loss on a sale or exchange of an interest in a 
    partnership, S corporation, or common trust fund, the adjustment 
    made under subsection (a) shall not be taken into account in 
    determining the adjusted basis of such interest.
    ``(g) Dispositions Between Related Persons.--
        ``(1) In general.--This section shall not apply to any sale or 
    other disposition of property between related persons except to the 
    extent that the basis of such property in the hands of the 
    transferee is a substituted basis.
        ``(2) Related persons defined.--For purposes of this section, 
    the term `related persons' means--
            ``(A) persons bearing a relationship set forth in section 
        267(b), and
            ``(B) persons treated as single employer under subsection 
        (b) or (c) of section 414.
    ``(h) Transfers To Increase Indexing Adjustment.--If any person 
transfers cash, debt, or any other property to another person and the 
principal purpose of such transfer is to secure or increase an 
adjustment under subsection (a), the Secretary may disallow part or all 
of such adjustment or increase.
    ``(i) Special Rules.--For purposes of this section--
        ``(1) Treatment of improvements, etc.--If there is an addition 
    to the adjusted basis of any tangible property or of any stock in a 
    corporation during the taxable year by reason of an improvement to 
    such property or a contribution to capital of such corporation--
            ``(A) such addition shall never be taken into account under 
        subsection (c)(1)(A) if the aggregate amount thereof during the 
        taxable year with respect to such property or stock is less 
        than $1,000, and
            ``(B) such addition shall be treated as a separate asset 
        acquired at the close of such taxable year if the aggregate 
        amount thereof during the taxable year with respect to such 
        property or stock is $1,000 or more.
    A rule similar to the rule of the preceding sentence shall apply to 
    any other portion of an asset to the extent that separate treatment 
    of such portion is appropriate to carry out the purposes of this 
    section.
        ``(2) Assets which are not indexed assets throughout holding 
    period.--The applicable inflation adjustment shall be appropriately 
    reduced for periods during which the asset was not an indexed 
    asset.
        ``(3) Treatment of certain distributions.--A distribution with 
    respect to stock in a corporation which is not a dividend shall be 
    treated as a disposition.
        ``(4) Acquisition date where there has been prior application 
    of subsection (a)(1) with respect to the taxpayer.--If there has 
    been a prior application of subsection (a)(1) to an asset while 
    such asset was held by the taxpayer, the date of acquisition of 
    such asset by the taxpayer shall be treated as not earlier than the 
    date of the most recent such prior application.
        ``(5) Collapsible corporations.--The application of section 
    341(a) (relating to collapsible corporations) shall be determined 
    without regard to this section.
    ``(j) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''
    (b) Clerical Amendment.--The table of sections for part II of 
subchapter O of chapter 1 is amended by inserting after the item 
relating to section 1021 the following new item:
        ``Sec. 1022. Indexing of certain assets acquired after December 
                  31, 2000, for purposes of determining gain.''

    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to the disposition of any property the holding period of 
    which begins after December 31, 2000.
        (2) Certain transactions between related persons.--The 
    amendments made by this section shall not apply to the disposition 
    of any property acquired after December 31, 2000, from a related 
    person (as defined in section 1022(g)(2) of the Internal Revenue 
    Code of 1986, as added by this section) if--
            (A) such property was so acquired for a price less than the 
        property's fair market value, and
            (B) the amendments made by this section did not apply to 
        such property in the hands of such related person.
    (d) Election To Recognize Gain on Assets Held on January 1, 2001.--
For purposes of the Internal Revenue Code of 1986--
        (1) In general.--A taxpayer other than a corporation may elect 
    to treat--
            (A) any readily tradable stock (which is an indexed asset) 
        held by such taxpayer on January 1, 2001, and not sold before 
        the next business day after such date, as having been sold on 
        such next business day for an amount equal to its closing 
        market price on such next business day (and as having been 
        reacquired on such next business day for an amount equal to 
        such closing market price), and
            (B) any other indexed asset held by the taxpayer on January 
        1, 2001, as having been sold on such date for an amount equal 
        to its fair market value on such date (and as having been 
        reacquired on such date for an amount equal to such fair market 
        value).
        (2) Treatment of gain or loss.--
            (A) Any gain resulting from an election under paragraph (1) 
        shall be treated as received or accrued on the date the asset 
        is treated as sold under paragraph (1) and shall be recognized 
        notwithstanding any provision of the Internal Revenue Code of 
        1986.
            (B) Any loss resulting from an election under paragraph (1) 
        shall not be allowed for any taxable year.
        (3) Election.--An election under paragraph (1) shall be made in 
    such manner as the Secretary of the Treasury or his delegate may 
    prescribe and shall specify the assets for which such election is 
    made. Such an election, once made with respect to any asset, shall 
    be irrevocable.
        (4) Readily tradable stock.--For purposes of this subsection, 
    the term ``readily tradable stock'' means any stock which, as of 
    January 1, 2001, is readily tradable on an established securities 
    market or otherwise.
    (e) Treatment of Principal Residences.--Property held and used by 
the taxpayer on January 1, 2001, as his principal residence (within the 
meaning of section 1034 of the Internal Revenue Code of 1986) shall be 
treated--
        (1) for purposes of subsection (c)(1) of this section and 
    section 1022 of such Code, as having a holding period which begins 
    on January 1, 2001, and
        (2) for purposes of section 1022(c)(2)(B)(ii) of such Code, as 
    having been acquired on January 1, 2001.
Subsection (d) shall not apply to property to which this subsection 
applies.

SEC. 11023. MODIFICATIONS TO EXCLUSION OF GAIN ON CERTAIN SMALL 
              BUSINESS STOCK.

    (a) Reduced Rate In Lieu of Exclusion.--
        (1) Section 1, as amended by section 11021, is amended by 
    adding at the end the following new subsection:
    ``(h) Maximum Capital Gains Rate for Certain Small Business 
Stock.--
        ``(1) In general.--If for any taxable year a taxpayer has gain 
    from the sale or exchange of any qualified small business stock 
    held for more than 5 years, then the tax imposed by this section 
    shall not exceed the sum of--
            ``(A) a tax computed on the taxable income reduced by \1/2\ 
        the amount of the small business gain, at the rates and in the 
        manner as if this subsection had not been enacted, plus
            ``(B) a tax of 14 percent of the small business gain.
        ``(2) Small business gain.--For purposes of paragraph (1), the 
    term `small business gain' means the lesser of--
            ``(A) gain from the sale or exchange of any qualified small 
        business stock held for more than 5 years, or
            ``(B) the net capital gain taken into account under section 
        1202(a).
        ``(3) Qualified small business stock.--The term `qualified 
    small business stock' has the meaning given such term by section 
    1203(c).''
        (2) Subsection (a) of section 1203, as redesignated by section 
    11021, is amended to read as follows:
    ``(a) Application of Reduced Rates to Qualified 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).''.

    (b) Repeal of Minimum Tax Preference.--
        (1) Subsection (a) of section 57 is amended by striking 
    paragraph (7).
        (2) Subclause (II) of section 53(d)(1)(B)(ii) is amended by 
    striking ``, (5), and (7)'' and inserting ``and (5)''.
    (c) Stock of Larger Businesses Eligible for Reduced Rates.--
Paragraph (1) of section 1203(d), as redesignated by section 11021, is 
amended by striking ``$50,000,000'' each place it appears and inserting 
``$100,000,000''.
    (d) Repeal of Per-Issuer Limitation.--Section 1203, as so 
redesignated, is amended by striking subsection (b).
    (e) Other Modifications.--
        (1) Repeal of working capital limitation.--Paragraph (6) of 
    section 1203(e), as so redesignated, is amended--
            (A) by striking ``2 years'' in subparagraph (B) and 
        inserting ``5 years'', and
            (B) by striking the last sentence.
        (2) Exception from redemption rules where business purpose.--
    Paragraph (3) of section 1203(c), as so redesignated, is amended by 
    adding at the end the following new subparagraph:
            ``(D) Waiver where business purpose.--A purchase of stock 
        by the issuing corporation shall be disregarded for purposes of 
        subparagraph (B) if the issuing corporation establishes that 
        there was a business purpose for such purchase and one of the 
        principal purposes of the purchase was not to avoid the 
        limitations of this section.''.
    (f) Clerical Amendment.--The section heading for section 1203, as 
redesignated by section 11021, is amended to read as follows:

``SEC. 1203. SMALL BUSINESS STOCK ELIGIBLE FOR PREFERENTIAL RATES.''

    (g) Effective Dates.--
        (1) Reduced rates.--The amendments made by subsections (a) and 
    (b) shall apply to taxable years beginning after the date of the 
    enactment of this Act.
        (2) Increase in size.--The amendment made by subsection (c) 
    shall apply to stock issued after the date of the enactment of this 
    Act.
        (3) Other rules.--The amendments made by subsections (d) and 
    (e) shall apply to stock issued after August 10, 1993.

                 Subchapter B--Corporate Capital Gains

SEC. 11025. REDUCTION OF ALTERNATIVE CAPITAL GAIN TAX FOR CORPORATIONS.

    (a) In General.--Section 1201 is amended to read as follows:

``SEC. 1201. ALTERNATIVE TAX FOR CORPORATIONS.

    ``(a) General Rule.--If for any taxable year a corporation has a 
net capital gain, then, in lieu of the tax imposed by sections 11, 511, 
and 831 (a) and (b) (whichever is applicable), there is hereby imposed 
a tax (if such tax is less than the tax imposed by such sections) which 
shall consist of the sum of--
        ``(1) a tax computed on the taxable income reduced by the 
    amount of the net capital gain, at the rates and in the manner as 
    if this subsection had not been enacted, plus
        ``(2) a tax of 28 percent of the net capital gain.
    ``(b) Special Rules for Qualified Small Business Gain.--
        ``(1) In general.--If for any taxable year a corporation has 
    gain from the sale or exchange of any qualified small business 
    stock held for more than 5 years, the amount determined under 
    subsection (a)(2) for such taxable year shall be equal to the sum 
    of--
            ``(A) 21 percent of the lesser of such gain or the 
        corporation's net capital gain, plus
            ``(B) 28 percent of the net capital gain reduced by the 
        gain taken into account under subparagraph (A).
        ``(2) Qualified small business stock.--For purposes of 
    paragraph (1), the term `qualified small business stock' has the 
    meaning given such term by section 1203(c), except that stock shall 
    not be treated as qualified small business stock if such stock was 
    at any time held by a member of the parent-subsidiary controlled 
    group (as defined in section 1203(d)(3)) which includes the 
    qualified small business.
    ``(c) Transitional Rule.--
        ``(1) In general.--In applying this section, net capital gain 
    for any taxable year shall not exceed the net capital gain 
    determined by taking into account only gains and losses properly 
    taken into account for the portion of the taxable year after 
    December 31, 1994.
        ``(2) Special rule for pass-thru entities.--Section 1202(e)(2) 
    shall apply for purposes of paragraph (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).''.

    (b) Technical Amendment.--Clause (iii) of section 852(b)(3)(D) is 
amended by striking ``65 percent'' and inserting ``72 percent''.
    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to taxable years ending after December 31, 1994.
        (2) Qualified small business stock.--Section 1201(b) of the 
    Internal Revenue Code of 1986 (as added by subsection (a)) shall 
    apply to gain from qualified small business stock acquired on or 
    after the date of the enactment of this Act.

 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.

    (a) In General.--Subsection (c) of section 165 (relating to 
limitation on losses of individuals) is amended by striking ``and'' at 
the end of paragraph (2), by striking the period at the end of 
paragraph (3) and inserting ``; and'', and by adding at the end the 
following new paragraph:
        ``(4) losses arising from the sale or exchange of the principal 
    residence (within the meaning of section 1034) of the taxpayer.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to sales and exchanges after December 31, 1994, in taxable years 
ending after such date.

          CHAPTER 3--CORPORATE ALTERNATIVE MINIMUM TAX REFORM

SEC. 11031. MODIFICATION OF DEPRECIATION RULES UNDER MINIMUM TAX.

    (a) In General.--Clause (i) of section 56(a)(1)(A) is amended by 
inserting ``and before January 1, 1996,'' after ``December 31, 1986,''.
    (b) Conforming Amendment.--Clause (ii) of section 56(a)(1)(A) is 
amended by striking ``The method'' and inserting ``In the case of 
property placed in service before January 1, 1996, the method''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1995.

SEC. 11032. LONG-TERM UNUSED CREDITS ALLOWED AGAINST MINIMUM TAX.

    (a) In General.--Section 53(c) (relating to limitation) is amended 
by adding at the end the following new paragraph:
        ``(2) Special rule for taxpayers with long-term unused 
    credits.--
            ``(A) In general.--If--
                ``(i) a corporation to which section 56(g) applies has 
            a long-term unused minimum tax credit for a taxable year, 
            and
                ``(ii) no credit would be allowable under this section 
            for the taxable year by reason of paragraph (1),
        then there shall be allowed a credit under subsection (a) for 
        the taxable year in the amount determined under subparagraph 
        (B).
            ``(B) Amount of credit.--For purposes of subparagraph (A), 
        the amount of the credit shall be equal to the least of the 
        following for the taxable year:
                ``(i) The long-term unused minimum tax credit.
                ``(ii) 50 percent of the taxpayer's tentative minimum 
            tax.
                ``(iii) The excess (if any) of the amount under 
            paragraph (1)(B) over the amount under paragraph (1)(A).
            ``(C) Long-term unused minimum tax credit.--For purposes of 
        this paragraph--
                ``(i) In general.--The long-term unused minimum tax 
            credit for any taxable year is the portion of the minimum 
            tax credit determined under subsection (b) attributable to 
            the adjusted net minimum tax for taxable years beginning 
            after 1986 and ending before the 7th taxable year 
            immediately preceding the taxable year for which the 
            determination is being made.
                ``(ii) First-in, first-out ordering rule.--For purposes 
            of clause (i), credits shall be treated as allowed under 
            subsection (a) on a first-in, first-out basis.''.
    (b) Conforming Amendments.--(1) Section 53(c) (as in effect before 
the amendment made by subsection (a)) is amended--
        (A) by striking ``The'' and inserting:
        ``(1) In general.--The'', and
        (B) by redesignating paragraphs (1) and (2) as subparagraphs 
    (A) and (B), respectively.
    (2) Subparagraph (C) of section 108(b)(4) is amended by striking 
``and (G)'' in the text and heading thereof and inserting ``, (C), and 
(G)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                  CHAPTER 4--COST RECOVERY PROVISIONS

SEC. 11035. TREATMENT OF ABANDONMENT OF LESSOR IMPROVEMENTS AT 
              TERMINATION OF LEASE.

    (a) In General.--Paragraph (8) of section 168(i) is amended to read 
as follows:
        ``(8) Treatment of leasehold improvements.--
            ``(A) In general.--In the case of any building erected (or 
        improvements made) on leased property, if such building or 
        improvement is property to which this section applies, the 
        depreciation deduction shall be determined under the provisions 
        of this section.
            ``(B) Treatment of lessor improvements which are abandoned 
        at termination of lease.--An improvement--
                ``(i) which is made by the lessor of leased property 
            for the lessee of such property, and
                ``(ii) which is irrevocably disposed of or abandoned by 
            the lessor at the termination of the lease by such lessee,
        shall be treated for purposes of determining gain or loss under 
        this title as disposed of by the lessor when so disposed of or 
        abandoned.''
    (b) Effective Date.--Subparagraph (B) of section 168(i)(8) of the 
Internal Revenue Code of 1986, as added by the amendment made by 
subsection (a), shall apply to improvements disposed of or abandoned 
after March 13, 1995.

SEC. 11036. INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES.

    (a) General Rule.--Paragraph (1) of section 179(b) (relating to 
dollar limitation) is amended to read as follows:
        ``(1) Dollar limitation.--The aggregate cost which may be taken 
    into account under subsection (a) for any taxable year shall not 
    exceed the following applicable 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 
          2001..........................................
                                                                 24,000 
          2002 or thereafter............................
                                                               25,000.''

    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1995.

                 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.

    (a) General Rule.--Chapter 79 (relating to definitions) is amended 
by inserting after section 7702A the following new section:

``SEC. 7702B. TREATMENT OF QUALIFIED LONG-TERM CARE INSURANCE.

    ``(a) In General.--For purposes of this title--
        ``(1) a qualified long-term care insurance contract shall be 
    treated as an accident and health insurance contract,
        ``(2) amounts (other than policyholder dividends, as defined in 
    section 808, or premium refunds) received under a qualified long-
    term care insurance contract shall be treated as amounts received 
    for personal injuries and sickness and shall be treated as 
    reimbursement for expenses actually incurred for medical care (as 
    defined in section 213(d)),
        ``(3) any plan of an employer providing coverage under a 
    qualified long-term care insurance contract shall be treated as an 
    accident and health plan with respect to such coverage,
        ``(4) except as provided in subsection (d)(3), amounts paid for 
    a qualified long-term care insurance contract providing the 
    benefits described in subsection (b)(2)(A) shall be treated as 
    payments made for insurance for purposes of section 213(d)(1)(D), 
    and
        ``(5) a qualified long-term care insurance contract shall be 
    treated as a guaranteed renewable contract subject to the rules of 
    section 816(e).
    ``(b) Qualified Long-Term Care Insurance Contract.--For purposes of 
this title--
        ``(1) In general.--The term `qualified long-term care insurance 
    contract' means any insurance contract if--
            ``(A) the only insurance protection provided under such 
        contract is coverage of qualified long-term care services,
            ``(B) such contract does not pay or reimburse expenses 
        incurred for services or items to the extent that such expenses 
        are reimbursable under title XVIII of the Social Security Act 
        or would be so reimbursable but for the application of a 
        deductible or coinsurance amount,
            ``(C) such contract is guaranteed renewable,
            ``(D) such contract does not provide for a cash surrender 
        value or other money that can be--
                ``(i) paid, assigned, or pledged as collateral for a 
            loan, or
                ``(ii) borrowed,
        other than as provided in subparagraph (E) or paragraph (2)(C),
            ``(E) all refunds of premiums, and all policyholder 
        dividends or similar amounts, under such contract are to be 
        applied as a reduction in future premiums or to increase future 
        benefits, and
            ``(F) such contract meets the requirements of subsection 
        (f).
        ``(2) Special rules.--
            ``(A) Per diem, etc. payments permitted.--A contract shall 
        not fail to be described in subparagraph (A) or (B) of 
        paragraph (1) by reason of payments being made on a per diem or 
        other periodic basis without regard to the expenses incurred 
        during the period to which the payments relate.
            ``(B) Special rules relating to medicare.--
                ``(i) Paragraph (1)(B) shall not apply to expenses 
            which are reimbursable under title XVIII of the Social 
            Security Act only as a secondary payor.
                ``(ii) No provision of law shall be construed or 
            applied so as to prohibit the offering of a qualified long-
            term care insurance contract on the basis that the contract 
            coordinates its benefits with those provided under such 
            title.
            ``(C) Refunds of premiums.--Paragraph (1)(E) shall not 
        apply to any refund on the death of the insured, or on a 
        complete surrender or cancellation of the contract, which 
        cannot exceed the aggregate premiums paid under the contract. 
        Any refund on a complete surrender or cancellation of the 
        contract shall be includible in gross income to the extent that 
        any deduction or exclusion was allowable with respect to the 
        premiums.
    ``(c) Qualified Long-Term Care Services.--For purposes of this 
section--
        ``(1) In general.--The term `qualified long-term care services' 
    means necessary diagnostic, preventive, therapeutic, curing, 
    treating, mitigating, and rehabilitative services, and maintenance 
    or personal care services, which--
            ``(A) are required by a chronically ill individual, and
            ``(B) are provided pursuant to a plan of care prescribed by 
        a licensed health care practitioner.
        ``(2) Chronically ill individual.--
            ``(A) In general.--The term `chronically ill individual' 
        means any individual who has been certified by a licensed 
        health care practitioner as--
                ``(i) being unable to perform (without substantial 
            assistance from another individual) at least 2 activities 
            of daily living for a period of at least 90 days due to a 
            loss of functional capacity or to cognitive impairment, or
                ``(ii) having a level of disability similar (as 
            determined by the Secretary in consultation with the 
            Secretary of Health and Human Services) to the level of 
            disability described in clause (i).
        Such term shall not include any individual otherwise meeting 
        the requirements of the preceding sentence unless within the 
        preceding 12-month period a licensed health care practitioner 
        has certified that such individual meets such requirements.
            ``(B) Activities of daily living.--For purposes of 
        subparagraph (A), each of the following is an activity of daily 
        living:
                ``(i) Eating.
                ``(ii) Toileting.
                ``(iii) Transferring.
                ``(iv) Bathing.
                ``(v) Dressing.
                ``(vi) Continence.
        Nothing in this section shall be construed to require a 
        contract to take into account all of the preceding activities 
        of daily living.
        ``(3) Maintenance or personal care services.--The term 
    `maintenance or personal care services' means any care the primary 
    purpose of which is the provision of needed assistance with any of 
    the disabilities as a result of which the individual is a 
    chronically ill individual (including the protection from threats 
    to health and safety due to severe cognitive impairment).
        ``(4) Licensed health care practitioner.--The term `licensed 
    health care practitioner' means any physician (as defined in 
    section 1861(r)(1) of the Social Security Act) and any registered 
    professional nurse, licensed social worker, or other individual who 
    meets such requirements as may be prescribed by the Secretary.
    ``(d) Special Rules for Treatment of Insureds.--
        ``(1) Aggregate payments in excess of limits.--
            ``(A) In general.--If the aggregate amount of periodic 
        payments under all qualified long-term care insurance contracts 
        with respect to an insured for any period exceed the dollar 
        amount in effect for such period under subparagraph (C), such 
        excess payments shall be treated as made for qualified long-
        term care services only to the extent of the costs incurred by 
        the payee (not otherwise compensated for by insurance or 
        otherwise) for qualified long-term care services provided 
        during such period for such insured.
            ``(B) Periodic payments.--For purposes of subparagraph (A), 
        the term `periodic payment' means any payment (whether on a 
        periodic basis or otherwise) made without regard to the extent 
        of the costs incurred by the payee for qualified long-term care 
        services.
            ``(C) Dollar amount.--The dollar amount in effect under 
        this paragraph shall be $175 per day (or the equivalent amount 
        in the case of payments on another periodic basis).
            ``(D) Inflation adjustment.--In the case of a calendar year 
        after 1996, the dollar amount contained in subparagraph (C) 
        shall be increased at the same time and in the same manner as 
        amounts are increased pursuant to section 213(d)(11).
    ``(e) Treatment of Coverage Provided as Part of a Life Insurance 
Contract.--Except as otherwise provided in regulations prescribed by 
the Secretary, in the case of any long-term care insurance coverage 
(whether or not qualified) provided by a rider on a life insurance 
contract--
        ``(1) In general.--This section shall apply as if the portion 
    of the contract providing such coverage is a separate contract.
        ``(2) Application of 7702.--Section 7702(c)(2) (relating to the 
    guideline premium limitation) shall be applied by increasing the 
    guideline premium limitation with respect to a life insurance 
    contract, as of any date--
            ``(A) by the sum of any charges (but not premium payments) 
        against the life insurance contract's cash surrender value 
        (within the meaning of section 7702(f)(2)(A)) for such coverage 
        made to that date under the contract, less
            ``(B) any such charges the imposition of which reduces the 
        premiums paid for the contract (within the meaning of section 
        7702(f)(1)).
        ``(3) Application of section 213.--No deduction shall be 
    allowed under section 213(a) for charges against the life insurance 
    contract's cash surrender value described in paragraph (2), unless 
    such charges are includible in income as a result of the 
    application of section 72(e)(10) and the rider is a qualified long-
    term care insurance contract under subsection (b).
        ``(4) Portion defined.--For purposes of this subsection, the 
    term `portion' means only the terms and benefits under a life 
    insurance contract that are in addition to the terms and benefits 
    under the contract without regard to the coverage under a qualified 
    long-term care insurance contract.''
    (b) Reserve Method.--Clause (iii) of section 807(d)(3)(A) is 
amended by inserting ``(other than a qualified long-term care insurance 
contract, as defined in section 7702B(b))'' after ``insurance 
contract''.
    (c) Long-Term Care Insurance Not Permitted Under Cafeteria Plans or 
Flexible Spending Arrangements.--
        (1) Cafeteria plans.--Section 125(f) is amended by adding at 
    the end the following new sentence: ``Such term shall not include 
    any long-term care insurance contract (as defined in section 
    4980C).''
        (2) Flexible spending arrangements.--The text of section 106 
    (relating to contributions by employer to accident and health 
    plans) is amended to read as follows:
    ``(a) General Rule.--Except as provided in subsection (b), gross 
income of an employee does not include employer-provided coverage under 
an accident or health plan.
    ``(b) Inclusion of Long-Term Care Benefits Provided Through 
Flexible Spending Arrangements.--
        ``(1) In general.--Effective on and after January 1, 1996, 
    gross income of an employee shall include employer-provided 
    coverage for qualified long-term care services (as defined in 
    section 7702B(c)) to the extent that such coverage is provided 
    through a flexible spending or similar arrangement.
        ``(2) Flexible spending arrangement.--For purposes of this 
    subsection, a flexible spending arrangement is a benefit program 
    which provides employees with coverage under which--
            ``(A) specified incurred expenses may be reimbursed 
        (subject to reimbursement maximums and other reasonable 
        conditions), and
            ``(B) the maximum amount of reimbursement which is 
        reasonably available to a participant for such coverage is less 
        than 500 percent of the value of such coverage.
    In the case of an insured plan, the maximum amount reasonably 
    available shall be determined on the basis of the underlying 
    coverage.''
    (d) Continuation Coverage Excise Tax Not To Apply.--Subsection (f) 
of section 4980B is amended by adding at the end the following new 
paragraph:
        ``(9) Continuation of long-term care coverage not required.--A 
    group health plan shall not be treated as failing to meet the 
    requirements of this subsection solely by reason of failing to 
    provide coverage under any qualified long-term care insurance 
    contract (as defined in section 7702B(b)).''
    (e) Amounts Paid to Relatives Treated as Not Paid for Medical 
Care.--Section 213(d) is amended by adding at the end the following new 
paragraph:
        ``(10) Certain payments to relatives treated as not paid for 
    medical care.--An amount paid for a qualified long-term care 
    service (as defined in section 7702B(c)) provided to an individual 
    shall be treated as not paid for medical care if such service is 
    provided--
            ``(A) by a relative (directly or through a partnership, 
        corporation, or other entity) unless the relative is a licensed 
        professional with respect to such services, or
            ``(B) by a corporation or partnership which is related 
        (within the meaning of section 267(b) or 707(b)) to the 
        individual.
    For purposes of this paragraph, the term `relative' means an 
    individual bearing a relationship to the individual which is 
    described in any of paragraphs (1) through (8) of section 152(a). 
    This paragraph shall not apply for purposes of section 105(b) with 
    respect to reimbursements through insurance.''
    (f) Clerical Amendment.--The table of sections for chapter 79 is 
amended by inserting after the item relating to section 7702A the 
following new item:
        ``Sec. 7702B. Treatment of qualified long-term care 
                  insurance.''.

    (g) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to contracts issued after December 31, 1995.
        (2) Continuation of existing policies.--In the case of any 
    contract issued before January 1, 1996, which met the long-term 
    care insurance requirements of the State in which the contract was 
    issused at the time the contract was issued--
            (A) such contract shall be treated for purposes of the 
        Internal Revenue Code of 1986 as a qualified long-term care 
        insurance contract (as defined in section 7702B(b) of such 
        Code), and
            (B) services provided under, or reimbursed by, such 
        contract shall be treated for such purposes as qualified long-
        term care services (as defined in section 7702B(c) of such 
        Code).
        (3) Exchanges of existing policies.--If, after the date of 
    enactment of this Act and before January 1, 1997, a contract 
    providing for long-term care insurance coverage is exchanged solely 
    for a qualified long-term care insurance contract (as defined in 
    section 7702B(b) of such Code), no gain or loss shall be recognized 
    on the exchange. If, in addition to a qualified long-term care 
    insurance contract, money or other property is received in the 
    exchange, then any gain shall be recognized to the extent of the 
    sum of the money and the fair market value of the other property 
    received. For purposes of this paragraph, the cancellation of a 
    contract providing for long-term care insurance coverage and 
    reinvestment of the cancellation proceeds in a qualified long-term 
    care insurance contract within 60 days thereafter shall be treated 
    as an exchange.
        (4) Issuance of certain riders permitted.--For purposes of 
    applying sections 101(f), 7702, and 7702A of the Internal Revenue 
    Code of 1986 to any contract--
            (A) the issuance of a rider which is treated as a qualified 
        long-term care insurance contract under section 7702B, and
            (B) the addition of any provision required to conform any 
        other long-term care rider to be so treated,
    shall not be treated as a modification or material change of such 
    contract.

SEC. 11042. QUALIFIED LONG-TERM CARE SERVICES TREATED AS MEDICAL CARE.

    (a) General Rule.--Paragraph (1) of section 213(d) (defining 
medical care) is amended by striking ``or'' at the end of subparagraph 
(B), by redesignating subparagraph (C) as subparagraph (D), and by 
inserting after subparagraph (B) the following new subparagraph:
            ``(C) for qualified long-term care services (as defined in 
        section 7702B(c)), or''.
    (b) Technical Amendments.--
        (1) Subparagraph (D) of section 213(d)(1) (as redesignated by 
    subsection (a)) is amended by striking ``subparagraphs (A) and 
    (B)'' and inserting ``subparagraphs (A), (B), and (C)''.
        (2)(A) Paragraph (1) of section 213(d) is amended by adding at 
    the end the following new flush sentence:
    ``In the case of a qualified long-term care insurance contract (as 
    defined in section 7702B(b)), only eligible long-term care premiums 
    (as defined in paragraph (11)) shall be taken into account under 
    subparagraph (D).''
        (B) Subsection (d) of section 213 is amended by adding at the 
    end the following new paragraph:
        ``(11) Eligible long-term care premiums.--
            ``(A) In general.--For purposes of this section, the term 
        `eligible long-term care premiums' means the amount paid during 
        a taxable year for any qualified long-term care insurance 
        contract (as defined in section 7702B(b)) covering an 
        individual, to the extent such amount does not exceed the 
        limitation determined under 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.  

            ``(B) Indexing.--
                ``(i) In general.--In the case of any taxable year 
            beginning in a calendar year after 1996, each dollar amount 
            contained in subparagraph (A) shall be increased by the 
            medical care cost adjustment of such amount for such 
            calendar year. If any increase determined under the 
            preceding sentence is not a multiple of $10, such increase 
            shall be rounded to the nearest multiple of $10.
                ``(ii) Medical care cost adjustment.--For purposes of 
            clause (i), the medical care cost adjustment for any 
            calendar year is the percentage (if any) by which--

                    ``(I) the medical care component of the Consumer 
                Price Index (as defined in section 1(f)(5)) for August 
                of the preceding calendar year, exceeds
                    ``(II) such component for August of 1995.

            The Secretary shall, in consultation with the Secretary of 
            Health and Human Services, prescribe an adjustment which 
            the Secretary determines is more appropriate for purposes 
            of this paragraph than the adjustment described in the 
            preceding sentence, and the adjustment so prescribed shall 
            apply in lieu of the adjustment described in the preceding 
            sentence.''
        (3) Paragraph (6) of section 213(d) is amended--
            (A) by striking ``subparagraphs (A) and (B)'' and inserting 
        ``subparagraphs (A), (B), and (C)'', and
            (B) by striking ``paragraph (1)(C)'' in subparagraph (A) 
        and inserting ``paragraph (1)(D)''.
        (4) Paragraph (7) of section 213(d) is amended by striking 
    ``subparagraphs (A) and (B)'' and inserting ``subparagraphs (A), 
    (B), and (C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11043. CERTAIN EXCHANGES OF LIFE INSURANCE CONTRACTS FOR QUALIFIED 
              LONG-TERM CARE INSURANCE CONTRACTS NOT TAXABLE.

    (a) In General.--Subsection (a) of section 1035 (relating to 
certain exchanges of insurance contracts) is amended by striking the 
period at the end of paragraph (3) and inserting ``; or'', and by 
adding at the end the following new paragraph:
        ``(4) a contract of life insurance or an endowment or annuity 
    contract for a qualified long-term care insurance contract (as 
    defined in section 7702B(b)).''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1995.

SEC. 11044. EXCEPTION FROM PENALTY TAX FOR AMOUNTS WITHDRAWN FROM 
              CERTAIN RETIREMENT PLANS FOR QUALIFIED LONG-TERM CARE 
              INSURANCE.

    (a) In General.--Paragraph (2) of section 72(t) is amended by 
adding at the end the following new subparagraph:
            ``(F) Premiums for qualified long-term care insurance 
        contracts.--Distributions to an individual from an individual 
        retirement plan, or from amounts attributable to employer 
        contributions made pursuant to elective deferrals described in 
        subparagraph (A) or (C) of section 402(g)(3), to the extent 
        such distributions do not exceed the premiums for a qualified 
        long-term care insurance contract (as defined in section 
        7702B(b)) for such individual or the spouse of such individual. 
        In applying subparagraph (B), such premiums shall be treated as 
        amounts not paid for medical care.''
    (b) Distributions Permitted From Certain Plans To Pay Long-term 
Care Premiums.--
        (1) Section 401(k)(2)(B)(i) is amended by striking ``or'' at 
    the end of subclause (III), by striking ``and'' at the end of 
    subclause (IV) and inserting ``or'', and by inserting after 
    subclause (IV) the following new subclause:

                    ``(V) the date distributions for premiums for a 
                long-term care insurance contract (as defined in 
                section 7702B(b)) for coverage of such individual or 
                the spouse of such individual are made, and''.

        (2) Section 403(b)(11) is amended by striking ``or'' at the end 
    of subparagraph (A), by striking the period at the end of 
    subparagraph (B) and inserting ``, or'', and by inserting after 
    subparagraph (B) the following new subparagraph:
            ``(C) for the payment of premiums for a long-term care 
        insurance contract (as defined in section 7702B(b)) for 
        coverage of the employee or the spouse of the employee.''
        (3) Subparagraph (A) of section 457(d)(1) is amended by 
    striking ``or'' at the end of clause (ii), by striking ``and'' at 
    the end of clause (iii) and inserting ``or'', and by inserting 
    after clause (iii) the following new clause:
                ``(iv) the date distributions for premiums for a long-
            term care insurance contract (as defined in section 
            7702B(b)) for coverage of such individual or the spouse of 
            such individual are made, and''.
    (c) Effective Date.--The amendments made by this section shall 
apply to payments and distributions after December 31, 1995.

SEC. 11045. REPORTING REQUIREMENTS.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61, as amended by section 11004, is amended by adding at the end the 
following new section:

``SEC. 6050R. CERTAIN LONG-TERM CARE BENEFITS.

    ``(a) Requirement of Reporting.--Any person who pays long-term care 
benefits shall make a return, according to the forms or regulations 
prescribed by the Secretary, setting forth--
        ``(1) the aggregate amount of such benefits paid by such person 
    to any individual during any calendar year, and
        ``(2) the name, address, and TIN of such individual.
    ``(b) Statements To Be Furnished to Persons With Respect to Whom 
Information Is Required.--Every person required to make a return under 
subsection (a) shall furnish to each individual whose name is required 
to be set forth in such return a written statement showing--
        ``(1) the name of the person making the payments, and
        ``(2) the aggregate amount of long-term care benefits paid to 
    the individual which are required to be shown on such return.
The written statement required under the preceding sentence shall be 
furnished to the individual on or before January 31 of the year 
following the calendar year for which the return under subsection (a) 
was required to be made.
    ``(c) Long-Term Care Benefits.--For purposes of this section, the 
term `long-term care benefit' means any amount paid under a long-term 
care insurance policy (within the meaning of section 4980C(e)).''.
    (b) Penalties.--
        (1) Subparagraph (B) of section 6724(d)(1), as amended by 
    section 11004, is amended by redesignating clauses (x) through (xv) 
    as clauses (xi) through (xvi), respectively, and by inserting after 
    clause (ix) the following new clause:
                ``(x) section 6050R (relating to certain long-term care 
            benefits),''.
        (2) Paragraph (2) of section 6724(d), as amended by section 
    11004, is amended by redesignating subparagraphs (R) through (U) as 
    subparagraphs (S) through (V), respectively, and by inserting after 
    subparagraph (P) the following new subparagraph:
            ``(R) section 6050R(b) (relating to certain long-term care 
        benefits),''.
    (c) Clerical Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61 is amended by adding at the end 
the following new item:

        ``Sec. 6050R. Certain long-term care benefits.''

    (d) Effective Date.--The amendments made by this section shall 
apply to benefits paid after December 31, 1995.

                PART II--CONSUMER PROTECTION PROVISIONS

SEC. 11051. POLICY REQUIREMENTS.

    Section 7702B (as added by section 11041) is amended by adding at 
the end the following new subsection:
    ``(f) Consumer Protection Provisions.--
        ``(1) In general.--The requirements of this subsection are met 
    with respect to any contract if any long-term care insurance policy 
    issued under the contract meets--
            ``(A) the requirements of the model regulation and model 
        Act described in paragraph (2),
            ``(B) the disclosure requirement of paragraph (3), and
            ``(C) the requirements relating to nonforfeitability under 
        paragraph (4).
        ``(2) Requirements of model regulation and act.--
            ``(A) In general.--The requirements of this paragraph are 
        met with respect to any policy if such policy meets--
                ``(i) Model regulation.--The following requirements of 
            the model regulation:

                    ``(I) Section 7A (relating to guaranteed renewal or 
                noncancellability), and the requirements of section 6B 
                of the model Act relating to such section 7A.
                    ``(II) Section 7B (relating to prohibitions on 
                limitations and exclusions).
                    ``(III) Section 7C (relating to extension of 
                benefits).
                    ``(IV) Section 7D (relating to continuation or 
                conversion of coverage).
                    ``(V) Section 7E (relating to discontinuance and 
                replacement of policies).
                    ``(VI) Section 8 (relating to unintentional lapse).
                    ``(VII) Section 9 (relating to disclosure), other 
                than section 9F thereof.
                    ``(VIII) Section 10 (relating to prohibitions 
                against post-claims underwriting).
                    ``(IX) Section 11 (relating to minimum standards).
                    ``(X) Section 12 (relating to requirement to offer 
                inflation protection), except that any requirement for 
                a signature on a rejection of inflation protection 
                shall permit the signature to be on an application or 
                on a separate form.
                    ``(XI) Section 23 (relating to prohibition against 
                preexisting conditions and probationary periods in 
                replacement policies or certificates).

                ``(ii) Model act.--The following requirements of the 
            model Act:

                    ``(I) Section 6C (relating to preexisting 
                conditions).
                    ``(II) Section 6D (relating to prior 
                hospitalization).

            ``(B) Definitions.--For purposes of this paragraph--
                ``(i) Model provisions.--The terms `model regulation' 
            and `model Act' mean the long-term care insurance model 
            regulation, and the long-term care insurance model Act, 
            respectively, promulgated by the National Association of 
            Insurance Commissioners (as adopted as of January 1993).
                ``(ii) Coordination.--Any provision of the model 
            regulation or model Act listed under clause (i) or (ii) of 
            subparagraph (A) shall be treated as including any other 
            provision of such regulation or Act necessary to implement 
            the provision.
        ``(3) Disclosure requirement.--The requirement of this 
    paragraph is met with respect to any policy if such policy meets 
    the requirements of section 4980C(d)(1).
        ``(4) Nonforfeiture requirements.--
            ``(A) In general.--The requirements of this paragraph are 
        met with respect to any level premium long-term care insurance 
        policy, if the issuer of such policy offers to the 
        policyholder, including any group policyholder, a nonforfeiture 
        provision meeting the requirements of subparagraph (B).
            ``(B) Requirements of provision.--The nonforfeiture 
        provision required under subparagraph (A) shall meet the 
        following requirements:
                ``(i) The nonforfeiture provision shall be 
            appropriately captioned.
                ``(ii) The nonforfeiture provision shall provide for a 
            benefit available in the event of a default in the payment 
            of any premiums and the amount of the benefit may be 
            adjusted subsequent to being initially granted only as 
            necessary to reflect changes in claims, persistency, and 
            interest as reflected in changes in rates for premium 
            paying policies approved by the Secretary for the same 
            policy form.
                ``(iii) The nonforfeiture provision shall provide at 
            least one of the following:

                    ``(I) Reduced paid-up insurance.
                    ``(II) Extended term insurance.
                    ``(III) Shortened benefit period.
                    ``(IV) Other similar offerings approved by the 
                Secretary.

        ``(5) Long-term care insurance policy defined.--For purposes of 
    this subsection, the term `long-term care insurance policy' has the 
    meaning given such term by section 4980C(e).''.

SEC. 11052. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE INSURANCE 
              POLICIES.

    (a) In General.--Chapter 43 is amended by adding at the end the 
following new section:

``SEC. 4980C. REQUIREMENTS FOR ISSUERS OF LONG-TERM CARE INSURANCE 
              POLICIES.

    ``(a) General Rule.--There is hereby imposed on any person failing 
to meet the requirements of subsection (c) or (d) a tax in the amount 
determined under subsection (b).
    ``(b) Amount.--
        ``(1) In general.--The amount of the tax imposed by subsection 
    (a) shall be $100 per policy for each day any requirements of 
    subsection (c) or (d) are not met with respect to each long-term 
    care insurance policy.
        ``(2) Waiver.--In the case of a failure which is due to 
    reasonable cause and not to willful neglect, the Secretary may 
    waive part or all of the tax imposed by subsection (a) to the 
    extent that payment of the tax would be excessive relative to the 
    failure involved.
    ``(c) Responsibilities.--The requirements of this subsection are as 
follows:
        ``(1) Requirements of model provisions.--
            ``(A) Model regulation.--The following requirements of the 
        model regulation must be met:
                ``(i) Section 13 (relating to application forms and 
            replacement coverage).
                ``(ii) Section 14 (relating to reporting requirements), 
            except that the issuer shall also report at least annually 
            the number of claims denied during the reporting period for 
            each class of business (expressed as a percentage of claims 
            denied), other than claims denied for failure to meet the 
            waiting period or because of any applicable preexisting 
            condition.
                ``(iii) Section 20 (relating to filing requirements for 
            marketing).
                ``(iv) Section 21 (relating to standards for 
            marketing), including inaccurate completion of medical 
            histories, other than sections 21C(1) and 21C(6) thereof, 
            except that--

                    ``(I) in addition to such requirements, no person 
                shall, in selling or offering to sell a long-term care 
                insurance policy, misrepresent a material fact; and
                    ``(II) no such requirements shall include a 
                requirement to inquire or identify whether a 
                prospective applicant or enrollee for long-term care 
                insurance has accident and sickness insurance.

                ``(v) Section 22 (relating to appropriateness of 
            recommended purchase).
                ``(vi) Section 24 (relating to standard format outline 
            of coverage).
                ``(vii) Section 25 (relating to requirement to deliver 
            shopper's guide).
            ``(B) Model act.--The following requirements of the model 
        Act must be met:
                ``(i) Section 6F (relating to right to return), except 
            that such section shall also apply to denials of 
            applications and any refund shall be made within 30 days of 
            the return or denial.
                ``(ii) Section 6G (relating to outline of coverage).
                ``(iii) Section 6H (relating to requirements for 
            certificates under group plans).
                ``(iv) Section 6I (relating to policy summary).
                ``(v) Section 6J (relating to monthly reports on 
            accelerated death benefits).
                ``(vi) Section 7 (relating to incontestability period).
            ``(C) Definitions.--For purposes of this paragraph, the 
        terms `model regulation' and `model Act' have the meanings 
        given such terms by section 7702B(f)(2)(B).
        ``(2) Delivery of policy.--If an application for a long-term 
    care insurance policy (or for a certificate under a group long-term 
    care insurance policy) is approved, the issuer shall deliver to the 
    applicant (or policyholder or certificateholder) the policy (or 
    certificate) of insurance not later than 30 days after the date of 
    the approval.
        ``(3) Information on denials of claims.--If a claim under a 
    long-term care insurance policy is denied, the issuer shall, within 
    60 days of the date of a written request by the policyholder or 
    certificateholder (or representative)--
            ``(A) provide a written explanation of the reasons for the 
        denial, and
            ``(B) make available all information directly relating to 
        such denial.
    ``(d) Disclosure.--The requirements of this subsection are met if 
the issuer of a long-term care insurance policy discloses in such 
policy and in the outline of coverage required under subsection 
(c)(1)(B)(ii) that the policy is intended to be a qualified long-term 
care insurance contract under section 7702B(b).
    ``(e) Long-Term Care Insurance Policy Defined.--For purposes of 
this section, the term `long-term care insurance policy' means any 
product which is advertised, marketed, or offered as long-term care 
insurance.''.
    (b) Conforming Amendment.--The table of sections for chapter 43 is 
amended by adding at the end the following new item:
        ``Sec. 4980C. Requirements for issuers of long-term care 
                  insurance policies.''.

SEC. 11053. COORDINATION WITH STATE REQUIREMENTS.

    Nothing in this part shall prevent a State from establishing, 
implementing, or continuing in effect standards related to the 
protection of policyholders of long-term care insurance policies (as 
defined in section 4980C(e) of the Internal Revenue Code of 1986), if 
such standards are not in conflict with or inconsistent with the 
standards established under such Code.

SEC. 11054. EFFECTIVE DATES.

    (a) In General.--The provisions of, and amendments made by, this 
part shall apply to contracts issued after December 31, 1995. The 
provisions of section 11041(g) of this Act (relating to transition 
rule) shall apply to such contracts.
    (b) Issuers.--The amendments made by section 11052 shall apply to 
actions taken after December 31, 1995.

         Subchapter B--Treatment of Accelerated Death Benefits

SEC. 11061. TREATMENT OF ACCELERATED DEATH BENEFITS BY RECIPIENT.

    (a) In General.--Section 101 (relating to certain death benefits) 
is amended by adding at the end the following new subsection:
    ``(g) Treatment of Certain Accelerated Death Benefits.--
        ``(1) In general.--For purposes of this section, the following 
    amounts shall be treated as an amount paid by reason of the death 
    of an insured:
            ``(A) Any amount received under a life insurance contract 
        on the life of an insured who is a terminally ill individual.
            ``(B) Any amount received under a life insurance contract 
        on the life of an insured who is a chronically ill individual 
        (as determined in such manner as the Secretary may prescribe) 
        but only if such amount is received under a rider or other 
        provision of such contract which is treated as a qualified 
        long-term care insurance contract under section 7702B.
        ``(2) Treatment of viatical settlements.--
            ``(A) In general.--In the case of a life insurance contract 
        on the life of an insured described in paragraph (1), if--
                ``(i) any portion of such contract is sold to any 
            viatical settlement provider, or
                ``(ii) any portion of the death benefit is assigned to 
            such a provider,
        the amount paid for such sale or assignment shall be treated as 
        an amount paid under the life insurance contract by reason of 
        the death of such insured.
            ``(B) Viatical settlement provider.--The term `viatical 
        settlement provider' means any person regularly engaged in the 
        trade or business of purchasing, or taking assignments of, life 
        insurance contracts on the lives of insureds described in 
        paragraph (1) if--
                ``(i) such person is licensed for such purposes in the 
            State in which the insured resides, or
                ``(ii) in the case of an insured who resides in a State 
            not requiring the licensing of such persons for such 
            purposes--

                    ``(I) such person meets the requirements of 
                sections 8 and 9 of the Viatical Settlements Model Act 
                of the National Association of Insurance Commissioners, 
                and
                    ``(II) meets the requirements of the Model 
                Regulations of the National Association of Insurance 
                Commissioners (relating to standards for evaluation of 
                reasonable payments) in determining amounts paid by 
                such person in connection with such purchases or 
                assignments.

        ``(3) Definitions.--For purposes of this subsection--
            ``(A) Terminally ill individual.--The term `terminally ill 
        individual' means an individual who has been certified by a 
        physician as having an illness or physical condition which can 
        reasonably be expected to result in death in 24 months or less 
        after the date of the certification.
            ``(B) Physician.--The term `physician' has the meaning 
        given to such term by section 1861(r)(1) of the Social Security 
        Act (42 U.S.C. 1395x(r)(1)).
        ``(4) Exception for business-related policies.--This subsection 
    shall not apply in the case of any amount paid to any taxpayer 
    other than the insured if such taxpayer has an insurable interest 
    with respect to the life of the insured by reason of the insured 
    being a director, officer, or employee of the taxpayer or by reason 
    of the insured being financially interested in any trade or 
    business carried on by the taxpayer.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to amounts received after December 31, 1995.

SEC. 11062. TAX TREATMENT OF COMPANIES ISSUING QUALIFIED ACCELERATED 
              DEATH BENEFIT RIDERS.

    (a) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--Section 818 (relating to other definitions and special 
rules) is amended by adding at the end the following new subsection:
    ``(g) Qualified Accelerated Death Benefit Riders Treated as Life 
Insurance.--For purposes of this part--
        ``(1) In general.--Any reference to a life insurance contract 
    shall be treated as including a reference to a qualified 
    accelerated death benefit rider on such contract.
        ``(2) Qualified accelerated death benefit riders.--For purposes 
    of this subsection, the term `qualified accelerated death benefit 
    rider' means any rider on a life insurance contract if the only 
    payments under the rider are payments meeting the requirements of 
    section 101(g).
        ``(3) Exception for long-term care riders.--Paragraph (1) shall 
    not apply to any rider which is treated as a long-term care 
    insurance contract under section 7702B.''
    (b) Effective Date.--
        (1) In general.--The amendment made by this section shall take 
    effect on January 1, 1996.
        (2) Issuance of rider not treated as material change.--For 
    purposes of applying sections 101(f), 7702, and 7702A of the 
    Internal Revenue Code of 1986 to any contract--
            (A) the issuance of a qualified accelerated death benefit 
        rider (as defined in section 818(g) of such Code (as added by 
        this Act)), and
            (B) the addition of any provision required to conform an 
        accelerated death benefit rider to the requirements of such 
        section 818(g),
    shall not be treated as a modification or material change of such 
    contract.

                  CHAPTER 2--MEDICAL SAVINGS ACCOUNTS

SEC. 11066. MEDICAL SAVINGS ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 (relating to 
additional itemized deductions for individuals) is amended by 
redesignating section 222 as section 223 and by inserting after section 
221 the following new section:

``SEC. 222. MEDICAL SAVINGS ACCOUNTS.

    ``(a) Deduction Allowed.--In the case of an individual who is an 
eligible individual for any month during the taxable year, there shall 
be allowed as a deduction for the taxable year an amount equal to the 
aggregate amount paid in cash during such taxable year by such 
individual to a medical savings account of such individual.
    ``(b) Limitations.--
        ``(1) In general.--Except as otherwise provided in this 
    subsection, the amount allowable as a deduction under subsection 
    (a) to an individual for the taxable year shall not exceed--
            ``(A) except as provided in subparagraph (B), the lesser 
        of--
                ``(i) $2,000, or
                ``(ii) the annual deductible limit for any individual 
            covered under the high deductible health plan, or
            ``(B) in the case of a high deductible health plan covering 
        the taxpayer and any other eligible individual who is the 
        spouse or any dependent (as defined in section 152) of the 
        taxpayer, the lesser of--
                ``(i) $4,000, or
                ``(ii) the annual limit under the plan on the aggregate 
            amount of deductibles required to be paid by all 
            individuals.
    The preceding sentence shall not apply if the spouse of such 
    individual is covered under any other high deductible health plan.
        ``(2) Special rule for married individuals.--
            ``(A) In general.--This subsection shall be applied 
        separately for each married individual.
            ``(B) Special rule.--If individuals who are married to each 
        other are covered under the same high deductible health plan, 
        then the amounts applicable under paragraph (1)(B) shall be 
        divided equally between them unless they agree on a different 
        division.
        ``(3) Coordination with exclusion for employer contributions.--
    No deduction shall be allowed under this section for any amount 
    paid for any taxable year to a medical savings account of an 
    individual if--
            ``(A) any amount is paid to any medical savings account of 
        such individual which is excludable from gross income under 
        section 106(b) for such year, or
            ``(B) in a case described in paragraph (2), any amount is 
        paid to any medical savings account of either spouse which is 
        so excludable for such year.
        ``(4) Proration of limitation.--
            ``(A) In general.--The limitation under paragraph (1) shall 
        be the sum of the monthly limitations for months during the 
        taxable year that the individual is an eligible individual if--
                ``(i) such individual is not an eligible individual for 
            all months of the taxable year,
                ``(ii) the deductible under the high deductible health 
            plan covering such individual is not the same throughout 
            such taxable year, or
                ``(iii) such limitation is determined under paragraph 
            (1)(B) for some but not all months during such taxable 
            year.
            ``(B) Monthly limitation.--The monthly limitation for any 
        month shall be an amount equal to \1/12\ of the limitation 
        which would (but for this paragraph and paragraph (3)) be 
        determined under paragraph (1) if the facts and circumstances 
        as of the first day of such month that such individual is 
        covered under a high deductible health plan were true for the 
        entire taxable year.
        ``(5) Denial of deduction to dependents.--No deduction shall be 
    allowed under this section to any individual with respect to whom a 
    deduction under section 151 is allowable to another taxpayer for a 
    taxable year beginning in the calendar year in which such 
    individual's taxable year begins.
    ``(c) Definitions.--For purposes of this section--
        ``(1) Eligible individual.--
            ``(A) In general.--The term `eligible individual' means, 
        with respect to any month, any individual--
                ``(i) who is covered under a high deductible health 
            plan as of the 1st day of such month, and
                ``(ii) who is not, while covered under a high 
            deductible health plan, covered under any health plan--

                    ``(I) which is not a high deductible health plan, 
                and
                    ``(II) which provides coverage for any benefit 
                which is covered under the high deductible health plan.

            ``(B) Certain coverage disregarded.--Subparagraph (A)(ii) 
        shall be applied without regard to--
                ``(i) coverage for any benefit provided by permitted 
            insurance, and
                ``(ii) coverage (whether through insurance or 
            otherwise) for accidents, disability, dental care, vision 
            care, or long-term care.
        ``(2) High deductible health plan.--The term `high deductible 
    health plan' means a health plan which--
            ``(A) has an annual deductible limit for each individual 
        covered by the plan which is not less than $1,500, and
            ``(B) has an annual limit on the aggregate amount of 
        deductibles required to be paid with respect to all individuals 
        covered by the plan which is not less than $3,000.
    Such term does not include a health plan if substantially all of 
    its coverage is coverage described in paragraph (1)(B).
        ``(3) Permitted insurance.--The term `permitted insurance' 
    means--
            ``(A) Medicare supplemental insurance,
            ``(B) insurance if substantially all of the coverage 
        provided under such insurance relates to--
                ``(i) liabilities incurred under workers' compensation 
            laws,
                ``(ii) tort liabilities,
                ``(iii) liabilities relating to ownership or use of 
            property, or
                ``(iv) such other similar liabilities as the Secretary 
            may specify by regulations,
            ``(C) insurance for a specified disease or illness, and
            ``(D) insurance paying a fixed amount per day (or other 
        period) of hospitalization.
    ``(d) Medical Savings Account.--For purposes of this section--
        ``(1) Medical savings account.--The term `medical savings 
    account' means a trust created or organized in the United States 
    exclusively for the purpose of paying the qualified medical 
    expenses of the account holder, but only if the written governing 
    instrument creating the trust meets the following requirements:
            ``(A) Except in the case of a rollover contribution 
        described in subsection (f)(5), no contribution will be 
        accepted--
                ``(i) unless it is in cash, or
                ``(ii) to the extent such contribution, when added to 
            previous contributions to the trust for the calendar year, 
            exceeds $4,000.
            ``(B) The trustee is a bank (as defined in section 408(n)), 
        an insurance company (as defined in section 816), or another 
        person who demonstrates to the satisfaction of the Secretary 
        that the manner in which such person will administer the trust 
        will be consistent with the requirements of this section.
            ``(C) No part of the trust assets will be invested in life 
        insurance contracts.
            ``(D) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
            ``(E) The interest of an individual in the balance in his 
        account is nonforfeitable.
        ``(2) Qualified medical expenses.--
            ``(A) In general.--The term `qualified medical expenses' 
        means, with respect to an account holder, amounts paid by such 
        holder for medical care (as defined in section 213(d)) for such 
        individual, the spouse of such individual, and any dependent 
        (as defined in section 152) of such individual, but only to the 
        extent such amounts are not compensated for by insurance or 
        otherwise.
            ``(B) Health insurance may not be purchased from account.--
                ``(i) In general.--Subparagraph (A) shall not apply to 
            any payment for insurance.
                ``(ii) Exceptions.--Clause (i) shall not apply to any 
            expense for coverage under--

                    ``(I) a health plan during any period of 
                continuation coverage required under any Federal law,
                    ``(II) a qualified long-term care contract (as 
                defined in section 7702B), or
                    ``(III) a health plan during a period in which the 
                individual is receiving unemployment compensation under 
                any Federal or State law.

        ``(3) Account holder.--The term `account holder' means the 
    individual on whose behalf the medical savings account was 
    established.
        ``(4) Certain rules to apply.--Rules similar to the following 
    rules shall apply for purposes of this section:
            ``(A) Section 219(d)(2) (relating to no deduction for 
        rollovers).
            ``(B) Section 219(f)(3) (relating to time when 
        contributions deemed made).
            ``(C) Except as provided in section 106(b), section 
        219(f)(5) (relating to employer payments).
            ``(D) Section 408(g) (relating to community property laws).
            ``(E) Section 408(h) (relating to custodial accounts).
    ``(e) Tax Treatment of Accounts.--
        ``(1) In general.--A medical savings account is exempt from 
    taxation under this subtitle unless such account has ceased to be a 
    medical savings account by reason of paragraph (2) or (3). 
    Notwithstanding the preceding sentence, any such account is subject 
    to the taxes imposed by section 511 (relating to imposition of tax 
    on unrelated business income of charitable, etc. organizations).
        ``(2) Account terminations.--Rules similar to the rules of 
    paragraphs (2) and (4) of section 408(e) shall apply to medical 
    savings accounts, and any amount treated as distributed under such 
    rules shall be treated as not used to pay qualified medical 
    expenses.
    ``(f) Tax Treatment of Distributions.--
        ``(1) Amounts used for qualified medical expenses.--
            ``(A) In general.--Any amount paid or distributed out of a 
        medical savings account which is used exclusively to pay 
        qualified medical expenses of any account holder (or any spouse 
        or dependent of the holder) shall not be includible in gross 
        income.
            ``(B) Treatment after death of account holder.--
                ``(i) Treatment if holder is spouse.--If, after the 
            death of the account holder, the account holder's interest 
            is payable to (or for the benefit of) the holder's spouse, 
            the medical savings account shall be treated as if the 
            spouse were the account holder.
                ``(ii) Treatment if designated holder is not spouse.--
            In the case of an account holder's interest in a medical 
            savings account which is payable to (or for the benefit of) 
            any person other than such holder's spouse upon the death 
            of such holder--

                    ``(I) such account shall cease to be a medical 
                savings account as of the date of death, and
                    ``(II) an amount equal to the fair market value of 
                the assets in such account on such date shall be 
                includible if such person is not the estate of such 
                holder, in such person's gross income for the taxable 
                year which includes such date, or if such person is the 
                estate of such holder, in such holder's gross income 
                for the last taxable year of such holder.

        ``(2) Inclusion of amounts not used for qualified medical 
    expenses.--
            ``(A) In general.--Any amount paid or distributed out of a 
        medical savings account which is not used exclusively to pay 
        the qualified medical expenses of the account holder or of the 
        spouse or dependents of such holder shall be included in the 
        gross income of such holder.
            ``(B) Special rules.--For purposes of subparagraph (A)--
                ``(i) all medical savings accounts of the account 
            holder shall be treated as 1 account,
                ``(ii) all payments and distributions during any 
            taxable year shall be treated as 1 distribution, and
                ``(iii) any distribution of property shall be taken 
            into account at its fair market value on the date of the 
            distribution.
        ``(3) Excess contributions returned before due date of 
    return.--Paragraph (2) shall not apply to the distribution of any 
    contribution paid during a taxable year to a medical savings 
    account to the extent that such contribution exceeds the amount 
    under subsection (d)(1)(A)(ii) if--
            ``(A) such distribution is received by the individual on or 
        before the last day prescribed by law (including extensions of 
        time) for filing such individual's return for such taxable 
        year, and
            ``(B) such distribution is accompanied by the amount of net 
        income attributable to such excess contribution.
    Any net income described in subparagraph (B) shall be included in 
    the gross income of the individual for the taxable year in which it 
    is received.
        ``(4) Penalty for distributions not used for qualified medical 
    expenses.--
            ``(A) In general.--The tax imposed by this chapter on the 
        account holder for any taxable year in which there is a payment 
        or distribution from a medical savings account of such holder 
        which is includible in gross income under paragraph (2) shall 
        be increased by 10 percent of the amount which is so 
        includible.
            ``(B) Exception for disability or death.--Subparagraph (A) 
        shall not apply if the payment or distribution is made after 
        the account holder becomes disabled within the meaning of 
        section 72(m)(7) or dies.
            ``(C) Exception for distributions after age 59\1/2\.--
        Subparagraph (A) shall not apply to any payment or distribution 
        after the date on which the account holder attains age 59\1/2\.
        ``(5) Rollover contribution.--An amount is described in this 
    paragraph as a rollover contribution if it meets the requirements 
    of subparagraphs (A) and (B).
            ``(A) In general.--Paragraph (2) shall not apply to any 
        amount paid or distributed from a medical savings account to 
        the account holder to the extent the amount received is paid 
        into a medical savings account for the benefit of such holder 
        not later than the 60th day after the day on which the holder 
        receives the payment or distribution.
            ``(B) Limitation.--This paragraph shall not apply to any 
        amount described in subparagraph (A) received by an individual 
        from a medical savings account if, at any time during the 1-
        year period ending on the day of such receipt, such individual 
        received any other amount described in subparagraph (A) from a 
        medical savings account which was not includible in the 
        individual's gross income because of the application of this 
        paragraph.
        ``(6) Coordination with medical expense deduction.--For 
    purposes of determining the amount of the deduction under section 
    213, any payment or distribution out of a medical savings account 
    for qualified medical expenses shall not be treated as an expense 
    paid for medical care.
        ``(7)  Transfer of account incident to divorce.--The transfer 
    of an individual's interest in a medical savings account to an 
    individual's spouse or former spouse under a divorce or separation 
    instrument described in subparagraph (A) of section 71(b)(2) shall 
    not be considered a taxable transfer made by such individual 
    notwithstanding any other provision of this subtitle, and such 
    interest shall, after such transfer, be treated as a medical 
    savings account with respect to which the spouse is the account 
    holder.
    ``(g) Cost-of-Living Adjustment.--
        ``(1) In general.--In the case of any taxable year beginning in 
    a calendar year after 1996, each dollar amount in subsection 
    (b)(1), (c)(2), or (d)(1)(A) shall be increased by an amount equal 
    to--
            ``(A) such dollar amount, multiplied by
            ``(B) the medical care cost adjustment for such calendar 
        year.
    If any increase under the preceding sentence is not a multiple of 
    $50, such increase shall be rounded to the nearest multiple of $50.
        ``(2) Medical care cost adjustment.--For purposes of paragraph 
    (1), the medical care cost adjustment for any calendar year is the 
    percentage (if any) by which--
            ``(A) the medical care component of the Consumer Price 
        Index (as defined in section 1(f)(5)) for August of the 
        preceding calendar year, exceeds
            ``(B) such component for August of 1995.
    ``(h) Reports.--The Secretary may require the trustee of a medical 
savings account to make such reports regarding such account to the 
Secretary and to the account holder with respect to contributions, 
distributions, and such other matters as the Secretary determines 
appropriate. The reports required by this subsection shall be filed at 
such time and in such manner and furnished to such individuals at such 
time and in such manner as may be required by those regulations.''
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 is amended by inserting after 
paragraph (18) the following new paragraph:
        ``(19) Medical savings accounts.--The deduction allowed by 
    section 222.''
    (c) Exclusions for Employer Contributions to Medical Savings 
Accounts.--
        (1) Exclusion from income tax.--Section 106 (relating to 
    contributions by employer to accident and health plans), as amended 
    by this Act, is amended--
            (A) by adding at the end the following new subsection:
    ``(c) Contributions to Medical Savings Accounts.--
        ``(1) In general.--In the case of an employee who is an 
    eligible individual, gross income does not include amounts 
    contributed by such employee's employer to any medical savings 
    account of such employee.
        ``(2) Coordination with deduction limitation.--The amount 
    excluded from the gross income of an employee under this subsection 
    for any taxable year shall not exceed the limitation under section 
    222(b)(1) (determined without regard to this subsection) which is 
    applicable to such employee for such taxable year.
        ``(3) No constructive receipt.--No amount shall be included in 
    the gross income of any employee solely because the employee may 
    choose between the contributions referred to in paragraph (1) and 
    employer contributions to another health plan of the employer.
        ``(4) Special rule for deduction of employer contributions.--
    Any employer contribution to a medical savings account, if 
    otherwise allowable as a deduction under this chapter, shall be 
    allowed only for the taxable year in which paid.
        ``(5) Definitions.--For purposes of this subsection, the terms 
    `eligible individual' and `medical savings account' have the 
    respective meanings given to such terms by section 222'', and
            (B) by striking ``subsection (b)'' in subsection (a) and 
        inserting ``this subsection''.
        (2) Exclusion from withholding tax.--Subsection (a) of section 
    3401 is amended by striking ``or'' at the end of paragraph (19), by 
    striking the period at the end of paragraph (20) and inserting ``; 
    or'', and by inserting after paragraph (20) the following new 
    paragraph:
        ``(21) any payment made to or for the benefit of an employee if 
    at the time of such payment it is reasonable to believe that the 
    employee will be able to exclude such payment from income under 
    section 106(b).''
    (d) Medical Savings Account Contributions Not Available Under 
Cafeteria Plans.--Subsection (f) of section 125 is amended by inserting 
``106(b),'' before ``117''.
    (e) Exclusion of Medical Savings Accounts From Estate Tax.--Part IV 
of subchapter A of chapter 11 is amended by adding at the end the 
following new section:

``SEC. 2057. MEDICAL SAVINGS ACCOUNTS.

    ``For purposes of the tax imposed by section 2001, the value of the 
taxable estate shall be determined by deducting from the value of the 
gross estate an amount equal to the value of any medical savings 
account (as defined in section 222(d)) included in the gross estate.''
    (f) Tax on Excess Contributions.--Section 4973 (relating to tax on 
excess contributions to individual retirement accounts, certain section 
403(b) contracts, and certain individual retirement annuities) is 
amended--
        (1) by inserting ``medical savings accounts,'' after 
    ``accounts,'' in the heading of such section,
        (2) by striking ``or'' at the end of paragraph (1) of 
    subsection (a),
        (3) by redesignating paragraph (2) of subsection (a) as 
    paragraph (3) and by inserting after paragraph (1) the following:
        ``(2) a medical savings account (within the meaning of section 
    222(d)), or'', and
        (4) by adding at the end the following new subsection:
    ``(d) Excess Contributions to Medical Savings Accounts.--For 
purposes of this section, in the case of a medical savings account 
(within the meaning of section 222(d)), the term `excess contributions' 
means the sum of--
        ``(1) the amount by which the amount contributed for the 
    taxable year to the account exceeds the amount which may be 
    contributed to the account under section 222(d)(1)(B)(ii) for such 
    taxable year, and
        ``(2) the amount determined under this subsection for the 
    preceding taxable year, reduced by the sum of distributions out of 
    the account included in gross income under section 222(f) (2) or 
    (3) and the excess (if any) of the maximum amount allowable as a 
    deduction under section 222 for the taxable year over the amount 
    contributed.
For purposes of this subsection, any contribution which is distributed 
out of the medical savings account in a distribution to which section 
222(f)(3) applies shall be treated as an amount not contributed.''
    (g) Tax on Prohibited Transactions.--
        (1) Section 4975 (relating to tax on prohibited transactions) 
    is amended by adding at the end of subsection (c) the following new 
    paragraph:
        ``(4) Special rule for medical savings accounts.--An individual 
    for whose benefit a medical savings account (within the meaning of 
    section 222(d)) is established shall be exempt from the tax imposed 
    by this section with respect to any transaction concerning such 
    account (which would otherwise be taxable under this section) if, 
    with respect to such transaction, the account ceases to be a 
    medical savings account by reason of the application of section 
    222(e)(2) to such account.''
        (2) Paragraph (1) of section 4975(e) is amended to read as 
    follows:
        ``(1) Plan.--For purposes of this section, the term `plan' 
    means--
            ``(A) a trust described in section 401(a) which forms a 
        part of a plan, or a plan described in section 403(a), which 
        trust or plan is exempt from tax under section 501(a),
            ``(B) an individual retirement account described in section 
        408(a),
            ``(C) an individual retirement annuity described in section 
        408(b),
            ``(D) a medical savings account described in section 
        220(d), or
            ``(E) a trust, plan, account, or annuity which, at any 
        time, has been determined by the Secretary to be described in 
        any preceding subparagraph of this paragraph.''
    (h) Failure To Provide Reports on MedicarePlus MSA's.--
        (1) Subsection (a) of section 6693 (relating to failure to 
    provide reports on individual retirement accounts or annuities) is 
    amended to read as follows:
    ``(a) Reports.--
        ``(1) In general.--If a person required to file a report under 
    a provision referred to in paragraph (2) fails to file such report 
    at the time and in the manner required by such provision, such 
    person shall pay a penalty of $50 for each failure unless it is 
    shown that such failure is due to reasonable cause.
        ``(2) Provisions.--The provisions referred to in this paragraph 
    are--
            ``(A) subsections (i) and (l) of section 408 (relating to 
        individual retirement plans), and
            ``(B) section 222(h) (relating to medical savings 
        accounts).''
    (i) Exception From Capitalization of Policy Acquisition Expenses.--
Subparagraph (B) of section 848(e)(1) (defining specified insurance 
contract) is amended by striking ``and'' at the end of clause (ii), by 
striking the period at the end of clause (iii) and inserting ``, and'', 
and by adding at the end the following new clause:
                ``(iv) any contract which is a medical savings account 
            (as defined in section 222(d)).''.
    (j) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 is amended by striking the last item and 
inserting the following:
        ``Sec. 222. Medical savings accounts.
        ``Sec. 223. Cross reference.''

    (k) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

  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.

    (a) In General.--Paragraph (1) of section 162(l) is amended to read 
as follows:
        ``(1) Allowance of deduction.--
            ``(A) In general.--In the case of an individual who is an 
        employee within the meaning of section 401(c)(1), there shall 
        be allowed as a deduction under this section an amount equal to 
        the applicable percentage of the amount paid during the taxable 
        year for insurance which constitutes medical care for the 
        taxpayer, his spouse, and dependents.
            ``(B) Applicable percentage.--For purposes of subparagraph 
        (A), the applicable percentage shall be determined under the 
        following table:
                                                          The applicable
``For taxable years beginning in calendar year--
                                                         percentage is--
    1996 or 1997..............................................

                                                             30 percent 

    1998 or 1999..............................................

                                                             35 percent 

    2000 or 2001..............................................

                                                             40 percent 

    2002 or thereafter........................................

                                                           50 percent.''

    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1995.

                 Subtitle D--Estate and Gift Provisions

SEC. 11071. COST-OF-LIVING ADJUSTMENTS RELATING TO ESTATE AND GIFT TAX 
              PROVISIONS.

    (a) Increase in Unified Estate and Gift Tax Credit.--
        (1) Estate tax credit.--
            (A) Subsection (a) of section 2010 (relating to unified 
        credit against estate tax) is amended by striking ``$192,800'' 
        and inserting ``the applicable credit amount''.
            (B) Section 2010 is amended by redesignating subsection (c) 
        as subsection (d) and by inserting after subsection (b) the 
        following new subsection:
    ``(c) Applicable Credit Amount.--For purposes of this section--
        ``(1) In general.--The applicable credit amount is the amount 
    of the tentative tax which would be determined under the rate 
    schedule set forth in section 2001(c) if the amount with respect to 
    which such tentative tax is to be computed were the applicable 
    exclusion amount determined in accordance with the following table:

    ``In the case of estates of decedents
                                                          The applicable
      dying, and gifts made, during:
                                                    exclusion amount is:
          1996..........................................
                                                               $625,000 
          1997..........................................
                                                                650,000 
          1998..........................................
                                                                675,000 
          1999..........................................
                                                                700,000 
          2000..........................................
                                                                725,000 
          2001 or thereafter............................
                                                               $750,000.

        ``(2) Cost-of-living adjustments.--In the case of any decedent 
    dying, and gift made, in a calendar year after 2001, the $750,000 
    amount set forth in paragraph (1) shall be increased by an amount 
    equal to--
            ``(A) $750,000, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year by substituting 
        `calendar year 2000' for `calendar year 1992' in subparagraph 
        (B) thereof.
    If any amount as adjusted under the preceding sentence is not a 
    multiple of $10,000, such amount shall be rounded to the nearest 
    multiple of $10,000.''
            (C) Paragraph (1) of section 6018(a) is amended by striking 
        ``$600,000'' and inserting ``the applicable exclusion amount in 
        effect under section 2010(c) (as adjusted under paragraph (2) 
        thereof) for the calendar year which includes the date of 
        death''.
            (D) Paragraph (2) of section 2001(c) is amended by striking 
        ``$21,040,000'' and inserting ``the amount at which the average 
        tax rate under this section is 55 percent''.
            (E) Subparagraph (A) of section 2102(c)(3) is amended by 
        striking ``$192,800'' and inserting ``the applicable credit 
        amount in effect under section 2010(c) for the calendar year 
        which includes the date of death''.
        (2) Unified gift tax credit.--Paragraph (1) of section 2505(a) 
    is amended by striking ``$192,800'' and inserting ``the applicable 
    credit amount in effect under section 2010(c) for such calendar 
    year''.
        (3) Effective date.--The amendments made by this subsection 
    shall apply to the estates of decedents dying, and gifts made, 
    after December 31, 1995.
    (b) Alternate Valuation of Certain Farm, Etc., Real Property.--
Subsection (a) of section 2032A is amended by adding at the end the 
following new paragraph:
        ``(3) Inflation adjustment.--In the case of estates of 
    decedents dying in a calendar year after 2000, the $750,000 amount 
    contained in paragraph (2) shall be increased by an amount equal 
    to--
            ``(A) $750,000, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year by substituting 
        `calendar year 1999' for `calendar year 1992' in subparagraph 
        (B) thereof.
    If any amount as adjusted under the preceding sentence is not a 
    multiple of $10,000, such amount shall be rounded to the nearest 
    multiple of $10,000.''
    (c) Annual Gift Tax Exclusion.--Subsection (b) of section 2503 is 
amended--
        (1) by striking the subsection heading and inserting the 
    following:
    ``(b) Exclusions From Gifts.--
        ``(1) In general.--'',
        (2) by moving the text 2 ems to the right, and
        (3) by adding at the end the following new paragraph:
        ``(2) Inflation adjustment.--In the case of gifts made in a 
    calendar year after 2000, the $10,000 amount contained in paragraph 
    (1) shall be increased by an amount equal to--
            ``(A) $10,000, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year by substituting 
        `calendar year 1999' for `calendar year 1992' in subparagraph 
        (B) thereof.
    If any amount as adjusted under the preceding sentence is not a 
    multiple of $1,000, such amount shall be rounded to the nearest 
    multiple of $1,000.''
    (d) Exemption From Generation-Skipping Tax.--Section 2631 (relating 
to GST exemption) is amended by adding at the end the following new 
subsection:
    ``(c) Inflation Adjustment.--In the case of an individual who dies 
in any calendar year after 2000, the $1,000,000 amount contained in 
subsection (a) shall be increased by an amount equal to--
        ``(1) $1,000,000, multiplied by
        ``(2) the cost-of-living adjustment determined under section 
    1(f)(3) for such calendar year by substituting `calendar year 1999' 
    for `calendar year 1992' in subparagraph (B) thereof.
If any amount as adjusted under the preceding sentence is not a 
multiple of $10,000, such amount shall be rounded to the nearest 
multiple of $10,000.''
    (e) Amount of Tax Eligible For 4 Percent Interest Rate on Extension 
of Time for Payment of Estate Tax on Closely Held Business.--
        (1) Subparagraph (A) of section 6601(j)(2) is amended by 
    striking ``$345,800'' and inserting ``the applicable limitation 
    amount''.
        (2) Subsection (j) of section 6601 is amended by redesignating 
    paragraph (3) as paragraph (4) and by inserting after paragraph (2) 
    the following new paragraph:
        ``(3) Applicable limitation amount.--
            ``(A) In general.--For purposes of paragraph (2), the 
        applicable limitation amount is the amount of the tentative tax 
        which would be determined under the rate schedule set forth in 
        section 2001(c) if the amount with respect to which such 
        tentative tax is to be computed were $1,000,000.
            ``(B) Inflation adjustment.--In the case of estates of 
        decedents dying in a calendar year after 2000, the $1,000,000 
        amount contained in subparagraph (A) shall be increased by an 
        amount equal to--
                ``(i) $1,000,000, multiplied by
                ``(ii) the cost-of-living adjustment determined under 
            section 1(f)(3) for such calendar year by substituting 
            `calendar year 1999' for `calendar year 1992' in 
            subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10,000, such amount shall be rounded to the 
        nearest multiple of $10,000.''

SEC. 11072. FAMILY-OWNED BUSINESS EXCLUSION.

    (a) In General.--Part III of subchapter A of chapter 11 (relating 
to gross estate) is amended by inserting after section 2033 the 
following new section:

``SEC. 2033A. FAMILY-OWNED BUSINESS EXCLUSION.

    ``(a) In General.--In the case of an estate of a decedent to which 
this section applies, the value of the gross estate shall not include 
the lesser of--
        ``(1) the adjusted value of the qualified family-owned business 
    interests of the decedent otherwise includible in the estate, or
        ``(2) the sum of--
            ``(A) $1,000,000, plus
            ``(B) 50 percent of the excess (if any) of the adjusted 
        value of such interests over $1,000,000, but not over 
        $2,500,000.
    ``(b) Estates to Which Section Applies.--
        ``(1) In general.--This section shall apply to an estate if--
            ``(A) the decedent was (at the date of the decedent's 
        death) a citizen or resident of the United States,
            ``(B) the sum of--
                ``(i) the adjusted value of the qualified family-owned 
            business interests described in paragraph (2), plus
                ``(ii) the amount of the gifts of such interests 
            determined under paragraph (3),
        exceeds 50 percent of the adjusted gross estate, and
            ``(C) during the 8-year period ending on the date of the 
        decedent's death there have been periods aggregating 5 years or 
        more during which--
                ``(i) such interests were owned by the decedent or a 
            member of the decedent's family, and
                ``(ii) there was material participation (within the 
            meaning of section 2032A(e)(6)) by the decedent or a member 
            of the decedent's family in the operation of the business 
            to which such interests relate.
        ``(2) Includible qualified family-owned business interests.--
    The qualified family-owned business interests described in this 
    paragraph are the interests which--
            ``(A) are included in determining the value of the gross 
        estate (without regard to this section), and
            ``(B) are acquired by any qualified heir from, or passed to 
        any qualified heir from, the decedent (within the meaning of 
        section 2032A(e)(9)).
        ``(3) Includible gifts of interests.--The amount of the gifts 
    of qualified family-owned business interests determined under this 
    paragraph is the excess of--
            ``(A) the sum of--
                ``(i) the amount of such gifts from the decedent to 
            members of the decedent's family taken into account under 
            subsection 2001(b)(1)(B), plus
                ``(ii) the amount of such gifts otherwise excluded 
            under section 2503(b),
        to the extent such interests are continuously held by members 
        of such family (other than the decedent's spouse) between the 
        date of the gift and the date of the decedent's death, over
            ``(B) the amount of such gifts from the decedent to members 
        of the decedent's family otherwise included in the gross 
        estate.
    ``(c) Adjusted Gross Estate.--For purposes of this section, the 
term `adjusted gross estate' means the value of the gross estate 
(determined without regard to this section)--
        ``(1) reduced by any amount deductible under paragraph (3) or 
    (4) of section 2053(a), and
        ``(2) increased by the excess of--
            ``(A) the sum of--
                ``(i) the amount of gifts determined under subsection 
            (b)(3), plus
                ``(ii) the amount (if more than de minimis) of other 
            transfers from the decedent to the decedent's spouse (at 
            the time of the transfer) within 10 years of the date of 
            the decedent's death, plus
                ``(iii) the amount of other gifts (not included under 
            clause (i) or (ii)) from the decedent within 3 years of 
            such date, other than gifts to members of the decedent's 
            family otherwise excluded under section 2503(b), over
            ``(B) the sum of the amounts described in clauses (i), 
        (ii), and (iii) of subparagraph (A) which are otherwise 
        includible in the gross estate.
For purposes of the preceding sentence, the Secretary may provide that 
de minimis gifts to persons other than members of the decedent's family 
shall not be taken into account.
    ``(d) Adjusted Value of the Qualified Family-Owned Business 
Interests.--For purposes of this section, the adjusted value of any 
qualified family-owned business interest is the value of such interest 
for purposes of this chapter (determined without regard to this 
section), reduced by the excess of--
        ``(1) any amount deductible under paragraph (3) or (4) of 
    section 2053(a), over
        ``(2) the sum of--
            ``(A) any indebtedness on any qualified residence of the 
        decedent the interest on which is deductible under section 
        163(h)(3), plus
            ``(B) any indebtedness to the extent the taxpayer 
        establishes that the proceeds of such indebtedness were used 
        for the payment of educational and medical expenses of the 
        decedent, the decedent's spouse, or the decedent's dependents 
        (within the meaning of section 152), plus
            ``(C) any indebtedness not described in clause (i) or (ii), 
        to the extent such indebtedness does not exceed $10,000.
    ``(e) Qualified Family-Owned Business Interest.--
        ``(1) In general.--For purposes of this section, the term 
    `qualified family-owned business interest' means--
            ``(A) an interest as a proprietor in a trade or business 
        carried on as a proprietorship, or
            ``(B) an interest in an entity carrying on a trade or 
        business, if--
                ``(i) at least--

                    ``(I) 50 percent of such entity is owned (directly 
                or indirectly) by the decedent and members of the 
                decedent's family,
                    ``(II) 70 percent of such entity is so owned by 
                members of 2 families, or
                    ``(III) 90 percent of such entity is so owned by 
                members of 3 families, and

                ``(ii) for purposes of subclause (II) or (III) of 
            clause (i), at least 30 percent of such entity is so owned 
            by the decedent and members of the decedent's family.
        ``(2) Limitation.--Such term shall not include--
            ``(A) any interest in a trade or business the principal 
        place of business of which is not located in the United States,
            ``(B) any interest in an entity, if the stock or debt of 
        such entity or a controlled group (as defined in section 
        267(f)(1)) of which such entity was a member was readily 
        tradable on an established securities market or secondary 
        market (as defined by the Secretary) at any time within 3 years 
        of the date of the decedent's death,
            ``(C) any interest in a trade or business not described in 
        section 542(c)(2), if more than 35 percent of the adjusted 
        ordinary gross income of such trade or business for the taxable 
        year which includes the date of the decedent's death would 
        qualify as personal holding company income (as defined in 
        section 543(a)),
            ``(D) that portion of an interest in a trade or business 
        that is attributable to--
                ``(i) cash or marketable securities, or both, in excess 
            of the reasonably expected day-to-day working capital needs 
            of such trade or business, and
                ``(ii) any other assets of the trade or business (other 
            than assets used in the active conduct of a trade or 
            business described in section 542(c)(2)), the income of 
            which is described in section 543(a) or in subparagraph 
            (B), (C), (D), or (E) of section 954(c)(1) (determined by 
            substituting `trade or business' for `controlled foreign 
            corporation').
        ``(3) Rules regarding ownership.--
            ``(A) Ownership of entities.--For purposes of paragraph 
        (1)(B)--
                ``(i) Corporations.--Ownership of a corporation shall 
            be determined by the holding of stock possessing the 
            appropriate percentage of the total combined voting power 
            of all classes of stock entitled to vote and the 
            appropriate percentage of the total value of shares of all 
            classes of stock.
                ``(ii) Partnerships.--Ownership of a partnership shall 
            be determined by the owning of the appropriate percentage 
            of the capital interest in such partnership.
            ``(B) Ownership of tiered entities.--For purposes of this 
        section, if by reason of holding an interest in a trade or 
        business, a decedent, any member of the decedent's family, any 
        qualified heir, or any member of any qualified heir's family is 
        treated as holding an interest in any other trade or business--
                ``(i) such ownership interest in the other trade or 
            business shall be disregarded in determining if the 
            ownership interest in the first trade or business is a 
            qualified family-owned business interest, and
                ``(ii) this section shall be applied separately in 
            determining if such interest in any other trade or business 
            is a qualified family-owned business interest.
            ``(C) Individual ownership rules.--For purposes of this 
        section, an interest owned, directly or indirectly, by or for 
        an entity described in paragraph (1)(B) shall be considered as 
        being owned proportionately by or for the entity's 
        shareholders, partners, or beneficiaries. A person shall be 
        treated as a beneficiary of any trust only if such person has a 
        present interest in such trust.
    ``(f) Tax Treatment of Failure To Materially Participate in 
Business or Dispositions of Interests.--
        ``(1) In general.--There is imposed an additional estate tax 
    if, within 10 years after the date of the decedent's death and 
    before the date of the qualified heir's death--
            ``(A) the material participation requirements described in 
        section 2032A(c)(6)(B) are not met with respect to the 
        qualified family-owned business interest which was acquired (or 
        passed) from the decedent,
            ``(B) the qualified heir disposes of any portion of a 
        qualified family-owned business interest (other than by a 
        disposition to a member of the qualified heir's family or 
        through a qualified conservation contribution under section 
        170(h)),
            ``(C) the qualified heir loses United States citizenship 
        (within the meaning of section 877) or with respect to whom an 
        event described in subparagraph (A) or (B) of section 877(e)(1) 
        occurs, and such heir does not comply with the requirements of 
        subsection (g), or
            ``(D) the principal place of business of a trade or 
        business of the qualified family-owned business interest ceases 
        to be located in the United States.
        ``(2) Additional estate tax.--
            ``(A) In general.--The amount of the additional estate tax 
        imposed by paragraph (1) shall be equal to--
                ``(i) the applicable percentage of the adjusted tax 
            difference attributable to the qualified family-owned 
            business interest (as determined under rules similar to the 
            rules of section 2032A(c)(2)(B)), plus
                ``(ii) interest on the amount determined under clause 
            (i) at the underpayment rate established under section 6621 
            for the period beginning on the date the estate tax 
            liability was due under this chapter and ending on the date 
            such additional estate tax is due.
            ``(B) Applicable percentage.--For purposes of this 
        paragraph, the applicable percentage 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.

    ``(g) Security Requirements for Noncitizen Qualified Heirs.--
        ``(1) In general.--Except upon the application of subparagraph 
    (F) or (M) of subsection (h)(3), if a qualified heir is not a 
    citizen of the United States, any interest under this section 
    passing to or acquired by such heir (including any interest held by 
    such heir at a time described in subsection (f)(1)(C)) shall be 
    treated as a qualified family-owned business interest only if the 
    interest passes or is acquired (or is held) in a qualified trust.
        ``(2) Qualified trust.--The term `qualified trust' means a 
    trust--
            ``(A) which is organized under, and governed by, the laws 
        of the United States or a State, and
            ``(B) except as otherwise provided in regulations, with 
        respect to which the trust instrument requires that at least 1 
        trustee of the trust be an individual citizen of the United 
        States or a domestic corporation.
    ``(h) Other Definitions and Applicable Rules.--For purposes of this 
section--
        ``(1) Qualified heir.--The term `qualified heir'--
            ``(A) has the meaning given to such term by section 
        2032A(e)(1), and
            ``(B) includes any active employee of the trade or business 
        to which the qualified family-owned business interest relates 
        if such employee has been employed by such trade or business 
        for a period of at least 10 years before the date of the 
        decedent's death.
        ``(2) Member of the family.--The term `member of the family' 
    has the meaning given to such term by section 2032A(e)(2).
        ``(3) Applicable rules.--Rules similar to the following rules 
    shall apply:
            ``(A) Section 2032A(b)(4) (relating to decedents who are 
        retired or disabled).
            ``(B) Section 2032A(b)(5) (relating to special rules for 
        surviving spouses).
            ``(C) Section 2032A(c)(2)(D) (relating to partial 
        dispositions).
            ``(D) Section 2032A(c)(3) (relating to only 1 additional 
        tax imposed with respect to any 1 portion).
            ``(E) Section 2032A(c)(4) (relating to due date).
            ``(F) Section 2032A(c)(5) (relating to liability for tax; 
        furnishing of bond).
            ``(G) Section 2032A(c)(7) (relating to no tax if use begins 
        within 2 years; active management by eligible qualified heir 
        treated as material participation).
            ``(H) Section 2032A(e)(10) (relating to community 
        property).
            ``(I) Section 2032A(e)(14) (relating to treatment of 
        replacement property acquired in section 1031 or 1033 
        transactions).
            ``(J) Section 2032A(f) (relating to statute of 
        limitations).
            ``(K) Section 6166(b)(3) (relating to farmhouses and 
        certain other structures taken into account).
            ``(L) Subparagraphs (B), (C), and (D) of section 6166(g)(1) 
        (relating to acceleration of payment).
            ``(M) Section 6324B (relating to special lien for 
        additional estate tax).
        ``(4) Coordination with other estate tax benefits.--If there is 
    a reduction in the value of the gross estate under this section--
            ``(A) the dollar limitation applicable under section 
        2032A(a)(2), and
            ``(B) the $1,000,000 amount under section 6601(j)(3) (as 
        adjusted),
    shall each be reduced (but not below zero) by the amount of such 
    reduction.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter A of chapter 11 is amended by inserting after the item 
relating to section 2033 the following new item:
        ``Sec. 2033A. Family-owned business exclusion.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after December 31, 1995.

SEC. 11073. TREATMENT OF LAND SUBJECT TO A QUALIFIED CONSERVATION 
              EASEMENT.

    (a) Estate Tax With Respect to Land Subject to a Qualified 
Conservation Easement.--Section 2031 (relating to the definition of 
gross estate) is amended by redesignating subsection (c) as subsection 
(d) and by inserting after subsection (b) the following new subsection:
    ``(c) Estate Tax With Respect to Land Subject to a Qualified 
Conservation Easement.--
        ``(1) In general.--If the executor makes the election described 
    in paragraph (4), then, except as otherwise provided in this 
    subsection, there shall be excluded from the gross estate the 
    applicable percentage of the lesser of--
            ``(A) the value of land subject to a qualified conservation 
        easement, reduced by the amount of any deduction under section 
        2055(f) with respect to such land, or
            ``(B) the excess (if any) of $5,000,000 over the lesser 
        of--
                ``(i) $2,500,000, or
                ``(ii) the adjusted value of the qualified family-owned 
            business interests of the decedent determined under section 
            2033A.
        ``(2) Applicable percentage.--For purposes of paragraph (1), 
    the term `applicable percentage' means 40 percent reduced (but not 
    below zero) by 2 percentage points for each percentage point (or 
    fraction thereof) by which the value of the qualified conservation 
    easement is less than 30 percent of the value of the land 
    (determined without regard to the value of such easement and 
    reduced by the value of any retained development right (as defined 
    in paragraph (4)).
        ``(3) Treatment of certain indebtedness.--
            ``(A) In general.--The exclusion provided in paragraph (1) 
        shall not apply to the extent that the land is debt-financed 
        property.
            ``(B) Definitions.--For purposes of this paragraph--
                ``(i) Debt-financed property.--The term `debt-financed 
            property' means any property with respect to which there is 
            an acquisition indebtedness (as defined in clause (ii)) on 
            the date of the decedent's death.
                ``(ii) Acquisition indebtedness.--The term `acquisition 
            indebtedness' means, with respect to debt-financed 
            property, the unpaid amount of--

                    ``(I) the indebtedness incurred by the donor in 
                acquiring such property,
                    ``(II) the indebtedness incurred before the 
                acquisition of such property if such indebtedness would 
                not have been incurred but for such acquisition,
                    ``(III) the indebtedness incurred after the 
                acquisition of such property if such indebtedness would 
                not have been incurred but for such acquisition and the 
                incurrence of such indebtedness was reasonably 
                foreseeable at the time of such acquisition, and
                    ``(IV) the extension, renewal, or refinancing of an 
                acquisition indebtedness.

        ``(4) Treatment of retained development right.--
            ``(A) In general.--Paragraph (1) shall not apply to the 
        value of any development right retained by the donor in the 
        conveyance of a qualified conservation easement.
            ``(B) Termination of retained development right.--If every 
        person in being who has an interest (whether or not in 
        possession) in the land executes an agreement to extinguish 
        permanently some or all of any development rights (as defined 
        in subparagraph (D)) retained by the donor on or before the 
        date for filing the return of the tax imposed by section 2001, 
        then any tax imposed by section 2001 shall be reduced 
        accordingly. Such agreement shall be filed with the return of 
        the tax imposed by section 2001. The agreement shall be in such 
        form as the Secretary shall prescribe.
            ``(C) Additional tax.--Any failure to implement the 
        agreement described in subparagraph (B) not later than the 
        earlier of--
                ``(i) the date which is 2 years after the date of the 
            decedent's death, or
                ``(ii) the date of the sale of such land subject to the 
            qualified conservation easement,
        shall result in the imposition of an additional tax in the 
        amount of the tax which would have been due on the retained 
        development rights subject to such agreement. Such additional 
        tax shall be due and payable on the last day of the 6th month 
        following such date.
            ``(D) Development right defined.--For purposes of this 
        paragraph, the term `development right' means any right to use 
        the land subject to the qualified conservation easement in 
        which such right is retained for any commercial purpose which 
        is not subordinate to and directly supportive of the use of 
        such land as a farm for farming purposes (within the meaning of 
        section 6420(c)).
        ``(4) Election.--The election under this subsection shall be 
    made on the return of the tax imposed by section 2001. Such an 
    election, once made, shall be irrevocable.
        ``(5) Calculation of estate tax due.--An executor making the 
    election described in paragraph (4) shall, for purposes of 
    calculating the amount of tax imposed by section 2001, include the 
    value of any development right (as defined in paragraph (3)) 
    retained by the donor in the conveyance of such qualified 
    conservation easement. The computation of tax on any retained 
    development right prescribed in this paragraph shall be done in 
    such manner and on such forms as the Secretary shall prescribe.
        ``(6) Definitions.--For purposes of this subsection--
            ``(A) Land subject to a qualified conservation easement.--
        The term `land subject to a qualified conservation easement' 
        means land--
                ``(i) which is located--

                    ``(I) in or within 25 miles of an area which, on 
                the date of the decedent's death, is a metropolitan 
                area (as defined by the Office of Management and 
                Budget),
                    ``(II) in or within 25 miles of an area which, on 
                the date of the decedent's death, is a national park or 
                wilderness area designated as part of the National 
                Wilderness Preservation System (unless it is determined 
                by the Secretary that land in or within 25 miles of 
                such a park or wilderness area is not under significant 
                development pressure), or
                    ``(III) in or within 10 miles of an area which, on 
                the date of the decedent's death, is an Urban National 
                Forest (as designated by the Forest Service),

                ``(ii) which was owned by the decedent or a member of 
            the decedent's family at all times during the 3-year period 
            ending on the date of the decedent's death, and
                ``(iii) with respect to which a qualified conservation 
            easement has been made by the decedent or a member of the 
            decedent's family.
            ``(B) Qualified conservation easement.--The term `qualified 
        conservation easement' means a qualified conservation 
        contribution (as defined in section 170(h)(1)) of a qualified 
        real property interest (as defined in section 170(h)(2)(C)), 
        except that clause (iv) of section 170(h)(4)(A) shall not 
        apply, and the restriction on the use of such interest 
        described in section 170(h)(2)(C) shall include a prohibition 
        on commercial recreational activity.
            ``(C) Member of family.--The term `member of the decedent's 
        family' means any member of the family (as defined in section 
        2032A(e)(2)) of the decedent.
        ``(7) Application of this section to interests in partnerships, 
    corporations, and trusts.--This section shall apply to an interest 
    in a partnership, corporation, or trust if at least 30 percent of 
    the entity is owned (directly or indirectly) by the decedent, as 
    determined under the rules described in section 2033A(e)(3).''.
    (b) Carryover Basis.--Section 1014(a) (relating to basis of 
property acquired from a decedent) is amended by striking the period at 
the end of paragraph (3) and inserting ``, or'' and by adding after 
paragraph (3) the following new paragraph:
        ``(4) to the extent of the applicability of the exclusion 
    described in section 2031(c), the basis in the hands of the 
    decedent.''.
    (c) Qualified Conservation Contribution Is Not a Disposition.--
Subsection (c) of section 2032A (relating to alternative valuation 
method) is amended by adding at the end the following new paragraph:
        ``(8) Qualified conservation contribution is not a 
    disposition.--A qualified conservation contribution (as defined in 
    section 170(h)) by gift or otherwise shall not be deemed a 
    disposition under subsection (c)(1)(A).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after December 31, 1995.

SEC. 11074. EXPANSION OF EXCEPTION FROM GENERATION-SKIPPING TRANSFER 
              TAX FOR TRANSFERS TO INDIVIDUALS WITH DECEASED PARENTS.

    (a) In General.--Section 2651 (relating to generation assignment) 
is amended by redesignating subsection (e) as subsection (f), and by 
inserting after subsection (d) the following new subsection:
    ``(e) Special Rule for Persons With a Deceased Parent.--
        ``(1) In general.--For purposes of determining whether any 
    transfer is a generation-skipping transfer, if--
            ``(A) an individual is a descendant of a parent of the 
        transferor (or the transferor's spouse or former spouse), and
            ``(B) such individual's parent who is a lineal descendant 
        of the parent of the transferor (or the transferor's spouse or 
        former spouse) is dead at the time the transfer (from which an 
        interest of such individual is established or derived) is 
        subject to a tax imposed by chapter 11 or 12 upon the 
        transferor (and if there shall be more than 1 such time, then 
        at the earliest such time),
    such individual shall be treated as if such individual were a 
    member of the generation which is 1 generation below the lower of 
    the transferor's generation or the generation assignment of the 
    youngest living ancestor of such individual who is also a 
    descendant of the parent of the transferor (or the transferor's 
    spouse or former spouse), and the generation assignment of any 
    descendant of such individual shall be adjusted accordingly.
        ``(2) Limited application of subsection to collateral heirs.--
    This subsection shall not apply with respect to a transfer to any 
    individual who is not a lineal descendant of the transferor (or the 
    transferor's spouse or former spouse) if, at the time of the 
    transfer, such transferor has any living lineal descendant.''
    (b) Conforming Amendments.--
        (1) Section 2612(c) (defining direct skip) is amended by 
    striking paragraph (2) and by redesignating paragraph (3) as 
    paragraph (2).
        (2) Section 2612(c)(2) (as so redesignated) is amended by 
    striking ``section 2651(e)(2)'' and inserting ``section 
    2651(f)(2)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to terminations, distributions, and transfers occurring after 
December 31, 1994.

SEC. 11075. EXTENSION OF TREATMENT OF CERTAIN RENTS UNDER SECTION 2032A 
              TO LINEAL DESCENDANTS.

    (a) General Rule.--Paragraph (7) of section 2032A(c) (relating to 
special rules for tax treatment of dispositions and failures to use for 
qualified use) is amended by adding at the end the following new 
subparagraph:
            ``(E) Certain rents treated as qualified use.--For purposes 
        of this subsection, a surviving spouse or lineal descendant of 
        the decedent shall not be treated as failing to use qualified 
        real property in a qualified use solely because such spouse or 
        descendant rents such property to a member of the family of 
        such spouse or descendant on a net cash basis. For purposes of 
        the preceding sentence, a legally adopted child of an 
        individual shall be treated as the child of such individual by 
        blood.''.
    (b) Conforming Amendment.--Section 2032A(b)(5)(A) is amended by 
striking out the last sentence.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to leases entered into after December 31, 1995.

              Subtitle E--Extension of Expiring Provisions

                    CHAPTER 1--TEMPORARY EXTENSIONS

SEC. 11111. WORK OPPORTUNITY TAX CREDIT.

    (a) Amount of Credit.--Subsection (a) of section 51 (relating to 
amount of credit) is amended by striking ``40 percent'' and inserting 
``35 percent''.
    (b) Members of Targeted Groups.--Subsection (d) of section 51 is 
amended to read as follows:
    ``(d) Members of Targeted Groups.--For purposes of this subpart--
        ``(1) In general.--An individual is a member of a targeted 
    group if such individual is--
            ``(A) a qualified IV-A recipient,
            ``(B) a qualified veteran,
            ``(C) a qualified ex-felon,
            ``(D) a high-risk youth,
            ``(E) a vocational rehabilitation referral, or
            ``(F) a qualified summer youth employee.
        ``(2) Qualified iv-a recipient.--
            ``(A) In general.--The term `qualified IV-A recipient' 
        means any individual who is certified by the designated local 
        agency as being a member of a family receiving assistance under 
        a IV-A program for at least a 9-month period ending during the 
        9-month period ending on the hiring date.
            ``(B) IV-A program.--For purposes of this paragraph, the 
        term `IV-A program' means any program providing assistance 
        under a State plan approved under part A of title IV of the 
        Social Security Act (relating to assistance for needy families 
        with minor children) and any successor of such program.
        ``(3) Qualified veteran.--
            ``(A) In general.--The term `qualified veteran' means any 
        veteran who is certified by the designated local agency as 
        being--
                ``(i) a member of a family receiving assistance under a 
            IV-A program (as defined in paragraph (2)(B)) for at least 
            a 9-month period ending during the 12-month period ending 
            on the hiring date, or
                ``(ii) a member of a family receiving assistance under 
            a food stamp program under the Food Stamp Act of 1977 for 
            at least a 3-month period ending during the 12-month period 
            ending on the hiring date.
            ``(B) Veteran.--For purposes of subparagraph (A), the term 
        `veteran' means any individual who is certified by the 
        designated local agency as--
                ``(i)(I) having served on active duty (other than 
            active duty for training) in the Armed Forces of the United 
            States for a period of more than 180 days, or
                ``(II) having been discharged or released from active 
            duty in the Armed Forces of the United States for a 
            service-connected disability, and
                ``(ii) not having any day during the 60-day period 
            ending on the hiring date which was a day of extended 
            active duty in the Armed Forces of the United States.
        For purposes of clause (ii), the term `extended active duty' 
        means a period of more than 90 days during which the individual 
        was on active duty (other than active duty for training).
        ``(4) Qualified ex-felon.--The term `qualified ex-felon' means 
    any individual who is certified by the designated local agency--
            ``(A) as having been convicted of a felony under any 
        statute of the United States or any State,
            ``(B) as having a hiring date which is not more than 1 year 
        after the last date on which such individual was so convicted 
        or was released from prison, and
            ``(C) as being a member of a family which had an income 
        during the 6 months immediately preceding the earlier of the 
        month in which such income determination occurs or the month in 
        which the hiring date occurs, which, on an annual basis, would 
        be 70 percent or less of the Bureau of Labor Statistics lower 
        living standard.
    Any determination under subparagraph (C) shall be valid for the 45-
    day period beginning on the date such determination is made.
        ``(5) High-risk youth.--
            ``(A) In general.--The term `high-risk youth' means any 
        individual who is certified by the designated local agency--
                ``(i) as having attained age 18 but not age 25 on the 
            hiring date, and
                ``(ii) as having his principal place of abode within an 
            empowerment zone or enterprise community.
            ``(B) Youth must continue to reside in zone.--In the case 
        of a high-risk youth, the term `qualified wages' shall not 
        include wages paid or incurred for services performed while 
        such youth's principal place of abode is outside an empowerment 
        zone or enterprise community.
        ``(6) Vocational rehabilitation referral.--The term `vocational 
    rehabilitation referral' means any individual who is certified by 
    the designated local agency as--
            ``(A) having a physical or mental disability which, for 
        such individual, constitutes or results in a substantial 
        handicap to employment, and
            ``(B) having been referred to the employer upon completion 
        of (or while receiving) rehabilitative services pursuant to--
                ``(i) an individualized written rehabilitation plan 
            under a State plan for vocational rehabilitation services 
            approved under the Rehabilitation Act of 1973, or
                ``(ii) a program of vocational rehabilitation carried 
            out under chapter 31 of title 38, United States Code.
        ``(7) Qualified summer youth employee.--
            ``(A) In general.--The term `qualified summer youth 
        employee' means any individual--
                ``(i) who performs services for the employer between 
            May 1 and September 15,
                ``(ii) who is certified by the designated local agency 
            as having attained age 16 but not 18 on the hiring date (or 
            if later, on May 1 of the calendar year involved),
                ``(iii) who has not been an employee of the employer 
            during any period prior to the 90-day period described in 
            subparagraph (B)(i), and
                ``(iv) who is certified by the designated local agency 
            as having his principal place of abode within an 
            empowerment zone or enterprise community.
            ``(B) Special rules for determining amount of credit.--For 
        purposes of applying this subpart to wages paid or incurred to 
        any qualified summer youth employee--
                ``(i) subsection (b)(2) shall be applied by 
            substituting `any 90-day period between May 1 and September 
            15' for `the 1-year period beginning with the day the 
            individual begins work for the employer', and
                ``(ii) subsection (b)(3) shall be applied by 
            substituting `$3,000' for `$6,000'.
        The preceding sentence shall not apply to an individual who, 
        with respect to the same employer, is certified as a member of 
        another targeted group after such individual has been a 
        qualified summer youth employee.
            ``(C) Youth must continue to reside in zone.--Paragraph 
        (5)(B) shall apply for purposes of this paragraph.
        ``(8) Hiring date.--The term `hiring date' means the day the 
    individual is hired by the employer.
        ``(9) Designated local agency.--The term `designated local 
    agency' means a State employment security agency established in 
    accordance with the Act of June 6, 1933, as amended (29 U.S.C. 49-
    49n).
        ``(10) Special rules for certifications.--
            ``(A) In general.--An individual shall not be treated as a 
        member of a targeted group unless--
                ``(i) on or before the day on which such individual 
            begins work for the employer, the employer has received a 
            certification from a designated local agency that such 
            individual is a member of a targeted group, or
                ``(ii)(I) on or before the day the individual is 
            offered employment with the employer, a pre-screening 
            notice is completed by the employer with respect to such 
            individual, and
                ``(II) not later than the 14th day after the individual 
            begins work for the employer, the employer submits such 
            notice, signed by the employer and the individual under 
            penalties of perjury, to the designated local agency as 
            part of a written request for such a certification from 
            such agency.
        For purposes of this paragraph, the term `pre-screening notice' 
        means a document (in such form as the Secretary shall 
        prescribe) which contains information provided by the 
        individual on the basis of which the employer believes that the 
        individual is a member of a targeted group.
            ``(B) Incorrect certifications.--If--
                ``(i) an individual has been certified by a designated 
            local agency as a member of a targeted group, and
                ``(ii) such certification is incorrect because it was 
            based on false information provided by such individual,
        the certification shall be revoked and wages paid by the 
        employer after the date on which notice of revocation is 
        received by the employer shall not be treated as qualified 
        wages.
            ``(C) Explanation of denial of request.--If a designated 
        local agency denies a request for certification of membership 
        in a targeted group, such agency shall provide to the person 
        making such request a written explanation of the reasons for 
        such denial.''
    (c) Minimum Employment Period.--Paragraph (3) of section 51(i) 
(relating to certain individuals ineligible) is amended to read as 
follows:
        ``(3) Individuals not meeting minimum employment period.--No 
    wages shall be taken into account under subsection (a) with respect 
    to any individual unless such individual either--
            ``(A) is employed by the employer at least 180 days (20 
        days in the case of a qualified summer youth employee), or
            ``(B) has completed at least 500 hours (120 hours in the 
        case of a qualified summer youth employee) of services 
        performed for the employer.''
    (d) Termination.--Paragraph (4) of section 51(c) (relating to wages 
defined) is amended to read as follows:
        ``(4) Termination.--The term `wages' shall not include any 
    amount paid or incurred to an individual who begins work for the 
    employer--
            ``(A) after December 31, 1994, and before January 1, 1996, 
        or
            ``(B) after December 31, 1996.''
    (e) Redesignation of Credit.--
        (1) Sections 38(b)(2) and 51(a) are each amended by striking 
    ``targeted jobs credit'' and inserting ``work opportunity credit''.
        (2) The subpart heading for subpart F of part IV of subchapter 
    A of chapter 1 is amended by striking ``Targeted Jobs Credit'' and 
    inserting ``Work Opportunity Credit''.
        (3) The table of subparts for such part IV is amended by 
    striking ``targeted jobs credit'' and inserting ``work opportunity 
    credit''.
        (4) The heading for paragraph (3) of section 1396(c) is amended 
    by striking ``targeted jobs credit'' and inserting ``work 
    opportunity credit''.
    (f) Technical Amendments.--
        (1) Paragraph (1) of section 51(c) is amended by striking ``, 
    subsection (d)(8)(D),''.
        (2) Paragraph (3) of section 51(i) is amended by striking 
    ``(d)(12)'' each place it appears and inserting ``(d)(6)''.
    (g) Effective Date.--The amendments made by this section shall 
apply to individuals who begin work for the employer after December 31, 
1995.

SEC. 11112. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE PROGRAMS.

    (a) Extension.--Subsection (d) of section 127 (relating to 
educational assistance programs) is amended by striking ``December 31, 
1994'' and inserting ``December 31, 1996''.
    (b) Limitation to Education Below Graduate Level.--The last 
sentence of section 127(c)(1) is amended by inserting before the period 
``or at the graduate level''.
    (c) Effective Dates.--
        (1) Extension.--The amendment made by subsection (a) shall 
    apply to taxable years beginning after December 31, 1994.
        (2) Limitation.--The amendment made by subsection (b) shall 
    apply to taxable years beginning after December 31, 1995.

SEC. 11113. RESEARCH CREDIT.

    (a) In General.--Subsection (h) of section 41 (relating to credit 
for research activities) is amended--
        (1) by striking ``June 30, 1995'' each place it appears and 
    inserting ``December 31, 1996'', and
        (2) by striking ``July 1, 1995'' each place it appears and 
    inserting ``January 1, 1997''.
    (b) Base Amount for Start-Up Companies.--Clause (i) of section 
41(c)(3)(B) (relating to start-up companies) is amended to read as 
follows:
                ``(i)  Taxpayers to which subparagraph applies.--The 
            fixed-base percentage shall be determined under this 
            subparagraph if--

                    ``(I) the first taxable year in which a taxpayer 
                had both gross receipts and qualified research expenses 
                begins after December 31, 1983, or
                    ``(II) there are fewer than 3 taxable years 
                beginning after December 31, 1983, and before January 
                1, 1989, in which the taxpayer had both gross receipts 
                and qualified research expenses.''.

    (c) Election of Alternative Incremental Credit.--Subsection (c) of 
section 41 is amended by redesignating paragraphs (4) and (5) as 
paragraphs (5) and (6), respectively, and by inserting after paragraph 
(3) the following new paragraph:
        ``(4) Election of alternative incremental credit.--
            ``(A) In general.--At the election of the taxpayer, the 
        credit determined under subsection (a)(1) shall be equal to the 
        sum of--
                ``(i) 1.65 percent of so much of the qualified research 
            expenses for the taxable year as exceeds 1 percent of the 
            average described in subsection (c)(1)(B) but does not 
            exceed 1.5 percent of such average,
                ``(ii) 2.2 percent of so much of such expenses as 
            exceeds 1.5 percent of such average but does not exceed 2 
            percent of such average, and
                ``(iii) 2.75 percent of so much of such expenses as 
            exceeds 2 percent of such average.
            ``(B) Election.--An election under this paragraph may be 
        made only for the first taxable year of the taxpayer beginning 
        after June 30, 1995. Such an election shall apply to the 
        taxable year for which made and all succeeding taxable years 
        unless revoked with the consent of the Secretary.''
    (d) Increased Credit for Contract Research Expenses With Respect to 
Certain Research Consortia.--Paragraph (3) of section 41(b) is amended 
by adding at the end the following new subparagraph:
            ``(C) Amounts paid to certain research consortia.--
                ``(i) In general.--Subparagraph (A) shall be applied by 
            substituting `75 percent' for `65 percent' with respect to 
            amounts paid or incurred by the taxpayer to a qualified 
            research consortium for qualified research.
                ``(ii) Qualified research consortium.--The term 
            `qualified research consortium' means any organization 
            described in subsection (e)(6)(B) if--

                    ``(I) at least 15 unrelated taxpayers paid (during 
                the calendar year in which the taxable year of the 
                taxpayer begins) amounts to such organization for 
                qualified research,
                    ``(II) no 3 persons paid during such calendar year 
                more than 50 percent of the total amounts paid during 
                such calendar year for qualified research, and
                    ``(III) no person contributed more than 20 percent 
                of such total amounts.

            For purposes of subclause (I), all persons treated as a 
            single employer under subsection (a) or (b) of section 52 
            shall be treated as related taxpayers.''
    (e)  Conforming Amendment.--Subparagraph (D) of section 28(b)(1) is 
amended by striking ``June 30, 1995'' and inserting ``December 31, 
1996''.
    (f) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to taxable years ending 
    after June 30, 1995.
        (2) Subsections (c) and (d).--The amendments made by 
    subsections (c) and (d) shall apply to taxable years beginning 
    after June 30, 1995.

SEC. 11114. ORPHAN DRUG TAX CREDIT.

    (a) Recategorized as a Business Credit.--
        (1) In general.--Section 28 (relating to clinical testing 
    expenses for certain drugs for rare diseases or conditions) is 
    transferred to subpart D of part IV of subchapter A of chapter 1, 
    inserted after section 45B, and redesignated as section 45C.
        (2) Conforming amendment.--Subsection (b) of section 38 
    (relating to general business credit) is amended by striking 
    ``plus'' at the end of paragraph (10), by striking the period at 
    the end of paragraph (11) and inserting ``, plus'', and by adding 
    at the end the following new paragraph:
        ``(12) the orphan drug credit determined under section 
    45C(a).''.
        (3) Clerical amendments.--
            (A) The table of sections for subpart B of such part IV is 
        amended by striking the item relating to section 28.
            (B) The table of sections for subpart D of such part IV is 
        amended by adding at the end the following new item:
    ``Sec. 45C. Clinical testing expenses for certain drugs for rare 
              diseases or conditions.''.
    (b) Credit Termination.--Subsection (e) of section 45C, as 
redesignated by subsection (a)(1), is amended by striking ``December 
31, 1994'' and inserting ``December 31, 1996''.
    (c) No Pre-1995 Carrybacks.--Subsection (d) of section 39 (relating 
to carryback and carryforward of unused credits) is amended by adding 
at the end the following new paragraph:
        ``(7) No carryback of section 45c credit before 1995.--No 
    portion of the unused business credit for any taxable year which is 
    attributable to the orphan drug credit determined under section 45C 
    may be carried back to a taxable year beginning before January 1, 
    1995.''.
    (d) Additional Conforming Amendments.--
        (1) Section 45C(a), as redesignated by subsection (a)(1), is 
    amended by striking ``There shall be allowed as a credit against 
    the tax imposed by this chapter for the taxable year'' and 
    inserting ``For purposes of section 38, the credit determined under 
    this section for the taxable year is''.
        (2) Section 45C(d), as so redesignated, is amended by striking 
    paragraph (2) and by redesignating paragraphs (3), (4), and (5) as 
    paragraphs (2), (3), and (4).
        (3) Section 29(b)(6)(A) is amended by striking ``sections 27 
    and 28'' and inserting ``section 27''.
        (4) Section 30(b)(3)(A) is amended by striking ``sections 27, 
    28, and 29'' and inserting ``sections 27 and 29''.
        (5) Section 53(d)(1)(B) is amended--
            (A) by striking ``or not allowed under section 28 solely by 
        reason of the application of section 28(d)(2)(B),'' in clause 
        (iii), and
            (B) by striking ``or not allowed under section 28 solely by 
        reason of the application of section 28(d)(2)(B)'' in clause 
        (iv)(II).
        (6) Section 55(c)(2) is amended by striking ``28(d)(2),''.
        (7) Section 280C(b) is amended--
            (A) by striking ``section 28(b)'' in paragraph (1) and 
        inserting ``section 45C(b)'',
            (B) by striking ``section 28'' in paragraphs (1) and (2)(A) 
        and inserting ``section 45C(b)'', and
            (C) by striking ``subsection (d)(2) thereof'' in paragraphs 
        (1) and (2)(A) and inserting ``section 38(c)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1994.

SEC. 11115. CONTRIBUTIONS OF STOCK TO PRIVATE FOUNDATIONS.

    (a) In General.--Subparagraph (D) of section 170(e)(5) (relating to 
special rule for contributions of stock for which market quotations are 
readily available) is amended by striking ``December 31, 1994'' and 
inserting ``December 31, 1996''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after December 31, 1994.

SEC. 11116. DELAY OF TAX ON FUEL USED IN COMMERCIAL AVIATION.

    (a) In General.--Sections 4092(b)(2), 6421(f)(2)(B), and 
6427(l)(4)(B) are each amended by striking ``September 30, 1995'' and 
inserting ``September 30, 1997''.
    (b) Conforming Amendment.--Section 13245 of the Omnibus Budget 
Reconciliation Act of 1993 is hereby repealed.
    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall take 
    effect after September 30, 1995, but shall not take effect if 
    section 11117 does not take effect.
        (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.
    (d) Floor Stocks Tax.--
        (1) Imposition of tax.--In the case of commercial aviation fuel 
    which is held by any person on October 1, 1997, there is hereby 
    imposed a floor stocks tax equal to 4.3 cents per gallon.
        (2) Liability for tax and method of payment.--
            (A) Liability for tax.--A person holding aviation fuel on 
        October 1, 1997, to which the tax imposed by paragraph (1) 
        applies shall be liable for such tax.
            (B) Method of payment.--The tax imposed by paragraph (1) 
        shall be paid in such manner as the Secretary shall prescribe.
            (C) Time for payment.--The tax imposed by paragraph (1) 
        shall be paid on or before April 30, 1998.
        (3) Definitions.--For purposes of this subsection--
            (A) Held by a person.--Aviation fuel shall be considered as 
        ``held by a person'' if title thereto has passed to such person 
        (whether or not delivery to the person has been made).
            (B) Commercial aviation fuel.--The term ``commercial 
        aviation fuel'' means aviation fuel (as defined in section 4093 
        of such Code) which is held on October 1, 1997, for sale or use 
        in commercial aviation (as defined in section 4092(b) of such 
        Code).
            (C) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury or the Secretary's delegate.
        (4) Exception for exempt uses.--The tax imposed by paragraph 
    (1) shall not apply to aviation fuel held by any person exclusively 
    for any use for which a credit or refund of the entire tax imposed 
    by section 4091 of such Code (other than the rate imposed by 
    section 4091(b)(2) of such Code) is allowable for aviation fuel so 
    used.
        (5) Exception for certain amounts of fuel.--
            (A) In general.--No tax shall be imposed by paragraph (1) 
        on aviation fuel held on October 1, 1997, by any person if the 
        aggregate amount of commercial aviation fuel held by such 
        person on such date does not exceed 2,000 gallons. The 
        preceding sentence shall apply only if such person submits to 
        the Secretary (at the time and in the manner required by the 
        Secretary) such information as the Secretary shall require for 
        purposes of this paragraph.
            (B) Exempt fuel.--For purposes of subparagraph (A), there 
        shall not be taken into account fuel held by any person which 
        is exempt from the tax imposed by paragraph (1) by reason of 
        paragraph (4).
            (C) Controlled groups.--For purposes of this paragraph--
                (i) Corporations.--

                    (I) In general.--All persons treated as a 
                controlled group shall be treated as 1 person.
                    (II) Controlled group.--The term ``controlled 
                group'' has the meaning given to such term by 
                subsection (a) of section 1563 of such Code; except 
                that for such purposes the phrase ``more than 50 
                percent'' shall be substituted for the phrase ``at 
                least 80 percent'' each place it appears in such 
                subsection.

                (ii) Nonincorporated persons under common control.--
            Under regulations prescribed by the Secretary, principles 
            similar to the principles of clause (i) shall apply to a 
            group of persons under common control where 1 or more of 
            such persons is not a corporation.
        (6) Other laws applicable.--All provisions of law, including 
    penalties, applicable with respect to the taxes imposed by section 
    4091 of such Code shall, insofar as applicable and not inconsistent 
    with the provisions of this subsection, apply with respect to the 
    floor stock taxes imposed by paragraph (1) to the same extent as if 
    such taxes were imposed by such section 4091.

SEC. 11117. EXTENSION OF AIRPORT AND AIRWAY TRUST FUND EXCISE TAXES.

    (a) Fuel Tax.--
        (1) Subparagraph (A) of section 4091(b)(3) is amended by 
    striking ``January 1, 1996'' and inserting ``October 1, 1996''.
        (2) Paragraph (2) of section 4081(d), as amended by section 
    11651 of this Act, is amended by striking ``January 1, 1996'' and 
    inserting ``October 1, 1996''.
    (b) Ticket Taxes.--Sections 4261(g) and 4271(d) are each amended by 
striking ``January 1, 1996'' and inserting ``October 1, 1996''.
    (c) Transfer to Airport and Airway Trust Fund.--
        (1) Subsection (b) of section 9502 is amended by striking 
    ``January 1, 1996'' each place it appears and inserting ``October 
    1, 1996''.
        (2) Paragraph (3) of section 9502(f) is amended by striking 
    ``December 31, 1995'' and inserting ``September 30, 1996''.

SEC. 11118. EXTENSION OF INTERNAL REVENUE SERVICE USER FEES.

    Subsection (c) of section 10511 of the Revenue Act of 1987 is 
amended by striking ``October 1, 2000'' and by inserting ``October 1, 
2002''.

             CHAPTER 2--SUNSET OF LOW-INCOME HOUSING CREDIT

SEC. 11121. SUNSET OF LOW-INCOME HOUSING CREDIT.

    (a) Repeal of Reallocation of Unused Credits Among States.--
Subparagraph (D) of section 42(h)(3) is amended by adding at the end 
the following new clause:
                ``(v) Termination.--No amount may be allocated under 
            this paragraph for any calendar year after 1995.''
    (b) Termination.--Section 42 is amended by adding at the end the 
following new subsection:
    ``(o) Termination.--
        ``(1) In general.--Except as provided in paragraph (2)--
            ``(A) clause (i) of subsection (h)(3)(C) shall not apply to 
        any amount allocated after December 31, 1997, and
            ``(B) subsection (h)(4) shall not apply to any building 
        placed in service after such date.
        ``(2) Exception for bond-financed buildings in progress.--For 
    purposes of paragraph (1)(B), a building shall be treated as placed 
    in service before January 1, 1998, if--
            ``(A) the bonds with respect to such building are issued 
        before such date,
            ``(B) the taxpayer's basis in the project (of which the 
        building is a part) as of December 31, 1997, is more than 10 
        percent of the taxpayer's reasonably expected basis in such 
        project as of December 31, 1999, and
            ``(C) such building is placed in service before January 1, 
        2000.''

    CHAPTER 3--EXTENSIONS OF SUPERFUND AND OIL SPILL LIABILITY TAXES

SEC. 11131. EXTENSION OF HAZARDOUS SUBSTANCE SUPERFUND TAXES.

    (a) Extension of Taxes.--
        (1) Environmental tax.--Section 59A(e) is amended to read as 
    follows:
    ``(e) Application of Tax.--The tax imposed by this section shall 
apply to taxable years beginning after December 31, 1986, and before 
January 1, 1997.''.
        (2) Excise taxes.--Section 4611(e) is amended to read as 
    follows:
    ``(e) Application of Hazardous Substance Superfund Financing 
Rate.--The Hazardous Substance Superfund financing rate under this 
section shall apply after December 31, 1986, and before October 1, 
1996.''.
    (b) Termination on Deposits of Taxes Into Hazardous Substance 
Superfund.--Paragraph (1) of section 9507(b) is amended by inserting 
``before August 1, 1996'' after ``received''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 11132. EXTENSION OF OIL SPILL LIABILITY TAX.

    (a) In General.--Section 4611(f)(1) (relating to application of oil 
spill liability trust fund financing rate) is amended by striking 
``after December 31, 1989, and before January 1, 1995'' and inserting 
``after December 31, 1995, and before October 1, 2002''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 1996.

              CHAPTER 4--EXTENSIONS RELATING TO FUEL TAXES

SEC. 11141. ETHANOL BLENDER REFUNDS.

    (a) In General.--Paragraph (4) of section 6427(f) (relating to 
gasoline, diesel fuel, and aviation fuel used to produce certain 
alcohol fuels) is amended by striking ``1995'' and inserting ``1999''.
    (b) Special Rule.--With respect to refund claims which could have 
been filed under section 6427(f) of the Internal Revenue Code of 1986 
during the period beginning on October 8, 1995, and ending on the date 
of the enactment of this Act, but for the expiration of such section 
after September 30, 1995, interest shall accrue on such claims from the 
date which is the later of--
        (1) November 1, 1995, or
        (2) 20 days after the claim could have been filed under such 
    section as in effect on September 30, 1995.
    (c) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 11142. EXTENSION OF BINDING CONTRACT DATE FOR BIOMASS AND COAL 
              FACILITIES.

    (a) In General.--Subparagraph (A) of section 29(g)(1) (relating to 
extension of certain facilities) is amended by striking ``January 1, 
1997'' and inserting ``January 1, 1998'' and by striking ``January 1, 
1996'' and inserting ``July 1, 1996''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 11143. EXEMPTION FROM DIESEL FUEL DYEING REQUIREMENTS WITH RESPECT 
              TO CERTAIN STATES.

    (a) In General.--Section 4082 (relating to exemptions for diesel 
fuel) is amended by redesignating subsections (c) and (d) as 
subsections (d) and (e), respectively, and by inserting after 
subsection (b) the following new subsection:
    ``(c) Exception to Dyeing Requirements.--Paragraph (2) of 
subsection (a) shall not apply with respect to any diesel fuel--
        ``(1) removed, entered, or sold in a State for ultimate sale or 
    use in an area of such State on or after the date on which such 
    area is exempted from the fuel dyeing requirements under subsection 
    (i) of section 211 of the Clean Air Act (as in effect on the date 
    of the enactment of this subsection) by the Administrator of the 
    Environmental Protection Agency under paragraph (4) of such 
    subsection (i) (as so in effect), and
        ``(2) the use of which is certified pursuant to regulations 
    issued by the Secretary.''
    (b) Effective Date.--The amendments made by this section shall take 
effect on the first day of the first calendar quarter beginning after 
the date of the enactment of this Act.

SEC. 11144. MORATORIUM FOR EXCISE TAX ON DIESEL FUEL SOLD FOR USE OR 
              USED IN DIESEL-POWERED MOTORBOATS.

    (a) In General.--Subparagraph (D) of section 4041(a)(1) (relating 
to the imposition of tax on diesel fuel and special motor fuels) is 
amended to read as follows:
            ``(D) Diesel fuel used in motorboats.--
                ``(i) Moratorium.--No tax shall be imposed by 
            subsection (a) or (d)(1) on diesel fuel sold for use or 
            used in a diesel-powered motorboat during the period after 
            December 31, 1995, and before July 1, 1997.
                ``(ii) Special termination date.--In the case of any 
            sale for use, or use, of fuel in a diesel-powered 
            motorboat--

                    ``(I) effective during the period after September 
                30, 1999, and before January 1, 2000, the rate of tax 
                imposed by this paragraph is 24.3 cents per gallon, and
                    ``(II) the termination of the tax under subsection 
                (d) shall not occur before January 1, 2000.''.

    (b) Effective Date.--The amendments made by this section shall take 
effect after December 31, 1995.

CHAPTER 5--PERMANENT EXTENSION OF FUTA EXEMPTION FOR ALIEN AGRICULTURAL 
                                WORKERS

SEC. 11151. FUTA EXEMPTION FOR ALIEN AGRICULTURAL WORKERS.

    (a) In General.--Subparagraph (B) of section 3306(c)(1) (defining 
employment) is amended by striking ``before January 1, 1995,''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to services performed after December 31, 1994.

   CHAPTER 6--DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF 
                       CERTAIN VETERANS PROGRAMS

SEC. 11161. DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF 
              CERTAIN VETERANS PROGRAMS.

    (a) General Rule.--Subparagraph (D) of section 6103(l)(7) (relating 
to disclosure of return information to Federal, State, and local 
agencies administering certain programs) is amended by striking 
``Clause (viii) shall not apply after September 30, 1998.'' and 
inserting ``Clause (viii) shall not apply after September 30, 2002.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

            Subtitle F--Taxpayer Bill of Rights 2 Provisions

SEC. 11201. EXPANSION OF AUTHORITY TO ABATE INTEREST.

    (a) General Rule.--Paragraph (1) of section 6404(e) (relating to 
abatement of interest in certain cases) is amended--
        (1) by inserting ``unreasonable'' before ``error'' each place 
    it appears in subparagraphs (A) and (B), and
        (2) by striking ``in performing a ministerial act'' each place 
    it appears and inserting ``in performing a ministerial or 
    managerial act''.
    (b) Clerical Amendment.--The subsection heading for subsection (e) 
of section 6404 is amended--
        (1) by striking ``Assessments'' and inserting ``Abatement'', 
    and
        (2) by inserting ``Unreasonable'' before ``Errors''.
    (c) Effective Date.--The amendments made by this section shall 
apply to interest accruing with respect to deficiencies or payments for 
taxable years beginning after the date of the enactment of this Act.

SEC. 11202. EXTENSION OF INTEREST-FREE PERIOD FOR PAYMENT OF TAX AFTER 
              NOTICE AND DEMAND.

    (a) General Rule.--Paragraph (3) of section 6601(e) (relating to 
payments made within 10 days after notice and demand) is amended to 
read as follows:
        ``(3) Payments made within specified period after notice and 
    demand.--If notice and demand is made for payment of any amount and 
    if such amount is paid within 21 calendar days (10 business days if 
    the amount for which such notice and demand is made equals or 
    exceeds $100,000) after the date of such notice and demand, 
    interest under this section on the amount so paid shall not be 
    imposed for the period after the date of such notice and demand.''
    (b) Conforming Amendments.--
        (1) Subparagraph (A) of section 6601(e)(2) is amended by 
    striking ``10 days from the date of notice and demand therefor'' 
    and inserting ``21 calendar days from the date of notice and demand 
    therefor (10 business days if the amount for which such notice and 
    demand is made equals or exceeds $100,000)''.
        (2) Paragraph (3) of section 6651(a) is amended by striking 
    ``10 days of the date of the notice and demand therefor'' and 
    inserting ``21 calendar days from the date of notice and demand 
    therefor (10 business days if the amount for which such notice and 
    demand is made equals or exceeds $100,000)''.
    (c) Effective Date.--The amendments made by this section shall 
apply in the case of any notice and demand given after June 30, 1996.

SEC. 11203. JOINT RETURN MAY BE MADE AFTER SEPARATE RETURNS WITHOUT 
              FULL PAYMENT OF TAX.

    (a) General Rule.--Paragraph (2) of section 6013(b) (relating to 
limitations on filing of joint return after filing separate returns) is 
amended by striking subparagraph (A) and redesignating the following 
subparagraphs accordingly.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 11204. MODIFICATIONS TO CERTAIN LEVY EXEMPTION AMOUNTS.

    (a) Fuel, Etc.--Paragraph (2) of section 6334(a) (relating to fuel, 
provisions, furniture, and personal effects exempt from levy) is 
amended--
        (1) by striking ``If the taxpayer is the head of a family, so'' 
    and inserting ``So'',
        (2) by striking ``his household'' and inserting ``the 
    taxpayer's household'', and
        (3) by striking ``$1,650 ($1,550 in the case of levies issued 
    during 1989)'' and inserting ``$2,500''.
    (b) Books, Etc.--Paragraph (3) of section 6334(a) (relating to 
books and tools of a trade, business, or profession) is amended by 
striking ``$1,100 ($1,050 in the case of levies issued during 1989)'' 
and inserting ``$1,250''.
    (c) Inflation Adjustment.--Section 6334 (relating to property 
exempt from levy) is amended by adding at the end the following new 
subsection:
    ``(f) Inflation Adjustment.--
        ``(1) In general.--In the case of any calendar year beginning 
    after 1996, each dollar amount referred to in paragraphs (2) and 
    (3) of subsection (a) shall be increased by an amount equal to--
            ``(A) such dollar amount, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year, by substituting 
        `calendar year 1995' for `calendar year 1992' in subparagraph 
        (B) thereof.
        ``(2) Rounding.--If any dollar amount after being increased 
    under paragraph (1) is not a multiple of $10, such dollar amount 
    shall be rounded to the nearest multiple of $10.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect with respect to levies issued after December 31, 1995.

SEC. 11205. OFFERS-IN-COMPROMISE.

    (a) Review Requirements.--Subsection (b) of section 7122 (relating 
to records) is amended by striking ``$500.'' and inserting ``$50,000. 
However, such compromise shall be subject to continuing quality review 
by the Secretary.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 11206. INCREASED LIMIT ON ATTORNEY FEES.

    (a) In General.--Paragraph (1) of section 7430(c) (defining 
reasonable litigation costs) is amended--
        (1) by striking ``$75'' in clause (iii) of subparagraph (B) and 
    inserting ``$110'',
        (2) by striking ``an increase in the cost of living or'' in 
    clause (iii) of subparagraph (B), and
        (3) by adding after clause (iii) the following:
    ``In the case of any calendar year beginning after 1996, the dollar 
    amount referred to in clause (iii) shall be increased by an amount 
    equal to such dollar amount multiplied by the cost-of-living 
    adjustment determined under section 1(f)(3) for such calendar year, 
    by substituting `calendar year 1995' for `calendar year 1992' in 
    subparagraph (B) thereof. If any dollar amount after being 
    increased under the preceding sentence is not a multiple of $10, 
    such dollar amount shall be rounded to the nearest multiple of 
    $10.''
    (b) Effective Date.--The amendment made by this section shall apply 
in the case of proceedings commenced after the date of the enactment of 
this Act.

SEC. 11207. AWARD OF LITIGATION COSTS PERMITTED IN DECLARATORY JUDGMENT 
              PROCEEDINGS.

    (a) In General.--Subsection (b) of section 7430 is amended by 
striking paragraph (3) and by redesignating paragraph (4) as paragraph 
(3).
    (b) Effective Date.--The amendment made by this section shall apply 
in the case of proceedings commenced after the date of the enactment of 
this Act.

SEC. 11208. INCREASE IN LIMIT ON RECOVERY OF CIVIL DAMAGES FOR 
              UNAUTHORIZED COLLECTION ACTIONS.

    (a) General Rule.--Subsection (b) of section 7433 (relating to 
damages) is amended by striking ``$100,000'' and inserting 
``$1,000,000''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to actions by officers or employees of the Internal Revenue 
Service after the date of the enactment of this Act.

SEC. 11209. ENROLLED AGENTS INCLUDED AS THIRD-PARTY RECORDKEEPERS.

    (a) In General.--Paragraph (3) of section 7609(a) (relating to 
third-party recordkeeper defined) is amended by striking ``and'' at the 
end of subparagraph (G), by striking the period at the end of 
subparagraph (H) and inserting ``; and'', and by adding at the end the 
following the subparagraph:
            ``(I) any enrolled agent.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to summonses issued after the date of the enactment of this Act.

SEC. 11210. ANNUAL REMINDERS TO TAXPAYERS WITH OUTSTANDING DELINQUENT 
              ACCOUNTS.

    (a) In General.--Chapter 77 (relating to miscellaneous provisions) 
is amended by adding at the end the following new section:

``SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.

    ``Not less often than annually, the Secretary shall send a written 
notice to each taxpayer who has a tax delinquent account of the amount 
of the tax delinquency as of the date of the notice.''
    (b) Clerical Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:
        ``Sec. 7524. Annual notice of tax delinquency.''

    (c) Effective Date.--The amendments made by this section shall 
apply to calendar years after 1995.

       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.

    (a) In General.--Subsection (b) of section 1033 is amended to read 
as follows:
    ``(b) Basis of Property Acquired Through Involuntary Conversion.--
        ``(1) Conversions described in subsection (a)(1).--If the 
    property was acquired as the result of a compulsory or involuntary 
    conversion described in subsection (a)(1), the basis shall be the 
    same as in the case of the property so converted--
            ``(A) decreased in the amount of any money received by the 
        taxpayer which was not expended in accordance with the 
        provisions of law (applicable to the year in which such 
        conversion was made) determining the taxable status of the gain 
        or loss upon such conversion, and
            ``(B) increased in the amount of gain or decreased in the 
        amount of loss to the taxpayer recognized upon such conversion 
        under the law applicable to the year in which such conversion 
        was made.
        ``(2) Conversions described in subsection (a)(2).--In the case 
    of property purchased by the taxpayer in a transaction described in 
    subsection (a)(2) which resulted in the nonrecognition of any part 
    of the gain realized as the result of a compulsory or involuntary 
    conversion, the basis shall be the cost of such property decreased 
    in the amount of the gain not so recognized; and if the property 
    purchased consists of more than 1 piece of property, the basis 
    determined under this sentence shall be allocated to the purchased 
    properties in proportion to their respective costs.
        ``(3) Property held by corporation the stock of which is 
    replacement property.--
            ``(A) In general.--If the basis of stock in a corporation 
        is decreased under paragraph (2), an amount equal to such 
        decrease shall also be applied to reduce the basis of property 
        held by the corporation at the time the taxpayer acquired 
        control (as defined in subsection (a)(2)(E)) of such 
        corporation.
            ``(B) Limitation.--Subparagraph (A) shall not apply to the 
        extent that it would (but for this subparagraph) require a 
        reduction in the aggregate adjusted bases of the property of 
        the corporation below the taxpayer's adjusted basis of the 
        stock in the corporation (determined immediately after such 
        basis is decreased under paragraph (2)).
            ``(C) Allocation of basis reduction.--The decrease required 
        under subparagraph (A) shall be allocated--
                ``(i) first to property which is similar or related in 
            service or use to the converted property,
                ``(ii) second to depreciable property (as defined in 
            section 1017(b)(3)(B)) not described in clause (i), and
                ``(iii) then to other property.
            ``(D) Special rules.--
                ``(i) Reduction not to exceed adjusted basis of 
            property.--No reduction in the basis of any property under 
            this paragraph shall exceed the adjusted basis of such 
            property (determined without regard to such reduction).
                ``(ii) Allocation of reduction among properties.--If 
            more than 1 property is described in a clause of 
            subparagraph (C), the reduction under this paragraph shall 
            be allocated among such property in proportion to the 
            adjusted bases of such property (as so determined).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to involuntary conversions occurring after September 13, 1995.

SEC. 11252. EXPANSION OF REQUIREMENT THAT INVOLUNTARILY CONVERTED 
              PROPERTY BE REPLACED WITH PROPERTY ACQUIRED FROM AN 
              UNRELATED PERSON.

    (a) In General.--Subsection (i) of section 1033 is amended to read 
as follows:
    ``(i) Replacement Property Must Be Acquired From Unrelated Person 
in Certain Cases.--
        ``(1) In general.--If the property which is involuntarily 
    converted is held by a taxpayer to which this subsection applies, 
    subsection (a) shall not apply if the replacement property or stock 
    is acquired from a related person. The preceding sentence shall not 
    apply to the extent that the related person acquired the 
    replacement property or stock from an unrelated person during the 
    period applicable under subsection (a)(2)(B).
        ``(2) Taxpayers to which subsection applies.--This subsection 
    shall apply to--
            ``(A) a C corporation,
            ``(B) a partnership in which 1 or more C corporations own, 
        directly or indirectly (determined in accordance with section 
        707(b)(3)), more than 50 percent of the capital interest, or 
        profits interest, in such partnership at the time of the 
        involuntary conversion, and
            ``(C) any other taxpayer if, with respect to property which 
        is involuntarily converted during the taxable year, the 
        aggregate of the amount of realized gain on such property on 
        which there is realized gain exceeds $100,000.
    In the case of a partnership, subparagraph (C) shall apply with 
    respect to the partnership and with respect to each partner. A 
    similar rule shall apply in the case of an S corporation and its 
    shareholders.
        ``(3) Related person.--For purposes of this subsection, a 
    person is related to another person if the person bears a 
    relationship to the other person described in section 267(b) or 
    707(b)(1).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to involuntary conversions occurring after September 13, 1995.

SEC. 11253. SPECIAL RULE FOR CROP INSURANCE PROCEEDS AND DISASTER 
              PAYMENTS.

    (a) In General.--Section 451(d) (relating to special rule for crop 
insurance proceeds and disaster payments) is amended to read as 
follows:
    ``(d) Special Rule for Crop Insurance Proceeds and Disaster 
Payments.--
        ``(1) General rule.--In the case of any payment described in 
    paragraph (2), a taxpayer reporting on the cash receipts and 
    disbursements method of accounting--
            ``(A) may elect to treat any such payment received in the 
        taxable year of destruction or damage of crops as having been 
        received in the following taxable year if the taxpayer 
        establishes that, under the taxpayer's practice, income from 
        such crops involved would have been reported in a following 
        taxable year, or
            ``(B) may elect to treat any such payment received in a 
        taxable year following the taxable year of the destruction or 
        damage of crops as having been received in the taxable year of 
        destruction or damage, if the taxpayer establishes that, under 
        the taxpayer's practice, income from such crops involved would 
        have been reported in the taxable year of destruction or 
        damage.
        ``(2) Payments described.--For purposes of this subsection, a 
    payment is described in this paragraph if such payment--
            ``(A) is insurance proceeds received on account of 
        destruction or damage to crops, or
            ``(B) is disaster assistance received under any Federal law 
        as a result of--
                ``(i) destruction or damage to crops caused by drought, 
            flood, or other natural disaster, or
                ``(ii) inability to plant crops because of such a 
            disaster.''.
    (b) Effective Date.--The amendment made by subsection (a) applies 
to payments received after December 31, 1992, as a result of 
destruction or damage occurring after such date.

SEC. 11254. APPLICATION OF INVOLUNTARY EXCLUSION RULES TO 
              PRESIDENTIALLY DECLARED DISASTERS.

    (a) In General.--Section 1033(h) is amended by redesignating 
paragraphs (2) and (3) as paragraphs (3) and (4) and by inserting after 
paragraph (1) the following new paragraph:
        ``(2) Trade or business and investment property.--If a 
    taxpayer's property held for productive use in a trade or business 
    or for investment is compulsorily or involuntarily converted as a 
    result of a Presidentially declared disaster, tangible property of 
    a type held for productive use in a trade or business shall be 
    treated for purposes of subsection (a) as property similar or 
    related in use to the property so converted.''.
    (b) Conforming Amendments.--Section 1033(h) is amended--
        (1) by striking ``residence'' in paragraph (3) (as redesignated 
    by subsection (a)) and inserting ``property'',
        (2) by striking ``Principal Residences'' in the heading and 
    inserting ``Property'', and
        (3) by striking ``(1) In general.--'' and inserting ``(1) 
    Principal residences.--''.
    (c) Effective Date.--The amendments made by this section shall 
apply to disasters declared after December 31, 1994, in taxable years 
ending after such date.

        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.

    (a) In General.--Chapter 42 (relating to private foundations and 
certain other tax-exempt organizations) is amended by redesignating 
subchapter D as subchapter E and by inserting after subchapter C the 
following new subchapter:

  ``Subchapter D--Failure By Certain Charitable Organizations To Meet 
                   Certain Qualification Requirements

        ``Sec. 4958. Taxes on excess benefit transactions.

``SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.

    ``(a) Initial Taxes.--
        ``(1) On the disqualified person.--There is hereby imposed on 
    each excess benefit transaction a tax equal to 25 percent of the 
    excess benefit. The tax imposed by this paragraph shall be paid by 
    any disqualified person referred to in subsection (f)(1) with 
    respect to such transaction.
        ``(2) On the management.--In any case in which a tax is imposed 
    by paragraph (1), there is hereby imposed on the participation of 
    any organization manager in the excess benefit transaction, knowing 
    that it is such a transaction, a tax equal to 10 percent of the 
    excess benefit, unless such participation is not willful and is due 
    to reasonable cause. The tax imposed by this paragraph shall be 
    paid by any organization manager who participated in the excess 
    benefit transaction.
    ``(b) Additional Tax On the Disqualified Person.--In any case in 
which an initial tax is imposed by subsection (a)(1) on an excess 
benefit transaction and the excess benefit involved in such transaction 
is not corrected within the taxable period, there is hereby imposed a 
tax equal to 200 percent of the excess benefit involved. The tax 
imposed by this subsection shall be paid by any disqualified person 
referred to in subsection (f)(1) with respect to such transaction.
    ``(c) Excess Benefit Transaction; Excess Benefit.--For purposes of 
this section--
        ``(1) Excess benefit transaction.--
            ``(A) In general.--The term `excess benefit transaction' 
        means any transaction in which an economic benefit is provided 
        by an applicable tax-exempt organization directly or indirectly 
        to or for the use of any disqualified person if the value of 
        the economic benefit provided exceeds the value of the 
        consideration (including the performance of services) received 
        for providing such benefit. For purposes of the preceding 
        sentence, an economic benefit shall not be treated as 
        consideration for the performance of services unless such 
        organization clearly indicated its intent to so treat such 
        benefit.
            ``(B) Excess benefit.--The term `excess benefit' means the 
        excess referred to in subparagraph (A).
        ``(2) Authority to include certain other private inurement.--To 
    the extent provided in regulations prescribed by the Secretary, the 
    term `excess benefit transaction' includes any transaction in which 
    the amount of any economic benefit provided to or for the use of a 
    disqualified person is determined in whole or in part by the 
    revenues of 1 or more activities of the organization but only if 
    such transaction results in inurement not permitted under paragraph 
    (3) or (4) of section 501(c), as the case may be. In the case of 
    any such transaction, the excess benefit shall be the amount of the 
    inurement not so permitted.
    ``(d) Special Rules.--For purposes of this section--
        ``(1) Joint and several liability.--If more than 1 person is 
    liable for any tax imposed by subsection (a) or subsection (b), all 
    such persons shall be jointly and severally liable for such tax.
        ``(2) Limit for management.--With respect to any 1 excess 
    benefit transaction, the maximum amount of the tax imposed by 
    subsection (a)(2) shall not exceed $10,000.
    ``(e) Applicable Tax-Exempt Organization.--For purposes of this 
subchapter, the term `applicable tax-exempt organization' means--
        ``(1) any organization which (without regard to any excess 
    benefit) would be described in paragraph (3) or (4) of section 
    501(c) and exempt from tax under section 501(a), and
        ``(2) any organization which was described in paragraph (1) at 
    any time during the 2-year period ending on the date of the 
    transaction.
Such term shall not include a private foundation (as defined in section 
509(a)).
    ``(f) Other Definitions.--For purposes of this section--
        ``(1) Disqualified person.--The term `disqualified person' 
    means, with respect to any transaction--
            ``(A) any person who was, at any time during the 5-year 
        period ending on the date of such transaction, in a position to 
        exercise substantial influence over the affairs of the 
        organization,
            ``(B) a member of the family of an individual described in 
        subparagraph (A), and
            ``(C) a 35-percent controlled entity.
        ``(2) Organization manager.--The term `organization manager' 
    means, with respect to any applicable tax-exempt organization, any 
    officer, director, or trustee of such organization (or any 
    individual having powers or responsibilities similar to those of 
    officers, directors, or trustees of the organization).
        ``(3) 35-percent controlled entity.--
            ``(A) In general.--The term `35-percent controlled entity' 
        means--
                ``(i) a corporation in which persons described in 
            subparagraph (A) or (B) of paragraph (1) own more than 35 
            percent of the total combined voting power,
                ``(ii) a partnership in which such persons own more 
            than 35 percent of the profits interest, and
                ``(iii) a trust or estate in which such persons own 
            more than 35 percent of the beneficial interest.
            ``(B) Constructive ownership rules.--Rules similar to the 
        rules of paragraphs (3) and (4) of section 4946(a) shall apply 
        for purposes of this paragraph.
        ``(4) Family members.--The members of an individual's family 
    shall be determined under section 4946(d); except that such members 
    also shall include the brothers and sisters (whether by the whole 
    or half blood) of the individual and their spouses.
        ``(5) Taxable period.--The term `taxable period' means, with 
    respect to any excess benefit transaction, the period beginning 
    with the date on which the transaction occurs and ending on the 
    earliest of--
            ``(A) the date of mailing a notice of deficiency under 
        section 6212 with respect to the tax imposed by subsection 
        (a)(1), or
            ``(B) the date on which the tax imposed by subsection 
        (a)(1) is assessed.
        ``(6) Correction.--The terms `correction' and `correct' mean, 
    with respect to any excess benefit transaction, undoing the excess 
    benefit to the extent possible, and where fully undoing the excess 
    benefit is not possible, such additional corrective action as is 
    prescribed by the Secretary by regulations.''
    (b) Application of Private Inurement Rule to Tax-Exempt 
Organizations Described in Section 501(c)(4).--
        (1) Paragraph (4) of section 501(c) is amended by inserting 
    ``(A)'' after ``(4)'' and by adding at the end the following:
        ``(B) Subparagraph (A) shall not apply to an entity unless no 
    part of the net earnings of such entity inures to the benefit of 
    any private shareholder or individual.''
        (2) In the case of an organization operating on a cooperative 
    basis which, before the date of the enactment of this Act, was 
    determined by the Secretary of the Treasury or his delegate, to be 
    described in section 501(c)(4) of the Internal Revenue Code of 1986 
    and exempt from tax under section 501(a) of such Code, the 
    allocation or return of net margins or capital to the members of 
    such organization in accordance with its incorporating statute and 
    bylaws shall not be treated for purposes of such Code as the 
    inurement of the net earnings of such organization to the benefit 
    of any private shareholder or individual. The preceding sentence 
    shall apply only if such statute and bylaws are substantially as 
    such statute and bylaws were in existence on the date of the 
    enactment of this Act.
    (c) Technical and Conforming Amendments.--
        (1) Subsection (e) of section 4955 is amended--
            (A) by striking ``Section 4945'' in the heading and 
        inserting ``Sections 4945 and 4958'', and
            (B) by inserting before the period ``or an excess benefit 
        for purposes of section 4958''.
        (2) Subsections (a), (b), and (c) of section 4963 are each 
    amended by inserting ``4958,'' after ``4955,''.
        (3) Subsection (e) of section 6213 is amended by inserting 
    ``4958 (relating to private excess benefit),'' before ``4971''.
        (4) Paragraphs (2) and (3) of section 7422(g) are each amended 
    by inserting ``4958,'' after ``4955,''.
        (5) Subsection (b) of section 7454 is amended by inserting ``or 
    whether an organization manager (as defined in section 4958(f)(2)) 
    has `knowingly' participated in an excess benefit transaction (as 
    defined in section 4958(c)),'' after ``section 4912(b),''.
        (6) The table of subchapters for chapter 42 is amended by 
    striking the last item and inserting the 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.''
    (d) Effective Dates.--
        (1) In general.--The amendments made by this section (other 
    than subsection (b)) shall apply to excess benefit transactions 
    occurring on or after September 14, 1995.
        (2) Binding contracts.--The amendments referred to in paragraph 
    (1) shall not apply to any benefit arising from a transaction 
    pursuant to any written contract which was binding on September 13, 
    1995, and at all times thereafter before such transaction occurred.
        (3) Application of private inurement rule to tax-exempt 
    organizations described in section 501(c)(4).--
            (A) In general.--The amendment made by subsection (b) shall 
        apply to inurement occurring on or after September 14, 1995.
            (B) Binding contracts.--The amendment made by subsection 
        (b) shall not apply to any inurement occurring before January 
        1, 1997, pursuant to a written contract which was binding on 
        September 13, 1995, and at all times thereafter before such 
        inurement occurred.

SEC. 11272. REPORTING OF CERTAIN EXCISE TAXES AND OTHER INFORMATION.

    (a) Reporting by Organizations Described in Section 501(c)(3).--
Subsection (b) of section 6033 (relating to certain organizations 
described in section 501(c)(3)) is amended by striking ``and'' at the 
end of paragraph (9), by redesignating paragraph (10) as paragraph 
(14), and by inserting after paragraph (9) the following new 
paragraphs:
        ``(10) the respective amounts (if any) of the taxes paid by the 
    organization during the taxable year under the following 
    provisions:
            ``(A) section 4911 (relating to tax on excess expenditures 
        to influence legislation),
            ``(B) section 4912 (relating to tax on disqualifying 
        lobbying expenditures of certain organizations), and
            ``(C) section 4955 (relating to taxes on political 
        expenditures of section 501(c)(3) organizations),
        ``(11) the respective amounts (if any) of the taxes paid by the 
    organization, or any disqualified person with respect to such 
    organization, during the taxable year under section 4958 (relating 
    to taxes on private excess benefit from certain charitable 
    organizations),
        ``(12) such information as the Secretary may require with 
    respect to any excess benefit transaction (as defined in section 
    4958),
        ``(13) the name of each disqualified person (as defined in 
    section 4958(f)(1)(A)) with respect to such organization and such 
    other information as the Secretary may prescribe, and''.
    (b) Organizations Described in Section 501(c)(4).--Section 6033 is 
amended by redesignating subsection (f) as subsection (g) and by 
inserting after subsection (e) the following new subsection:
    ``(f) Certain Organizations Described in Section 501(c)(4).--Every 
organization described in section 501(c)(4) which is subject to the 
requirements of subsection (a) shall include on the return required 
under subsection (a) the information referred to in paragraphs (11), 
(12) and (13) of subsection (b) with respect to such organization.''
    (c) Effective Date.--The amendments made by this section shall 
apply to returns for taxable years beginning after the date of the 
enactment of this Act.

SEC. 11273. INCREASE IN PENALTIES ON EXEMPT ORGANIZATIONS FOR FAILURE 
              TO FILE COMPLETE AND TIMELY ANNUAL RETURNS.

    (a) In General.--Subparagraph (A) of section 6652(c)(1) (relating 
to annual returns under section 6033) is amended by striking ``$10'' 
and inserting ``$20'' and by striking ``$5,000'' and inserting 
``$10,000''.
    (b) Larger Penalty on Organizations Having Gross Receipts in Excess 
of $1,000,000.--Subparagraph (A) of section 6652(c)(1) is amended by 
adding at the end the following new sentence: ``In the case of an 
organization having gross receipts exceeding $1,000,000 for any year, 
with respect to the return required under section 6033 for such year, 
the first sentence of this subparagraph shall be applied by 
substituting `$100' for `$20' and, in lieu of applying the second 
sentence of this subparagraph, the maximum penalty under this 
subparagraph shall not exceed $50,000.''
    (c) Effective Date.--The amendments made by this section shall 
apply to returns for taxable years ending on or after December 31, 
1995.

                      CHAPTER 2--OTHER PROVISIONS

SEC. 11276. COOPERATIVE SERVICE ORGANIZATIONS FOR CERTAIN FOUNDATIONS.

    (a) In General.--Section 501 (relating to exemption from tax on 
corporations, certain trusts, etc.) is amended by redesignating 
subsection (n) as subsection (o) and by inserting after subsection (m) 
the following new subsection:
    ``(n) Cooperative Service Organizations for Certain Foundations.--
        ``(1) In general.--For purposes of this title, if an 
    organization--
            ``(A) is organized and operated solely for purposes 
        referred to in subsection (f)(1),
            ``(B) is composed solely of members which are exempt from 
        taxation under subsection (a) and are--
                ``(i) private foundations, or
                ``(ii) community foundations as to which section 
            170(b)(1)(A)(vi) applies,
            ``(C) has at least 20 members,
            ``(D) does not at any time after the second taxable year 
        beginning after the date of its organization or, if later, 
        beginning after the date of the enactment of this subsection, 
        have a member which holds more than 10 percent (by value) of 
        the interests in the organization,
            ``(E) is organized and controlled by its members but is not 
        controlled by any one member and does not have a member which 
        controls another member of the organization, and
            ``(F) permits members of the organization to require the 
        dismissal of any of the organization's investment advisers, 
        following reasonable notice, if members holding a majority of 
        interest in the account managed by such adviser vote to remove 
        such adviser,
    then such organization shall be treated as an organization 
    organized and operated exclusively for charitable purposes.
        ``(2) Treatment of income of members.--If any member of an 
    organization described in paragraph (1) is a private foundation 
    (other than an exempt operating foundation, as defined in section 
    4940(d)), such private foundation's allocable share of the capital 
    gain net income and gross investment income of the organization for 
    any taxable year of the organization shall be treated, for purposes 
    of section 4940, as capital gain net income and gross investment 
    income of such private foundation (whether or not distributed to 
    such foundation) for the taxable year of such private foundation 
    with or within which the taxable year of the organization described 
    in paragraph (1) ends (and such private foundation shall take into 
    account its allocable share of the deductions referred to in 
    section 4940(c)(3) of the organization).
        ``(3) Applicable excise taxes.--Subchapter A of chapter 42 
    (other than sections 4940 and 4942) shall apply to any organization 
    described in paragraph (1).''.
    (b) Conforming Amendments.--
        (1) Section 4945(d) is amended by adding at the end the 
    following new flush sentence:
``Paragraph (4)(B) shall not apply to a grant to an organization 
described in section 501(n).''
        (2) Section 4942(g)(1)(A) is amended by inserting ``or an 
    organization described in section 501(n)'' after ``subsection 
    (j)(3))''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1995.

SEC. 11277. EXCLUSION FROM UNRELATED BUSINESS TAXABLE INCOME FOR 
              CERTAIN SPONSORSHIP PAYMENTS.

    (a) In General.--Section 513 (relating to unrelated trade or 
business income) is amended by adding at the end the following new 
subsection:
    ``(i) Treatment of Certain Sponsorship Payments.--
        ``(1) In general.--The term `unrelated trade or business' does 
    not include the activity of soliciting and receiving qualified 
    sponsorship payments.
        ``(2) Qualified sponsorship payments.--For purposes of this 
    subsection--
            ``(A) In general.--The term `qualified sponsorship payment' 
        means any payment made by any person engaged in a trade or 
        business with respect to which there is no arrangement or 
        expectation that such person will receive any substantial 
        return benefit other than the use or acknowledgement of the 
        name or logo (or product lines) of such person's trade or 
        business in connection with the activities of the organization 
        that receives such payment. Such a use or acknowledgement does 
        not include advertising such person's products or services 
        (including messages containing qualitative or comparative 
        language, price information or other indications of savings or 
        value, an endorsement, or an inducement to purchase, sell, or 
        use such products or services).
            ``(B) Limitations.--
                ``(i) Contingent payments.--The term `qualified 
            sponsorship payment' does not include any payment if the 
            amount of such payment is contingent upon the level of 
            attendance at one or more events, broadcast ratings, or 
            other factors indicating the degree of public exposure to 
            one or more events.
                ``(ii) Acknowledgements or advertising in 
            periodicals.--The term `qualified sponsorship payment' does 
            not include any payment which entitles the payor to an 
            acknowledgement or advertising in regularly scheduled and 
            printed material published by or on behalf of the payee 
            organization that is not related to and primarily 
            distributed in connection with a specific event conducted 
            by the payee organization.
        ``(3) Allocation of portions of single payment.--For purposes 
    of this subsection, to the extent that a portion of a payment would 
    (if made as a separate payment) be a qualified sponsorship payment, 
    such portion of such payment and the other portion of such payment 
    shall be treated as separate payments.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to payments solicited or received after December 31, 1995.

SEC. 11278. TREATMENT OF DUES PAID TO AGRICULTURAL OR HORTICULTURAL 
              ORGANIZATIONS.

    (a) General Rule.--Section 512 (defining unrelated business taxable 
income) is amended by adding at the end the following new subsection:
    ``(d) Treatment of Dues of Agricultural or Horticultural 
Organizations.--
        ``(1) In general.--If--
            ``(A) an agricultural or horticultural organization 
        described in section 501(c)(5) requires annual dues to be paid 
        in order to be a member of such organization, and
            ``(B) the amount of such required annual dues does not 
        exceed $100,
    in no event shall any portion of such dues be treated as derived by 
    such organization from an unrelated trade or business by reason of 
    any benefits or privileges to which members of such organization 
    are entitled.
        ``(2) Indexation of $100 amount.--In the case of any taxable 
    year beginning in a calendar year after 1995, the $100 amount in 
    paragraph (1) shall be increased by an amount equal to--
            ``(A) $100, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, by substituting `calendar year 1994' for `calendar year 
        1992' in subparagraph (B) thereof.
        ``(3) Dues.--For purposes of this subsection, the term `dues' 
    means any payment required to be made in order to be recognized by 
    the organization as a member of the organization.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1994.

SEC. 11279. REPEAL OF CREDIT FOR CONTRIBUTIONS TO COMMUNITY DEVELOPMENT 
              CORPORATIONS.

    (a) In General.--Section 13311 of the Revenue Reconciliation Act of 
1993 (relating to credit for contributions to certain community 
development corporations) is hereby repealed.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after the date of the enactment of this Act 
(other than contributions made pursuant to a legally enforceable 
agreement which is in effect on the date of the enactment of this Act).

              Subtitle I--Tax Reform and Other Provisions

              CHAPTER 1--PROVISIONS RELATING TO BUSINESSES

SEC. 11301. TAX TREATMENT OF CERTAIN EXTRAORDINARY DIVIDENDS.

    (a) Treatment of Extraordinary Dividends in Excess of Basis.--
Paragraph (2) of section 1059(a) (relating to corporate shareholder's 
basis in stock reduced by nontaxed portion of extraordinary dividends) 
is amended to read as follows:
        ``(2) Amounts in excess of basis.--If the nontaxed portion of 
    such dividends exceeds such basis, such excess shall be treated as 
    gain from the sale or exchange of such stock for the taxable year 
    in which the extraordinary dividend is received.''.
    (b) Treatment of Redemptions Where Options Involved.--Paragraph (1) 
of section 1059(e) (relating to treatment of partial liquidations and 
non-pro rata redemptions) is amended to read as follows:
        ``(1) Treatment of partial liquidations and certain 
    redemptions.--Except as otherwise provided in regulations--
            ``(A) Redemptions.--In the case of any redemption of 
        stock--
                ``(i) which is part of a partial liquidation (within 
            the meaning of section 302(e)) of the redeeming 
            corporation,
                ``(ii) which is not pro rata as to all shareholders, or
                ``(iii) which would not have been treated (in whole or 
            in part) as a dividend if any options had not been taken 
            into account under section 318(a)(4),
        any amount treated as a dividend with respect to such 
        redemption shall be treated as an extraordinary dividend to 
        which paragraphs (1) and (2) of subsection (a) apply without 
        regard to the period the taxpayer held such stock. In the case 
        of a redemption described in clause (iii), only the basis in 
        the stock redeemed shall be taken into account under subsection 
        (a).
            ``(B) Reorganizations, etc.--An exchange described in 
        section 356(a)(1) which is treated as a dividend under section 
        356(a)(2) shall be treated as a redemption of stock for 
        purposes of applying subparagraph (A).''.
    (c) Effective Dates.--
        (1) In general.--The amendments made by this section shall 
    apply to distributions after May 3, 1995.
        (2) Transition rule.--The amendments made by this section shall 
    not apply to any distribution made pursuant to the terms of--
            (A) a written binding contract in effect on May 3, 1995, 
        and at all times thereafter before such distribution, or
            (B) a tender offer outstanding on May 3, 1995.
        (3) Certain dividends not pursuant to certain redemptions.--In 
    determining whether the amendment made by subsection (a) applies to 
    any extraordinary dividend other than a dividend treated as an 
    extraordinary dividend under section 1059(e)(1) of the Internal 
    Revenue Code of 1986 (as amended by this Act), paragraphs (1) and 
    (2) shall be applied by substituting ``September 13, 1995'' for 
    ``May 3, 1995''.

SEC. 11302. REGISTRATION OF CONFIDENTIAL CORPORATE TAX SHELTERS.

    (a) In General.--Section 6111 (relating to registration of tax 
shelters) is amended by redesignating subsections (d) and (e) as 
subsections (e) and (f), respectively, and by inserting after 
subsection (c) the following new subsection:
    ``(d) Certain Confidential Arrangements Treated as Tax Shelters.--
        ``(1) In general.--For purposes of this section, the term `tax 
    shelter' includes any entity, plan, arrangement, or transaction--
            ``(A) a significant purpose of the structure of which is 
        the avoidance or evasion of Federal income tax for a direct or 
        indirect participant which is a corporation,
            ``(B) which is offered to any potential participant under 
        conditions of confidentiality, and
            ``(C) for which the tax shelter promoters may receive fees 
        in excess of $100,000 in the aggregate.
        ``(2) Conditions of confidentiality.--For purposes of paragraph 
    (1)(B), an offer is under conditions of confidentiality if--
            ``(A) the potential participant to whom the offer is made 
        (or any other person acting on behalf of such participant) has 
        an understanding or agreement with or for the benefit of any 
        promoter of the tax shelter that such participant (or such 
        other person) will limit disclosure of the tax shelter or any 
        significant tax features of the tax shelter, or
            ``(B) any promoter of the tax shelter--
                ``(i) claims, knows, or has reason to know,
                ``(ii) knows or has reason to know that any other 
            person (other than the potential participant) claims, or
                ``(iii) causes another person to claim,
        that the tax shelter (or any aspect thereof) is proprietary to 
        any person other than the potential participant or is otherwise 
        protected from disclosure to or use by others.
    For purposes of this subsection, the term `promoter' means any 
    person or any related person (within the meaning of section 267 or 
    707) who participates in the organization, management, or sale of 
    the tax shelter.
        ``(3) Persons other than promoter required to register in 
    certain cases.--
            ``(A) In general.--If--
                ``(i) the requirements of subsection (a) are not met 
            with respect to any tax shelter (as defined in paragraph 
            (1)) by any tax shelter promoter, and
                ``(ii) no tax shelter promoter is a United States 
            person,
        then each United States person who discussed participation in 
        such shelter shall register such shelter under subsection (a).
            ``(B) Exception.--Subparagraph (A) shall not apply to a 
        United States person who discussed participation in a tax 
        shelter if--
                ``(i) such person notified the promoter in writing (not 
            later than the close of the 90th day after the day on which 
            such discussions began) that such person would not 
            participate in such shelter, and
                ``(ii) such person does not participate in such 
            shelter.
        ``(4) Offer to participate treated as offer for sale.--For 
    purposes of subsections (a) and (b), an offer to participate in a 
    tax shelter (as defined in paragraph (1)) shall be treated as an 
    offer for sale.''.
    (b) Penalty.--Subsection (a) of section 6707 (relating to failure 
to furnish information regarding tax shelters) is amended by adding at 
the end the following new paragraph:
        ``(3) Confidential arrangements.--
            ``(A) In general.--In the case of a tax shelter (as defined 
        in section 6111(d)), the penalty imposed under paragraph (1) 
        shall be an amount equal to the greater of--
                ``(i) 50 percent of the fees paid to any promoter of 
            the tax shelter with respect to offerings made before the 
            date such shelter is registered under section 6111, or
                ``(ii) $10,000.
        Clause (i) shall be applied by substituting `75 percent' for 
        `50 percent' in the case of an intentional failure or act 
        described in paragraph (1).
            ``(B) Special rule for participants required to register 
        shelter.--In the case of a person required to register such a 
        tax shelter by reason of section 6111(d)(3)--
                ``(i) such person shall be required to pay the penalty 
            under paragraph (1) only if such person actually 
            participated in such shelter,
                ``(ii) the amount of such penalty shall be determined 
            by taking into account under subparagraph (A)(i) only the 
            fees paid by such person, and
                ``(iii) such penalty shall be in addition to the 
            penalty imposed on any other person for failing to register 
            such shelter.''.
    (c) Conforming Amendments.--
        (1) Paragraph (2) of section 6707(a) is amended by striking 
    ``The penalty'' and inserting ``Except as provided in paragraph 
    (3), the penalty''.
        (2) Subparagraph (A) of section 6707(a)(1) is amended by 
    striking ``paragraph (2)'' and inserting ``paragraph (2) or (3), as 
    the case may be''.
    (d) Effective Date.--The amendments made by this section shall 
apply to any tax shelter (as defined in section 6111(d) of the Internal 
Revenue Code of 1986, as amended by this section) interests in which 
are offered to potential participants after the Secretary of the 
Treasury prescribes guidance with respect to meeting requirements added 
by such amendments.

SEC. 11303. DENIAL OF DEDUCTION FOR INTEREST ON LOANS WITH RESPECT TO 
              COMPANY-OWNED INSURANCE.

    (a) In General.--Paragraph (4) of section 264(a) is amended--
        (1) by inserting ``, or any endowment or annuity contracts 
    owned by the taxpayer covering any individual,'' after ``the life 
    of any individual'', and
        (2) by striking all that follows ``carried on by the taxpayer'' 
    and inserting a period.
    (b) Exception for Contracts Relating to Key Persons; Permissible 
Interest Rates.--Section 264 is amended--
        (1) by striking ``Any'' in subsection (a)(4) and inserting 
    ``Except as provided in subsection (d), any'', and
        (2) by adding at the end the following new subsection:
    ``(d) Special Rules For Application of Subsection (a)(4).--
        ``(1) Exception for key persons.--Subsection (a)(4) shall not 
    apply to any interest paid or accrued on any indebtedness with 
    respect to policies or contracts covering an individual who is a 
    key person to the extent that the aggregate amount of such 
    indebtedness with respect to policies and contracts covering such 
    individual does not exceed $50,000.
        ``(2) Interest rate cap on key persons and pre-1986 
    contracts.--
            ``(A) In general.--No deduction shall be allowed by reason 
        of paragraph (1) or the last sentence of subsection (a) with 
        respect to interest paid or accrued for any month to the extent 
        the amount of such interest exceeds the amount which would have 
        been determined if the applicable rate of interest were used 
        for such month.
            ``(B) Applicable rate of interest.--For purposes of 
        subparagraph (A)--
                ``(i) In general.--The applicable rate of interest for 
            any month is the rate of interest described as Moody's 
            Corporate Bond Yield Average-Monthly Average Corporates as 
            published by Moody's Investors Service, Inc., or any 
            successor thereto, for such month.
                ``(ii) Pre-1986 contract.--In the case of indebtedness 
            on a contract to which the last sentence of subsection (a) 
            applies--

                    ``(I) which is a contract providing a fixed rate of 
                interest, the applicable rate of interest for any month 
                shall be the Moody's rate described in clause (i) for 
                the month in which the contract was purchased, or
                    ``(II) which is a contract providing a variable 
                rate of interest, the applicable rate of interest for 
                any month in an applicable period shall be such Moody's 
                rate for the last month preceding such period.

            For purposes of subclause (II), the taxpayer shall elect an 
            applicable period for such contract on its return of tax 
            imposed by this chapter for its first taxable year ending 
            on or after October 13, 1995. Such applicable period shall 
            be for any number of months (not greater than 12) specified 
            in the election and may not be changed by the taxpayer 
            without the consent of the Secretary.
        ``(3) Key person.--For purposes of paragraph (1), the term `key 
    person' means an officer or 20-percent owner, except that the 
    number of individuals who may be treated as key persons with 
    respect to any taxpayer shall not exceed the greater of--
            ``(A) 5 individuals, or
            ``(B) the lesser of 5 percent of the total officers and 
        employees of the taxpayer or 10 individuals.
        ``(4) 20-percent owner.--For purposes of this subsection, the 
    term `20-percent owner' means--
            ``(A) if the taxpayer is a corporation, any person who owns 
        directly 20 percent or more of the outstanding stock of the 
        corporation or stock possessing 20 percent or more of the total 
        combined voting power of all stock of the corporation, or
            ``(B) if the taxpayer is not a corporation, any person who 
        owns 20 percent or more of the capital or profits interest in 
        the employer.
        ``(5) Aggregation rules.--
            ``(A) In general.--For purposes of paragraph (4)(A) and 
        applying the $50,000 limitation in paragraph (1)--
                ``(i) all members of a controlled group shall be 
            treated as 1 taxpayer, and
                ``(ii) such limitation shall be allocated among the 
            members of such group in such manner as the Secretary may 
            prescribe.
            ``(B) Controlled group.--For purposes of this paragraph, 
        all persons treated as a single employer under subsection (a) 
        or (b) of section 52 or subsection (m) or (o) of section 414 
        shall be treated as members of a controlled group.''.
    (c) Effective Dates.--
        (1) In general.--The amendments made by this section shall 
    apply to interest paid or accrued after December 31, 1995.
        (2) Transition rule for existing indebtedness.--
            (A) In general.--In the case of--
                (i) indebtedness incurred before January 1, 1996, or
                (ii) indebtedness incurred before January 1, 1997 with 
            respect to any contract or policy entered into in 1994 or 
            1995,
        the amendments made by this section shall not apply to 
        qualified interest paid or accrued on such indebtedness after 
        October 13, 1995, and before January 1, 1999.
            (B) Qualified interest.--For purposes of subparagraph (A), 
        the qualified interest with respect to any indebtedness for any 
        month is the amount of interest which would be paid or accrued 
        for such month on such indebtedness if--
                (i) in the case of any interest paid or accrued after 
            December 31, 1995, indebtedness with respect to no more 
            than 20,000 insured individuals were taken into account, 
            and
                (ii) the lesser of the following rates of interest were 
            used for such month:

                    (I) The rate of interest specified under the terms 
                of the indebtedness as in effect on October 13, 1995 
                (and without regard to modification of such terms after 
                such date).
                    (II) The applicable percentage rate of interest 
                described as Moody's Corporate Bond Yield Average-
                Monthly Average Corporates as published by Moody's 
                Investors Service, Inc., or any successor thereto, for 
                such month.

        For purposes of clause (i), all persons treated as a single 
        employer under subsection (a) or (b) of section 52 of the 
        Internal Revenue Code of 1986 or subsection (m) or (o) of 
        section 414 of such Code shall be treated as one person.
            (C) Applicable percentage.--For purposes of subparagraph 
        (B), the applicable percentage is as follows:

    For calendar year:
                                                      The percentage is:
        1995............................................
                                                            100 percent 
        1996............................................
                                                             90 percent 
        1997............................................
                                                             80 percent 
        1998............................................
                                                             70 percent.

        (3) Special rule for grandfathered contracts.--This section 
    shall not apply to any contract purchased on or before June 20, 
    1986, except that section 264(d)(2) of the Internal Revenue Code of 
    1986 shall apply to interest paid or accrued after October 13, 
    1995.
    (d) Spread of Income Inclusion on Surrender, Etc. of Contracts.--
        (1) In general.--If any amount is received under any life 
    insurance policy or endowment or annuity contract described in 
    paragraph (4) of section 264(a) of the Internal Revenue Code of 
    1986--
            (A) on the complete surrender, redemption, or maturity of 
        such policy or contract during calendar year 1996, 1997, or 
        1998, or
            (B) in full discharge during any such calendar year of the 
        obligation under the policy or contract which is in the nature 
        of a refund of the consideration paid for the policy or 
        contract,
    then (in lieu of any other inclusion in gross income) such amount 
    shall be includible in gross income ratably over the 4-taxable year 
    period beginning with the taxable year such amount would (but for 
    this paragraph) be includible. The preceding sentence shall only 
    apply to the extent the amount is includible in gross income for 
    the taxable year in which the event described in subparagraph (A) 
    or (B) occurs.
        (2) Special rules for applying section 264.--A contract shall 
    not be treated as--
            (A) failing to meet the requirement of section 264(c)(1) of 
        the Internal Revenue Code of 1986, or
            (B) a single premium contract under section 264(b)(1) of 
        such Code,
    solely by reason of an occurrence described in subparagraph (A) or 
    (B) of paragraph (1) of this subsection or solely by reason of no 
    additional premiums being received under the contract by reason of 
    a lapse occurring after October 13, 1995.
        (3) Special rule for deferred acquisition costs.--In the case 
    of the occurrence of any event described in subparagraph (A) or (B) 
    of paragraph (1) of this subsection with respect to any policy or 
    contract--
            (A) section 848 of the Internal Revenue Code of 1986 shall 
        not apply to the unamortized balance (if any) of the specified 
        policy acquisition expenses attributable to such policy or 
        contract immediately before the insurance company's taxable 
        year in which such event occurs, and
            (B) there shall be allowed as a deduction to such company 
        for such taxable year under chapter 1 of such Code an amount 
        equal to such unamortized balance.

SEC. 11304. TERMINATION OF SUSPENSE ACCOUNTS FOR FAMILY CORPORATIONS 
              REQUIRED TO USE ACCRUAL METHOD OF ACCOUNTING.

    (a) In General.--Subsection (i) of section 447 (relating to method 
of accounting for corporations engaged in farming) is amended by adding 
at the end the following new paragraph:
        ``(7) Termination.--
            ``(A) In general.--No suspense account may be established 
        under this subsection by any corporation required by this 
        section to change its method of accounting for any taxable year 
        ending after September 13, 1995.
            ``(B) 20-year phaseout of existing suspense accounts.--Each 
        suspense account under this subsection shall be reduced (but 
        not below zero) for each of the first 20 taxable years 
        beginning after September 13, 1995, by an amount equal to the 
        applicable portion of such account. Any reduction in a suspense 
        account under this paragraph shall be included in gross income 
        for the taxable year of the reduction. The amount of the 
        reduction required under this paragraph for any taxable year 
        shall be reduced (but not below zero) by the amount of any 
        reduction required for such taxable year under any other 
        provision of this subsection.
            ``(C) Applicable portion.--For purposes of subparagraph 
        (B), the term `applicable portion' means, for any taxable year, 
        the amount which would ratably reduce the amount in the account 
        (after taking into account prior reductions) to zero over the 
        period consisting of such taxable year and the remaining 
        taxable years in such first 20 taxable years.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after September 13, 1995.

SEC. 11305. TERMINATION OF PUERTO RICO AND POSSESSION TAX CREDIT.

    (a) In General.--Section 936 is amended by adding at the end the 
following new subsection:
    ``(j) Termination.--
        ``(1) In general.--Except as otherwise provided in this 
    subsection, this section shall not apply to any taxable year 
    beginning after December 31, 1995.
        ``(2) Transition rules for active business income credit.--
    Except as provided in paragraph (3)--
            ``(A) In general.--In the case of an existing credit 
        claimant to which subsection (a)(4)(B) does not apply, the 
        credit determined under subsection (a)(1)(A) shall be allowed 
        for taxable years beginning after December 31, 1995, and before 
        January 1, 2002.
            ``(B) Special rule for reduced credit.--
                ``(i) In general.--In the case of an existing credit 
            claimant to which subsection (a)(4)(B) applies, the credit 
            determined under subsection (a)(1)(A) shall be allowed for 
            taxable years beginning after December 31, 1995, and before 
            January 1, 1998.
                ``(ii) Election irrevocable after 1997.--An election 
            under subsection (a)(4)(B)(iii) which is in effect for the 
            taxpayer's last taxable year beginning before 1997 may not 
            be revoked unless it is revoked for the taxpayer's first 
            taxable year beginning in 1997 and all subsequent taxable 
            years.
        ``(3) Additional restricted credit.--
            ``(A) In general.--In the case of an existing credit 
        claimant--
                ``(i) the credit under subsection (a)(1)(A) shall be 
            allowed for the period beginning with the first taxable 
            year after the last taxable year to which subparagraph (A) 
            or (B) of paragraph (2), whichever is appropriate, applied 
            and ending with the last taxable year beginning before 
            January 1, 2006, except that
                ``(ii) the aggregate amount of taxable income taken 
            into account under subsection (a)(1)(A) for any such 
            taxable year shall not exceed the adjusted base period 
            income of such claimant.
            ``(B) Coordination with subsection (a)(4).--The amount of 
        income described in subsection (a)(1)(A) which is taken into 
        account in applying subsection (a)(4) shall be such income as 
        reduced under this paragraph.
        ``(4) Adjusted base period income.--For purposes of paragraph 
    (3)--
            ``(A) In general.--The term `adjusted base period income' 
        means the average of the inflation-adjusted possession incomes 
        of the corporation for each base period year.
            ``(B) Inflation-adjusted possession income.--For purposes 
        of subparagraph (A), the inflation-adjusted possession income 
        of any corporation for any base period year shall be an amount 
        equal to the sum of--
                ``(i) the possession income of such corporation for 
            such base period year, plus
                ``(ii) such possession income multiplied by the 
            inflation adjustment percentage for such base period year.
            ``(C) Inflation adjustment percentage.--For purposes of 
        subparagraph (B), the inflation adjustment percentage for any 
        base period year means the percentage (if any) by which--
                ``(i) the CPI for 1995, exceeds
                ``(ii) the CPI for the calendar year in which the base 
            period year for which the determination is being made ends.
        For purposes of the preceding sentence, the CPI for any 
        calendar year is the CPI (as defined in section 1(f)(5)) for 
        such year under section 1(f)(4).
            ``(D) Increase in inflation adjustment percentage for 
        growth during base years.--The inflation adjustment percentage 
        (determined under subparagraph (C) without regard to this 
        subparagraph) for each of the 5 taxable years referred to in 
        paragraph (5)(A) shall be increased by--
                ``(i) 5 percentage points in the case of a taxable year 
            ending during the 1-year period ending on October 13, 1995;
                ``(ii) 10.25 percentage points in the case of a taxable 
            year ending during the 1-year period ending on October 13, 
            1994;
                ``(iii) 15.76 percentage points in the case of a 
            taxable year ending during the 1-year period ending on 
            October 13, 1993;
                ``(iv) 21.55 percentage points in the case of a taxable 
            year ending during the 1-year period ending on October 13, 
            1992; and
                ``(v) 27.63 percentage points in the case of a taxable 
            year ending during the 1-year period ending on October 13, 
            1991.
        ``(5) Base period year.--For purposes of this subsection--
            ``(A) In general.--The term `base period year' means each 
        of 3 taxable years which are among the 5 most recent taxable 
        years of the corporation ending before October 14, 1995, 
        determined by disregarding--
                ``(i) one taxable year for which the corporation had 
            the largest inflation-adjusted possession income, and
                ``(ii) one taxable year for which the corporation had 
            the smallest inflation-adjusted possession income.
            ``(B) Corporations not having significant possession income 
        throughout 5-year period.--
                ``(i) In general.--If a corporation does not have 
            significant possession income for each of the most recent 5 
            taxable years ending before October 14, 1995, then, in lieu 
            of applying subparagraph (A), the term `base period year' 
            means only those taxable years (of such 5 taxable years) 
            for which the corporation has significant possession 
            income; except that, if such corporation has significant 
            possession income for 4 of such 5 taxable years, the rule 
            of subparagraph (A)(ii) shall apply.
                ``(ii) Special rule.--If there is no year (of such 5 
            taxable years) for which a corporation has significant 
            possession income--

                    ``(I) the term `base period year' means the first 
                taxable year ending on or after October 14, 1995, but
                    ``(II) the amount of possession income for such 
                year which is taken into account under paragraph (4) 
                shall be the amount which would be determined if such 
                year were a short taxable year ending on September 30, 
                1995.

                ``(iii) Significant possession income.--For purposes of 
            this subparagraph, the term `significant possession income' 
            means possession income which exceeds 2 percent of the 
            possession income of the taxpayer for the taxable year (of 
            the period of 6 taxable years ending with the first taxable 
            year ending on or after October 14, 1995) having the 
            greatest possession income.
            ``(C) Election to use one base period year.--
                ``(i) In general.--At the election of the taxpayer, the 
            term `base period year' means--

                    ``(I) only the last taxable year of the corporation 
                ending in calendar year 1992, or
                    ``(II) a deemed taxable year which includes the 
                first ten months of calendar year 1995.

                ``(ii) Base period income for 1995.--In determining the 
            adjusted base period income of the corporation for the 
            deemed taxable year under clause (i)(II), the possession 
            income shall be annualized and shall be determined without 
            regard to any extraordinary item.
                ``(iii) Election.--An election under this subparagraph 
            by any possession corporation may be made only for the 
            corporation's first taxable year beginning after December 
            31, 1995, for which it is a possession corporation. The 
            rules of subclauses (II) and (III) of subsection 
            (a)(4)(B)(iii) shall apply to the election under this 
            subparagraph.
            ``(D) Acquisitions and dispositions.--Rules similar to the 
        rules of subparagraphs (A) and (B) of section 41(f)(3) shall 
        apply for purposes of this subsection.
        ``(6) Possession income.--For purposes of this subsection, the 
    term `possession income' means the income referred to in subsection 
    (a)(1)(A), except that there shall not be taken into account any 
    such income from an applicable possession (as defined in paragraph 
    (8)(B)). In no event shall possession income be treated as being 
    less than zero.
        ``(7) Short years.--If the current year or a base period year 
    is a short taxable year, the application of this subsection shall 
    be made with such annualizations as the Secretary shall prescribe.
        ``(8) Special rules for certain possessions.--
            ``(A) In general.--In the case of an existing credit 
        claimant with respect to an applicable possession, this section 
        (other than the preceding paragraphs of this subsection) shall 
        apply to taxable years beginning after December 31, 1995, and 
        before January 1, 2006.
            ``(B) Applicable possession.--For purposes of this 
        paragraph, the term `applicable possession' means Guam, 
        American Samoa, and the Commonwealth of the Northern Mariana 
        Islands.
        ``(9) Existing credit claimant.--For purposes of this 
    subsection--
            ``(A) In general.--The term `existing credit claimant' 
        means a corporation--
                ``(i) which was actively conducting a trade or business 
            in a possession on October 13, 1995, and
                ``(ii) with respect to which an election under this 
            section is in effect for the corporation's taxable year 
            which includes October 13, 1995.
            ``(B) New lines of business prohibited.--If, after October 
        13, 1995, a corporation which would (but for this subparagraph) 
        be an existing credit claimant adds a substantial new line of 
        business, such corporation shall cease to be treated as an 
        existing credit claimant as of the close of the taxable year 
        ending before the date of such addition.
            ``(C) Binding contract exception.--If, on October 13, 1995, 
        and at all times thereafter, there is in effect with respect to 
        a corporation a binding contract for the acquisition of assets 
        to be used in, or for the sale of assets to be produced from, a 
        trade or business, the corporation shall be treated for 
        purposes of this paragraph as actively conducting such trade or 
        business on October 13, 1995. The preceding sentence shall not 
        apply if such trade or business is not actively conducted 
        before January 1, 1996.
            ``(D) Special rule for applicable possessions.--In 
        determining under paragraph (8) whether a taxpayer is an 
        existing credit claimant with respect to an applicable 
        possession, this paragraph shall be applied separately with 
        respect to such possession.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1995.

SEC. 11306. DEPRECIATION UNDER INCOME FORECAST METHOD.

    (a) General Rule.--Section 167 (relating to depreciation) is 
amended by redesignating subsection (g) as subsection (h) and by 
inserting after subsection (f) the following new subsection:
    ``(g) Depreciation Under Income Forecast Method.--
        ``(1) In general.--If the depreciation deduction allowable 
    under this section to any taxpayer with respect to any property is 
    determined under the income forecast method or any similar method--
            ``(A) in determining the amount of the depreciation 
        deduction under such method, the estimated income from the 
        property shall include all income earned before the close of 
        the 10th taxable year following the taxable year in which the 
        property was placed in service in connection with the ultimate 
        use of the property by, or the ultimate sale of merchandise to, 
        persons who are not related persons (within the meaning of 
        section 267(b)) to the taxpayer,
            ``(B) the adjusted basis of the property shall only include 
        amounts with respect to which the requirements of section 
        461(h) are satisfied,
            ``(C) the depreciation deduction under such method for the 
        10th taxable year beginning after the taxable year in which the 
        property was placed in service shall be equal to the adjusted 
        basis of such property as of the beginning of such 10th taxable 
        year, and
            ``(D) such taxpayer shall pay (or be entitled to receive) 
        interest computed under the look-back method of paragraph (2) 
        for any recomputation year.
        ``(2) Look-back method.--The interest computed under the look-
    back method of this paragraph for any recomputation year shall be 
    determined by--
            ``(A) first determining the depreciation deductions under 
        this section with respect to such property which would have 
        been allowable for prior taxable years if the determination of 
        the amounts so allowable had been made on the basis of the sum 
        of the following (instead of the estimated income with respect 
        to such property)--
                ``(i) the actual income from such property for periods 
            before the close of the recomputation year, and
                ``(ii) an estimate of the future income with respect to 
            such property for periods after the recomputation year,
            ``(B) second, determining (solely for purposes of computing 
        such interest) the overpayment or underpayment of tax for each 
        such prior taxable year which would result solely from the 
        application of subparagraph (A), and
            ``(C) then using the adjusted overpayment rate (as defined 
        in section 460(b)(7)), compounded daily, on the overpayment or 
        underpayment determined under subparagraph (B).
    For purposes of the preceding sentence, any cost incurred after the 
    property is placed in service (which is not treated as a separate 
    property under paragraph (5)) shall be taken into account by 
    discounting (using the Federal mid-term rate determined under 
    section 1274(d) as of the time such cost is incurred) such cost to 
    its value as of the date the property is placed in service. The 
    taxpayer may elect with respect to any property to have the 
    preceding sentence not apply to such property.
        ``(3) Exception from look-back method.--Paragraph (1)(D) shall 
    not apply with respect to any property which, when placed in 
    service by the taxpayer, had a basis of $100,000 or less.
        ``(4) Recomputation year.--For purposes of this subsection, 
    except as provided in regulations, the term `recomputation year' 
    means, with respect to any property, the third and the 10th taxable 
    years beginning after the taxable year in which the property was 
    placed in service, unless the actual income from the property for 
    the period before the close of such third or 10th taxable year is 
    within 10 percent of the estimated income from the property for 
    such period which was taken into account under paragraph (1)(A).
        ``(5) Special rules.--
            ``(A) Certain costs treated as separate property.--For 
        purposes of this subsection, the following costs shall be 
        treated as separate properties:
                ``(i) Any costs incurred with respect to any property 
            after the 10th taxable year beginning after the taxable 
            year in which the property was placed in service.
                ``(ii) Any costs incurred after the property is placed 
            in service and before the close of such 10th taxable year 
            if such costs are significant and give rise to a 
            significant increase in the income from the property which 
            was not included in the estimated income from the property.
            ``(B) Syndication income from television series.--In the 
        case of property which is an episode in a television series, 
        income from syndicating such series shall not be required to be 
        taken into account under this subsection before the earlier 
        of--
                ``(i) the 4th taxable year beginning after the date the 
            first episode in such series is placed in service, or
                ``(ii) the earliest taxable year in which the taxpayer 
            has an arrangement relating to the future syndication of 
            such series.
            ``(C) Collection of interest.--For purposes of subtitle F 
        (other than sections 6654 and 6655), any interest required to 
        be paid by the taxpayer under paragraph (1) for any 
        recomputation year shall be treated as an increase in the tax 
        imposed by this chapter for such year.
            ``(D) Determinations.--For purposes of paragraph (2), 
        determinations of the amount of income from any property shall 
        be determined in the same manner as for purposes of applying 
        the income forecast method; except that any income from the 
        disposition of such property shall be taken into account.
            ``(E) Treatment of pass-thru entities.--Rules similar to 
        the rules of section 460(b)(4) shall apply for purposes of this 
        subsection.''.
    (b) Effective Date.--
        (1) In general.--The amendment made by subsection (a) shall 
    apply to property placed in service after September 13, 1995.
        (2) Binding contracts.--The amendment made by subsection (a) 
    shall not apply to any property produced or acquired by the 
    taxpayer pursuant to a written contract which was binding on 
    September 13, 1995, and at all times thereafter before such 
    production or acquisition.

SEC. 11307. TRANSFERS OF EXCESS PENSION ASSETS.

    (a) In General.--Section 420 (relating to transfers of excess 
pension assets to retiree health accounts) is amended by adding at the 
end the following new subsection:
    ``(f) Similar Rules To Apply to Other Transfers of Excess Plan 
Assets.--
        ``(1) In general.--If there is a qualified employee benefit 
    transfer of any excess pension assets of a defined benefit plan 
    (other than a multiemployer plan) to an employer--
            ``(A) a trust which is part of such plan shall not be 
        treated as failing to meet the requirements of section 401(a) 
        solely by reason of such transfer (or any other action 
        authorized under this section), and
            ``(B) such transfer shall not be treated as--
                ``(i) an employer reversion for purposes of section 
            4980, or
                ``(ii) a prohibited transaction for purposes of section 
            4975.
    The gross income of the employer shall include the amount of any 
    qualified employee benefit transfer made during the taxable year.
        ``(2) Qualified employee benefit transfer.--For purposes of 
    this section--
            ``(A) In general.--The term `qualified employee benefit 
        transfer' means a transfer--
                ``(i) of excess pension assets of a defined benefit 
            plan to the employer, and
                ``(ii) with respect to which--

                    ``(I) the use requirements of paragraph (3) are 
                met, and
                    ``(II) the requirements of subsection (c)(2)(A) are 
                met (determined by treating such transfer as a 
                qualified transfer).

            ``(B) Limitation on amounts transferred.--The amount of 
        excess pension assets which may be transferred in qualified 
        employee benefit transfers during any taxable year shall not 
        exceed the amount which is reasonably estimated to be the 
        amount the employer maintaining the plan will pay (whether 
        directly or through reimbursement) during the taxable year for 
        qualified current employee benefit liabilities.
            ``(C) Coordination with transfers to retiree health 
        accounts.--Such term shall not include any qualified transfer 
        (as defined in subsection (b)).
            ``(D) Expiration.--No transfer in any taxable year 
        beginning after December 31, 2001, shall be treated as a 
        qualified employee benefit transfer.
        ``(3) Restrictions on use of transferred assets.--
            ``(A) In general.--Any assets transferred to an employer in 
        a qualified employee benefit transfer shall be used only to pay 
        qualified current employee benefit liabilities for the taxable 
        year of the transfer (whether directly or through 
        reimbursement).
            ``(B) Amounts not used to pay benefits.--An employer shall 
        transfer to a plan an amount equal to any assets transferred 
        out of the plan in a qualified employee benefit transfer which 
        are not used as provided in subparagraph (A). Such amount shall 
        be treated in the same manner as amounts are treated under 
        subsection (c)(1)(B), except that allocable income shall be 
        determined by using the Federal short-term rate under section 
        1274(d).
            ``(C) Qualified current employee benefit liabilities.--For 
        purposes of this subsection--
                ``(i) In general.--The term `qualified current employee 
            benefit liabilities' means, with respect to any taxable 
            year, the aggregate amounts (including administrative 
            expenses) for which a deduction is allowable to the 
            employer for such taxable year with respect to applicable 
            employee benefits.
                ``(ii) Applicable employee benefits.--The term 
            `applicable employee benefits' means--

                    ``(I) contributions to a trust described in section 
                401(a) which is exempt from tax under section 501(a),
                    ``(II) benefits under an accident or health plan 
                (within the meaning of section 105),
                    ``(III) disability benefits,
                    ``(IV) benefits under an educational assistance 
                program of the employer described in section 127(b), 
                and
                    ``(V) benefits under a dependent care assistance 
                program of the employer described in section 129(d).

        ``(4) Definition and special rules.--For purposes of this 
    subsection--
            ``(A) Excess pension assets.--The term `excess pension 
        assets' has the meaning given such term by subsection (e)(2).
            ``(B) Coordination with section 412.--In the case of a 
        qualified employee benefit transfer--
                ``(i) any assets transferred in a plan year on or 
            before the valuation date for such year (and any income 
            allocable thereto) shall, for purposes of section 412, be 
            treated as assets in the plan as of the valuation date for 
            such year, and
                ``(ii) the plan shall be treated as having a net 
            experience loss under section 412(b)(2)(B)(iv) in an amount 
            equal to the amount of such transfer and for which 
            amortization charges begin for the first plan year after 
            the plan year in which such transfer occurs, except that 
            such section shall be applied to such amount by 
            substituting `10 plan years' for `5 plan years'.''
    (b) Excess Assets.--Section 420(e)(2) is amended to read as 
follows:
        ``(2) Excess pension assets.--The term `excess pension assets' 
    means the excess (if any) of--
            ``(A) the amount determined under section 412(c)(7)(A)(ii), 
        over
            ``(B) the greater of--
                ``(i) the amount determined under section 
            412(c)(7)(A)(i)(II), or
                ``(ii) 125 percent of termination liability determined 
            under section 414(l), except that the actuarial assumptions 
            used in making such determinations shall be the assumptions 
            used by the Pension Benefit Guaranty Corporation for 
            single-employer plan termination purposes under regulations 
            under title IV of the Employee Retirement Income Security 
            Act of 1974.
    The determination under the preceding sentence with respect to any 
    transfer shall be made as of the date of the transfer. No 
    substantial changes in the regulations described in clause (ii) 
    which are made after the date of the enactment of the Revenue 
    Reconciliation Act of 1995 shall be taken into account for purposes 
    of such clause.''
    (c) Taxpayers in Bankruptcy May Not Make Transfers.--Section 420(e) 
is amended by adding at the end the following new paragraph:
        ``(5) Exclusion of taxpayers in bankruptcy.--No qualified 
    transfer or qualified employee benefit transfer may be made under 
    this section by a taxpayer if--
            ``(A) the taxpayer has filed, or has had filed against it, 
        a petition in a title 11 or similar case (within the meaning of 
        section 368(a)(3)), and
            ``(B) such case is still pending.''
    (d) Conforming Amendments to ERISA.--
        (1) Notice.--Section 101(e) of the Employee Retirement Income 
    Security Act of 1974 (29 U.S.C. 1021(e)) is amended--
            (A) by inserting ``or a qualified employee benefit 
        transfer,'' after ``to a health benefits account,'' in 
        paragraphs (1) and (2)(A),
            (B) by inserting ``or qualified employee benefits'' after 
        ``the amount of health benefits liabilities'' in paragraph (1),
            (C) in paragraph (3)--
                (i) by striking ``January 1, 1995'' and inserting ``the 
            date of the enactment of the Revenue Reconciliation Act of 
            1995'', and
                (ii) by striking ``paragraph (1)'' and inserting ``this 
            subsection'', and
            (D) by striking ``to Health Benefits Accounts'' in the 
        heading.
        (2) Exclusive benefit.--Paragraph (1) of section 403(c) of such 
    Act (29 U.S.C. 1103(c)(1)) is amended by striking ``January 1, 
    1995'' and inserting ``the date of the enactment of the Revenue 
    Reconciliation Act of 1995''.
        (3) Exemption from prohibited transaction.--Paragraph (13) of 
    section 408(b) of such Act (29 U.S.C. 1108(b)(13)) is amended--
            (A) by striking ``retiree health account'' and inserting 
        ``health benefits account'',
            (B) by inserting before the period at the end ``, or any 
        transfer of such assets in a taxable year beginning before 
        January 1, 2002, in a qualified employee benefit transfer 
        permitted under such section 420'', and
            (C) by striking ``January 1, 1995'' and inserting ``the 
        date of the enactment of the Revenue Reconciliation Act of 
        1995''.
    (e) Effective Dates.--
        (1) In general.--The amendments made by this section shall 
    apply to transfers on and after the date of the enactment of this 
    Act.
        (2) Qualified transfers.--To the extent the amendments made by 
    subsections (b), (c), and (d) apply to qualified transfers under 
    section 420 of the Internal Revenue Code of 1986 (as in effect on 
    the day before the date of the enactment of this Act), such 
    amendments shall apply to transfers occurring after December 31, 
    1995.

SEC. 11308. REPEAL OF EXCLUSION FOR INTEREST ON LOANS USED TO ACQUIRE 
              EMPLOYER SECURITIES.

    (a) In General.--Section 133 (relating to interest on certain loans 
used to acquire employer securities) is hereby repealed.
    (b) Conforming Amendments.--
        (1) Subparagraph (B) of section 291(e)(1) is amended by 
    striking clause (iv) and by redesignating clause (v) as clause 
    (iv).
        (2) Section 812 is amended by striking subsection (g).
        (3) Paragraph (5) of section 852(b) is amended by striking 
    subparagraph (C).
        (4) Paragraph (2) of section 4978(b) is amended by striking 
    subparagraph (A) and all that follows and inserting the following:
            ``(A) first from qualified securities to which section 1042 
        applied acquired during the 3-year period ending on the date of 
        the disposition, beginning with the securities first so 
        acquired, and
            ``(B) then from any other employer securities.
    If subsection (d) applies to a disposition, the disposition shall 
    be treated as made from employer securities in the opposite order 
    of the preceding sentence.''.
        (5)(A) Section 4978B (relating to tax on disposition of 
    employer securities to which section 133 applied) is hereby 
    repealed.
        (B) The table of sections for chapter 43 is amended by striking 
    the item relating to section 4978B.
        (6) Subsection (e) of section 6047 is amended by striking 
    paragraphs (1), (2), and (3) and inserting the following new 
    paragraphs:
        ``(1) any employer maintaining, or the plan administrator 
    (within the meaning of section 414(g)) of, an employee stock 
    ownership plan which holds stock with respect to which section 
    404(k) applies to dividends paid on such stock, or
        ``(2) both such employer or plan administrator,''.
        (7) Subsection (f) of section 7872 is amended by striking 
    paragraph (12).
    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to loans made after October 13, 1995.
        (2) Refinancings.--The amendments made by this section shall 
    not apply to loans made after October 13, 1995, to refinance 
    securities acquisition loans (determined without regard to section 
    133(b)(1)(B) of the Internal Revenue Code of 1986, as in effect on 
    the day before the date of the enactment of this Act) made on or 
    before such date or to refinance loans described in this paragraph 
    if--
            (A) the refinancing loans meet the requirements of section 
        133 of such Code (as so in effect),
            (B) immediately after the refinancing the principal amount 
        of the loan resulting from the refinancing does not exceed the 
        principal amount of the refinanced loan (immediately before the 
        refinancing), and
            (C) the term of such refinancing loan does not extend 
        beyond the last day of the term of the original securities 
        acquisition loan.
    For purposes of this paragraph, the term ``securities acquisition 
    loan'' includes a loan from a corporation to an employee stock 
    ownership plan described in section 133(b)(3) of such Code (as so 
    in effect).

                        CHAPTER 2--LEGAL REFORMS

SEC. 11311. REPEAL OF EXCLUSION FOR PUNITIVE DAMAGES AND FOR DAMAGES 
              NOT ATTRIBUTABLE TO PHYSICAL INJURIES OR SICKNESS.

    (a) In General.--Paragraph (2) of section 104(a) (relating to 
compensation for injuries or sickness) is amended to read as follows:
        ``(2) the amount of any damages (other than punitive damages) 
    received (whether by suit or agreement and whether as lump sums or 
    as periodic payments) on account of personal physical injuries or 
    physical sickness;''.
    (b) Emotional Distress as Such Treated as Not Physical Injury or 
Physical Sickness.--Section 104(a) is amended by striking the last 
sentence and inserting the following new sentence: ``For purposes of 
paragraph (2), emotional distress shall not be treated as a physical 
injury or physical sickness. The preceding sentence shall not apply to 
an amount of damages not in excess of the amount paid for medical care 
(described in subparagraph (A) or (B) of section 213(d)(1)) 
attributable to emotional distress.''.
    (c) Special Rule for States in Which Only Punitive Damages May Be 
Awarded in Wrongful Death Actions.--Section 104 is amended by 
redesignating subsection (c) as subsection (d) and by inserting after 
subsection (b) the following new subsection:
    ``(c) Restriction on Punitive Damages Not To Apply in Certain 
Cases.--The restriction on the application of subsection (a)(2) to 
punitive damages shall not apply to punitive damages which--
        ``(1) are awarded in a civil action--
            ``(A) which is a wrongful death action, and
            ``(B) with respect to which applicable State law (as in 
        effect on February 1, 1996, and without regard to any 
        modification after such date) provides, or has been construed 
        to provide by a court of competent jurisdiction pursuant to a 
        decision issued on or before February 1, 1996, that only 
        punitive damages may be awarded in such an action, and
        ``(2) would have been excludable from gross income under 
    subsection (a)(2) as in effect for amounts received on December 31, 
    1995.
This subsection shall cease to apply to any civil action filed on or 
after the first date on which the applicable State law ceases to 
provide (or is no longer construed to provide) the treatment described 
in paragraph (2).''
    (d) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to amounts received 
    after December 31, 1995, in taxable years ending after such date.
        (2) Exception.--The amendments made by this section shall not 
    apply to any amount received under a written binding agreement, 
    court decree, or mediation award in effect on (or issued on or 
    before) September 13, 1995.

SEC. 11312. REPORTING OF CERTAIN PAYMENTS MADE TO ATTORNEYS.

    (a) In General.--Section 6045 (relating to returns of brokers) is 
amended by adding at the end the following new subsection:
    ``(f) Return Required in the Case of Payments to Attorneys.--
        ``(1) In general.--Any person engaged in a trade or business 
    and making a payment (in the course of such trade or business) to 
    which this subsection applies shall file a return under subsection 
    (a) and a statement under subsection (b) with respect to such 
    payment.
        ``(2) Application of subsection.--
            ``(A) In general.--This subsection shall apply to any 
        payment to an attorney in connection with legal services 
        (whether or not such services are performed for the payor).
            ``(B) Exception.--This subsection shall not apply to the 
        portion of any payment which is required to be reported under 
        section 6041(a) (or would be so required but for the dollar 
        limitation contained therein) or section 6051.''.
    (b) Reporting of Attorneys' Fees Payable to Corporations.--The 
regulations providing an exception under section 6041 of the Internal 
Revenue Code of 1986 for payments made to corporations shall not apply 
to payments of attorneys' fees.
    (c) Effective Date.--The amendment made by this section shall apply 
to payments made after December 31, 1996.

        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.

    (a) In General.--Subsection (d) of section 1034 (relating to 
limitations) is amended by adding at the end the following new 
paragraph:
        ``(3) Recognition of gain attributable to depreciation.--
    Subsection (a) shall not apply to so much of the gain from the sale 
    of any residence as does not exceed the portion of the depreciation 
    adjustments (as defined in section 1250(b)(3)) attributable to 
    periods after December 31, 1995, in respect of such residence.''.
    (b) Comparable Treatment Under 1-Time Exclusion of Gain on Sale of 
Principal Residence.--Subsection (d) of section 121 is amended by 
adding at the end the following new paragraph:
        ``(10) Recognition of gain attributable to depreciation.--
            ``(A) In general.--Subsection (a) shall not apply to so 
        much of the gain from the sale of any property as does not 
        exceed the portion of the depreciation adjustments (as defined 
        in section 1250(b)(3)) attributable to periods after December 
        31, 1995, in respect of such property.
            ``(B) Coordination with paragraph (5).--If this section 
        does not apply to gain attributable to a portion of a residence 
        by reason of paragraph (5), subparagraph (A) shall not apply to 
        depreciation adjustments attributable to such portion.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 1995.

SEC. 11322. NONRECOGNITION OF GAIN ON SALE OF PRINCIPAL RESIDENCE BY 
              NONCITIZENS LIMITED TO NEW RESIDENCES LOCATED IN THE 
              UNITED STATES.

    (a) In General.--Subsection (d) of section 1034 (relating to 
limitations) (as amended by section 11321) is amended by adding at the 
end the following new paragraph:
        ``(4) New residence must be located in united states in certain 
    cases.--
            ``(A) In general.--In the case of a sale of an old 
        residence by a taxpayer--
                ``(i) who is not a citizen of the United States at the 
            time of sale, and
                ``(ii) who is not a citizen or resident of the United 
            States on the date which is 2 years after the date of the 
            sale of such old residence,
        subsection (a) shall apply only if the new residence is located 
        in the United States or a possession of the United States.
            ``(B) Property held jointly by husband and wife.--
        Subparagraph (A) shall not apply if--
                ``(i) the old residence is held by a husband and wife 
            as joint tenants, tenants by the entirety, or community 
            property,
                ``(ii) such husband and wife make a joint return for 
            the taxable year of the sale or exchange, and
                ``(iii) one spouse is a citizen of the United States at 
            the time of sale.''.
    (b) Effective Date.--
        (1) In general.--The amendment made by this section shall apply 
    to sales of old residences after December 31, 1995.
        (2) Treatment of purchases of new residences.--The amendment 
    made by this section shall not apply to new residences--
            (A) purchased before September 13, 1995, or
            (B) purchased on or after such date pursuant to a binding 
        contract in effect on such date and at all times thereafter 
        before such purchase.
        (3) Certain rules to apply.--For purposes of this subsection, 
    the rules of paragraphs (1), (2), and (3) of section 1034(c) of the 
    Internal Revenue Code of 1986 shall apply.

          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.

    (a) In General.--Section 6427 (relating to fuels not used for 
taxable purposes) is amended by striking subsection (g).
    (b) Conforming Amendments.--
        (1) Paragraph (3) of section 34(a) is amended to read as 
    follows:
        ``(3) under section 6427 with respect to fuels used for 
    nontaxable purposes or resold during the taxable year (determined 
    without regard to section 6427(k)).''.
        (2) Paragraphs (1) and (2)(A) of section 6427(i) are each 
    amended--
            (A) by striking ``(g),'', and
            (B) by striking ``(or a qualified diesel powered highway 
        vehicle purchased)'' each place it appears.
    (c) Effective Date.--The amendments made by this section shall 
apply to vehicles purchased after December 31, 1995.

SEC. 11332. MODIFICATIONS TO EXCISE TAX ON OZONE-DEPLETING CHEMICALS.

    (a) In General.--Section 4682(d)(1) (relating to recycling) is 
amended by inserting ``, or on any recycled halon imported from any 
country which is a signatory to the Montreal Protocol on Substances 
that Deplete the Ozone Layer'' before the period at the end.
    (b) Certification System.--The Secretary of the Treasury, after 
consultation with the Administrator of the Environmental Protection 
Agency, shall develop a certification system to ensure compliance with 
the recycling requirement for imported halon under section 4682(d)(1) 
of the Internal Revenue Code of 1986, as amended by subsection (a).
    (c) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 11333. ELECTION TO AVOID TAX-EXEMPT BOND PENALTIES FOR LOCAL 
              FURNISHERS OF ELECTRICITY AND GAS.

    Section 142(f) (relating to local furnishing of electric energy or 
gas) is amended by adding at the end the following new paragraphs:
        ``(3) Election to avoid penalties for certain furnishers.--
            ``(A) In general.--If--
                ``(i) a person engaged in the local furnishing of 
            electric energy or gas, directly or indirectly financed 
            facilities for such furnishing in whole or in part with 
            exempt facility bonds described in subsection (a)(8) issued 
            before the date of the enactment of this paragraph,
                ``(ii) such bonds would (but for this paragraph) cease 
            to be tax-exempt by reason of such person failing to meet 
            the local furnishing requirement of such section as a 
            result of a service area expansion by such person, and
                ``(iii) an election described in subparagraph (B) is 
            made by such person with respect to all such facilities of 
            the person,
        then such bonds shall not cease to be tax-exempt by reason of 
        such expansion (and section 150(b)(4) shall not apply to 
        interest on such bonds).
            ``(B) Election.--An election is described in this 
        subparagraph if it is an election made in such manner as the 
        Secretary prescribes, and such person agrees that--
                ``(i) no bond exempt from tax under section 103 and 
            described in subsection (a)(8) may be issued on or after 
            the date of the enactment of this paragraph with respect to 
            the facilities for the local furnishing of electric energy 
            or gas, or both of such person, other than such a bond 
            issued to refund another bond if the amount of such bond 
            does not exceed the outstanding amount of the refunded bond 
            and the maturity date of the refunding bond is not later 
            than the average maturity date of the refunded bonds to be 
            refunded by the issue of which the refunding bond is a 
            part,
                ``(ii) the expansion of the service area--

                    ``(I) is not financed with the proceeds of any 
                exempt facility bond described in subsection (a)(8), 
                and
                    ``(II) is not treated as a nonqualifying use under 
                the rules of paragraph (2), and

                ``(iii) all outstanding bonds used to finance the 
            facilities for such person are redeemed not later than 6 
            months after the later of--

                    ``(I) the earliest date on which such bonds may be 
                redeemed, or
                    ``(II) the date of the election.

            ``(C) Related persons.--For purposes of this paragraph, the 
        term `person' includes a group of related persons (within the 
        meaning of section 144(a)(3)) which includes such person.
        ``(4) Application of section.--For purposes of this section, no 
    person may qualify on or after the date of the enactment of this 
    paragraph for tax-exempt bond financing for the local furnishing of 
    electric energy or gas unless such person is engaged on such date 
    in the local furnishing of the energy source for which facilities 
    are financed.''.

SEC. 11334. TAX-EXEMPT BONDS FOR SALE OF ALASKA POWER ADMINISTRATION 
              FACILITY.

    Sections 142(f)(4) (as added by section 11333(a)) and 147(d) of the 
Internal Revenue Code of 1986 shall not apply with respect to any 
private activity bond issued after the date of the enactment of this 
Act and used to finance the acquisition of the Snettisham hydroelectric 
project from the Alaska Power Administration in determining if such 
bond is a qualified bond for purposes of such Code.

                CHAPTER 5--FOREIGN TRUST TAX COMPLIANCE

SEC. 11341. IMPROVED INFORMATION REPORTING ON FOREIGN TRUSTS.

    (a) In General.--Section 6048 (relating to returns as to certain 
foreign trusts) is amended to read as follows:

``SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOREIGN TRUSTS.

    ``(a) Notice of Certain Events.--
        ``(1) General rule.--On or before the 90th day (or such later 
    day as the Secretary may prescribe) after any reportable event, the 
    responsible party shall provide written notice of such event to the 
    Secretary in accordance with paragraph (2).
        ``(2) Contents of notice.--The notice required by paragraph (1) 
    shall contain such information as the Secretary may prescribe, 
    including--
            ``(A) the amount of money or other property (if any) 
        transferred to the trust in connection with the reportable 
        event, and
            ``(B) the identity of the trust and of each trustee and 
        beneficiary (or class of beneficiaries) of the trust.
        ``(3) Reportable event.--For purposes of this subsection--
            ``(A) In general.--The term `reportable event' means--
                ``(i) the creation of any foreign trust by a United 
            States person,
                ``(ii) the transfer of any money or property (directly 
            or indirectly) to a foreign trust by a United States 
            person, including a transfer by reason of death, and
                ``(iii) the death of a citizen or resident of the 
            United States if--

                    ``(I) the decedent was treated as the owner of any 
                portion of a foreign trust under the rules of subpart E 
                of part I of subchapter J of chapter 1, or
                    ``(II) any portion of a foreign trust was included 
                in the gross estate of the decedent.

            ``(B) Exceptions.--
                ``(i) Fair market value sales.--Subparagraph (A)(ii) 
            shall not apply to any transfer of property to a trust in 
            exchange for consideration of at least the fair market 
            value of the transferred property. For purposes of the 
            preceding sentence, consideration other than cash shall be 
            taken into account at its fair market value and the rules 
            of section 679(a)(3) shall apply.
                ``(ii) Deferred compensation and charitable trusts.--
            Subparagraph (A) shall not apply with respect to a trust 
            which is--

                    ``(I) described in section 402(b), 404(a)(4), or 
                404A, or
                    ``(II) determined by the Secretary to be described 
                in section 501(c)(3).

        ``(4) Responsible party.--For purposes of this subsection, the 
    term `responsible party' means--
            ``(A) the grantor in the case of the creation of an inter 
        vivos trust,
            ``(B) the transferor in the case of a reportable event 
        described in paragraph (3)(A)(ii) other than a transfer by 
        reason of death, and
            ``(C) the executor of the decedent's estate in any other 
        case.
    ``(b) United States Grantor of Foreign Trust.--
        ``(1) In general.--If, at any time during any taxable year of a 
    United States person, such person is treated as the owner of any 
    portion of a foreign trust under the rules of subpart E of part I 
    of subchapter J of chapter 1, such person shall be responsible to 
    ensure that--
            ``(A) such trust makes a return for such year which sets 
        forth a full and complete accounting of all trust activities 
        and operations for the year, the name of the United States 
        agent for such trust, and such other information as the 
        Secretary may prescribe, and
            ``(B) such trust furnishes such information as the 
        Secretary may prescribe to each United States person (i) who is 
        treated as the owner of any portion of such trust or (ii) who 
        receives (directly or indirectly) any distribution from the 
        trust.
        ``(2) Trusts not having united states agent.--
            ``(A) In general.--If the rules of this paragraph apply to 
        any foreign trust, the determination of amounts required to be 
        taken into account with respect to such trust by a United 
        States person under the rules of subpart E of part I of 
        subchapter J of chapter 1 shall be determined by the Secretary.
            ``(B) United states agent required.--The rules of this 
        paragraph shall apply to any foreign trust to which paragraph 
        (1) applies unless such trust agrees (in such manner, subject 
        to such conditions, and at such time as the Secretary shall 
        prescribe) to authorize a United States person to act as such 
        trust's limited agent solely for purposes of applying sections 
        7602, 7603, and 7604 with respect to--
                ``(i) any request by the Secretary to examine records 
            or produce testimony related to the proper treatment of 
            amounts required to be taken into account under the rules 
            referred to in subparagraph (A), or
                ``(ii) any summons by the Secretary for such records or 
            testimony.
        The appearance of persons or production of records by reason of 
        a United States person being such an agent shall not subject 
        such persons or records to legal process for any purpose other 
        than determining the correct treatment under this title of the 
        amounts required to be taken into account under the rules 
        referred to in subparagraph (A). A foreign trust which appoints 
        an agent described in this subparagraph shall not be considered 
        to have an office or a permanent establishment in the United 
        States, or to be engaged in a trade or business in the United 
        States, solely because of the activities of such agent pursuant 
        to this subsection.
            ``(C) Other rules to apply.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 6038A(e) shall apply for 
        purposes of this paragraph.
    ``(c) Reporting by United States Beneficiaries of Foreign Trusts.--
        ``(1) In general.--If any United States person receives 
    (directly or indirectly) during any taxable year of such person any 
    distribution from a foreign trust, such person shall make a return 
    with respect to such trust for such year which includes--
            ``(A) the name of such trust,
            ``(B) the aggregate amount of the distributions so received 
        from such trust during such taxable year, and
            ``(C) such other information as the Secretary may 
        prescribe.
        ``(2) Inclusion in income if records not provided.--
            ``(A) In general.--If adequate records are not provided to 
        the Secretary to determine the proper treatment of any 
        distribution from a foreign trust, such distribution shall be 
        treated as an accumulation distribution includible in the gross 
        income of the distributee under chapter 1. To the extent 
        provided in regulations, the preceding sentence shall not apply 
        if the foreign trust elects to be subject to rules similar to 
        the rules of subsection (b)(2)(B).
            ``(B) Application of accumulation distribution rules.--For 
        purposes of applying section 668 in a case to which 
        subparagraph (A) applies, the applicable number of years for 
        purposes of section 668(a) shall be \1/2\ of the number of 
        years the trust has been in existence.
    ``(d) Special Rules.--
        ``(1) Determination of whether united states person receives 
    distribution.--For purposes of this section, in determining whether 
    a United States person receives a distribution from a foreign 
    trust, the fact that a portion of such trust is treated as owned by 
    another person under the rules of subpart E of part I of subchapter 
    J of chapter 1 shall be disregarded.
        ``(2) Domestic trusts with foreign activities.--To the extent 
    provided in regulations, a trust which is a United States person 
    shall be treated as a foreign trust for purposes of this section 
    and section 6677 if such trust has substantial activities, or holds 
    substantial property, outside the United States.
        ``(3) Time and manner of filing information.--Any notice or 
    return required under this section shall be made at such time and 
    in such manner as the Secretary shall prescribe.
        ``(4) Modification of return requirements.--The Secretary is 
    authorized to suspend or modify any requirement of this section if 
    the Secretary determines that the United States has no significant 
    tax interest in obtaining the required information.''.
    (b) Increased Penalties.--Section 6677 (relating to failure to file 
information returns with respect to certain foreign trusts) is amended 
to read as follows:

``SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN 
              FOREIGN TRUSTS.

    ``(a) Civil Penalty.--In addition to any criminal penalty provided 
by law, if any notice or return required to be filed by section 6048--
        ``(1) is not filed on or before the time provided in such 
    section, or
        ``(2) does not include all the information required pursuant to 
    such section or includes incorrect information,
the person required to file such notice or return shall pay a penalty 
equal to 35 percent of the gross reportable amount. If any failure 
described in the preceding sentence continues for more than 90 days 
after the day on which the Secretary mails notice of such failure to 
the person required to pay such penalty, such person shall pay a 
penalty (in addition to the amount determined under the preceding 
sentence) of $10,000 for each 30-day period (or fraction thereof) 
during which such failure continues after the expiration of such 90-day 
period. In no event shall the penalty under this subsection with 
respect to any failure exceed the gross reportable amount.
    ``(b) Special Rules for Returns Under Section 6048(b).--In the case 
of a return required under section 6048(b)--
        ``(1) the United States person referred to in such section 
    shall be liable for the penalty imposed by subsection (a), and
        ``(2) subsection (a) shall be applied by substituting `5 
    percent' for `35 percent'.
    ``(c) Gross Reportable Amount.--For purposes of subsection (a), the 
term `gross reportable amount' means--
        ``(1) the gross value of the property involved in the event 
    (determined as of the date of the event) in the case of a failure 
    relating to section 6048(a),
        ``(2) the gross value of the portion of the trust's assets at 
    the close of the year treated as owned by the United States person 
    in the case of a failure relating to section 6048(b)(1), and
        ``(3) the gross amount of the distributions in the case of a 
    failure relating to section 6048(c).
    ``(d) Reasonable Cause Exception.--No penalty shall be imposed by 
this section on any failure which is shown to be due to reasonable 
cause and not due to willful neglect. The fact that a foreign 
jurisdiction would impose a civil or criminal penalty on the taxpayer 
(or any other person) for disclosing the required information is not 
reasonable cause.
    ``(e) Deficiency Procedures Not To Apply.--Subchapter B of chapter 
63 (relating to deficiency procedures for income, estate, gift, and 
certain excise taxes) shall not apply in respect of the assessment or 
collection of any penalty imposed by subsection (a).''.
    (c) Conforming Amendments.--
        (1) Paragraph (2) of section 6724(d), as amended by sections 
    11004 and 11045, is amended by striking ``or'' at the end of 
    subparagraph (U), by striking the period at the end of subparagraph 
    (V) and inserting ``, or'', and by inserting after subparagraph (V) 
    the following new subparagraph:
            ``(W) section 6048(b)(1)(B) (relating to foreign trust 
        reporting requirements).''.
        (2) The table of sections for subpart B of part III of 
    subchapter A of chapter 61 is amended by striking the item relating 
    to section 6048 and inserting the following new item:
        ``Sec. 6048. Information with respect to certain foreign 
                  trusts.''.

        (3) The table of sections for part I of subchapter B of chapter 
    68 is amended by striking the item relating to section 6677 and 
    inserting the following new item:
        ``Sec. 6677. Failure to file information with respect to certain 
                  foreign trusts.''.

    (d) Effective Dates.--
        (1) Reportable events.--To the extent related to subsection (a) 
    of section 6048 of the Internal Revenue Code of 1986, as amended by 
    this section, the amendments made by this section shall apply to 
    reportable events (as defined in such section 6048) occurring after 
    the date of the enactment of this Act.
        (2) Grantor trust reporting.--To the extent related to 
    subsection (b) of such section 6048, the amendments made by this 
    section shall apply to taxable years of United States persons 
    beginning after the date of the enactment of this Act.
        (3) Reporting by united states beneficiaries.--To the extent 
    related to subsection (c) of such section 6048, the amendments made 
    by this section shall apply to distributions received after the 
    date of the enactment of this Act.

SEC. 11342. MODIFICATIONS OF RULES RELATING TO FOREIGN TRUSTS HAVING 
              ONE OR MORE UNITED STATES BENEFICIARIES.

    (a) Treatment of Trust Obligations, Etc.--
        (1) Paragraph (2) of section 679(a) is amended by striking 
    subparagraph (B) and inserting the following:
            ``(B) Transfers at fair market value.--To any transfer of 
        property to a trust in exchange for consideration of at least 
        the fair market value of the transferred property. For purposes 
        of the preceding sentence, consideration other than cash shall 
        be taken into account at its fair market value.''.
        (2) Subsection (a) of section 679 (relating to foreign trusts 
    having one or more United States beneficiaries) is amended by 
    adding at the end the following new paragraph:
        ``(3) Certain obligations not taken into account under fair 
    market value exception.--
            ``(A) In general.--In determining whether paragraph (2)(B) 
        applies to any transfer by a person described in clause (ii) or 
        (iii) of subparagraph (C), there shall not be taken into 
        account--
                ``(i) except as provided in regulations, any obligation 
            of a person described in subparagraph (C), and
                ``(ii) to the extent provided in regulations, any 
            obligation which is guaranteed by a person described in 
            subparagraph (C).
            ``(B) Treatment of principal payments on obligation.--
        Principal payments by the trust on any obligation referred to 
        in subparagraph (A) shall be taken into account on and after 
        the date of the payment in determining the portion of the trust 
        attributable to the property transferred.
            ``(C) Persons described.--The persons described in this 
        subparagraph are--
                ``(i) the trust,
                ``(ii) any grantor or beneficiary of the trust, and
                ``(iii) any person who is related (within the meaning 
            of section 643(i)(2)(B)) to any grantor or beneficiary of 
            the trust.''.
    (b) Exemption of Transfers to Charitable Trusts.--Subsection (a) of 
section 679 is amended by striking ``section 404(a)(4) or 404A'' and 
inserting ``section 6048(a)(3)(B)(ii)''.
    (c) Other Modifications.--Subsection (a) of section 679 is amended 
by adding at the end the following new paragraphs:
        ``(4) Special rules applicable to foreign grantor who later 
    becomes a united states person.--
            ``(A) In general.--If a nonresident alien individual has a 
        residency starting date within 5 years after directly or 
        indirectly transferring property to a foreign trust, this 
        section and section 6048 shall be applied as if such individual 
        transferred to such trust on the residency starting date an 
        amount equal to the portion of such trust attributable to the 
        property transferred by such individual to such trust in such 
        transfer.
            ``(B) Treatment of undistributed income.--For purposes of 
        this section, undistributed net income for periods before such 
        individual's residency starting date shall be taken into 
        account in determining the portion of the trust which is 
        attributable to property transferred by such individual to such 
        trust but shall not otherwise be taken into account.
            ``(C) Residency starting date.--For purposes of this 
        paragraph, an individual's residency starting date is the 
        residency starting date determined under section 7701(b)(2)(A).
        ``(5) Outbound trust migrations.--If--
            ``(A) an individual who is a citizen or resident of the 
        United States transferred property to a trust which was not a 
        foreign trust, and
            ``(B) such trust becomes a foreign trust while such 
        individual is alive,
    then this section and section 6048 shall be applied as if such 
    individual transferred to such trust on the date such trust becomes 
    a foreign trust an amount equal to the portion of such trust 
    attributable to the property previously transferred by such 
    individual to such trust. A rule similar to the rule of paragraph 
    (4)(B) shall apply for purposes of this paragraph.''.
    (d) Modifications Relating to Whether Trust Has United States 
Beneficiaries.--Subsection (c) of section 679 is amended by adding at 
the end the following new paragraph:
        ``(3) Certain united states beneficiaries disregarded.--A 
    beneficiary shall not be treated as a United States person in 
    applying this section with respect to any transfer of property to 
    foreign trust if such beneficiary first became a United States 
    person more than 5 years after the date of such transfer.''.
    (e) Technical Amendment.--Subparagraph (A) of section 679(c)(2) is 
amended to read as follows:
            ``(A) in the case of a foreign corporation, such 
        corporation is a controlled foreign corporation (as defined in 
        section 957(a)),''.
    (f) Regulations.--Section 679 is amended by adding at the end the 
following new subsection:
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to transfers of property after February 6, 1995.

SEC. 11343. FOREIGN PERSONS NOT TO BE TREATED AS OWNERS UNDER GRANTOR 
              TRUST RULES.

    (a) General Rule.--
        (1) Subsection (f) of section 672 (relating to special rule 
    where grantor is foreign person) is amended to read as follows:
    ``(f) Subpart Not To Result in Foreign Ownership.--
        ``(1) In general.--Notwithstanding any other provision of this 
    subpart, this subpart shall apply only to the extent such 
    application results in an amount being currently taken into account 
    (directly or through 1 or more entities) under this chapter in 
    computing the income of a citizen or resident of the United States 
    or a domestic corporation.
        ``(2) Exceptions.--
            ``(A) Certain revocable and irrevocable trusts.--Paragraph 
        (1) shall not apply to any trust if--
                ``(i) the power to revest absolutely in the grantor 
            title to the trust property is exercisable solely by the 
            grantor without the approval or consent of any other person 
            or with the consent of a related or subordinate party who 
            is subservient to the grantor, or
                ``(ii) the only amounts distributable from such trust 
            (whether income or corpus) during the lifetime of the 
            grantor are amounts distributable to the grantor or the 
            spouse of the grantor.
            ``(B) Compensatory trusts.--Except as provided in 
        regulations, paragraph (1) shall not apply to any portion of a 
        trust distributions from which are taxable as compensation for 
        services rendered.
        ``(3) Special rules.--Except as otherwise provided in 
    regulations prescribed by the Secretary--
            ``(A) a controlled foreign corporation (as defined in 
        section 957) shall be treated as a domestic corporation for 
        purposes of paragraph (1), and
            ``(B) paragraph (1) shall not apply for purposes of 
        applying section 1296.
        ``(4) Recharacterization of purported gifts.--In the case of 
    any transfer directly or indirectly from a partnership or foreign 
    corporation which the transferee treats as a gift or bequest, the 
    Secretary may recharacterize such transfer in such circumstances as 
    the Secretary determines to be appropriate to prevent the avoidance 
    of the purposes of this subsection.
        ``(5) Special rule where grantor is foreign person.--If--
            ``(A) but for this subsection, a foreign person would be 
        treated as the owner of any portion of a trust, and
            ``(B) such trust has a beneficiary who is a United States 
        person,
    such beneficiary shall be treated as the grantor of such portion to 
    the extent such beneficiary has made transfers of property by gift 
    (directly or indirectly) to such foreign person. For purposes of 
    the preceding sentence, any gift shall not be taken into account to 
    the extent such gift would be excluded from taxable gifts under 
    section 2503(b).
        ``(6) Regulations.--The Secretary shall prescribe such 
    regulations as may be necessary or appropriate to carry out the 
    purposes of this subsection, including regulations providing that 
    paragraph (1) shall not apply in appropriate cases.''.
        (2) The last sentence of subsection (c) of section 672 of such 
    Code is amended by inserting ``subsection (f) and'' before 
    ``sections 674''.
    (b) Credit for Certain Taxes.--Paragraph (2) of section 665(d) is 
amended by adding at the end the following new sentence: ``Under rules 
or regulations prescribed by the Secretary, in the case of any foreign 
trust of which the settlor or another person would be treated as owner 
of any portion of the trust under subpart E but for section 672(f), the 
term `taxes imposed on the trust' includes the allocable amount of any 
income, war profits, and excess profits taxes imposed by any foreign 
country or possession of the United States on the settlor or such other 
person in respect of trust gross income.''.
    (c) Distributions by Certain Foreign Trusts Through Nominees.--
        (1) Section 643 is amended by adding at the end the following 
    new subsection:
    ``(h) Distributions by Certain Foreign Trusts Through Nominees.--
For purposes of this part, any amount paid to a United States person 
which is derived directly or indirectly from a foreign trust of which 
the payor is not the grantor shall be deemed in the year of payment to 
have been directly paid by the foreign trust to such United States 
person.''.
        (2) Section 665 is amended by striking subsection (c).
    (d) Effective Date.--
        (1) In general.--Except as provided by paragraph (2), the 
    amendments made by this section shall take effect on the date of 
    the enactment of this Act.
        (2) Exception for certain trusts.--The amendments made by this 
    section shall not apply to any trust--
            (A) which is treated as owned by the grantor or another 
        person under section 676 or 677 (other than subsection (a)(3) 
        thereof) of the Internal Revenue Code of 1986, and
            (B) which is in existence on September 19, 1995.
    The preceding sentence shall not apply to the portion of any such 
    trust attributable to any transfer to such trust after September 
    19, 1995.
    (e) Transitional Rule.--If--
        (1) by reason of the amendments made by this section, any 
    person other than a United States person ceases to be treated as 
    the owner of a portion of a domestic trust, and
        (2) before January 1, 1997, such trust becomes a foreign trust, 
    or the assets of such trust are transferred to a foreign trust,
no tax shall be imposed by section 1491 of the Internal Revenue Code of 
1986 by reason of such trust becoming a foreign trust or the assets of 
such trust being transferred to a foreign trust.

SEC. 11344. INFORMATION REPORTING REGARDING FOREIGN GIFTS.

    (a) In General.--Subpart A of part III of subchapter A of chapter 
61 is amended by inserting after section 6039E the following new 
section:

``SEC. 6039F. NOTICE OF GIFTS RECEIVED FROM FOREIGN PERSONS.

    ``(a) In General.--If the value of the aggregate foreign gifts 
received by a United States person (other than an organization 
described in section 501(c) and exempt from tax under section 501(a)) 
during any taxable year exceeds $10,000, such United States person 
shall furnish (at such time and in such manner as the Secretary shall 
prescribe) such information as the Secretary may prescribe regarding 
each foreign gift received during such year.
    ``(b) Foreign Gift.--For purposes of this section, the term 
`foreign gift' means any amount received from a person other than a 
United States person which the recipient treats as a gift or bequest. 
Such term shall not include any qualified transfer (within the meaning 
of section 2503(e)(2)).
    ``(c) Penalty for Failure To File Information.--
        ``(1) In general.--If a United States person fails to furnish 
    the information required by subsection (a) with respect to any 
    foreign gift within the time prescribed therefor (including 
    extensions)--
            ``(A) the tax consequences of the receipt of such gift 
        shall be determined by the Secretary in the Secretary's sole 
        discretion from the Secretary's own knowledge or from such 
        information as the Secretary may obtain through testimony or 
        otherwise, and
            ``(B) such United States person shall pay (upon notice and 
        demand by the Secretary and in the same manner as tax) an 
        amount equal to 5 percent of the amount of such foreign gift 
        for each month for which the failure continues (not to exceed 
        25 percent of such amount in the aggregate).
        ``(2) Reasonable cause exception.--Paragraph (1) shall not 
    apply to any failure to report a foreign gift if the United States 
    person shows that the failure is due to reasonable cause and not 
    due to willful neglect.
    ``(d) Cost-of-Living Adjustment.--In the case of any taxable year 
beginning after December 31, 1996, the $10,000 amount under subsection 
(a) shall be increased by an amount equal to the product of such amount 
and the cost-of-living adjustment for such taxable year under section 
1(f)(3), except that subparagraph (B) thereof shall be applied by 
substituting `1995' for `1992'.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (b) Clerical Amendment.--The table of sections for such subpart is 
amended by inserting after the item relating to section 6039E the 
following new item:
        ``Sec. 6039F. Notice of large gifts received from foreign 
                  persons.''.

    (c) Effective Date.--The amendments made by this section shall 
apply to amounts received after the date of the enactment of this Act 
in taxable years ending after such date.

SEC. 11345. MODIFICATION OF RULES RELATING TO FOREIGN TRUSTS WHICH ARE 
              NOT GRANTOR TRUSTS.

    (a) Modification of Interest Charge on Accumulation 
Distributions.--Subsection (a) of section 668 (relating to interest 
charge on accumulation distributions from foreign trusts) is amended to 
read as follows:
    ``(a) General Rule.--For purposes of the tax determined under 
section 667(a)--
        ``(1) Interest determined using underpayment rates.--The 
    interest charge determined under this section with respect to any 
    distribution is the amount of interest which would be determined on 
    the partial tax computed under section 667(b) for the period 
    described in paragraph (2) using the rates and the method under 
    section 6621 applicable to underpayments of tax.
        ``(2) Period.--For purposes of paragraph (1), the period 
    described in this paragraph is the period which begins on the date 
    which is the applicable number of years before the date of the 
    distribution and which ends on the date of the distribution.
        ``(3) Applicable number of years.--For purposes of paragraph 
    (2)--
            ``(A) In general.--The applicable number of years with 
        respect to a distribution is the number determined by 
        dividing--
                ``(i) the sum of the products described in subparagraph 
            (B) with respect to each undistributed income year, by
                ``(ii) the aggregate undistributed net income.
        The quotient determined under the preceding sentence shall be 
        rounded under procedures prescribed by the Secretary.
            ``(B) Product described.--For purposes of subparagraph (A), 
        the product described in this subparagraph with respect to any 
        undistributed income year is the product of--
                ``(i) the undistributed net income for such year, and
                ``(ii) the sum of the number of taxable years between 
            such year and the taxable year of the distribution 
            (counting in each case the undistributed income year but 
            not counting the taxable year of the distribution).
        ``(4) Undistributed income year.--For purposes of this 
    subsection, the term `undistributed income year' means any prior 
    taxable year of the trust for which there is undistributed net 
    income, other than a taxable year during all of which the 
    beneficiary receiving the distribution was not a citizen or 
    resident of the United States.
        ``(5) Determination of undistributed net income.--
    Notwithstanding section 666, for purposes of this subsection, an 
    accumulation distribution from the trust shall be treated as 
    reducing proportionately the undistributed net income for 
    undistributed income years.
        ``(6) Periods before 1996.--Interest for the portion of the 
    period described in paragraph (2) which occurs before January 1, 
    1996, shall be determined--
            ``(A) by using an interest rate of 6 percent, and
            ``(B) without compounding until January 1, 1996.''.
    (b) Abusive Transactions.--Section 643(a) is amended by inserting 
after paragraph (6) the following new paragraph:
        ``(7) Abusive transactions.--The Secretary shall prescribe such 
    regulations as may be necessary or appropriate to carry out the 
    purposes of this part, including regulations to prevent avoidance 
    of such purposes.''.
    (c) Treatment of Loans From Trusts.--
        (1) In general.--Section 643 (relating to definitions 
    applicable to subparts A, B, C, and D) is amended by adding at the 
    end the following new subsection:
    ``(i) Loans From Foreign Trusts.--For purposes of subparts B, C, 
and D--
        ``(1) General rule.--Except as provided in regulations, if a 
    foreign trust makes a loan of cash or marketable securities 
    directly or indirectly to--
            ``(A) any grantor or beneficiary of such trust who is a 
        United States person, or
            ``(B) any United States person not described in 
        subparagraph (A) who is related to such grantor or beneficiary,
    the amount of such loan shall be treated as a distribution by such 
    trust to such grantor or beneficiary (as the case may be).
        ``(2) Definitions and special rules.--For purposes of this 
    subsection--
            ``(A) Cash.--The term `cash' includes foreign currencies 
        and cash equivalents.
            ``(B) Related person.--
                ``(i) In general.--A person is related to another 
            person if the relationship between such persons would 
            result in a disallowance of losses under section 267 or 
            707(b). In applying section 267 for purposes of the 
            preceding sentence, section 267(c)(4) shall be applied as 
            if the family of an individual includes the spouses of the 
            members of the family.
                ``(ii) Allocation.--If any person described in 
            paragraph (1)(B) is related to more than one person, the 
            grantor or beneficiary to whom the treatment under this 
            subsection applies shall be determined under regulations 
            prescribed by the Secretary.
            ``(C) Exclusion of tax-exempts.--The term `United States 
        person' does not include any entity exempt from tax under this 
        chapter.
            ``(D) Trust not treated as simple trust.--Any trust which 
        is treated under this subsection as making a distribution shall 
        be treated as not described in section 651.
        ``(3) Subsequent transactions regarding loan principal.--If any 
    loan is taken into account under paragraph (1), any subsequent 
    transaction between the trust and the original borrower regarding 
    the principal of the loan (by way of complete or partial repayment, 
    satisfaction, cancellation, discharge, or otherwise) shall be 
    disregarded for purposes of this title.''.
        (2) Technical amendment.--Paragraph (8) of section 7872(f) is 
    amended by inserting ``, 643(i),'' before ``or 1274'' each place it 
    appears.
    (d) Effective Dates.--
        (1) Interest charge.--The amendment made by subsection (a) 
    shall apply to distributions after the date of the enactment of 
    this Act.
        (2) Abusive transactions.--The amendment made by subsection (b) 
    shall take effect on the date of the enactment of this Act.
        (3) Loans from trusts.--The amendment made by subsection (c) 
    shall apply to loans of cash or marketable securities after 
    September 19, 1995.

SEC. 11346. RESIDENCE OF ESTATES AND TRUSTS, ETC.

    (a) Treatment as United States Person.--
        (1) In general.--Paragraph (30) of section 7701(a) is amended 
    by striking subparagraph (D) and by inserting after subparagraph 
    (C) the following:
            ``(D) any estate or trust if--
                ``(i) a court within the United States is able to 
            exercise primary supervision over the administration of the 
            estate or trust, and
                ``(ii) in the case of a trust, one or more United 
            States fiduciaries have the authority to control all 
            substantial decisions of the trust.''.
        (2) Conforming amendment.--Paragraph (31) of section 7701(a) is 
    amended to read as follows:
        ``(31) Foreign estate or trust.--The term `foreign estate' or 
    `foreign trust' means any estate or trust other than an estate or 
    trust described in section 7701(a)(30)(D).''.
        (3) Effective date.--The amendments made by this subsection 
    shall apply--
            (A) to taxable years beginning after December 31, 1996, or
            (B) at the election of the trustee of a trust, to taxable 
        years ending after the date of the enactment of this Act.
    Such an election, once made, shall be irrevocable.
    (b) Domestic Trusts Which Become Foreign Trusts.--
        (1) In general.--Section 1491 (relating to imposition of tax on 
    transfers to avoid income tax) is amended by adding at the end the 
    following new flush sentence:
``If a trust which is not a foreign trust becomes a foreign trust, such 
trust shall be treated for purposes of this section as having 
transferred, immediately before becoming a foreign trust, all of its 
assets to a foreign trust.''.
        (2) Penalty.--Section 1494 is amended by adding at the end the 
    following new subsection:
    ``(c) Penalty.--In the case of any failure to file a return 
required by the Secretary with respect to any transfer described in 
section 1491 with respect to a trust, the person required to file such 
return shall be liable for the penalties provided in section 6677 in 
the same manner as if such failure were a failure to file a return 
under section 6048(a).''.
        (3) Effective date.--The amendments made by this subsection 
    shall take effect on the date of the enactment of this Act.

 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.

    (a) In General.--Subsection (a) of section 877 is amended to read 
as follows:
    ``(a) Treatment of Expatriates.--
        ``(1) In general.--Every nonresident alien individual who, 
    within the 10-year period immediately preceding the close of the 
    taxable year, lost United States citizenship, unless such loss did 
    not have for 1 of its principal purposes the avoidance of taxes 
    under this subtitle or subtitle B, shall be taxable for such 
    taxable year in the manner provided in subsection (b) if the tax 
    imposed pursuant to such subsection exceeds the tax which, without 
    regard to this section, is imposed pursuant to section 871.
        ``(2) Certain individuals treated as having tax avoidance 
    purpose.--For purposes of paragraph (1), an individual shall be 
    treated as having a principal purpose to avoid such taxes if--
            ``(A) the average annual net income tax (as defined in 
        section 38(c)(1)) of such individual for the period of 5 
        taxable years ending before the date of the loss of United 
        States citizenship is greater than $100,000, or
            ``(B) the net worth of the individual as of such date is 
        $500,000 or more.
    In the case of the loss of United States citizenship in any 
    calendar year after 1996, such $100,000 and $500,000 amounts shall 
    be increased by an amount equal to such dollar amount multiplied by 
    the cost-of-living adjustment determined under section 1(f)(3) for 
    such calendar year by substituting `1994' for `1992' in 
    subparagraph (B) thereof. Any increase under the preceding sentence 
    shall be rounded to the nearest multiple of $1,000.''
    (b) Exceptions.--
        (1) In general.--Section 877 is amended by striking subsection 
    (d), by redesignating subsection (c) as subsection (d), and by 
    inserting after subsection (b) the following new subsection:
    ``(c) Tax Avoidance Not Presumed in Certain Cases.--
        ``(1) In general.--Subsection (a)(2) shall not apply to an 
    individual if--
            ``(A) such individual is described in a subparagraph of 
        paragraph (2) of this subsection, and
            ``(B) within the 1-year period beginning on the date of the 
        loss of United States citizenship, such individual submits a 
        ruling request for the Secretary's determination as to whether 
        such loss has for 1 of its principal purposes the avoidance of 
        taxes under this subtitle or subtitle B.
        ``(2) Individuals described.--
            ``(A) Dual citizenship, etc.--An individual is described in 
        this subparagraph if--
                ``(i) the individual became at birth a citizen of the 
            United States and a citizen of another country and 
            continues to be a citizen of such other country, or
                ``(ii) the individual becomes (not later than the close 
            of a reasonable period after loss of United States 
            citizenship) a citizen of the country in which--

                    ``(I) such individual was born,
                    ``(II) if such individual is married, such 
                individual's spouse was born, or
                    ``(III) either of such individual's parents were 
                born.

            ``(B) Long-term foreign residents.--An individual is 
        described in this subparagraph if, for each year in the 10-year 
        period ending on the date of loss of United States citizenship, 
        the individual was present in the United States for 30 days or 
        less. The rule of section 7701(b)(3)(D)(ii) shall apply for 
        purposes of this subparagraph.
            ``(C) Renunciation upon reaching age of majority.--An 
        individual is described in this subparagraph if the 
        individual's loss of United States citizenship occurs before 
        such individual attains age 18\1/2\.
            ``(D) Individuals specified in regulations.--An individual 
        is described in this subparagraph if the individual is 
        described in a category of individuals prescribed by regulation 
        by the Secretary.''
        (2) Technical amendment.--Paragraph (1) of section 877(b) of 
    such Code is amended by striking ``subsection (c)'' and inserting 
    ``subsection (d)''.
    (c) Treatment of Property Disposed of in Nonrecognition 
Transactions; Treatment of Distributions From Certain Controlled 
Foreign Corporations.--Subsection (d) of section 877, as redesignated 
by subsection (b), is amended to read as follows:
    ``(d) Special Rules for Source, Etc.--For purposes of subsection 
(b)--
        ``(1) Source rules.--The following items of gross income shall 
    be treated as income from sources within the United States:
            ``(A) Sale of property.--Gains on the sale or exchange of 
        property (other than stock or debt obligations) located in the 
        United States.
            ``(B) Stock or debt obligations.--Gains on the sale or 
        exchange of stock issued by a domestic corporation or debt 
        obligations of United States persons or of the United States, a 
        State or political subdivision thereof, or the District of 
        Columbia.
            ``(C) Income or gain derived from controlled foreign 
        corporation.--Any income or gain derived from stock in a 
        foreign corporation but only--
                ``(i) if the individual losing United States 
            citizenship owned (within the meaning of section 958(a)), 
            or is considered as owning (by applying the ownership rules 
            of section 958(b)), at any time during the 2-year period 
            ending on the date of the loss of United States 
            citizenship, more than 50 percent of--

                    ``(I) the total combined voting power of all 
                classes of stock entitled to vote of such corporation, 
                or
                    ``(II) the total value of the stock of such 
                corporation, and

                ``(ii) to the extent such income or gain does not 
            exceed the earnings and profits attributable to such stock 
            which were earned or accumulated before the loss of 
            citizenship and during periods that the ownership 
            requirements of clause (i) are met.
        ``(2) Gain recognition on certain exchanges.--
            ``(A) In general.--In the case of any exchange of property 
        to which this paragraph applies, notwithstanding any other 
        provision of this title, such property shall be treated as sold 
        for its fair market value on the date of such exchange, and any 
        gain shall be recognized for the taxable year which includes 
        such date.
            ``(B) Exchanges to which paragraph applies.--This paragraph 
        shall apply to any exchange during the 10-year period described 
        in subsection (a) if--
                ``(i) gain would not (but for this paragraph) be 
            recognized on such exchange in whole or in part for 
            purposes of this subtitle,
                ``(ii) income derived from such property was from 
            sources within the United States (or, if no income was so 
            derived, would have been from such sources), and
                ``(iii) income derived from the property acquired in 
            the exchange would be from sources outside the United 
            States.
            ``(C) Exception.--Subparagraph (A) shall not apply if the 
        individual enters into an agreement with the Secretary which 
        specifies that any income or gain derived from the property 
        acquired in the exchange (or any other property which has a 
        basis determined in whole or part by reference to such 
        property) during such 10-year period shall be treated as from 
        sources within the United States. If the property transferred 
        in the exchange is disposed of by the person acquiring such 
        property, such agreement shall terminate and any gain which was 
        not recognized by reason of such agreement shall be recognized 
        as of the date of such disposition.
            ``(D) Secretary may extend period.--To the extent provided 
        in regulations prescribed by the Secretary, subparagraph (B) 
        shall be applied by substituting the 15-year period beginning 5 
        years before the loss of United States citizenship for the 10-
        year period referred to therein.
            ``(E) Secretary may require recognition of gain in certain 
        cases.--To the extent provided in regulations prescribed by the 
        Secretary--
                ``(i) the removal of appreciated tangible personal 
            property from the United States, and
                ``(ii) any other occurrence which (without recognition 
            of gain) results in a change in the source of the income or 
            gain from property from sources within the United States to 
            sources outside the United States,
        shall be treated as an exchange to which this paragraph 
        applies.
        ``(3) Substantial diminishing of risks of ownership.--For 
    purposes of determining whether this section applies to any gain on 
    the sale or exchange of any property, the running of the 10-year 
    period described in subsection (a) shall be suspended for any 
    period during which the individual's risk of loss with respect to 
    the property is substantially diminished by--
            ``(A) the holding of a put with respect to such property 
        (or similar property),
            ``(B) the holding by another person of a right to acquire 
        the property, or
            ``(C) a short sale or any other transaction.''
    (d) Credit for Foreign Taxes Imposed on United States Source 
Income.--
        (1) Subsection (b) of section 877 is amended by adding at the 
    end the following new sentence: ``The tax imposed solely by reason 
    of this section shall be reduced (but not below zero) by the amount 
    of any income, war profits, and excess profits taxes (within the 
    meaning of section 903) paid to any foreign country or possession 
    of the United States on any income of the taxpayer on which tax is 
    imposed solely by reason of this section.''
        (2) Subsection (a) of section 877, as amended by subsection 
    (a), is amended by inserting ``(after any reduction in such tax 
    under the last sentence of such subsection)'' after ``such 
    subsection''.
    (e) Comparable Estate and Gift Tax Treatment.--
        (1) Estate tax.--
            (A) In general.--Subsection (a) of section 2107 is amended 
        to read as follows:
    ``(a) Treatment of Expatriates.--
        ``(1) Rate of tax.--A tax computed in accordance with the table 
    contained in section 2001 is hereby imposed on the transfer of the 
    taxable estate, determined as provided in section 2106, of every 
    decedent nonresident not a citizen of the United States if, within 
    the 10-year period ending with the date of death, such decedent 
    lost United States citizenship, unless such loss did not have for 1 
    of its principal purposes the avoidance of taxes under this 
    subtitle or subtitle A.
        ``(2) Certain individuals treated as having tax avoidance 
    purpose.--
            ``(A) In general.--For purposes of paragraph (1), an 
        individual shall be treated as having a principal purpose to 
        avoid such taxes if such individual is so treated under section 
        877(a)(2).
            ``(B) Exception.--Subparagraph (A) shall not apply to a 
        decedent meeting the requirements of section 877(c)(1).''
            (B) Credit for foreign death taxes.--Subsection (c) of 
        section 2107 is amended by redesignating paragraph (2) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following new paragraph:
        ``(2) Credit for foreign death taxes.--
            ``(A) In general.--The tax imposed by subsection (a) shall 
        be credited with the amount of any estate, inheritance, legacy, 
        or succession taxes actually paid to any foreign country in 
        respect of any property which is included in the gross estate 
        solely by reason of subsection (b).
            ``(B) Limitation on credit.--The credit allowed by 
        subparagraph (A) for such taxes paid to a foreign country shall 
        not exceed the lesser of--
                ``(i) the amount which bears the same ratio to the 
            amount of such taxes actually paid to such foreign country 
            in respect of property included in the gross estate as the 
            value of the property included in the gross estate solely 
            by reason of subsection (b) bears to the value of all 
            property subjected to such taxes by such foreign country, 
            or
                ``(ii) such property's proportionate share of the 
            excess of--

                    ``(I) the tax imposed by subsection (a), over
                    ``(II) the tax which would be imposed by section 
                2101 but for this section.

            ``(C) Proportionate share.--For purposes of subparagraph 
        (B), a property's proportionate share is the percentage of the 
        value of the property which is included in the gross estate 
        solely by reason of subsection (b) bears to the total value of 
        the gross estate.''
            (C) Expansion of inclusion in gross estate of stock of 
        foreign corporations.--Paragraph (2) of section 2107(b) is 
        amended by striking ``more than 50 percent of'' and all that 
        follows and inserting ``more than 50 percent of--
            ``(A) the total combined voting power of all classes of 
        stock entitled to vote of such corporation, or
            ``(B) the total value of the stock of such corporation,''.
        (2) Gift tax.--
            (A) In general.--Paragraph (3) of section 2501(a) is 
        amended to read as follows:
        ``(3) Exception.--
            ``(A) Certain individuals.--Paragraph (2) shall not apply 
        in the case of a donor who, within the 10-year period ending 
        with the date of transfer, lost United States citizenship, 
        unless such loss did not have for 1 of its principal purposes 
        the avoidance of taxes under this subtitle or subtitle A.
            ``(B) Certain individuals treated as having tax avoidance 
        purpose.--For purposes of subparagraph (A), an individual shall 
        be treated as having a principal purpose to avoid such taxes if 
        such individual is so treated under section 877(a)(2).
            ``(C) Exception for certain individuals.--Subparagraph (B) 
        shall not apply to a decedent meeting the requirements of 
        section 877(c)(1).
            ``(D) Credit for foreign gift taxes.--The tax imposed by 
        this section solely by reason of this paragraph shall be 
        credited with the amount of any gift tax actually paid to any 
        foreign country in respect of any gift which is taxable under 
        this section solely by reason of this paragraph.''
    (f) Comparable Treatment of Lawful Permanent Residents Who Cease To 
Be Taxed as Residents.--
        (1) In general.--Section 877 is amended by redesignating 
    subsection (e) as subsection (f) and by inserting after subsection 
    (d) the following new subsection:
    ``(e) Comparable Treatment of Lawful Permanent Residents Who Cease 
To Be Taxed as Residents.--
        ``(1) In general.--Any long-term resident of the United States 
    who--
            ``(A) ceases to be a lawful permanent resident of the 
        United States (within the meaning of section 7701(b)(6)), or
            ``(B) commences to be treated as a resident of a foreign 
        country under the provisions of a tax treaty between the United 
        States and the foreign country and who does not waive the 
        benefits of such treaty applicable to residents of the foreign 
        country,
    shall be treated for purposes of this section and sections 2107, 
    2501, and 6039F in the same manner as if such resident were a 
    citizen of the United States who lost United States citizenship on 
    the date of such cessation or commencement.
        ``(2) Long-term resident.--For purposes of this subsection, the 
    term `long-term resident' means any individual (other than a 
    citizen of the United States) who is a lawful permanent resident of 
    the United States in at least 8 taxable years during the period of 
    15 taxable years ending with the taxable year during which the 
    event described in subparagraph (A) or (B) of paragraph (1) occurs. 
    For purposes of the preceding sentence, an individual shall not be 
    treated as a lawful permanent resident for any taxable year if such 
    individual is treated as a resident of a foreign country for the 
    taxable year under the provisions of a tax treaty between the 
    United States and the foreign country and does not waive the 
    benefits of such treaty applicable to residents of the foreign 
    country.
        ``(3) Special rules.--
            ``(A) Exceptions not to apply.--Subsection (c) shall not 
        apply to an individual who is treated as provided in paragraph 
        (1).
            ``(B) Step-up in basis.--Solely for purposes of determining 
        any tax imposed by reason of this subsection, property which 
        was held by the long-term resident on the date the individual 
        first became a resident of the United States shall be treated 
        as having a basis on such date of not less than the fair market 
        value of such property on such date. The preceding sentence 
        shall not apply if the individual elects not to have such 
        sentence apply. Such an election, once made, shall be 
        irrevocable.
        ``(4) Authority to exempt individuals.--This subsection shall 
    not apply to an individual who is described in a category of 
    individuals prescribed by regulation by the Secretary.
        ``(5) Regulations.--The Secretary shall prescribe such 
    regulations as may be appropriate to carry out this subsection, 
    including regulations providing for the application of this 
    subsection in cases where an alien individual becomes a resident of 
    the United States during the 10-year period after being treated as 
    provided in paragraph (1).''
        (2) Conforming amendments.--
            (A) Section 2107 is amended by striking subsection (d), by 
        redesignating subsection (e) as subsection (d), and by 
        inserting after subsection (d) (as so redesignated) the 
        following new subsection:
    ``(e) Cross Reference.--
          ``For comparable treatment of long-term lawful permanent 
        residents who ceased to be taxed as residents, see section 
        877(e).''
            (B) Paragraph (3) of section 2501(a) (as amended by 
        subsection (e)) is amended by adding at the end the following 
        new subparagraph:
            ``(E) Cross reference.--
          ``For comparable treatment of long-term lawful permanent 
        residents who ceased to be taxed as residents, see section 
        877(e).''
    (g) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to--
            (A) individuals losing United States citizenship (within 
        the meaning of section 877 of the Internal Revenue Code of 
        1986) on or after February 6, 1995, and
            (B) long-term residents of the United States with respect 
        to whom an event described in subparagraph (A) or (B) of 
        section 877(e)(1) of such Code occurs on or after February 6, 
        1995.
        (2) Special rule.--
            (A) In general.--In the case of an individual who performed 
        an act of expatriation specified in paragraph (1), (2), (3), or 
        (4) of section 349(a) of the Immigration and Nationality Act (8 
        U.S.C. 1481(a)(1)-(4)) before February 6, 1995, but who did 
        not, on or before such date, furnish to the United States 
        Department of State a signed statement of voluntary 
        relinquishment of United States nationality confirming the 
        performance of such act, the amendments made by this section 
        and section 11349 shall apply to such individual except that--
                (i) the 10-year period described in section 877(a) of 
            such Code shall not expire before the end of the 10-year 
            period beginning on the date such statement is so 
            furnished, and
                (ii) the 1-year period referred to in section 877(c) of 
            such Code, as amended by this section, shall not expire 
            before the date which is 1 year after the date of the 
            enactment of this Act.
            (B) Exception.--Subparagraph (A) shall not apply if the 
        individual establishes to the satisfaction of the Secretary of 
        the Treasury that such loss of United States citizenship 
        occurred before February 6, 1994.

SEC. 11349. INFORMATION ON INDIVIDUALS LOSING UNITED STATES 
              CITIZENSHIP.

    (a) In General.--Subpart A of part III of subchapter A of chapter 
61, as amended by section 11344, is amended by inserting after section 
6039F the following new section:

``SEC. 6039G. INFORMATION ON INDIVIDUALS LOSING UNITED STATES 
              CITIZENSHIP.

    ``(a) In General.--Notwithstanding any other provision of law, any 
individual who loses United States citizenship (within the meaning of 
section 877(a)) shall provide a statement which includes the 
information described in subsection (b). Such statement shall be--
        ``(1) provided not later than the earliest date of any act 
    referred to in subsection (c), and
        ``(2) provided to the person or court referred to in subsection 
    (c) with respect to such act.
    ``(b) Information To Be Provided.--Information required under 
subsection (a) shall include--
        ``(1) the taxpayer's TIN,
        ``(2) the mailing address of such individual's principal 
    foreign residence,
        ``(3) the foreign country in which such individual is residing,
        ``(4) the foreign country of which such individual is a 
    citizen,
        ``(5) in the case of an individual having a net worth of at 
    least the dollar amount applicable under section 877(a)(2)(B), 
    information detailing the assets and liabilities of such 
    individual, and
        ``(6) such other information as the Secretary may prescribe.
    ``(c) Acts Described.--For purposes of this section, the acts 
referred to in this subsection are--
        ``(1) the individual's renunciation of his United States 
    nationality before a diplomatic or consular officer of the United 
    States pursuant to paragraph (5) of section 349(a) of the 
    Immigration and Nationality Act (8 U.S.C. 1481(a)(5)),
        ``(2) the individual's furnishing to the United States 
    Department of State a signed statement of voluntary relinquishment 
    of United States nationality confirming the performance of an act 
    of expatriation specified in paragraph (1), (2), (3), or (4) of 
    section 349(a) of the Immigration and Nationality Act (8 U.S.C. 
    1481(a)(1)-(4)),
        ``(3) the issuance by the United States Department of State of 
    a certificate of loss of nationality to the individual, or
        ``(4) the cancellation by a court of the United States of a 
    naturalized citizen's certificate of naturalization.
    ``(d) Penalty.--Any individual failing to provide a statement 
required under subsection (a) shall be subject to a penalty for each 
year (of the 10-year period beginning on the date of loss of United 
States citizenship) during any portion of which such failure continues 
in an amount equal to the greater of--
        ``(1) 5 percent of the tax required to be paid under section 
    877 for the taxable year ending during such year, or
        ``(2) $1,000,
unless it is shown that such failure is due to reasonable cause and not 
to willful neglect.
    ``(e) Information To Be Provided To Secretary.--Notwithstanding any 
other provision of law--
        ``(1) any Federal agency or court which collects (or is 
    required to collect) the statement under subsection (a) shall 
    provide to the Secretary--
            ``(A) a copy of any such statement, and
            ``(B) the name (and any other identifying information) of 
        any individual refusing to comply with the provisions of 
        subsection (a),
        ``(2) the Secretary of State shall provide to the Secretary a 
    copy of each certificate as to the loss of American nationality 
    under section 358 of the Immigration and Nationality Act which is 
    approved by the Secretary of State, and
        ``(3) the Federal agency primarily responsible for 
    administering the immigration laws shall provide to the Secretary 
    the name of each lawful permanent resident of the United States 
    (within the meaning of section 7701(b)(6)) whose status as such has 
    been revoked or has been administratively or judicially determined 
    to have been abandoned.
    ``(f) Reporting by Long-Term Lawful Permanent Residents Who Cease 
To Be Taxed as Residents.--In lieu of applying the last sentence of 
subsection (a), any individual who is required to provide a statement 
under this section by reason of section 877(e)(1) shall provide such 
statement with the return of tax imposed by chapter 1 for the taxable 
year during which the event described in such section occurs.
    ``(g) Exemption.--The Secretary may by regulations exempt any class 
of individuals from the requirements of this section if he determines 
that applying this section to such individuals is not necessary to 
carry out the purposes of this section.''
    (b) Clerical Amendment.--The table of sections for such subpart A 
is amended by inserting after the item relating to section 6039F the 
following new item:
        ``Sec. 6039G. Information on individuals losing United States 
                  citizenship.''
    (c) Effective Date.--The amendments made by this section shall 
apply to--
        (1) individuals losing United States citizenship (within the 
    meaning of section 877 of the Internal Revenue Code of 1986) on or 
    after February 6, 1995, and
        (2) long-term residents of the United States with respect to 
    whom an event described in subparagraph (A) or (B) of section 
    877(e)(1) of such Code occurs on or after such date.
In no event shall any statement required by such amendments be due 
before the 90th day after the date of the enactment of this Act.

         CHAPTER 7--FINANCIAL ASSET SECURITIZATION INVESTMENTS

SEC. 11351. FINANCIAL ASSET SECURITIZATION INVESTMENT TRUSTS.

    (a) In General.--Subchapter M of chapter 1 is amended by adding at 
the end the following new part:

       ``PART V--FINANCIAL ASSET SECURITIZATION 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.

``SEC. 860H. TAXATION OF A FASIT; OTHER GENERAL RULES.

    ``(a) Taxation of FASIT.--A FASIT as such shall not be subject to 
taxation under this subtitle (and shall not be treated as a trust, 
partnership, corporation, or taxable mortgage pool).
    ``(b) Taxation of Holder of Ownership Interest.--In determining the 
taxable income of the holder of the ownership interest in a FASIT--
        ``(1) all assets, liabilities, and items of income, gain, 
    deduction, loss, and credit of a FASIT shall be treated as assets, 
    liabilities, and such items (as the case may be) of such holder,
        ``(2) the constant yield method (including the rules of section 
    1272(a)(6)) shall be applied under an accrual method of accounting 
    in determining all interest, acquisition discount, original issue 
    discount, and market discount and all premium deductions or 
    adjustments with respect to all debt instruments of the FASIT,
        ``(3) the amount of the tax imposed by section 860L(e) 
    (relating to tax on income from foreclosure property) shall be 
    allowed as a deduction,
        ``(4) there shall not be taken into account any item of income, 
    gain, loss, or deduction allocable to prohibited income, and
        ``(5) interest accrued by the FASIT which is exempt from tax 
    imposed by this subtitle shall, when taken into account by such 
    holder, be treated as ordinary income.
For purposes of this subtitle, securities treated as held by such 
holder under paragraph (1) shall be treated as held for investment.
    ``(c) Treatment of Regular Interests.--For purposes of this title--
        ``(1) a regular interest in a FASIT, if not otherwise a debt 
    instrument, shall be treated as a debt instrument,
        ``(2) section 163(e)(5) shall not apply to such an interest, 
    and
        ``(3) amounts includible in gross income with respect to such 
    an interest shall be determined under an accrual method of 
    accounting.

``SEC. 860I. GAIN RECOGNITION ON CONTRIBUTIONS TO AND DISTRIBUTIONS 
              FROM A FASIT AND IN OTHER CASES.

    ``(a) Contributions to FASIT.--
        ``(1) In general.--If property is contributed to a FASIT by the 
    holder of the ownership interest in such FASIT, gain (if any) shall 
    be recognized to such holder in an amount equal to the excess (if 
    any) of such property's value under subsection (e) on the date of 
    such contribution over its adjusted basis on such date.
        ``(2) Debt instruments acquired other than by contribution by 
    holder of ownership interest.--For purposes of this part, any debt 
    instrument which is acquired by a FASIT other than in a 
    contribution by the holder of the ownership interest in the FASIT 
    shall be treated--
            ``(A) as having been acquired by such holder at its fair 
        market value on the date of its acquisition by the FASIT, and
            ``(B) as having been contributed by such holder to the 
        FASIT at its value under subsection (e) on such date.
        ``(3) Deferral of gain recognition.--The Secretary may 
    prescribe regulations which--
            ``(A) provide that gain otherwise recognized under 
        paragraph (1) shall not be recognized before the earliest date 
        on which such property supports any regular interest in such 
        FASIT or any indebtedness of the holder of the ownership 
        interest (or of any person related to such holder), and
            ``(B) provide such adjustments to the other provisions of 
        this part to the extent appropriate in the context of the 
        treatment provided under subparagraph (A).
    ``(b) Certain Distributions.--If a FASIT makes a distribution of 
property with respect to the ownership interest in the FASIT, gain (if 
any) shall be recognized to such FASIT on the distribution in the same 
manner as if the FASIT had sold such property to the distributee at its 
value under subsection (e) on the date of such distribution.
    ``(c) Gain Recognition on Property Outside FASIT Which Supports 
Regular Interests.--If property held by the holder of the ownership 
interest in a FASIT (or by any person related to such holder) supports 
any regular interest in such FASIT--
        ``(1) gain shall be recognized to such holder in the same 
    manner as if such holder had sold such property at its value under 
    subsection (e) on the earliest date such property supports such an 
    interest, and
        ``(2) such property shall be treated as held by such FASIT for 
    purposes of this part.
    ``(d) Gain Recognition on Retained Interests.--If--
        ``(1) any interest in a debt instrument is contributed to a 
    FASIT, and
        ``(2) the contributor (or any person related to such 
    contributor) retains any interest in such instrument (including a 
    right to receive excessive servicing fees with respect to such 
    instrument),
then gain shall be recognized to such contributor (or person) in the 
same manner as if the contributor (or person) had sold the retained 
interest at its value under subsection (e) on the date of such 
contribution.
    ``(e) Valuation.--For purposes of this section--
        ``(1) In general.--The value of any property under this 
    subsection shall be--
            ``(A) in the case of property other than a debt instrument, 
        its fair market value, and
            ``(B) in the case of a debt instrument, the sum of the 
        present values of the reasonably expected payments under such 
        instrument determined (in the manner provided by regulations 
        prescribed by the Secretary)--
                ``(i) as of the date of the event resulting in the gain 
            recognition under this section, and
                ``(ii) by using a discount rate equal to 120 percent of 
            the applicable Federal rate (as defined in section 
            1274(d)), or such other discount rate specified in such 
            regulations, compounded semiannually.
        ``(2) Special rule for revolving loan accounts.--For purposes 
    of paragraph (1)--
            ``(A) each extension of credit (other than the accrual of 
        interest) on a revolving loan account shall be treated as a 
        separate debt instrument, and
            ``(B) payments on such extensions of credit having 
        substantially the same terms shall be applied to such 
        extensions beginning with the earliest such extension.
    ``(f) Special Rules.--
        ``(1) Nonrecognition rules not to apply.--Gain required to be 
    recognized under this section shall be recognized notwithstanding 
    any other provision of this subtitle.
        ``(2) Basis adjustments.--The basis of any property on which 
    gain is recognized under this section shall be increased by the 
    amount of gain so recognized.

``SEC. 860J. NON-FASIT LOSSES NOT TO OFFSET CERTAIN FASIT INCLUSIONS.

    ``(a) In General.--The taxable income of the holder of the 
ownership interest or any high-yield interest in a FASIT for any 
taxable year shall in no event be less than such holder's taxable 
income determined solely with respect to such interests.
    ``(b) Coordination With Section 172.--Any increase in the taxable 
income of any holder of the ownership interest or a high-yield interest 
in a FASIT for any taxable year by reason of subsection (a) shall be 
disregarded--
        ``(1) in determining under section 172 the amount of any net 
    operating loss for such taxable year, and
        ``(2) in determining taxable income for such taxable year for 
    purposes of the 2nd sentence of section 172(b)(2).
    ``(c) Coordination With Minimum Tax.--For purposes of part VI of 
subchapter A of this chapter--
        ``(1) the reference in section 55(b)(2) to taxable income shall 
    be treated as a reference to taxable income determined without 
    regard to this section,
        ``(2) the alternative minimum taxable income of any holder of 
    the ownership interest or a high-yield interest in a FASIT for any 
    taxable year shall in no event be less than such holder's taxable 
    income determined solely with respect to such interests, and
        ``(3) any increase in taxable income under this section shall 
    be disregarded for purposes of computing the alternative tax net 
    operating loss deduction.

``SEC. 860K. TREATMENT OF TRANSFERS OF HIGH-YIELD INTERESTS TO 
              DISQUALIFIED HOLDERS.

    ``(a) General Rule.--If any high-yield interest is held by a 
disqualified holder, this chapter shall be applied as if the transferor 
of such interest to such holder had not transferred such interest.
    ``(b) Exceptions.--Rules similar to the rules of paragraphs (4) and 
(7) of section 860E(e) shall apply to the tax imposed by reason of 
subsection (a).
    ``(c) Disqualified Holder.--For purposes of this section, the term 
`disqualified holder' means any holder other than an eligible 
corporation (as defined in section 860L(a)(2)).
    ``(d) Treatment of Interests Held By Securities Dealers.--
        ``(1) In general.--Subsection (a) shall not apply to any high-
    yield interest held by a disqualified holder if such holder is a 
    dealer in securities who acquired such interest exclusively for 
    sale to customers in the ordinary course of business (and not for 
    investment).
        ``(2) Change in dealer status.--
            ``(A) In general.--In the case of a dealer in securities 
        which is not an eligible corporation (as defined in section 
        860L(a)(2)), if--
                ``(i) such dealer ceases to be a dealer in securities, 
            or
                ``(ii) such dealer commences holding the high-yield 
            interest for investment,
        there is hereby imposed (in addition to other taxes) an excise 
        tax equal to the product of the highest rate of tax specified 
        in section 11(b)(1) and the income of such dealer attributable 
        to such interest for periods after the date of such cessation 
        or commencement.
            ``(B) Holding for 31 days or less.--For purposes of 
        subparagraph (A)(ii), a dealer shall not be treated as holding 
        an interest for investment before the 32d day after the date 
        such dealer acquired such interest unless such interest is so 
        held as part of a plan to avoid the purposes of this paragraph.
            ``(C) Administrative provisions.--The deficiency procedures 
        of subtitle F shall apply to the tax imposed by this paragraph.
    ``(e) Treatment of High-Yield Interests in Pass-Thru Entities.--If 
a pass-thru entity (as defined in section 860E(e)(6)) issues a debt or 
equity interest--
        ``(1) which is supported by any regular interest in a FASIT, 
    and
        ``(2) which has an original yield to maturity which is greater 
    than each of--
            ``(A) the sum determined under clauses (i) and (ii) of 
        section 163(i)(1)(B) with respect to such debt or equity 
        interest, and
            ``(B) the yield to maturity on such regular interest,
    there is hereby imposed on the pass-thru entity a tax (in addition 
    to other taxes) equal to the product of the highest rate of tax 
    specified in section 11(b)(1) and the income of the holder of such 
    debt or equity interest which is properly attributable to such 
    regular interest. For purposes of the preceding sentence, the yield 
    to maturity of any equity interest shall be determined under 
    regulations prescribed by the Secretary.

``SEC. 860L. DEFINITIONS AND OTHER SPECIAL RULES.

    ``(a) FASIT.--
        ``(1) In general.--For purposes of this title, the terms 
    `financial asset securitization investment trust' and `FASIT' mean 
    any entity--
            ``(A) for which an election to be treated as a FASIT 
        applies for the taxable year,
            ``(B) all of the interests in which are regular interests 
        or the ownership interest,
            ``(C) which has only 1 ownership interest and such 
        ownership interest is held directly by an eligible corporation,
            ``(D) as of the close of the 3rd month beginning after the 
        day of its formation and at all times thereafter, substantially 
        all of the assets of which (including assets treated as held by 
        the entity under section 860I(c)(2)) consist of permitted 
        assets, and
            ``(E) which is not described in section 851(a).
    A rule similar to the rule of the last sentence of section 860D(a) 
    shall apply for purposes of this paragraph.
        ``(2) Eligible corporation.--For purposes of paragraph (1)(C), 
    the term `eligible corporation' means any domestic C corporation 
    other than--
            ``(A) a corporation which is exempt from, or is not subject 
        to, tax under this chapter,
            ``(B) an entity described in section 851(a) or 856(a),
            ``(C) a REMIC, and
            ``(D) an organization to which part I of subchapter T 
        applies.
        ``(3) Election.--
            ``(A) In general.--An entity (otherwise meeting the 
        requirements of paragraph (1)) may elect to be treated as a 
        FASIT. Except as provided in paragraph (5), such an election 
        shall apply to the taxable year for which made and all 
        subsequent taxable years unless revoked with the consent of the 
        Secretary.
            ``(B) Elections made after 1st taxable year of entity.--If 
        the election under subparagraph (A) is made after the first 
        taxable year of the entity, all property held (or treated as 
        held under section 860I(c)(2)) by such entity as of the first 
        day of the first taxable year for which such election is made 
        shall be treated as contributed to such entity on such first 
        day by the holder of the ownership interest in such entity.
        ``(4) Termination.--If any entity ceases to be a FASIT at any 
    time during the taxable year, such entity shall not be treated as a 
    FASIT for such taxable year or any succeeding taxable year.
        ``(5) Inadvertent terminations, etc.--Rules similar to the 
    rules of section 860D(b)(2)(B) shall apply to inadvertent failures 
    to qualify or remain qualified as a FASIT.
    ``(b) Interests in FASIT.--For purposes of this part--
        ``(1) Regular interest.--
            ``(A) In general.--The term `regular interest' means any 
        interest which is issued by a FASIT with fixed terms and which 
        is designated as a regular interest if--
                ``(i) such interest unconditionally entitles the holder 
            to receive a specified principal amount (or other similar 
            amount),
                ``(ii) except as otherwise provided by the Secretary--

                    ``(I) in the case of a FASIT which would be treated 
                as a REMIC if an election under section 860D(b) had 
                been made, interest payments (or other similar 
                amounts), if any, with respect to such interest at or 
                before maturity meet the requirements applicable under 
                clause (i) or (ii) of section 860G(a)(1)(B), or
                    ``(II) in the case of any other FASIT, interest 
                payments (or other similar amounts), if any, with 
                respect to such interest are determined using a current 
                rate which is reasonably expected to measure 
                contemporaneous variations in the cost of newly 
                borrowed funds in the currency in which the regular 
                interest is denominated,

                ``(iii) such interest does not have a stated maturity 
            (including options to renew) greater than 30 years (or such 
            longer period as may be permitted by regulations),
                ``(iv) the issue price of such interest does not exceed 
            125 percent of its stated principal amount, and
                ``(v) the yield to maturity on such interest is less 
            than the sum determined under section 163(i)(1)(B) with 
            respect to such interest.
        Interest shall not fail to meet the requirements of clause (i) 
        merely because the timing (but not the amount) of the principal 
        payments (or other similar amounts) may be contingent on the 
        extent that payments on debt instruments held by the FASIT are 
        made in advance of anticipated payments and on the amount of 
        income from permitted assets.
            ``(B) High-yield interests.--
                ``(i) In general.--The term `regular interest' includes 
            any high-yield interest.
                ``(ii) High-yield interest.--The term `high-yield 
            interest' means any interest which would be described in 
            subparagraph (A) but for failing to meet the requirements 
            of one or more of clauses (i), (iv), or (v) thereof.
        ``(2) Ownership interest.--The term `ownership interest' means 
    the interest issued by a FASIT which is designated as an ownership 
    interest and which is not a regular interest.
    ``(c) Permitted Assets.--For purposes of this part--
        ``(1) In general.--The term `permitted asset' means--
            ``(A) cash or cash equivalents,
            ``(B) any debt instrument (as defined in section 
        1275(a)(1)) under which interest payments (or other similar 
        amounts), if any, at or before maturity meet the requirements 
        applicable under clause (i) or (ii) of section 860G(a)(1)(B),
            ``(C) foreclosure property,
            ``(D) any asset--
                ``(i) which is an interest rate or foreign currency 
            notional principal contract, letter of credit, insurance, 
            guarantee against payment defaults, or other similar 
            instrument, permitted by the Secretary, and
                ``(ii) which is reasonably required to guarantee or 
            hedge against the FASIT's risks associated with being the 
            obligor on interests issued by the FASIT, and
            ``(E) contract rights to acquire debt instruments described 
        in subparagraph (B) or assets described in subparagraph (D).
        ``(2) Debt issued by holder of ownership interest not permitted 
    asset.--The term `permitted asset' shall not include any debt 
    instrument issued by the holder of the ownership interest in the 
    FASIT or by any person related to such holder or any direct or 
    indirect interest in such a debt instrument. The preceding sentence 
    shall not apply to cash equivalents and to any other investment 
    specified in regulations prescribed by the Secretary.
        ``(3) Foreclosure property.--The term `foreclosure property' 
    means property--
            ``(A) which would be foreclosure property under section 
        856(e) (determined without regard to paragraph (5) thereof) if 
        acquired by a real estate investment trust, and
            ``(B) which is acquired in connection with the default or 
        imminent default of a debt instrument held by the FASIT unless 
        the security interest in such property was created for the 
        principal purpose of permitting the FASIT to invest in such 
        property.
    Solely for purposes of subsection (a)(1), the determination of 
    whether any property is foreclosure property shall be made without 
    regard to section 856(e)(4).
    ``(d) Tax on Prohibited Transactions.--
        ``(1) In general.--There is hereby imposed for each taxable 
    year of a FASIT a tax equal to 100 percent of the net income 
    derived from prohibited transactions.
        ``(2) Prohibited transactions.--For purposes of this part, the 
    term `prohibited transaction' means--
            ``(A) the receipt of any income derived from any asset that 
        is not a permitted asset,
            ``(B) except as provided in paragraph (3), the disposition 
        of any permitted asset,
            ``(C) the receipt of any income derived from any loan 
        originated by the FASIT, and
            ``(D) the receipt of any income representing a fee or other 
        compensation for services (other than any fee received as 
        compensation for a waiver, amendment, or consent under 
        permitted assets (other than foreclosure property) held by the 
        FASIT).
        ``(3) Exception for income from certain dispositions.--
            ``(A) In general.--Paragraph (2)(B) shall not apply to a 
        disposition which would not be a prohibited transaction (as 
        defined in section 860F(a)(2)) by reason of--
                ``(i) clause (ii), (iii), or (iv) of section 
            860F(a)(2)(A), or
                ``(ii) section 860F(a)(5),
        if the FASIT were treated as a REMIC and debt instruments 
        described in subsection (c)(1)(B) were treated as qualified 
        mortgages.
            ``(B) Substitution of debt instruments; reduction of over-
        collateralization.--Paragraph (2)(B) shall not apply to--
                ``(i) the substitution of a debt instrument described 
            in subsection (c)(1)(B) for another debt instrument which 
            is a permitted asset, or
                ``(ii) the distribution of a debt instrument 
            contributed by the holder of the ownership interest to such 
            holder in order to reduce over-collateralization of the 
            FASIT,
        but only if a principal purpose of acquiring the debt 
        instrument which is disposed of was not the recognition of gain 
        (or the reduction of a loss) as a result of an increase in the 
        market value of the debt instrument after its acquisition by 
        the FASIT.
            ``(C) Liquidation of class of regular interests.--Paragraph 
        (2)(B) shall not apply to the complete liquidation of any class 
        of regular interests.
        ``(4) Net income.--For purposes of this subsection, net income 
    shall be determined in accordance with section 860F(a)(3).
    ``(e) Tax on Income From Foreclosure Property.--
        ``(1) In general.--A tax is hereby imposed for each taxable 
    year on the net income from foreclosure property of each FASIT. 
    Such tax shall be computed by multiplying the net income from 
    foreclosure property by the highest rate of tax specified in 
    section 11(b).
        ``(2) Net income from foreclosure property.--For purposes of 
    this part, the term `net income from foreclosure property' means 
    the amount which would be the FASIT's net income from foreclosure 
    property under section 857(b)(4)(B) if the FASIT were a real estate 
    investment trust.
    ``(f) Coordination With Wash Sales Rules.--Rules similar to the 
rules of section 860F(d) shall apply to the ownership interest in a 
FASIT.
    ``(g) Related Person.--For purposes of this part, a person 
(hereinafter in this subsection referred to as the `related person') is 
related to any person if--
        ``(1) the related person bears a relationship to such person 
    specified in section 267(b) or section 707(b)(1), or
        ``(2) the related person and such person are engaged in trades 
    or businesses under common control (within the meaning of 
    subsections (a) and (b) of section 52).
For purposes of paragraph (1), in applying section 267(b) or 707(b)(1), 
`20 percent' shall be substituted for `50 percent'.
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
part, including regulations to prevent the abuse of the purposes of 
this part through transactions which are not primarily related to 
securitization of debt instruments by a FASIT.''.
    (b) Technical Amendments.--
        (1) Paragraph (2) of section 26(b) is amended by striking 
    ``and'' at the end of subparagraph (M), by striking the period at 
    the end of subparagraph (N) and inserting ``, and'', and by adding 
    at the end the following new subparagraph:
            ``(O) section 860K (relating to treatment of transfers of 
        high-yield interests to disqualified holders).''.
        (2) Paragraph (6) of section 56(g) is amended by striking ``or 
    REMIC'' and inserting ``REMIC, or FASIT''.
        (3) Clause (ii) of section 382(l)(4)(B) is amended by striking 
    ``or a REMIC to which part IV of subchapter M applies'' and 
    inserting ``a REMIC to which part IV of subchapter M applies, or a 
    FASIT to which part V of subchapter M applies''.
        (4) Paragraph (1) of section 582(c) is amended by inserting ``, 
    and any regular or ownership interest in a FASIT,'' after 
    ``REMIC''.
        (5) Subparagraph (E) of section 856(c)(6) is amended by adding 
    at the end the following new sentence: ``References in the 
    preceding provisions of this subparagraph to a REMIC shall be 
    treated as including a reference to a FASIT.''.
        (6) Subparagraph (C) of section 1202(e)(4) is amended by 
    striking ``or REMIC'' and inserting ``REMIC, or FASIT''.
        (7) Clause (xi) of section 7701(a)(19)(C) is amended to read as 
    follows:
                ``(xi) any regular or residual interest in a REMIC, and 
            any regular or ownership interest in a FASIT, but only in 
            the proportion which the assets of such REMIC or FASIT 
            consist of property described in any of the preceding 
            clauses of this subparagraph; except that if 95 percent or 
            more of the assets of such REMIC or FASIT are assets 
            described in clauses (i) through (x), the entire interest 
            in the REMIC or FASIT shall qualify.''.
        (8) Subparagraph (A) of section 7701(i)(2) is amended by 
    inserting ``or a FASIT'' after ``a REMIC''.
    (c) Clerical Amendment.--The table of parts for subchapter M of 
chapter 1 is amended by adding at the end the following new item:
        ``Part V. Financial asset securitization investment trusts.''.

    (d) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                   CHAPTER 8--DEPRECIATION PROVISIONS

SEC. 11361. TREATMENT OF CONTRIBUTIONS IN AID OF CONSTRUCTION.

    (a) Treatment of Contributions in Aid of Construction.--
        (1) In general.--Section 118 (relating to contributions to the 
    capital of a corporation) is amended--
            (A) by redesignating subsection (c) as subsection (e), and
            (B) by inserting after subsection (b) the following new 
        subsections:
    ``(c) Special Rules for Water and Sewerage Disposal Utilities.--
        ``(1) General rule.--For purposes of this section, the term 
    `contribution to the capital of the taxpayer' includes any amount 
    of money or other property received from any person (whether or not 
    a shareholder) by a regulated public utility which provides water 
    or sewerage disposal services if--
            ``(A) such amount is a contribution in aid of construction,
            ``(B) in the case of contribution of property other than 
        water or sewerage disposal facilities, such amount meets the 
        requirements of the expenditure rule of paragraph (2), and
            ``(C) such amount (or any property acquired or constructed 
        with such amount) is not included in the taxpayer's rate base 
        for ratemaking purposes.
        ``(2) Expenditure rule.--An amount meets the requirements of 
    this paragraph if--
            ``(A) an amount equal to such amount is expended for the 
        acquisition or construction of tangible property described in 
        section 1231(b)--
                ``(i) which is the property for which the contribution 
            was made or is of the same type as such property, and
                ``(ii) which is used predominantly in the trade or 
            business of furnishing water or sewerage disposal services,
            ``(B) the expenditure referred to in subparagraph (A) 
        occurs before the end of the second taxable year after the year 
        in which such amount was received, and
            ``(C) accurate records are kept of the amounts contributed 
        and expenditures made, the expenditures to which contributions 
        are allocated, and the year in which the contributions and 
        expenditures are received and made.
        ``(3) Definitions.--For purposes of this subsection--
            ``(A) Contribution in aid of construction.--The term 
        `contribution in aid of construction' shall be defined by 
        regulations prescribed by the Secretary, except that such term 
        shall not include amounts paid as service charges for starting 
        or stopping services.
            ``(B) Predominantly.--The term `predominantly' means 80 
        percent or more.
            ``(C) Regulated public utility.--The term `regulated public 
        utility' has the meaning given such term by section 
        7701(a)(33), except that such term shall not include any 
        utility which is not required to provide water or sewerage 
        disposal services to members of the general public in its 
        service area.
        ``(4) Disallowance of deductions and credits; adjusted basis.--
    Notwithstanding any other provision of this subtitle, no deduction 
    or credit shall be allowed for, or by reason of, any expenditure 
    which constitutes a contribution in aid of construction to which 
    this subsection applies. The adjusted basis of any property 
    acquired with contributions in aid of construction to which this 
    subsection applies shall be zero.
    ``(d) Statute of Limitations.--If the taxpayer for any taxable year 
treats an amount as a contribution to the capital of the taxpayer 
described in subsection (c), then--
        ``(1) the statutory period for the assessment of any deficiency 
    attributable to any part of such amount shall not expire before the 
    expiration of 3 years from the date the Secretary is notified by 
    the taxpayer (in such manner as the Secretary may prescribe) of--
            ``(A) the amount of the expenditure referred to in 
        subparagraph (A) of subsection (c)(2),
            ``(B) the taxpayer's intention not to make the expenditures 
        referred to in such subparagraph, or
            ``(C) a failure to make such expenditure within the period 
        described in subparagraph (B) of subsection (c)(2); and
        ``(2) such deficiency may be assessed before the expiration of 
    such 3-year period notwithstanding the provisions of any other law 
    or rule of law which would otherwise prevent such assessment.''.
        (2) Conforming amendment.--Section 118(b) is amended by 
    inserting ``except as provided in subsection (c),'' before ``the 
    term''.
        (3) Effective date.--The amendments made by this subsection 
    shall apply to amounts received after the date of the enactment of 
    this Act.
    (b) Recovery Method and Period for Water Utility Property.--
        (1) Requirement to use straight line method.--Section 168(b)(3) 
    is amended by adding at the end the following new subparagraph:
            ``(F) Water utility property described in subsection 
        (e)(5).''.
        (2) 25-year recovery period.--The table contained in section 
    168(c)(1) is amended by inserting the following item after the item 
    relating to 20-year property:

    ``Water utility property..................................

                                                             25 years''.

        (3) Water utility property.--
            (A) In general.--Section 168(e) is amended by adding at the 
        end the following new paragraph:
        ``(5) Water utility property.--The term `water utility 
    property' means property--
            ``(A) which is an integral part of the gathering, 
        treatment, or commercial distribution of water, and which, 
        without regard to this paragraph, would be 20-year property, 
        and
            ``(B) any municipal sewer.''.
            (B) Conforming amendments.--Section 168 is amended--
                (i) by striking subparagraph (F) of subsection (e)(3), 
            and
                (ii) by striking the item relating to subparagraph (F) 
            in the table in subsection (g)(3).
        (4) Alternative system.--Clause (iv) of section 168(g)(2)(C) is 
    amended by inserting ``or water utility property'' after ``tunnel 
    bore''.
        (5) Effective date.--The amendments made by this subsection 
    shall apply to property placed in service after the date of the 
    enactment of this Act, other than property placed in service 
    pursuant to a binding contract in effect on such date and at all 
    times thereafter before the property is placed in service.

SEC. 11362. DEDUCTION FOR CERTAIN OPERATING AUTHORITY.

    (a) General Rule.--For purpose of chapter 1 of the Internal Revenue 
Code of 1986, in computing the taxable income of a taxpayer who, on 
January 1, 1995, held one or more operating authorities preempted by 
section 601 of the Federal Aviation Administration Authorization Act of 
1994, the taxpayer shall be entitled to deduct ratably over the 36-
month period beginning with January 1995 an amount equal to the 
aggregate adjusted bases of such operating authorities held by the 
taxpayer on January 1, 1995.
    (b) Treatment as Depreciation.--Any deduction under subsection (a) 
shall be treated as a deduction for depreciation for purposes of the 
Internal Revenue Code of 1986.
    (c) Effective Date.--The provisions of this section shall apply to 
taxable years ending after December 31, 1994.

SEC. 11363. CLASS LIFE FOR GAS STATION CONVENIENCE STORES AND SIMILAR 
              STRUCTURES.

    (a) In General.--Section 168(e)(3)(E) (classifying certain property 
as 15-year property) is amended by striking ``and'' at the end of 
clause (i), by striking the period at the end of clause (ii) and 
inserting ``, and'', and by adding at the end the following new clause:
                ``(iii) any section 1250 property which is a retail 
            motor fuels outlet (whether or not food or other 
            convenience items are sold at the outlet).''.
    (b) Conforming Amendment.--Subparagraph (B) of section 168(g)(3) is 
amended by inserting after the item relating to subparagraph (E)(ii) in 
the table contained therein the following new item:
        ``(E)(iii)................. 20''.

    (c) Effective Date.--The amendments made by this section shall 
apply to property which is placed in service on or after the date of 
the enactment of this Act and to which section 168 of the Internal 
Revenue Code of 1986 applies after the amendment made by section 201 of 
the Tax Reform Act of 1986. A taxpayer may elect to have such 
amendments apply with respect to any property placed in service before 
such date and to which such section so applies.

                      CHAPTER 9--OTHER PROVISIONS

SEC. 11371. APPLICATION OF FAILURE-TO-PAY PENALTY TO SUBSTITUTE 
              RETURNS.

    (a) General Rule.--Section 6651 (relating to failure to file tax 
return or to pay tax) is amended by adding at the end the following new 
subsection:
    ``(g) Treatment of Returns Prepared by Secretary Under Section 
6020(b).--In the case of any return made by the Secretary under section 
6020(b)--
        ``(1) such return shall be disregarded for purposes of 
    determining the amount of the addition under paragraph (1) of 
    subsection (a), but
        ``(2) such return shall be treated as the return filed by the 
    taxpayer for purposes of determining the amount of the addition 
    under paragraphs (2) and (3) of subsection (a).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply in the case of any return the due date for which (determined 
without regard to extensions) is after the date of the enactment of 
this Act.

SEC. 11372. EXTENSION OF WITHHOLDING TO CERTAIN GAMBLING WINNINGS.

    (a) Repeal of Exemption for Bingo and Keno.--Paragraph (5) of 
section 3402(q) is amended to read as follows:
        ``(5) Exemption for slot machines.--The tax imposed under 
    paragraph (1) shall not apply to winnings from a slot machine.''.
    (b) Threshold Amount.--Paragraph (3) of section 3402(q) is 
amended--
        (1) by striking ``(B) and (C)'' in subparagraph (A) and 
    inserting ``(B), (C), and (D)'', and
        (2) by adding at the end the following new subparagraph:
            ``(D) Bingo and keno.--Proceeds of more than $5,000 from a 
        wager placed in a bingo or keno game.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 11373. LOSSES FROM FORECLOSURE PROPERTY.

    (a) In General.--Section 818(b) is amended by adding at the end the 
following new paragraph:
        ``(2) Losses from foreclosure property.--
            ``(A) In general.--The amortizable portion of any loss 
        arising from the sale or exchange of foreclosure property which 
        (without regard to this paragraph) is treated as a capital loss 
        shall be treated as a loss from the sale or exchange of real 
        property used in carrying on an insurance business which is 
        recognized ratably over the 10-taxable year period beginning 
        with the taxable year following the taxable year in which the 
        sale or exchange of the foreclosure property occurred.
            ``(B) Amortizable portion.--For purposes of this 
        paragraph--
                ``(i) In general.--The amortizable portion of a loss 
            referred to in subparagraph (A) is the percentage (not 
            greater than 20 percent) of such loss to which the taxpayer 
            elects to have this paragraph apply.
                ``(ii) Subsequent modifications of amount.--The 
            taxpayer may elect for any of the taxable years in the 
            change period to change (subject to the limitation under 
            clause (i)) the percentage of a loss referred to in 
            subparagraph (A) which is treated as the amortizable 
            portion of such loss. If the taxpayer so elects, each such 
            changed percentage shall be treated as if it were the 
            percentage specified in the election made under clause (i), 
            and proper adjustments shall be made for all taxable years 
            to reflect each such change.
                ``(iii) Statute of limitations.-- For purposes of 
            section 6501(h) and 6511(d)(2), any change by reason of an 
            election under clause (ii) shall be treated as a capital 
            loss carryback from the year such change is made.
                ``(iv) Change period.--For purposes of clause (ii), the 
            change period is the 3-taxable year period following the 
            taxable year in which the sale or exchange of the 
            foreclosure property occurred.
            ``(C) Election to treat unamortized ordinary losses as 
        capital losses.--
                ``(i) In general.--The taxpayer may elect to treat any 
            unused amount of any ordinary loss described in 
            subparagraph (A) as a capital loss arising in the taxable 
            year for which the election under this subparagraph is 
            made.
                ``(ii) Limitation on election.--An election may be made 
            under clause (i) with respect to any loss only for any 
            taxable year in the 5-taxable year period following the 
            taxable year referred to in subparagraph (A).
                ``(iii) Unused amount of ordinary loss.--For purposes 
            of clause (i), the unused amount of an ordinary loss is the 
            amount of the amortizable portion of any loss which has not 
            been recognized as of the close of the preceding taxable 
            year.
                ``(iv) Ordering rule.--Any unused amount of an ordinary 
            loss with respect to which an election was made under 
            clause (i) shall be treated as coming first from the last 
            taxable year in the 10-taxable year period referred to in 
            subparagraph (A) and then from each preceding taxable year 
            in reverse chronological order.
            ``(D) Foreclosure property.--For purposes of this 
        paragraph, the term `foreclosure property' means any real 
        property used in a trade or businesses (as defined in section 
        1231(b) without regard to this subsection) which is acquired by 
        a life insurance company as the result of--
                ``(i) such company having bid on such property at 
            foreclosure, or
                ``(ii) such company having otherwise reduced such 
            property to ownership or possession by agreement or process 
            of law, after there was a default (or default was imminent) 
            on indebtedness which such property secured.
            ``(E) Time for making elections.--Any election under this 
        paragraph for any taxable year shall be made on or before the 
        due date (including extensions) for the return of tax for such 
        taxable year.''
    (b) Conforming Amendments.--Section 818(b) is amended--
        (1) by striking ``In the'' and inserting:
        ``(1) In general.--In the '', and
        (2) by redesignating paragraphs (1) and (2) and subparagraphs 
    (A) and (B) of paragraph (1) as subparagraphs (A) and (B) and 
    clauses (i) and (ii) of subparagraph (A), respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1994.

SEC. 11374. NONRECOGNITION TREATMENT FOR CERTAIN TRANSFERS BY COMMON 
              TRUST FUNDS TO REGULATED INVESTMENT COMPANIES.

    (a) General Rule.--Section 584 (relating to common trust funds) is 
amended by redesignating subsection (h) as subsection (i) and by 
inserting after subsection (g) the following new subsection:
    ``(h) Nonrecognition Treatment for Certain Transfers to Regulated 
Investment Companies.--
        ``(1) In general.--If--
            ``(A) pursuant to a single plan, a common trust fund 
        transfers substantially all of its assets to one or more 
        regulated investment companies in exchange solely for stock in 
        the company or companies to which such assets are so 
        transferred, and
            ``(B) such stock is distributed by such common trust fund 
        to participants in such common trust fund in exchange solely 
        for their interests in such common trust fund,
    no gain or loss shall be recognized by such common trust fund by 
    reason of such transfer or distribution, and no gain or loss shall 
    be recognized by any participant in such common trust fund by 
    reason of such exchange.
        ``(2) Basis rules.--
            ``(A) Regulated investment company.--The basis of any asset 
        received by a regulated investment company in a transfer 
        referred to in paragraph (1)(A) shall be the same as it would 
        be in the hands of the common trust fund.
            ``(B) Participants.--The basis of the stock which is 
        received in an exchange referred to in paragraph (1)(B) shall 
        be the same as that of the property exchanged. If stock in more 
        than one regulated investment company is received in such 
        exchange, the basis determined under the preceding sentence 
        shall be allocated among the stock in each such company on the 
        basis of respective fair market values.
        ``(3) Treatment of assumptions of liability.--
            ``(A) In general.--In determining whether the transfer 
        referred to in paragraph (1)(A) is in exchange solely for stock 
        in one or more regulated investment companies, the assumption 
        by any such company of a liability of the common trust fund, 
        and the fact that any property transferred by the common trust 
        fund is subject to a liability, shall be disregarded.
            ``(B) Special rule where assumed liabilities exceed 
        basis.--
                ``(i) In general.--If, in any transfer referred to in 
            paragraph (1)(A), the assumed liabilities exceed the 
            aggregate adjusted bases (in the hands of the common trust 
            fund) of the assets transferred to the regulated investment 
            company or companies--

                    ``(I) notwithstanding paragraph (1), gain shall be 
                recognized to the common trust fund on such transfer in 
                an amount equal to such excess,
                    ``(II) the basis of the assets received by the 
                regulated investment company or companies in such 
                transfer shall be increased by the amount so 
                recognized, and
                    ``(III) any adjustment to the basis of a 
                participant's interest in the common trust fund as a 
                result of the gain so recognized shall be treated as 
                occurring immediately before the exchange referred to 
                in paragraph (1)(B).

            If the transfer referred to in paragraph (1)(A) is to two 
            or more regulated investment companies, the basis increase 
            under subclause (II) shall be allocated among such 
            companies on the basis of the respective fair market values 
            of the assets received by each of such companies.
                ``(ii) Assumed liabilities.--For purposes of clause 
            (i), the term `assumed liabilities' means the aggregate 
            of--

                    ``(I) any liability of the common trust fund 
                assumed by any regulated investment company in 
                connection with the transfer referred to in paragraph 
                (1)(A), and
                    ``(II) any liability to which property so 
                transferred is subject.

        ``(4) Common trust fund must meet diversification rules.--This 
    subsection shall not apply to any common trust fund which would not 
    meet the requirements of section 368(a)(2)(F)(ii) if it were a 
    corporation. For purposes of the preceding sentence, Government 
    securities shall not be treated as securities of an issuer in 
    applying the 25-percent and 50-percent test and such securities 
    shall not be excluded for purposes of determining total assets 
    under clause (iv) of section 368(a)(2)(F).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to transfers after December 31, 1995.

SEC. 11375. EXCLUSION FOR ENERGY CONSERVATION SUBSIDIES LIMITED TO 
              SUBSIDIES WITH RESPECT TO DWELLING UNITS.

    (a) In General.--Paragraph (1) of section 136(c) (defining energy 
conservation measure) is amended by striking ``energy demand--'' and 
all that follows and inserting ``energy demand with respect to a 
dwelling unit.''
    (b) Conforming Amendments.--
        (1) Subsection (a) of section 136 is amended to read as 
    follows:
    ``(a) Exclusion.--Gross income shall not include the value of any 
subsidy provided (directly or indirectly) by a public utility to a 
customer for the purchase or installation of any energy conservation 
measure.''
        (2) Paragraph (2) of section 136(c) is amended--
            (A) by striking subparagraph (A) and by redesignating 
        subparagraphs (B) and (C) as subparagraphs (A) and (B), 
        respectively, and
            (B) by striking ``and special rules'' in the paragraph 
        heading.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts received after December 31, 1995, unless received 
pursuant to a written binding contract in effect on September 13, 1995, 
and at all times thereafter.

SEC. 11376. ELECTION TO CEASE STATUS AS QUALIFIED SCHOLARSHIP FUNDING 
              CORPORATION.

    (a) In General.--Subsection (d) of section 150 (relating to 
definitions and special rules) is amended by adding at the end thereof 
the following new paragraph:
        ``(3) Election to cease status as qualified scholarship funding 
    corporation.--
            ``(A) In general.--Any qualified scholarship funding bond, 
        and qualified student loan bond, outstanding on the date of the 
        issuer's election under this paragraph (and any bond (or series 
        of bonds) issued to refund such a bond) shall not fail to be a 
        tax-exempt bond solely because the issuer ceases to be 
        described in subparagraphs (A) and (B) of paragraph (2) if the 
        issuer meets the requirements of subparagraphs (B) and (C) of 
        this paragraph.
            ``(B) Assets and liabilities of issuer transferred to 
        taxable subsidiary.--The requirements of this subparagraph are 
        met by an issuer if--
                ``(i) all of the student loan notes of the issuer and 
            other assets pledged to secure the repayment of qualified 
            scholarship funding bond indebtedness of the issuer are 
            transferred to another corporation within a reasonable 
            period after the election is made under this paragraph;
                ``(ii) such transferee corporation assumes or otherwise 
            provides for the payment of all of the qualified 
            scholarship funding bond indebtedness of the issuer within 
            a reasonable period after the election is made under this 
            paragraph;
                ``(iii) to the extent permitted by law, such transferee 
            corporation assumes all of the responsibilities, and 
            succeeds to all of the rights, of the issuer under the 
            issuer's agreements with the Secretary of Education in 
            respect of student loans;
                ``(iv) immediately after such transfer, the issuer, 
            together with any other issuer which has made an election 
            under this paragraph in respect of such transferee, hold 
            all of the senior stock in such transferee corporation; and
                ``(v) such transferee corporation is not exempt from 
            tax under this chapter.
            ``(C) Issuer to operate as independent organization 
        described in section 501(c)(3).--The requirements of this 
        subparagraph are met by an issuer if, within a reasonable 
        period after the transfer referred to in subparagraph (B)--
                ``(i) the issuer is described in section 501(c)(3) and 
            exempt from tax under section 501(a);
                ``(ii) the issuer no longer is described in 
            subparagraphs (A) and (B) of paragraph (2); and
                ``(iii) at least 80 percent of the members of the board 
            of directors of the issuer are independent members.
            ``(D) Senior stock.--For purposes of this paragraph, the 
        term `senior stock' means stock--
                ``(i) which participates pro rata and fully in the 
            equity value of the corporation with all other common stock 
            of the corporation but which has the right to payment of 
            liquidation proceeds prior to payment of liquidation 
            proceeds in respect of other common stock of the 
            corporation;
                ``(ii) which has a fixed right upon liquidation and 
            upon redemption to an amount equal to the greater of--

                    ``(I) the fair market value of such stock on the 
                date of liquidation or redemption (whichever is 
                applicable); or
                    ``(II) the fair market value of all assets 
                transferred in exchange for such stock and reduced by 
                the amount of all liabilities of the corporation which 
                has made an election under this paragraph assumed by 
                the transferee corporation in such transfer;

                ``(iii) the holder of which has the right to require 
            the transferee corporation to redeem on a date that is not 
            later than 10 years after the date on which an election 
            under this paragraph was made and pursuant to such election 
            such stock was issued; and
                ``(iv) in respect of which, during the time such stock 
            is outstanding, there is not outstanding any equity 
            interest in the corporation having any liquidation, 
            redemption or dividend rights in the corporation which are 
            superior to those of such stock.
            ``(E) Independent member.--The term `independent member' 
        means a member of the board of directors of the issuer who 
        (except for services as a member of such board) receives no 
        compensation directly or indirectly--
                ``(i) for services performed in connection with such 
            transferee corporation, or
                ``(ii) for services as a member of the board of 
            directors or as an officer of such transferee corporation.
        For purposes of clause (ii), the term `officer' includes any 
        individual having powers or responsibilities similar to those 
        of officers.
            ``(F) Coordination with certain private foundation taxes.--
        For purposes of sections 4942 (relating to the excise tax on a 
        failure to distribute income) and 4943 (relating to the excise 
        tax on excess business holdings), the transferee corporation 
        referred to in subparagraph (B) shall be treated as a 
        functionally related business (within the meaning of section 
        4942(j)(4)) with respect to the issuer during the period 
        commencing with the date on which an election is made under 
        this paragraph and ending on the date that is the earlier of--
                ``(i) the last day of the last taxable year for which 
            more than 50 percent of the gross income of such transferee 
            corporation is derived from, or more than 50 percent of the 
            assets (by value) of such transferee corporation consists 
            of, student loan notes incurred under the Higher Education 
            Act of 1965; or
                ``(ii) the last day of the taxable year of the issuer 
            during which occurs the date which is 10 years after the 
            date on which the election under this paragraph is made.
            ``(G) Election.--An election under this paragraph may be 
        revoked only with the consent of the Secretary.''
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 11377. CERTAIN AMOUNTS DERIVED FROM FOREIGN CORPORATIONS TREATED 
              AS UNRELATED BUSINESS TAXABLE INCOME.

    (a) General Rule.--Subsection (b) of section 512 (relating to 
modifications) is amended by adding at the end thereof the following 
new paragraph:
        ``(18) Treatment of certain amounts derived from foreign 
    corporations.--
            ``(A) In general.--Notwithstanding paragraph (1), any 
        amount included in gross income under section 951(a)(1)(A) 
        shall be included as an item of gross income derived from an 
        unrelated trade or business to the extent the amount so 
        included is attributable to insurance income (as defined in 
        section 953) which, if derived directly by the organization, 
        would be treated as gross income from an unrelated trade or 
        business. There shall be allowed all deductions directly 
        connected with amounts included in gross income under the 
        preceding sentence.
            ``(B) Exception.--Subparagraph (A) shall not apply to 
        income attributable to a policy of insurance or reinsurance 
        with respect to which the person (directly or indirectly) 
        insured is--
                ``(i) such organization,
                ``(ii) an affiliate of such organization which is 
            exempt from tax under section 501(a), or
                ``(iii) a director or officer of, or an individual who 
            performs services for, such organization or affiliate but 
            only if the insurance covers primarily risks associated 
            with the performance of services for the benefit of such 
            organization or affiliate.
        For purposes of this subparagraph, the determination as to 
        whether an entity is an affiliate of an organization shall be 
        made under rules similar to the rules of section 168(h)(4)(B).
            ``(C) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary or appropriate to carry out the 
        purposes of this paragraph, including regulations for the 
        application of this paragraph in the case of income paid 
        through 1 or more entities or between 2 or more chains of 
        entities.''
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts included in gross income in any taxable year beginning after 
December 31, 1995.

SEC. 11378. REPEAL OF FINANCIAL INSTITUTION TRANSITION RULE TO INTEREST 
              ALLOCATION RULES.

    (a) In General.--Paragraph (5) of section 1215(c) of the Tax Reform 
Act of 1986 (Public Law 99-514, 100 Stat. 2548) is hereby repealed.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11379. REPEAL OF BAD DEBT RESERVE METHOD FOR THRIFT SAVINGS 
              ASSOCIATIONS.

    (a) In General.--Section 593 (relating to reserves for losses on 
loans) is hereby repealed.
    (b) Conforming Amendments.--
        (1) Subsection (d) of section 50 is amended by adding at the 
    end the following new sentence:
``Paragraphs (1)(A), (2)(A), and (4) of section 46(e) referred to in 
paragraph (1) of this subsection shall not apply to any taxable year 
beginning after December 31, 1995.''
        (2) Subsection (e) of section 52 is amended by striking 
    paragraph (1) and by redesignating paragraphs (2) and (3) as 
    paragraphs (1) and (2), respectively.
        (3) Subsection (a) of section 57 is amended by striking 
    paragraph (4).
        (4) Section 246 is amended by striking subsection (f).
        (5) Clause (i) of section 291(e)(1)(B) is amended by striking 
    ``or to which section 593 applies''.
        (6) Subparagraph (A) of section 585(a)(2) is amended by 
    striking ``other than an organization to which section 593 
    applies''.
        (7) Sections 595 and 596 are hereby repealed.
        (8) Subsection (a) of section 860E is amended--
            (A) by striking ``Except as provided in paragraph (2), 
        the'' in paragraph (1) and inserting ``The'',
            (B) by striking paragraphs (2) and (4) and redesignating 
        paragraphs (3) and (5) as paragraphs (2) and (3), respectively, 
        and
            (C) by striking in paragraph (2) (as so redesignated) all 
        that follows ``subsection'' and inserting a period.
        (9) Paragraph (3) of section 992(d) is amended by striking ``or 
    593''.
        (10) Section 1038 is amended by striking subsection (f).
        (11) Clause (ii) of section 1042(c)(4)(B) is amended by 
    striking ``or 593''.
        (12) Subsection (c) of section 1277 is amended by striking ``or 
    to which section 593 applies''.
        (13) Subparagraph (B) of section 1361(b)(2) is amended by 
    striking ``or to which section 593 applies''.
        (14) The table of sections for part II of subchapter H of 
    chapter 1 is amended by striking the items relating to sections 
    593, 595, and 596.
    (c) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to taxable years 
    beginning after December 31, 1995.
        (2) Repeal of section 595.--The repeal of section 595 under 
    subsection (b)(7) shall apply to property acquired in taxable years 
    beginning after December 31, 1995.
    (d) 6-Year Spread of Adjustments.--
        (1) In general.--In the case of any taxpayer who is required by 
    reason of the amendments made by this section to change its method 
    of computing reserves for bad debts--
            (A) such change shall be treated as a change in a method of 
        accounting,
            (B) such change shall be treated as initiated by the 
        taxpayer and as having been made with the consent of the 
        Secretary, and
            (C) the net amount of the adjustments required to be taken 
        into account by the taxpayer under section 481(a)--
                (i) shall be determined by taking into account only 
            applicable excess reserves, and
                (ii) as so determined, shall be taken into account 
            ratably over the 6-taxable year period beginning with the 
            first taxable year beginning after December 31, 1995.
        (2) Applicable excess reserves.--
            (A) In general.--For purposes of paragraph (1), the term 
        `applicable excess reserves' means the excess (if any) of--
                (i) the balance of the reserves described in section 
            593(c)(1) of such Code (as in effect on the day before the 
            date of the enactment of this Act) as of the close of the 
            taxpayer's last taxable year beginning before January 1, 
            1996, over
                (ii) the lesser of--

                    (I) the balance of such reserves as of the close of 
                the taxpayer's last taxable year beginning before 
                January 1, 1988, or
                    (II) the balance of the reserves described in 
                subclause (I), reduce by an amount determined in the 
                same manner as under section 585(b)(2)(B)(ii) on the 
                basis of the taxable years described in clause (i) and 
                this clause.

            (B) Special rule for thrifts which become small banks.--In 
        the case of a bank (as defined in section 581 of such Code) 
        which is not a large bank (as defined in section 585(c)(2) of 
        such Code) for its first taxable year beginning after December 
        31, 1995--
                (i) the balance taken into account under subparagraph 
            (A)(ii) shall not be less than the amount which would be 
            the balance of such reserve as of the close of its last 
            taxable year beginning before January 1, 1996, if the 
            additions to such reserve for all taxable years had been 
            determined under section 585(b)(2)(A), and
                (ii) the opening balance of the reserve for bad debts 
            as of the beginning of such first taxable year shall be the 
            balance taken into account under subparagraph (A)(ii) 
            (determined after the application of clause (i) of this 
            subparagraph).
        The preceding sentence shall not apply for purposes of 
        paragraphs (5), (6), and (7).
        (3) Recapture of pre-1988 reserves where taxpayer ceases to be 
    bank.--If during any taxable year beginning after December 31, 
    1995, a taxpayer to which paragraph (1) applied is not a bank (as 
    defined in section 581), paragraph (1) shall apply to the reserves 
    described in subparagraph (A)(ii) except that such reserves shall 
    be taken into account ratably over the 6-taxable year period 
    beginning with such taxable year.
        (4) Suspension of recapture if residential loan requirement 
    met.--
            (A) In general.--In the case of a bank which meets the 
        residential loan requirement of subparagraph (B) for a taxable 
        year beginning after December 31, 1995, and before January 1, 
        1998--
                (i) no adjustment shall be taken into account under 
            paragraph (1) for such taxable year, and
                (ii) such taxable year shall be disregarded in 
            determining--

                    (I) whether any other taxable year is a taxable 
                year for which an adjustment is required to be taken 
                into account under paragraph (1), and
                    (II) the amount of such adjustment.

            (B) Residential loan requirement.--A taxpayer meets the 
        residential loan requirement of this subparagraph for any 
        taxable year if the principal amount of the residential loans 
        made by the taxpayer during such year is not less than the base 
        amount for such year.
            (C) Residential loan.--For purposes of this paragraph, the 
        term ``residential loan'' means any loan described in clause 
        (v) of section 7701(a)(19)(C) of such Code but only if such 
        loan is incurred in acquiring, constructing, or improving the 
        property described in such clause.
            (D) Base amount.--For purposes of subparagraph (B), the 
        base amount is the average of the principal amounts of the 
        residential loans made by the taxpayer during the 6 most recent 
        taxable years beginning before January 1, 1996. At the election 
        of the taxpayer who made such loans during each of such 6 
        taxable years, the preceding sentence shall be applied without 
        regard to the taxable year in which such principal amount was 
        the highest and the taxable year in such principal amount was 
        the lowest. Such an election may be made only for the first 
        taxable year beginning after December 31, 1995, and, if made 
        for such taxable year, shall apply to the succeeding taxable 
        year unless revoked with the consent of the Secretary of the 
        Treasury or his delegate.
            (E) Controlled groups.--In the case of a taxpayer which is 
        a member of any controlled group of corporations described in 
        section 1563(a)(1) of such Code, subparagraph (B) shall be 
        applied with respect to such group.
        (5) Continued application of fresh start under section 585 
    transitional rules.--In the case of a taxpayer to which paragraph 
    (1) applied and which was not a large bank (as defined in section 
    585(c)(2) of such Code) for its first taxable year beginning after 
    December 31, 1995:
            (A) In general.--For purposes of determining the net amount 
        of adjustments referred to in section 585(c)(3)(A)(iii) of such 
        Code, there shall be taken into account only the excess of the 
        reserve for bad debts as of the close of the last taxable year 
        before the disqualification year over the balance taken into 
        account by such taxpayer under paragraph (2)(A)(ii) of this 
        subsection.
            (B) Treatment under elective cut-off method.--For purposes 
        of applying section 585(c)(4) of such Code--
                (i) the balance of the reserve taken into account under 
            subparagraph (B) thereof shall be reduced by the balance 
            taken into account by such taxpayer under paragraph 
            (2)(A)(ii) of this subsection, and
                (ii) no amount shall be includible in gross income by 
            reason of such reduction.
        (6) Continued application of section 593(e).--Notwithstanding 
    the amendments made by this section, in the case of a taxpayer to 
    which paragraph (1) of this subsection applies, section 593(e) of 
    such Code (as in effect on the day before the date of the enactment 
    of this Act) shall continue to apply to such taxpayer as if such 
    taxpayer were a domestic building and loan association but the 
    amount of the reserves taken into account under subparagraphs (B) 
    and (C) of section 593(e)(1) (as so in effect) shall be the balance 
    taken into account by such taxpayer under paragraph (2)(A)(ii) of 
    this subsection.
        (7) Certain items included as section 381(c) items.--The 
    balance of the applicable excess reserves, and the balance taken 
    into account by a taxpayer under paragraph (2)(A)(ii) of this 
    subsection, shall be treated as items described in section 381(c) 
    of such Code.
        (8) Conversions to credit unions.--In the case of a taxpayer to 
    which paragraph (1) applied which becomes a credit union described 
    in section 501(c)(14)(A)--
            (A) any amount required to be included in the gross income 
        of the credit union by reason of this subsection shall be 
        treated as derived from an unrelated trade or business (as 
        defined in section 513), and
            (B) for purposes of paragraph (3), the credit union shall 
        not be treated as if it were a bank.
        (9) Regulations.--The Secretary of the Treasury or his delegate 
    shall prescribe such regulations as may be necessary to carry out 
    this subsection, including regulations providing for the 
    application of paragraphs (4) and (6) in the case of acquisitions, 
    mergers, spin-offs, and other reorganizations.

SEC. 11380. NEWSPAPER DISTRIBUTORS TREATED AS DIRECT SELLERS.

    (a) In General.--Section 3508(b)(2)(A) is amended by striking 
``or'' at the end of clause (i), by inserting ``or'' at the end of 
clause (ii), and by inserting after clause (ii) the following new 
clause:
                ``(iii) is engaged in the trade or business of the 
            delivering or distribution of newspapers or shopping news 
            (including any services directly related to such trade or 
            business),''.
    (b) Effective Date.--The amendments made by this section shall 
apply to services performed after December 31, 1995.

                     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.

    (a) General Rule.--
        (1) Section 1034(d) (relating to limitation on rollover of gain 
    on sale of principal residence), as amended by sections 11321 and 
    11322, is amended by striking paragraphs (1) and (2) and by 
    redesignating paragraphs (3) and (4) as paragraphs (1) and (2), 
    respectively.
        (2) Paragraph (4) of section 1034(c) is amended to read as 
    follows:
        ``(4) If the taxpayer, during the period described in 
    subsection (a), purchases more than 1 residence which is used by 
    him as his principal residence at some time within 2 years after 
    the date of the sale of the old residence, only the first of such 
    residences so used by him after the date of such sale shall 
    constitute the new residence.''
        (3) Subsections (h)(1) and (k) of section 1034 are each amended 
    by striking ``(other than the 2 years referred to in subsection 
    (c)(4))''.
    (b) Effective Date.--The amendments made by this section shall 
apply to sales of old residences (within the meaning of section 1034 of 
the Internal Revenue Code of 1986) after the date of the enactment of 
this Act.

SEC. 11402. SPECIAL RULES IN CASE OF DIVORCE.

    (a) In General.--Subsection (c) of section 1034 is amended by 
adding at the end the following new paragraph:
        ``(5) If--
            ``(A) a residence is sold by an individual pursuant to a 
        divorce or marital separation, and
            ``(B) the taxpayer used such residence as his principal 
        residence at any time during the 2-year period ending on the 
        date of such sale,
    for purposes of this section, such residence shall be treated as 
    the taxpayer's principal residence at the time of such sale.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to sales of old residences (within the meaning of section 1034 of 
the Internal Revenue Code of 1986) after the date of the enactment of 
this Act.

SEC. 11403. ONE-TIME EXCLUSION OF GAIN FROM SALE OF PRINCIPAL RESIDENCE 
              FOR CERTAIN SPOUSES.

    (a) In General.--Paragraph (2) of section 121(b) (relating to one-
time exclusion of gain from sale of principal residence by individual 
who has attained age 55) is amended by adding at the end the following 
new sentence: ``For purposes of applying the preceding sentence to 
individuals who are married to each other, an election by one 
individual with respect to a sale or exchange occurring before the 
marriage shall be disregarded for purposes of permitting an election 
with respect to property owned and used by the other individual as his 
principal residence throughout the 3-year period ending on the date of 
the marriage.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply for purposes of determining whether an election may be made under 
section 121 of the Internal Revenue Code of 1986 with respect to a sale 
or exchange occurring after September 13, 1995.

                     Subchapter B--Other Provisions

SEC. 11411. TREATMENT OF CERTAIN REIMBURSED EXPENSES OF RURAL MAIL 
              CARRIERS.

    (a) In General.--Section 162 (relating to trade or business 
expenses) is amended by redesignating subsection (o) as subsection (p) 
and by inserting after subsection (n) the following new subsection:
    ``(o) Treatment of Certain Reimbursed Expenses of Rural Mail 
Carriers.--
        ``(1) General rule.--In the case of any employee of the United 
    States Postal Service who performs services involving the 
    collection and delivery of mail on a rural route and who receives 
    qualified reimbursements for the expenses incurred by such employee 
    for the use of a vehicle in performing such services--
            ``(A) the amount allowable as a deduction under this 
        chapter for the use of a vehicle in performing such services 
        shall be equal to the amount of such qualified reimbursements; 
        and
            ``(B) such qualified reimbursements shall be treated as 
        paid under a reimbursement or other expense allowance 
        arrangement for purposes of section 62(a)(2)(A) (and section 
        62(c) shall not apply to such qualified reimbursements).
        ``(2) Definition of qualified reimbursements.--For purposes of 
    this subsection, the term `qualified reimbursements' means the 
    amounts paid by the United States Postal Service to employees as an 
    equipment maintenance allowance under the 1991 collective 
    bargaining agreement between the United States Postal Service and 
    the National Rural Letter Carriers' Association. Amounts paid as an 
    equipment maintenance allowance by such Postal Service under later 
    collective bargaining agreements that supersede the 1991 agreement 
    shall be considered qualified reimbursements if such amounts do not 
    exceed the amounts that would have been paid under the 1991 
    agreement, adjusted for changes in the Consumer Price Index (as 
    defined in section 1(f)(5)) since 1991.''
    (b) Technical Amendment.--Section 6008 of the Technical and 
Miscellaneous Revenue Act of 1988 is hereby repealed.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11412. TREATMENT OF TRAVELING EXPENSES OF CERTAIN FEDERAL 
              EMPLOYEES ENGAGED IN CRIMINAL INVESTIGATIONS.

    (a) In General.--Subsection (a) of section 162 is amended by adding 
at the end the following new sentence: ``The preceding sentence shall 
not apply to any Federal employee during any period for which such 
employee is certified by the Attorney General (or the designee thereof) 
as traveling on behalf of the United States in temporary duty status to 
investigate, or provide support services for the investigation of, a 
Federal crime.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years ending after the date of the enactment of this 
Act.

                   CHAPTER 2--PENSION SIMPLIFICATION

              Subchapter A--Simplified Distribution Rules

SEC. 11421. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM 
              DISTRIBUTIONS.

    (a) In General.--Subsection (d) of section 402 (relating to 
taxability of beneficiary of employees' trust) is amended to read as 
follows:
    ``(d) Taxability of Beneficiary of Certain Foreign Situs Trusts.--
For purposes of subsections (a), (b), and (c), a stock bonus, pension, 
or profit-sharing trust which would qualify for exemption from tax 
under section 501(a) except for the fact that it is a trust created or 
organized outside the United States shall be treated as if it were a 
trust exempt from tax under section 501(a).''.
    (b) Conforming Amendments.--
        (1) Subparagraph (D) of section 402(e)(4) (relating to other 
    rules applicable to exempt trusts) is amended to read as follows:
            ``(D) Lump-sum distribution.--For purposes of this 
        paragraph--
                ``(i) In general.--The term `lump sum distribution' 
            means the distribution or payment within one taxable year 
            of the recipient of the balance to the credit of an 
            employee which becomes payable to the recipient--

                    ``(I) on account of the employee's death,
                    ``(II) after the employee attains age 59\1/2\,
                    ``(III) on account of the employee's separation 
                from service, or
                    ``(IV) after the employee has become disabled 
                (within the meaning of section 72(m)(7)),

            from a trust which forms a part of a plan described in 
            section 401(a) and which is exempt from tax under section 
            501 or from a plan described in section 403(a). Subclause 
            (III) of this clause shall be applied only with respect to 
            an individual who is an employee without regard to section 
            401(c)(1), and subclause (IV) shall be applied only with 
            respect to an employee within the meaning of section 
            401(c)(1). For purposes of this clause, a distribution to 
            two or more trusts shall be treated as a distribution to 
            one recipient. For purposes of this paragraph, the balance 
            to the credit of the employee does not include the 
            accumulated deductible employee contributions under the 
            plan (within the meaning of section 72(o)(5)).
                ``(ii) Aggregation of certain trusts and plans.--For 
            purposes of determining the balance to the credit of an 
            employee under clause (i)--

                    ``(I) all trusts which are part of a plan shall be 
                treated as a single trust, all pension plans maintained 
                by the employer shall be treated as a single plan, all 
                profit-sharing plans maintained by the employer shall 
                be treated as a single plan, and all stock bonus plans 
                maintained by the employer shall be treated as a single 
                plan, and
                    ``(II) trusts which are not qualified trusts under 
                section 401(a) and annuity contracts which do not 
                satisfy the requirements of section 404(a)(2) shall not 
                be taken into account.

                ``(iii) Community property laws.--The provisions of 
            this paragraph shall be applied without regard to community 
            property laws.
                ``(iv) Amounts subject to penalty.--This paragraph 
            shall not apply to amounts described in subparagraph (A) of 
            section 72(m)(5) to the extent that section 72(m)(5) 
            applies to such amounts.
                ``(v) Balance to credit of employee not to include 
            amounts payable under qualified domestic relations order.--
            For purposes of this paragraph, the balance to the credit 
            of an employee shall not include any amount payable to an 
            alternate payee under a qualified domestic relations order 
            (within the meaning of section 414(p)).
                ``(vi) Transfers to cost-of-living arrangement not 
            treated as distribution.--For purposes of this paragraph, 
            the balance to the credit of an employee under a defined 
            contribution plan shall not include any amount transferred 
            from such defined contribution plan to a qualified cost-of-
            living arrangement (within the meaning of section 
            415(k)(2)) under a defined benefit plan.
                ``(vii) Lump-sum distributions of alternate payees.--If 
            any distribution or payment of the balance to the credit of 
            an employee would be treated as a lump-sum distribution, 
            then, for purposes of this paragraph, the payment under a 
            qualified domestic relations order (within the meaning of 
            section 414(p)) of the balance to the credit of an 
            alternate payee who is the spouse or former spouse of the 
            employee shall be treated as a lump-sum distribution. For 
            purposes of this clause, the balance to the credit of the 
            alternate payee shall not include any amount payable to the 
            employee.''.
        (2) Section 402(c) (relating to rules applicable to rollovers 
    from exempt trusts) is amended by striking paragraph (10).
        (3) Paragraph (1) of section 55(c) (defining regular tax) is 
    amended by striking ``shall not include any tax imposed by section 
    402(d) and''.
        (4) Paragraph (8) of section 62(a) (relating to certain portion 
    of lump-sum distributions from pension plans taxed under section 
    402(d)) is hereby repealed.
        (5) Section 401(a)(28)(B) (relating to coordination with 
    distribution rules) is amended by striking clause (v).
        (6) Subparagraph (B)(ii) of section 401(k)(10) (relating to 
    distributions that must be lump-sum distributions) is amended to 
    read as follows:
            ``(ii) Lump-sum distribution.--For purposes of this 
        subparagraph, the term `lump-sum distribution' means any 
        distribution of the balance to the credit of an employee 
        immediately before the distribution.''.
        (7) Section 406(c) (relating to termination of status as deemed 
    employee not to be treated as separation from service for purposes 
    of limitation of tax) is hereby repealed.
        (8) Section 407(c) (relating to termination of status as deemed 
    employee not to be treated as separation from service for purposes 
    of limitation of tax) is hereby repealed.
        (9) Section 691(c) (relating to deduction for estate tax) is 
    amended by striking paragraph (5).
        (10) Paragraph (1) of section 871(b) (relating to imposition of 
    tax) is amended by striking ``section 1, 55, or 402(d)(1)'' and 
    inserting ``section 1 or 55''.
        (11) Subsection (b) of section 877 (relating to alternative 
    tax) is amended by striking ``section 1, 55, or 402(d)(1)'' and 
    inserting ``section 1 or 55''.
        (12) Section 4980A(c)(4) is amended--
            (A) by striking ``to which an election under section 
        402(d)(4)(B) applies'' and inserting ``(as defined in section 
        402(e)(4)(D)) with respect to which the individual elects to 
        have this paragraph apply'',
            (B) by adding at the end the following new flush sentence:
    ``An individual may elect to have this paragraph apply to only one 
    lump-sum distribution.'', and
            (C) by striking the heading and inserting:
        ``(4) Special one-time election.--''.
        (13) Section 402(e) is amended by striking paragraph (5).
    (c) Effective Dates.--
        (1) In general.--The amendments made by this section shall 
    apply to taxable years beginning after December 31, 1998.
        (2) Retention of certain transition rules.--Notwithstanding any 
    other provision of this section, the amendments made by this 
    section shall not apply to any distribution for which the taxpayer 
    elects the benefits of section 1122(h)(3) or (h)(5) of the Tax 
    Reform Act of 1986. For purposes of the preceding sentence, the 
    rules of sections 402(c)(10) and 402(d) of the Internal Revenue 
    Code of 1986 (as in effect before the amendments made by this Act) 
    shall apply.

SEC. 11422. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH BENEFITS.

    (a) In General.--Subsection (b) of section 101 is hereby repealed.
    (b) Conforming Amendments.--
        (1) Subsection (c) of section 101 is amended by striking 
    ``subsection (a) or (b)'' and inserting ``subsection (a)''.
        (2) Sections 406(e) and 407(e) are each amended by striking 
    paragraph (2) and by redesignating paragraph (3) as paragraph (2).
        (3) Section 7701(a)(20) is amended by striking ``, for the 
    purposes of applying the provisions of section 101(b) with respect 
    to employees' death benefits''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11423. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER 
              CERTAIN EMPLOYER PLANS.

    (a) General Rule.--Subsection (d) of section 72 (relating to 
annuities; certain proceeds of endowment and life insurance contracts) 
is amended to read as follows:
    ``(d) Special Rules for Qualified Employer Retirement Plans.--
        ``(1) Simplified method of taxing annuity payments.--
            ``(A) In general.--In the case of any amount received as an 
        annuity under a qualified employer retirement plan--
                ``(i) subsection (b) shall not apply, and
                ``(ii) the investment in the contract shall be 
            recovered as provided in this paragraph.
            ``(B) Method of recovering investment in contract.--
                ``(i) In general.--Gross income shall not include so 
            much of any monthly annuity payment under a qualified 
            employer retirement plan as does not exceed the amount 
            obtained by dividing--

                    ``(I) the investment in the contract (as of the 
                annuity starting date), by
                    ``(II) the number of anticipated payments 
                determined under the table contained in clause (iii) 
                (or, in the case of a contract to which subsection 
                (c)(3)(B) applies, the number of monthly annuity 
                payments under such contract).

                ``(ii) Certain rules made applicable.--Rules similar to 
            the rules of paragraphs (2) and (3) of subsection (b) shall 
            apply for purposes of this paragraph.
                ``(iii) Number of anticipated payments.--

                 ``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.

            ``(C) Adjustment for refund feature not applicable.--For 
        purposes of this paragraph, investment in the contract shall be 
        determined under subsection (c)(1) without regard to subsection 
        (c)(2).
            ``(D) Special rule where lump sum paid in connection with 
        commencement of annuity payments.--If, in connection with the 
        commencement of annuity payments under any qualified employer 
        retirement plan, the taxpayer receives a lump sum payment--
                ``(i) such payment shall be taxable under subsection 
            (e) as if received before the annuity starting date, and
                ``(ii) the investment in the contract for purposes of 
            this paragraph shall be determined as if such payment had 
            been so received.
            ``(E) Exception.--This paragraph shall not apply in any 
        case where the primary annuitant has attained age 75 on the 
        annuity starting date unless there are fewer than 5 years of 
        guaranteed payments under the annuity.
            ``(F) Adjustment where annuity payments not on monthly 
        basis.--In any case where the annuity payments are not made on 
        a monthly basis, appropriate adjustments in the application of 
        this paragraph shall be made to take into account the period on 
        the basis of which such payments are made.
            ``(G) Qualified employer retirement plan.--For purposes of 
        this paragraph, the term `qualified employer retirement plan' 
        means any plan or contract described in paragraph (1), (2), or 
        (3) of section 4974(c).
        ``(2) Treatment of employee contributions under defined 
    contribution plans.--For purposes of this section, employee 
    contributions (and any income allocable thereto) under a defined 
    contribution plan may be treated as a separate contract.''.
    (b) Effective Date.--The amendment made by this section shall apply 
in cases where the annuity starting date is after December 31, 1995.

SEC. 11424. REQUIRED DISTRIBUTIONS.

    (a) In General.--Section 401(a)(9)(C) (defining required beginning 
date) is amended to read as follows:
            ``(C) Required beginning date.--For purposes of this 
        paragraph--
                ``(i) In general.--The term `required beginning date' 
            means April 1 of the calendar year following the later of--

                    ``(I) the calendar year in which the employee 
                attains age 70\1/2\, or
                    ``(II) the calendar year in which the employee 
                retires.

                ``(ii) Exception.--Subclause (II) of clause (i) shall 
            not apply--

                    ``(I) except as provided in section 409(d), in the 
                case of an employee who is a 5-percent owner (as 
                defined in section 416) with respect to the plan year 
                ending in the calendar year in which the employee 
                attains age 70\1/2\, or
                    ``(II) for purposes of section 408(a)(6) or (b)(3).

                ``(iii) Actuarial adjustment.--In the case of an 
            employee to whom clause (i)(II) applies who retires in a 
            calendar year after the calendar year in which the employee 
            attains age 70\1/2\, the employee's accrued benefit shall 
            be actuarially increased to take into account the period 
            after age 70\1/2\ in which the employee was not receiving 
            any benefits under the plan.
                ``(iv) Exception for governmental and church plans.--
            Clauses (ii) and (iii) shall not apply in the case of a 
            governmental plan or church plan. For purposes of this 
            clause, the term `church plan' means a plan maintained by a 
            church for church employees, and the term `church' means 
            any church (as defined in section 3121(w)(3)(A)) or 
            qualified church-controlled organization (as defined in 
            section 3121(w)(3)(B)).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1995.

            Subchapter B--Increased Access to Pension Plans

SEC. 11431. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 401(k).

    (a) In General.--Subparagraph (B) of section 401(k)(4) is amended 
to read as follows:
            ``(B) Eligibility of state and local governments and tax-
        exempt organizations.--
                ``(i) Governments ineligible.--A cash or deferred 
            arrangement shall not be treated as a qualified cash or 
            deferred arrangement if it is part of a plan maintained by 
            a State or local government or political subdivision 
            thereof, or any agency or instrumentality thereof. This 
            clause shall not apply to a rural cooperative plan.
                ``(ii) Tax-exempts eligible.--

                    ``(I) In general.--Any organization exempt from tax 
                under this subtitle may include a qualified cash or 
                deferred arrangement as part of a plan maintained by 
                it.
                    ``(II) Treatment of indian tribal governments.--An 
                employer which is an Indian tribal government (as 
                defined in section 7701(a)(40)), a subdivision of an 
                Indian tribal government (determined in accordance with 
                section 7871(d)), an agency or instrumentality of an 
                Indian tribal government or subdivision thereof, or a 
                corporation chartered under Federal, State, or tribal 
                law which is owned in whole or in part by any of the 
                foregoing shall be treated as an organization exempt 
                from tax under this subtitle for purposes of subclause 
                (I).''.

    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 1996, but shall not apply to 
any cash or deferred arrangement to which clause (i) of section 
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.

               Subchapter C--Nondiscrimination Provisions

SEC. 11441. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES; REPEAL OF 
              FAMILY AGGREGATION.

    (a) In General.--Paragraph (1) of section 414(q) (defining highly 
compensated employee) is amended to read as follows:
        ``(1) In general.--The term `highly compensated employee' means 
    any employee who--
            ``(A) was a 5-percent owner at any time during the year or 
        the preceding year, or
            ``(B) for the preceding year had compensation from the 
        employer in excess of $80,000 and was in the top-paid group of 
        the employer.
    The Secretary shall adjust the $80,000 amount under subparagraph 
    (B) at the same time and in the same manner as under section 
    415(d), except that the base period shall be the calendar quarter 
    ending September 30, 1996.''.
    (b) Repeal of Family Aggregation Rules.--
        (1) In general.--Paragraph (6) of section 414(q) is hereby 
    repealed.
        (2) Compensation limit.--Paragraph (17)(A) of section 401(a) is 
    amended by striking the last sentence.
        (3) Deduction.--Subsection (l) of section 404 is amended by 
    striking the last sentence.
    (c) Conforming Amendments.--
        (1)(A) Subsection (q) of section 414 is amended by striking 
    paragraphs (2), (5), (8), and (12) and by redesignating paragraphs 
    (3), (4), (7), (9), (10), and (11) as paragraphs (2) through (7), 
    respectively.
        (B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 408(k)(2)(C), and 
    416(i)(1)(D) are each amended by striking ``section 414(q)(7)'' and 
    inserting ``section 414(q)(4)''.
        (C) Section 416(i)(1)(A) is amended by striking ``section 
    414(q)(8)'' and inserting ``section 414(r)(9)''.
        (2)(A) Section 414(r) is amended by adding at the end the 
    following new paragraph:
        ``(9) Excluded employees.--For purposes of this subsection, the 
    following employees shall be excluded:
            ``(A) Employees who have not completed 6 months of service.
            ``(B) Employees who normally work less than 17\1/2\ hours 
        per week.
            ``(C) Employees who normally work not more than 6 months 
        during any year.
            ``(D) Employees who have not attained the age of 21.
            ``(E) Except to the extent provided in regulations, 
        employees who are included in a unit of employees covered by an 
        agreement which the Secretary of Labor finds to be a collective 
        bargaining agreement between employee representatives and the 
        employer.
    Except as provided by the Secretary, the employer may elect to 
    apply subparagraph (A), (B), (C), or (D) by substituting a shorter 
    period of service, smaller number of hours or months, or lower age 
    for the period of service, number of hours or months, or age (as 
    the case may be) specified in such subparagraph.''.
        (B) Subparagraph (A) of section 414(r)(2) is amended by 
    striking ``subsection (q)(8)'' and inserting ``paragraph (9)''.
        (3) Section 1114(c)(4) of the Tax Reform Act of 1986 is amended 
    by adding at the end the following new sentence: ``Any reference in 
    this paragraph to section 414(q) shall be treated as a reference to 
    such section as in effect on the day before the date of the 
    enactment of the Revenue Reconciliation Act of 1995.''.
    (d) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to years beginning after December 31, 1995, except that in 
    determining whether an employee is a highly compensated employee 
    for years beginning in 1996, such amendments shall be treated as 
    having been in effect for years beginning in 1995.
        (2) Family aggregation.--The amendments made by subsection (b) 
    shall apply to years beginning after December 31, 1995.

SEC. 11442. MODIFICATION OF ADDITIONAL PARTICIPATION REQUIREMENTS.

    (a) General Rule.--Section 401(a)(26)(A) (relating to additional 
participation requirements) is amended to read as follows:
        ``(A) In general.--In the case of a trust which is a part of a 
    defined benefit plan, such trust shall not constitute a qualified 
    trust under this subsection unless on each day of the plan year 
    such trust benefits at least the lesser of--
            ``(i) 50 employees of the employer, or
            ``(ii) the greater of--
                ``(I) 40 percent of all employees of the employer, or
                ``(II) 2 employees (or if there is only 1 employee, 
            such employee).''.
    (b) Separate Line of Business Test.--Section 401(a)(26)(G) 
(relating to separate line of business) is amended by striking 
``paragraph (7)'' and inserting ``paragraph (2)(A) or (7)''.
    (c) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1995.

SEC. 11443. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR DEFERRED 
              ARRANGEMENTS AND MATCHING CONTRIBUTIONS.

    (a) Alternative Methods of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements), as amended by this Act, is amended by adding at the end 
the following new paragraph:
        ``(12) Alternative methods of meeting nondiscrimination 
    requirements.--
            ``(A) In general.--A cash or deferred arrangement shall be 
        treated as meeting the requirements of paragraph (3)(A)(ii) if 
        such arrangement--
                ``(i) meets the contribution requirements of 
            subparagraph (B) or (C), and
                ``(ii) meets the notice requirements of subparagraph 
            (D).
            ``(B) Matching contributions.--
                ``(i) In general.--The requirements of this 
            subparagraph are met if, under the arrangement, the 
            employer makes matching contributions on behalf of each 
            employee who is not a highly compensated employee in an 
            amount equal to--

                    ``(I) 100 percent of the elective contributions of 
                the employee to the extent such elective contributions 
                do not exceed 3 percent of the employee's compensation, 
                and
                    ``(II) 50 percent of the elective contributions of 
                the employee to the extent that such elective 
                contributions exceed 3 percent but do not exceed 5 
                percent of the employee's compensation.

                ``(ii) Rate for highly compensated employees.--The 
            requirements of this subparagraph are not met if, under the 
            arrangement, the matching contribution with respect to any 
            elective contribution of a highly compensated employee at 
            any level of compensation is greater than that with respect 
            to an employee who is not a highly compensated employee.
                ``(iii) Alternative plan designs.--If the matching 
            contribution with respect to any elective contribution at 
            any specific level of compensation is not equal to the 
            percentage required under clause (i), an arrangement shall 
            not be treated as failing to meet the requirements of 
            clause (i) if--

                    ``(I) the level of an employer's matching 
                contribution does not increase as an employee's 
                elective contributions increase, and
                    ``(II) the aggregate amount of matching 
                contributions with respect to elective contributions 
                not in excess of such level of compensation is at least 
                equal to the amount of matching contributions which 
                would be made if matching contributions were made on 
                the basis of the percentages described in clause (i).

            ``(C) Nonelective contributions.--The requirements of this 
        subparagraph are met if, under the arrangement, the employer is 
        required, without regard to whether the employee makes an 
        elective contribution or employee contribution, to make a 
        contribution to a defined contribution plan on behalf of each 
        employee who is not a highly compensated employee and who is 
        eligible to participate in the arrangement in an amount equal 
        to at least 3 percent of the employee's compensation.
            ``(D) Notice requirement.--An arrangement meets the 
        requirements of this paragraph if, under the arrangement, each 
        employee eligible to participate is, within a reasonable period 
        before any year, given written notice of the employee's rights 
        and obligations under the arrangement which--
                ``(i) is sufficiently accurate and comprehensive to 
            appraise the employee of such rights and obligations, and
                ``(ii) is written in a manner calculated to be 
            understood by the average employee eligible to participate.
            ``(E) Other requirements.--
                ``(i) Withdrawal and vesting restrictions.--An 
            arrangement shall not be treated as meeting the 
            requirements of subparagraph (B) or (C) unless the 
            requirements of subparagraphs (B) and (C) of paragraph (2) 
            are met with respect to all employer contributions 
            (including matching contributions).
                ``(ii) Social security and similar contributions not 
            taken into account.--An arrangement shall not be treated as 
            meeting the requirements of subparagraph (B) or (C) unless 
            such requirements are met without regard to subsection (l), 
            and, for purposes of subsection (l), employer contributions 
            under subparagraph (B) or (C) shall not be taken into 
            account.
            ``(F) Other plans.--An arrangement shall be treated as 
        meeting the requirements under subparagraph (A)(i) if any other 
        plan maintained by the employer meets such requirements with 
        respect to employees eligible under the arrangement.''.
    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions), as amended 
by this Act, is amended by redesignating paragraph (10) as paragraph 
(11) and by adding after paragraph (9) the following new paragraph:
        ``(11) Alternative method of satisfying tests.--
            ``(A) In general.--A defined contribution plan shall be 
        treated as meeting the requirements of paragraph (2) with 
        respect to matching contributions if the plan--
                ``(i) meets the contribution requirements of 
            subparagraph (B) or (C) of subsection (k)(12),
                ``(ii) meets the notice requirements of subsection 
            (k)(12)(D), and
                ``(iii) meets the requirements of subparagraph (B).
            ``(B) Limitation on matching contributions.--The 
        requirements of this subparagraph are met if--
                ``(i) matching contributions on behalf of any employee 
            may not be made with respect to an employee's contributions 
            or elective deferrals in excess of 6 percent of the 
            employee's compensation,
                ``(ii) the level of an employer's matching contribution 
            does not increase as an employee's contributions or 
            elective deferrals increase, and
                ``(iii) the matching contribution with respect to any 
            highly compensated employee at a specific level of 
            compensation is not greater than that with respect to an 
            employee who is not a highly compensated employee.''.
    (c) Year for Computing Nonhighly Compensated Employee Percentage.--
        (1) Cash or deferred arrangements.--Clause (ii) of section 
    401(k)(3)(A) is amended--
            (A) by striking ``such year'' and inserting ``the plan 
        year'',
            (B) by striking ``for such plan year'' and inserting ``the 
        preceding plan year'', and
            (C) by adding at the end the following new sentence: ``An 
        arrangement may apply this clause by using the plan year rather 
        than the preceding plan year if the employer so elects, except 
        that if such an election is made, it may not be changed except 
        as provided by the Secretary.''.
        (2) Matching and employee contributions.--Section 401(m)(2)(A) 
    is amended--
            (A) by inserting ``for such plan year'' after ``highly 
        compensated employee'',
            (B) by inserting ``for the preceding plan year'' after 
        ``eligible employees'' each place it appears in clause (i) and 
        clause (ii), and
            (C) by adding at the end the following flush sentence: 
        ``This subparagraph may be applied by using the plan year 
        rather than the preceding plan year if the employer so elects, 
        except that if such an election is made, it may not be changed 
        except as provided by the Secretary.''.
    (d) Special Rule for Determining Average Deferral Percentage for 
First Plan Year, Etc.--
        (1) Paragraph (3) of section 401(k) is amended by adding at the 
    end the following new subparagraph:
            ``(E) For purposes of this paragraph, in the case of the 
        first plan year of any plan, the amount taken into account as 
        the actual deferral percentage of nonhighly compensated 
        employees for the preceding plan year shall be--
                ``(i) 3 percent, or
                ``(ii) if the employer makes an election under this 
            subclause, the actual deferral percentage of nonhighly 
            compensated employees determined for such first plan 
            year.''.
        (2) Paragraph (3) of section 401(m) is amended by adding at the 
    end the following: ``Rules similar to the rules of subsection 
    (k)(3)(E) shall apply for purposes of this subsection.''.
    (e) Distribution of Excess Contributions.--
        (1) Subparagraph (C) of section 401(k)(8) (relating to 
    arrangement not disqualified if excess contributions distributed) 
    is amended by striking ``on the basis of the respective portions of 
    the excess contributions attributable to each of such employees'' 
    and inserting ``on the basis of the amount of contributions by, or 
    on behalf of, each of such employees''.
        (2) Subparagraph (C) of section 401(m)(6) (relating to method 
    of distributing excess aggregate contributions) is amended by 
    striking ``on the basis of the respective portions of such amounts 
    attributable to each of such employees'' and inserting ``on the 
    basis of the amount of contributions on behalf of, or by, each such 
    employee''.
    (f) Effective Dates.--
        (1) In general.--The amendments made by this section shall 
    apply to years beginning after December 31, 1998.
        (2) Excess contributions.--The amendments made by subsection 
    (e) shall apply to years beginning after December 31, 1995.

SEC. 11444. DEFINITION OF COMPENSATION FOR SECTION 415 PURPOSES.

    (a) General Rule.--Section 415(c)(3) (defining participant's 
compensation) is amended by adding at the end the following new 
subparagraph:
            ``(D) Certain deferrals included.--The term `participant's 
        compensation' shall include--
                ``(i) any elective deferral (as defined in section 
            402(g)(3)), and
                ``(ii) any amount which is contributed by the employer 
            at the election of the employee and which is not includible 
            in the gross income of the employee under section 125 or 
            457.''.
    (b) Conforming Amendments.--
        (1) Section 414(q)(4), as redesignated by section 11441, is 
    amended to read as follows:
        ``(7) Compensation.--For purposes of this subsection, the term 
    `compensation' has the meaning given such term by section 
    415(c)(3).''.
        (2) Section 414(s)(2) is amended by inserting ``not'' after 
    ``elect'' in the text and heading thereof.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1997.

                 Subchapter D--Miscellaneous Provisions

SEC. 11451. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.

    (a) Aggregation Rules.--Section 401(d) (relating to additional 
requirements for qualification of trusts and plans benefiting owner-
employees) is amended to read as follows:
    ``(d) Contribution Limit on Owner-Employees.--A trust forming part 
of a pension or profit-sharing plan which provides contributions or 
benefits for employees some or all of whom are owner-employees shall 
constitute a qualified trust under this section only if, in addition to 
meeting the requirements of subsection (a), the plan provides that 
contributions on behalf of any owner-employee may be made only with 
respect to the earned income of such owner-employee which is derived 
from the trade or business with respect to which such plan is 
established.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 11452. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER 
              PLANS.

    (a) In General.--Paragraph (2) of section 411(a) (relating to 
minimum vesting standards) is amended--
        (1) by striking ``subparagraph (A), (B), or (C)'' and inserting 
    ``subparagraph (A) or (B)''; and
        (2) by striking subparagraph (C).
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after the earlier of--
        (1) the later of--
            (A) January 1, 1996, or
            (B) the date on which the last of the collective bargaining 
        agreements pursuant to which the plan is maintained terminates 
        (determined without regard to any extension thereof after the 
        date of the enactment of this Act), or
        (2) January 1, 1998.
Such amendments shall not apply to any individual who does not have 
more than 1 hour of service under the plan on or after the 1st day of 
the 1st plan year to which such amendments apply.

SEC. 11453. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.

    (a) Distributions for Hardship or After a Certain Age.--Section 
401(k)(7) is amended by adding at the end the following new 
subparagraph:
            ``(C) Special rule for certain distributions.--A rural 
        cooperative plan which includes a qualified cash or deferred 
        arrangement shall not be treated as violating the requirements 
        of section 401(a) or of paragraph (2) merely by reason of a 
        hardship distribution or a distribution to a participant after 
        attainment of age 59\1/2\. For purposes of this section, the 
        term `hardship distribution' means a distribution described in 
        paragraph (2)(B)(i)(IV) (without regard to the limitation of 
        its application to profit-sharing or stock bonus plans).''.
    (b) Public Utility Districts.--Clause (i) of section 401(k)(7)(B) 
(defining rural cooperative) is amended to read as follows:
                ``(i) any organization which--

                    ``(I) is engaged primarily in providing electric 
                service on a mutual or cooperative basis, or
                    ``(II) is engaged primarily in providing electric 
                service to the public in its area of service and which 
                is exempt from tax under this subtitle or which is a 
                State or local government (or an agency or 
                instrumentality thereof), other than a municipality (or 
                an agency or instrumentality thereof).''

    (c) Effective Dates.--
        (1) Distributions.--The amendments made by subsection (a) shall 
    apply to distributions after the date of the enactment of this Act.
        (2) Rural cooperative.--The amendments made by subsection (b) 
    shall apply to plan years beginning after December 31, 1994.

SEC. 11454. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415.

    (a) Compensation Limit.--Subsection (b) of section 415 is amended 
by adding immediately after paragraph (10) the following new paragraph:
        ``(11) Special limitation rule for governmental plans.--In the 
    case of a governmental plan (as defined in section 414(d)), 
    subparagraph (B) of paragraph (1) shall not apply.''
    (b) Treatment of Certain Excess Benefit Plans.--
        (1) In general.--Section 415 is amended by adding at the end 
    the following new subsection:
    ``(m) Treatment of Qualified Governmental Excess Benefit 
Arrangements.--
        ``(1) Governmental plan not affected.--In determining whether a 
    governmental plan (as defined in section 414(d)) meets the 
    requirements of this section, benefits provided under a qualified 
    governmental excess benefit arrangement shall not be taken into 
    account. Income accruing to a governmental plan (or to a trust that 
    is maintained solely for the purpose of providing benefits under a 
    qualified governmental excess benefit arrangement) in respect of a 
    qualified governmental excess benefit arrangement shall constitute 
    income derived from the exercise of an essential governmental 
    function upon which such governmental plan (or trust) shall be 
    exempt from tax under section 115.
        ``(2) Taxation of participant.--For purposes of this chapter--
            ``(A) the taxable year or years for which amounts in 
        respect of a qualified governmental excess benefit arrangement 
        are includible in gross income by a participant, and
            ``(B) the treatment of such amounts when so includible by 
        the participant,
    shall be determined as if such qualified governmental excess 
    benefit arrangement were treated as a plan for the deferral of 
    compensation which is maintained by a corporation not exempt from 
    tax under this chapter and which does not meet the requirements for 
    qualification under section 401.
        ``(3) Qualified governmental excess benefit arrangement.--For 
    purposes of this subsection, the term `qualified governmental 
    excess benefit arrangement' means a portion of a governmental plan 
    if--
            ``(A) such portion is maintained solely for the purpose of 
        providing to participants in the plan that part of the 
        participant's annual benefit otherwise payable under the terms 
        of the plan that exceeds the limitations on benefits imposed by 
        this section,
            ``(B) under such portion no election is provided at any 
        time to the participant (directly or indirectly) to defer 
        compensation, and
            ``(C) benefits described in subparagraph (A) are not paid 
        from a trust forming a part of such governmental plan unless 
        such trust is maintained solely for the purpose of providing 
        such benefits.''
        (2) Coordination with section 457.--Subsection (e) of section 
    457 is amended by adding at the end the following new paragraph:
        ``(15) Treatment of qualified governmental excess benefit 
    arrangements.--Subsections (b)(2) and (c)(1) shall not apply to any 
    qualified governmental excess benefit arrangement (as defined in 
    section 415(m)(3)), and benefits provided under such an arrangement 
    shall not be taken into account in determining whether any other 
    plan is an eligible deferred compensation plan.''
        (3) Conforming amendment.--Paragraph (2) of section 457(f) is 
    amended by striking ``and'' at the end of subparagraph (C), by 
    striking the period at the end of subparagraph (D) and inserting 
    ``, and'', and by inserting immediately thereafter the following 
    new subparagraph:
            ``(E) a qualified governmental excess benefit arrangement 
        described in section 415(m).''
    (c) Exemption for Survivor and Disability Benefits.--Paragraph (2) 
of section 415(b) is amended by adding at the end the following new 
subparagraph:
            ``(I) Exemption for survivor and disability benefits 
        provided under governmental plans.--Subparagraph (B) of 
        paragraph (1), subparagraph (C) of this paragraph, and 
        paragraph (5) shall not apply to--
                ``(i) income received from a governmental plan (as 
            defined in section 414(d)) as a pension, annuity, or 
            similar allowance as the result of the recipient becoming 
            disabled by reason of personal injuries or sickness, or
                ``(ii) amounts received from a governmental plan by the 
            beneficiaries, survivors, or the estate of an employee as 
            the result of the death of the employee.''
    (d) Revocation of Grandfather Election.--
        (1) In general.--Subparagraph (C) of section 415(b)(10) is 
    amended by adding at the end the following new clause:
                ``(ii) Revocation of election.--An election under 
            clause (i) may be revoked not later than the last day of 
            the third plan year beginning after the date of the 
            enactment of this clause. The revocation shall apply to all 
            plan years to which the election applied and to all 
            subsequent plan years. Any amount paid by a plan in a 
            taxable year ending after the revocation shall be 
            includible in income in such taxable year under the rules 
            of this chapter in effect for such taxable year, except 
            that, for purposes of applying the limitations imposed by 
            this section, any portion of such amount which is 
            attributable to any taxable year during which the election 
            was in effect shall be treated as received in such taxable 
            year.''
        (2) Conforming amendment.--Subparagraph (C) of section 
    415(b)(10) is amended by striking ``This'' and inserting:
                ``(i) In general.--This''.
    (e) Effective Date.--
        (1) In general.--The amendments made by subsections (a), (b), 
    and (c) shall apply to years beginning after December 31, 1994. The 
    amendments made by subsection (d) shall apply with respect to 
    revocations adopted after the date of the enactment of this Act.
        (2) Treatment for years beginning before date of enactment.--
    Nothing in the amendments made by this section shall be construed 
    to infer that a governmental plan (as defined in section 414(d) of 
    the Internal Revenue Code of 1986) fails to satisfy the 
    requirements of section 415 of such Code for any taxable year 
    beginning before the date of the enactment of this Act.

SEC. 11455. UNIFORM RETIREMENT AGE.

    (a) Discrimination Testing.--Paragraph (5) of section 401(a) 
(relating to special rules relating to nondiscrimination requirements) 
is amended by adding at the end the following new subparagraph:
            ``(F) Social security retirement age.--For purposes of 
        testing for discrimination under paragraph (4)--
                ``(i) the social security retirement age (as defined in 
            section 415(b)(8)) shall be treated as a uniform retirement 
            age, and
                ``(ii) subsidized early retirement benefits and joint 
            and survivor annuities shall not be treated as being 
            unavailable to employees on the same terms merely because 
            such benefits or annuities are based in whole or in part on 
            an employee's social security retirement age (as so 
            defined).''
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1995.

SEC. 11456. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.

    (a) All Disabled Participants Receiving Contributions.--Section 
415(c)(3)(C) is amended by adding at the end the following: ``If a 
defined contribution plan provides for the continuation of 
contributions on behalf of all participants described in clause (i) for 
a fixed or determinable period, this subparagraph shall be applied 
without regard to clauses (ii) and (iii).''
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1995.

SEC. 11457. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE AND LOCAL 
              GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

    (a) Special Rules for Plan Distributions.--Paragraph (9) of section 
457(e) (relating to other definitions and special rules) is amended to 
read as follows:
        ``(9) Benefits not treated as made available by reason of 
    certain elections, etc.--
            ``(A) Total amount payable is $3,500 or less.--The total 
        amount payable to a participant under the plan shall not be 
        treated as made available merely because the participant may 
        elect to receive such amount (or the plan may distribute such 
        amount without the participant's consent) if--
                ``(i) such amount does not exceed $3,500, and
                ``(ii) such amount may be distributed only if--

                    ``(I) no amount has been deferred under the plan 
                with respect to such participant during the 2-year 
                period ending on the date of the distribution, and
                    ``(II) there has been no prior distribution under 
                the plan to such participant to which this subparagraph 
                applied.

        A plan shall not be treated as failing to meet the distribution 
        requirements of subsection (d) by reason of a distribution to 
        which this subparagraph applies.
            ``(B) Election to defer commencement of distributions.--The 
        total amount payable to a participant under the plan shall not 
        be treated as made available merely because the participant may 
        elect to defer commencement of distributions under the plan 
        if--
                ``(i) such election is made after amounts may be 
            available under the plan in accordance with subsection 
            (d)(1)(A) and before commencement of such distributions, 
            and
                ``(ii) the participant may make only 1 such 
            election.''.
    (b) Cost-of-Living Adjustment of Maximum Deferral Amount.--
Subsection (e) of section 457, as amended by section 11454(b)(2) 
(relating to governmental plans), is amended by adding at the end the 
following new paragraph:
        ``(16) Cost-of-living adjustment of maximum deferral amount.--
    The Secretary shall adjust the $7,500 amount specified in 
    subsections (b)(2) and (c)(1) at the same time and in the same 
    manner as under section 415(d), except that the base period shall 
    be the calendar quarter ending September 30, 1994, and any increase 
    under this paragraph which is not a multiple of $500 shall be 
    rounded to the next lowest multiple of $500.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11458. TRUST REQUIREMENT FOR DEFERRED COMPENSATION PLANS OF STATE 
              AND LOCAL GOVERNMENTS.

    (a) In General.--Section 457 is amended by adding at the end the 
following new subsection:
    ``(g) Governmental Plans Must Maintain Set Asides for Exclusive 
Benefit of Participants.--
        ``(1) In general.--A plan maintained by an eligible employer 
    described in subsection (e)(1)(A) shall not be treated as an 
    eligible deferred compensation plan unless all assets and income of 
    the plan described in subsection (b)(6) are held in trust for the 
    exclusive benefit of participants and their beneficiaries.
        ``(2) Taxability of trusts and participants.--For purposes of 
    this title--
            ``(A) a trust described in paragraph (1) shall be treated 
        as an organization exempt from taxation under section 501(a), 
        and
            ``(B) notwithstanding any other provision of this title, 
        amounts in the trust shall be includible in the gross income of 
        participants and beneficiaries only to the extent, and at the 
        time, provided in this section.
        ``(3) Custodial accounts and contracts.--For purposes of this 
    subsection, custodial accounts and contracts described in section 
    401(f) shall be treated as trusts under rules similar to the rules 
    under section 401(f).''
    (b) Conforming Amendment.--Paragraph (6) of section 457(b) is 
amended by inserting ``except as provided in subsection (g),'' before 
``which provides that''.
    (c) Effective Dates.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to assets and income 
    described in section 457(b)(6) of the Internal Revenue Code of 1986 
    held by a plan on and after the date of the enactment of this Act.
        (2) Transition rule.--In the case of assets and income 
    described in paragraph (1) held by a plan before the first day of 
    the first calendar quarter beginning after the close of the first 
    regular session of the State legislature of the State in which the 
    governmental entity maintaining the plan is located beginning after 
    the date of the enactment of this Act, a trust need not be 
    established by reason of the amendments made by this section before 
    such first day. For purposes of the preceding sentence, in the case 
    of a State that has a 2-year legislative session, each year of such 
    session shall be deemed to be a separate regular session of the 
    State legislature.

SEC. 11459. TRANSITION RULE FOR COMPUTING MAXIMUM BENEFITS UNDER 
              SECTION 415 LIMITATIONS.

    (a) In General.--Subparagraph (A) of section 767(d)(3) of the 
Uruguay Round Agreements Act is amended to read as follows:
            ``(A) Exception.--A plan that was adopted and in effect 
        before December 8, 1994, shall not be required to apply the 
        amendments made by subsection (b) with respect to benefits 
        accrued before the earlier of--
                ``(i) the later of the date a plan amendment applying 
            such amendment is adopted or made effective, or
                ``(ii) the first day of the first limitation year 
            beginning after December 31, 1999.
        Determinations under section 415(b)(2)(E) of the Internal 
        Revenue Code of 1986 shall be made with respect to such 
        benefits on the basis of such section as in effect on December 
        7, 1994 (except that the modification made by subsection (b) 
        shall be taken into account), and the provisions of the plan as 
        in effect on December 7, 1994, but only if such provisions of 
        the plan meet the requirements of such section (as so in 
        effect).''
    (b) Modification of Certain Assumptions for Adjusting Benefits of 
Defined Benefit Plans for Early Retirees.--Subparagraph (E) of section 
415(b)(2) (relating to limitation on certain assumptions) is amended--
        (1) by striking ``Except as provided in clause (ii), for 
    purposes of adjusting any benefit or limitation under subparagraph 
    (B) or (C),'' in clause (i) and inserting ``For purposes of 
    adjusting any limitation under subparagraph (C) and, except as 
    provided in clause (ii), for purposes of adjusting any benefit 
    under subparagraph (B),'', and
        (2) by striking ``For purposes of adjusting the benefit or 
    limitation of any form of benefit subject to section 417(e)(3),'' 
    in clause (ii) and inserting ``For purposes of adjusting any 
    benefit under subparagraph (B) for any form of benefit subject to 
    section 417(e)(3),''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of section 767 of the Uruguay 
Round Agreements Act.
    (d) Transitional Rule.--In the case of a plan that was adopted and 
in effect before December 8, 1994, if--
        (1) a plan amendment was adopted or made effective on or before 
    the date of the enactment of this Act applying the amendments made 
    by section 767(b) of the Uruguay Round Agreements Act, and
        (2) within 1 year after the date of the enactment of this Act, 
    a plan amendment is adopted which repeals the amendment referred to 
    in paragraph (1),
the amendment referred to in paragraph (1) shall not be taken into 
account in applying section 767(d)(3)(A) of the Uruguay Round 
Agreements Act, as amended by subsection (a).

SEC. 11460. MODIFICATIONS OF SECTION 403(b).

    (a) Multiple Salary Reduction Agreements Permitted.--
        (1) General rule.--For purposes of section 403(b) of the 
    Internal Revenue Code of 1986, the frequency that an employee is 
    permitted to enter into a salary reduction agreement, the salary to 
    which such an agreement may apply, and the ability to revoke such 
    an agreement shall be determined under the rules applicable to cash 
    or deferred elections under section 401(k) of such Code.
        (2) Effective date.--This subsection shall apply to taxable 
    years beginning after December 31, 1995.
    (b) Treatment of Indian Tribal Governments.--
        (1) In general.--In the case of any contract purchased in a 
    plan year beginning before January 1, 1995, section 403(b) of the 
    Internal Revenue Code of 1986 shall be applied as if any reference 
    to an employer described in section 501(c)(3) of the Internal 
    Revenue Code of 1986 which is exempt from tax under section 501 of 
    such Code included a reference to an employer which is an Indian 
    tribal government (as defined by section 7701(a)(40) of such Code), 
    a subdivision of an Indian tribal government (determined in 
    accordance with section 7871(d) of such Code), an agency or 
    instrumentality of an Indian tribal government or subdivision 
    thereof, or a corporation chartered under Federal, State, or tribal 
    law which is owned in whole or in part by any of the foregoing.
        (2) Rollovers.--Solely for purposes of applying section 
    403(b)(8) of such Code to a contract to which paragraph (1) 
    applies, a qualified cash or deferred arrangement under section 
    401(k) of such Code shall be treated as if it were a plan or 
    contract described in clause (ii) of section 403(b)(8)(A) of such 
    Code.
    (c) Elective Deferrals.--
        (1) In general.--Subparagraph (E) of section 403(b)(1) is 
    amended to read as follows:
            ``(E) in the case of a contract purchased under a salary 
        reduction agreement, the contract meets the requirements of 
        section 401(a)(30),''.
        (2) Effective date.--The amendment made by this subsection 
    shall apply to years beginning after December 31, 1995.

SEC. 11461. WAIVER OF MINIMUM PERIOD FOR JOINT AND SURVIVOR ANNUITY 
              EXPLANATION BEFORE ANNUITY STARTING DATE.

    (a) General Rule.--For purposes of section 417(a)(3)(A) of the 
Internal Revenue Code of 1986 (relating to plan to provide written 
explanations), the minimum period prescribed by the Secretary of the 
Treasury between the date that the explanation referred to in such 
section is provided and the annuity starting date shall not apply if 
waived by the participant and, if applicable, the participant's spouse.
    (b) Effective Date.--Subsection (a) shall apply to plan years 
beginning after December 31, 1995.

SEC. 11462. REPEAL OF LIMITATION IN CASE OF DEFINED BENEFIT PLAN AND 
              DEFINED CONTRIBUTION PLAN FOR SAME EMPLOYEE; EXCESS 
              DISTRIBUTIONS.

    (a) In General.--Section 415(e) is repealed.
    (b) Excess Distributions.--Section 4980A is amended by adding at 
the end the following new subsection:
    ``(g) Limitation on Application.--This section shall not apply to 
distributions during years beginning after December 31, 1995, and 
before January 1, 1999, and such distributions shall be treated as made 
first from amounts not described in subsection (f).''
    (c) Conforming Amendments.--
        (1) Subparagraph (B) of section 415(b)(5) is amended by 
    striking ``and subsection (e)''.
        (2) Paragraph (1) of section 415(f) is amended by striking 
    ``subsections (b), (c), and (e)'' and inserting ``subsections (b) 
    and (c)''.
        (3) Subsection (g) of section 415 is amended by striking 
    ``subsections (e) and (f)'' in the last sentence and inserting 
    ``subsection (f)''.
        (4) Clause (i) of section 415(k)(2)(A) is amended to read as 
    follows:
                ``(i) any contribution made directly by an employee 
            under such an arrangement shall not be treated as an annual 
            addition for purposes of subsection (c), and''.
        (5) Clause (ii) of section 415(k)(2)(A) is amended by striking 
    ``subsections (c) and (e)'' and inserting ``subsection (c)''.
        (6) Section 416 is amended by striking subsection (h).
    (d) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall apply to limitation years 
    beginning after December 31, 1998.
        (2) Excess distributions.--The amendment made by subsection (b) 
    shall apply to years beginning after December 31, 1995.

SEC. 11463. TAX ON PROHIBITED TRANSACTIONS.

    (a) In General.--Section 4975(a) is amended by striking ``5 
percent'' and inserting ``10 percent''.
    (b) Effective Date.--The amendment made by this section shall apply 
to prohibited transactions occurring after December 31, 1995.

SEC. 11464. TREATMENT OF LEASED EMPLOYEES.

    (a) General Rule.--Subparagraph (C) of section 414(n)(2) (defining 
leased employee) is amended to read as follows:
            ``(C) such services are performed under primary direction 
        or control by the recipient.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1995, but shall not apply 
to any relationship determined under an Internal Revenue Service ruling 
issued before the date of the enactment of this Act pursuant to section 
414(n)(2)(C) of the Internal Revenue Code of 1986 (as in effect on the 
day before such date) not to involve a leased employee.

               CHAPTER 3--TREATMENT OF LARGE PARTNERSHIPS

SEC. 11471. SIMPLIFIED FLOW-THROUGH FOR ELECTING LARGE PARTNERSHIPS.

    (a) General Rule.--Subchapter K (relating to partners and 
partnerships) is amended by adding at the end the following new part:

        ``PART IV--SPECIAL RULES FOR ELECTING LARGE 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.
        ``Sec. 776. Special rules for partnerships holding oil and gas 
                  properties.
        ``Sec. 777. Regulations.

``SEC. 771. APPLICATION OF SUBCHAPTER TO ELECTING LARGE PARTNERSHIPS.

    ``The preceding provisions of this subchapter to the extent 
inconsistent with the provisions of this part shall not apply to an 
electing large partnership and its partners.

``SEC. 772. SIMPLIFIED FLOW-THROUGH.

    ``(a) General Rule.--In determining the income tax of a partner of 
an electing large partnership, such partner shall take into account 
separately such partner's distributive share of the partnership's--
        ``(1) taxable income or loss from passive loss limitation 
    activities,
        ``(2) taxable income or loss from other activities,
        ``(3) net capital gain (or net capital loss)--
            ``(A) to the extent allocable to passive loss limitation 
        activities, and
            ``(B) to the extent allocable to other activities,
        ``(4) tax-exempt interest,
        ``(5) applicable net AMT adjustment separately computed for--
            ``(A) passive loss limitation activities, and
            ``(B) other activities,
        ``(6) general credits,
        ``(7) low-income housing credit determined under section 42,
        ``(8) rehabilitation credit determined under section 47,
        ``(9) foreign income taxes,
        ``(10) the credit allowable under section 29, and
        ``(11) other items to the extent that the Secretary determines 
    that the separate treatment of such items is appropriate.
    ``(b) Separate Computations.--In determining the amounts required 
under subsection (a) to be separately taken into account by any 
partner, this section and section 773 shall be applied separately with 
respect to such partner by taking into account such partner's 
distributive share of the items of income, gain, loss, deduction, or 
credit of the partnership.
    ``(c) Treatment at Partner Level.--
        ``(1) In general.--Except as provided in this subsection, rules 
    similar to the rules of section 702(b) shall apply to any partner's 
    distributive share of the amounts referred to in subsection (a).
        ``(2) Income or loss from passive loss limitation activities.--
    For purposes of this chapter, any partner's distributive share of 
    any income or loss described in subsection (a)(1) shall be treated 
    as an item of income or loss (as the case may be) from the conduct 
    of a trade or business which is a single passive activity (as 
    defined in section 469). A similar rule shall apply to a partner's 
    distributive share of amounts referred to in paragraphs (3)(A) and 
    (5)(A) of subsection (a).
        ``(3) Income or loss from other activities.--
            ``(A) In general.--For purposes of this chapter, any 
        partner's distributive share of any income or loss described in 
        subsection (a)(2) shall be treated as an item of income or 
        expense (as the case may be) with respect to property held for 
        investment.
            ``(B) Deductions for loss not subject to section 67.--The 
        deduction under section 212 for any loss described in 
        subparagraph (A) shall not be treated as a miscellaneous 
        itemized deduction for purposes of section 67.
        ``(4) Treatment of net capital gain or loss.--For purposes of 
    this chapter, any partner's distributive share of any gain or loss 
    described in subsection (a)(3) shall be treated as a long-term 
    capital gain or loss, as the case may be.
        ``(5) Minimum tax treatment.--In determining the alternative 
    minimum taxable income of any partner, such partner's distributive 
    share of any applicable net AMT adjustment shall be taken into 
    account in lieu of making the separate adjustments provided in 
    sections 56, 57, and 58 with respect to the items of the 
    partnership. Except as provided in regulations, the applicable net 
    AMT adjustment shall be treated, for purposes of section 53, as an 
    adjustment or item of tax preference not specified in section 
    53(d)(1)(B)(ii).
        ``(6) General credits.--A partner's distributive share of the 
    amount referred to in paragraph (6) of subsection (a) shall be 
    taken into account as a current year business credit.
    ``(d) Operating Rules.--For purposes of this section--
        ``(1) Passive loss limitation activity.--The term `passive loss 
    limitation activity' means--
            ``(A) any activity which involves the conduct of a trade or 
        business, and
            ``(B) any rental activity.
    For purposes of the preceding sentence, the term `trade or 
    business' includes any activity treated as a trade or business 
    under paragraph (5) or (6) of section 469(c).
        ``(2) Tax-exempt interest.--The term `tax-exempt interest' 
    means interest excludable from gross income under section 103.
        ``(3) Applicable net amt adjustment.--
            ``(A) In general.--The applicable net AMT adjustment is--
                ``(i) with respect to taxpayers other than 
            corporations, the net adjustment determined by using the 
            adjustments applicable to individuals, and
                ``(ii) with respect to corporations, the net adjustment 
            determined by using the adjustments applicable to 
            corporations.
            ``(B) Net adjustment.--The term `net adjustment' means the 
        net adjustment in the items attributable to passive loss 
        activities or other activities (as the case may be) which would 
        result if such items were determined with the adjustments of 
        sections 56, 57, and 58.
        ``(4) Treatment of certain separately stated items.--
            ``(A) Exclusion for certain purposes.--In determining the 
        amounts referred to in paragraphs (1) and (2) of subsection 
        (a), any net capital gain or net capital loss (as the case may 
        be), and any item referred to in subsection (a)(11), shall be 
        excluded.
            ``(B) Allocation rules.--The net capital gain shall be 
        treated--
                ``(i) as allocable to passive loss limitation 
            activities to the extent the net capital gain does not 
            exceed the net capital gain determined by only taking into 
            account gains and losses from sales and exchanges of 
            property used in connection with such activities, and
                ``(ii) as allocable to other activities to the extent 
            such gain exceeds the amount allocated under clause (i).
        A similar rule shall apply for purposes of allocating any net 
        capital loss.
            ``(C) Net capital loss.--The term `net capital loss' means 
        the excess of the losses from sales or exchanges of capital 
        assets over the gains from sales or exchange of capital assets.
        ``(5) General credits.--The term `general credits' means any 
    credit other than the low-income housing credit, the rehabilitation 
    credit, the foreign tax credit, and the credit allowable under 
    section 29.
        ``(6) Foreign income taxes.--The term `foreign income taxes' 
    means taxes described in section 901 which are paid or accrued to 
    foreign countries and to possessions of the United States.
    ``(e) Special Rule for Unrelated Business Tax.--In the case of a 
partner which is an organization subject to tax under section 511, such 
partner's distributive share of any items shall be taken into account 
separately to the extent necessary to comply with the provisions of 
section 512(c)(1).
    ``(f) Special Rules for Applying Passive Loss Limitations.--If any 
person holds an interest in an electing large partnership other than as 
a limited partner--
        ``(1) paragraph (2) of subsection (c) shall not apply to such 
    partner, and
        ``(2) such partner's distributive share of the partnership 
    items allocable to passive loss limitation activities shall be 
    taken into account separately to the extent necessary to comply 
    with the provisions of section 469.
The preceding sentence shall not apply to any items allocable to an 
interest held as a limited partner.

``SEC. 773. COMPUTATIONS AT PARTNERSHIP LEVEL.

    ``(a) General Rule.--
        ``(1) Taxable income.--The taxable income of an electing large 
    partnership shall be computed in the same manner as in the case of 
    an individual except that--
            ``(A) the items described in section 772(a) shall be 
        separately stated, and
            ``(B) the modifications of subsection (b) shall apply.
        ``(2) Elections.--All elections affecting the computation of 
    the taxable income of an electing large partnership or the 
    computation of any credit of an electing large partnership shall be 
    made by the partnership; except that the election under section 
    901, and any election under section 108, shall be made by each 
    partner separately.
        ``(3) Limitations, etc.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        all limitations and other provisions affecting the computation 
        of the taxable income of an electing large partnership or the 
        computation of any credit of an electing large partnership 
        shall be applied at the partnership level (and not at the 
        partner level).
            ``(B) Certain limitations applied at partner level.--The 
        following provisions shall be applied at the partner level (and 
        not at the partnership level):
                ``(i) Section 68 (relating to overall limitation on 
            itemized deductions).
                ``(ii) Sections 49 and 465 (relating to at risk 
            limitations).
                ``(iii) Section 469 (relating to limitation on passive 
            activity losses and credits).
                ``(iv) Any other provision specified in regulations.
        ``(4) Coordination with other provisions.--Paragraphs (2) and 
    (3) shall apply notwithstanding any other provision of this chapter 
    other than this part.
    ``(b) Modifications to Determination of Taxable Income.--In 
determining the taxable income of an electing large partnership--
        ``(1) Certain deductions not allowed.--The following deductions 
    shall not be allowed:
            ``(A) The deduction for personal exemptions provided in 
        section 151.
            ``(B) The net operating loss deduction provided in section 
        172.
            ``(C) The additional itemized deductions for individuals 
        provided in part VII of subchapter B (other than section 212 
        thereof).
        ``(2) Charitable deductions.--In determining the amount 
    allowable under section 170, the limitation of section 170(b)(2) 
    shall apply.
        ``(3) Coordination with section 67.--In lieu of applying 
    section 67, 70 percent of the amount of the miscellaneous itemized 
    deductions shall be disallowed.
    ``(c) Special Rules for Income From Discharge of Indebtedness.--If 
an electing large partnership has income from the discharge of any 
indebtedness--
        ``(1) such income shall be excluded in determining the amounts 
    referred to in section 772(a), and
        ``(2) in determining the income tax of any partner of such 
    partnership--
            ``(A) such income shall be treated as an item required to 
        be separately taken into account under section 772(a), and
            ``(B) the provisions of section 108 shall be applied 
        without regard to this part.

``SEC. 774. OTHER MODIFICATIONS.

    ``(a) Treatment of Certain Optional Adjustments, Etc.--In the case 
of an electing large partnership--
        ``(1) computations under section 773 shall be made without 
    regard to any adjustment under section 743(b) or 108(b), but
        ``(2) a partner's distributive share of any amount referred to 
    in section 772(a) shall be appropriately adjusted to take into 
    account any adjustment under section 743(b) or 108(b) with respect 
    to such partner.
    ``(b) Credit Recapture Determined at Partnership Level.--
        ``(1) In general.--In the case of an electing large 
    partnership--
            ``(A) any credit recapture shall be taken into account by 
        the partnership, and
            ``(B) the amount of such recapture shall be determined as 
        if the credit with respect to which the recapture is made had 
        been fully utilized to reduce tax.
        ``(2) Method of taking recapture into account.--An electing 
    large partnership shall take into account a credit recapture by 
    reducing the amount of the appropriate current year credit to the 
    extent thereof, and if such recapture exceeds the amount of such 
    current year credit, the partnership shall be liable to pay such 
    excess.
        ``(3) Dispositions not to trigger recapture.--No credit 
    recapture shall be required by reason of any transfer of an 
    interest in an electing large partnership.
        ``(4) Credit recapture.--For purposes of this subsection, the 
    term `credit recapture' means any increase in tax under section 
    42(j) or 50(a).
    ``(c) Partnership Not Terminated by Reason of Change in 
Ownership.--Subparagraph (B) of section 708(b)(1) shall not apply to an 
electing large partnership.
    ``(d) Partnership Entitled to Certain Credits.--The following shall 
be allowed to an electing large partnership and shall not be taken into 
account by the partners of such partnership:
        ``(1) The credit provided by section 34.
        ``(2) Any credit or refund under section 852(b)(3)(D).
    ``(e) Treatment of REMIC Residuals.--For purposes of applying 
section 860E(e)(6) to any electing large partnership--
        ``(1) all interests in such partnership shall be treated as 
    held by disqualified organizations,
        ``(2) in lieu of applying subparagraph (C) of section 
    860E(e)(6), the amount subject to tax under section 860E(e)(6) 
    shall be excluded from the gross income of such partnership, and
        ``(3) subparagraph (D) of section 860E(e)(6) shall not apply.
    ``(f) Special Rules for Applying Certain Installment Sale Rules.--
In the case of an electing large partnership--
        ``(1) the provisions of sections 453(l)(3) and 453A shall be 
    applied at the partnership level, and
        ``(2) in determining the amount of interest payable under such 
    sections, such partnership shall be treated as subject to tax under 
    this chapter at the highest rate of tax in effect under section 1 
    or 11.

``SEC. 775. ELECTING LARGE PARTNERSHIP DEFINED.

    ``(a) General Rule.--For purposes of this part--
        ``(1) In general.--The term `electing large partnership' means, 
    with respect to any partnership taxable year, any partnership if--
            ``(A) the number of persons who were partners in such 
        partnership in the preceding partnership taxable year equaled 
        or exceeded 100, and
            ``(B) such partnership elects the application of this part.
    To the extent provided in regulations, a partnership shall cease to 
    be treated as an electing large partnership for any partnership 
    taxable year if in such taxable year fewer than 100 persons were 
    partners in such partnership.
        ``(2) Election.--The election under this subsection shall apply 
    to the taxable year for which made and all subsequent taxable years 
    unless revoked with the consent of the Secretary.
    ``(b) Special Rules for Certain Service Partnerships.--
        ``(1) Certain partners not counted.--For purposes of this 
    section, the term `partner' does not include any individual 
    performing substantial services in connection with the activities 
    of the partnership and holding an interest in such partnership, or 
    an individual who formerly performed substantial services in 
    connection with such activities and who held an interest in such 
    partnership at the time the individual performed such services.
        ``(2) Exclusion.--For purposes of this part, an election under 
    subsection (a) shall not be effective with respect to any 
    partnership if substantially all the partners of such partnership--
            ``(A) are individuals performing substantial services in 
        connection with the activities of such partnership or are 
        personal service corporations (as defined in section 269A(b)) 
        the owner-employees (as defined in section 269A(b)) of which 
        perform such substantial services,
            ``(B) are retired partners who had performed such 
        substantial services, or
            ``(C) are spouses of partners who are performing (or had 
        previously performed) such substantial services.
        ``(3) Special rule for lower tier partnerships.--For purposes 
    of this subsection, the activities of a partnership shall include 
    the activities of any other partnership in which the partnership 
    owns directly an interest in the capital and profits of at least 80 
    percent.
    ``(c) Exclusion of Commodity Pools.--For purposes of this part, an 
election under subsection (a) shall not be effective with respect to 
any partnership the principal activity of which is the buying and 
selling of commodities (not described in section 1221(1)), or options, 
futures, or forwards with respect to such commodities.
    ``(d) Secretary May Rely on Treatment on Return.--If, on the 
partnership return of any partnership, such partnership is treated as 
an electing large partnership, such treatment shall be binding on such 
partnership and all partners of such partnership but not on the 
Secretary.

``SEC. 776. SPECIAL RULES FOR PARTNERSHIPS HOLDING OIL AND GAS 
              PROPERTIES.

    ``(a) Exception for Partnerships Holding Significant Oil and Gas 
Properties.--
        ``(1) In general.--For purposes of this part, an election under 
    section 775(a) shall not be effective with respect to any 
    partnership if the average percentage of assets (by value) held by 
    such partnership during the taxable year which are oil or gas 
    properties is at least 25 percent. For purposes of the preceding 
    sentence, any interest held by a partnership in another partnership 
    shall be disregarded, except that the partnership shall be treated 
    as holding its proportionate share of the assets of such other 
    partnership.
        ``(2) Election to waive exception.--Any partnership may elect 
    to have paragraph (1) not apply. Such an election shall apply to 
    the partnership taxable year for which made and all subsequent 
    partnership taxable years unless revoked with the consent of the 
    Secretary.
    ``(b) Special Rules Where Part Applies.--
        ``(1) Computation of percentage depletion.--In the case of an 
    electing large partnership, except as provided in paragraph (2)--
            ``(A) the allowance for depletion under section 611 with 
        respect to any partnership oil or gas property shall be 
        computed at the partnership level without regard to any 
        provision of section 613A requiring such allowance to be 
        computed separately by each partner,
            ``(B) such allowance shall be determined without regard to 
        the provisions of section 613A(c) limiting the amount of 
        production for which percentage depletion is allowable and 
        without regard to paragraph (1) of section 613A(d), and
            ``(C) paragraph (3) of section 705(a) shall not apply.
        ``(2) Treatment of certain partners.--
            ``(A) In general.--In the case of a disqualified person, 
        the treatment under this chapter of such person's distributive 
        share of any item of income, gain, loss, deduction, or credit 
        attributable to any partnership oil or gas property shall be 
        determined without regard to this part. Such person's 
        distributive share of any such items shall be excluded for 
        purposes of making determinations under sections 772 and 773.
            ``(B) Disqualified person.--For purposes of subparagraph 
        (A), the term `disqualified person' means, with respect to any 
        partnership taxable year--
                ``(i) any person referred to in paragraph (2) or (4) of 
            section 613A(d) for such person's taxable year in which 
            such partnership taxable year ends, and
                ``(ii) any other person if such person's average daily 
            production of domestic crude oil and natural gas for such 
            person's taxable year in which such partnership taxable 
            year ends exceeds 500 barrels.
            ``(C) Average daily production.--For purposes of 
        subparagraph (B), a person's average daily production of 
        domestic crude oil and natural gas for any taxable year shall 
        be computed as provided in section 613A(c)(2)--
                ``(i) by taking into account all production of domestic 
            crude oil and natural gas (including such person's 
            proportionate share of any production of a partnership),
                ``(ii) by treating 6,000 cubic feet of natural gas as a 
            barrel of crude oil, and
                ``(iii) by treating as 1 person all persons treated as 
            1 taxpayer under section 613A(c)(8) or among whom 
            allocations are required under such section.

``SEC. 777. REGULATIONS.

    ``The Secretary shall prescribe such regulations as may be 
appropriate to carry out the purposes of this part.''
    (b) Clerical Amendment.--The table of parts for subchapter K of 
chapter 1 is amended by adding at the end the following new item:
        ``Part IV. Special rules for electing large partnerships.''

    (c) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 1995.

SEC. 11472. RETURNS MAY BE REQUIRED ON MAGNETIC MEDIA.

    (a) In General.--Paragraph (2) of section 6011(e) (relating to 
returns on magnetic media) is amended by adding at the end the 
following new sentence:
    ``Notwithstanding the preceding sentence, the Secretary shall 
    require partnerships having more than 100 partners to file returns 
    on magnetic media.''
    (b) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 1995.

                     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.

    Section 1296 is amended by adding at the end the following new 
subsection:
    ``(e) Exception for United States Shareholders of Controlled 
Foreign Corporations.--
        ``(1) In general.--For purposes of this part, a corporation 
    shall not be treated with respect to a shareholder as a passive 
    foreign investment company during the qualified portion of such 
    shareholder's holding period with respect to stock in such 
    corporation.
        ``(2) Qualified portion.--For purposes of this subsection, the 
    term `qualified portion' means the portion of the shareholder's 
    holding period--
            ``(A) which is after December 31, 1995, and
            ``(B) during which the shareholder is a United States 
        shareholder (as defined in section 951(b)) of the corporation 
        and the corporation is a controlled foreign corporation.
        ``(3) New holding period if qualified portion ends.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        if the qualified portion of a shareholder's holding period with 
        respect to any stock ends after December 31, 1995, solely for 
        purposes of this part, the shareholder's holding period with 
        respect to such stock shall be treated as beginning as of the 
        first day following such period.
            ``(B) Exception.--Subparagraph (A) shall not apply if such 
        stock was, with respect to such shareholder, stock in a passive 
        foreign investment company at any time before the qualified 
        portion of the shareholder's holding period with respect to 
        such stock and no election under section 1298(b)(1) is made.''

SEC. 11482. ELECTION OF MARK TO MARKET FOR MARKETABLE STOCK IN PASSIVE 
              FOREIGN INVESTMENT COMPANY.

    (a) In General.--Part VI of subchapter P of chapter 1 is amended by 
redesignating subpart C as subpart D, by redesignating sections 1296 
and 1297 as sections 1297 and 1298, respectively, and by inserting 
after subpart B the following new subpart:

      ``Subpart C--Election of Mark to Market For Marketable Stock

        ``Sec. 1296. Election of mark to market for marketable stock.

``SEC. 1296. ELECTION OF MARK TO MARKET FOR MARKETABLE STOCK.

    ``(a) General Rule.--In the case of marketable stock in a passive 
foreign investment company which is owned (or treated under subsection 
(g) as owned) by a United States person at the close of any taxable 
year of such person, at the election of such person--
        ``(1) If the fair market value of such stock as of the close of 
    such taxable year exceeds its adjusted basis, such United States 
    person shall include in gross income for such taxable year an 
    amount equal to the amount of such excess.
        ``(2) If the adjusted basis of such stock exceeds the fair 
    market value of such stock as of the close of such taxable year, 
    such United States person shall be allowed a deduction for such 
    taxable year equal to the lesser of--
            ``(A) the amount of such excess, or
            ``(B) the unreversed inclusions with respect to such stock.
    ``(b) Basis Adjustments.--
        ``(1) In general.--The adjusted basis of stock in a passive 
    foreign investment company--
            ``(A) shall be increased by the amount included in the 
        gross income of the United States person under subsection 
        (a)(1) with respect to such stock, and
            ``(B) shall be decreased by the amount allowed as a 
        deduction to the United States person under subsection (a)(2) 
        with respect to such stock.
        ``(2) Special rule for stock constructively owned.--In the case 
    of stock in a passive foreign investment company which the United 
    States person is treated as owning under subsection (g)--
            ``(A) the adjustments under paragraph (1) shall apply to 
        such stock in the hands of the person actually holding such 
        stock but only for purposes of determining the subsequent 
        treatment under this chapter of the United States person with 
        respect to such stock, and
            ``(B) similar adjustments shall be made to the adjusted 
        basis of the property by reason of which the United States 
        person is treated as owning such stock.
    ``(c) Character and Source Rules.--
        ``(1) Ordinary treatment.--
            ``(A) Gain.--Any amount included in gross income under 
        subsection (a)(1), and any gain on the sale or other 
        disposition of marketable stock in a passive foreign investment 
        company (with respect to which an election under this section 
        is in effect), shall be treated as ordinary income.
            ``(B) Loss.--Any--
                ``(i) amount allowed as a deduction under subsection 
            (a)(2), and
                ``(ii) loss on the sale or other disposition of 
            marketable stock in a passive foreign investment company 
            (with respect to which an election under this section is in 
            effect) to the extent that the amount of such loss does not 
            exceed the unreversed inclusions with respect to such 
            stock,
        shall be treated as an ordinary loss. The amount so treated 
        shall be treated as a deduction allowable in computing adjusted 
        gross income.
        ``(2) Source.--The source of any amount included in gross 
    income under subsection (a)(1) (or allowed as a deduction under 
    subsection (a)(2)) shall be determined in the same manner as if 
    such amount were gain or loss (as the case may be) from the sale of 
    stock in the passive foreign investment company.
    ``(d) Unreversed Inclusions.--For purposes of this section, the 
term `unreversed inclusions' means, with respect to any stock in a 
passive foreign investment company, the excess (if any) of--
        ``(1) the amount included in gross income of the taxpayer under 
    subsection (a)(1) with respect to such stock for prior taxable 
    years, over
        ``(2) the amount allowed as a deduction under subsection (a)(2) 
    with respect to such stock for prior taxable years.
The amount referred to in paragraph (1) shall include any amount which 
would have been included in gross income under subsection (a)(1) with 
respect to such stock for any prior taxable year but for section 1291.
    ``(e) Marketable Stock.--For purposes of this section--
        ``(1) In general.--The term `marketable stock' means--
            ``(A) any stock which is regularly traded on--
                ``(i) a national securities exchange which is 
            registered with the Securities and Exchange Commission or 
            the national market system established pursuant to section 
            11A of the Securities and Exchange Act of 1934, or
                ``(ii) any exchange or other market which the Secretary 
            determines has rules adequate to carry out the purposes of 
            this part,
            ``(B) to the extent provided in regulations, stock in any 
        foreign corporation which is comparable to a regulated 
        investment company and which offers for sale or has outstanding 
        any stock of which it is the issuer and which is redeemable at 
        its net asset value, and
            ``(C) to the extent provided in regulations, any option on 
        stock described in subparagraph (A) or (B).
        ``(2) Special rule for regulated investment companies.--In the 
    case of any regulated investment company which is offering for sale 
    or has outstanding any stock of which it is the issuer and which is 
    redeemable at its net asset value, all stock in a passive foreign 
    investment company which it owns directly or indirectly shall be 
    treated as marketable stock for purposes of this section. Except as 
    provided in regulations, similar treatment as marketable stock 
    shall apply in the case of any other regulated investment company 
    which publishes net asset valuations at least annually.
    ``(f) Treatment of Controlled Foreign Corporations Which are 
Shareholders in Passive Foreign Investment Companies.--In the case of a 
foreign corporation which is a controlled foreign corporation and which 
owns (or is treated under subsection (g) as owning) stock in a passive 
foreign investment company--
        ``(1) this section (other than subsection (c)(2)) shall apply 
    to such foreign corporation in the same manner as if such 
    corporation were a United States person, and
        ``(2) for purposes of subpart F of part III of subchapter N--
            ``(A) any amount included in gross income under subsection 
        (a)(1) shall be treated as foreign personal holding company 
        income described in section 954(c)(1)(A), and
            ``(B) any amount allowed as a deduction under subsection 
        (a)(2) shall be treated as a deduction allocable to foreign 
        personal holding company income so described.
    ``(g) Stock Owned Through Certain Foreign Entities.--Except as 
provided in regulations--
        ``(1) In general.--For purposes of this section, stock owned, 
    directly or indirectly, by or for a foreign partnership or foreign 
    trust or foreign estate shall be considered as being owned 
    proportionately by its partners or beneficiaries. Stock considered 
    to be owned by a person by reason of the application of the 
    preceding sentence shall, for purposes of applying such sentence, 
    be treated as actually owned by such person.
        ``(2) Treatment of certain dispositions.--In any case in which 
    a United States person is treated as owning stock in a passive 
    foreign investment company by reason of paragraph (1)--
            ``(A) any disposition by the United States person or by any 
        other person which results in the United States person being 
        treated as no longer owning such stock, and
            ``(B) any disposition by the person owning such stock,
    shall be treated as a disposition by the United States person of 
    the stock in the passive foreign investment company.
    ``(h) Coordination With Section 851(b).--For purposes of paragraphs 
(2) and (3) of section 851(b), any amount included in gross income 
under subsection (a) shall be treated as a dividend.
    ``(i) Stock Acquired From a Decedent.--In the case of stock of a 
passive foreign investment company which is acquired by bequest, 
devise, or inheritance (or by the decedent's estate) and with respect 
to which an election under this section was in effect as of the date of 
the decedent's death, notwithstanding section 1014, the basis of such 
stock in the hands of the person so acquiring it shall be the adjusted 
basis of such stock in the hands of the decedent immediately before his 
death (or, if lesser, the basis which would have been determined under 
section 1014 without regard to this subsection).
    ``(j) Coordination With Section 1291 for First Year of Election.--
        ``(1) Taxpayers other than regulated investment companies.--
            ``(A) In general.--If the taxpayer elects the application 
        of this section with respect to any marketable stock in a 
        corporation after the beginning of the taxpayer's holding 
        period in such stock, and if the requirements of subparagraph 
        (B) are not satisfied, section 1291 shall apply to--
                ``(i) any distributions with respect to, or disposition 
            of, such stock in the first taxable year of the taxpayer 
            for which such election is made, and
                ``(ii) any amount which, but for section 1291, would 
            have been included in gross income under subsection (a) 
            with respect to such stock for such taxable year in the 
            same manner as if such amount were gain on the disposition 
            of such stock.
            ``(B) Requirements.--The requirements of this subparagraph 
        are met if, with respect to each of such corporation's taxable 
        years for which such corporation was a passive foreign 
        investment company and which begin after December 31, 1986, and 
        included any portion of the taxpayer's holding period in such 
        stock, such corporation was treated as a qualified electing 
        fund under this part with respect to the taxpayer.
        ``(2) Special rules for regulated investment companies.--
            ``(A) In general.--If a regulated investment company elects 
        the application of this section with respect to any marketable 
        stock in a corporation after the beginning of the taxpayer's 
        holding period in such stock, then, with respect to such 
        company's first taxable year for which such company elects the 
        application of this section with respect to such stock--
                ``(i) section 1291 shall not apply to such stock with 
            respect to any distribution or disposition during, or 
            amount included in gross income under this section for, 
            such first taxable year, but
                ``(ii) such regulated investment company's tax under 
            this chapter for such first taxable year shall be increased 
            by the aggregate amount of interest which would have been 
            determined under section 1291(c)(3) if section 1291 were 
            applied without regard to this subparagraph.
        Clause (ii) shall not apply if for the preceding taxable year 
        the company elected to mark to market the stock held by such 
        company as of the last day of such preceding taxable year.
            ``(B) Disallowance of deduction.--No deduction shall be 
        allowed to any regulated investment company for the increase in 
        tax under subparagraph (A)(ii).
    ``(k) Election.--This section shall apply to marketable stock in a 
passive foreign investment company which is held by a United States 
person only if such person elects to apply this section with respect to 
such stock. Such an election shall apply to the taxable year for which 
made and all subsequent taxable years unless--
        ``(1) such stock ceases to be marketable stock, or
        ``(2) the Secretary consents to the revocation of such 
    election.
    ``(l) Transition Rule for Individuals Becoming Subject to United 
States Tax.--If any individual becomes a United States person in a 
taxable year beginning after December 31, 1995, solely for purposes of 
this section, the adjusted basis (before adjustments under subsection 
(b)) of any marketable stock in a passive foreign investment company 
owned by such individual on the first day of such taxable year shall be 
treated as being the greater of its fair market value on such first day 
or its adjusted basis on such first day.''
    (b) Coordination With Interest Charge, Etc.--
        (1) Paragraph (1) of section 1291(d) is amended by adding at 
    the end the following new flush sentence:
    ``Except as provided in section 1296(j), this section also shall 
    not apply if an election under section 1296(k) is in effect for the 
    taxpayer's taxable year.''
        (2) The subsection heading for subsection (d) of section 1291 
    is amended by striking ``Subpart B'' and inserting ``Subparts B and 
    C''.
        (3) Subparagraph (A) of section 1291(a)(3) is amended to read 
    as follows:
            ``(A) Holding period.--The taxpayer's holding period shall 
        be determined under section 1223; except that--
                ``(i) for purposes of applying this section to an 
            excess distribution, such holding period shall be treated 
            as ending on the date of such distribution, and
                ``(ii) if section 1296 applied to such stock with 
            respect to the taxpayer for any prior taxable year, such 
            holding period shall be treated as beginning on the first 
            day of the first taxable year beginning after the last 
            taxable year for which section 1296 so applied.''
    (c) Conforming Amendments.--
        (1) Sections 532(b)(4) and 542(c)(10) are each amended by 
    striking ``section 1296'' and inserting ``section 1297''.
        (2) Subsection (f) of section 551 is amended by striking 
    ``section 1297(b)(5)'' and inserting ``section 1298(b)(5)''
        (3) Subsections (a)(1) and (d) of section 1293 are each amended 
    by striking ``section 1297(a)'' and inserting ``section 1298(a)''.
        (4) Paragraph (3) of section 1297(b), as redesignated by 
    subsection (a), is hereby repealed.
        (5) The table of sections for subpart D of part VI of 
    subchapter P of chapter 1, as redesignated by subsection (a), is 
    amended to read as follows:

        ``Sec. 1297. Passive foreign investment company.
        ``Sec. 1298. Special rules.''

        (6) The table of subparts for part VI of subchapter P of 
    chapter 1 is amended by striking the last item and inserting the 
    following new items:

        ``Subpart C. Election of mark to market for marketable stock.
        ``Subpart D. General provisions.''

    (d) Clarification of Gain Recognition Election.--The last sentence 
of section 1298(b)(1), as so redesignated, is amended by inserting 
``(determined without regard to the preceding sentence)'' after 
``investment company''.

SEC. 11483. MODIFICATIONS TO DEFINITION OF PASSIVE INCOME.

    (a) Exception for Same Country Income Not To Apply.--Paragraph (1) 
of section 1297(b) (defining passive income), as redesignated by 
section 11482, is amended by inserting before the period ``without 
regard to paragraph (3) thereof''.
    (b) Passive Income Not To Include FSC Income.--Paragraph (2) of 
section 1297(b), as so redesignated, is amended by striking ``or'' at 
the end of subparagraph (B), by striking the period at the end of 
subparagraph (C) and inserting ``, or'', and by inserting after 
subparagraph (C) the following new subparagraph:
            ``(D) any foreign trade income of a FSC.''

SEC. 11484. EFFECTIVE DATE.

    The amendments made by this subchapter shall apply to--
        (1) taxable years of United States persons beginning after 
    December 31, 1995, and
        (2) taxable years of foreign corporations ending with or within 
    such taxable years of United States persons.

       Subchapter B--Treatment of Controlled Foreign Corporations

SEC. 11486. GAIN ON CERTAIN STOCK SALES BY CONTROLLED FOREIGN 
              CORPORATIONS TREATED AS DIVIDENDS.

    (a) General Rule.--Section 964 (relating to miscellaneous 
provisions) is amended by adding at the end the following new 
subsection:
    ``(e) Gain on Certain Stock Sales by Controlled Foreign 
Corporations Treated as Dividends.--
        ``(1) In general.--If a controlled foreign corporation sells or 
    exchanges stock in any other foreign corporation, gain recognized 
    on such sale or exchange shall be included in the gross income of 
    such controlled foreign corporation as a dividend to the same 
    extent that it would have been so included under section 1248(a) if 
    such controlled foreign corporation were a United States person. 
    For purposes of determining the amount which would have been so 
    includible, the determination of whether such other foreign 
    corporation was a controlled foreign corporation shall be made 
    without regard to the preceding sentence.
        ``(2) Same country exception not applicable.--Clause (i) of 
    section 954(c)(3)(A) shall not apply to any amount treated as a 
    dividend by reason of paragraph (1).
        ``(3) Clarification of deemed sales.--For purposes of this 
    subsection, a controlled foreign corporation shall be treated as 
    having sold or exchanged any stock if, under any provision of this 
    subtitle, such controlled foreign corporation is treated as having 
    gain from the sale or exchange of such stock.''
    (b) Amendment of Section 904(d).--Clause (i) of section 
904(d)(2)(E) is amended by striking ``and except as provided in 
regulations, the taxpayer was a United States shareholder in such 
corporation''.
    (c) Effective Dates.--
        (1) The amendment made by subsection (a) shall apply to gain 
    recognized on transactions occurring after the date of the 
    enactment of this Act.
        (2) The amendment made by subsection (b) shall apply to 
    distributions after the date of the enactment of this Act.

SEC. 11487. MISCELLANEOUS MODIFICATIONS TO SUBPART F.

    (a) Section 1248 Gain Taken Into Account in Determining Pro Rata 
Share.--
        (1) In general.--Paragraph (2) of section 951(a) (defining pro 
    rata share of subpart F income) is amended by adding at the end the 
    following new sentence: ``For purposes of subparagraph (B), any 
    gain included in the gross income of any person as a dividend under 
    section 1248 shall be treated as a distribution received by such 
    person with respect to the stock involved.''
        (2) Effective date.--The amendment made by paragraph (1) shall 
    apply to dispositions after the date of the enactment of this Act.
    (b) Basis Adjustments in Stock Held by Foreign Corporation.--
        (1) In general.--Section 961 (relating to adjustments to basis 
    of stock in controlled foreign corporations and of other property) 
    is amended by adding at the end the following new subsection:
    ``(c) Basis Adjustments in Stock Held by Foreign Corporation.--
Under regulations prescribed by the Secretary, if a United States 
shareholder is treated under section 958(a)(2) as owning any stock in a 
controlled foreign corporation which is actually owned by another 
controlled foreign corporation, adjustments similar to the adjustments 
provided by subsections (a) and (b) shall be made to the basis of such 
stock in the hands of such other controlled foreign corporation, but 
only for the purposes of determining the amount included under section 
951 in the gross income of such United States shareholder (or any other 
United States shareholder who acquires from any person any portion of 
the interest of such United States shareholder by reason of which such 
shareholder was treated as owning such stock, but only to the extent of 
such portion, and subject to such proof of identity of such interest as 
the Secretary may prescribe by regulations).''
        (2) Effective date.--The amendment made by paragraph (1) shall 
    apply for purposes of determining inclusions for taxable years of 
    United States shareholders beginning after December 31, 1995.
    (c) Determination of Previously Taxed Income in Section 304 
Distributions, Etc.--
        (1) In general.--Section 959 (relating to exclusion from gross 
    income of previously taxed earnings and profits) is amended by 
    adding at the end the following new subsection:
    ``(g) Adjustments for Certain Transactions.--If by reason of--
        ``(1) a transaction to which section 304 applies,
        ``(2) the structure of a United States shareholder's holdings 
    in controlled foreign corporations, or
        ``(3) other circumstances,
there would be a multiple inclusion of any item in income (or an 
inclusion or exclusion without an appropriate basis adjustment) by 
reason of this subpart, the Secretary may prescribe regulations 
providing such modifications in the application of this subpart as may 
be necessary to eliminate such multiple inclusion or provide such basis 
adjustment, as the case may be.''
        (2) Effective date.--The amendment made by paragraph (1) shall 
    take effect on the date of the enactment of this Act.
    (d) Clarification of Treatment of Branch Tax Exemptions or 
Reductions.--
        (1) In general.--Subsection (b) of section 952 is amended by 
    adding at the end the following new sentence: ``For purposes of 
    this subsection, any exemption (or reduction) with respect to the 
    tax imposed by section 884 shall not be taken into account.''.
        (2) Effective date.--The amendment made by paragraph (1) shall 
    apply to taxable years beginning after December 31, 1986.

SEC. 11488. INDIRECT FOREIGN TAX CREDIT ALLOWED FOR CERTAIN LOWER TIER 
              COMPANIES.

    (a) Section 902 Credit.--
        (1) In general.--Subsection (b) of section 902 (relating to 
    deemed taxes increased in case of certain 2nd and 3rd tier foreign 
    corporations) is amended to read as follows:
    ``(b) Deemed Taxes Increased in Case of Certain Lower Tier 
Corporations.--
        ``(1) In general.--If--
            ``(A) any foreign corporation is a member of a qualified 
        group, and
            ``(B) such foreign corporation owns 10 percent or more of 
        the voting stock of another member of such group from which it 
        receives dividends in any taxable year,
    such foreign corporation shall be deemed to have paid the same 
    proportion of such other member's post-1986 foreign income taxes as 
    would be determined under subsection (a) if such foreign 
    corporation were a domestic corporation.
        ``(2) Qualified group.--For purposes of paragraph (1), the term 
    `qualified group' means--
            ``(A) the foreign corporation described in subsection (a), 
        and
            ``(B) any other foreign corporation if--
                ``(i) the domestic corporation owns at least 5 percent 
            of the voting stock of such other foreign corporation 
            indirectly through a chain of foreign corporations 
            connected through stock ownership of at least 10 percent of 
            their voting stock,
                ``(ii) the foreign corporation described in subsection 
            (a) is the first tier corporation in such chain, and
                ``(iii) such other corporation is not below the sixth 
            tier in such chain.
    The term `qualified group' shall not include any foreign 
    corporation below the third tier in the chain referred to in clause 
    (i) unless such foreign corporation is a controlled foreign 
    corporation (as defined in section 957) and the domestic 
    corporation is a United States shareholder (as defined in section 
    951(b)) in such foreign corporation. Paragraph (1) shall apply to 
    those taxes paid by a member of the qualified group below the third 
    tier only with respect to periods during which it was a controlled 
    foreign corporation.''
        (2) Conforming amendments.--
            (A) Subparagraph (B) of section 902(c)(3) is amended by 
        adding ``or'' at the end of clause (i) and by striking clauses 
        (ii) and (iii) and inserting the following new clause:
                ``(ii) the requirements of subsection (b)(2) are met 
            with respect to such foreign corporation.''
            (B) Subparagraph (B) of section 902(c)(4) is amended by 
        striking ``3rd foreign corporation'' and inserting ``sixth tier 
        foreign corporation''.
            (C) The heading for paragraph (3) of section 902(c) is 
        amended by striking ``where domestic corporation acquires 10 
        percent of foreign corporation'' and inserting ``where foreign 
        corporation first qualifies''.
            (D) Paragraph (3) of section 902(c) is amended by striking 
        ``ownership'' each place it appears.
    (b) Section 960 Credit.--Paragraph (1) of section 960(a) (relating 
to special rules for foreign tax credits) is amended to read as 
follows:
        ``(1) Deemed paid credit.--For purposes of subpart A of this 
    part, if there is included under section 951(a) in the gross income 
    of a domestic corporation any amount attributable to earnings and 
    profits of a foreign corporation which is a member of a qualified 
    group (as defined in section 902(b)) with respect to the domestic 
    corporation, then, except to the extent provided in regulations, 
    section 902 shall be applied as if the amount so included were a 
    dividend paid by such foreign corporation (determined by applying 
    section 902(c) in accordance with section 904(d)(3)(B)).''
    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to taxes of foreign corporations for taxable years of such 
    corporations beginning after the date of enactment of this Act.
        (2) Special rule.--In the case of any chain of foreign 
    corporations described in clauses (i) and (ii) of section 
    902(b)(2)(B) of the Internal Revenue Code of 1986 (as amended by 
    this section), no liquidation, reorganization, or similar 
    transaction in a taxable year beginning after the date of the 
    enactment of this Act shall have the effect of permitting taxes to 
    be taken into account under section 902 of the Internal Revenue 
    Code of 1986 which could not have been taken into account under 
    such section but for such transaction.

SEC. 11489. REPEAL OF INCLUSION OF CERTAIN EARNINGS INVESTED IN EXCESS 
              PASSIVE ASSETS.

    (a) In General.--
        (1) Repeal of inclusion.--Paragraph (1) of section 951(a) 
    (relating to amounts included in gross income of United States 
    shareholders) is amended by striking subparagraph (C), by striking 
    ``; and'' at the end of subparagraph (B) and inserting a period, 
    and by adding ``and'' at the end of subparagraph (A).
        (2) Repeal of inclusion amount.--Section 956A (relating to 
    earnings invested in excess passive assets) is repealed.
    (b) Conforming Amendments.--
        (1) Paragraph (1) of section 956(b) is amended to read as 
    follows:
        ``(1) Applicable earnings.--For purposes of this section, the 
    term `applicable earnings' means, with respect to any controlled 
    foreign corporation, the sum of--
            ``(A) the amount (not including a deficit) referred to in 
        section 316(a)(1), and
            ``(B) the amount referred to in section 316(a)(2),
    but reduced by distributions made during the taxable year.''
        (2) Paragraph (3) of section 956(b) is amended to read as 
    follows:
        ``(3) Special rule where corporation ceases to be a controlled 
    foreign corporation.--If any foreign corporation ceases to be a 
    controlled foreign corporation during any taxable year--
            ``(A) the determination of any United States shareholder's 
        pro rata share shall be made on the basis of stock owned 
        (within the meaning of section 958(a)) by such shareholder on 
        the last day during the taxable year on which the foreign 
        corporation is a controlled foreign corporation,
            ``(B) the average referred to in subsection (a)(1)(A) for 
        such taxable year shall be determined by only taking into 
        account quarters ending on or before such last day, and
            ``(C) in determining applicable earnings, the amount taken 
        into account by reason of being described in paragraph (2) of 
        section 316(a) shall be the portion of the amount so described 
        which is allocable (on a pro rata basis) to the part of such 
        year during which the corporation is a controlled foreign 
        corporation.''
        (3) Subsection (a) of section 959 (relating to exclusion from 
    gross income of previously taxed earnings and profits) is amended 
    by adding ``or'' at the end of paragraph (1), by striking ``or'' at 
    the end of paragraph (2), and by striking paragraph (3).
        (4) Subsection (a) of section 959 is amended by striking 
    ``paragraphs (2) and (3)'' in the last sentence and inserting 
    ``paragraph (2)''.
        (5) Subsection (c) of section 959 is amended by adding at the 
    end the following flush sentence:
``References in this subsection to section 951(a)(1)(C) and subsection 
(a)(3) shall be treated as references to such provisions as in effect 
on the day before the date of the enactment of the Revenue 
Reconciliation Act of 1995.''
        (6) Paragraph (1) of section 959(f) is amended to read as 
    follows:
        ``(1) In general.--For purposes of this section, amounts that 
    would be included under subparagraph (B) of section 951(a)(1) 
    (determined without regard to this section) shall be treated as 
    attributable first to earnings described in subsection (c)(2), and 
    then to earnings described in subsection (c)(3).''
        (7) Paragraph (2) of section 959(f) is amended by striking 
    ``subparagraphs (B) and (C) of section 951(a)(1)'' and inserting 
    ``section 951(a)(1)(B)''.
        (8) Subsection (b) of section 989 is amended by striking 
    ``subparagraph (B) or (C) of section 951(a)(1)'' and inserting 
    ``section 951(a)(1)(B)''.
        (9) Paragraph (9) of section 1298(b), as redesignated by 
    section 11482, is amended by striking ``subparagraph (B) or (C) of 
    section 951(a)(1)'' and inserting ``section 951(a)(1)(B)''.
        (10) Subsections (d)(3)(B) and (e)(2)(B)(ii) of section 1298, 
    as redesignated by section 11482, are each amended by striking ``or 
    section 956A''.
    (c) Clerical Amendment.--The table of sections for subpart F of 
part III of subchapter N of chapter 1 is amended by striking the item 
relating to section 956A.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years of foreign corporations beginning after 
September 30, 1995, and to taxable years of United States shareholders 
within which or with which such taxable years of foreign corporations 
end.

                 CHAPTER 5--OTHER INCOME TAX PROVISIONS

          Subchapter A--Provisions Relating to S Corporations

SEC. 11501. S CORPORATIONS PERMITTED TO HAVE 75 SHAREHOLDERS.

    Subparagraph (A) of section 1361(b)(1) (defining small business 
corporation) is amended by striking ``35 shareholders'' and inserting 
``75 shareholders''.

SEC. 11502. ELECTING SMALL BUSINESS TRUSTS.

    (a) General Rule.--Subparagraph (A) of section 1361(c)(2) (relating 
to certain trusts permitted as shareholders) is amended by inserting 
after clause (iv) the following new clause:
                ``(v) An electing small business trust.''
    (b) Current Beneficiaries Treated as Shareholders.--Subparagraph 
(B) of section 1361(c)(2) is amended by adding at the end the following 
new clause:
                ``(v) In the case of a trust described in clause (v) of 
            subparagraph (A), each potential current beneficiary of 
            such trust shall be treated as a shareholder; except that, 
            if for any period there is no potential current beneficiary 
            of such trust, such trust shall be treated as the 
            shareholder during such period.''
    (c) Electing Small Business Trust Defined.--Section 1361 (defining 
S corporation) is amended by adding at the end the following new 
subsection:
    ``(e) Electing Small Business Trust Defined.--
        ``(1) Electing small business trust.--For purposes of this 
    section--
            ``(A) In general.--Except as provided in subparagraph (B), 
        the term `electing small business trust' means any trust if--
                ``(i) such trust does not have as a beneficiary any 
            person other than (I) an individual, (II) an estate, or 
            (III) an organization described in paragraph (2), (3), (4), 
            or (5) of section 170(c) which holds a contingent interest 
            and is not a potential current beneficiary,
                ``(ii) no interest in such trust was acquired by 
            purchase, and
                ``(iii) an election under this subsection applies to 
            such trust.
            ``(B) Certain trusts not eligible.--The term `electing 
        small business trust' shall not include--
                ``(i) any qualified subchapter S trust (as defined in 
            subsection (d)(3)) if an election under subsection (d)(2) 
            applies to any corporation the stock of which is held by 
            such trust, and
                ``(ii) any trust exempt from tax under this subtitle.
            ``(C) Purchase.--For purposes of subparagraph (A), the term 
        `purchase' means any acquisition if the basis of the property 
        acquired is determined under section 1012.
        ``(2) Potential current beneficiary.--For purposes of this 
    section, the term `potential current beneficiary' means, with 
    respect to any period, any person who at any time during such 
    period is entitled to, or at the discretion of any person may 
    receive, a distribution from the principal or income of the trust. 
    If a trust disposes of all of the stock which it holds in an S 
    corporation, then, with respect to such corporation, the term 
    `potential current beneficiary' does not include any person who 
    first met the requirements of the preceding sentence during the 60-
    day period ending on the date of such disposition.
        ``(3) Election.--An election under this subsection shall be 
    made by the trustee. Any such election shall apply to the taxable 
    year of the trust for which made and all subsequent taxable years 
    of such trust unless revoked with the consent of the Secretary.
        ``(4) Cross reference.--
          ``For special treatment of electing small business trusts, see 
        section 641(d).''
    (d) Taxation of Electing Small Business Trusts.--Section 641 
(relating to imposition of tax on trusts) is amended by adding at the 
end the following new subsection:
    ``(d) Special Rules for Taxation of Electing Small Business 
Trusts.--
        ``(1) In general.--For purposes of this chapter--
            ``(A) the portion of any electing small business trust 
        which consists of stock in 1 or more S corporations shall be 
        treated as a separate trust, and
            ``(B) the amount of the tax imposed by this chapter on such 
        separate trust shall be determined with the modifications of 
        paragraph (2).
        ``(2) Modifications.--For purposes of paragraph (1), the 
    modifications of this paragraph are the following:
            ``(A) Except as provided in section 1(h), the amount of the 
        tax imposed by section 1(e) shall be determined by using the 
        highest rate of tax set forth in section 1(e).
            ``(B) The exemption amount under section 55(d) shall be 
        zero.
            ``(C) The only items of income, loss, deduction, or credit 
        to be taken into account are the following:
                ``(i) The items required to be taken into account under 
            section 1366.
                ``(ii) Any gain or loss from the disposition of stock 
            in an S corporation.
                ``(iii) To the extent provided in regulations, State or 
            local income taxes or administrative expenses to the extent 
            allocable to items described in clauses (i) and (ii).
        No deduction or credit shall be allowed for any amount not 
        described in this paragraph, and no item described in this 
        paragraph shall be apportioned to any beneficiary.
            ``(D) No amount shall be allowed under paragraph (1) or (2) 
        of section 1211(b).
        ``(3) Treatment of remainder of trust and distributions.--For 
    purposes of determining--
            ``(A) the amount of the tax imposed by this chapter on the 
        portion of any electing small business trust not treated as a 
        separate trust under paragraph (1), and
            ``(B) the distributable net income of the entire trust,
    the items referred to in paragraph (2)(C) shall be excluded. Except 
    as provided in the preceding sentence, this subsection shall not 
    affect the taxation of any distribution from the trust.
        ``(4) Treatment of unused deductions where termination of 
    separate trust.--If a portion of an electing small business trust 
    ceases to be treated as a separate trust under paragraph (1), any 
    carryover or excess deduction of the separate trust which is 
    referred to in section 642(h) shall be taken into account by the 
    entire trust.
        ``(5) Electing small business trust.--For purposes of this 
    subsection, the term `electing small business trust' has the 
    meaning given such term by section 1361(e)(1).''
    (e) Technical Amendment.--Paragraph (1) of section 1366(a) is 
amended by inserting ``, or of a trust or estate which terminates,'' 
after ``who dies''.

SEC. 11503. EXPANSION OF POST-DEATH QUALIFICATION FOR CERTAIN TRUSTS.

    Subparagraph (A) of section 1361(c)(2) (relating to certain trusts 
permitted as shareholders) is amended--
        (1) by striking ``60-day period'' each place it appears in 
    clauses (ii) and (iii) and inserting ``2-year period'', and
        (2) by striking the last sentence in clause (ii).

SEC. 11504. FINANCIAL INSTITUTIONS PERMITTED TO HOLD SAFE HARBOR DEBT.

    Clause (iii) of section 1361(c)(5)(B) (defining straight debt) is 
amended by striking ``or a trust described in paragraph (2)'' and 
inserting ``a trust described in paragraph (2), or a person which is 
actively and regularly engaged in the business of lending money.''

SEC. 11505. RULES RELATING TO INADVERTENT TERMINATIONS AND INVALID 
              ELECTIONS.

    (a) General Rule.--Subsection (f) of section 1362 (relating to 
inadvertent terminations) is amended to read as follows:
    ``(f) Inadvertent Invalid Elections or Terminations.--If--
        ``(1) an election under subsection (a) by any corporation--
            ``(A) was not effective for the taxable year for which made 
        (determined without regard to subsection (b)(2)) by reason of a 
        failure to meet the requirements of section 1361(b) or to 
        obtain shareholder consents, or
            ``(B) was terminated under paragraph (2) or (3) of 
        subsection (d),
        ``(2) the Secretary determines that the circumstances resulting 
    in such ineffectiveness or termination were inadvertent,
        ``(3) no later than a reasonable period of time after discovery 
    of the circumstances resulting in such ineffectiveness or 
    termination, steps were taken--
            ``(A) so that the corporation is a small business 
        corporation, or
            ``(B) to acquire the required shareholder consents, and
        ``(4) the corporation, and each person who was a shareholder in 
    the corporation at any time during the period specified pursuant to 
    this subsection, agrees to make such adjustments (consistent with 
    the treatment of the corporation as an S corporation) as may be 
    required by the Secretary with respect to such period,
then, notwithstanding the circumstances resulting in such 
ineffectiveness or termination, such corporation shall be treated as an 
S corporation during the period specified by the Secretary.''
    (b) Late Elections.--Subsection (b) of section 1362 is amended by 
adding at the end the following new paragraph:
        ``(5) Authority to treat late elections as timely.--If--
            ``(A) an election under subsection (a) is made for any 
        taxable year (determined without regard to paragraph (3)) after 
        the date prescribed by this subsection for making such election 
        for such taxable year, and
            ``(B) the Secretary determines that there was reasonable 
        cause for the failure to timely make such election,
    the Secretary may treat such election as timely made for such 
    taxable year (and paragraph (3) shall not apply).''
    (c) Effective Date.--The amendments made by subsection (a) and (b) 
shall apply with respect to elections for taxable years beginning after 
December 31, 1982.

SEC. 11506. AGREEMENT TO TERMINATE YEAR.

    Paragraph (2) of section 1377(a) (relating to pro rata share) is 
amended to read as follows:
        ``(2) Election to terminate year.--
            ``(A) In general.--If any shareholder terminates the 
        shareholder's interest in the corporation during the taxable 
        year and all affected shareholders and the corporation agree to 
        the application of this paragraph, paragraph (1) shall be 
        applied to the affected shareholders as if the taxable year 
        consisted of 2 taxable years the first of which ends on the 
        date of the termination.
            ``(B) Affected shareholders.--For purposes of subparagraph 
        (A), the term `affected shareholders' means the shareholder 
        whose interest is terminated and all shareholders to whom such 
        shareholder has transferred shares during the taxable year. If 
        such shareholder has transferred shares to the corporation, the 
        term `affected shareholders' shall include all persons who are 
        shareholders during the taxable year.''

SEC. 11507. EXPANSION OF POST-TERMINATION TRANSITION PERIOD.

    (a) In General.--Paragraph (1) of section 1377(b) (relating to 
post-termination transition period) is amended by striking ``and'' at 
the end of subparagraph (A), by redesignating subparagraph (B) as 
subparagraph (C), and by inserting after subparagraph (A) the following 
new subparagraph:
            ``(B) the 120-day period beginning on the date of any 
        determination pursuant to an audit of the taxpayer which 
        follows the termination of the corporation's election and which 
        adjusts a subchapter S item of income, loss, or deduction of 
        the corporation arising during the S period (as defined in 
        section 1368(e)(2)), and''.
    (b) Determination Defined.--Paragraph (2) of section 1377(b) is 
amended by striking subparagraphs (A) and (B), by redesignating 
subparagraph (C) as subparagraph (B), and by inserting before 
subparagraph (B) (as so redesignated) the following new subparagraph:
            ``(A) a determination as defined in section 1313(a), or''.
    (c) Repeal of Special Audit Provisions for Subchapter S Items.--
        (1) General rule.--Subchapter D of chapter 63 (relating to tax 
    treatment of subchapter S items) is hereby repealed.
        (2) Consistent treatment required.--Section 6037 (relating to 
    return of S corporation) is amended by adding at the end the 
    following new subsection:
    ``(c) Shareholder's Return Must Be Consistent With Corporate Return 
or Secretary Notified of Inconsistency.--
        ``(1) In general.--A shareholder of an S corporation shall, on 
    such shareholder's return, treat a subchapter S item in a manner 
    which is consistent with the treatment of such item on the 
    corporate return.
        ``(2) Notification of inconsistent treatment.--
            ``(A) In general.--In the case of any subchapter S item, 
        if--
                ``(i)(I) the corporation has filed a return but the 
            shareholder's treatment on his return is (or may be) 
            inconsistent with the treatment of the item on the 
            corporate return, or
                ``(II) the corporation has not filed a return, and
                ``(ii) the shareholder files with the Secretary a 
            statement identifying the inconsistency,
        paragraph (1) shall not apply to such item.
            ``(B) Shareholder receiving incorrect information.--A 
        shareholder shall be treated as having complied with clause 
        (ii) of subparagraph (A) with respect to a subchapter S item if 
        the shareholder--
                ``(i) demonstrates to the satisfaction of the Secretary 
            that the treatment of the subchapter S item on the 
            shareholder's return is consistent with the treatment of 
            the item on the schedule furnished to the shareholder by 
            the corporation, and
                ``(ii) elects to have this paragraph apply with respect 
            to that item.
        ``(3) Effect of failure to notify.--In any case--
            ``(A) described in subparagraph (A)(i)(I) of paragraph (2), 
        and
            ``(B) in which the shareholder does not comply with 
        subparagraph (A)(ii) of paragraph (2),
    any adjustment required to make the treatment of the items by such 
    shareholder consistent with the treatment of the items on the 
    corporate return shall be treated as arising out of mathematical or 
    clerical errors and assessed according to section 6213(b)(1). 
    Paragraph (2) of section 6213(b) shall not apply to any assessment 
    referred to in the preceding sentence.
        ``(4) Subchapter s item.--For purposes of this subsection, the 
    term `subchapter S item' means any item of an S corporation to the 
    extent that regulations prescribed by the Secretary provide that, 
    for purposes of this subtitle, such item is more appropriately 
    determined at the corporation level than at the shareholder level.
        ``(5) Addition to tax for failure to comply 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.''
        (3) Conforming amendments.--
            (A) Section 1366 is amended by striking subsection (g).
            (B) Subsection (b) of section 6233 is amended to read as 
        follows:
    ``(b) Similar Rules in Certain Cases.--If a partnership return is 
filed for any taxable year but it is determined that there is no entity 
for such taxable year, to the extent provided in regulations, rules 
similar to the rules of subsection (a) shall apply.''
            (C) The table of subchapters for chapter 63 is amended by 
        striking the item relating to subchapter D.

SEC. 11508. S CORPORATIONS PERMITTED TO HOLD SUBSIDIARIES.

    (a) In General.--Paragraph (2) of section 1361(b) (defining 
ineligible corporation) is amended by striking subparagraph (A) and by 
redesignating subparagraphs (B), (C), (D), and (E) as subparagraphs 
(A), (B), (C), and (D), respectively.
    (b) Treatment of Certain Wholly Owned S Corporation Subsidiaries.--
Section 1361(b) (defining small business corporation) is amended by 
adding at the end the following new paragraph:
        ``(3) Treatment of certain wholly owned subsidiaries.--
            ``(A) In general.--For purposes of this title--
                ``(i) a corporation which is a qualified subchapter S 
            subsidiary shall not be treated as a separate corporation, 
            and
                ``(ii) all assets, liabilities, and items of income, 
            deduction, and credit of a qualified subchapter S 
            subsidiary shall be treated as assets, liabilities, and 
            such items (as the case may be) of the S corporation.
            ``(B) Qualified subchapter s subsidiary.--For purposes of 
        this paragraph, the term `qualified subchapter S subsidiary' 
        means any domestic corporation which is not an ineligible 
        corporation (as defined in paragraph (2)), if--
                ``(i) 100 percent of the stock of such corporation is 
            held by the S corporation, and
                ``(ii) the S corporation elects to treat such 
            corporation as a qualified subchapter S subsidiary.
            ``(C) Treatment of terminations of qualified subchapter s 
        subsidiary status.--For purposes of this title, if any 
        corporation which was a qualified subchapter S subsidiary 
        ceases to meet the requirements of subparagraph (B), such 
        corporation shall be treated as a new corporation acquiring all 
        of its assets (and assuming all of its liabilities) immediately 
        before such cessation from the S corporation in exchange for 
        its stock.''
    (c) Certain Dividends Not Treated as Passive Investment Income.--
Paragraph (3) of section 1362(d) is amended by adding at the end the 
following new subparagraph:
            ``(F) Treatment of certain dividends.--If an S corporation 
        holds stock in a C corporation meeting the requirements of 
        section 1504(a)(2), the term `passive investment income' shall 
        not include dividends from such C corporation to the extent 
        such dividends are attributable to the earnings and profits of 
        such C corporation derived from the active conduct of a trade 
        or business.''
    (d) Conforming Amendments.--
        (1) Subsection (c) of section 1361 is amended by striking 
    paragraph (6).
        (2) Subsection (b) of section 1504 (defining includible 
    corporation) is amended by adding at the end the following new 
    paragraph:
        ``(8) An S corporation.''

SEC. 11509. TREATMENT OF DISTRIBUTIONS DURING LOSS YEARS.

    (a) Adjustments for Distributions Taken Into Account Before 
Losses.--
        (1) Subparagraph (A) of section 1366(d)(1) (relating to losses 
    and deductions cannot exceed shareholder's basis in stock and debt) 
    is amended by striking ``paragraph (1)'' and inserting ``paragraphs 
    (1) and (2)(A)''.
        (2) Subsection (d) of section 1368 (relating to certain 
    adjustments taken into account) is amended by adding at the end the 
    following new sentence:
``In the case of any distribution made during any taxable year, the 
adjusted basis of the stock shall be determined with regard to the 
adjustments provided in paragraph (1) of section 1367(a) for the 
taxable year.''
    (b) Accumulated Adjustments Account.--Paragraph (1) of section 
1368(e) (relating to accumulated adjustments account) is amended by 
adding at the end the following new subparagraph:
        ``(C) Net loss for year disregarded.--
            ``(i) In general.--In applying this section to 
        distributions made during any taxable year, the amount in the 
        accumulated adjustments account as of the close of such taxable 
        year shall be determined without regard to any net negative 
        adjustment for such taxable year.
            ``(ii) Net negative adjustment.--For purposes of clause 
        (i), the term `net negative adjustment' means, with respect to 
        any taxable year, the excess (if any) of--
                ``(I) the reductions in the account for the taxable 
            year (other than for distributions), over
                ``(II) the increases in such account for such taxable 
            year.''
    (c) Conforming Amendments.--Subparagraph (A) of section 1368(e)(1) 
is amended--
        (1) by striking ``as provided in subparagraph (B)'' and 
    inserting ``as otherwise provided in this paragraph'', and
        (2) by striking ``section 1367(b)(2)(A)'' and inserting 
    ``section 1367(a)(2)''.

SEC. 11510. TREATMENT OF S CORPORATIONS UNDER SUBCHAPTER C.

    Subsection (a) of section 1371 (relating to application of 
subchapter C rules) is amended to read as follows:
    ``(a) Application of Subchapter C Rules.--Except as otherwise 
provided in this title, and except to the extent inconsistent with this 
subchapter, subchapter C shall apply to an S corporation and its 
shareholders.''

SEC. 11511. ELIMINATION OF CERTAIN EARNINGS AND PROFITS.

    (a) In General.--If--
        (1) a corporation was an electing small business corporation 
    under subchapter S of chapter 1 of the Internal Revenue Code of 
    1986 for any taxable year beginning before January 1, 1983, and
        (2) such corporation is an S corporation under subchapter S of 
    chapter 1 of such Code for its first taxable year beginning after 
    December 31, 1995,
the amount of such corporation's accumulated earnings and profits (as 
of the beginning of such first taxable year) shall be reduced by an 
amount equal to the portion (if any) of such accumulated earnings and 
profits which were accumulated in any taxable year beginning before 
January 1, 1983, for which such corporation was an electing small 
business corporation under such subchapter S.
    (b) Conforming Amendments.--
        (1) Paragraph (3) of section 1362(d) is amended--
            (A) by striking ``Subchapter C'' in the paragraph heading 
        and inserting ``Accumulated'',
            (B) by striking ``subchapter C'' in subparagraph (A)(i)(I) 
        and inserting ``accumulated'', and
            (C) by striking subparagraph (B) and redesignating the 
        following subparagraphs accordingly.
        (2)(A) Subsection (a) of section 1375 is amended by striking 
    ``subchapter C'' in paragraph (1) and inserting ``accumulated''.
        (B) Paragraph (3) of section 1375(b) is amended to read as 
    follows:
        ``(3) Passive investment income, etc.--The terms `passive 
    investment income' and `gross receipts' have the same respective 
    meanings as when used in paragraph (3) of section 1362(d).''
        (C) The section heading for section 1375 is amended by striking 
    ``subchapter c'' and inserting ``accumulated''.
        (D) The table of sections for part III of subchapter S of 
    chapter 1 is amended by striking ``subchapter C'' in the item 
    relating to section 1375 and inserting ``accumulated''.
        (3) Clause (i) of section 1042(c)(4)(A) is amended by striking 
    ``section 1362(d)(3)(D)'' and inserting ``section 1362(d)(3)(C)''.

SEC. 11512. CARRYOVER OF DISALLOWED LOSSES AND DEDUCTIONS UNDER AT-RISK 
              RULES ALLOWED.

    Paragraph (3) of section 1366(d) (relating to carryover of 
disallowed losses and deductions to post-termination transition period) 
is amended by adding at the end the following new subparagraph:
            ``(D) At-risk limitations.--To the extent that any increase 
        in adjusted basis described in subparagraph (B) would have 
        increased the shareholder's amount at risk under section 465 if 
        such increase had occurred on the day preceding the 
        commencement of the post-termination transition period, rules 
        similar to the rules described in subparagraphs (A) through (C) 
        shall apply to any losses disallowed by reason of section 
        465(a).''

SEC. 11513. ADJUSTMENTS TO BASIS OF INHERITED S STOCK TO REFLECT 
              CERTAIN ITEMS OF INCOME.

    (a) In General.--Subsection (b) of section 1367 (relating to 
adjustments to basis of stock of shareholders, etc.) is amended by 
adding at the end the following new paragraph:
        ``(4) Adjustments in case of inherited stock.--
            ``(A) In general.--If any person acquires stock in an S 
        corporation by reason of the death of a decedent or by bequest, 
        devise, or inheritance, section 691 shall be applied with 
        respect to any item of income of the S corporation in the same 
        manner as if the decedent had held directly his pro rata share 
        of such item.
            ``(B) Adjustments to basis.--The basis determined under 
        section 1014 of any stock in an S corporation shall be reduced 
        by the portion of the value of the stock which is attributable 
        to items constituting income in respect of the decedent.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply in the case of decedents dying after the date of the enactment of 
this Act.

SEC. 11514. S CORPORATIONS ELIGIBLE FOR RULES APPLICABLE TO REAL 
              PROPERTY SUBDIVIDED FOR SALE BY NONCORPORATE TAXPAYERS.

    (a) In General.--Subsection (a) of section 1237 (relating to real 
property subdivided for sale) is amended by striking ``other than a 
corporation'' in the material preceding paragraph (1) and inserting 
``other than a C corporation''.
    (b) Conforming Amendment.--Subparagraph (A) of section 1237(a)(2) 
is amended by inserting ``an S corporation which included the taxpayer 
as a shareholder,'' after ``controlled by the taxpayer,''.

SEC. 11515. EFFECTIVE DATE.

    (a) In General.--Except as otherwise provided in this subchapter, 
the amendments made by this subchapter shall apply to taxable years 
beginning after December 31, 1995.
    (b) Treatment of Certain Elections Under Prior Law.--For purposes 
of section 1362(g) of the Internal Revenue Code of 1986 (relating to 
election after termination), any termination under section 1362(d) of 
such Code in a taxable year beginning before January 1, 1996, shall not 
be taken into account.

Subchapter B--Repeal of 30-Percent Gross Income Limitation on Regulated 
                          Investment Companies

SEC. 11521. REPEAL OF 30-PERCENT GROSS INCOME LIMITATION.

    (a) General Rule.--Subsection (b) of section 851 (relating to 
limitations) is amended by striking paragraph (3), by adding ``and'' at 
the end of paragraph (2), and by redesignating paragraph (4) as 
paragraph (3).
    (b) Technical Amendments.--
        (1) The material following paragraph (3) of section 851(b) (as 
    redesignated by subsection (a)) is amended--
            (A) by striking out ``paragraphs (2) and (3)'' and 
        inserting ``paragraph (2)'', and
            (B) by striking out the last sentence thereof.
        (2) Subsection (c) of section 851 is amended by striking 
    ``subsection (b)(4)'' each place it appears (including the heading) 
    and inserting ``subsection (b)(3)''.
        (3) Subsection (d) of section 851 is amended by striking 
    ``subsections (b)(4)'' and inserting ``subsections (b)(3)''.
        (4) Paragraph (1) of section 851(e) is amended by striking 
    ``subsection (b)(4)'' and inserting ``subsection (b)(3)''.
        (5) Paragraph (4) of section 851(e) is amended by striking 
    ``subsections (b)(4)'' and inserting ``subsections (b)(3)''.
        (6) Section 851 is amended by striking subsection (g) and 
    redesignating subsection (h) as subsection (g).
        (7) Subsection (g) of section 851 (as redesignated by paragraph 
    (6)) is amended by striking paragraph (3).
        (8) Section 817(h)(2) is amended--
            (A) by striking ``851(b)(4)'' in subparagraph (A) and 
        inserting ``851(b)(3)'', and
            (B) by striking ``851(b)(4)(A)(i)'' in subparagraph (B) and 
        inserting ``851(b)(3)(A)(i)''.
        (9) Section 1092(f)(2) is amended by striking ``Except for 
    purposes of section 851(b)(3), the'' and inserting ``The''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.

                  Subchapter C--Accounting Provisions

SEC. 11551. MODIFICATIONS TO LOOK-BACK METHOD FOR LONG-TERM CONTRACTS.

    (a) Look-Back Method Not To Apply in Certain Cases.--Subsection (b) 
of section 460 (relating to percentage of completion method) is amended 
by adding at the end the following new paragraph:
        ``(6) Election to have look-back method not apply in de minimis 
    cases.--
            ``(A) Amounts taken into account after completion of 
        contract.--Paragraph (1)(B) shall not apply with respect to any 
        taxable year (beginning after the taxable year in which the 
        contract is completed) if--
                ``(i) the cumulative taxable income (or loss) under the 
            contract as of the close of such taxable year, is within
                ``(ii) 10 percent of the cumulative look-back taxable 
            income (or loss) under the contract as of the close of the 
            most recent taxable year to which paragraph (1)(B) applied 
            (or would have applied but for subparagraph (B)).
            ``(B) De minimis discrepancies.--Paragraph (1)(B) shall not 
        apply in any case to which it would otherwise apply if--
                ``(i) the cumulative taxable income (or loss) under the 
            contract as of the close of each prior contract year, is 
            within
                ``(ii) 10 percent of the cumulative look-back income 
            (or loss) under the contract as of the close of such prior 
            contract year.
            ``(C) Definitions.--For purposes of this paragraph--
                ``(i) Contract year.--The term `contract year' means 
            any taxable year for which income is taken into account 
            under the contract.
                ``(ii) Look-back income or loss.--The look-back income 
            (or loss) is the amount which would be the taxable income 
            (or loss) under the contract if the allocation method set 
            forth in paragraph (2)(A) were used in determining taxable 
            income.
                ``(iii) Discounting not applicable.--The amounts taken 
            into account after the completion of the contract shall be 
            determined without regard to any discounting under the 2nd 
            sentence of paragraph (2).
            ``(D) Contracts to which paragraph applies.--This paragraph 
        shall only apply if the taxpayer makes an election under this 
        subparagraph. Unless revoked with the consent of the Secretary, 
        such an election shall apply to all long-term contracts 
        completed during the taxable year for which election is made or 
        during any subsequent taxable year.''
    (b) Modification of Interest Rate.--
        (1) In general.--Subparagraph (C) of section 460(b)(2) is 
    amended by striking ``the overpayment rate established by section 
    6621'' and inserting ``the adjusted overpayment rate (as defined in 
    paragraph (7))''.
        (2) Adjusted overpayment rate.--Subsection (b) of section 460 
    is amended by adding at the end the following new paragraph:
        ``(7) Adjusted overpayment rate.--
            ``(A) In general.--The adjusted overpayment rate for any 
        interest accrual period is the overpayment rate in effect under 
        section 6621 for the calendar quarter in which such interest 
        accrual period begins.
            ``(B) Interest accrual period.--For purposes of 
        subparagraph (A), the term `interest accrual period' means the 
        period--
                ``(i) beginning on the day after the return due date 
            for any taxable year of the taxpayer, and
                ``(ii) ending on the return due date for the following 
            taxable year.
        For purposes of the preceding sentence, the term `return due 
        date' means the date prescribed for filing the return of the 
        tax imposed by this chapter (determined without regard to 
        extensions).''
    (c) Effective Date.--The amendments made by this section shall 
apply to contracts completed in taxable years ending after the date of 
the enactment of this Act.

SEC. 11552. APPLICATION OF MARK TO MARKET ACCOUNTING METHOD TO TRADERS 
              IN SECURITIES.

    (a) In General.--Section 475 (relating to mark to market accounting 
method for dealers in securities) is amended by redesignating 
subsection (e) as subsection (f) and by inserting after subsection (d) 
the following new subsection:
    ``(e) Authority To Extend Method to Traders in Securities.--
        ``(1) In general.--A trader in securities may elect to have the 
    provisions of this section (other than subsection (d)(3)) apply to 
    securities held by the trader. Such election may be made only with 
    the consent of the Secretary.
        ``(2) Trader in securities.--For purposes of this subsection, 
    the term `trader in securities' means a taxpayer who is regularly 
    engaged in trading securities.''
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years ending on and after December 31, 1995.

SEC. 11553. MODIFICATION OF RULING AMOUNTS FOR NUCLEAR DECOMMISSIONING 
              COSTS.

    (a) In General.--Section 468A(d) (relating to ruling amount) is 
amended by adding at the end the following new paragraph:
            ``(4) Nonsubstantial modifications.--A taxpayer may modify 
        a schedule of ruling amounts under paragraph (1) without a 
        review under paragraph (3) if such modification does not 
        substantially modify the ruling amount. The taxpayer shall 
        notify the Secretary of any such modification.''
    (b) Effective Date.--The amendment made by this section shall apply 
to modifications after the date of the enactment of this Act.

                Subchapter D--Tax-Exempt Bond Provision

SEC. 11561. REPEAL OF DEBT SERVICE-BASED LIMITATION ON INVESTMENT IN 
              CERTAIN NONPURPOSE INVESTMENTS.

    (a) In General.--Subsection (d) of section 148 (relating to special 
rules for reasonably required reserve or replacement fund) is amended 
by striking paragraph (3).
    (b) Effective Date.--The amendments made by this part shall apply 
to bonds issued after the date of the enactment of this Act.

                   Subchapter E--Insurance Provisions

SEC. 11571. TREATMENT OF CERTAIN INSURANCE CONTRACTS ON RETIRED LIVES.

    (a) General Rule.--
        (1) Paragraph (2) of section 817(d) (defining variable 
    contract) is amended by striking ``or'' at the end of subparagraph 
    (A), by striking ``and'' at the end of subparagraph (B) and 
    inserting ``or'', and by inserting after subparagraph (B) the 
    following new subparagraph:
            ``(C) provides for funding of insurance on retired lives as 
        described in section 807(c)(6), and''.
        (2) Paragraph (3) of section 817(d) is amended by striking 
    ``or'' at the end of subparagraph (A), by striking the period at 
    the end of subparagraph (B) and inserting ``, or'', and by 
    inserting after subparagraph (B) the following new subparagraph:
            ``(C) in the case of funds held under a contract described 
        in paragraph (2)(C), the amounts paid in, or the amounts paid 
        out, reflect the investment return and the market value of the 
        segregated asset account.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11572. TREATMENT OF MODIFIED GUARANTEED CONTRACTS.

    (a) General Rule.--Subpart E of part I of subchapter L of chapter 1 
(relating to definitions and special rules) is amended by inserting 
after section 817 the following new section:

``SEC. 817A. SPECIAL RULES FOR MODIFIED GUARANTEED CONTRACTS.

    ``(a) Computation of Reserves.--In the case of a modified 
guaranteed contract, clause (ii) of section 807(e)(1)(A) shall not 
apply.
    ``(b) Segregated Assets Under Modified Guaranteed Contracts Marked 
to Market.--
        ``(1) In general.--In the case of any life insurance company, 
    for purposes of this subtitle--
            ``(A) Any gain or loss with respect to a segregated asset 
        shall be treated as ordinary income or loss, as the case may 
        be.
            ``(B) If any segregated asset is held by such company as of 
        the close of any taxable year--
                ``(i) such company shall recognize gain or loss as if 
            such asset were sold for its fair market value on the last 
            business day of such taxable year, and
                ``(ii) any such gain or loss shall be taken into 
            account for such taxable year.
        Proper adjustment shall be made in the amount of any gain or 
        loss subsequently realized for gain or loss taken into account 
        under the preceding sentence. The Secretary may provide by 
        regulations for the application of this subparagraph at times 
        other than the times provided in this subparagraph.
        ``(2) Segregated asset.--For purposes of paragraph (1), the 
    term `segregated asset' means any asset held as part of a 
    segregated account referred to in subsection (d)(1) under a 
    modified guaranteed contract.
    ``(c) Special Rule in Computing Life Insurance Reserves.--For 
purposes of applying section 816(b)(1)(A) to any modified guaranteed 
contract, an assumed rate of interest shall include a rate of interest 
determined, from time to time, with reference to a market rate of 
interest.
    ``(d) Modified Guaranteed Contract Defined.--For purposes of this 
section, the term `modified guaranteed contract' means a contract not 
described in section 817--
        ``(1) all or part of the amounts received under which are 
    allocated to an account which, pursuant to State law or regulation, 
    is segregated from the general asset accounts of the company and is 
    valued from time to time with reference to market values,
        ``(2) which--
            ``(A) provides for the payment of annuities,
            ``(B) is a life insurance contract, or
            ``(C) is a pension plan contract which is not a life, 
        accident, health, property, casualty, or liability contract,
        ``(3) for which reserves are valued at market for annual 
    statement purposes, and
        ``(4) which provides for a net surrender value or a 
    policyholder's fund (as defined in section 807(e)(1)).
If only a portion of a contract is not described in section 817, such 
portion shall be treated for purposes of this section as a separate 
contract.
    ``(e) Regulations.--The Secretary may prescribe regulations--
        ``(1) to provide for the treatment of market value adjustments 
    under sections 72, 7702, 7702A, and 807(e)(1)(B),
        ``(2) to determine the interest rates applicable under sections 
    807(c)(3), 807(d)(2)(B), and 812 with respect to a modified 
    guaranteed contract annually, in a manner appropriate for modified 
    guaranteed contracts and, to the extent appropriate for such a 
    contract, to modify or waive the applicability of section 811(d),
        ``(3) to provide rules to limit ordinary gain or loss treatment 
    to assets constituting reserves for modified guaranteed contracts 
    (and not other assets) of the company,
        ``(4) to provide appropriate treatment of transfers of assets 
    to and from the segregated account, and
        ``(5) as may be necessary or appropriate to carry out the 
    purposes of this section.''.
    (b) Clerical Amendment.--The table of sections for subpart E of 
part I of subchapter L of chapter 1 is amended by inserting after the 
item relating to section 817 the following new item:
``Sec. 817A. Special rules for modified guaranteed contracts.''.

    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply to taxable years beginning after December 31, 1995.
        (2) Treatment of net adjustments.--In the case of any taxpayer 
    required by the amendments made by this section to change its 
    calculation of reserves to take into account market value 
    adjustments and to mark segregated assets to market for any taxable 
    year--
            (A) such changes shall be treated as a change in method of 
        accounting initiated by the taxpayer,
            (B) such changes shall be treated as made with the consent 
        of the Secretary, and
            (C) the adjustments required by reason of section 481 of 
        the Internal Revenue Code of 1986 shall be taken into account 
        as ordinary income or loss by the taxpayer for the taxpayer's 
        first taxable year beginning after December 31, 1995.

                     Subchapter F--Other Provisions

SEC. 11581. CLOSING OF PARTNERSHIP TAXABLE YEAR WITH RESPECT TO 
              DECEASED PARTNER, ETC.

    (a) General Rule.--Subparagraph (A) of section 706(c)(2) (relating 
to disposition of entire interest) is amended to read as follows:
            ``(A) Disposition of entire interest.--The taxable year of 
        a partnership shall close with respect to a partner whose 
        entire interest in the partnership terminates (whether by 
        reason of death, liquidation, or otherwise).''
    (b) Clerical Amendment.--The paragraph heading for paragraph (2) of 
section 706(c) is amended to read as follows:
        ``(2) Treatment of dispositions.--''.
    (c) Effective Date.--The amendments made by this section shall 
apply to partnership taxable years beginning after December 31, 1995.

SEC. 11582. CREDIT FOR SOCIAL SECURITY TAXES PAID WITH RESPECT TO 
              EMPLOYEE CASH TIPS.

    (a) Reporting Requirement Not Considered.--Subparagraph (A) of 
section 45B(b)(1) (relating to excess employer social security tax) is 
amended by inserting ``(without regard to whether such tips are 
reported under section 6053)'' after ``section 3121(q)''.
    (b) Taxes Paid.--Subsection (d) of section 13443 of the Revenue 
Reconciliation Act of 1993 is amended by inserting ``, with respect to 
services performed before, on, or after such date'' after ``1993''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by, and the provisions of, 
section 13443 of the Revenue Reconciliation Act of 1993.

SEC. 11583. DUE DATE FOR FIRST QUARTER ESTIMATED TAX PAYMENTS BY 
              PRIVATE FOUNDATIONS.

    (a) In General.--Paragraph (3) of section 6655(g) is amended by 
inserting after subparagraph (C) the following new subparagraph:
            ``(D) In the case of any private foundation, subsection 
        (c)(2) shall be applied by substituting `May 15' for `April 15' 
        ''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1995.

                     CHAPTER 6--ESTATES AND TRUSTS

                  Subchapter A--Income Tax Provisions

SEC. 11601. CERTAIN REVOCABLE TRUSTS TREATED AS PART OF ESTATE.

    (a) In General.--Subpart A of part I of subchapter J (relating to 
estates, trusts, beneficiaries, and decedents) is amended by adding at 
the end the following new section:

``SEC. 646. CERTAIN REVOCABLE TRUSTS TREATED AS PART OF ESTATE.

    ``(a) General Rule.--For purposes of this subtitle, if both the 
executor (if any) of an estate and the trustee of a qualified revocable 
trust elect the treatment provided in this section, such trust shall be 
treated and taxed as part of such estate (and not as a separate trust) 
for all taxable years of the estate ending after the date of the 
decedent's death and before the applicable date.
    ``(b) Definitions.--For purposes of subsection (a)--
        ``(1) Qualified revocable trust.--The term `qualified revocable 
    trust' means any trust (or portion thereof) which was treated under 
    section 676 as owned by the decedent of the estate referred to in 
    subsection (a) by reason of a power in the grantor (determined 
    without regard to section 672(e)).
        ``(2) Applicable date.--The term `applicable date' means--
            ``(A) if no return of tax imposed by chapter 11 is required 
        to be filed, the date which is 2 years after the date of the 
        decedent's death, and
            ``(B) if such a return is required to be filed, the date 
        which is 6 months after the date of the final determination of 
        the liability for tax imposed by chapter 11.
    ``(c) Election.--The election under subsection (a) shall be made 
not later than the time prescribed for filing the return of tax imposed 
by this chapter for the first taxable year of the estate (determined 
with regard to extensions) and, once made, shall be irrevocable.''
    (b) Comparable Treatment Under Generation-Skipping Tax.--Paragraph 
(1) of section 2652(b) is amended by adding at the end the following 
new sentence: ``Such term shall not include any trust during any period 
the trust is treated as part of an estate under section 646.''
    (c) Clerical Amendment.--The table of sections for such subpart A 
is amended by adding at the end the following new item:
        ``Sec. 646. Certain revocable trusts treated as part of 
                  estate.''

    (d) Effective Date.--The amendments made by this section shall 
apply with respect to estates of decedents dying after the date of the 
enactment of this Act.

SEC. 11602. DISTRIBUTIONS DURING FIRST 65 DAYS OF TAXABLE YEAR OF 
              ESTATE.

    (a) In General.--Subsection (b) of section 663 (relating to 
distributions in first 65 days of taxable year) is amended by inserting 
``an estate or'' before ``a trust'' each place it appears.
    (b) Conforming Amendment.--Paragraph (2) of section 663(b) is 
amended by striking ``the fiduciary of such trust'' and inserting ``the 
executor of such estate or the fiduciary of such trust (as the case may 
be)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 11603. SEPARATE SHARE RULES AVAILABLE TO ESTATES.

    (a) In General.--Subsection (c) of section 663 (relating to 
separate shares treated as separate trusts) is amended--
        (1) by inserting before the last sentence the following new 
    sentence: ``Rules similar to the rules of the preceding provisions 
    of this subsection shall apply to treat substantially separate and 
    independent shares of different beneficiaries in an estate having 
    more than 1 beneficiary as separate estates.'', and
        (2) by inserting ``or estates'' after ``trusts'' in the last 
    sentence.
    (b) Conforming Amendment.--The subsection heading of section 663(c) 
is amended by inserting ``Estates or'' before ``Trusts''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after the date of the enactment of 
this Act.

SEC. 11604. EXECUTOR OF ESTATE AND BENEFICIARIES TREATED AS RELATED 
              PERSONS FOR DISALLOWANCE OF LOSSES, ETC.

    (a) Disallowance of Losses.--Subsection (b) of section 267 
(relating to losses, expenses, and interest with respect to 
transactions between related taxpayers) is amended by striking ``or'' 
at the end of paragraph (11), by striking the period at the end of 
paragraph (12) and inserting ``; or'', and by adding at the end the 
following new paragraph:
        ``(13) Except in the case of a sale or exchange in satisfaction 
    of a pecuniary bequest, an executor of an estate and a beneficiary 
    of such estate.''
    (b) Ordinary Income From Gain From Sale of Depreciable Property.--
Subsection (b) of section 1239 is amended by striking the period at the 
end of paragraph (2) and inserting ``, and'' and by adding at the end 
the following new paragraph:
        ``(3) except in the case of a sale or exchange in satisfaction 
    of a pecuniary bequest, an executor of an estate and a beneficiary 
    of such estate.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 11605. LIMITATION ON TAXABLE YEAR OF ESTATES.

    (a) In General.--Section 645 (relating to taxable year of trusts) 
is amended to read as follows:

``SEC. 645. TAXABLE YEAR OF ESTATES AND TRUSTS.

    ``(a) Estates.--For purposes of this subtitle, the taxable year of 
an estate shall be a year ending on October 31, November 30, or 
December 31.
    ``(b) Trusts.--
        ``(1) In general.--For purposes of this subtitle, the taxable 
    year of any trust shall be the calendar year.
        ``(2) Exception for trusts exempt from tax and charitable 
    trusts.--Paragraph (1) shall not apply to a trust exempt from 
    taxation under section 501(a) or to a trust described in section 
    4947(a)(1).''
    (b) Clerical Amendment.--The table of sections for subpart A of 
part I of subchapter J of chapter 1 is amended by striking the item 
relating to section 645 and inserting the following new item:
        ``Sec. 645. Taxable year of estates and trusts.''

    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying after the date of the enactment of 
this Act.

SEC. 11606. TREATMENT OF FUNERAL TRUSTS.

    (a) In General.--Subpart F of part I of subchapter J of chapter 1 
is amended by adding at the end the following new section:

``SEC. 684. TREATMENT OF FUNERAL TRUSTS.

    ``(a) In General.--In the case of a qualified funeral trust--
        ``(1) subparts B, C, D, and E shall not apply, and
        ``(2) no deduction shall be allowed by section 642(b).
    ``(b) Qualified Funeral Trust.--For purposes of this subsection, 
the term `qualified funeral trust' means any trust (other than a 
foreign trust) if--
        ``(1) the trust arises as a result of a contract with a person 
    engaged in the trade or business of providing funeral or burial 
    services or property necessary to provide such services,
        ``(2) the sole purpose of the trust is to hold, invest, and 
    reinvest funds in the trust and to use such funds solely to make 
    payments for such services or property for the benefit of the 
    beneficiaries of the trust,
        ``(3) the only beneficiaries of such trust are individuals who 
    have entered into contracts described in paragraph (1) to have such 
    services or property provided at their death,
        ``(4) the only contributions to the trust are contributions by 
    or for the benefit of such beneficiaries,
        ``(5) the trustee elects the application of this subsection, 
    and
        ``(6) the trust would (but for the election described in 
    paragraph (5)) be treated as owned by the beneficiaries under 
    subpart E.
    ``(c) Dollar Limitation on Contributions.--
        ``(1) In general.--The term `qualified funeral trust' shall not 
    include any trust which accepts aggregate contributions by or for 
    the benefit of an individual in excess of $7,000.
        ``(2) Related trusts.--For purposes of paragraph (1), all 
    trusts having trustees which are related persons shall be treated 
    as 1 trust. For purposes of the preceding sentence, persons are 
    related if--
            ``(A) the relationship between such persons would result in 
        the disallowance of losses under section 267 or 707(b),
            ``(B) such persons are treated as a single employer under 
        subsection (a) or (b) of section 52, or
            ``(C) the Secretary determines that treating such persons 
        as related is necessary to prevent avoidance of the purposes of 
        this section.
        ``(3) Inflation adjustment.--In the case of any contract 
    referred to in subsection (b)(1) which is entered into during any 
    calendar year after 1996, the dollar amount referred to paragraph 
    (1) shall be increased by an amount equal to--
            ``(A) such dollar amount, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year, by substituting 
        `calendar year 1995' for `calendar year 1992' in subparagraph 
        (B) thereof.
    If any dollar amount after being increased under the preceding 
    sentence is not a multiple of $100, such dollar amount shall be 
    rounded to the nearest multiple of $100.
    ``(d) Application of Rate Schedule.--Section 1(e) shall be applied 
to each qualified funeral trust by treating each beneficiary's interest 
in each such trust as a separate trust.
    ``(e) Treatment of Amounts Refunded to Beneficiary on 
Cancellation.--No gain or loss shall be recognized to a beneficiary 
described in subsection (b)(3) of any qualified funeral trust by reason 
of any payment from such trust to such beneficiary by reason of 
cancellation of a contract referred to in subsection (b)(1). If any 
payment referred to in the preceding sentence consists of property 
other than money, the basis of such property in the hands of such 
beneficiary shall be the same as the trust's basis in such property 
immediately before the payment.
    ``(f) Simplified Reporting.--The Secretary may prescribe rules for 
simplified reporting of all trusts having a single trustee.''
    (b) Clerical Amendment.--The table of sections for subpart F of 
part I of subchapter J of chapter 1 is amended by adding at the end the 
following new item:
        ``Sec. 684. Treatment of funeral trusts.''

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

              Subchapter B--Estate and Gift Tax Provisions

SEC. 11611. CLARIFICATION OF WAIVER OF CERTAIN RIGHTS OF RECOVERY.

    (a) Amendment to Section 2207A.--Paragraph (2) of section 2207A(a) 
(relating to right of recovery in the case of certain marital deduction 
property) is amended to read as follows:
        ``(2) Decedent may otherwise direct.--Paragraph (1) shall not 
    apply with respect to any property to the extent that the decedent 
    in his will (or a revocable trust) specifically indicates an intent 
    to waive any right of recovery under this subchapter with respect 
    to such property.''
    (b) Amendment to Section 2207B.--Paragraph (2) of section 2207B(a) 
(relating to right of recovery where decedent retained interest) is 
amended to read as follows:
        ``(2) Decedent may otherwise direct.--Paragraph (1) shall not 
    apply with respect to any property to the extent that the decedent 
    in his will (or a revocable trust) specifically indicates an intent 
    to waive any right of recovery under this subchapter with respect 
    to such property.''
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to the estates of decedents dying after the date of 
the enactment of this Act.

SEC. 11612. ADJUSTMENTS FOR GIFTS WITHIN 3 YEARS OF DECEDENT'S DEATH.

    (a) General Rule.--Section 2035 is amended to read as follows:

``SEC. 2035. ADJUSTMENTS FOR CERTAIN GIFTS MADE WITHIN 3 YEARS OF 
              DECEDENT'S DEATH.

    ``(a) Inclusion of Certain Property in Gross Estate.--If--
        ``(1) the decedent made a transfer (by trust or otherwise) of 
    an interest in any property, or relinquished a power with respect 
    to any property, during the 3-year period ending on the date of the 
    decedent's death, and
        ``(2) the value of such property (or an interest therein) would 
    have been included in the decedent's gross estate under section 
    2036, 2037, 2038, or 2042 if such transferred interest or 
    relinquished power had been retained by the decedent on the date of 
    his death,
the value of the gross estate shall include the value of any property 
(or interest therein) which would have been so included.
    ``(b) Inclusion of Gift Tax on Gifts Made During 3 Years Before 
Decedent's Death.--The amount of the gross estate (determined without 
regard to this subsection) shall be increased by the amount of any tax 
paid under chapter 12 by the decedent or his estate on any gift made by 
the decedent or his spouse during the 3-year period ending on the date 
of the decedent's death.
    ``(c) Other Rules Relating to Transfers Within 3 Years of Death.--
        ``(1) In general.--For purposes of--
            ``(A) section 303(b) (relating to distributions in 
        redemption of stock to pay death taxes),
            ``(B) section 2032A (relating to special valuation of 
        certain farms, etc., real property), and
            ``(C) subchapter C of chapter 64 (relating to lien for 
        taxes),
    the value of the gross estate shall include the value of all 
    property to the extent of any interest therein of which the 
    decedent has at any time made a transfer, by trust or otherwise, 
    during the 3-year period ending on the date of the decedent's 
    death.
        ``(2) Coordination with section 6166.--An estate shall be 
    treated as meeting the 35 percent of adjusted gross estate 
    requirement of section 6166(a)(1) only if the estate meets such 
    requirement both with and without the application of paragraph (1).
        ``(3) Marital and small transfers.--Paragraph (1) shall not 
    apply to any transfer (other than a transfer with respect to a life 
    insurance policy) made during a calendar year to any donee if the 
    decedent was not required by section 6019 (other than by reason of 
    section 6019(2)) to file any gift tax return for such year with 
    respect to transfers to such donee.
    ``(d) Exception.--Subsection (a) shall not apply to any bona fide 
sale for an adequate and full consideration in money or money's worth.
    ``(e) Treatment of Certain Transfers From Revocable Trusts.--For 
purposes of this section and section 2038, any transfer from any 
portion of a trust during any period that such portion was treated 
under section 676 as owned by the decedent by reason of a power in the 
grantor (determined without regard to section 672(e)) shall be treated 
as a transfer made directly by the decedent.''
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter A of chapter 11 is amended by striking ``gifts'' in the item 
relating to section 2035 and inserting ``certain gifts''.
    (c) Effective Date.--The amendments made by this section shall 
apply to the estates of decedents dying after the date of the enactment 
of this Act.

SEC. 11613. CLARIFICATION OF QUALIFIED TERMINABLE INTEREST RULES.

    (a) General Rule.--
        (1) Estate tax.--Subparagraph (B) of section 2056(b)(7) 
    (defining qualified terminable interest property) is amended by 
    adding at the end the following new clause:
                ``(vi) Treatment of certain income distributions.--An 
            income interest shall not fail to qualify as a qualified 
            income interest for life solely because income for the 
            period after the last distribution date and on or before 
            the date of the surviving spouse's death is not required to 
            be distributed to the surviving spouse or to the estate of 
            the surviving spouse.''
        (2) Gift tax.--Paragraph (3) of section 2523(f) is amended by 
    striking ``and (iv)'' and inserting ``(iv), and (vi)''.
    (b) Clarification of Subsequent Inclusions.--Section 2044 is 
amended by adding at the end the following new subsection:
    ``(d) Clarification of Inclusion of Certain Income.--The amount 
included in the gross estate under subsection (a) shall include the 
amount of any income from the property to which this section applies 
for the period after the last distribution date and on or before the 
date of the decedent's death if such income is not otherwise included 
in the decedent's gross estate.''
    (c) Effective Date.--
        (1) In general.--The amendments made by this section shall 
    apply with respect to the estates of decedents dying, and gifts 
    made, after the date of the enactment of this Act.
        (2) Application of section 2044 to transfers before date of 
    enactment.--In the case of the estate of any decedent dying after 
    the date of the enactment of this Act, if there was a transfer of 
    property on or before such date--
            (A) such property shall not be included in the gross estate 
        of the decedent under section 2044 of the Internal Revenue Code 
        of 1986 if no prior marital deduction was allowed with respect 
        to such a transfer of such property to the decedent, but
            (B) such property shall be so included if such a deduction 
        was allowed.

SEC. 11614. TRANSITIONAL RULE UNDER SECTION 2056A.

    (a) General Rule.--In the case of any trust created under an 
instrument executed before the date of the enactment of the Revenue 
Reconciliation Act of 1990, such trust shall be treated as meeting the 
requirements of paragraph (1) of section 2056A(a) of the Internal 
Revenue Code of 1986 if the trust instrument requires that all trustees 
of the trust be individual citizens of the United States or domestic 
corporations.
    (b) Effective Date.--The provisions of subsection (a) shall take 
effect as if included in the provisions of section 11702(g) of the 
Revenue Reconciliation Act of 1990.

SEC. 11615. OPPORTUNITY TO CORRECT CERTAIN FAILURES UNDER SECTION 
              2032A.

    (a) General Rule.--Paragraph (3) of section 2032A(d) (relating to 
modification of election and agreement to be permitted) is amended to 
read as follows:
        ``(3) Modification of election and agreement to be permitted.--
    The Secretary shall prescribe procedures which provide that in any 
    case in which the executor makes an election under paragraph (1) 
    (and submits the agreement referred to in paragraph (2)) within the 
    time prescribed therefor, but--
            ``(A) the notice of election, as filed, does not contain 
        all required information, or
            ``(B) signatures of 1 or more persons required to enter 
        into the agreement described in paragraph (2) are not included 
        on the agreement as filed, or the agreement does not contain 
        all required information,
    the executor will have a reasonable period of time (not exceeding 
    90 days) after notification of such failures to provide such 
    information or signatures.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to the estates of decedents dying after the date of the enactment 
of this Act.

SEC. 11616. GIFTS MAY NOT BE REVALUED FOR ESTATE TAX PURPOSES AFTER 
              EXPIRATION OF STATUTE OF LIMITATIONS.

    (a) In General.--Section 2001 (relating to imposition and rate of 
estate tax) is amended by adding at the end the following new 
subsection:
    ``(f) Valuation of Gifts.--If--
        ``(1) the time has expired within which a tax may be assessed 
    under chapter 12 (or under corresponding provisions of prior laws) 
    on the transfer of property by gift made during a preceding 
    calendar period (as defined in section 2502(b)), and
        ``(2) the value of such gift is shown on the return for such 
    preceding calendar period or is disclosed in such return, or in a 
    statement attached to the return, in a manner adequate to apprise 
    the Secretary of the nature of such gift,
the value of such gift shall, for purposes of computing the tax under 
this chapter, be the value of such gift as finally determined for 
purposes of chapter 12.''
    (b) Modification of Application of Statute of Limitations.--
Paragraph (9) of section 6501(c) is amended to read as follows:
        ``(9) Gift tax on certain gifts not shown on return.--If any 
    gift of property the value of which (or any increase in taxable 
    gifts required under section 2701(d)) is required to be shown on a 
    return of tax imposed by chapter 12 (without regard to section 
    2503(b)), and is not shown on such return, any tax imposed by 
    chapter 12 on such gift may be assessed, or a proceeding in court 
    for the collection of such tax may be begun without assessment, at 
    any time. The preceding sentence shall not apply to any item which 
    is disclosed in such return, or in a statement attached to the 
    return, in a manner adequate to apprise the Secretary of the nature 
    of such item. The value of any item which is so disclosed may not 
    be redetermined by the Secretary after the expiration of the period 
    under subsection (a).''
    (c) Declaratory Judgment Procedure for Determining Value of Gift.--
        (1) In general.--Part IV of subchapter C of chapter 76 is 
    amended by inserting after section 7476 the following new section:

``SEC. 7477. DECLARATORY JUDGMENTS RELATING TO VALUE OF CERTAIN GIFTS.

    ``(a) Creation of Remedy.--In a case of an actual controversy 
involving a determination by the Secretary of the value of any gift 
shown on the return of tax imposed by chapter 12 or disclosed on such 
return or in any statement attached to such return, upon the filing of 
an appropriate pleading, the Tax Court may make a declaration of the 
value of such gift. Any such declaration shall have the force and 
effect of a decision of the Tax Court and shall be reviewable as such.
    ``(b) Limitations.--
        ``(1) Petitioner.--A pleading may be filed under this section 
    only by the donor.
        ``(2) Exhaustion of administrative remedies.--The court shall 
    not issue a declaratory judgment or decree under this section in 
    any proceeding unless it determines that the petitioner has 
    exhausted all available administrative remedies within the Internal 
    Revenue Service.
        ``(3) Time for bringing action.--If the Secretary sends by 
    certified or registered mail notice of his determination as 
    described in subsection (a) to the petitioner, no proceeding may be 
    initiated under this section unless the pleading is filed before 
    the 91st day after the date of such mailing.''
        (2) Clerical amendment.--The table of sections for such part IV 
    is amended by inserting after the item relating to section 7476 the 
    following new item:
        ``Sec. 7477. Declaratory judgments relating to value of certain 
                  gifts.''

    (d) Conforming Amendment.--Subsection (c) of section 2504 is 
amended by striking ``, and if a tax under this chapter or under 
corresponding provisions of prior laws has been assessed or paid for 
such preceding calendar period''.
    (e) Effective Dates.--
        (1) In general.--The amendments made by subsections (a) and (c) 
    shall apply to gifts made after the date of the enactment of this 
    Act.
        (2) Subsection (b).--The amendment made by subsection (b) shall 
    apply to gifts made in calendar years ending after the date of the 
    enactment of this Act.

SEC. 11617. CLARIFICATIONS RELATING TO DISCLAIMERS.

    (a) Partial Transfer-Type Disclaimers Permitted.--Paragraph (3) of 
section 2518(c) (relating to certain transfers treated as disclaimers) 
is amended by inserting ``(or an undivided portion of such interest)'' 
after ``entire interest in the property''.
    (b) Retention of Interest by Decedent's Spouse Permitted in 
Transfer-Type Disclaimers.--Paragraph (3) of section 2518(c) is amended 
by adding at the end the following new flush sentence:
    ``For purposes of the preceding sentence, a written transfer by the 
    spouse of the decedent of property to a trust shall not fail to be 
    treated as a transfer of such spouse's interest in such property by 
    reason of such spouse having an interest in such trust.''
    (c) Disclaimers Are Effective For Income Tax Purposes.--Subsection 
(a) of section 2518 is amended by inserting ``and subtitle A'' after 
``this subtitle'' each place it appears.
    (d) Effective Date.--The amendments made by this section shall 
apply to transfers creating an interest in the person disclaiming, and 
disclaimers, made after the date of the enactment of this Act.

SEC. 11618. CLARIFICATION OF TREATMENT OF SURVIVOR ANNUITIES UNDER 
              QUALIFIED TERMINABLE INTEREST RULES.

    (a) In General.--Subparagraph (C) of section 2056(b)(7) is amended 
by inserting ``(or, in the case of an interest in an annuity arising 
under the community property laws of a State, included in the gross 
estate of the decedent under section 2033)'' after ``section 2039''.
    (b) Effective Date.--The amendment made by this section shall apply 
to estates of decedents dying after the date of the enactment of this 
Act.

SEC. 11619. TREATMENT UNDER QUALIFIED DOMESTIC TRUST RULES OF FORMS OF 
              OWNERSHIP WHICH ARE NOT TRUSTS.

    (a) In General.--Subsection (c) of section 2056A (defining 
qualified domestic trust) is amended by adding at the end the following 
new paragraph:
        ``(3) Trust.--To the extent provided in regulations prescribed 
    by the Secretary, the term `trust'includes other arrangements which 
have substantially the same effect as a trust.''
    (b) Effective Date.--The amendment made by this section shall apply 
to estates of decedents dying after the date of the enactment of this 
Act.

            Subchapter C--Generation-Skipping Tax Provisions

SEC. 11631. TAXABLE TERMINATION NOT TO INCLUDE DIRECT SKIPS.

    (a) In General.--Paragraph (1) of section 2612(a) (defining taxable 
termination) is amended by adding at the end the following new flush 
sentence:
    ``Such term shall not include a direct skip.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to generation-skipping transfers (as defined in section 2611 of 
the Internal Revenue Code of 1986) after the date of the enactment of 
this Act.

                  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.

    (a) In General.--Paragraph (1) of section 5008(c) (relating to 
distilled spirits returned to bonded premises) is amended by striking 
``withdrawn from bonded premises on payment or determination of tax'' 
and inserting ``on which tax has been determined or paid''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect at the beginning of the first calendar quarter beginning 
more than 180 days after the date of the enactment of this Act.

SEC. 11642. FERMENTED MATERIAL FROM ANY BREWERY MAY BE RECEIVED AT A 
              DISTILLED SPIRITS PLANT.

    (a) In General.--Paragraph (2) of section 5222(b) (relating to 
production, receipt, removal, and use of distilling materials) is 
amended to read as follows:
        ``(2) beer conveyed without payment of tax from brewery 
    premises, beer which has been lawfully removed from brewery 
    premises upon determination of tax, or''.
    (b) Clarification of Authority To Permit Removal of Beer Without 
Payment of Tax for Use as Distilling Material.--Section 5053 (relating 
to exemptions) is amended by redesignating subsection (f) as subsection 
(i) and by inserting after subsection (e) the following new subsection:
    ``(f) Removal for Use as Distilling Material.--Subject to such 
regulations as the Secretary may prescribe, beer may be removed from a 
brewery without payment of tax to any distilled spirits plant for use 
as distilling material.''
    (c) Clarification of Refund and Credit of Tax.--Section 5056 
(relating to refund and credit of tax, or relief from liability) is 
amended--
        (1) by redesignating subsection (c) as subsection (d) and by 
    inserting after subsection (b) the following new subsection:
    ``(c) Beer Received at a Distilled Spirits Plant.--Any tax paid by 
any brewer on beer produced in the United States may be refunded or 
credited to the brewer, without interest, or if the tax has not been 
paid, the brewer may be relieved of liability therefor, under 
regulations as the Secretary may prescribe, if such beer is received on 
the bonded premises of a distilled spirits plant pursuant to the 
provisions of section 5222(b)(2), for use in the production of 
distilled spirits.'', and
        (2) by striking ``or rendering unmerchantable'' in subsection 
    (d) (as so redesignated) and inserting ``rendering unmerchantable, 
    or receipt on the bonded premises of a distilled spirits plant''.
    (d) Effective Date.--The amendments made by this section shall take 
effect at the beginning of the first calendar quarter beginning more 
than 180 days after the date of the enactment of this Act.

SEC. 11643. REFUND OF TAX ON WINE RETURNED TO BOND NOT LIMITED TO 
              UNMERCHANTABLE WINE.

    (a) In General.--Subsection (a) of section 5044 (relating to refund 
of tax on unmerchantable wine) is amended by striking ``as 
unmerchantable''.
    (b) Conforming Amendments.--
        (1) Section 5361 is amended by striking ``unmerchantable''.
        (2) The section heading for section 5044 is amended by striking 
    ``unmerchantable''.
        (3) The item relating to section 5044 in the table of sections 
    for subpart C of part I of subchapter A of chapter 51 is amended by 
    striking ``unmerchantable''.
    (c) Effective Date.--The amendments made by this section shall take 
effect at the beginning of the first calendar quarter beginning more 
than 180 days after the date of the enactment of this Act.

SEC. 11644. BEER MAY BE WITHDRAWN FREE OF TAX FOR DESTRUCTION.

    (a) In General.--Section 5053 is amended by inserting after 
subsection (g) the following new subsection:
    ``(h) Removals for Destruction.--Subject to such regulations as the 
Secretary may prescribe, beer may be removed from the brewery without 
payment of tax for destruction.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect at the beginning of the first calendar quarter beginning 
more than 180 days after the date of the enactment of this Act.

SEC. 11645. TRANSFER TO BREWERY OF BEER IMPORTED IN BULK WITHOUT 
              PAYMENT OF TAX.

    (a) In General.--Part II of subchapter G of chapter 51 is amended 
by adding at the end the following new section:

``SEC. 5418. BEER IMPORTED IN BULK.

    ``Beer imported or brought into the United States in bulk 
containers may, under such regulations as the Secretary may prescribe, 
be withdrawn from customs custody and transferred in such bulk 
containers to the premises of a brewery without payment of the internal 
revenue tax imposed on such beer. The proprietor of a brewery to which 
such beer is transferred shall become liable for the tax on the beer 
withdrawn from customs custody under this section upon release of the 
beer from customs custody, and the importer, or the person bringing 
such beer into the United States, shall thereupon be relieved of the 
liability for such tax.''
    (b) Clerical Amendment.--The table of sections for such part II is 
amended by adding at the end the following new item:
        ``Sec. 5418. Beer imported in bulk.''

    (c) Effective Date.--The amendments made by this section shall take 
effect at the beginning of the first calendar quarter beginning more 
than 180 days after the date of the enactment of this Act.

       Subchapter B--Consolidation of Taxes on Aviation Gasoline

SEC. 11651. CONSOLIDATION OF TAXES ON AVIATION GASOLINE.

    (a) In General.--Subparagraph (A) of section 4081(a)(2) (relating 
to imposition of tax on gasoline and diesel fuel) is amended by 
redesignating clause (ii) as clause (iii) and by striking clause (i) 
and inserting the following:
                ``(i) in the case of gasoline other than aviation 
            gasoline, 18.3 cents per gallon,
                ``(ii) in the case of aviation gasoline, 19.3 cents per 
            gallon, and''.
    (b) Termination.--Subsection (d) of section 4081 is amended by 
redesignating paragraph (2) as paragraph (3) and by inserting after 
paragraph (1) the following new paragraph:
        ``(2) Aviation gasoline.--On and after January 1, 1996, the 
    rate specified in subsection (a)(2)(A)(ii) shall be 4.3 cents per 
    gallon.''
    (c) Repeal of Retail Level Tax.--
        (1) Subsection (c) of section 4041 is amended by striking 
    paragraphs (2) and (3) and by redesignating paragraphs (4) and (5) 
    as paragraphs (2) and (3), respectively.
        (2) Paragraph (3) of section 4041(c), as redesignated by 
    paragraph (1), is amended by striking ``paragraphs (1) and (2)'' 
    and inserting ``paragraph (1)''.
    (d) Conforming Amendments.--
        (1) Paragraph (1) of section 4041(k) is amended by adding 
    ``and'' at the end of subparagraph (A), by striking ``, and'' at 
    the end of subparagraph (B) and inserting a period, and by striking 
    subparagraph (C).
        (2) Paragraph (1) of section 4081(d) is amended by striking 
    ``each rate of tax specified in subsection (a)(2)(A)'' and 
    inserting ``the rates of tax specified in clauses (i) and (iii) of 
    subsection (a)(2)(A)''.
        (3) Sections 6421(f)(2)(A) and 9502(f)(1)(A) are each amended 
    by striking ``section 4041(c)(4)'' and inserting ``section 
    4041(c)(2)''.
        (4) Paragraph (2) of section 9502(b) is amended by striking 
    ``14 cents'' and inserting ``15 cents''.
    (e) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.
    (f) Floor Stocks Tax.--
        (1) Imposition of tax.--In the case of aviation gasoline on 
    which tax was imposed under section 4081 of the Internal Revenue 
    Code of 1986 before January 1, 1996, and which is held on such date 
    by any person, there is hereby imposed a floor stocks tax of 1 cent 
    per gallon of such gasoline.
        (2) Liability for tax and method of payment.--
            (A) Liability for tax.--A person holding aviation gasoline 
        on January 1, 1996, to which the tax imposed by paragraph (1) 
        applies shall be liable for such tax.
            (B) Method of payment.--The tax imposed by paragraph (1) 
        shall be paid in such manner as the Secretary shall prescribe.
            (C) Time for payment.--The tax imposed by paragraph (1) 
        shall be paid on or before June 30, 1996.
        (3) Definitions.--For purposes of this subsection:
            (A) Held by a person.--Gasoline shall be considered as 
        ``held by a person'' if title thereto has passed to such person 
        (whether or not delivery to the person has been made).
            (B) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury or his delegate.
        (4) Exception for exempt uses.--The tax imposed by paragraph 
    (1) shall not apply to gasoline held by any person exclusively for 
    any use to the extent a credit or refund of the tax imposed by 
    section 4081 of such Code is allowable for such use.
        (5) Exception for fuel held in aircraft tank.--No tax shall be 
    imposed by paragraph (1) on aviation gasoline held in the tank of 
    an aircraft.
        (6) Exception for certain amounts of fuel.--
            (A) In general.--No tax shall be imposed by paragraph (1) 
        on aviation gasoline held on January 1, 1996, by any person if 
        the aggregate amount of aviation gasoline held by such person 
        on such date does not exceed 6,000 gallons. The preceding 
        sentence shall apply only if such person submits to the 
        Secretary (at the time and in the manner required by the 
        Secretary) such information as the Secretary shall require for 
        purposes of this paragraph.
            (B) Exempt fuel.--For purposes of subparagraph (A), there 
        shall not be taken into account fuel held by any person which 
        is exempt from the tax imposed by paragraph (1) by reason of 
        paragraph (4) or (5).
            (C) Controlled groups.--
                (i) Corporations.--In the case of a controlled group, 
            the 6,000 gallon amount in subparagraph (A) shall be 
            apportioned among the component members of such group in 
            such manner as the Secretary shall by regulations 
            prescribe. For purposes of the preceding sentence, the term 
            ``controlled group'' has the meaning given to such term by 
            subsection (a) of section 1563 of such Code; except that 
            for such purposes the phrase ``more than 50 percent'' shall 
            be substituted for the phrase ``at least 80 percent'' each 
            place it appears in such subsection.
                (ii) Nonincorporated persons under common control.--
            Under regulations prescribed by the Secretary, principles 
            similar to the principles of clause (i) shall apply to a 
            group under common control where 1 or more of the members 
            is not a corporation.
        (7) Other laws applicable.--All provisions of law, including 
    penalties, applicable with respect to the taxes imposed by section 
    4081 of such Code shall, insofar as applicable and not inconsistent 
    with the provisions of this subsection, apply with respect to the 
    floor stock taxes imposed by paragraph (1) to the same extent as if 
    such taxes were imposed by such section 4081.

               Subchapter C--Other Excise Tax Provisions

SEC. 11661. CERTAIN COMBINATIONS NOT TREATED AS MANUFACTURE UNDER 
              RETAIL SALES TAX ON HEAVY TRUCKS.

    (a) In General.--Paragraph (2) of section 4052(c) (relating to 
certain combinations not treated as manufacture) is amended by striking 
``or wood or metal floor'' and inserting ``wood or metal floor, or a 
power take-off and dump body''.
    (b) Removal of Fifth Wheel.--Paragraph (1) of section 4052(c) is 
amended by inserting before the period ``or the removal of any coupling 
device (including any fifth wheel)''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

                  CHAPTER 8--ADMINISTRATIVE PROVISION

SEC. 11671. CERTAIN NOTICES DISREGARDED UNDER PROVISION INCREASING 
              INTEREST RATE ON LARGE CORPORATE UNDERPAYMENTS.

    (a) General Rule.--Subparagraph (B) of section 6621(c)(2) (defining 
applicable date) is amended by adding at the end the following new 
clause:
                ``(iii) Exception for letters or notices involving 
            small amounts.--For purposes of this paragraph, any letter 
            or notice shall be disregarded if the amount of the 
            deficiency or proposed deficiency (or the assessment or 
            proposed assessment) set forth in such letter or notice is 
            not greater than $100,000 (determined by not taking into 
            account any interest, penalties, or additions to tax).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply for purposes of determining interest for periods after December 
31, 1995.

                  Subtitle K--Miscellaneous Provisions

SEC. 11701. TREATMENT OF STORAGE OF PRODUCT SAMPLES.

    (a) In General.--Paragraph (2) of section 280A(c) is amended by 
striking ``inventory'' and inserting ``inventory or product samples''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 1995.

SEC. 11702. ADJUSTMENT OF DEATH BENEFIT LIMITS FOR CERTAIN POLICIES.

    (a) In General.--Subparagraph (C)(i) of section 7702(e)(2) 
(relating to limited increases in death benefit permitted) is amended 
by striking ``$5,000'' and inserting ``$7,000'' and by striking 
``$25,000'' and inserting ``$30,000''.
    (b) Inflation Adjustments.--Section 7702(e) (relating to 
computational rules) is amended by adding at the end the following new 
paragraph:
        ``(3) Inflation adjustment to death benefit limits for years 
    after 1996.--In the case of any taxable year beginning in a 
    calendar year after 1996, each dollar amount contained in paragraph 
    (2)(C)(i) shall be increased by an amount equal to--
            ``(A) such dollar amount, multiplied by
            ``(B) the cost-of-living adjustment determined under 
        section 1(f)(3), for the calendar year in which the taxable 
        year begins, by substituting `calendar year 1995' for `calendar 
        year 1992' in subparagraph (B) thereof.''.
    (c) Conforming Amendment.--Section 72(e)(10)(B) is amended by 
striking ``$25,000'' and inserting ``$30,000 (adjusted at the same time 
and in the same manner as under section 7702(e)(3))''.
    (d) Effective Date.--The amendments made by this section shall 
apply to contracts entered into after December 31, 1995.

SEC. 11703. ORGANIZATIONS SUBJECT TO SECTION 833.

    (a) In General.--Section 833(c) (relating to organization to which 
section applies) is amended by adding at the end the following new 
paragraph:
        ``(4) Treatment as existing blue cross or blue shield 
    organization.--
            ``(A) In general.--Paragraph (2) shall be applied to an 
        organization described in subparagraph (B) as if it were a Blue 
        Cross or Blue Shield organization.
            ``(B) Applicable organization.--An organization is 
        described in this subparagraph if it--
                ``(i) is organized under, and governed by, State laws 
            which are specifically and exclusively applicable to not-
            for-profit health insurance or health service type 
            organizations, and
                ``(ii) is not a Blue Cross or Blue Shield organization 
            or health maintenance organization.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years ending after October 13, 1995.

SEC. 11704. CORRECTION OF INFLATION ADJUSTMENT IN LUXURY EXCISE TAX ON 
              AUTOMOBILES.

    (a) In General.--Subsection (e) of section 4001 (relating to 
inflation adjustment) is amended to read as follows:
    ``(e) Inflation Adjustment.--
        ``(1) In general.--The $30,000 amount in subsection (a) and 
    section 4003(a) shall be increased by an amount equal to--
            ``(A) $30,000, multiplied by
            ``(B) the cost-of-living adjustment under section 1(f)(3) 
        for the calendar year in which the vehicle is sold, determined 
        by substituting `calendar year 1990' for `calendar year 1992' 
        in subparagraph (B) thereof.
        ``(2) Rounding.--If any amount as adjusted under paragraph (1) 
    is not a multiple of $2,000, such amount shall be rounded to the 
    next lowest multiple of $2,000.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 11705. EXTENSION AND PHASEDOWN OF LUXURY PASSENGER AUTOMOBILE TAX.

    (a) Extension.--Subsection (f) of section 4001 is amended by 
striking ``1999'' and inserting ``2002''.
    (b) Phasedown.--Section 4001 is amended by redesignating subsection 
(f) (as amended by subsection (a) of this section) as subsection (g) 
and by inserting after subsection (e) the following new subsection:
    ``(f) Phasedown.--For sales occurring in a calendar year after 1995 
and before 2003, subsection (a) shall be applied by substituting for 
`10 percent' the percentage determined in accordance with the following 
table:

``If the calendar year is:
                                                      The percentage is:
  1996..................................................
                                                        9 percent       
  1997..................................................
                                                        8 percent       
  1998..................................................
                                                        7 percent       
  1999..................................................
                                                        6 percent       
  2000..................................................
                                                        5 percent       
  2001..................................................
                                                        4 percent       
  2002..................................................
                                                        3 percent.''    

    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

                       Subtitle K--Miscellaneous

SEC. 13101. FOOD STAMP ELIGIBILITY.

    Section 6(f) of the Food Stamp Act of 1977 (7 U.S.C. 2015(f)) is 
amended by striking the third sentence and inserting the following: 
``The State agency shall, at its option, consider either all income and 
financial resources of the individual rendered ineligible to 
participate in the food stamp program under this subsection, or such 
income, less a pro rata share, and the financial resources of the 
ineligible individual, to determine the eligibility and the value of 
the allotment of the household of which such individual is a member.''.

SEC. 13102. REDUCTION IN BLOCK GRANTS FOR SOCIAL SERVICES.

    Section 2003(c) of the Social Security Act (42 U.S.C. 1397b) is 
amended--
        (1) by striking ``and'' at the end of paragraph (4); and
        (2) by striking paragraph (5) and inserting the following:
        ``(5) $2,800,000,000 for each of the fiscal years 1990 through 
    1996; and
        ``(6) $2,240,000,000 for each fiscal year after fiscal year 
    1996.''.

             Subtitle L--Generalized System of Preferences

SEC. 11801. SHORT TITLE.

    This subtitle may be cited as the ``GSP Renewal Act of 1995''.

SEC. 11802. GENERALIZED SYSTEM OF PREFERENCES.

    (a) In General.--Title V of the Trade Act of 1974 is amended to 
read as follows:

              ``TITLE V--GENERALIZED SYSTEM OF PREFERENCES

``SEC. 501. AUTHORITY TO EXTEND PREFERENCES.

    ``The President may provide duty-free treatment for any eligible 
article from any beneficiary developing country in accordance with the 
provisions of this title. In taking any such action, the President 
shall have due regard for--
        ``(1) the effect such action will have on furthering the 
    economic development of developing countries through the expansion 
    of their exports;
        ``(2) the extent to which other major developed countries are 
    undertaking a comparable effort to assist developing countries by 
    granting generalized preferences with respect to imports of 
    products of such countries;
        ``(3) the anticipated impact of such action on United States 
    producers of like or directly competitive products; and
        ``(4) the extent of the beneficiary developing country's 
    competitiveness with respect to eligible articles.

``SEC. 502. DESIGNATION OF BENEFICIARY DEVELOPING COUNTRIES.

    ``(a) Authority To Designate Countries.--
        ``(1) Beneficiary developing countries.--The President is 
    authorized to designate countries as beneficiary developing 
    countries for purposes of this title.
        ``(2) Least-developed beneficiary developing countries.--The 
    President is authorized to designate any beneficiary developing 
    country as a least-developed beneficiary developing country for 
    purposes of this title, based on the considerations in section 501 
    and subsection (c) of this section.
    ``(b) Countries Ineligible for Designation.--
        ``(1) Specific countries.--The following countries may not be 
    designated as beneficiary developing countries for purposes of this 
    title:
            ``(A) Australia.
            ``(B) Canada.
            ``(C) European Union member states.
            ``(D) Iceland.
            ``(E) Japan.
            ``(F) Monaco.
            ``(G) New Zealand.
            ``(H) Norway.
            ``(I) Switzerland.
        ``(2) Other bases for ineligibility.--The President shall not 
    designate any country a beneficiary developing country under this 
    title if any of the following applies:
            ``(A) Such country is a Communist country, unless--
                ``(i) the products of such country receive 
            nondiscriminatory treatment,
                ``(ii) such country is a WTO Member (as such term is 
            defined in section 2(10) of the Uruguay Round Agreements 
            Act) (19 U.S.C. 3501(10)) and a member of the International 
            Monetary Fund, and
                ``(iii) such country is not dominated or controlled by 
            international communism.
            ``(B) Such country is a party to an arrangement of 
        countries and participates in any action pursuant to such 
        arrangement, the effect of which is--
                ``(i) to withhold supplies of vital commodity resources 
            from international trade or to raise the price of such 
            commodities to an unreasonable level, and
                ``(ii) to cause serious disruption of the world 
            economy.
            ``(C) Such country affords preferential treatment to the 
        products of a developed country, other than the United States, 
        which has, or is likely to have, a significant adverse effect 
        on United States commerce.
            ``(D)(i) Such country--
                ``(I) has nationalized, expropriated, or otherwise 
            seized ownership or control of property, including patents, 
            trademarks, or copyrights, owned by a United States citizen 
            or by a corporation, partnership, or association which is 
            50 percent or more beneficially owned by United States 
            citizens,
                ``(II) has taken steps to repudiate or nullify an 
            existing contract or agreement with a United States citizen 
            or a corporation, partnership, or association which is 50 
            percent or more beneficially owned by United States 
            citizens, the effect of which is to nationalize, 
            expropriate, or otherwise seize ownership or control of 
            property, including patents, trademarks, or copyrights, so 
            owned, or
                ``(III) has imposed or enforced taxes or other 
            exactions, restrictive maintenance or operational 
            conditions, or other measures with respect to property, 
            including patents, trademarks, or copyrights, so owned, the 
            effect of which is to nationalize, expropriate, or 
            otherwise seize ownership or control of such property,
        unless clause (ii) applies.
            ``(ii) This clause applies if the President determines 
        that--
                ``(I) prompt, adequate, and effective compensation has 
            been or is being made to the citizen, corporation, 
            partnership, or association referred to in clause (i),
                ``(II) good faith negotiations to provide prompt, 
            adequate, and effective compensation under the applicable 
            provisions of international law are in progress, or the 
            country described in clause (i) is otherwise taking steps 
            to discharge its obligations under international law with 
            respect to such citizen, corporation, partnership, or 
            association, or
                ``(III) a dispute involving such citizen, corporation, 
            partnership, or association over compensation for such a 
            seizure has been submitted to arbitration under the 
            provisions of the Convention for the Settlement of 
            Investment Disputes, or in another mutually agreed upon 
            forum,
        and the President promptly furnishes a copy of such 
        determination to the Senate and House of Representatives.
            ``(E) Such country fails to act in good faith in 
        recognizing as binding or in enforcing arbitral awards in favor 
        of United States citizens or a corporation, partnership, or 
        association which is 50 percent or more beneficially owned by 
        United States citizens, which have been made by arbitrators 
        appointed for each case or by permanent arbitral bodies to 
        which the parties involved have submitted their dispute.
            ``(F) Such country aids or abets, by granting sanctuary 
        from prosecution to, any individual or group which has 
        committed an act of international terrorism.
            ``(G) Such country has not taken or is not taking steps to 
        afford internationally recognized worker rights to workers in 
        the country (including any designated zone in that country).
    Subparagraphs (D), (E), (F), and (G) shall not prevent the 
    designation of any country as a beneficiary developing country 
    under this title if the President determines that such designation 
    will be in the national economic interest of the United States and 
    reports such determination to the Congress with the reasons 
    therefor.
    ``(c) Factors Affecting Country Designation.--In determining 
whether to designate any country as a beneficiary developing country 
under this title, the President shall take into account--
        ``(1) an expression by such country of its desire to be so 
    designated;
        ``(2) the level of economic development of such country, 
    including its per capita gross national product, the living 
    standards of its inhabitants, and any other economic factors which 
    the President deems appropriate;
        ``(3) whether or not other major developed countries are 
    extending generalized preferential tariff treatment to such 
    country;
        ``(4) the extent to which such country has assured the United 
    States that it will provide equitable and reasonable access to the 
    markets and basic commodity resources of such country and the 
    extent to which such country has assured the United States that it 
    will refrain from engaging in unreasonable export practices;
        ``(5) the extent to which such country is providing adequate 
    and effective protection of intellectual property rights;
        ``(6) the extent to which such country has taken action to--
            ``(A) reduce trade distorting investment practices and 
        policies (including export performance requirements); and
            ``(B) reduce or eliminate barriers to trade in services; 
        and
        ``(7) whether or not such country has taken or is taking steps 
    to afford to workers in that country (including any designated zone 
    in that country) internationally recognized worker rights.
    ``(d) Withdrawal, Suspension, or Limitation of Country 
Designation.--
        ``(1) In general.--The President may withdraw, suspend, or 
    limit the application of the duty-free treatment accorded under 
    this title with respect to any country. In taking any action under 
    this subsection, the President shall consider the factors set forth 
    in section 501 and subsection (c) of this section.
        ``(2) Changed circumstances.--The President shall, after 
    complying with the requirements of subsection (f)(2), withdraw or 
    suspend the designation of any country as a beneficiary developing 
    country if, after such designation, the President determines that 
    as the result of changed circumstances such country would be barred 
    from designation as a beneficiary developing country under 
    subsection (b)(2). Such country shall cease to be a beneficiary 
    developing country on the day on which the President issues an 
    Executive order or Presidential proclamation revoking the 
    designation of such country under this title.
        ``(3) Advice to congress.--The President shall, as necessary, 
    advise the Congress on the application of section 501 and 
    subsection (c) of this section, and the actions the President has 
    taken to withdraw, to suspend, or to limit the application of duty-
    free treatment with respect to any country which has failed to 
    adequately take the actions described in subsection (c).
    ``(e) Mandatory Graduation of Beneficiary Developing Countries.--If 
the President determines that a beneficiary developing country has 
become a `high income' country, as defined by the official statistics 
of the International Bank for Reconstruction and Development, then the 
President shall terminate the designation of such country as a 
beneficiary developing country for purposes of this title, effective on 
January 1 of the second year following the year in which such 
determination is made.
    ``(f) Congressional Notification.--
        ``(1) Notification of designation.--
            ``(A) In general.--Before the President designates any 
        country as a beneficiary developing country under this title, 
        the President shall notify the Congress of the President's 
        intention to make such designation, together with the 
        considerations entering into such decision.
            ``(B) Designation as least-developed beneficiary developing 
        country.--At least 60 days before the President designates any 
        country as a least-developed beneficiary developing country, 
        the President shall notify the Congress of the President's 
        intention to make such designation.
        ``(2) Notification of termination.--If the President has 
    designated any country as a beneficiary developing country under 
    this title, the President shall not terminate such designation 
    unless, at least 60 days before such termination, the President has 
    notified the Congress and has notified such country of the 
    President's intention to terminate such designation, together with 
    the considerations entering into such decision.

``SEC. 503. DESIGNATION OF ELIGIBLE ARTICLES.

    ``(a) Eligible Articles.--
        ``(1) Designation.--
            ``(A) In general.--Except as provided in subsection (b), 
        the President is authorized to designate articles as eligible 
        articles from all beneficiary developing countries for purposes 
        of this title by Executive order or Presidential proclamation 
        after receiving the advice of the International Trade 
        Commission in accordance with subsection (e).
            ``(B) Least-developed beneficiary developing countries.--
        Except for articles described in subparagraphs (A), (B), and 
        (E) of subsection (b)(1) and articles described in paragraphs 
        (2) and (3) of subsection (b), the President may, in carrying 
        out section 502(d)(1) and subsection (c)(1) of this section, 
        designate articles as eligible articles only for countries 
        designated as least-developed beneficiary developing countries 
        under section 502(a)(2) if, after receiving the advice of the 
        International Trade Commission in accordance with subsection 
        (e) of this section, the President determines that such 
        articles are not import-sensitive in the context of imports 
        from least-developed beneficiary developing countries.
            ``(C) Three-year rule.--If, after receiving the advice of 
        the International Trade Commission under subsection (e), an 
        article has been formally considered for designation as an 
        eligible article under this title and denied such designation, 
        such article may not be reconsidered for such designation for a 
        period of 3 years after such denial.
        ``(2) Rule of origin.--
            ``(A) General rule.--The duty-free treatment provided under 
        this title shall apply to any eligible article which is the 
        growth, product, or manufacture of a beneficiary developing 
        country if--
                ``(i) that article is imported directly from a 
            beneficiary developing country into the customs territory 
            of the United States; and
                ``(ii) the sum of--

                    ``(I) the cost or value of the materials produced 
                in the beneficiary developing country or any two or 
                more such countries that are members of the same 
                association of countries and are treated as one country 
                under section 507(2), plus
                    ``(II) the direct costs of processing operations 
                performed in such beneficiary developing country or 
                such member countries,

            is not less than 35 percent of the appraised value of such 
            article at the time it is entered.
            ``(B) Exclusions.--An article shall not be treated as the 
        growth, product, or manufacture of a beneficiary developing 
        country by virtue of having merely undergone--
                ``(i) simple combining or packaging operations, or
                ``(ii) mere dilution with water or mere dilution with 
            another substance that does not materially alter the 
            characteristics of the article.
        ``(3) Regulations.--The Secretary of the Treasury, after 
    consulting with the United States Trade Representative, shall 
    prescribe such regulations as may be necessary to carry out 
    paragraph (2), including, but not limited to, regulations providing 
    that, in order to be eligible for duty-free treatment under this 
    title, an article--
            ``(A) must be wholly the growth, product, or manufacture of 
        a beneficiary developing country, or
            ``(B) must be a new or different article of commerce which 
        has been grown, produced, or manufactured in the beneficiary 
        developing country.
    ``(b) Articles That May Not Be Designated as Eligible Articles.--
        ``(1) Import sensitive articles.--The President may not 
    designate any article as an eligible article under subsection (a) 
    if such article is within one of the following categories of 
    import-sensitive articles:
            ``(A) Textile and apparel articles which were not eligible 
        articles for purposes of this title on January 1, 1994, as this 
        title was in effect on such date.
            ``(B) Watches, except those watches entered after June 30, 
        1989, that the President specifically determines, after public 
        notice and comment, will not cause material injury to watch or 
        watch band, strap, or bracelet manufacturing and assembly 
        operations in the United States or the United States insular 
        possessions.
            ``(C) Import-sensitive electronic articles.
            ``(D) Import-sensitive steel articles.
            ``(E) Footwear, handbags, luggage, flat goods, work gloves, 
        and leather wearing apparel which were not eligible articles 
        for purposes of this title on January 1, 1995, as this title 
        was in effect on such date.
            ``(F) Import-sensitive semimanufactured and manufactured 
        glass products.
            ``(G) Any other articles which the President determines to 
        be import-sensitive in the context of the Generalized System of 
        Preferences.
        ``(2) Articles against which other actions taken.--An article 
    shall not be an eligible article for purposes of this title for any 
    period during which such article is the subject of any action 
    proclaimed pursuant to section 203 of this Act (19 U.S.C. 2253) or 
    section 232 or 351 of the Trade Expansion Act of 1962 (19 U.S.C. 
    1862, 1981).
        ``(3) Agricultural products.--No quantity of an agricultural 
    product subject to a tariff-rate quota that exceeds the in-quota 
    quantity shall be eligible for duty-free treatment under this 
    title.
    ``(c) Withdrawal, Suspension, or Limitation of Duty-Free Treatment; 
Competitive Need Limitation.--
        ``(1) In general.--The President may withdraw, suspend, or 
    limit the application of the duty-free treatment accorded under 
    this title with respect to any article, except that no rate of duty 
    may be established with respect to any article pursuant to this 
    subsection other than the rate which would apply but for this 
    title. In taking any action under this subsection, the President 
    shall consider the factors set forth in sections 501 and 502(c).
        ``(2) Competitive need limitation.--
            ``(A) Basis for withdrawal of duty-free treatment.--
                ``(i) In general.--Except as provided in clause (ii) 
            and subject to subsection (d), whenever the President 
            determines that a beneficiary developing country has 
            exported (directly or indirectly) to the United States 
            during any calendar year beginning after December 31, 
            1995--

                    ``(I) a quantity of an eligible article having an 
                appraised value in excess of the applicable amount for 
                the calendar year, or
                    ``(II) a quantity of an eligible article equal to 
                or exceeding 50 percent of the appraised value of the 
                total imports of that article into the United States 
                during any calendar year,

            the President shall, not later than July 1 of the next 
            calendar year, terminate the duty-free treatment for that 
            article from that beneficiary developing country.
                ``(ii) Annual adjustment of applicable amount.--For 
            purposes of applying clause (i), the applicable amount is--

                    ``(I) for 1996, $75,000,000, and
                    ``(II) for each calendar year thereafter, an amount 
                equal to the applicable amount in effect for the 
                preceding calendar year plus $5,000,000.

            ``(B) Country defined.--For purposes of this paragraph, the 
        term `country' does not include an association of countries 
        which is treated as one country under section 507(2), but does 
        include a country which is a member of any such association.
            ``(C) Redesignations.--A country which is no longer treated 
        as a beneficiary developing country with respect to an eligible 
        article by reason of subparagraph (A) may, subject to the 
        considerations set forth in sections 501 and 502, be 
        redesignated a beneficiary developing country with respect to 
        such article if imports of such article from such country did 
        not exceed the limitations in subparagraph (A) during the 
        preceding calendar year.
            ``(D) Least-developed beneficiary developing countries.--
        Subparagraph (A) shall not apply to any least-developed 
        beneficiary developing country.
            ``(E) Articles not produced in the united states 
        excluded.--Subparagraph (A)(i)(II) shall not apply with respect 
        to any eligible article if a like or directly competitive 
        article was not produced in the United States on January 1, 
        1995.
            ``(F) De minimis waivers.--
                ``(i) In general.--The President may disregard 
            subparagraph (A)(i)(II) with respect to any eligible 
            article from any beneficiary developing country if the 
            aggregate appraised value of the imports of such article 
            into the United States during the preceding calendar year 
            does not exceed the applicable amount for such preceding 
            calendar year.
                ``(ii) Applicable amount.--For purposes applying clause 
            (i), the applicable amount is--

                    ``(I) for calendar year 1995, $13,000,000, and
                    ``(II) for each calendar year thereafter, an amount 
                equal to the applicable amount in effect for the 
                preceding calendar year plus $500,000.

    ``(d) Waiver of Competitive Need Limitation.--
        ``(1) In general.--The President may waive the application of 
    subsection (c)(2) with respect to any eligible article of any 
    beneficiary developing country if, before July 1 of the calendar 
    year beginning after the calendar year for which a determination 
    described in subsection (c)(2)(A) was made with respect to such 
    eligible article, the President--
            ``(A) receives the advice of the International Trade 
        Commission under section 332 of the Tariff Act of 1930 on 
        whether any industry in the United States is likely to be 
        adversely affected by such waiver,
            ``(B) determines, based on the considerations described in 
        sections 501 and 502(c) and the advice described in 
        subparagraph (A), that such waiver is in the national economic 
        interest of the United States, and
            ``(C) publishes the determination described in subparagraph 
        (B) in the Federal Register.
        ``(2) Considerations by the president.--In making any 
    determination under paragraph (1), the President shall give great 
    weight to--
            ``(A) the extent to which the beneficiary developing 
        country has assured the United States that such country will 
        provide equitable and reasonable access to the markets and 
        basic commodity resources of such country, and
            ``(B) the extent to which such country provides adequate 
        and effective protection of intellectual property rights.
        ``(3) Other bases for waiver.--The President may waive the 
    application of subsection (c)(2) if, before July 1 of the calendar 
    year beginning after the calendar year for which a determination 
    described in subsection (c)(2) was made with respect to a 
    beneficiary developing country, the President determines that--
            ``(A) there has been a historical preferential trade 
        relationship between the United States and such country,
            ``(B) there is a treaty or trade agreement in force 
        covering economic relations between such country and the United 
        States, and
            ``(C) such country does not discriminate against, or impose 
        unjustifiable or unreasonable barriers to, United States 
        commerce,
    and the President publishes that determination in the Federal 
    Register.
        ``(4) Limitations on waivers.--
            ``(A) In general.--The President may not exercise the 
        waiver authority under this subsection with respect to a 
        quantity of an eligible article entered during any calendar 
        year beginning after 1995, the aggregate appraised value of 
        which equals or exceeds 30 percent of the aggregate appraised 
        value of all articles that entered duty-free under this title 
        during the preceding calendar year.
            ``(B) Other waiver limits.--The President may not exercise 
        the waiver authority provided under this subsection with 
        respect to a quantity of an eligible article entered during any 
        calendar year beginning after 1995, the aggregate appraised 
        value of which exceeds 15 percent of the aggregate appraised 
        value of all articles that have entered duty-free under this 
        title during the preceding calendar year from those beneficiary 
        developing countries which for the preceding calendar year--
                ``(i) had a per capita gross national product 
            (calculated on the basis of the best available information, 
            including that of the International Bank for Reconstruction 
            and Development) of $5,000 or more; or
                ``(ii) had exported (either directly or indirectly) to 
            the United States a quantity of articles that was duty-free 
            under this title that had an aggregate appraised value of 
            more than 10 percent of the aggregate appraised value of 
            all articles that entered duty-free under this title during 
            that year.
            ``(C) Calculation of limitations.--There shall be counted 
        against the limitations imposed under subparagraphs (A) and (B) 
        for any calendar year only that value of any eligible article 
        of any country that--
                ``(i) entered duty-free under this title during such 
            calendar year; and
                ``(ii) is in excess of the value of that article that 
            would have been so entered during such calendar year if the 
            limitations under subsection (c)(2)(A) applied.
        ``(5) Effective period of waiver.--Any waiver granted under 
    this subsection shall remain in effect until the President 
    determines that such waiver is no longer warranted due to changed 
    circumstances.
    ``(e) International Trade Commission Advice.--Before designating 
articles as eligible articles under subsection (a)(1), the President 
shall publish and furnish the International Trade Commission with lists 
of articles which may be considered for designation as eligible 
articles for purposes of this title. The provisions of sections 131, 
132, 133, and 134 shall be complied with as though action under section 
501 and this section were action under section 123 to carry out a trade 
agreement entered into under section 123.
    ``(f) Special Rule Concerning Puerto Rico.--No action under this 
title may affect any tariff duty imposed by the Legislature of Puerto 
Rico pursuant to section 319 of the Tariff Act of 1930 on coffee 
imported into Puerto Rico.

``SEC. 504. REVIEW AND REPORTS TO CONGRESS.

    ``The President shall submit an annual report to the Congress on 
the status of internationally recognized worker rights within each 
beneficiary developing country.

``SEC. 505. DATE OF TERMINATION.

    ``No duty-free treatment provided under this title shall remain in 
effect after December 31, 1996.

``SEC. 506. AGRICULTURAL EXPORTS OF BENEFICIARY DEVELOPING COUNTRIES.

    ``The appropriate agencies of the United States shall assist 
beneficiary developing countries to develop and implement measures 
designed to assure that the agricultural sectors of their economies are 
not directed to export markets to the detriment of the production of 
foodstuffs for their citizenry.

``SEC. 507. DEFINITIONS.

    ``For purposes of this title:
        ``(1) Beneficiary developing country.--The term `beneficiary 
    developing country' means any country with respect to which there 
    is in effect an Executive order or Presidential proclamation by the 
    President designating such country as a beneficiary developing 
    country for purposes of this title.
        ``(2) Country.--The term `country' means any foreign country or 
    territory, including any overseas dependent territory or possession 
    of a foreign country, or the Trust Territory of the Pacific 
    Islands. In the case of an association of countries which is a free 
    trade area or customs union, or which is contributing to 
    comprehensive regional economic integration among its members 
    through appropriate means, including, but not limited to, the 
    reduction of duties, the President may by Executive order or 
    Presidential proclamation provide that all members of such 
    association other than members which are barred from designation 
    under section 502(b) shall be treated as one country for purposes 
    of this title.
        ``(3) Entered.--The term `entered' means entered, or withdrawn 
    from warehouse for consumption, in the customs territory of the 
    United States.
        ``(4) Internationally recognized worker rights.--The term 
    `internationally recognized worker rights' includes--
            ``(A) the right of association;
            ``(B) the right to organize and bargain collectively;
            ``(C) a prohibition on the use of any form of forced or 
        compulsory labor;
            ``(D) a minimum age for the employment of children; and
            ``(E) acceptable conditions of work with respect to minimum 
        wages, hours of work, and occupational safety and health.
        ``(5) Least-developed beneficiary developing country.--The term 
    `least-developed beneficiary developing country' means a 
    beneficiary developing country that is designated as a least-
    developed beneficiary developing country under section 
    502(a)(2).''.
    (b) Table of Contents.--The items relating to title V in the table 
of contents of the Trade Act of 1974 are 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.''.

SEC. 11803. RETROACTIVE APPLICATION FOR CERTAIN LIQUIDATIONS AND 
              RELIQUIDATIONS.

    (a) In General.--Notwithstanding section 514 of the Tariff Act of 
1930 or any other provision of law and subject to subsection (b), the 
entry--
        (1) of any article to which duty-free treatment under title V 
    of the Trade Act of 1974 would have applied if the entry had been 
    made on July 31, 1995, and
        (2) that was made after July 31, 1995, and before the date of 
    the enactment of this Act,
shall be liquidated or reliquidated as free of duty, and the Secretary 
of the Treasury shall refund any duty paid with respect to such entry. 
As used in this subsection, the term ``entry'' includes a withdrawal 
from warehouse for consumption.
    (b) Requests.--Liquidation or reliquidation may be made under 
subsection (a) with respect to an entry only if a request therefor is 
filed with the Customs Service, within 180 days after the date of the 
enactment of this Act, that contains sufficient information to enable 
the Customs Service--
        (1) to locate the entry; or
        (2) to reconstruct the entry if it cannot be located.

SEC. 11804. CONFORMING AMENDMENTS.

    (a) Trade Laws.--
        (1) Section 1211(b) of the Omnibus Trade and Competitiveness 
    Act of 1988 (19 U.S.C. 3011(b)) is amended--
            (A) in paragraph (1), by striking ``(19 U.S.C. 2463(a), 
        2464(c)(3))'' and inserting ``(as in effect on July 31, 
        1995)''; and
            (B) in paragraph (2), by striking ``(19 U.S.C. 
        2464(c)(1))'' and inserting the following: ``(as in effect on 
        July 31, 1995)''.
        (2) Section 203(c)(7) of the Andean Trade Preference Act (19 
    U.S.C. 3202(c)(7)) is amended by striking ``502(a)(4)'' and 
    inserting ``507(4)''.
        (3) Section 212(b)(7) of the Caribbean Basin Economic Recovery 
    Act (19 U.S.C. 2702(b)(7)) is amended by striking ``502(a)(4)'' and 
    inserting ``507(4)''.
        (4) General note 3(a)(iv)(C) of the Harmonized Tariff Schedule 
    of the United States is amended by striking ``sections 503(b) and 
    504(c)'' and inserting ``subsections (a), (c), and (d) of section 
    503''.
        (5) Section 201(a)(2) of the North American Free Trade 
    Agreement Implementation Act (19 U.S.C. 3331(a)(2)) is amended by 
    striking ``502(a)(2) of the Trade Act of 1974 (19 U.S.C. 
    2462(a)(2))'' and inserting ``502(f)(2) of the Trade Act of 1974''.
        (6) Section 131 of the Uruguay Round Agreements Act (19 U.S.C. 
    3551) is amended in subsections (a) and (b)(1) by striking 
    ``502(a)(4)'' and inserting ``507(4)''.
    (b) Other Laws.--
        (1) Section 871(f)(2)(B) of the Internal Revenue Code of 1986 
    is amended by striking ``within the meaning of section 502'' and 
    inserting ``under title V''.
        (2) Section 2202(8) of the Export Enhancement Act of 1988 (15 
    U.S.C. 4711(8)) is amended by striking ``502(a)(4)'' and inserting 
    ``507(4)''.
        (3) Section 231A(a) of the Foreign Assistance Act of 1961 (22 
    U.S.C. 2191a(a)) is amended--
            (A) in paragraph (1) by striking ``502(a)(4) of the Trade 
        Act of 1974 (19 U.S.C. 2462(a)(4))'' and inserting ``507(4) of 
        the Trade Act of 1974'';
            (B) in paragraph (2) by striking ``505(c) of the Trade Act 
        of 1974 (19 U.S.C. 2465(c))'' and inserting ``504 of the Trade 
        Act of 1974''; and
            (C) in paragraph (4) by striking ``502(a)(4)'' and 
        inserting ``507(4)''.
        (4) Section 1621(a)(1) of the International Financial 
    Institutions Act (22 U.S.C. 262p-4p(a)(1)) is amended by striking 
    ``502(a)(4)'' and inserting ``507(4)''.
        (5) Section 103B of the Agricultural Act of 1949 (7 U.S.C. 
    1444-2) is amended in subsections (a)(5)(F)(v) and (n)(1)(C) by 
    striking ``503(d) of the Trade Act of 1974 (19 U.S.C. 2463(d))'' 
    and inserting ``503(b)(3) of the Trade Act of 1974''.

               Subtitle M--Increase in Public Debt Limit

SEC. 11901. INCREASE IN PUBLIC DEBT LIMIT.

    Subsection (b) of section 3101 of title 31, United States Code, is 
amended by striking the dollar amount contained in the first sentence 
and inserting ``$5,500,000,000,000'' and by striking the second 
sentence (if any).

  TITLE XII--TEACHING HOSPITALS AND GRADUATE MEDICAL EDUCATION; ASSET 
                  SALES; WELFARE; AND OTHER PROVISIONS

SEC. 12001. SHORT TITLE.

    Subtitles A through K of this title may be cited as the ``Personal 
Responsibility and Work Opportunity Act of 1995''.

SEC. 12002. TABLE OF CONTENTS.

    The table of contents of subtitles A through L of this 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.

                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.
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 Non-Residential 
                                 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 means-tested 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.

 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.

           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.
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 A--Block Grants for Temporary Assistance for Needy Families

SEC. 12100. REFERENCES TO THE SOCIAL SECURITY ACT.

    Except as otherwise specifically provided, wherever in this 
subtitle an amendment is expressed in terms of an amendment to or 
repeal of a section or other provision, the reference shall be 
considered to be made to that section or other provision of the Social 
Security Act.

SEC. 12101. BLOCK GRANTS TO STATES.

    Part A of title IV (42 U.S.C. 601 et seq.) is amended to read as 
follows:

  ``PART A--BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE FOR NEEDY 
                                FAMILIES

``SEC. 401. ELIGIBLE STATES; STATE PLAN.

    ``(a) In General.--As used in this part, the term `eligible State' 
means, with respect to a fiscal year, a State that, during the 2-year 
period immediately preceding the fiscal year, has submitted to the 
Secretary a plan that includes the following:
        ``(1) Outline of family assistance program.--
            ``(A) General provisions.--A written document that outlines 
        how the State intends to do the following:
                ``(i) Conduct a program, designed to serve all 
            political subdivisions in the State, that provides 
            assistance to needy families with (or expecting) children 
            and provides parents with job preparation, work, and 
            support services to enable them to leave the program and 
            become self-sufficient.
                ``(ii) Require a parent or caretaker receiving 
            assistance under the program to engage in work (as defined 
            by the State) once the State determines the parent or 
            caretaker is ready to engage in work, or once the parent or 
            caretaker has received assistance under the program for 24 
            months (whether or not consecutive), whichever is earlier.
                ``(iii) Ensure that parents and caretakers receiving 
            assistance under the program engage in work activities in 
            accordance with section 406.
                ``(iv) Take such reasonable steps as the State deems 
            necessary to restrict the use and disclosure of information 
            about individuals and families receiving assistance under 
            the program.
                ``(v) Establish goals and take action to prevent and 
            reduce the incidence of out-of-wedlock pregnancies, with 
            special emphasis on teenage pregnancies, and establish 
            numerical goals for reducing the illegitimacy ratio of the 
            State (as defined in section 402(a)(2)(B)) for calendar 
            years 1996 through 2005.
            ``(B) Special provisions.--
                ``(i) The document shall indicate whether the State 
            intends to treat families moving into the State from 
            another State differently than other families under the 
            program, and if so, how the State intends to treat such 
            families under the program.
                ``(ii) The document shall indicate whether the State 
            intends to provide assistance under the program to 
            individuals who are not citizens of the United States, and 
            if so, shall include an overview of such assistance.
        ``(2) Certification that the state will operate a child support 
    enforcement program.--A certification by the chief executive 
    officer of the State that, during the fiscal year, the State will 
    operate a child support enforcement program under the State plan 
    approved under part D.
        ``(3) Certification that the state will operate a child 
    protection program.--A certification by the chief executive officer 
    of the State that, during the fiscal year, the State will operate a 
    child protection program under the State plan approved under part 
    B.
        ``(4) Certification of the administration of the program.--A 
    certification by the chief executive officer of the State 
    specifying which State agency or agencies will administer and 
    supervise the program referred to in paragraph (1) for the fiscal 
    year, which shall include assurances that local governments and 
    private sector organizations--
            ``(A) have been consulted regarding the plan and design of 
        welfare services in the State so that services are provided in 
        a manner appropriate to local populations; and
            ``(B) have had at least 60 days to submit comments on the 
        plan and the design of such services.
        ``(5) Certification that the state will provide indians with 
    equitable access to assistance.--A certification by the chief 
    executive officer of the State that, during the fiscal year, the 
    State will provide each Indian who is a member of an Indian tribe 
    in the State that does not have a tribal family assistance plan 
    approved under section 411 with equitable access to assistance 
    under the State program funded under this part.
    ``(b) Special Rule for Fiscal Year 1996.--Notwithstanding 
subsection (a), the term `eligible State' means, with respect to fiscal 
year 1996, a State that has submitted to the Secretary a plan described 
in subsection (a) within 3 months after the date of the enactment of 
this part.
    ``(c) Public Availability of State Plan Summary.--The State shall 
make available to the public a summary of any plan submitted by the 
State under this section.

``SEC. 402. PAYMENTS TO STATES.

    ``(a) Grants.--
        ``(1) Family assistance grant.--
            ``(A) In general.--Each eligible State shall be entitled to 
        receive from the Secretary, for each of fiscal years 1996, 
        1997, 1998, 1999, and 2000, a grant in an amount equal to the 
        State family assistance grant. The payment of these grants to 
        States shall not be deemed to entitle any individual or family 
        to any assistance under any State program funded under this 
        part.
            ``(B) State family assistance grant defined.--As used in 
        this part, the term `State family assistance grant' means the 
        greatest of--
                ``(i) \1/3\ of the total amount required to be paid to 
            the State under section 403 of this title (as in effect on 
            September 30, 1995) for fiscal years 1992, 1993, and 1994 
            (other than with respect to amounts expended by the State 
            for child care under subsection (g) or (i) of section 402 
            (as so in effect));
                ``(ii) the total amount required to be paid to the 
            State under such section 403 for fiscal year 1994 (other 
            than with respect to amounts expended by the State for 
            child care under subsection (g) or (i) of section 402 (as 
            so in effect)); or
                ``(iii) \4/3\ of the total amount required to be paid 
            to the State under such section 403 for the 1st 3 quarters 
            of fiscal year 1995 (other than with respect to amounts 
            expended by the State under the State plan approved under 
            part F (as so in effect) or for child care under subsection 
            (g) or (i) of section 402 (as so in effect)), plus the 
            total amount required to be paid to the State for fiscal 
            year 1995 under section 403(l) (as so in effect).
        ``(2) Grant to reward states that reduce out-of-wedlock 
    births.--
            ``(A) In general.--In addition to any grant under paragraph 
        (1), each eligible State shall be entitled to receive from the 
        Secretary for fiscal year 1998 or any succeeding fiscal year, a 
        grant in an amount equal to the State family assistance grant 
        multiplied by--
                ``(i) 5 percent if--

                    ``(I) the illegitimacy ratio of the State for the 
                fiscal year is at least 1 percentage point lower than 
                the illegitimacy ratio of the State for fiscal year 
                1995; and
                    ``(II) the rate of induced pregnancy terminations 
                in the State for the fiscal year is less than the rate 
                of induced pregnancy terminations in the State for 
                fiscal year 1995; or

                ``(ii) 10 percent--

                    ``(I) if the illegitimacy ratio of the State for 
                the fiscal year is at least 2 percentage points lower 
                than the illegitimacy ratio of the State for fiscal 
                year 1995; and
                    ``(II) the rate of induced pregnancy terminations 
                in the State for the fiscal year is less than the rate 
                of induced pregnancy terminations in the State for 
                fiscal year 1995.

            ``(B) Illegitimacy ratio.--As used in this paragraph, the 
        term `illegitimacy ratio' means, with respect to a State and a 
        fiscal year--
                ``(i) the number of out-of-wedlock births that occurred 
            in the State during the most recent fiscal year for which 
            such information is available; divided by
                ``(ii) the number of births that occurred in the State 
            during the most recent fiscal year for which such 
            information is available.
            ``(C) Disregard of changes in data due to changed reporting 
        methods.--For purposes of subparagraph (A), the Secretary shall 
        disregard--
                ``(i) any difference between the illegitimacy ratio of 
            a State for a fiscal year and the illegitimacy ratio of the 
            State for fiscal year 1995 which is attributable to a 
            change in State methods of reporting data used to calculate 
            the illegitimacy ratio; and
                ``(ii) any difference between the rate of induced 
            pregnancy terminations in a State for a fiscal year and 
            such rate for fiscal year 1995 which is attributable to a 
            change in State methods of reporting data used to calculate 
            such rate.
        ``(3) Supplemental grant for population increases in certain 
    states.--
            ``(A) In general.--In addition to any grant under paragraph 
        (1), each qualifying State shall, subject to subparagraph (E), 
        be entitled to receive from the Secretary for each of fiscal 
        years 1997, 1998, 1999, and 2000, a grant in an amount equal to 
        the sum of--
                ``(i) the amount (if any) required to be paid to the 
            State under this paragraph for the immediately preceding 
            fiscal year; and
                ``(ii) 2.5 percent of the sum of--

                    ``(I) the total amount required to be paid to the 
                State under part A (as in effect during fiscal year 
                1994) for fiscal year 1994; and
                    ``(II) the amount (if any) required to be paid to 
                the State under this paragraph for the fiscal year 
                preceding the fiscal year specified in the matter 
                preceding clause (i).

            ``(B) Qualifying state.--
                ``(i) In general.--For purposes of this paragraph, a 
            State is a qualifying State for a fiscal year if--

                    ``(I) the level of welfare spending per poor person 
                by the State for the immediately preceding fiscal year 
                is less than the national average level of State 
                welfare spending per poor person for such preceding 
                fiscal year; and
                    ``(II) the population growth rate of the State (as 
                determined by the Bureau of the Census for the most 
                recent fiscal year for which information is available) 
                exceeds the average population growth rate for all 
                States (as so determined) for such most recent fiscal 
                year.

                ``(ii) State must qualify in fiscal year 1997.--
            Notwithstanding clause (i), a State shall not be a 
            qualifying State for any fiscal year after 1997 by reason 
            of clause (i) if the State is not a qualifying State for 
            fiscal year 1997 by reason of clause (i).
                ``(iii) Certain states deemed qualifying states.--For 
            purposes of this paragraph, a State is deemed to be a 
            qualifying State for fiscal years 1997, 1998, 1999, and 
            2000 if--

                    ``(I) the level of welfare spending per poor person 
                by the State for fiscal year 1996 is less than 35 
                percent of the national average level of State welfare 
                spending per poor person for fiscal year 1996; or
                    ``(II) the population of the State increased by 
                more than 10 percent from April 1, 1990 to July 1, 
                1994, as determined by the Bureau of the Census.

            ``(C) Definitions.--As used in this paragraph:
                ``(i) Level of welfare spending per poor person.--The 
            term `level of State welfare spending per poor person' 
            means, with respect to a State and a fiscal year--

                    ``(I) the sum of--

                        ``(aa) the total amount required to be paid to 
                    the State under part A (as in effect during fiscal 
                    year 1994) for fiscal year 1994; and
                        ``(bb) the amount (if any) paid to the State 
                    under this paragraph for the immediately preceding 
                    fiscal year; divided by

                    ``(II) the number of individuals, according to the 
                1990 decennial census, who were residents of the State 
                and whose income was below the poverty line.

                ``(ii) National average level of state welfare spending 
            per poor person.--The term `national average level of State 
            welfare spending per poor person' means, with respect to a 
            fiscal year, an amount equal to--

                    ``(I) the total amount required to be paid to the 
                States under part A (as in effect during fiscal year 
                1994) for fiscal year 1994; divided by
                    ``(II) the number of individuals, according to the 
                1990 decennial census, who were residents of any State 
                and whose income was below the poverty line.

                ``(iii) State.--The term `State' means each of the 50 
            States of the United States and the District of Columbia.
            ``(D) Appropriation.--Out of any money in the Treasury of 
        the United States not otherwise appropriated, there are 
        appropriated for fiscal years 1996, 1997, 1998, 1999, and 2000 
        such sums as are necessary for grants under this paragraph, in 
        a total amount not to exceed $800,000,000.
            ``(E) Grants reduced pro rata if insufficient 
        appropriations.--If the amount appropriated pursuant to this 
        paragraph for a fiscal year is less than the total amount of 
        payments otherwise required to be made under this paragraph for 
        the fiscal year, then the amount otherwise payable to each 
        qualifying State for the fiscal year under this paragraph shall 
        be reduced by a percentage equal to the amount so appropriated 
        divided by such total amount.
    ``(b) Contingency Fund.--
        ``(1) Establishment.--There is hereby established in the 
    Treasury of the United States a fund which shall be known as the 
    `Contingency Fund for State Welfare Programs' (in this section 
    referred to as the `Fund').
        ``(2) Deposits into fund.--Out of any money in the Treasury of 
    the United States not otherwise appropriated, there are 
    appropriated for fiscal years 1996, 1997, 1998, 1999, and 2000 such 
    sums as are necessary for payment to the Fund in a total amount not 
    to exceed $800,000,000.
        ``(3) Computation of grant.--
            ``(A) In general.--Subject to subparagraph (B), the 
        Secretary of the Treasury shall pay to each eligible State for 
        a fiscal year an amount equal to the Federal medical assistance 
        percentage for the State for the fiscal year (as defined in 
        section 1905(b), as in effect on the date of the enactment of 
        this part) of so much of the expenditures by the State in the 
        fiscal year under the State program funded under this part as 
        exceed the historic State expenditures (as defined in section 
        408(a)(7)(B)(iii)) for the State.
            ``(B) Limitation.--The total amount paid to a State under 
        subparagraph (A) for any fiscal year shall not exceed an amount 
        equal to 20 percent of the State family assistance grant for 
        the fiscal year.
            ``(C) Method of reconciliation.--If, at the end of any 
        fiscal year, the Secretary finds that a State to which amounts 
        from the Fund were paid in the fiscal year did not meet the 
        maintenance of effort requirement under paragraph (4)(B) for 
        the fiscal year, the Secretary shall reduce the grant payable 
        to the State under subsection (a)(1) for the immediately 
        succeeding fiscal year by such amounts.
        ``(4) Eligible state.--
            ``(A) In general.--For purposes of this subsection, a State 
        is an eligible State for a fiscal year, if--
                ``(i)(I) the average rate of total unemployment in such 
            State (seasonally adjusted) for the period consisting of 
            the most recent 3 months for which data for all States are 
            published equals or exceeds 6.5 percent; and
                ``(II) the average rate of total unemployment in such 
            State (seasonally adjusted) for the 3-month period equals 
            or exceeds 110 percent of such average rate for either (or 
            both) of the corresponding 3-month periods ending in the 2 
            preceding calendar years; and
                ``(ii) has met the maintenance of effort requirement 
            under subparagraph (B) for the State program funded under 
            this part for the fiscal year.
            ``(B) Maintenance of effort.--The maintenance of effort 
        requirement for any State under this subparagraph for any 
        fiscal year is the expenditure by the State during the fiscal 
        year of an amount at least equal to 100 percent of the level of 
        historic State expenditures for the State (as determined under 
        section 408(e)).
        ``(5) State.--As used in this subsection, the term `State' 
    means each of the 50 States of the United States and the District 
    of Columbia.
    ``(c) Condition of Grant.--
        ``(1) In general.--Notwithstanding any other provision of this 
    section, as a condition of receiving a grant under this section, a 
    State shall not provide cash assistance to a family that includes 
    an adult who has received assistance under any State program funded 
    under this part for 60 months (whether or not consecutive) after 
    September 30, 1995, except as provided in paragraphs (2) and (3).
        ``(2) Minor child exception.--In determining the number of 
    months for which an individual who is a parent or pregnant, as the 
    case may be, has received assistance under the State program funded 
    under this part, there shall be disregarded any month for which 
    such assistance was provided with respect to the individual and 
    throughout which the individual was--
            ``(A) a minor child; and
            ``(B) not the head of a household or married to the head of 
        a household.
        ``(3) Hardship exception.--
            ``(A) In general.--The State may exempt a family from the 
        application of paragraph (1) by reason of hardship or if the 
        family includes an individual who has been battered or 
        subjected to extreme cruelty.
            ``(B) Limitation.--The number of families with respect to 
        which an exemption made by a State under subparagraph (A) is in 
        effect for a fiscal year shall not exceed 15 percent of the 
        average monthly number of families to which the State is 
        providing assistance under the program funded under this part.
            ``(C) Battered or subject to extreme cruelty defined.--For 
        purposes of subparagraph (A), an individual has been battered 
        or subjected to extreme cruelty if the individual has been 
        subjected to--
                ``(i) physical acts that resulted in, or threatened to 
            result in, physical injury to the individual;
                ``(ii) sexual abuse;
                ``(iii) sexual activity involving a dependent child;
                ``(iv) being forced as the caretaker relative of a 
            dependent child to engage in nonconsensual sexual acts or 
            activities;
                ``(v) threats of, or attempts at, physical or sexual 
            abuse;
                ``(vi) mental abuse; or
                ``(vii) neglect or deprivation of medical care.
        ``(4) Rule of interpretation.--Paragraph (1) shall not be 
    interpreted to require any State to provide assistance to any 
    individual for any period of time under the State program funded 
    under this part.

``SEC. 403. USE OF GRANTS.

    ``(a) General Rules.--Subject to this part, a State to which a 
grant is made under section 402 may use the grant--
        ``(1) in any manner that is reasonably calculated to increase 
    the flexibility of States in operating a program designed to--
            ``(A) provide assistance to needy families so that children 
        may be cared for in their own homes or in the homes of 
        relatives;
            ``(B) end the dependence of needy parents on government 
        benefits by promoting job preparation, work, and marriage;
            ``(C) prevent and reduce the incidence of out-of-wedlock 
        pregnancies and establish annual numerical goals for preventing 
        and reducing the incidence of these pregnancies; and
            ``(D) encourage the formation and maintenance of two-parent 
        families; and
        ``(2) in any manner that the State was authorized to use 
    amounts received under part A or F of this title, as such parts 
    were in effect on September 30, 1995.
    ``(b) Limitation on Use of Grant for Administrative Purposes.--
        ``(1) Limitation.--A State to which a grant is made under 
    section 402 shall not expend more than 15 percent of the grant for 
    administrative purposes.
        ``(2) Exception.--Paragraph (1) shall not apply to the use of a 
    grant for information technology and computerization needed for 
    tracking or monitoring required by or under this part.
    ``(c) Authority To Use Portion of Grant for Other Purposes.--
        ``(1) In general.--A State may use not more than 30 percent of 
    the amount of the grant made to the State under section 402 for a 
    fiscal year to carry out a State program pursuant to any or all of 
    the following provisions of law:
            ``(A) Part B of this title.
            ``(B) Title XX of this Act.
            ``(C) The Child Care and Development Block Grant Act of 
        1990.
        ``(2) Applicable rules.--Any amount paid to the State under 
    this part that is used to carry out a State program pursuant to a 
    provision of law specified in paragraph (1) shall not be subject to 
    the requirements of this part, but shall be subject to the 
    requirements that apply to Federal funds provided directly under 
    the provision of law to carry out the program.
    ``(d) Authority To Reserve Certain Amounts for Assistance.--A State 
may reserve amounts paid to the State under this part for any fiscal 
year for the purpose of providing, without fiscal year limitation, 
assistance under the State program funded under this part.
    ``(e) Authority To Operate Employment Placement Program.--A State 
to which a grant is made under section 402 may use the grant to make 
payments (or provide job placement vouchers) to State-approved public 
and private job placement agencies that provide employment placement 
services to individuals who receive assistance under the State program 
funded under this part.
    ``(f) Implementation of Electronic Benefit Transfer System.--A 
State to which a grant is made under section 402 is encouraged to 
implement an electronic benefit transfer system for providing 
assistance under the State program funded under this part, and may use 
the grant for such purpose.

``SEC. 404. ADMINISTRATIVE PROVISIONS.

    ``(a) Quarterly.--The Secretary shall pay each grant payable to a 
State under section 402 in quarterly installments.
    ``(b) Notification.--Not later than 3 months before the payment of 
any such quarterly installment to a State, the Secretary shall notify 
the State of the amount of any reduction determined under section 
411(a)(1)(B) with respect to the State.
    ``(c) Computation and Certification of Payments to States.--
        ``(1) Computation.--The Secretary shall estimate the amount to 
    be paid to each eligible State for each quarter under this part, 
    such estimate to be based on a report filed by the State containing 
    an estimate by the State of the total sum to be expended by the 
    State in the quarter under the State program funded under this part 
    and such other information as the Secretary may find necessary.
        ``(2) Certification.--The Secretary of Health and Human 
    Services shall certify to the Secretary of the Treasury the amount 
    estimated by the Secretary under paragraph (1) with respect to a 
    State.
    ``(d) Payment Method.--Upon receipt of a certification under 
subsection (c)(2) with respect to a State, the Secretary of the 
Treasury shall, through the Fiscal Service of the Department of the 
Treasury and before audit or settlement by the General Accounting 
Office, pay to the State, at the time or times fixed by the Secretary 
of Health and Human Services, the amount so certified.

``SEC. 405. FEDERAL LOANS FOR STATE WELFARE PROGRAMS.

    ``(a) Loan Authority.--
        ``(1) In general.--The Secretary shall make loans to any loan-
    eligible State, for a period to maturity of not more than 3 years.
        ``(2) Loan-eligible state.--As used in paragraph (1), the term 
    `loan-eligible State' means a State against which a penalty has not 
    been imposed under section 408(a)(1) at any time before the loan is 
    to be made.
    ``(b) Rate of Interest.--The Secretary shall charge and collect 
interest on any loan made under this section at a rate equal to the 
current average market yield on outstanding marketable obligations of 
the United States with remaining periods to maturity comparable to the 
period to maturity of the loan.
    ``(c) Use of Loan.--A State shall use a loan made to the State 
under this section only for any purpose for which grant amounts 
received by the State under section 402(a) may be used including--
        ``(1) welfare anti-fraud activities; and
        ``(2) the provision of assistance under the State program to 
    Indian families that have moved from the service area of an Indian 
    tribe with a tribal family assistance plan approved under section 
    411.
    ``(d) Limitation on Total Amount of Loans to a State.--The 
cumulative dollar amount of all loans made to a State under this 
section during fiscal years 1996 through 2000 shall not exceed 10 
percent of the State family assistance grant.
    ``(e) Limitation on Total Amount of Outstanding Loans.--The total 
dollar amount of loans outstanding under this section may not exceed 
$1,700,000,000.
    ``(f) Appropriation.--Out of any money in the Treasury of the 
United States not otherwise appropriated, there are appropriated such 
sums as may be necessary for the cost of loans under this section.

``SEC. 406. MANDATORY WORK REQUIREMENTS.

    ``(a) Participation Rate Requirements.--
        ``(1) All families.--A State to which a grant is made under 
    section 402 for a fiscal year shall achieve the minimum 
    participation rate specified in the following table for the fiscal 
    year with respect to all families receiving assistance under the 
    State program funded under this part:

            
                                                             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.  

        ``(2) 2-parent families.--A State to which a grant is made 
    under section 402 for a fiscal year shall achieve the minimum 
    participation rate specified in the following table for the fiscal 
    year with respect to 2-parent families receiving assistance under 
    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.  

    ``(b) Calculation of Participation Rates.--
        ``(1) All families.--
            ``(A) Average monthly rate.--For purposes of subsection 
        (a)(1), the participation rate for all families of a State for 
        a fiscal year is the average of the participation rates for all 
        families of the State for each month in the fiscal year.
            ``(B) Monthly participation rates.--The participation rate 
        of a State for all families of the State for a month, expressed 
        as a percentage, is--
                ``(i) the number of families receiving assistance under 
            the State program funded under this part that include an 
            adult who is engaged in work for the month; divided by
                ``(ii) the amount by which--

                    ``(I) the number of families receiving such 
                assistance during the month that include an adult 
                receiving such assistance; exceeds
                    ``(II) the number of families receiving such 
                assistance that are subject in such month to a 
                reduction or termination of assistance pursuant to 
                section 408(a)(2) but have not been subject to such 
                penalty for more than 3 months within the preceding 12-
                month period (whether or not consecutive).

        ``(2) 2-parent families.--
            ``(A) Average monthly rate.--For purposes of subsection 
        (a)(2), the participation rate for 2-parent families of a State 
        for a fiscal year is the average of the participation rates for 
        2-parent families of the State for each month in the fiscal 
        year.
            ``(B) Monthly participation rates.--The participation rate 
        of a State for 2-parent families of the State for a month shall 
        be calculated by use of the formula set forth in paragraph 
        (1)(B), except that in the formula the term `number of 2-parent 
        families' shall be substituted for the term `number of 
        families' each place such latter term appears.
        ``(3) Pro rata reduction of participation rate due to caseload 
    reductions not required by federal law.--
            ``(A) In general.--The Secretary shall prescribe 
        regulations for reducing the minimum participation rate 
        otherwise required by this section for a fiscal year by the 
        number of percentage points equal to the number of percentage 
        points (if any) by which--
                ``(i) the number of families receiving assistance 
            during the fiscal year under the State program funded under 
            this part is less than
                ``(ii) the number of families that received aid under 
            the State plan approved under part A of this title (as in 
            effect on September 30, 1995) during the fiscal year 
            immediately preceding such effective date.
        The minimum participation rate shall not be reduced to the 
        extent that the Secretary determines that the reduction in the 
        number of families receiving such assistance is required by 
        Federal law.
            ``(B) Eligibility changes not counted.--The regulations 
        described in subparagraph (A) shall not take into account 
        families that are diverted from a State program funded under 
        this part as a result of differences in eligibility criteria 
        under a State program funded under this part and eligibility 
        criteria under such State's plan under the Aid to Families with 
        Dependent Children program, as such plan was in effect on the 
        day before the date of the enactment of the Personal 
        Responsibility and Work Opportunity Act of 1995. Such 
        regulations shall place the burden on the Secretary to prove 
        that such families were diverted as a direct result of 
        differences in such eligibility criteria.
        ``(4) State option to include individuals receiving assistance 
    under a tribal family assistance plan.--For purposes of paragraphs 
    (1)(B) and (2)(B), a State may, at its option, include families 
    receiving assistance under a tribal family assistance plan approved 
    under section 411.
    ``(c) Engaged in Work.--
        ``(1) All families.--For purposes of subsection (b)(1)(B)(i), a 
    recipient is engaged in work for a month in a fiscal year if the 
    recipient is participating in such activities for at least the 
    minimum average number of hours per week specified in the following 
    table during the month, not fewer than 20 hours per week of which 
    are attributable to an activity described in paragraph (1), (2), 
    (3), (4), (5), (7), or (8) of subsection (d) (or, in the case of 
    the first 4 weeks for which the recipient is required under this 
    section to participate in work activities, an activity described 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.  
        ``(2) 2-parent families.--For purposes of subsection 
    (b)(2)(B)(i), an adult is engaged in work for a month in a fiscal 
    year if the adult is making progress in such activities for at 
    least 35 hours per week during the month, not fewer than 30 hours 
    per week of which are attributable to an activity described in 
    paragraph (1), (2), (3), (4), (5), (7), or (8) of subsection (d) 
    (or, in the case of the first 4 weeks for which the recipient is 
    required under this section to participate in work activities, an 
    activity described in subsection (d)(6)).
        ``(3) Limitation on vocational education activities counted as 
    work.--For purposes of determining monthly participation rates 
    under paragraphs (1)(B)(i) and (2)(B)(i) of subsection (b), not 
    more than 20 percent of adults in all families and in 2-parent 
    families determined to be engaged in work in the State for a month 
    may meet the work activity requirement through participation in 
    vocational educational training.
    ``(d) Work Activities Defined.--As used in this section, the term 
`work activities' means--
        ``(1) unsubsidized employment;
        ``(2) subsidized private sector employment;
        ``(3) subsidized public sector employment;
        ``(4) work experience (including work associated with the 
    refurbishing of publicly assisted housing) if sufficient private 
    sector employment is not available;
        ``(5) on-the-job training;
        ``(6) job search and job readiness assistance;
        ``(7) community service programs;
        ``(8) vocational educational training (not to exceed 12 months 
    with respect to any individual);
        ``(9) job skills training directly related to employment;
        ``(10) education directly related to employment, in the case of 
    a recipient who has not attained 20 years of age, and has not 
    received a high school diploma or a certificate of high school 
    equivalency; and
        ``(11) satisfactory attendance at secondary school, in the case 
    of a recipient who--
            ``(A) has not completed secondary school; and
            ``(B) is a dependent child, or a head of household who has 
        not attained 20 years of age.

``SEC. 407. PROHIBITIONS.

    ``(a) In General.--
        ``(1) No assistance for families without a minor child.--A 
    State to which a grant is made under section 402 may not use any 
    part of the grant to provide assistance to a family, unless the 
    family includes--
            ``(A) a minor child who resides with a custodial parent or 
        other adult caretaker relative of the child; or
            ``(B) a pregnant individual.
        ``(2) Reduced assistance for family if adult refuses to work.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        a State to which a grant is made under section 402 may not fail 
        to--
                ``(i) reduce the amount of assistance otherwise payable 
            to a family receiving assistance under the State program 
            funded under this part, pro rata (or more, at the option of 
            the State) with respect to any period during a month in 
            which an adult member of the family refuses to engage in 
            work required in accordance with this section; or
                ``(ii) terminate such assistance,
        subject to such good cause and other exceptions as the State 
        may establish.
            ``(B) Exception.--Notwithstanding subparagraph (A), a State 
        may not reduce or terminate assistance under the State program 
        funded under this part based on a refusal of an adult to work 
        if the adult is a single custodial parent caring for a child 
        who has not attained 6 years of age, and the adult proves that 
        the adult has a demonstrated inability (as determined by the 
        State) to obtain needed child care, for 1 or more of the 
        following reasons:
                ``(i) Unavailability of appropriate child care within a 
            reasonable distance from the individual's home or work 
            site.
                ``(ii) Unavailability or unsuitability of informal 
            child care by a relative or under other arrangements.
                ``(iii) Unavailability of appropriate and affordable 
            formal child care arrangements.
        ``(3) Reduction or elimination of assistance for noncooperation 
    in child support.--If the agency responsible for administering the 
    State plan approved under part D determines that an individual is 
    not cooperating with the State in establishing, modifying, or 
    enforcing a support order with respect to a child of the 
    individual, then the State--
            ``(A) shall deduct from the assistance that would otherwise 
        be provided to the family of the individual under the State 
        program funded under this part the share of such assistance 
        attributable to the individual; and
            ``(B) may deny the family any assistance under the State 
        program.
        ``(4) No assistance for families not assigning certain support 
    rights to the state.--
            ``(A) In general.--A State to which a grant is made under 
        section 402 may not fail to require, as a condition of 
        providing assistance to a family under the State program funded 
        under this part, that a member of the family assign to the 
        State any rights the family member may have (on behalf of the 
        family member or of any other person for whom the family member 
        has applied for or is receiving such assistance) to support 
        from any other person, not exceeding the total amount of 
        assistance so provided to the family, which accrue (or have 
        accrued) before the date the family leaves the program, which 
        assignment, on and after the date the family leaves the 
        program, shall not apply with respect to--
                ``(i) if the assignment occurs on or after October 1, 
            1997, and before October 1, 2000, any support (other than 
            support collected pursuant to section 464) which accrued 
            before the family received such assistance and which the 
            State has not collected by September 30, 2000; or
                ``(II) if the assignment occurs on or after October 1, 
            2000, any support (other than support collected pursuant to 
            section 464) which accrued before the family received such 
            assistance and which the State has not collected by the 
            date the family leaves the program.
            ``(B) Limitation.--A State to which a grant is made under 
        section 402 may not require, as a condition of providing 
        assistance to any family under the State program funded under 
        this part, that a member of the family assign to the State any 
        rights to support described in subparagraph (A) which accrue 
        after the date the family leaves the program.
        ``(5) No assistance for teenage parents who do not attend high 
    school or other equivalent training program.--A State to which a 
    grant is made under section 402 may not use any part of the grant 
    to provide assistance to an individual who has not attained 18 
    years of age, is not married, has a minor child at least 12 weeks 
    of age in his or her care, and has not successfully completed a 
    high school education (or its equivalent), if the individual does 
    not participate in--
            ``(A) educational activities directed toward the attainment 
        of a high school diploma or its equivalent; or
            ``(B) an alternative educational or training program that 
        has been approved by the State.
        ``(6) No assistance for teenage parents not living in adult-
    supervised settings.--
            ``(A) In general.--
                ``(i) Requirement.--Except as provided in subparagraph 
            (B), a State to which a grant is made under section 402 may 
            not use any part of the grant to provide assistance to an 
            individual described in clause (ii) of this subparagraph if 
            the individual and the minor child referred to in clause 
            (ii)(II) do not reside in a place of residence maintained 
            by a parent, legal guardian, or other adult relative of the 
            individual as such parent's, guardian's, or adult 
            relative's own home.
                ``(ii) Individual described.-- For purposes of clause 
            (i), an individual described in this clause is an 
            individual who--

                    ``(I) has not attained 18 years of age; and
                    ``(II) is not married, and has a minor child in his 
                or her care.

            ``(B) Exception.--
                ``(i) Provision of, or assistance in locating, adult-
            supervised living arrangement.--In the case of an 
            individual who is described in clause (ii), the State 
            agency referred to in section 401(a)(4) shall provide, or 
            assist the individual in locating, a second chance home, 
            maternity home, or other appropriate adult-supervised 
            supportive living arrangement, taking into consideration 
            the needs and concerns of the individual, unless the State 
            agency determines that the individual's current living 
            arrangement is appropriate, and thereafter shall require 
            that the individual and the minor child referred to in 
            subparagraph (A)(ii)(II) reside in such living arrangement 
            as a condition of the continued receipt of assistance under 
            the State program funded under this part (or in an 
            alternative appropriate arrangement, should circumstances 
            change and the current arrangement cease to be 
            appropriate).
                ``(ii) Individual described.--For purposes of clause 
            (i), an individual is described in this clause if the 
            individual is described in subparagraph (A)(ii), and--

                    ``(I) the individual has no parent, legal guardian 
                or other appropriate adult relative described in 
                subclause (II) of his or her own who is living or whose 
                whereabouts are known;
                    ``(II) no living parent, legal guardian, or other 
                appropriate adult relative, who would otherwise meet 
                applicable State criteria to act as the individual's 
                legal guardian, of such individual allows the 
                individual to live in the home of such parent, 
                guardian, or relative;
                    ``(III) the State agency determines that--

                        ``(aa) the individual or the minor child 
                    referred to in subparagraph (A)(ii)(II) is being or 
                    has been subjected to serious physical or emotional 
                    harm, sexual abuse, or exploitation in the 
                    residence of the individual's own parent or legal 
                    guardian; or
                        ``(bb) substantial evidence exists of an act or 
                    failure to act that presents an imminent or serious 
                    harm if the individual and the minor child lived in 
                    the same residence with the individual's own parent 
                    or legal guardian; or

                    ``(IV) the State agency otherwise determines that 
                it is in the best interest of the minor child to waive 
                the requirement of subparagraph (A) with respect to the 
                individual or the minor child.

                ``(iii) Second-chance home.--For purposes of this 
            subparagraph, the term `second-chance home' means an entity 
            that provides individuals described in clause (ii) with a 
            supportive and supervised living arrangement in which such 
            individuals are required to learn parenting skills, 
            including child development, family budgeting, health and 
            nutrition, and other skills to promote their long-term 
            economic independence and the well-being of their children.
        ``(7) No medical services.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        a State to which a grant is made under section 402 may not use 
        any part of the grant to provide medical services.
            ``(B) Exception for family planning services.--As used in 
        subparagraph (A), the term `medical services' does not include 
        family planning services.
        ``(8) Denial of assistance for 10 years to a person found to 
    have fraudulently misrepresented residence in order to obtain 
    assistance in 2 or more states.--A State to which a grant is made 
    under section 402 may not use any part of the grant to provide cash 
    assistance to an individual during the 10-year period that begins 
    on the date the individual is convicted in Federal or State court 
    of having made a fraudulent statement or representation with 
    respect to the place of residence of the individual in order to 
    receive assistance simultaneously from 2 or more States under 
    programs that are funded under this title, title XIX, or the Food 
    Stamp Act of 1977, or benefits in 2 or more States under the 
    supplemental security income program under title XVI.
        ``(9) Denial of assistance for fugitive felons and probation 
    and parole violators.--
            ``(A) In general.--A State to which a grant is made under 
        section 402 may not use any part of the grant to provide 
        assistance to any individual who is--
                ``(i) fleeing to avoid prosecution, or custody or 
            confinement after conviction, under the laws of the place 
            from which the individual flees, for a crime, or an attempt 
            to commit a crime, which is a felony under the laws of the 
            place from which the individual flees, or which, in the 
            case of the State of New Jersey, is a high misdemeanor 
            under the laws of such State; or
                ``(ii) violating a condition of probation or parole 
            imposed under Federal or State law.
            ``(B) Exchange of information with law enforcement 
        agencies.--If a State to which a grant is made under section 
        402 establishes safeguards against the use or disclosure of 
        information about applicants or recipients of assistance under 
        the State program funded under this part, the safeguards shall 
        not prevent the State agency administering the program from 
        furnishing a Federal, State, or local law enforcement officer, 
        upon the request of the officer, with the current address of 
        any recipient if the officer furnishes the agency with the name 
        of the recipient and notifies the agency that--
                ``(i) such recipient--

                    ``(I) is fleeing to avoid prosecution, or custody 
                or confinement after conviction, under the laws of the 
                place from which the recipient flees, for a crime, or 
                an attempt to commit a crime, which is a felony under 
                the laws of the place from which the recipient flees, 
                or which, in the case of the State of New Jersey, is a 
                high misdemeanor under the laws of such State;
                    ``(II) is violating a condition of probation or 
                parole imposed under Federal or State law; or
                    ``(III) has information that is necessary for the 
                officer to conduct the official duties of the officer; 
                and

                ``(ii) the location or apprehension of the recipient is 
            within such official duties.
        ``(10) Denial of assistance for minor children who are absent 
    from the home for a significant period.--
            ``(A) In general.--A State to which a grant is made under 
        section 402 may not use any part of the grant to provide 
        assistance for a minor child who has been, or is expected by a 
        parent (or other caretaker relative) of the child to be, absent 
        from the home for a period of 45 consecutive days or, at the 
        option of the State, such period of not less than 30 and not 
        more than 90 consecutive days as the State may provide for in 
        the State plan submitted pursuant to section 401.
            ``(B) State authority to establish good cause exceptions.--
        The State may establish such good cause exceptions to 
        subparagraph (A) as the State considers appropriate if such 
        exceptions are provided for in the State plan submitted 
        pursuant to section 401.
            ``(C) Denial of assistance for relative who fails to notify 
        state agency of absence of child.--A State to which a grant is 
        made under section 402 may not use any part of the grant to 
        provide assistance for an individual who is a parent (or other 
        caretaker relative) of a minor child and who fails to notify 
        the agency administering the State program funded under this 
        part, of the absence of the minor child from the home for the 
        period specified in or provided for under subparagraph (A), by 
        the end of the 5-day period that begins with the date that it 
        becomes clear to the parent (or relative) that the minor child 
        will be absent for such period so specified or provided for.
        ``(11) Income security payments not to be disregarded in 
    determining the amount of assistance to be provided to a family.--
    If a State to which a grant is made under section 402 uses any part 
    of the grant to provide assistance for any individual who is 
    receiving a payment under a State plan for old-age assistance 
    approved under section 2, a State program funded under part B that 
    provides cash payments for foster care, or the supplemental 
    security income program under title XVI, then the State may not 
    disregard the payment in determining the amount of assistance to be 
    provided to the family of which the individual is a member under 
    the State program funded under this part.

``SEC. 408. PENALTIES.

    ``(a) In General.--Subject to subsections (b), (c), and (d):
        ``(1) For use of grant in violation of this part.--
            ``(A) General penalty.--If an audit conducted under chapter 
        75 of title 31, United States Code, finds that an amount paid 
        to a State under section 402 for a fiscal year has been used in 
        violation of this part, the Secretary shall reduce the grant 
        payable to the State under section 402(a)(1) for the 
        immediately succeeding fiscal year quarter by the amount so 
        used.
            ``(B) Enhanced penalty for intentional violations.--If the 
        State does not prove to the satisfaction of the Secretary that 
        the State did not intend to use the amount in violation of this 
        part, the Secretary shall further reduce the grant payable to 
        the State under section 402(a)(1) for the immediately 
        succeeding fiscal year quarter by an amount equal to 5 percent 
        of the State family assistance grant.
        ``(2) For failure to submit required report.--
            ``(A) In general.--If the Secretary determines that a State 
        has not, within 6 months after the end of a fiscal year, 
        submitted the report required by section 410 for the fiscal 
        year, the Secretary shall reduce the grant payable to the State 
        under section 402(a)(1) for the immediately succeeding fiscal 
        year by an amount equal to 4 percent of the State family 
        assistance grant.
            ``(B) Rescission of penalty.--The Secretary shall rescind a 
        penalty imposed on a State under subparagraph (A) with respect 
        to a report for a fiscal year if the State submits the report 
        before the end of the immediately succeeding fiscal year.
        ``(3) For failure to satisfy minimum participation rates.--
            ``(A) In general.--If the Secretary determines that a State 
        to which a grant is made under section 402 for a fiscal year 
        has failed to comply with section 406(a) for the fiscal year, 
        the Secretary shall reduce the grant payable to the State under 
        section 402(a)(1) for the immediately succeeding fiscal year by 
        an amount equal to not more than 5 percent of the State family 
        assistance grant.
            ``(B) Penalty based on severity of failure.--The Secretary 
        shall impose reductions under subparagraph (A) based on the 
        degree of noncompliance.
        ``(4) For failure to participate in the income and eligibility 
    verification system.--If the Secretary determines that a State 
    program funded under this part is not participating during a fiscal 
    year in the income and eligibility verification system required by 
    section 1137, the Secretary shall reduce the grant payable to the 
    State under section 402(a)(1) for the immediately succeeding fiscal 
    year by an amount equal to not more than 2 percent of the State 
    family assistance grant.
        ``(5) For failure to comply with paternity establishment and 
    child support enforcement requirements under part d.--
    Notwithstanding any other provision of this Act, if the Secretary 
    determines that the State agency that administers a program funded 
    under this part does not enforce the penalties requested by the 
    agency administering part D against recipients of assistance under 
    the State program who fail to cooperate in establishing paternity 
    in accordance with such part, the Secretary shall reduce the grant 
    payable to the State under section 402(a)(1) for the immediately 
    succeeding fiscal year (without regard to this section) by not more 
    than 5 percent.
        ``(6) For failure to timely repay a federal loan fund for state 
    welfare programs.--If the Secretary determines that a State has 
    failed to repay any amount borrowed from the Federal Loan Fund for 
    State Welfare Programs established under section 405 within the 
    period of maturity applicable to the loan, plus any interest owed 
    on the loan, the Secretary shall reduce the grant payable to the 
    State under section 402(a)(1) for the immediately succeeding fiscal 
    year quarter (without regard to this section) by the outstanding 
    loan amount, plus the interest owed on the outstanding amount. The 
    Secretary may not forgive any outstanding loan amount or interest 
    owed on the outstanding amount.
        ``(7) Maintenance of effort.--
            ``(A) In general.--The Secretary shall reduce the grant 
        payable to the State under section 402(a)(1) for fiscal year 
        1996, 1997, 1998, 1999, or 2000 by the amount (if any) by which 
        State expenditures under the State program funded under this 
        part for the then immediately preceding fiscal year is less 
        than the applicable percentage of historic State expenditures.
            ``(B) Definitions.--As used in this paragraph:
                ``(i) State expenditures under the state program funded 
            under this part.--

                    ``(I) In general.--The term `State expenditures 
                under the State program funded under this part' means, 
                with respect to a State and a fiscal year, the sum of 
                the expenditures by the State under the program for the 
                fiscal year for--

                        ``(aa) cash assistance;
                        ``(bb) child care assistance;
                        ``(cc) education, job training, and work;
                        ``(dd) administrative costs; and
                        ``(ee) any other use of funds allowable under 
                    section 403(a)(1).

                    ``(II) Exclusion of transfers from other state and 
                local programs.--Such term does not include funding 
                supplanted by transfers from other State and local 
                programs.

                ``(ii) Applicable percentage.--The term `applicable 
            percentage' means--

                    ``(I) for fiscal year 1996, 75 percent; and
                    ``(II) for fiscal years 1997, 1998, 1999, and 2000, 
                75 percent reduced (if appropriate) in accordance with 
                subparagraph (C)(iii).

                ``(iii) Historic state expenditures.--The term 
            `historic State expenditures' means, with respect to a 
            State, the lesser of--

                    ``(I) the expenditures by the State under parts A 
                and F of this title (as in effect during fiscal year 
                1994) for fiscal year 1994; or
                    ``(II) the amount which bears the same ratio to the 
                amount described in subclause (I) as--

                        ``(aa) the State family assistance grant for 
                    the immediately preceding fiscal year; bears to
                        ``(bb) the total amount of Federal payments to 
                    the State under section 403 (as in effect during 
                    fiscal year 1994) for fiscal year 1994.
                ``(iv) Expenditures by the state.--The term 
            `expenditures by the State' does not include any 
            expenditures from amounts made available by the Federal 
            Government, State funds expended for the medicaid program 
            under title XIX or the MediGrant program under title XXI, 
            or any State funds which are used to match Federal funds or 
            are expended as a condition of receiving Federal funds 
            under Federal programs other than under title I.
            ``(C) Applicable percentage reduced for states with best or 
        most improved performance in certain areas.--
                ``(i) Scoring of state performance.--Beginning with 
            fiscal year 1997, the Secretary shall assign to each State 
            a score that represents the performance of the State for 
            the fiscal year in each category described in clause (ii).
                ``(ii) Categories.--The categories described in this 
            clause are the following:

                    ``(I) Increasing the number of families that 
                received assistance under a State program funded under 
                this part in the fiscal year, and that, during the 
                fiscal year, become ineligible for such assistance as a 
                result of unsubsidized employment.
                    ``(II) Reducing the percentage of families that, 
                within 18 months after becoming ineligible for 
                assistance under the State program funded under this 
                part, become eligible for such assistance.
                    ``(III) Increasing the amount earned by families 
                that receive assistance under this part.
                    ``(IV) Reducing the percentage of families in the 
                State that receive assistance under the State program 
                funded under this part.

                ``(iii) Reduction of maintenance of effort threshold.--

                    ``(I) Reduction for states with 5 greatest scores 
                in each category of performance.--The applicable 
                percentage for a State for a fiscal year shall be 
                reduced by 2 percentage points, with respect to each 
                category described in clause (ii) for which the score 
                assigned to the State under clause (i) for the fiscal 
                year is 1 of the 5 highest scores so assigned to 
                States.
                    ``(II) Reduction for states with 5 greatest 
                improvement in scores in each category of 
                performance.--The applicable percentage for a State for 
                a fiscal year shall be reduced by 2 percentage points 
                for a State for a fiscal year, with respect to each 
                category described in clause (ii) for which the 
                difference between the score assigned to the State 
                under clause (i) for the fiscal year and the score so 
                assigned to the State for the immediately preceding 
                fiscal year is 1 of the 5 greatest such differences.
                    ``(III) Limitation on reduction.--The applicable 
                percentage for a State for a fiscal year may not be 
                reduced by more than 8 percentage points pursuant to 
                this clause.

        ``(8) Penalties for substantial noncompliance of state child 
    support enforcement program with requirements of part d.--
            ``(A) In general.--If a State program operated under part D 
        is found as a result of a review conducted under section 
        452(a)(4) not to have complied substantially with the 
        requirements of such part for any quarter, and the Secretary 
        determines that the program is not complying substantially with 
        such requirements at the time the finding is made, the 
        Secretary shall, subject to paragraph (2), reduce the grant 
        payable to the State under section 402(a)(1) for the quarter 
        and each subsequent quarter that ends before the 1st quarter 
        throughout which the program is found not to be in substantial 
        compliance with such requirements by--
                ``(i) not less than 1 nor more than 2 percent;
                ``(ii) not less than 2 nor more than 3 percent, if the 
            finding is the 2nd consecutive such finding made as a 
            result of such a review; or
                ``(iii) not less than 3 nor more than 5 percent, if the 
            finding is the 3rd or a subsequent consecutive such finding 
            made as a result of such a review.
            ``(B) Disregard of noncompliance which is of a technical 
        nature.--For purposes of subparagraph (A) and section 
        452(a)(4), a State which is not in full compliance with the 
        requirements of this part shall be determined to be in 
        substantial compliance with such requirements only if the 
        Secretary determines that any noncompliance with such 
        requirements is of a technical nature which does not adversely 
        affect the performance of the State's program operated under 
        part D.
        ``(9) For failure to expend additional state funds to replace 
    grant reductions.--If the grant payable to a State under section 
    402(a)(1) for a fiscal year is reduced by reason of any of the 
    preceding paragraphs of this subsection, the State shall, during 
    the immediately succeeding fiscal year, expend under the State 
    program funded under this part an amount equal to the sum of--
            ``(A) the applicable percentage of the historic State 
        expenditures; and
            ``(B) 105 percent of the total amount of such reductions 
        under such preceding paragraphs.
    ``(b) Reasonable Cause Exception.--The Secretary may not impose a 
penalty on a State under subsection (a) with respect to a requirement 
if the Secretary determines that the State has reasonable cause for 
failing to comply with the requirement.
    ``(c) Corrective Compliance Plan.--
        ``(1) In general.--
            ``(A) Notification of violation.--Notwithstanding any other 
        provision of law, the Federal Government shall, before 
        assessing a penalty against a State under subsection (a), 
        notify the State of the violation of law for which the penalty 
        would be assessed and allow the State the opportunity to enter 
        into a corrective compliance plan in accordance with this 
        subsection which outlines how the State will correct any such 
        violations and how the State will insure continuing compliance 
        with the requirements of this part.
            ``(B) 60-day period to propose a corrective compliance 
        plan.--Any State notified under subparagraph (A) shall have 60 
        days in which to submit to the Federal Government a corrective 
        compliance plan to correct any violations described in 
        subparagraph (A).
            ``(C) Acceptance of plan.--The Federal Government shall 
        have 60 days to accept or reject the State's corrective 
        compliance plan and may consult with the State during this 
        period to modify the plan. If the Federal Government does not 
        accept or reject the corrective compliance plan during the 
        period, the corrective compliance plan shall be deemed to be 
        accepted.
        ``(2) Failure to correct.--If a corrective compliance plan is 
    accepted by the Federal Government, no penalty shall be imposed 
    with respect to a violation described in paragraph (1) if the State 
    corrects the violation pursuant to the plan. If a State has not 
    corrected the violation in a timely manner under the plan, some or 
    all of the penalty shall be assessed.
    ``(d) Limitation on Amount of Penalty.--
        ``(1) In general.--In imposing the penalties described in 
    subsection (a), the Secretary shall not reduce any quarterly 
    payment to a State by more than 25 percent.
        ``(2) Carryforward of unrecovered penalties.--To the extent 
    that paragraph (1) prevents the Secretary from recovering during a 
    fiscal year the full amount of all penalties imposed on a State 
    under subsection (a) for a prior fiscal year, the Secretary shall 
    apply any remaining amount of such penalties to the grant payable 
    to the State under section 402(a)(1) for the immediately succeeding 
    fiscal year.

``SEC. 409. APPEAL OF ADVERSE DECISION.

    ``(a) In General.--Within 5 days after the date any adverse 
decision is made or action is taken under this part with respect to a 
State, the Secretary shall notify the chief executive officer of the 
State of the adverse decision or action, including any decision with 
respect to the State plan submitted under section 401 or the imposition 
of a penalty under section 408.
    ``(b) Administrative Review of Adverse Decision.--
        ``(1) In general.--Within 60 days after the date a State 
    receives notice under this section of an adverse decision, the 
    State may appeal the decision, in whole or in part, to the 
    Departmental Appeals Board established in the Department of Health 
    and Human Services (in this section referred to as the `Board') by 
    filing an appeal with the Board.
        ``(2) Procedural rules.--The Board shall consider a State's 
    appeal on the basis of such documentation as the State may submit 
    and as the Board may require to support the final decision of the 
    Board. In deciding whether to uphold an adverse decision or any 
    portion of such a decision, the Board shall conduct a thorough 
    review of the issues and take into account all relevant evidence. 
    The Board shall make a final determination with respect to an 
    appeal filed under this paragraph not less than 60 days after the 
    date the appeal is filed.
    ``(c) Judicial Review of Adverse Decision.--
        ``(1) In general.--Within 90 days after the date of a final 
    decision by the Board with respect to an adverse decision regarding 
    a State under this section, the State may obtain judicial review of 
    the final decision (and the findings incorporated into the final 
    decision) by filing an action in--
            ``(A) the district court of the United States for the 
        judicial district in which the principal or headquarters office 
        of the State agency is located; or
            ``(B) the United States District Court for the District of 
        Columbia.
        ``(2) Procedural rules.--The district court in which an action 
    is filed shall review the final decision of the Board on the record 
    established in the administrative proceeding, in accordance with 
    the standards of review prescribed by subparagraphs (A) through (E) 
    of section 706(2) of title 5, United States Code. The review shall 
    be on the basis of the documents and supporting data submitted to 
    the Board.

``SEC. 410. DATA COLLECTION AND REPORTING.

    ``(a) General Reporting Requirement.--Beginning July 1, 1996, each 
State shall collect on a monthly basis, and report to the Secretary on 
a quarterly basis, the following information on the families receiving 
assistance under the State program funded under this part:
        ``(1) The county of residence of the family.
        ``(2) Whether a child receiving such assistance or an adult in 
    the family is disabled.
        ``(3) The ages of the members of such families.
        ``(4) The number of individuals in the family, and the relation 
    of each family member to the youngest child in the family.
        ``(5) The employment status and earnings of the employed adult 
    in the family.
        ``(6) The marital status of the adults in the family, including 
    whether such adults have never married, are widowed, or are 
    divorced.
        ``(7) The educational status of each adult in the family.
        ``(8) The educational status of each child in the family.
        ``(9) Whether the family received subsidized housing, 
    assistance under the State MediGrant plan approved under title XXI, 
    food stamps, or subsidized child care, and if the latter 2, the 
    amount received.
        ``(10) The number of months that the family has received each 
    type of assistance under the program.
        ``(11) If the adults participated in, and the number of hours 
    per week of participation in, the following activities:
            ``(A) Education.
            ``(B) Subsidized private sector employment.
            ``(C) Unsubsidized employment.
            ``(D) Public sector employment, work experience, or 
        community service.
            ``(E) Job search.
            ``(F) Job skills training or on-the-job training.
            ``(G) Vocational education.
        ``(12) Information necessary to calculate participation rates 
    under section 406.
        ``(13) The type and amount of assistance received under the 
    program, including the amount of and reason for any reduction of 
    assistance (including sanctions).
        ``(14) From a sample of closed cases, whether the family left 
    the program, and if so, whether the family left due to--
            ``(A) employment;
            ``(B) marriage;
            ``(C) the prohibition set forth in section 407(a)(8);
            ``(D) sanction; or
            ``(E) State policy.
        ``(15) Any amount of unearned income received by any member of 
    the family.
        ``(16) The citizenship of the members of the family.
    ``(b) Use of Estimates.--
        ``(1) Authority.--A State may comply with subsection (a) by 
    submitting an estimate which is obtained through the use of 
    scientifically acceptable sampling methods approved by the 
    Secretary.
        ``(2) Sampling and other methods.--The Secretary shall provide 
    the States with such case sampling plans and data collection 
    procedures as the Secretary deems necessary to produce 
    statistically valid estimates of the performance of State programs 
    funded under this part. The Secretary may develop and implement 
    procedures for verifying the quality of data submitted by the 
    States.
    ``(c) Report on Use of Federal Funds To Cover Administrative Costs 
and Overhead.--The report required by subsection (a) for a fiscal 
quarter shall include a statement of the percentage of the funds paid 
to the State under this part for the quarter that are used to cover 
administrative costs or overhead.
    ``(d) Report on State Expenditures on Programs for Needy 
Families.--The report required by subsection (a) for a fiscal quarter 
shall include a statement of the total amount expended by the State 
during the quarter on programs for needy families.
    ``(e) Report on Noncustodial Parents Participating in Work 
Activities.--The report required by subsection (a) for a fiscal quarter 
shall include the number of noncustodial parents in the State who 
participated in work activities (as defined in section 406(d)) during 
the quarter.
    ``(f) Report on Transitional Services.--The report required by 
subsection (a) for a fiscal quarter shall include the total amount 
expended by the State during the quarter to provide transitional 
services to a family that has ceased to receive assistance under this 
part because of employment, along with a description of such services.
    ``(g) Report to Congress.--Not later than 6 months after the end of 
fiscal year 1997, and each fiscal year thereafter, the Secretary shall 
transmit to the Congress a report describing--
        ``(1) whether the States are meeting--
            ``(A) the participation rates described in section 406(a); 
        and
            ``(B) the objectives of--
                ``(i) increasing employment and earnings of needy 
            families, and child support collections; and
                ``(ii) decreasing out-of-wedlock pregnancies and child 
            poverty;
        ``(2) the demographic and financial characteristics of families 
    applying for assistance, families receiving assistance, and 
    families that become ineligible to receive assistance;
        ``(3) the characteristics of each State program funded under 
    this part; and
        ``(4) the trends in employment and earnings of needy families 
    with minor children living at home.

``SEC. 411. DIRECT FUNDING AND ADMINISTRATION BY INDIAN TRIBES.

    ``(a) Grants for Indian Tribes.--
        ``(1) Tribal family assistance grant.--
            ``(A) In general.--For each of fiscal years 1997, 1998, 
        1999, and 2000, the Secretary shall pay to each Indian tribe 
        that has an approved tribal family assistance plan a tribal 
        family assistance grant for the fiscal year in an amount equal 
        to the amount determined under subparagraph (B), and shall 
        reduce the grant payable under section 402(a)(1) to any State 
        in which lies the service area or areas of the Indian tribe by 
        that portion of the amount so determined that is attributable 
        to expenditures by the State.
            ``(B) Amount determined.--
                ``(i) In general.--The amount determined under this 
            subparagraph is an amount equal to the total amount of the 
            Federal payments to a State or States under section 403 for 
            fiscal year 1994 (as in effect during such fiscal year) 
            attributable to expenditures by the State or States under 
            parts A and F of this title (as so in effect) for fiscal 
            year 1994 for Indian families residing in the service area 
            or areas identified by the Indian tribe pursuant to 
            subsection (b)(1)(C).
                ``(ii) Use of state submitted data.--

                    ``(I) In general.--The Secretary shall use State 
                submitted data to make each determination under clause 
                (i).
                    ``(II) Disagreement with determination.--If an 
                Indian tribe or tribal organization disagrees with 
                State submitted data described under subclause (I), the 
                Indian tribe or tribal organization may submit to the 
                Secretary such additional information as may be 
                relevant to making the determination under clause (i) 
                and the Secretary may consider such information before 
                making such determination.

        ``(2) Grants for indian tribes that received jobs funds.--
            ``(A) In general.--The Secretary shall pay to each eligible 
        Indian tribe for each of fiscal years 1996, 1997, 1998, 1999, 
        and 2000 a grant in an amount equal to the amount received by 
        the Indian tribe in fiscal year 1994 under section 482(i) (as 
        in effect during fiscal year 1994).
            ``(B) Eligible indian tribe.--For purposes of subparagraph 
        (A), the term `eligible Indian tribe' means an Indian tribe or 
        Alaska Native organization that conducted a job opportunities 
        and basic skills training program in fiscal year 1995 under 
        section 482(i) (as in effect during such fiscal year).
            ``(C) Use of grant.--Each Indian tribe to which a grant is 
        made under this paragraph shall use the grant for the purpose 
        of operating a program to make work activities available to 
        members of the Indian tribe.
            ``(D) Appropriation.--Out of any money in the Treasury of 
        the United States not otherwise appropriated, there are 
        appropriated $7,638,474 for each fiscal year specified in 
        subparagraph (A) for grants under subparagraph (A).
    ``(b) 3-Year Tribal Family Assistance Plan.--
        ``(1) In general.--Any Indian tribe that desires to receive a 
    tribal family assistance grant shall submit to the Secretary a 3-
    year tribal family assistance plan that--
            ``(A) outlines the Indian tribe's approach to providing 
        welfare-related services for the 3-year period, consistent with 
        this section;
            ``(B) specifies whether the welfare-related services 
        provided under the plan will be provided by the Indian tribe or 
        through agreements, contracts, or compacts with intertribal 
        consortia, States, or other entities;
            ``(C) identifies the population and service area or areas 
        to be served by such plan;
            ``(D) provides that a family receiving assistance under the 
        plan may not receive duplicative assistance from other State or 
        tribal programs funded under this part;
            ``(E) identifies the employment opportunities in or near 
        the service area or areas of the Indian tribe and the manner in 
        which the Indian tribe will cooperate and participate in 
        enhancing such opportunities for recipients of assistance under 
        the plan consistent with any applicable State standards; and
            ``(F) applies the fiscal accountability provisions of 
        section 5(f)(1) of the Indian Self-Determination and Education 
        Assistance Act (25 U.S.C. 450c(f)(1)), relating to the 
        submission of a single-agency audit report required by chapter 
        75 of title 31, United States Code.
        ``(2) Approval.--The Secretary shall approve each tribal family 
    assistance plan submitted in accordance with paragraph (1).
        ``(3) Consortium of tribes.--Nothing in this section shall 
    preclude the development and submission of a single tribal family 
    assistance plan by the participating Indian tribes of an 
    intertribal consortium.
    ``(c) Minimum Work Participation Requirements and Time Limits.--The 
Secretary, with the participation of Indian tribes, shall establish for 
each Indian tribe receiving a grant under this section minimum work 
participation requirements, appropriate time limits for receipt of 
welfare-related services under the grant, and penalties against 
individuals--
        ``(1) consistent with the purposes of this section;
        ``(2) consistent with the economic conditions and resources 
    available to each tribe; and
        ``(3) similar to comparable provisions in section 406(d).
    ``(d) Emergency Assistance.--Nothing in this section shall preclude 
an Indian tribe from seeking emergency assistance from any Federal loan 
program or emergency fund.
    ``(e) Accountability.--Nothing in this section shall be construed 
to limit the ability of the Secretary to maintain program funding 
accountability consistent with--
        ``(1) generally accepted accounting principles; and
        ``(2) the requirements of the Indian Self-Determination and 
    Education Assistance Act (25 U.S.C. 450 et seq.).
    ``(f) Penalties.--
        ``(1) Subsections (a)(1), (a)(6), and (b) of section 408, shall 
    apply to an Indian tribe with an approved tribal assistance plan in 
    the same manner as such subsections apply to a State.
        ``(2) Section 408(a)(3) shall apply to an Indian tribe with an 
    approved tribal assistance plan by substituting `meet minimum work 
    participation requirements established under section 411(c)' for 
    `comply with section 406(a)'.
    ``(g) Data Collection and Reporting.--Section 410 shall apply to an 
Indian tribe with an approved tribal family assistance plan.
    ``(h) Special Rule for Indian Tribes in Alaska.--
        ``(1) In general.--Notwithstanding any other provision of this 
    section, and except as provided in paragraph (2), a tribal 
    organization in the State of Alaska that receives a tribal family 
    assistance grant under this section shall use the grant to operate 
    a program in accordance with the requirements comparable to the 
    requirements applicable to the program of the State of Alaska 
    funded under this part. Comparability of programs shall be 
    established on the basis of program criteria developed by the 
    Secretary in consultation with the State of Alaska and the tribal 
    organizations.
        ``(2) Waiver.--An Indian tribe described in paragraph (1) may 
    apply to the appropriate State authority to receive a waiver of the 
    requirement of paragraph (1).

``SEC. 412. RESEARCH, EVALUATIONS, AND NATIONAL STUDIES.

    ``(a) Research.--The Secretary shall conduct research on the 
benefits, effects, and costs of operating different State programs 
funded under this part, including time limits relating to eligibility 
for assistance. The research shall include studies on the effects of 
different programs and the operation of such programs on welfare 
dependency, illegitimacy, teen pregnancy, employment rates, child well-
being, and any other area the Secretary deems appropriate. The 
Secretary shall also conduct research on the costs and benefits of 
State activities under section 406.
    ``(b) Development and Evaluation of Innovative Approaches To 
Reducing Welfare Dependency and Increasing Child Well-Being.--
        ``(1) In general.--The Secretary may assist States in 
    developing, and shall evaluate, innovative approaches for reducing 
    welfare dependency and increasing the well-being of minor children 
    living at home with respect to recipients of assistance under 
    programs funded under this part. The Secretary may provide funds 
    for training and technical assistance to carry out the approaches 
    developed pursuant to this paragraph.
        ``(2) Evaluations.--In performing the evaluations under 
    paragraph (1), the Secretary shall, to the maximum extent feasible, 
    use random assignment as an evaluation methodology.
    ``(c) Dissemination of Information.--The Secretary shall develop 
innovative methods of disseminating information on any research, 
evaluations, and studies conducted under this section, including the 
facilitation of the sharing of information and best practices among 
States and localities through the use of computers and other 
technologies.
    ``(d) Annual Ranking of States and Review of Most and Least 
Successful Work Programs.--
        ``(1) Annual ranking of states.--The Secretary shall rank 
    annually the States to which grants are paid under section 402 in 
    the order of their success in placing recipients of assistance 
    under the State program funded under this part into long-term 
    private sector jobs, reducing the overall welfare caseload, and, 
    when a practicable method for calculating this information becomes 
    available, diverting individuals from formally applying to the 
    State program and receiving assistance. In ranking States under 
    this subsection, the Secretary shall take into account the average 
    number of minor children living at home in families in the State 
    that have incomes below the poverty line and the amount of funding 
    provided each State for such families.
        ``(2) Annual review of most and least successful work 
    programs.--The Secretary shall review the programs of the 3 States 
    most recently ranked highest under paragraph (1) and the 3 States 
    most recently ranked lowest under paragraph (1) that provide 
    parents with work experience, assistance in finding employment, and 
    other work preparation activities and support services to enable 
    the families of such parents to leave the program and become self-
    sufficient.
    ``(e) Annual Ranking of States and Review of Issues Relating to 
Out-of-Wedlock Births.--
        ``(1) Annual ranking of states.--
            ``(A) In general.--The Secretary shall annually rank States 
        to which grants are made under section 402 based on the 
        following ranking factors:
                ``(i) Absolute out-of-wedlock ratios.--The ratio 
            represented by--

                    ``(I) the total number of out-of-wedlock births in 
                families receiving assistance under the State program 
                under this part in the State for the most recent fiscal 
                year for which information is available; over
                    ``(II) the total number of births in families 
                receiving assistance under the State program under this 
                part in the State for such year.

                ``(ii) Net changes in the out-of-wedlock ratio.--The 
            difference between the ratio described in subparagraph 
            (A)(i) for the most recent fiscal year for which 
            information is available and such State's ratio determined 
            for the preceding year.
        ``(2) Annual review.--The Secretary shall review the programs 
    of the 5 States most recently ranked highest under paragraph (1) 
    and the 5 States most recently ranked the lowest under paragraph 
    (1).
    ``(f) State-Initiated Studies.--A State shall be eligible to 
receive funding to evaluate the State's family assistance program 
funded under this part if--
        ``(1) the State submits a proposal to the Secretary for such 
    evaluation,
        ``(2) the Secretary determines that the design and approach of 
    the evaluation is rigorous and is likely to yield information that 
    is credible and will be useful to other States, and
        ``(3) unless otherwise waived by the Secretary, the State 
    provides a non-Federal share of at least 10 percent of the cost of 
    such study.
    ``(g) Funding of Studies and Demonstrations.--
        ``(1) In general.--Out of any money in the Treasury of the 
    United States not otherwise appropriated, there are appropriated 
    $15,000,000 for each fiscal year specified in section 402(a)(1) for 
    the purpose of paying--
            ``(A) the cost of conducting the research described in 
        subsection (a);
            ``(B) the cost of developing and evaluating innovative 
        approaches for reducing welfare dependency and increasing the 
        well-being of minor children under subsection (b);
            ``(C) the Federal share of any State-initiated study 
        approved under subsection (f); and
            ``(D) an amount determined by the Secretary to be necessary 
        to operate and evaluate demonstration projects, relating to 
        this part, that are in effect or approved under section 1115 as 
        of September 30, 1995, and are continued after such date.
        ``(2) Allocation.--Of the amount appropriated under paragraph 
    (1) for a fiscal year--
            ``(A) 50 percent shall be allocated for the purposes 
        described in subparagraphs (A) and (B) of paragraph (1), and
            ``(B) 50 percent shall be allocated for the purposes 
        described in subparagraphs (C) and (D) of paragraph (1).

``SEC. 413. STUDY BY THE CENSUS BUREAU.

    ``(a) In General.--The Bureau of the Census shall expand the Survey 
of Income and Program Participation as necessary to obtain such 
information as will enable interested persons to evaluate the impact of 
the amendments made by subtitle A of the Personal Responsibility and 
Work Opportunity Act of 1995 on a random national sample of recipients 
of assistance under State programs funded under this part and (as 
appropriate) other low-income families, and in doing so, shall pay 
particular attention to the issues of out-of-wedlock birth, welfare 
dependency, the beginning and end of welfare spells, and the causes of 
repeat welfare spells.
    ``(b) Appropriation.--Out of any money in the Treasury of the 
United States not otherwise appropriated, there are appropriated 
$10,000,000 for each of fiscal years 1996, 1997, 1998, 1999, and 2000 
for payment to the Bureau of the Census to carry out subsection (a).

``SEC. 414. WAIVERS.

    ``(a) Continuation of Waivers.--
        ``(1) In general.--Except as provided in paragraph (2), if any 
    waiver granted to a State under section 1115 or otherwise which 
    relates to the provision of assistance under a State plan under 
    this part is in effect or approved by the Secretary as of October 
    1, 1995, the amendments made by the Personal Responsibility and 
    Work Opportunity Act of 1995 shall not apply with respect to the 
    State before the expiration (determined without regard to any 
    extensions) of the waiver to the extent such amendments are 
    inconsistent with the terms of the waiver.
        ``(2) Financing limitation.--Notwithstanding any other 
    provision of law, beginning with fiscal year 1996, a State 
    operating under a waiver described in paragraph (1) shall receive 
    the payment described for such State for such fiscal year under 
    section 402, in lieu of any other payment provided for in the 
    waiver.
    ``(b) State Option To Terminate Waiver.--
        ``(1) In general.--A State may terminate a waiver described in 
    subsection (a) before the expiration of the waiver.
        ``(2) Report.--A State which terminates a waiver under 
    paragraph (1) shall submit a report to the Secretary summarizing 
    the waiver and any available information concerning the result or 
    effect of such waiver.
        ``(3) Hold harmless provision.--
            ``(A) In general.--Notwithstanding any other provision of 
        law, a State that, not later than the date described in 
        subparagraph (B), submits a written request to terminate a 
        waiver described in subsection (a) shall be held harmless for 
        accrued cost neutrality liabilities incurred under the terms 
        and conditions of such waiver.
            ``(B) Date described.--The date described in this 
        subparagraph is the later of--
                ``(i) January 1, 1996; or
                ``(ii) 90 days following the adjournment of the first 
            regular session of the State legislature that begins after 
            the date of the enactment of the Personal Responsibility 
            and Work Opportunity Act of 1995.
    ``(c) Secretarial Encouragement of Current Waivers.--The Secretary 
shall encourage any State operating a waiver described in subsection 
(a) to continue such waiver and to evaluate, using random sampling and 
other characteristics of accepted scientific evaluations, the result or 
effect of such waiver.
    ``(d) Continuation of Individual Waivers.--A State may elect to 
continue one or more individual waivers described in subsection (a)(1).

``SEC. 415. ASSISTANT SECRETARY FOR FAMILY SUPPORT.

    ``The programs under this part and part D shall be administered by 
an Assistant Secretary for Family Support within the Department of 
Health and Human Services, who shall be appointed by the President, by 
and with the advice and consent of the Senate, and who shall be in 
addition to any other Assistant Secretary of Health and Human Services 
provided for by law.

``SEC. 416. LIMITATION ON FEDERAL AUTHORITY.

    ``No officer or employee of the Federal Government may regulate the 
conduct of States under this part or enforce any provision of this 
part, except to the extent expressly provided in this part.

``SEC. 417. DEFINITIONS.

    ``As used in this part:
        ``(1) Adult.--The term `adult' means an individual who is not a 
    minor child.
        ``(2) Minor child.--The term `minor child' means an individual 
    who--
            ``(A) has not attained 18 years of age; or
            ``(B) has not attained 19 years of age and is a full-time 
        student in a secondary school (or in the equivalent level of 
        vocational or technical training).
        ``(3) Fiscal year.--The term `fiscal year' means any 12-month 
    period ending on September 30 of a calendar year.
        ``(4) Indian, indian tribe, and tribal organization.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        the terms `Indian', `Indian tribe', and `tribal organization' 
        have the meaning given such terms by section 4 of the Indian 
        Self-Determination and Education Assistance Act (25 U.S.C. 
        450b).
            ``(B) Special rule for indian tribes in alaska.--The term 
        `Indian tribe' means, with respect to the State of Alaska, only 
        the following Alaska Native regional nonprofit corporations:
                ``(i) Arctic Slope Native Association.
                ``(ii) Kawerak, Inc.
                ``(iii) Maniilaq Association.
                ``(iv) Association of Village Council Presidents.
                ``(v) Tanana Chiefs Conference.
                ``(vi) Cook Inlet Tribal Council.
                ``(vii) Bristol Bay Native Association.
                ``(viii) Aleutian and Pribilof Island Association.
                ``(ix) Chugachmuit.
                ``(x) Tlingit Haida Central Council.
                ``(xi) Kodiak Area Native Association.
                ``(xii) Copper River Native Association.
                ``(xiii) Metlakatla Indian Tribe.
        ``(5) State.--Except as otherwise specifically provided, the 
    term `State' includes the several States, the District of Columbia, 
    the Commonwealth of Puerto Rico, the United States Virgin Islands, 
    Guam, and American Samoa.''.

SEC. 12102. REPORT ON DATA PROCESSING.

    (a) In General.--Within 6 months after the date of the enactment of 
this Act, the Secretary of Health and Human Services shall prepare and 
submit to the Congress a report on--
        (1) the status of the automated data processing systems 
    operated by the States to assist management in the administration 
    of State programs under part A of title IV of the Social Security 
    Act (whether in effect before or after October 1, 1995); and
        (2) what would be required to establish a system capable of--
            (A) tracking participants in public programs over time; and
            (B) checking case records of the States to determine 
        whether individuals are participating in public programs of 2 
        or more States.
    (b) Preferred Contents.--The report required by subsection (a) 
should include--
        (1) a plan for building on the automated data processing 
    systems of the States to establish a system with the capabilities 
    described in subsection (a)(2); and
        (2) an estimate of the amount of time required to establish 
    such a system and of the cost of establishing such a system.

SEC. 12103. CONFORMING AMENDMENTS TO THE SOCIAL SECURITY ACT.

    (a) Amendments to Title II.--
        (1) Section 205(c)(2)(C)(vi) (42 U.S.C. 405(c)(2)(C)(vi)), as 
    so redesignated by section 321(a)(9)(B) of the Social Security 
    Independence and Program Improvements Act of 1994, is amended--
            (A) by inserting ``an agency administering a program funded 
        under part A of title IV or'' before ``an agency operating''; 
        and
            (B) by striking ``A or D of title IV of this Act'' and 
        inserting ``D of such title''.
        (2) Section 228(d)(1) (42 U.S.C. 428(d)(1)) is amended by 
    inserting ``under a State program funded under'' before ``part A of 
    title IV''.
    (b) Amendments to Part D of Title IV.--
        (1) Section 451 (42 U.S.C. 651) is amended by striking ``aid'' 
    and inserting ``assistance under a State program funded''.
        (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
    amended--
            (A) by striking ``aid to families with dependent children'' 
        and inserting ``assistance under a State program funded under 
        part A'';
            (B) by striking ``such aid'' and inserting ``such 
        assistance''; and
            (C) by striking ``under section 402(a)(26) or 471(a)(17)'' 
        and inserting ``pursuant to section 408(a)(4) or under section 
        471(a)(17)''.
        (3) Section 452(a)(10)(F) (42 U.S.C. 652(a)(10)(F)) is 
    amended--
            (A) by striking ``aid under a State plan approved'' and 
        inserting ``assistance under a State program funded''; and
            (B) by striking ``in accordance with the standards referred 
        to in section 402(a)(26)(B)(ii)'' and inserting ``by the 
        State''.
        (4) Section 452(b) (42 U.S.C. 652(b)) is amended in the first 
    sentence by striking ``aid under the State plan approved under part 
    A'' and inserting ``assistance under the State program funded under 
    part A''.
        (5) Section 452(d)(3)(B)(i) (42 U.S.C. 652(d)(3)(B)(i)) is 
    amended by striking ``1115(c)'' and inserting ``1115(b)''.
        (6) Section 452(g)(2)(A)(ii)(I) (42 U.S.C. 652(g)(2)(A)(ii)(I)) 
    is amended by striking ``aid is being paid under the State's plan 
    approved under part A or E'' and inserting ``assistance is being 
    provided under the State program funded under part A or aid is 
    being paid under the State's plan approved under part E''.
        (7) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is amended in 
    the matter following clause (iii) by striking ``aid was being paid 
    under the State's plan approved under part A or E'' and inserting 
    ``assistance was being provided under the State program funded 
    under part A or aid was being paid under the State's plan approved 
    under part E''.
        (8) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended in the 
    matter following subparagraph (B)--
            (A) by striking ``who is a dependent child'' and inserting 
        ``with respect to whom assistance is being provided under the 
        State program funded under part A'';
            (B) by inserting ``by the State agency administering the 
        State plan approved under this part'' after ``found''; and
            (C) by striking ``under section 402(a)(26)'' and inserting 
        ``with the State in establishing paternity''.
        (9) Section 452(h) (42 U.S.C. 652(h)) is amended by striking 
    ``under section 402(a)(26)'' and inserting ``pursuant to section 
    408(a)(4)''.
        (10) Section 453(c)(3) (42 U.S.C. 653(c)(3)) is amended by 
    striking ``aid under part A of this title'' and inserting 
    ``assistance under a State program funded under part A''.
        (11) Section 454(5)(A) (42 U.S.C. 654(5)(A)) is amended--
            (A) by striking ``under section 402(a)(26)'' and inserting 
        ``pursuant to section 408(a)(4)''; and
            (B) by striking ``; except that this paragraph shall not 
        apply to such payments for any month following the first month 
        in which the amount collected is sufficient to make such family 
        ineligible for assistance under the State plan approved under 
        part A;'' and inserting a comma.
        (12) Section 454(6)(D) (42 U.S.C. 654(6)(D)) is amended by 
    striking ``aid under a State plan approved'' and inserting 
    ``assistance under a State program funded''.
        (13) Section 456(a)(1) (42 U.S.C. 656(a)(1)) is amended by 
    striking ``under section 402(a)(26)''.
        (14) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is amended 
    by striking ``402(a)(26)'' and inserting ``408(a)(4)''.
        (15) Section 466(b)(2) (42 U.S.C. 666(b)(2)) is amended by 
    striking ``aid'' and inserting ``assistance under a State program 
    funded''.
        (16) Section 469(a) (42 U.S.C. 669(a)) is amended--
            (A) by striking ``aid under plans approved'' and inserting 
        ``assistance under State programs funded''; and
            (B) by striking ``such aid'' and inserting ``such 
        assistance''.
    (c) Repeal of Part F of Title IV.--Part F of title IV (42 U.S.C. 
681-687) is repealed.
    (d) Amendment to Title X.--Section 1002(a)(7) (42 U.S.C. 
1202(a)(7)) is amended by striking ``aid to families with dependent 
children under the State plan approved under section 402 of this Act'' 
and inserting ``assistance under a State program funded under part A of 
title IV''.
    (e) Amendments to Title XI.--
        (1) Section 1108 (42 U.S.C. 1308) is amended to read as 
    follows:

``SEC. 1108. LIMITATION ON PAYMENTS TO PUERTO RICO, THE VIRGIN ISLANDS, 
              GUAM, AND AMERICAN SAMOA.

    ``(a) In General.--Notwithstanding any other provision of this Act, 
the total amount certified by the Secretary of Health and Human 
Services under titles I, X, XIV, and XVI, and under parts A and B of 
title IV for payment to any territory for a fiscal year shall not 
exceed the ceiling amount for the territory for the fiscal year.
    ``(b) Definitions.--As used in this section:
        ``(1) Territory.--The term `territory' means Puerto Rico, the 
    Virgin Islands, Guam, and American Samoa.
        ``(2) Ceiling amount.--The term `ceiling amount' means, with 
    respect to a territory and a fiscal year, the mandatory ceiling 
    amount with respect to the territory plus the discretionary ceiling 
    amount with respect to the territory, reduced for the fiscal year 
    in accordance with subsection (e).
        ``(3) Mandatory ceiling amount.--The term `mandatory ceiling 
    amount' means--
            ``(A) $103,538,000 with respect to Puerto Rico;
            ``(B) $4,812,000 with respect to Guam;
            ``(C) $3,677,397 with respect to the Virgin Islands; and
            ``(D) $1,122,095 with respect to American Samoa.
        ``(4) Discretionary ceiling amount.--The term `discretionary 
    ceiling amount' means, with respect to a territory, the dollar 
    amount specified in subsection (c)(2) with respect to the 
    territory.
    ``(c) Discretionary Grants.--
        ``(1) In general.--The Secretary shall make a grant to each 
    territory for any fiscal year in the amount appropriated pursuant 
    to paragraph (2) for the fiscal year for payment to the territory.
        ``(2) Use of grant.--Any territory to which a grant is made 
    under paragraph (1) may expend the amount under any program 
    operated or funded under any provision of law specified in 
    subsection (a).
        ``(3) Limitation on authorization of appropriations.--For 
    grants under paragraph (1), there are authorized to be appropriated 
    to the Secretary for each fiscal year--
            ``(A) $7,951,000 for payment to Puerto Rico;
            ``(B) $345,000 for payment to Guam;
            ``(C) $275,000 for payment to the Virgin Islands; and
            ``(D) $190,000 for payment to American Samoa.
    ``(d) Authority To Transfer Funds Among Programs.--Notwithstanding 
any other provision of this Act, any territory to which an amount is 
paid under any provision of law specified in subsection (a) may use 
part or all of the amount to carry out any program operated by the 
territory, or funded, under any other such provision of law.
    ``(e) Maintenance of Effort.--The ceiling amount with respect to a 
territory shall be reduced for a fiscal year by an amount equal to the 
amount (if any) by which--
        ``(1) the total amount expended by the territory under all 
    programs of the territory operated pursuant to the provisions of 
    law specified in subsection (a) (as such provisions were in effect 
    for fiscal year 1995) for fiscal year 1995; exceeds
        ``(2) the total amount expended by the territory under all 
    programs of the territory that are funded under the provisions of 
    law specified in subsection (a) for the fiscal year that 
    immediately precedes the fiscal year referred to in the matter 
    preceding paragraph (1).''.
        (2) Section 1109 (42 U.S.C. 1309) is amended by striking ``or 
    part A of title IV,''.
        (3) Section 1115 (42 U.S.C. 1315) is amended--
            (A) in subsection (a)(2)--
                (i) by inserting ``(A)'' after ``(2)'';
                (ii) by striking ``403,'';
                (iii) by striking the period at the end and inserting 
            ``, and''; and
                (iv) by adding at the end the following new 
            subparagraph:
        ``(B) costs of such project which would not otherwise be a 
    permissible use of funds under part A of title IV and which are not 
    included as part of the costs of projects under section 1110, shall 
    to the extent and for the period prescribed by the Secretary, be 
    regarded as a permissible use of funds under such part.''; and
            (B) in subsection (c)(3), by striking ``under the program 
        of aid to families with dependent children'' and inserting 
        ``part A of such title''.
        (4) Section 1116 (42 U.S.C. 1316) is amended--
            (A) in each of subsections (a)(1), (b), and (d), by 
        striking ``or part A of title IV,''; and
            (B) in subsection (a)(3), by striking ``404,''.
        (5) Section 1118 (42 U.S.C. 1318) is amended--
            (A) by striking ``403(a),'';
            (B) by striking ``and part A of title IV,''; and
            (C) by striking ``, and shall, in the case of American 
        Samoa, mean 75 per centum with respect to part A of title IV''.
        (6) Section 1119 (42 U.S.C. 1319) is amended--
            (A) by striking ``or part A of title IV''; and
            (B) by striking ``403(a),''.
        (7) Section 1133(a) (42 U.S.C. 1320b-3(a)) is amended by 
    striking ``or part A of title IV,''.
        (8) Section 1136 (42 U.S.C. 1320b-6) is repealed.
        (9) Section 1137 (42 U.S.C. 1320b-7) is amended--
            (A) in subsection (b), by striking paragraph (1) and 
        inserting the following:
        ``(1) any State program funded under part A of title IV of this 
    Act;''; and
            (B) in subsection (d)(1)(B)--
                (i) by striking ``In this subsection--'' and all that 
            follows through ``(ii) in'' and inserting ``In this 
            subsection, in'';
                (ii) by redesignating subclauses (I), (II), and (III) 
            as clauses (i), (ii), and (iii); and
                (iii) by moving such redesignated material 2 ems to the 
            left.
    (f) Amendment to Title XIV.--Section 1402(a)(7) (42 U.S.C. 
1352(a)(7)) is amended by striking ``aid to families with dependent 
children under the State plan approved under section 402 of this Act'' 
and inserting ``assistance under a State program funded under part A of 
title IV''.
    (g) Amendment to Title XVI as in Effect With Respect to the 
Territories.--Section 1602(a)(11), as in effect without regard to the 
amendment made by section 301 of the Social Security Amendments of 1972 
(42 U.S.C. 1382 note), is amended by striking ``aid under the State 
plan approved'' and inserting ``assistance under a State program 
funded''.
    (h) Amendment to Title XVI as in Effect With Respect to the 
States.--Section 1611(c)(5)(A) (42 U.S.C. 1382(c)(5)(A)) is amended to 
read as follows: ``(A) a State program funded under part A of title 
IV,''.

SEC. 12104. CONFORMING AMENDMENTS TO THE FOOD STAMP ACT OF 1977 AND 
              RELATED PROVISIONS.

    (a) Section 5 of the Food Stamp Act of 1977 (7 U.S.C. 2014) is 
amended--
        (1) in the second sentence of subsection (a), by striking 
    ``plan approved'' and all that follows through ``title IV of the 
    Social Security Act'' and inserting ``program funded under part A 
    of title IV of the Social Security Act (42 U.S.C. 601 et seq.) that 
    the Secretary determines complies with standards established by the 
    Secretary that ensure that the standards under the State program 
    are comparable to or more restrictive than those in effect on June 
    1, 1995'';
        (2) in subsection (d)--
            (A) in paragraph (5), by striking ``assistance to families 
        with dependent children'' and inserting ``assistance under a 
        State program funded''; and
            (B) by striking paragraph (13) and redesignating paragraphs 
        (14), (15), and (16) as paragraphs (13), (14), and (15), 
        respectively;
        (3) in subsection (j), by striking ``plan approved under part A 
    of title IV of such Act (42 U.S.C. 601 et seq.)'' and inserting 
    ``program funded under part A of title IV of the Act (42 U.S.C. 601 
    et seq.) that the Secretary determines complies with standards 
    established by the Secretary that ensure that the standards under 
    the State program are comparable to or more restrictive than those 
    in effect on June 1, 1995''.
    (b) Section 6 of such Act (7 U.S.C. 2015) is amended--
        (1) in subsection (c)(5), by striking ``the State plan 
    approved'' and inserting ``the State program funded'';
        (2) in subsection (e)--
            (A) by striking ``aid to families with dependent children'' 
        and inserting ``benefits under a State program funded''; and
            (B) by inserting before the semicolon the following: ``that 
        the Secretary determines complies with standards established by 
        the Secretary that ensure that the standards under the State 
        program are comparable to or more restrictive than those in 
        effect on June 1, 1995''; and
        (3) by adding at the end the following new subsection:
    ``(i) Eligibility Under Other Law.--Notwithstanding any other 
provision of this Act, a household may not receive benefits under this 
Act as a result of the household's eligibility under a State program 
funded under part A of title IV of the Social Security Act (42 U.S.C. 
601 et seq.), unless the Secretary determines that any household with 
income above 130 percent of the poverty guidelines is not eligible for 
the program.''.
    (c) Section 16(g)(4) of such Act (7 U.S.C. 2025(g)(4)) is amended 
by striking ``State plans under the Aid to Families with Dependent 
Children Program under'' and inserting ``State programs funded under 
part A of''.
    (d) Section 17 of such Act (7 U.S.C. 2026) is amended--
        (1) in the first sentence of subsection (b)(1)(A), by striking 
    ``to aid to families with dependent children under part A of title 
    IV of the Social Security Act'' and inserting ``or are receiving 
    assistance under a State program funded under part A of title IV of 
    the Social Security Act (42 U.S.C. 601 et seq.)''; and
        (2) in subsection (b)(3), by adding at the end the following 
    new subparagraph:
         ``(I) The Secretary may not grant a waiver under this 
    paragraph on or after October 1, 1995. Any reference in this 
    paragraph to a provision of title IV of the Social Security Act 
    shall be deemed to be a reference to such provision as in effect on 
    September 30, 1995.'';
    (e) Section 20 of such Act (7 U.S.C. 2029) is amended--
        (1) in subsection (a)(2)(B) by striking ``operating--'' and all 
    that follows through ``(ii) any other'' and inserting ``operating 
    any''; and
        (2) in subsection (b)--
            (A) in paragraph (1)--
                (i) by striking ``(b)(1) A household'' and inserting 
            ``(b) A household''; and
                (ii) in subparagraph (B), by striking ``training 
            program'' and inserting ``activity'';
            (B) by striking paragraph (2); and
            (C) by redesignating subparagraphs (A) through (F) as 
        paragraphs (1) through (6), respectively.
    (f) Section 5(h)(1) of the Agriculture and Consumer Protection Act 
of 1973 (Public Law 93-186; 7 U.S.C. 612c note) is amended by striking 
``the program for aid to families with dependent children'' and 
inserting ``the State program funded''.
    (g) Section 9 of the National School Lunch Act (42 U.S.C. 1758) is 
amended--
        (1) in subsection (b)--
            (A) in paragraph (2)(C)(ii)(II)--
                (i) by striking ``program for aid to families with 
            dependent children'' and inserting ``State program 
            funded''; and
                (ii) by inserting before the period at the end the 
            following: ``that the Secretary determines complies with 
            standards established by the Secretary that ensure that the 
            standards under the State program are comparable to or more 
            restrictive than those in effect on June 1, 1995''; and
            (B) in paragraph (6)--
                (i) in subparagraph (A)(ii)--

                    (I) by striking ``an AFDC assistance unit (under 
                the aid to families with dependent children program 
                authorized'' and inserting ``a family (under the State 
                program funded''; and
                    (II) by striking ``, in a State'' and all that 
                follows through ``9902(2)))'' and inserting ``that the 
                Secretary determines complies with standards 
                established by the Secretary that ensure that the 
                standards under the State program are comparable to or 
                more restrictive than those in effect on June 1, 
                1995''; and

                (ii) in subparagraph (B), by striking ``aid to families 
            with dependent children'' and inserting ``assistance under 
            the State program funded under part A of title IV of the 
            Social Security Act (42 U.S.C. 601 et seq.) that the 
            Secretary determines complies with standards established by 
            the Secretary that ensure that the standards under the 
            State program are comparable to or more restrictive than 
            those in effect on June 1, 1995''; and
        (2) in subsection (d)(2)(C)--
            (A) by striking ``program for aid to families with 
        dependent children'' and inserting ``State program funded''; 
        and
            (B) by inserting before the period at the end the 
        following: ``that the Secretary determines complies with 
        standards established by the Secretary that ensure that the 
        standards under the State program are comparable to or more 
        restrictive than those in effect on June 1, 1995''.
    (h) Section 17(d)(2)(A)(ii)(II) of the Child Nutrition Act of 1966 
(42 U.S.C. 1786(d)(2)(A)(ii)(II)) is amended--
        (1) by striking ``program for aid to families with dependent 
    children established'' and inserting ``State program funded''; and
        (2) by inserting before the semicolon the following: ``that the 
    Secretary determines complies with standards established by the 
    Secretary that ensure that the standards under the State program 
    are comparable to or more restrictive than those in effect on June 
    1, 1995''.

SEC. 12105. CONFORMING AMENDMENTS TO OTHER LAWS.

    (a) Subsection (b) of section 508 of the Unemployment Compensation 
Amendments of 1976 (42 U.S.C. 603a; Public Law 94-566; 90 Stat. 2689) 
is amended to read as follows:
    ``(b) Provision for Reimbursement of Expenses.--For purposes of 
section 455 of the Social Security Act, expenses incurred to reimburse 
State employment offices for furnishing information requested of such 
offices--
        ``(1) pursuant to the third sentence of section 3(a) of the Act 
    entitled `An Act to provide for the establishment of a national 
    employment system and for cooperation with the States in the 
    promotion of such system, and for other purposes', approved June 6, 
    1933 (29 U.S.C. 49b(a)), or
        ``(2) by a State or local agency charged with the duty of 
    carrying a State plan for child support approved under part D of 
    title IV of the Social Security Act,
shall be considered to constitute expenses incurred in the 
administration of such State plan.''.
    (b) Section 9121 of the Omnibus Budget Reconciliation Act of 1987 
(42 U.S.C. 602 note) is repealed.
    (c) Section 9122 of the Omnibus Budget Reconciliation Act of 1987 
(42 U.S.C. 602 note) is repealed.
    (d) Section 221 of the Housing and Urban-Rural Recovery Act of 1983 
(42 U.S.C. 602 note), relating to treatment under AFDC of certain 
rental payments for federally assisted housing, is repealed.
    (e) Section 159 of the Tax Equity and Fiscal Responsibility Act of 
1982 (42 U.S.C. 602 note) is repealed.
    (f) Section 202(d) of the Social Security Amendments of 1967 (81 
Stat. 882; 42 U.S.C. 602 note) is repealed.
    (g) Section 903 of the Stewart B. McKinney Homeless Assistance 
Amendments Act of 1988 (42 U.S.C. 11381 note), relating to 
demonstration projects to reduce number of AFDC families in welfare 
hotels, is amended--
        (1) in subsection (a), by striking ``aid to families with 
    dependent children under a State plan approved'' and inserting 
    ``assistance under a State program funded''; and
        (2) in subsection (c), by striking ``aid to families with 
    dependent children in the State under a State plan approved'' and 
    inserting ``assistance in the State under a State program funded''.
    (h) The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is 
amended--
        (1) in section 404C(c)(3) (20 U.S.C. 1070a-23(c)(3)), by 
    striking ``(Aid to Families with Dependent Children)''; and
        (2) in section 480(b)(2) (20 U.S.C. 1087vv(b)(2)), by striking 
    ``aid to families with dependent children under a State plan 
    approved'' and inserting ``assistance under a State program 
    funded''.
    (i) The Carl D. Perkins Vocational and Applied Technology Education 
Act (20 U.S.C. 2301 et seq.) is amended--
        (1) in section 231(d)(3)(A)(ii) (20 U.S.C. 2341(d)(3)(A)(ii)), 
    by striking ``the program for aid to dependent children'' and 
    inserting ``the State program funded'';
        (2) in section 232(b)(2)(B) (20 U.S.C. 2341a(b)(2)(B)), by 
    striking ``the program for aid to families with dependent 
    children'' and inserting ``the State program funded''; and
        (3) in section 521(14)(B)(iii) (20 U.S.C. 2471(14)(B)(iii)), by 
    striking ``the program for aid to families with dependent 
    children'' and inserting ``the State program funded''.
    (j) The Elementary and Secondary Education Act of 1965 (20 U.S.C. 
2701 et seq.) is amended--
        (1) in section 1113(a)(5) (20 U.S.C. 6313(a)(5)), by striking 
    ``Aid to Families with Dependent Children Program'' and inserting 
    ``State program funded under part A of title IV of the Social 
    Security Act'';
        (2) in section 1124(c)(5) (20 U.S.C. 6333(c)(5)), by striking 
    ``the program of aid to families with dependent children under a 
    State plan approved under'' and inserting ``a State program funded 
    under part A of''; and
        (3) in section 5203(b)(2) (20 U.S.C. 7233(b)(2))--
            (A) in subparagraph (A)(xi), by striking ``Aid to Families 
        with Dependent Children benefits'' and inserting ``assistance 
        under a State program funded under part A of title IV of the 
        Social Security Act''; and
            (B) in subparagraph (B)(viii), by striking ``Aid to 
        Families with Dependent Children'' and inserting ``assistance 
        under the State program funded under part A of title IV of the 
        Social Security Act''.
    (k) Chapter VII of title I of Public Law 99-88 (25 U.S.C. 13d-1) is 
amended to read as follows: ``Provided further, That general assistance 
payments made by the Bureau of Indian Affairs shall be made--
        ``(1) after April 29, 1985, and before October 1, 1995, on the 
    basis of Aid to Families with Dependent Children (AFDC) standards 
    of need; and
        ``(2) on and after October 1, 1995, on the basis of standards 
    of need established under the State program funded under part A of 
    title IV of the Social Security Act,
except that where a State ratably reduces its AFDC or State program 
payments, the Bureau shall reduce general assistance payments in such 
State by the same percentage as the State has reduced the AFDC or State 
program payment.''.
    (l) The Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.) is 
amended--
        (1) in section 51(d)(9) (26 U.S.C. 51(d)(9)), by striking all 
    that follows ``agency as'' and inserting ``being eligible for 
    financial assistance under part A of title IV of the Social 
    Security Act and as having continually received such financial 
    assistance during the 90-day period which immediately precedes the 
    date on which such individual is hired by the employer.'';
        (2) in section 3304(a)(16) (26 U.S.C. 3304(a)(16)), by striking 
    ``eligibility for aid or services,'' and all that follows through 
    ``children approved'' and inserting ``eligibility for assistance, 
    or the amount of such assistance, under a State program funded'';
        (3) in section 6103(l)(7)(D)(i) (26 U.S.C. 6103(l)(7)(D)(i)), 
    by striking ``aid to families with dependent children provided 
    under a State plan approved'' and inserting ``a State program 
    funded'';
        (4) in section 6334(a)(11)(A) (26 U.S.C. 6334(a)(11)(A)), by 
    striking ``(relating to aid to families with dependent children)''; 
    and
        (5) in section 7523(b)(3)(C) (26 U.S.C. 7523(b)(3)(C)), by 
    striking ``aid to families with dependent children'' and inserting 
    ``assistance under a State program funded under part A of title IV 
    of the Social Security Act''.
    (m) Section 3(b) of the Wagner-Peyser Act (29 U.S.C. 49b(b)) is 
amended by striking ``State plan approved under part A of title IV'' 
and inserting ``State program funded under part A of title IV''.
    (n) The Job Training Partnership Act (29 U.S.C. 1501 et seq.) is 
amended--
        (1) in section 4(29)(A)(i) (29 U.S.C. 1503(29)(A)(i)), by 
    striking ``(42 U.S.C. 601 et seq.)'';
        (2) in section 106(b)(6)(C) (29 U.S.C. 1516(b)(6)(C)), by 
    striking ``State aid to families with dependent children records,'' 
    and inserting ``records collected under the State program funded 
    under part A of title IV of the Social Security Act,'';
        (3) in section 121(b)(2) (29 U.S.C. 1531(b)(2))--
            (A) by striking ``the JOBS program'' and inserting ``the 
        work activities required under title IV of the Social Security 
        Act''; and
            (B) by striking the second sentence;
        (4) in section 123(c) (29 U.S.C. 1533(c))--
            (A) in paragraph (1)(E), by repealing clause (vi); and
            (B) in paragraph (2)(D), by repealing clause (v);
        (5) in section 203(b)(3) (29 U.S.C. 1603(b)(3)), by striking 
    ``, including recipients under the JOBS program'';
        (6) in subparagraphs (A) and (B) of section 204(a)(1) (29 
    U.S.C. 1604(a)(1) (A) and (B)), by striking ``(such as the JOBS 
    program)'' each place it appears;
        (7) in section 205(a) (29 U.S.C. 1605(a)), by striking 
    paragraph (4) and inserting the following:
        ``(4) the portions of title IV of the Social Security Act 
    relating to work activities;'';
        (8) in section 253 (29 U.S.C. 1632)--
            (A) in subsection (b)(2), by repealing subparagraph (C); 
        and
            (B) in paragraphs (1)(B) and (2)(B) of subsection (c), by 
        striking ``the JOBS program or'' each place it appears;
        (9) in section 264 (29 U.S.C. 1644)--
            (A) in subparagraphs (A) and (B) of subsection (b)(1), by 
        striking ``(such as the JOBS program)'' each place it appears; 
        and
            (B) in subparagraphs (A) and (B) of subsection (d)(3), by 
        striking ``and the JOBS program'' each place it appears;
        (10) in section 265(b) (29 U.S.C. 1645(b)), by striking 
    paragraph (6) and inserting the following:
        ``(6) the portion of title IV of the Social Security Act 
    relating to work activities;'';
        (11) in the second sentence of section 429(e) (29 U.S.C. 
    1699(e)), by striking ``and shall be in an amount that does not 
    exceed the maximum amount that may be provided by the State 
    pursuant to section 402(g)(1)(C) of the Social Security Act (42 
    U.S.C. 602(g)(1)(C))'';
        (12) in section 454(c) (29 U.S.C. 1734(c)), by striking ``JOBS 
    and'';
        (13) in section 455(b) (29 U.S.C. 1735(b)), by striking ``the 
    JOBS program,'';
        (14) in section 501(1) (29 U.S.C. 1791(1)), by striking ``aid 
    to families with dependent children under part A of title IV of the 
    Social Security Act (42 U.S.C. 601 et seq.)'' and inserting 
    ``assistance under the State program funded under part A of title 
    IV of the Social Security Act'';
        (15) in section 506(1)(A) (29 U.S.C. 1791e(1)(A)), by striking 
    ``aid to families with dependent children'' and inserting 
    ``assistance under the State program funded'';
        (16) in section 508(a)(2)(A) (29 U.S.C. 1791g(a)(2)(A)), by 
    striking ``aid to families with dependent children'' and inserting 
    ``assistance under the State program funded''; and
        (17) in section 701(b)(2)(A) (29 U.S.C. 1792(b)(2)(A))--
            (A) in clause (v), by striking the semicolon and inserting 
        ``; and''; and
            (B) by striking clause (vi).
    (o) Section 3803(c)(2)(C)(iv) of title 31, United States Code, is 
amended to read as follows:
                ``(iv) assistance under a State program funded under 
            part A of title IV of the Social Security Act''.
    (p) Section 2605(b)(2)(A)(i) of the Low-Income Home Energy 
Assistance Act of 1981 (42 U.S.C. 8624(b)(2)(A)(i)) is amended to read 
as follows:
                ``(i) assistance under the State program funded under 
            part A of title IV of the Social Security Act;''.
    (q) Section 303(f)(2) of the Family Support Act of 1988 (42 U.S.C. 
602 note) is amended--
        (1) by striking ``(A)''; and
        (2) by striking subparagraphs (B) and (C).
    (r) The Balanced Budget and Emergency Deficit Control Act of 1985 
(2 U.S.C. 900 et seq.) is amended--
        (1) in the first section 255(h) (2 U.S.C. 905(h)), by striking 
    ``Aid to families with dependent children (75-0412-0-1-609);'' and 
    inserting ``Block grants to States for temporary assistance for 
    needy families;''; and
        (2) in section 256 (2 U.S.C. 906)--
            (A) by striking subsection (k); and
            (B) by redesignating subsection (l) as subsection (k).
    (s) The Immigration and Nationality Act (8 U.S.C. 1101 et seq.) is 
amended--
        (1) in section 210(f) (8 U.S.C. 1160(f)), by striking ``aid 
    under a State plan approved under'' each place it appears and 
    inserting ``assistance under a State program funded under'';
        (2) in section 245A(h) (8 U.S.C. 1255a(h))--
            (A) in paragraph (1)(A)(i), by striking ``program of aid to 
        families with dependent children'' and inserting ``State 
        program of assistance''; and
            (B) in paragraph (2)(B), by striking ``aid to families with 
        dependent children'' and inserting ``assistance under a State 
        program funded under part A of title IV of the Social Security 
        Act''; and
        (3) in section 412(e)(4) (8 U.S.C. 1522(e)(4)), by striking 
    ``State plan approved'' and inserting ``State program funded''.
    (t) Section 640(a)(4)(B)(i) of the Head Start Act (42 U.S.C. 
9835(a)(4)(B)(i)) is amended by striking ``program of aid to families 
with dependent children under a State plan approved'' and inserting 
``State program of assistance funded''.
    (u) Section 9 of the Act of April 19, 1950 (64 Stat. 47, chapter 
92; 25 U.S.C. 639) is repealed.
    (v) Subparagraph (E) of section 213(d)(6) of the School-To-Work 
Opportunities Act of 1994 (20 U.S.C. 6143(d)(6)) is amended to read as 
follows:
            ``(E) part A of title IV of the Social Security Act (42 
        U.S.C. 601 et seq.) relating to work activities;''.

SEC. 12106. EFFECTIVE DATE; TRANSITION RULE.

    (a) In General.--Except as otherwise provided in this subtitle, 
this subtitle and the amendments made by this subtitle shall take 
effect on October 1, 1995.
    (b) Penalties.--
        (1) In general.--Paragraphs (2) through (7) and paragraph (9) 
    of section 408(a) of the Social Security Act (as added by section 
    12101 of this Act) shall apply with respect to fiscal years 
    beginning on or after October 1, 1996.
        (2) Misuse of funds.--Paragraphs (1) and (8) of section 408(a) 
    of the Social Security Act (as added by section 12101 of this Act, 
    shall apply with respect to fiscal years beginning on or after 
    October 1, 1995.
    (c) Transition Rules.--
        (1) State option to continue afdc program.--
            (A) 9-month extension.--A State may elect to continue the 
        State AFDC program until June 30, 1996.
            (B) No individual or family entitlement under continued 
        state afdc programs.--Notwithstanding any other provision of 
        law or any rule of law, no individual or family is entitled to 
        aid under any State AFDC program on or after the date of the 
        enactment of this Act.
            (C) Limitations on federal obligations.--
                (i) Under afdc program.--If a State elects to continue 
            the State AFDC program pursuant to subparagraph (A), the 
            total obligations of the Federal Government to the State 
            under part A of title IV of the Social Security Act (as in 
            effect on September 30, 1995) after the date of the 
            enactment of this Act shall not exceed an amount equal to--

                    (I) the State family assistance grant (as defined 
                in section 402(a)(1)(B) of the Social Security Act (as 
                in effect pursuant to the amendment made by section 
                12101 of this Act)); minus
                    (II) any obligations of the Federal Government to 
                the State under such part (as in effect on September 
                30, 1995) with respect to expenditures by the State 
                during the period that begins on October 1, 1995, and 
                ends on the day before the date of the enactment of 
                this Act.

                (ii) Under temporary family assistance program.--
            Notwithstanding section 402(a)(1) of the Social Security 
            Act (as in effect pursuant to the amendment made by section 
            12101 of this Act), the total obligations of the Federal 
            Government to the State under such section 402(a)(1) for 
            fiscal year 1996 after the termination of the State AFDC 
            program shall not exceed an amount equal to--

                    (I) the amount described in clause (i)(I) of this 
                subparagraph; minus
                    (II) any obligations of the Federal Government to 
                the State under part A of title IV of the Social 
                Security Act (as in effect on September 30, 1995) with 
                respect to expenditures by the State on or after 
                October 1, 1995.

            (D) Submission of state plan for fiscal year 1996 deemed 
        acceptance of grant limitations and formula.--The submission of 
        a plan by a State under section 401(a) of the Social Security 
        Act (as in effect pursuant to the amendment made by section 
        12101 of this Act) for fiscal year 1996 is deemed to constitute 
        the State's acceptance of the grant reductions under 
        subparagraph (C)(ii) of this paragraph (including the formula 
        for computing the amount of the reduction).
            (E) State afdc program defined.--As used in this paragraph, 
        the term ``State AFDC program'' means the State program under 
        parts A and F of title IV of the Social Security Act (as in 
        effect on September 30, 1995).
        (2) Claims, actions, and proceedings.--The amendments made by 
    this subtitle shall not apply with respect to--
            (A) powers, duties, functions, rights, claims, penalties, 
        or obligations applicable to aid, assistance, or services 
        provided before the effective date of this subtitle under the 
        provisions amended; and
            (B) administrative actions and proceedings commenced before 
        such date, or authorized before such date to be commenced, 
        under such provisions.
        (3) Closing out account for those programs terminated or 
    substantially modified by this subtitle.--In closing out accounts, 
    Federal and State officials may use scientifically acceptable 
    statistical sampling techniques. Claims made under programs which 
    are repealed or substantially amended in this subtitle and which 
    involve State expenditures in cases where assistance or services 
    were provided during a prior fiscal year, shall be treated as 
    expenditures during fiscal year 1995 for purposes of reimbursement 
    even if payment was made by a State on or after October 1, 1995. 
    States shall complete the filing of all claims no later than 
    September 30, 1997. Federal department heads shall--
            (A) use the single audit procedure to review and resolve 
        any claims in connection with the close out of programs, and
            (B) reimburse States for any payments made for assistance 
        or services provided during a prior fiscal year from funds for 
        fiscal year 1995, rather than the funds authorized by this 
        subtitle.
        (4) Continuance in office of assistant secretary for family 
    support.--The individual who, on the day before the effective date 
    of this subtitle, is serving as Assistant Secretary for Family 
    Support within the Department of Health and Human Services shall, 
    until a successor is appointed to such position--
            (A) continue to serve in such position; and
            (B) except as otherwise provided by law--
                (i) continue to perform the functions of the Assistant 
            Secretary for Family Support under section 417 of the 
            Social Security Act (as in effect before such effective 
            date); and
                (ii) have the powers and duties of the Assistant 
            Secretary for Family Support under section 415 of the 
            Social Security Act (as in effect pursuant to the amendment 
            made by section 12101 of this Act).
    (d) Sunset.--The amendment made by section 12101 shall be effective 
only during the 6-year period beginning on October 1, 1995.

                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.

               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 B--Supplemental Security Income

SEC. 12200. REFERENCE TO SOCIAL SECURITY ACT.

    Except as otherwise specifically provided, where ever in this 
subtitle an amendment is expressed in terms of an amendment to or 
repeal of a section or other provision, the reference shall be 
considered to be made to that section or other provision of the Social 
Security Act.

                  CHAPTER 1--ELIGIBILITY RESTRICTIONS

SEC. 12201. DENIAL OF SUPPLEMENTAL SECURITY INCOME BENEFITS BY REASON 
              OF DISABILITY TO DRUG ADDICTS AND ALCOHOLICS.

    (a) In General.--Section 1614(a)(3) (42 U.S.C. 1382c(a)(3)) is 
amended by adding at the end the following:
    ``(I) Notwithstanding subparagraph (A), an individual shall not be 
considered to be disabled for purposes of this title if alcoholism or 
drug addiction would (but for this subparagraph) be a contributing 
factor material to the Commissioner's determination that the individual 
is disabled.''.
    (b) Representative Payee Requirements.--
        (1) Section 1631(a)(2)(A)(ii)(II) (42 U.S.C. 
    1383(a)(2)(A)(ii)(II)) is amended to read as follows:
    ``(II) In the case of an individual eligible for benefits under 
this title by reason of disability, the payment of such benefits shall 
be made to a representative payee if the Commissioner of Social 
Security determines that such payment would serve the interest of the 
individual because the individual also has an alcoholism or drug 
addiction condition that prevents the individual from managing such 
benefits.''.
        (2) Section 1631(a)(2)(B)(vii) (42 U.S.C. 1383(a)(2)(B)(vii)) 
    is amended by striking ``eligible for benefits'' and all that 
    follows through ``is disabled'' and inserting ``described in 
    subparagraph (A)(ii)(II)''.
        (3) Section 1631(a)(2)(B)(ix)(II) (42 U.S.C. 
    1383(a)(2)(B)(ix)(II)) is amended by striking all that follows ``15 
    years, or'' and inserting ``described in subparagraph 
    (A)(ii)(II)''.
        (4) Section 1631(a)(2)(D)(i)(II) (42 U.S.C. 
    1383(a)(2)(D)(i)(II)) is amended by striking ``eligible for 
    benefits'' and all that follows through ``is disabled'' and 
    inserting ``described in subparagraph (A)(ii)(II)''.
    (c) Treatment Referrals for Individuals With an Alcoholism or Drug 
Addiction Condition.--Title XVI (42 U.S.C. 1381 et seq.) is amended by 
adding at the end the following new section:

    ``TREATMENT REFERRALS FOR INDIVIDUALS WITH AN ALCOHOLISM OR DRUG 
                          ADDICTION CONDITION

    ``Sec. 1636. In the case of any eligible individual whose benefits 
under this title by reason of disability are paid to a representative 
payee pursuant to section 1631(a)(2)(A)(ii)(II), the Commissioner of 
Social Security shall refer such individual to the appropriate State 
agency administering the State plan for substance abuse treatment 
services approved under subpart II of part B of title XIX of the Public 
Health Service Act (42 U.S.C. 300x-21 et seq.).''.
    (d) Conforming Amendments.--
        (1) Section 1611(e) (42 U.S.C. 1382(e)) is amended by striking 
    paragraph (3).
        (2) Section 1634 (42 U.S.C. 1383c) is amended by striking 
    subsection (e).
        (3) Section 201(c)(1) of the Social Security Independence and 
    Program Improvements Act of 1994 (42 U.S.C. 425 note) is amended--
            (A) by striking ``to--'' and all that follows through ``in 
        cases in which'' and inserting ``to individuals who are 
        entitled to disability insurance benefits or child's, widow's, 
        or widower's insurance benefits based on disability under title 
        II of the Social Security Act, in cases in which'';
            (B) by striking ``either subparagraph (A) or subparagraph 
        (B)'' and inserting ``the preceding sentence''; and
            (C) by striking ``subparagraph (A) or (B)'' and inserting 
        ``the preceding sentence''.
    (e) Supplemental Funding for Alcohol and Substance Abuse Treatment 
Programs.--
        (1) In general.--Out of any money in the Treasury not otherwise 
    appropriated, there are hereby appropriated to supplement State and 
    Tribal programs funded under section 1933 of the Public Health 
    Service Act (42 U.S.C. 300x-33), $50,000,000 for each of the fiscal 
    years 1997 and 1998.
        (2) Additional funds.--Amounts appropriated under paragraph (1) 
    shall be in addition to any funds otherwise appropriated for 
    allotments under section 1933 of the Public Health Service Act (42 
    U.S.C. 300x-33) and shall be allocated pursuant to such section 
    1933.
        (3) Use of Funds.--A State or tribal government receiving an 
    allotment under this subsection shall consider as priorities, for 
    purposes of expending funds allotted under this subsection, 
    activities relating to the treatment of the abuse of alcohol and 
    other drugs.
    (f) Effective Dates.--
        (1) In general.--Except as provided in paragraphs (2) and (3), 
    the amendments made by this section shall apply to applicants for 
    benefits for months beginning on or after the date of the enactment 
    of this Act, without regard to whether regulations have been issued 
    to implement such amendments.
        (2) Application to current recipients.--
            (A) Application and notice.--Notwithstanding any other 
        provision of law, in the case of an individual who is receiving 
        supplemental security income benefits under title XVI of the 
        Social Security Act as of the date of the enactment of this Act 
        and whose eligibility for such benefits would terminate by 
        reason of the amendments made by this section, such amendments 
        shall apply with respect to the benefits of such individual, 
        including such individual's treatment (if any) provided 
        pursuant to such title as in effect on the day before the date 
        of such enactment, for months beginning on or after January 1, 
        1997, and the Commissioner of Social Security shall so notify 
        the individual not later than 90 days after the date of the 
        enactment of this Act.
            (B) Reapplication.--
                (i) In general.--Not later than 120 days after the date 
            of the enactment of this Act, each individual notified 
            pursuant to subparagraph (A) who desires to reapply for 
            benefits under title XVI of the Social Security Act, as 
            amended by this title, may reapply to the Commissioner of 
            Social Security.
                (ii) Determination of eligibility.--Not later than 
            January 1, 1997, the Commissioner of Social Security shall 
            complete the eligibility redetermination of each individual 
            who reapplies for benefits under clause (i) pursuant to the 
            procedures of title XVI of such Act.
        (3) Additional application of payee representative and 
    treatment referral requirements.--The amendments made by 
    subsections (b) and (c) shall also apply--
            (A) in the case of any individual who is receiving 
        supplemental security income benefits under title XVI of the 
        Social Security Act as of the date of the enactment of this 
        Act, on and after the date of such individual's first 
        continuing disability review occurring after such date of 
        enactment, and
            (B) in the case of any individual who receives supplemental 
        security income benefits under title XVI of the Social Security 
        Act and has attained age 65, in such manner as determined 
        appropriate by the Commissioner of Social Security.

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.

    (a) In General.--Section 1614(a) (42 U.S.C. 1382c(a)) is amended by 
adding at the end the following new paragraph:
    ``(5) An individual shall not be considered an eligible individual 
for the purposes of this title during the 10-year period that begins on 
the date the individual is convicted in Federal or State court of 
having made a fraudulent statement or representation with respect to 
the place of residence of the individual in order to receive assistance 
simultaneously from 2 or more States under programs that are funded 
under title IV, title XXI, or the Food Stamp Act of 1977, or benefits 
in 2 or more States under the supplemental security income program 
under this title.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 12203. DENIAL OF SSI BENEFITS FOR FUGITIVE FELONS AND PROBATION 
              AND PAROLE VIOLATORS.

    (a) In General.--Section 1611(e) (42 U.S.C. 1382(e)), as amended by 
section 12201(d)(1), is amended by inserting after paragraph (2) the 
following new paragraph:
    ``(3) A person shall not be considered an eligible individual or 
eligible spouse for purposes of this title with respect to any month if 
during such month the person is--
        ``(A) fleeing to avoid prosecution, or custody or confinement 
    after conviction, under the laws of the place from which the person 
    flees, for a crime, or an attempt to commit a crime, which is a 
    felony under the laws of the place from which the person flees, or 
    which, in the case of the State of New Jersey, is a high 
    misdemeanor under the laws of such State; or
        ``(B) violating a condition of probation or parole imposed 
    under Federal or State law.''.
    (b) Exchange of Information With Law Enforcement Agencies.--Section 
1611(e) (42 U.S.C. 1382(e)), as amended by section 12201(d)(1) and 
subsection (a), is amended by inserting after paragraph (3) the 
following new paragraph:
    ``(4) Notwithstanding any other provision of law, the Commissioner 
shall furnish any Federal, State, or local law enforcement officer, 
upon the request of the officer, with the current address, Social 
Security number, and photograph (if applicable) of any recipient of 
benefits under this title, if the officer furnishes the Commissioner 
with the name of the recipient and notifies the Commissioner that--
        ``(A) the recipient--
            ``(i) is described in subparagraph (A) or (B) of paragraph 
        (3); or
            ``(ii) has information that is necessary for the officer to 
        conduct the officer's official duties; and
        ``(B) the location or apprehension of the recipient is within 
    the officer's official duties.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

               CHAPTER 2--BENEFITS FOR DISABLED CHILDREN

SEC. 12211. DEFINITION AND ELIGIBILITY RULES.

    (a) Definition of Childhood Disability.--Section 1614(a)(3) (42 
U.S.C. 1382c(a)(3)), as amended by section 7251(a), is amended--
        (1) in subparagraph (A), by striking ``An individual'' and 
    inserting ``Except as provided in subparagraph (C), an 
    individual'';
        (2) in subparagraph (A), by striking ``(or, in the case of an 
    individual under the age of 18, if he suffers from any medically 
    determinable physical or mental impairment of comparable 
    severity)'';
        (3) by redesignating subparagraphs (C) through (I) as 
    subparagraphs (D) through (J), respectively;
        (4) by inserting after subparagraph (B) the following new 
    subparagraph:
    ``(C) An individual under the age of 18 shall be considered 
disabled for the purposes of this title if that individual has a 
medically determinable physical or mental impairment, which results in 
marked and severe functional limitations, and which can be expected to 
result in death or which has lasted or can be expected to last for a 
continuous period of not less than 12 months. Notwithstanding the 
preceding sentence, no individual under the age of 18 who engages in 
substantial gainful activity (determined in accordance with regulations 
prescribed pursuant to subparagraph (E)) may be considered to be 
disabled.''; and
        (5) in subparagraph (F), as redesignated by paragraph (3), by 
    striking ``(D)'' and inserting ``(E)''.
    (b) Changes to Childhood SSI Regulations.--
        (1) Modification to medical criteria for evaluation of mental 
    and emotional disorders.--The Commissioner of Social Security shall 
    modify sections 112.00C.2. and 112.02B.2.c.(2) of appendix 1 to 
    subpart P of part 404 of title 20, Code of Federal Regulations, to 
    eliminate references to maladaptive behavior in the domain of 
    personal/behavorial function.
        (2) Discontinuance of individualized functional assessment.--
    The Commissioner of Social Security shall discontinue the 
    individualized functional assessment for children set forth in 
    sections 416.924d and 416.924e of title 20, Code of Federal 
    Regulations.
    (c) Medical Improvement Review Standard as it Applies to 
Individuals Under the Age of 18.--Section 1614(a)(4) (42 U.S.C. 
1382(a)(4)) is amended--
        (1) by redesignating subclauses (I) and (II) of clauses (i) and 
    (ii) of subparagraph (B) as subclauses (aa) and (bb), respectively;
        (2) by redesignating clauses (i) and (ii) of subparagraphs (A) 
    and (B) as subclauses (I) and (II), respectively;
        (3) by redesignating subparagraphs (A) through (C) as clauses 
    (i) through (iii), respectively, and by moving their left hand 
    margin 2 ems to the right;
        (4) by inserting before clause (i) (as redesignated by 
    paragraph (3)) the following:
            ``(A) in the case of an individual who is age 18 or older--
        '';
        (5) at the end of subparagraph (A)(iii) (as redesignated by 
    paragraphs (3) and (4)), by striking the period and inserting ``; 
    or'';
        (6) by inserting after and below subparagraph (A)(iii) (as so 
    redesignated) the following:
            ``(B) in the case of an individual who is under the age of 
        18--
                ``(i) substantial evidence which demonstrates that 
            there has been medical improvement in the individual's 
            impairment or combination of impairments, and that such 
            impairment or combination of impairments no longer results 
            in marked and severe functional limitations; or
                ``(ii) substantial evidence which demonstrates that, as 
            determined on the basis of new or improved diagnostic 
            techniques or evaluations, the individual's impairment or 
            combination of impairments, is not as disabling as it was 
            considered to be at the time of the most recent prior 
            decision that he or she was under a disability or continued 
            to be under a disability, and such impairment or 
            combination of impairments does not result in marked or 
            severe functional limitations; or'';
        (7) by redesignating subparagraph (D) as subparagraph (C) and 
    by inserting in such subparagraph ``in the case of any 
    individual,'' before ``substantial evidence''; and
        (8) in the first sentence following subparagraph (C) (as 
    redesignated by paragraph (7)), by--
            (A) inserting ``(i)'' before ``to restore''; and
            (B) inserting ``, or (ii) in the case of an individual 
        under the age of 18, to eliminate or improve the individual's 
        impairment or combination of impairments so that it no longer 
        results in marked and severe functional limitations'' 
        immediately before the period.
    (d) Amount of Benefits.--Section 1611(b) (42 U.S.C. 1382(b)) is 
amended by adding at the end the following new paragraph:
    ``(3)(i) Except with respect to individuals described in clause 
(ii), the benefit under this title for an individual described in 
section 1614(a)(3)(C) shall be payable at a rate equal to 75 percent of 
the rate otherwise determined under this subsection.
    ``(ii) An individual is described in this clause if such individual 
is described in section 1614(a)(3)(C), and--
        ``(I) in the case of such an individual under the age of 6, 
    such individual has a medical impairment that severely limits the 
    individual's ability to function in a manner appropriate to 
    individuals of the same age and who without special personal 
    assistance would require specialized care outside the home; or
        ``(II) in the case of such an individual who has attained the 
    age of 6, such individual requires personal care assistance with--
            ``(aa) at least 2 activities of daily living;
            ``(bb) continual 24-hour supervision or monitoring to avoid 
        causing injury or harm to self or others; or
            ``(cc) the administration of medical treatment; and
    who without such assistance would require full-time or part-time 
    specialized care outside the home.
    ``(iii)(I) For purposes of clause (ii), the term `specialized care' 
means medical care beyond routine administration of medication.
    ``(II) For purposes of clause (ii)(II)--
        ``(aa) the term `personal care assistance' means at least 
    hands-on and stand-by assistance, supervision, or cueing; and
        ``(bb) the term `activities of daily living' means eating, 
    toileting, dressing, bathing, and mobility.''.
    (e) Effective Dates, Etc.--
        (1) Effective dates.--
            (A) In general.--The provisions of, and amendments made by, 
        subsections (a), (b), and (c) shall apply to applicants for 
        benefits under title XVI of the Social Security Act for months 
        beginning on or after the date of the enactment of this Act, 
        without regard to whether regulations have been issued to 
        implement such provisions and amendments.
            (B) Eligibility rules.--The amendments made by subsection 
        (d) shall apply to--
                (i) applicants for benefits under title XVI of the 
            Social Security Act for months beginning on or after 
            January 1, 1997; and
                (ii) with respect to continuing disability reviews of 
            eligibility for benefits under such title occurring on or 
            after such date.
        (2) Application to current recipients.--
            (A) Eligibility determinations.--Not later than 1 year 
        after the date of the enactment of this Act, the Commissioner 
        of Social Security shall redetermine the eligibility of any 
        individual under age 18 who is receiving supplemental security 
        income benefits based on a disability under title XVI of the 
        Social Security Act as of the date of the enactment of this Act 
        and whose eligibility for such benefits may terminate by reason 
        of the provisions of, and amendments made by, subsections (a), 
        (b), and (c). With respect to any redetermination under this 
        subparagraph--
                (i) section 1614(a)(4) of the Social Security Act (42 
            U.S.C. 1382c(a)(4)) shall not apply;
                (ii) the Commissioner of Social Security shall apply 
            the eligibility criteria for new applicants for benefits 
            under title XVI of such Act;
                (iii) the Commissioner shall give such redetermination 
            priority over all continuing eligibility reviews and other 
            reviews under such title; and
                (iv) such redetermination shall be counted as a review 
            or redetermination otherwise required to be made under 
            section 208 of the Social Security Independence and Program 
            Improvements Act of 1994 or any other provision of title 
            XVI of the Social Security Act.
            (B) Grandfather provision.--The provisions of, and 
        amendments made by, subsections (a), (b), and (c), and the 
        redetermination under subparagraph (A), shall only apply with 
        respect to the benefits of an individual described in 
        subparagraph (A) for months beginning on or after January 1, 
        1997.
            (C) Notice.--Not later than 90 days after the date of the 
        enactment of this Act, the Commissioner of Social Security 
        shall notify an individual described in subparagraph (A) of the 
        provisions of this paragraph.
        (3) Regulations.--The Commissioner of Social Security shall 
    submit for review to the committees of jurisdiction in the Congress 
    any final regulation pertaining to the eligibility of individuals 
    under age 18 for benefits under title XVI of the Social Security 
    Act at least 45 days before the effective date of such regulation. 
    The submission under this paragraph shall include supporting 
    documentation providing a cost analysis, workload impact, and 
    projections as to how the regulation will effect the future number 
    of recipients under such title.
        (4) Appropriations.--
            (A) In general.--Out of any money in the Treasury not 
        otherwise appropriated, there are authorized to be appropriated 
        and are hereby appropriated, to remain available without fiscal 
        year limitation, $200,000,000 for fiscal year 1996, $75,000,000 
        for fiscal year 1997, and $25,000,000 for fiscal year 1998, for 
        the Commissioner of Social Security to utilize only for 
        continuing disability reviews and redeterminations under title 
        XVI of the Social Security Act, with reviews and 
        redeterminations for individuals affected by the provisions of 
        subsection (b) given highest priority.
            (B) Additional funds.--Amounts appropriated under 
        subparagraph (A) shall be in addition to any funds otherwise 
        appropriated for continuing disability reviews and 
        redeterminations under title XVI of the Social Security Act.

SEC. 12212. ELIGIBILITY REDETERMINATIONS AND CONTINUING DISABILITY 
              REVIEWS.

    (a) Continuing Disability Reviews Relating to Certain Children.--
Section 1614(a)(3)(H) (42 U.S.C. 1382c(a)(3)(H)), as redesignated by 
section 12211(a)(3), is amended--
        (1) by inserting ``(i)'' after ``(H)''; and
        (2) by adding at the end the following new clause:
    ``(ii)(I) Not less frequently than once every 3 years, the 
Commissioner shall review in accordance with paragraph (4) the 
continued eligibility for benefits under this title of each individual 
who has not attained 18 years of age and is eligible for such benefits 
by reason of an impairment (or combination of impairments) which may 
improve (or, at the option of the Commissioner, which is unlikely to 
improve).
    ``(II) A representative payee of a recipient whose case is reviewed 
under this clause shall present, at the time of review, evidence 
demonstrating that the recipient is, and has been, receiving treatment, 
to the extent considered medically necessary and available, of the 
condition which was the basis for providing benefits under this title.
    ``(III) If the representative payee refuses to comply without good 
cause with the requirements of subclause (II), the Commissioner of 
Social Security shall, if the Commissioner determines it is in the best 
interest of the individual, promptly terminate payment of benefits to 
the representative payee, and provide for payment of benefits to an 
alternative representative payee of the individual or, if the interest 
of the individual under this title would be served thereby, to the 
individual.
    ``(IV) Subclause (II) shall not apply to the representative payee 
of any individual with respect to whom the Commissioner determines such 
application would be inappropriate or unnecessary. In making such 
determination, the Commissioner shall take into consideration the 
nature of the individual's impairment (or combination of impairments). 
Section 1631(c) shall not apply to a finding by the Commissioner that 
the requirements of subclause (II) should not apply to an individual's 
representative payee.''.
    (b) Disability Eligibility Redeterminations Required for SSI 
Recipients Who Attain 18 Years of Age.--
        (1) In general.--Section 1614(a)(3)(H) (42 U.S.C. 
    1382c(a)(3)(H)), as amended by subsection (a), is amended by adding 
    at the end the following new clause:
    ``(iii) If an individual is eligible for benefits under this title 
by reason of disability for the month preceding the month in which the 
individual attains the age of 18 years, the Commissioner shall 
redetermine such eligibility--
        ``(I) during the 1-year period beginning on the individual's 
    18th birthday; and
        ``(II) by applying the criteria used in determining the initial 
    eligibility for applicants who are age 18 or older.
With respect to a redetermination under this clause, paragraph (4) 
shall not apply and such redetermination shall be considered a 
substitute for a review or redetermination otherwise required under any 
other provision of this subparagraph during that 1-year period.''.
        (2) Conforming repeal.--Section 207 of the Social Security 
    Independence and Program Improvements Act of 1994 (42 U.S.C. 1382 
    note; 108 Stat. 1516) is hereby repealed.
    (c) Continuing Disability Review Required for Low Birth Weight 
Babies.--Section 1614(a)(3)(H) (42 U.S.C. 1382c(a)(3)(H)), as amended 
by subsections (a) and (b), is amended by adding at the end the 
following new clause:
    ``(iv)(I) Not later than 12 months after the birth of an 
individual, the Commissioner shall review in accordance with paragraph 
(4) the continuing eligibility for benefits under this title by reason 
of disability of such individual whose low birth weight is a 
contributing factor material to the Commissioner's determination that 
the individual is disabled.
    ``(II) A review under subclause (I) shall be considered a 
substitute for a review otherwise required under any other provision of 
this subparagraph during that 12-month period.
    ``(III) A representative payee of a recipient whose case is 
reviewed under this clause shall present, at the time of review, 
evidence demonstrating that the recipient is, and has been, receiving 
treatment, to the extent considered medically necessary and available, 
of the condition which was the basis for providing benefits under this 
title.
    ``(IV) If the representative payee refuses to comply without good 
cause with the requirements of subclause (III), the Commissioner of 
Social Security shall, if the Commissioner determines it is in the best 
interest of the individual, promptly terminate payment of benefits to 
the representative payee, and provide for payment of benefits to an 
alternative representative payee of the individual or, if the interest 
of the individual under this title would be served thereby, to the 
individual.
    ``(V) Subclause (III) shall not apply to the representative payee 
of any individual with respect to whom the Commissioner determines such 
application would be inappropriate or unnecessary. In making such 
determination, the Commissioner shall take into consideration the 
nature of the individual's impairment (or combination of impairments). 
Section 1631(c) shall not apply to a finding by the Commissioner that 
the requirements of subclause (III) should not apply to an individual's 
representative payee.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to benefits for months beginning on or after the date of the 
enactment of this Act, without regard to whether regulations have been 
issued to implement such amendments.

SEC. 12213. ADDITIONAL ACCOUNTABILITY REQUIREMENTS.

    (a) Disposal of Resources for Less Than Fair Market Value.--
        (1) In general.--Section 1613(c) (42 U.S.C. 1382b(c)) is 
    amended to read as follows:
    ``(c) Disposal of Resources for Less Than Fair Market Value.--
(1)(A)(i) If an individual who has not attained 18 years of age (or any 
person acting on such individual's behalf) disposes of resources of the 
individual for less than fair market value on or after the look-back 
date specified in clause (ii)(I), the individual is ineligible for 
benefits under this title for months during the period beginning on the 
date specified in clause (iii) and equal to the number of months 
specified in clause (iv).
    ``(ii)(I) The look-back date specified in this subclause is a date 
that is 36 months before the date specified in subclause (II).
    ``(II) The date specified in this subclause is the date on which 
the individual applies for benefits under this title or, if later, the 
date on which the disposal of the individual's resources for less than 
fair market value occurs.
    ``(iii) The date specified in this clause is the first day of the 
first month that follows the month in which the individual's resources 
were disposed of for less than fair market value and that does not 
occur in any other period of ineligibility under this paragraph.
    ``(iv) The number of months of ineligibility under this clause for 
an individual shall be equal to--
        ``(I) the total, cumulative uncompensated value of all the 
    individual's resources so disposed of on or after the look-back 
    date specified in clause (ii)(I), divided by
        ``(II) the amount of the maximum monthly benefit payable under 
    section 1611(b) to an eligible individual for the month in which 
    the date specified in clause (ii)(II) occurs.
    ``(B) An individual shall not be ineligible for benefits under this 
title by reason of subparagraph (A) if the Commissioner determines 
that--
        ``(i) the individual intended to dispose of the resources at 
    fair market value;
        ``(ii) the resources were transferred exclusively for a purpose 
    other than to qualify for benefits under this title;
        ``(iii) all resources transferred for less than fair market 
    value have been returned to the individual; or
        ``(iv) the denial of eligibility would work an undue hardship 
    on the individual (as determined on the basis of criteria 
    established by the Commissioner in regulations).
    ``(C) For purposes of this paragraph, in the case of a resource 
held by an individual in common with another person or persons in a 
joint tenancy, tenancy in common, or similar arrangement, the resource 
(or the affected portion of such resource) shall be considered to be 
disposed of by such individual when any action is taken, either by such 
individual or by any other person, that reduces or eliminates such 
individual's ownership or control of such resource.
    ``(D)(i) Notwithstanding subparagraph (A), this subsection shall 
not apply to a transfer of a resource to a trust if the portion of the 
trust attributable to such resource is considered a resource available 
to the individual pursuant to subsection (e)(3) (or would be so 
considered, but for the application of subsection (e)(4)).
    ``(ii) In the case of a trust established by an individual (within 
the meaning of paragraph (2)(A) of subsection (e)), if from such 
portion of the trust (if any) that is considered a resource available 
to the individual pursuant to paragraph (3) of such subsection (or 
would be so considered but for the application of paragraph (2) of such 
subsection) or the residue of such portion upon the termination of the 
trust--
        ``(I) there is made a payment other than to or for the benefit 
    of the individual, or
        ``(II) no payment could under any circumstance be made to the 
    individual,
then the payment described in subclause (I) or the foreclosure of 
payment described in subclause (II) shall be considered a disposal of 
resources by the individual subject to this subsection, as of the date 
of such payment or foreclosure, respectively.
    ``(2)(A) At the time an individual (and the individual's eligible 
spouse, if any) applies for benefits under this title, and at the time 
the eligibility of an individual (and such spouse, if any) for such 
benefits is redetermined, the Commissioner of Social Security shall--
        ``(i) inform such individual of the provisions of paragraph (1) 
    providing for a period of ineligibility for benefits under this 
    title for individuals who make certain dispositions of resources 
    for less than fair market value, and inform such individual that 
    information obtained pursuant to clause (ii) will be made available 
    to the State agency administering a State plan under title XXI (as 
    provided in subparagraph (B)); and
        ``(ii) obtain from such individual information which may be 
    used in determining whether or not a period of ineligibility for 
    such benefits would be required by reason of paragraph (1).
    ``(B) The Commissioner of Social Security shall make the 
information obtained under subparagraph (A)(ii) available, on request, 
to any State agency administering a State plan approved under title 
XXI.
    ``(3) For purposes of this subsection--
        ``(A) the term `trust' includes any legal instrument or device 
    that is similar to a trust; and
        ``(B) the term `benefits under this title' includes 
    supplementary payments pursuant to an agreement for Federal 
    administration under section 1616(a), and payments pursuant to an 
    agreement entered into under section 212(b) of Public Law 93-66.''.
        (2) Effective date.--The amendment made by this subsection 
    shall be effective with respect to transfers of resources for less 
    than fair market value that occur at least 90 days after the date 
    of the enactment of this Act.
    (b) Treatment of Assets Held in Trust.--
        (1) Treatment as resource.--Section 1613 (42 U.S.C. 1382) is 
    amended by adding at the end the following new subsection:

                                 ``trusts

    ``(e)(1) In determining the resources of an individual who has not 
attained 18 years of age, the provisions of paragraph (3) shall apply 
to a trust established by such individual.
    ``(2)(A) For purposes of this subsection, an individual shall be 
considered to have established a trust if any assets of the individual 
were transferred to the trust.
    ``(B) In the case of an irrevocable trust to which the assets of an 
individual and the assets of any other person or persons were 
transferred, the provisions of this subsection shall apply to the 
portion of the trust attributable to the assets of the individual.
    ``(C) This subsection shall apply without regard to--
        ``(i) the purposes for which the trust is established;
        ``(ii) whether the trustees have or exercise any discretion 
    under the trust;
        ``(iii) any restrictions on when or whether distributions may 
    be made from the trust; or
        ``(iv) any restrictions on the use of distributions from the 
    trust.
    ``(3)(A) In the case of a revocable trust, the corpus of the trust 
shall be considered a resource available to the individual.
    ``(B) In the case of an irrevocable trust, if there are any 
circumstances under which payment from the trust could be made to or 
for the benefit of the individual, the portion of the corpus from which 
payment to or for the benefit of the individual could be made shall be 
considered a resource available to the individual.
    ``(4) The Commissioner may waive the application of this subsection 
with respect to any individual if the Commissioner determines, on the 
basis of criteria prescribed in regulations, that such application 
would work an undue hardship on such individual.
    ``(5) For purposes of this subsection--
        ``(A) the term `trust' includes any legal instrument or device 
    that is similar to a trust;
        ``(B) the term `corpus' means all property and other interests 
    held by the trust, including accumulated earnings and any other 
    addition to such trust after its establishment (except that such 
    term does not include any such earnings or addition in the month in 
    which such earnings or addition is credited or otherwise 
    transferred to the trust);
        ``(C) the term `asset' includes any income or resource of the 
    individual, including--
            ``(i) any income otherwise excluded by section 1612(b);
            ``(ii) any resource otherwise excluded by this section; and
            ``(iii) any other payment or property that the individual 
        is entitled to but does not receive or have access to because 
        of action by--
                ``(I) such individual;
                ``(II) a person or entity (including a court) with 
            legal authority to act in place of, or on behalf of, such 
            individual; or
                ``(III) a person or entity (including a court) acting 
            at the direction of, or upon the request of, such 
            individual; and
        ``(D) the term `benefits under this title' includes 
    supplementary payments pursuant to an agreement for Federal 
    administration under section 1616(a), and payments pursuant to an 
    agreement entered into under section 212(b) of Public Law 93-66.''.
        (2) Treatment as income.--Section 1612(a)(2) (42 U.S.C. 
    1382a(a)(2)) is amended--
            (A) by striking ``and'' at the end of subparagraph (E);
            (B) by striking the period at the end of subparagraph (F) 
        and inserting ``; and''; and
            (C) by adding at the end the following new subparagraph:
            ``(G) any earnings of, and additions to, the corpus of a 
        trust (as defined in section 1613(f)) established by an 
        individual (within the meaning of paragraph (2)(A) of section 
        1613(e)) and of which such individual is a beneficiary (other 
        than a trust to which paragraph (4) of such section applies); 
        except that in the case of an irrevocable trust, there shall 
        exist circumstances under which payment from such earnings or 
        additions could be made to, or for the benefit of, such 
        individual.''.
        (3) Effective date.--The amendments made by this subsection 
    shall take effect on January 1, 1996, and shall apply to trusts 
    established on or after such date.
    (c) Requirement To Establish Account.--
        (1) In general.--Section 1631(a)(2) (42 U.S.C. 1383(a)(2)) is 
    amended--
            (A) by redesignating subparagraphs (F) and (G) as 
        subparagraphs (G) and (H), respectively; and
            (B) by inserting after subparagraph (E) the following new 
        subparagraph:
    ``(F)(i)(I) Each representative payee of an eligible individual 
under the age of 18 who is eligible for the payment of benefits 
described in subclause (II) shall establish on behalf of such 
individual an account in a financial institution into which such 
benefits shall be paid, and shall thereafter maintain such account for 
use in accordance with clause (ii).
    ``(II) Benefits described in this subclause are past-due monthly 
benefits under this title (which, for purposes of this subclause, 
include State supplementary payments made by the Commissioner pursuant 
to an agreement under section 1616 or section 212(b) of Public Law 93-
66) in an amount (after any withholding by the Commissioner for 
reimbursement to a State for interim assistance under subsection (g)) 
that exceeds the product of--
        ``(aa) 6, and
        ``(bb) the maximum monthly benefit payable under this title to 
    an eligible individual.
    ``(ii)(I) A representative payee may use funds in the account 
established under clause (i) to pay for allowable expenses described in 
subclause (II).
    ``(II) An allowable expense described in this subclause is an 
expense for--
        ``(aa) education or job skills training;
        ``(bb) personal needs assistance;
        ``(cc) special equipment;
        ``(dd) housing modification;
        ``(ee) medical treatment;
        ``(ff) therapy or rehabilitation; or
        ``(gg) any other item or service that the Commissioner 
    determines to be appropriate;
provided that such expense benefits such individual and, in the case of 
an expense described in division (cc), (dd), (ff), or (gg), is related 
to the impairment (or combination of impairments) of such individual.
    ``(III) The use of funds from an account established under clause 
(i) in any manner not authorized by this clause--
        ``(aa) by a representative payee shall constitute misuse of 
    benefits for all purposes of this paragraph, and any representative 
    payee who knowingly misuses benefits from such an account shall be 
    liable to the Commissioner in an amount equal to the total amount 
    of such misused benefits; and
        ``(bb) by an eligible individual who is his or her own 
    representative payee shall be considered an overpayment subject to 
    recovery under subsection (b).
    ``(IV) This clause shall continue to apply to funds in the account 
after the child has reached age 18, regardless of whether benefits are 
paid directly to the beneficiary or through a representative payee.
    ``(iii) The representative payee may deposit into the account 
established pursuant to clause (i)--
        ``(I) past-due benefits payable to the eligible individual in 
    an amount less than that specified in clause (i)(II), and
        ``(II) any other funds representing an underpayment under this 
    title to such individual, provided that the amount of such 
    underpayment is equal to or exceeds the maximum monthly benefit 
    payable under this title to an eligible individual.
    ``(iv) The Commissioner of Social Security shall establish a system 
for accountability monitoring whereby such representative payee shall 
report, at such time and in such manner as the Commissioner shall 
require, on activity respecting funds in the account established 
pursuant to clause (i).''.
        (2) Exclusion from resources.--Section 1613(a) (42 U.S.C. 
    1382b(a)) is amended--
            (A) in paragraph (9), by striking ``; and'' and inserting a 
        semicolon;
            (B) in the first paragraph (10), by striking the period and 
        inserting a semicolon;
            (C) by redesignating the second paragraph (10) as paragraph 
        (11), and by striking the period and inserting ``; and''; and
            (D) by adding at the end the following:
        ``(12) the assets and accrued interest or other earnings of any 
    account established and maintained in accordance with section 
    1631(a)(2)(F).''.
        (3) Exclusion from income.--Section 1612(b) (42 U.S.C. 
    1382a(b)) is amended--
            (A) by striking ``and'' at the end of paragraph (19);
            (B) by striking the period at the end of paragraph (20) and 
        inserting ``; and''; and
            (C) by adding at the end the following new paragraph:
        ``(21) the interest or other earnings on any account 
    established and maintained in accordance with section 
    1631(a)(2)(F).''.
        (4) Effective date.--The amendments made by this subsection 
    shall apply to payments made after the date of the enactment of 
    this Act.

SEC. 12214. REDUCTION IN CASH BENEFITS PAYABLE TO INSTITUTIONALIZED 
              INDIVIDUALS WHOSE MEDICAL COSTS ARE COVERED BY PRIVATE 
              INSURANCE.

    (a) In General.--Section 1611(e)(1)(B) (42 U.S.C. 1382(e)(1)(B)) is 
amended--
        (1) by striking ``title XIX, or'' and inserting ``title XIX,''; 
    and
        (2) by inserting ``or, in the case of an eligible individual 
    under the age of 18 receiving payments (with respect to such 
    individual) under any health insurance policy issued by a private 
    provider of such insurance'' after ``section 1614(f)(2)(B),''.
    (b) Effective Date.--The amendment made by this section shall apply 
to benefits for months beginning 90 or more days after the date of the 
enactment of this Act, without regard to whether regulations have been 
issued to implement such amendments.

SEC. 12215. REGULATIONS.

    Within 3 months after the date of the enactment of this Act, the 
Commissioner of Social Security shall prescribe such regulations as may 
be necessary to implement the amendments made by sections 12211, 12212, 
12213, and 12214.

                       Subtitle C--Child Support

SEC. 12300. REFERENCE TO SOCIAL SECURITY ACT.

    Except as otherwise specifically provided, whereever in this 
subtitle an amendment is expressed in terms of an amendment to or 
repeal of a section or other provision, the reference shall be 
considered to be made to that section or other provision of the Social 
Security Act.

     CHAPTER 1--ELIGIBILITY FOR SERVICES; DISTRIBUTION OF PAYMENTS

SEC. 12301. STATE OBLIGATION TO PROVIDE CHILD SUPPORT ENFORCEMENT 
              SERVICES.

    (a) State Plan Requirements.--Section 454 (42 U.S.C. 654) is 
amended--
        (1) by striking paragraph (4) and inserting the following new 
    paragraph:
        ``(4) provide that the State will--
            ``(A) provide services relating to the establishment of 
        paternity or the establishment, modification, or enforcement of 
        child support obligations, as appropriate, under the plan with 
        respect to--
                ``(i) each child for whom (I) assistance is provided 
            under the State program funded under part A of this title, 
            (II) benefits or services for foster care maintenance and 
            adoption assistance are provided under the State program 
            funded under part B of this title, or (III) medical 
            assistance is provided under the State plan approved under 
            title XXI, unless the State agency administering the plan 
            determines (in accordance with paragraph (29)) that it is 
            against the best interests of the child to do so; and
                ``(ii) any other child, if an individual applies for 
            such services with respect to the child; and
            ``(B) enforce any support obligation established with 
        respect to--
                ``(i) a child with respect to whom the State provides 
            services under the plan; or
                ``(ii) the custodial parent of such a child.''; and
        (2) in paragraph (6)--
            (A) by striking ``provide that'' and inserting ``provide 
        that--'';
            (B) by striking subparagraph (A) and inserting the 
        following new subparagraph:
            ``(A) services under the plan shall be made available to 
        residents of other States on the same terms as to residents of 
        the State submitting the plan;'';
            (C) in subparagraph (B), by inserting ``on individuals not 
        receiving assistance under any State program funded under part 
        A'' after ``such services shall be imposed'';
            (D) in each of subparagraphs (B), (C), (D), and (E)--
                (i) by indenting the subparagraph in the same manner 
            as, and aligning the left margin of the subparagraph with 
            the left margin of, the matter inserted by subparagraph (B) 
            of this paragraph; and
                (ii) by striking the final comma and inserting a 
            semicolon; and
            (E) in subparagraph (E), by indenting each of clauses (i) 
        and (ii) 2 additional ems.
    (b) Continuation of Services for Families Ceasing To Receive 
Assistance Under the State Program Funded Under Part A.--Section 454 
(42 U.S.C. 654) is amended--
        (1) by striking ``and'' at the end of paragraph (23);
        (2) by striking the period at the end of paragraph (24) and 
    inserting ``; and''; and
        (3) by adding after paragraph (24) the following new paragraph:
        ``(25) provide that if a family with respect to which services 
    are provided under the plan ceases to receive assistance under the 
    State program funded under part A, the State shall provide 
    appropriate notice to the family and continue to provide such 
    services, subject to the same conditions and on the same basis as 
    in the case of other individuals to whom services are furnished 
    under the plan, except that an application or other request to 
    continue services shall not be required of such a family and 
    paragraph (6)(B) shall not apply to the family.''.
    (c) Conforming Amendments.--
        (1) Section 452(b) (42 U.S.C. 652(b)) is amended by striking 
    ``454(6)'' and inserting ``454(4)''.
        (2) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is amended by 
    striking ``454(6)'' each place it appears and inserting 
    ``454(4)(A)(ii)''.
        (3) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is amended by 
    striking ``in the case of overdue support which a State has agreed 
    to collect under section 454(6)'' and inserting ``in any other 
    case''.
        (4) Section 466(e) (42 U.S.C. 666(e)) is amended by striking 
    ``paragraph (4) or (6) of section 454'' and inserting ``section 
    454(4)''.

SEC. 12302. DISTRIBUTION OF CHILD SUPPORT COLLECTIONS.

    (a) In General.--Section 457 (42 U.S.C. 657) is amended to read as 
follows:

``SEC. 457. DISTRIBUTION OF COLLECTED SUPPORT.

    ``(a) In General.--An amount collected on behalf of a family as 
support by a State pursuant to a plan approved under this part shall be 
distributed as follows:
        ``(1) Families receiving assistance.--In the case of a family 
    receiving assistance from the State, the State shall--
            ``(A) retain, or distribute to the family, the State share 
        of the amount so collected; and
            ``(B) pay to the Federal Government the Federal share of 
        the amount so collected.
        ``(2) Families that formerly received assistance.--In the case 
    of a family that formerly received assistance from the State:
            ``(A) Current support payments.--To the extent that the 
        amount so collected does not exceed the amount required to be 
        paid to the family for the month in which collected, the State 
        shall distribute the amount so collected to the family.
            ``(B) Payments of arrearages.--To the extent that the 
        amount so collected exceeds the amount required to be paid to 
        the family for the month in which collected, the State shall 
        distribute the amount so collected as follows:
                ``(i) Distribution of arrearages that accrued after the 
            family ceased to receive assistance.--

                    ``(I) Pre-October 1997.--The provisions of this 
                section (other than subsection (b)(1)) as in effect on 
                the day before the date of the enactment of section 
                12302 of the Personal Responsibility and Work 
                Opportunity Act of 1995 shall apply with respect to the 
                distribution of support arrearages that--

                        ``(aa) accrued after the family ceased to 
                    receive assistance, and
                        ``(bb) are collected before October 1, 1997.

                    ``(II) Post-September 1997.--With respect to 
                amounts collected on or after October 1, 1997--

                        ``(aa) In general.--The State shall distribute 
                    any amount collected (other than amounts described 
                    in clause (iv)) to the family to the extent 
                    necessary to satisfy any support arrearages with 
                    respect to the family that accrued after the family 
                    ceased to receive assistance from the State.
                        ``(bb) Reimbursement of governments for 
                    assistance provided to the family.--To the extent 
                    that division (aa) does not apply to the amount, 
                    the State shall retain the State share of the 
                    amount so collected, and pay to the Federal 
                    Government the Federal share (as defined in 
                    subsection (c)(2)(A)) of the amount so collected, 
                    to the extent necessary to reimburse amounts paid 
                    to the family as assistance by the State.
                        ``(cc) Distribution of the remainder to the 
                    family.--To the extent that neither division (aa) 
                    nor division (bb) applies to the amount so 
                    collected, the State shall distribute the amount to 
                    the family.
                ``(ii) Distribution of arrearages that accrued before 
            the family received assistance.--

                    ``(I) Pre-October 2000.--The provisions of this 
                section (other than subsection (b)(1)) as in effect on 
                the day before the date of the enactment of section 
                12302 of the Personal Responsibility and Work 
                Opportunity Act of 1995 shall apply with respect to the 
                distribution of support arrearages that--

                        ``(aa) accrued before the family received 
                    assistance, and
                        ``(bb) are collected before October 1, 2000.

                    ``(II) Post-September 2000.--Unless based on the 
                report required by paragraph (4), the Congress 
                determines otherwise, with respect to amounts collected 
                on or after October 1, 2000--

                        ``(aa) In general.--The State shall first 
                    distribute any amount collected (other than amounts 
                    described in clause (iv)) to the family to the 
                    extent necessary to satisfy any support arrears 
                    with respect to the family that accrued before the 
                    family received assistance from the State .
                        ``(bb) Reimbursement of governments for 
                    assistance provided to the family.--The State shall 
                    retain the State share of the amounts so collected 
                    in excess of those distributed pursuant to division 
                    (aa) and pay to the Federal Government the Federal 
                    share (as defined in subsection (c)(2)) of the 
                    amount so collected, to the extent necessary to 
                    reimburse all or part of the amounts paid to the 
                    family as assistance by the State.
                        ``(cc) Distribution of the remainder to the 
                    family.--To the extent that neither division (aa) 
                    nor division (bb) applies to the amount so 
                    collected, the State shall distribute the amount to 
                    the family.
                ``(iii) Distribution of arrearages that accrued while 
            the family received assistance.--In the case of a family 
            described in this subparagraph, the provisions of paragraph 
            (1) shall apply with respect to the distribution of support 
            arrearages that accrued while the family received 
            assistance.
                ``(iv) Amounts collected pursuant to section 464.--
            Notwithstanding any other provision of this section, any 
            amount of support collected pursuant to section 464 shall 
            be retained by the State to the extent necessary to 
            reimburse amounts paid to the family as assistance by the 
            State. The State shall pay to the Federal Government the 
            Federal share of the amounts so retained. To the extent the 
            amount collected pursuant to section 464 exceeds the amount 
            so retained, the State shall distribute the excess to the 
            family.
                ``(v) Ordering rules for distributions.--For purposes 
            of this subparagraph, the State shall treat any support 
            arrearages collected as accruing in the following order:

                    ``(I) to the period after the family ceased to 
                receive assistance;
                    ``(II) to the period before the family received 
                assistance; and
                    ``(III) to the period while the family was 
                receiving assistance.

        ``(3) Families that never received assistance.--In the case of 
    any other family, the State shall distribute the amount so 
    collected to the family.
        ``(4) Study and report.--Not later than October 1, 1998, the 
    Secretary shall report to the Congress the Secretary's findings 
    with respect to--
            ``(A) whether the distribution of post-assistance 
        arrearages to families has been effective in moving people off 
        of welfare and keeping them off of welfare;
            ``(B) whether early implementation of a pre-assistance 
        arrearage program by some States has been effective in moving 
        people off of welfare and keeping them off of welfare;
            ``(C) what the overall impact has been of the amendments 
        made by the Personal Responsibility and Work Opportunity Act of 
        1995 with respect to child support enforcement in moving people 
        off of welfare and keeping them off of welfare; and
            ``(D) based on the information and data the Secretary has 
        obtained, what changes, if any, should be made in the policies 
        related to the distribution of child support arrearages.
    ``(b) Continuation of Assignments.--Any rights to support 
obligations, which were assigned to a State as a condition of receiving 
assistance from the State under part A and which were in effect on the 
day before the date of the enactment of the Personal Responsibility and 
Work Opportunity Act of 1995, shall remain assigned after such date.
    ``(c) Definitions.--As used in subsection (a):
        ``(1) Assistance.--The term `assistance from the State' means--
            ``(A) assistance under the State program funded under part 
        A or under the State plan approved under part A of this title 
        (as in effect on the day before the date of the enactment of 
        the Personal Responsibility and Work Opportunity Act of 1995); 
        or
            ``(B) benefits under the State plan approved under part E 
        of this title (as in effect on the day before the date of the 
        enactment of the Personal Responsibility and Work Opportunity 
        Act of 1995).
        ``(2) Federal share.--The term `Federal share' means--
            ``(A) if the amounts collected and retained by the State 
        (to the extent necessary to reimburse amounts paid to families 
        as assistance by the State) are equal to or greater than such 
        amounts collected in fiscal year 1995 (reduced by amounts not 
        retained by the State in fiscal year 1995 as a result of the 
        application of subsection (b)(1) of this section as in effect 
        on the day before the date of the enactment of the Personal 
        Responsibility and Work Opportunity Act of 1995), the highest 
        Federal medical assistance percentage in effect for the State 
        in fiscal year 1995 or any succeeding year of the amount so 
        collected; or
            ``(B) if the amounts so collected and retained by the State 
        are less than such amounts collected in fiscal year 1995 
        (reduced by amounts not retained by the State in fiscal year 
        1995 as a result of the application of subsection (b)(1) of 
        this section as in effect on the day before the date of the 
        enactment of the Personal Responsibility and Work Opportunity 
        Act of 1995), the amounts so collected and retained less the 
        State share in fiscal year 1995.
        ``(3) Federal medical assistance percentage.--The term `Federal 
    medical assistance percentage' means--
            ``(A) the Federal medical assistance percentage (as defined 
        in section 1118), in the case of Puerto Rico, the Virgin 
        Islands, Guam, and American Samoa; or
            ``(B) the Federal medical assistance percentage (as defined 
        in section 2122(c)) in the case of any other State.
        ``(4) State share.--The term `State share' means 100 percent 
    minus the Federal share.
    ``(d) Continuation of Services for Families Ceasing To Receive 
Assistance Under the State Program Funded Under Part A.--When a family 
with respect to which services are provided under a State plan approved 
under this part ceases to receive assistance under the State program 
funded under part A, the State shall provide appropriate notice to the 
family and continue to provide such services, subject to the same 
conditions and on the same basis as in the case of individuals to whom 
services are furnished under section 454, except that an application or 
other request to continue services shall not be required of such a 
family and section 454(6)(B) shall not apply to the family.''.
    (b) Conforming Amendment.--Section 464(a)(1) (42 U.S.C. 664(a)(1)) 
is amended by striking ``section 457(b)(4) or (d)(3)'' and inserting 
``section 457''.
    (c) Effective Date.--The amendments made by this section shall be 
effective on October 1, 1996, or earlier at the State's option.

SEC. 12303. PRIVACY SAFEGUARDS.

    (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by section 12301(b) of this Act, is amended--
        (1) by striking ``and'' at the end of paragraph (24);
        (2) by striking the period at the end of paragraph (25) and 
    inserting ``; and''; and
        (3) by adding after paragraph (25) the following new paragraph:
        ``(26) will have in effect safeguards, applicable to all 
    confidential information handled by the State agency, that are 
    designed to protect the privacy rights of the parties, including--
            ``(A) safeguards against unauthorized use or disclosure of 
        information relating to proceedings or actions to establish 
        paternity, or to establish or enforce support;
            ``(B) prohibitions against the release of information on 
        the whereabouts of 1 party to another party against whom a 
        protective order with respect to the former party has been 
        entered; and
            ``(C) prohibitions against the release of information on 
        the whereabouts of 1 party to another party if the State has 
        reason to believe that the release of the information may 
        result in physical or emotional harm to the former party.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on October 1, 1997.

                  CHAPTER 2--LOCATE AND CASE TRACKING

SEC. 12311. STATE CASE REGISTRY.

    Section 454A, as added by section 12344(a)(2) of this Act, is 
amended by adding at the end the following new subsections:
    ``(e) State Case Registry.--
        ``(1) Contents.--The automated system required by this section 
    shall include a registry (which shall be known as the `State case 
    registry') that contains records with respect to--
            ``(A) each case in which services are being provided by the 
        State agency under the State plan approved under this part; and
            ``(B) each support order established or modified in the 
        State on or after October 1, 1998.
        ``(2) Linking of local registries.--The State case registry may 
    be established by linking local case registries of support orders 
    through an automated information network, subject to this section.
        ``(3) Use of standardized data elements.--Such records shall 
    use standardized data elements for both parents (such as names, 
    social security numbers and other uniform identification numbers, 
    dates of birth, and case identification numbers), and contain such 
    other information (such as on-case status) as the Secretary may 
    require.
        ``(4) Payment records.--Each case record in the State case 
    registry with respect to which services are being provided under 
    the State plan approved under this part and with respect to which a 
    support order has been established shall include a record of--
            ``(A) the amount of monthly (or other periodic) support 
        owed under the order, and other amounts (including arrearages, 
        interest or late payment penalties, and fees) due or overdue 
        under the order;
            ``(B) any amount described in subparagraph (A) that has 
        been collected;
            ``(C) the distribution of such collected amounts;
            ``(D) the birth date of any child for whom the order 
        requires the provision of support; and
            ``(E) the amount of any lien imposed with respect to the 
        order pursuant to section 466(a)(4).
        ``(5) Updating and monitoring.--The State agency operating the 
    automated system required by this section shall promptly establish 
    and maintain, and regularly monitor, case records in the State case 
    registry with respect to which services are being provided under 
    the State plan approved under this part, on the basis of--
            ``(A) information on administrative actions and 
        administrative and judicial proceedings and orders relating to 
        paternity and support;
            ``(B) information obtained from comparison with Federal, 
        State, or local sources of information;
            ``(C) information on support collections and distributions; 
        and
            ``(D) any other relevant information.
    ``(f) Information Comparisons and Other Disclosures of 
Information.--The State shall use the automated system required by this 
section to extract information from (at such times, and in such 
standardized format or formats, as may be required by the Secretary), 
to share and compare information with, and to receive information from, 
other data bases and information comparison services, in order to 
obtain (or provide) information necessary to enable the State agency 
(or the Secretary or other State or Federal agencies) to carry out this 
part, subject to section 6103 of the Internal Revenue Code of 1986. 
Such information comparison activities shall include the following:
        ``(1) Federal case registry of child support orders.--
    Furnishing to the Federal Case Registry of Child Support Orders 
    established under section 453(h) (and update as necessary, with 
    information including notice of expiration of orders) the minimum 
    amount of information on child support cases recorded in the State 
    case registry that is necessary to operate the registry (as 
    specified by the Secretary in regulations).
        ``(2) Federal parent locator service.--Exchanging information 
    with the Federal Parent Locator Service for the purposes specified 
    in section 453.
        ``(3) Temporary family assistance and medigrant agencies.--
    Exchanging information with State agencies (of the State and of 
    other States) administering programs funded under part A, programs 
    operated under State plans under title XXI, and other programs 
    designated by the Secretary, as necessary to perform State agency 
    responsibilities under this part and under such programs.
        ``(4) Intrastate and interstate information comparisons.--
    Exchanging information with other agencies of the State, agencies 
    of other States, and interstate information networks, as necessary 
    and appropriate to carry out (or assist other States to carry out) 
    the purposes of this part.''.

SEC. 12312. COLLECTION AND DISBURSEMENT OF SUPPORT PAYMENTS.

    (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 12301(b) and 12303(a) of this Act, is amended--
        (1) by striking ``and'' at the end of paragraph (25);
        (2) by striking the period at the end of paragraph (26) and 
    inserting ``; and''; and
        (3) by adding after paragraph (26) the following new paragraph:
        ``(27) provide that, on and after October 1, 1998, the State 
    agency will--
            ``(A) operate a State disbursement unit in accordance with 
        section 454B; and
            ``(B) have sufficient State staff (consisting of State 
        employees) and (at State option) contractors reporting directly 
        to the State agency to--
                ``(i) monitor and enforce support collections through 
            the unit (including carrying out the automated data 
            processing responsibilities described in section 454A(g)); 
            and
                ``(ii) take the actions described in section 466(c)(1) 
            in appropriate cases.''.
    (b) Establishment of State Disbursement Unit.--Part D of title IV 
(42 U.S.C. 651-669), as amended by section 12344(a)(2) of this Act, is 
amended by inserting after section 454A the following new section:

``SEC. 454B. COLLECTION AND DISBURSEMENT OF SUPPORT PAYMENTS.

    ``(a) State Disbursement Unit.--
        ``(1) In general.--In order for a State to meet the 
    requirements of this section, the State agency must establish and 
    operate a unit (which shall be known as the `State disbursement 
    unit') for the collection and disbursement of payments under 
    support orders in all cases being enforced by the State pursuant to 
    section 454(4).
        ``(2) Operation.--The State disbursement unit shall be 
    operated--
            ``(A) directly by the State agency (or 2 or more State 
        agencies under a regional cooperative agreement), or (to the 
        extent appropriate) by a contractor responsible directly to the 
        State agency; and
            ``(B) in coordination with the automated system established 
        by the State pursuant to section 454A.
        ``(3) Linking of local disbursement units.--The State 
    disbursement unit may be established by linking local disbursement 
    units through an automated information network, subject to this 
    section, if the Secretary agrees that the system will not cost more 
    nor take more time to establish or operate than a centralized 
    system. In addition, employers shall be given 1 location to which 
    income withholding is sent.
    ``(b) Required Procedures.--The State disbursement unit shall use 
automated procedures, electronic processes, and computer-driven 
technology to the maximum extent feasible, efficient, and economical, 
for the collection and disbursement of support payments, including 
procedures--
        ``(1) for receipt of payments from parents, employers, and 
    other States, and for disbursements to custodial parents and other 
    obligees, the State agency, and the agencies of other States;
        ``(2) for accurate identification of payments;
        ``(3) to ensure prompt disbursement of the custodial parent's 
    share of any payment; and
        ``(4) to furnish to any parent, upon request, timely 
    information on the current status of support payments under an 
    order requiring payments to be made by or to the parent.
    ``(c) Timing of Disbursements.--
        ``(1) In general.--Except as provided in paragraph (2), the 
    State disbursement unit shall distribute all amounts payable under 
    section 457(a) within 2 business days after receipt from the 
    employer or other source of periodic income, if sufficient 
    information identifying the payee is provided.
        ``(2) Permissive retention of arrearages.--The State 
    disbursement unit may delay the distribution of collections toward 
    arrearages until the resolution of any timely appeal with respect 
    to such arrearages.
    ``(d) Business Day Defined.--As used in this section, the term 
`business day' means a day on which State offices are open for regular 
business.''.
    (c) Use of Automated System.--Section 454A, as added by section 
12344(a)(2) and as amended by section 12311 of this Act, is amended by 
adding at the end the following new subsection:
    ``(g) Collection and Distribution of Support Payments.--
        ``(1) In general.--The State shall use the automated system 
    required by this section, to the maximum extent feasible, to assist 
    and facilitate the collection and disbursement of support payments 
    through the State disbursement unit operated under section 454B, 
    through the performance of functions, including, at a minimum--
            ``(A) transmission of orders and notices to employers (and 
        other debtors) for the withholding of wages and other income--
                ``(i) within 2 business days after receipt from a 
            court, another State, an employer, the Federal Parent 
            Locator Service, or another source recognized by the State 
            of notice of, and the income source subject to, such 
            withholding; and
                ``(ii) using uniform formats prescribed by the 
            Secretary;
            ``(B) ongoing monitoring to promptly identify failures to 
        make timely payment of support; and
            ``(C) automatic use of enforcement procedures (including 
        procedures authorized pursuant to section 466(c)) if payments 
        are not timely made.
        ``(2) Business day defined.--As used in paragraph (1), the term 
    `business day' means a day on which State offices are open for 
    regular business.''.
    (d) Effective Date.--The amendments made by this section shall 
become effective on October 1, 1998.

SEC. 12313. STATE DIRECTORY OF NEW HIRES.

    (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 12301(b), 12303(a) and 12312(a) of this Act, is 
amended--
        (1) by striking ``and'' at the end of paragraph (26);
        (2) by striking the period at the end of paragraph (27) and 
    inserting ``; and''; and
        (3) by adding after paragraph (27) the following new paragraph:
        ``(28) provide that, on and after October 1, 1997, the State 
    will operate a State Directory of New Hires in accordance with 
    section 453A.''.
    (b) State Directory of New Hires.--Part D of title IV (42 U.S.C. 
651-669) is amended by inserting after section 453 the following new 
section:

``SEC. 453A. STATE DIRECTORY OF NEW HIRES.

    ``(a) Establishment.--
        ``(1) In general.--
            ``(A) Requirement for States that have no directory.--
        Except as provided in subparagraph (B), not later than October 
        1, 1997, each State shall establish an automated directory (to 
        be known as the `State Directory of New Hires') which shall 
        contain information supplied in accordance with subsection (b) 
        by employers on each newly hired employee.
            ``(B) States with new hire reporting in existence.--A State 
        which has a new hire reporting law in existence on the date of 
        the enactment of this section may continue to operate under the 
        State law, but the State must meet the requirements of this 
        section (other than subsection (f)) not later than October 1, 
        1997.
        ``(2) Definitions.--As used in this section:
            ``(A) Employee.--The term `employee'--
                ``(i) means an individual who is an employee within the 
            meaning of chapter 24 of the Internal Revenue Code of 1986; 
            and
                ``(ii) does not include an employee of a Federal or 
            State agency performing intelligence or counterintelligence 
            functions, if the head of such agency has determined that 
            reporting pursuant to paragraph (1) with respect to the 
            employee could endanger the safety of the employee or 
            compromise an ongoing investigation or intelligence 
            mission.
            ``(B) Employer.--
                ``(i) In general.--The term `employer' has the meaning 
            given such term in section 3401(d) of the Internal Revenue 
            Code of 1996 and includes any governmental entity and any 
            labor organization.
                ``(ii) Labor organization.--The term `labor 
            organization' shall have the meaning given such term in 
            section 2(5) of the National Labor Relations Act, and 
            includes any entity (also known as a `hiring hall') which 
            is used by the organization and an employer to carry out 
            requirements described in section 8(f)(3) of such Act of an 
            agreement between the organization and the employer.
    ``(b) Employer Information.--
        ``(1) Reporting requirement.--
            ``(A) In general.--Except as provided in subparagraphs (B) 
        and (C), each employer shall furnish to the Directory of New 
        Hires of the State in which a newly hired employee works, a 
        report that contains the name, address, and Social Security 
        number of the employee, and the name of, and identifying number 
        assigned under section 6109 of the Internal Revenue Code of 
        1986 to, the employer.
            ``(B) Multistate employers.--An employer that has employees 
        who are employed in 2 or more States and that transmits reports 
        magnetically or electronically may comply with subparagraph (A) 
        by designating 1 State in which such employer has employees to 
        which the employer will transmit the report described in 
        subparagraph (A), and transmitting such report to such State. 
        Any employer that transmits reports pursuant to this 
        subparagraph shall notify the Secretary in writing as to which 
        State such employer designates for the purpose of sending 
        reports.
            ``(C) Federal government employers.--Any department, 
        agency, or instrumentality of the United States shall comply 
        with subparagraph (A) by transmitting the report described in 
        subparagraph (A) to the National Directory of New Hires 
        established pursuant to section 453.
        ``(2) Timing of report.--Each State may provide the time within 
    which the report required by paragraph (1) shall be made with 
    respect to an employee, but such report shall be made not later 
    than 20 days after the date the employer hires the employee.
    ``(c) Reporting Format and Method.--Each report required by 
subsection (b) shall be made on a W-4 form or, at the option of the 
employer, an equivalent form, and may be transmitted by 1st class mail, 
magnetically, or electronically.
    ``(d) Civil Money Penalties on Noncomplying Employers.--The State 
shall have the option to set a State civil money penalty which shall be 
less than--
        ``(1) $25; or
        ``(2) $500 if, under State law, the failure is the result of a 
    conspiracy between the employer and the employee to not supply the 
    required report or to supply a false or incomplete report.
    ``(e) Entry of Employer Information.--Information shall be entered 
into the data base maintained by the State Directory of New Hires 
within 5 business days of receipt from an employer pursuant to 
subsection (b).
    ``(f) Information Comparisons.--
        ``(1) In general.--Not later than May 1, 1998, an agency 
    designated by the State shall, directly or by contract, conduct 
    automated comparisons of the Social Security numbers reported by 
    employers pursuant to subsection (b) and the Social Security 
    numbers appearing in the records of the State case registry for 
    cases being enforced under the State plan.
        ``(2) Notice of match.--When an information comparison 
    conducted under paragraph (1) reveals a match with respect to the 
    Social Security number of an individual required to provide support 
    under a support order, the State Directory of New Hires shall 
    provide the agency administering the State plan approved under this 
    part of the appropriate State with the name, address, and Social 
    Security number of the employee to whom the Social Security number 
    is assigned, and the name of, and identifying number assigned under 
    section 6109 of the Internal Revenue Code of 1986 to, the employer.
    ``(g) Transmission of Information.--
        ``(1) Transmission of wage withholding notices to employers.--
    Within 2 business days after the date information regarding a newly 
    hired employee is entered into the State Directory of New Hires, 
    the State agency enforcing the employee's child support obligation 
    shall transmit a notice to the employer of the employee directing 
    the employer to withhold from the wages of the employee an amount 
    equal to the monthly (or other periodic) child support obligation 
    (including any past due support obligation) of the employee, unless 
    the employee's wages are not subject to withholding pursuant to 
    section 466(b)(3).
        ``(2) Transmissions to the national directory of new hires.--
            ``(A) New hire information.--Within 3 business days after 
        the date information regarding a newly hired employee is 
        entered into the State Directory of New Hires, the State 
        Directory of New Hires shall furnish the information to the 
        National Directory of New Hires.
            ``(B) Wage and unemployment compensation information.--The 
        State Directory of New Hires shall, on a quarterly basis, 
        furnish to the National Directory of New Hires extracts of the 
        reports required under section 303(a)(6) to be made to the 
        Secretary of Labor concerning the wages and unemployment 
        compensation paid to individuals, by such dates, in such 
        format, and containing such information as the Secretary of 
        Health and Human Services shall specify in regulations.
        ``(3) Business day defined.--As used in this subsection, the 
    term `business day' means a day on which State offices are open for 
    regular business.
    ``(h) Other Uses of New Hire Information.--
        ``(1) Location of child support obligors.--The agency 
    administering the State plan approved under this part shall use 
    information received pursuant to subsection (f)(2) to locate 
    individuals for purposes of establishing paternity and 
    establishing, modifying, and enforcing child support obligations.
        ``(2) Verification of eligibility for certain programs.--A 
    State agency responsible for administering a program specified in 
    section 1137(b) shall have access to information reported by 
    employers pursuant to subsection (b) of this section for purposes 
    of verifying eligibility for the program.
        ``(3) Administration of employment security and workers' 
    compensation.--State agencies operating employment security and 
    workers' compensation programs shall have access to information 
    reported by employers pursuant to subsection (b) for the purposes 
    of administering such programs.''.
    (c) Quarterly Wage Reporting.--Section 1137(a)(3) (42 U.S.C. 1320b-
7(a)(3)) is amended--
        (1) by inserting ``(including State and local governmental 
    entities and labor organizations (as defined in section 
    453A(a)(2)(B)(iii)))'' after ``employers''; and
        (2) by inserting ``, and except that no report shall be filed 
    with respect to an employee of a State or local agency performing 
    intelligence or counterintelligence functions, if the head of such 
    agency has determined that filing such a report could endanger the 
    safety of the employee or compromise an ongoing investigation or 
    intelligence mission'' after ``paragraph (2)''.

SEC. 12314. AMENDMENTS CONCERNING INCOME WITHHOLDING.

    (a) Mandatory Income Withholding.--
        (1) In general.--Section 466(a)(1) (42 U.S.C. 666(a)(1)) is 
    amended to read as follows:
        ``(1)(A) Procedures described in subsection (b) for the 
    withholding from income of amounts payable as support in cases 
    subject to enforcement under the State plan.
        ``(B) Procedures under which the wages of a person with a 
    support obligation imposed by a support order issued (or modified) 
    in the State before October 1, 1996, if not otherwise subject to 
    withholding under subsection (b), shall become subject to 
    withholding as provided in subsection (b) if arrearages occur, 
    without the need for a judicial or administrative hearing.''.
        (2) Conforming amendments.--
            (A) Section 466(b) (42 U.S.C. 666(b)) is amended in the 
        matter preceding paragraph (1), by striking ``subsection 
        (a)(1)'' and inserting ``subsection (a)(1)(A)''.
            (B) Section 466(b)(4) (42 U.S.C. 666(b)(4)) is amended to 
        read as follows:
        ``(4)(A) Such withholding must be carried out in full 
    compliance with all procedural due process requirements of the 
    State, and the State must send notice to each noncustodial parent 
    to whom paragraph (1) applies--
            ``(i) that the withholding has commenced; and
            ``(ii) of the procedures to follow if the noncustodial 
        parent desires to contest such withholding on the grounds that 
        the withholding or the amount withheld is improper due to a 
        mistake of fact.
        ``(B) The notice under subparagraph (A) of this paragraph shall 
    include the information provided to the employer under paragraph 
    (6)(A).''.
            (C) Section 466(b)(5) (42 U.S.C. 666(b)(5)) is amended by 
        striking all that follows ``administered by'' and inserting 
        ``the State through the State disbursement unit established 
        pursuant to section 454B, in accordance with the requirements 
        of section 454B.''.
            (D) Section 466(b)(6)(A) (42 U.S.C. 666(b)(6)(A)) is 
        amended--
                (i) in clause (i), by striking ``to the appropriate 
            agency'' and all that follows and inserting ``to the State 
            disbursement unit within 2 business days after the date the 
            amount would (but for this subsection) have been paid or 
            credited to the employee, for distribution in accordance 
            with this part. The employer shall comply with the 
            procedural rules relating to income withholding of the 
            State in which the employee works, regardless of the State 
            where the notice originates.''.
                (ii) in clause (ii), by inserting ``be in a standard 
            format prescribed by the Secretary, and'' after ``shall''; 
            and
                (iii) by adding at the end the following new clause:
        ``(iii) As used in this subparagraph, the term `business day' 
    means a day on which State offices are open for regular 
    business.''.
            (E) Section 466(b)(6)(D) (42 U.S.C. 666(b)(6)(D)) is 
        amended by striking ``any employer'' and all that follows and 
        inserting ``any employer who--
            ``(i) discharges from employment, refuses to employ, or 
        takes disciplinary action against any noncustodial parent 
        subject to wage withholding required by this subsection because 
        of the existence of such withholding and the obligations or 
        additional obligations which it imposes upon the employer; or
            ``(ii) fails to withhold support from wages, or to pay such 
        amounts to the State disbursement unit in accordance with this 
        subsection.''.
            (F) Section 466(b) (42 U.S.C. 666(b)) is amended by adding 
        at the end the following new paragraph:
        ``(11) Procedures under which the agency administering the 
    State plan approved under this part may execute a withholding order 
    without advance notice to the obligor, including issuing the 
    withholding order through electronic means.''.
    (b) Conforming Amendment.--Section 466(c) (42 U.S.C. 666(c)) is 
repealed.

SEC. 12315. LOCATOR INFORMATION FROM INTERSTATE NETWORKS.

    Section 466(a) (42 U.S.C. 666(a)) is amended by adding at the end 
the following new paragraph:
        ``(12) Locator information from interstate networks.--
    Procedures to ensure that all Federal and State agencies conducting 
    activities under this part have access to any system used by the 
    State to locate an individual for purposes relating to motor 
    vehicles or law enforcement.''.

SEC. 12316. EXPANSION OF THE FEDERAL PARENT LOCATOR SERVICE.

    (a) Expanded Authority To Locate Individuals and Assets.--Section 
453 (42 U.S.C. 653) is amended--
        (1) in subsection (a), by striking all that follows 
    ``subsection (c))'' and inserting ``, for the purpose of 
    establishing parentage, establishing, setting the amount of, 
    modifying, or enforcing child support obligations, or enforcing 
    child custody or visitation orders--
        ``(1) information on, or facilitating the discovery of, the 
    location of any individual--
            ``(A) who is under an obligation to pay child support or 
        provide child custody or visitation rights;
            ``(B) against whom such an obligation is sought;
            ``(C) to whom such an obligation is owed,
    including the individual's social security number (or numbers), 
    most recent address, and the name, address, and employer 
    identification number of the individual's employer;
        ``(2) information on the individual's wages (or other income) 
    from, and benefits of, employment (including rights to or 
    enrollment in group health care coverage); and
        ``(3) information on the type, status, location, and amount of 
    any assets of, or debts owed by or to, any such individual.''; and
        (2) in subsection (b)--
            (A) in the matter preceding paragraph (1), by striking 
        ``social security'' and all that follows through ``absent 
        parent'' and inserting ``information described in subsection 
        (a)''; and
            (B) in the flush paragraph at the end, by adding the 
        following: ``No information shall be disclosed to any person if 
        the State has notified the Secretary that the State has 
        reasonable evidence of domestic violence or child abuse and the 
        disclosure of such information could be harmful to the 
        custodial parent or the child of such parent. Information 
        received or transmitted pursuant to this section shall be 
        subject to the safeguard provisions contained in section 
        454(26).''.
    (b) Authorized Person for Information Regarding Visitation 
Rights.--Section 453(c) (42 U.S.C. 653(c)) is amended--
        (1) in paragraph (1), by striking ``support'' and inserting 
    ``support or to seek to enforce orders providing child custody or 
    visitation rights''; and
        (2) in paragraph (2), by striking ``, or any agent of such 
    court; and'' and inserting ``or to issue an order against a 
    resident parent for child custody or visitation rights, or any 
    agent of such court;''.
    (c) Reimbursement for Information From Federal Agencies.--Section 
453(e)(2) (42 U.S.C. 653(e)(2)) is amended in the 4th sentence by 
inserting ``in an amount which the Secretary determines to be 
reasonable payment for the information exchange (which amount shall not 
include payment for the costs of obtaining, compiling, or maintaining 
the information)'' before the period.
    (d) Reimbursement for Reports by State Agencies.--Section 453 (42 
U.S.C. 653) is amended by adding at the end the following new 
subsection:
    ``(g) Reimbursement for Reports by State Agencies.--The Secretary 
may reimburse Federal and State agencies for the costs incurred by such 
entities in furnishing information requested by the Secretary under 
this section in an amount which the Secretary determines to be 
reasonable payment for the information exchange (which amount shall not 
include payment for the costs of obtaining, compiling, or maintaining 
the information).''.
    (e) Conforming Amendments.--
        (1) Sections 452(a)(9), 453(a), 453(b), 463(a), 463(e), and 
    463(f) (42 U.S.C. 652(a)(9), 653(a), 653(b), 663(a), 663(e), and 
    663(f)) are each amended by inserting ``Federal'' before ``Parent'' 
    each place such term appears.
        (2) Section 453 (42 U.S.C. 653) is amended in the heading by 
    adding ``federal'' before ``parent''.
    (f) New Components.--Section 453 (42 U.S.C. 653), as amended by 
subsection (d) of this section, is amended by adding at the end the 
following new subsections:
    ``(h) Federal Case Registry of Child Support Orders.--
        ``(1) In general.--Not later than October 1, 1998, in order to 
    assist States in administering programs under State plans approved 
    under this part and programs funded under part A, and for the other 
    purposes specified in this section, the Secretary shall establish 
    and maintain in the Federal Parent Locator Service an automated 
    registry (which shall be known as the `Federal Case Registry of 
    Child Support Orders'), which shall contain abstracts of support 
    orders and other information described in paragraph (2) with 
    respect to each case in each State case registry maintained 
    pursuant to section 454A(e), as furnished (and regularly updated), 
    pursuant to section 454A(f), by State agencies administering 
    programs under this part.
        ``(2) Case information.--The information referred to in 
    paragraph (1) with respect to a case shall be such information as 
    the Secretary may specify in regulations (including the names, 
    social security numbers or other uniform identification numbers, 
    and State case identification numbers) to identify the individuals 
    who owe or are owed support (or with respect to or on behalf of 
    whom support obligations are sought to be established), and the 
    State or States which have the case.
    ``(i) National Directory of New Hires.--
        ``(1) In general.--In order to assist States in administering 
    programs under State plans approved under this part and programs 
    funded under part A, and for the other purposes specified in this 
    section, the Secretary shall, not later than October 1, 1996, 
    establish and maintain in the Federal Parent Locator Service an 
    automated directory to be known as the National Directory of New 
    Hires, which shall contain the information supplied pursuant to 
    section 453A(g)(2).
        ``(2) Entry of data.--Information shall be entered into the 
    data base maintained by the National Directory of New Hires within 
    2 business days of receipt pursuant to section 453A(g)(2).
        ``(3) Administration of federal tax laws.--The Secretary of the 
    Treasury shall have access to the information in the National 
    Directory of New Hires for purposes of administering section 32 of 
    the Internal Revenue Code of 1986, or the advance payment of the 
    earned income tax credit under section 3507 of such Code, and 
    verifying a claim with respect to employment in a tax return.
        ``(4) List of multistate employers.--The Secretary shall 
    maintain within the National Directory of New Hires a list of 
    multistate employers that report information regarding newly hired 
    employees pursuant to section 453A(b)(1)(B), and the State which 
    each such employer has designated to receive such information.
    ``(j) Information Comparisons and Other Disclosures.--
        ``(1) Verification by social security administration.--
            ``(A) In general.--The Secretary shall transmit information 
        on individuals and employers maintained under this section to 
        the Social Security Administration to the extent necessary for 
        verification in accordance with subparagraph (B).
            ``(B) Verification by ssa.--The Social Security 
        Administration shall verify the accuracy of, correct, or supply 
        to the extent possible, and report to the Secretary, the 
        following information supplied by the Secretary pursuant to 
        subparagraph (A):
                ``(i) The name, social security number, and birth date 
            of each such individual.
                ``(ii) The employer identification number of each such 
            employer.
        ``(2) Information comparisons.--For the purpose of locating 
    individuals in a paternity establishment case or a case involving 
    the establishment, modification, or enforcement of a support order, 
    the Secretary shall--
            ``(A) compare information in the National Directory of New 
        Hires against information in the support case abstracts in the 
        Federal Case Registry of Child Support Orders not less often 
        than every 2 business days; and
            ``(B) within 2 such days after such a comparison reveals a 
        match with respect to an individual, report the information to 
        the State agency responsible for the case.
        ``(3) Information comparisons and disclosures of information in 
    all registries for title iv program purposes.--To the extent and 
    with the frequency that the Secretary determines to be effective in 
    assisting States to carry out their responsibilities under programs 
    operated under this part and programs funded under part A, the 
    Secretary shall--
            ``(A) compare the information in each component of the 
        Federal Parent Locator Service maintained under this section 
        against the information in each other such component (other 
        than the comparison required by paragraph (2)), and report 
        instances in which such a comparison reveals a match with 
        respect to an individual to State agencies operating such 
        programs; and
            ``(B) disclose information in such registries to such State 
        agencies.
        ``(4) Provision of new hire information to the social security 
    administration.--The National Directory of New Hires shall provide 
    the Commissioner of Social Security with all information in the 
    National Directory, which shall be used to determine the accuracy 
    of payments under the supplemental security income program under 
    title XVI and in connection with benefits under title II.
        ``(5) Research.--The Secretary may provide access to 
    information reported by employers pursuant to section 453A(b) for 
    research purposes found by the Secretary to be likely to contribute 
    to achieving the purposes of part A or this part, but without 
    personal identifiers.
    ``(k) Fees.--
        ``(1) For ssa verification.--The Secretary shall reimburse the 
    Commissioner of Social Security, at a rate negotiated between the 
    Secretary and the Commissioner, for the costs incurred by the 
    Commissioner in performing the verification services described in 
    subsection (j).
        ``(2) For information from state directories of new hires.--The 
    Secretary shall reimburse costs incurred by State directories of 
    new hires in furnishing information as required by subsection 
    (j)(3), at rates which the Secretary determines to be reasonable 
    (which rates shall not include payment for the costs of obtaining, 
    compiling, or maintaining such information).
        ``(3) For information furnished to state and federal 
    agencies.--A State or Federal agency that receives information from 
    the Secretary pursuant to this section shall reimburse the 
    Secretary for costs incurred by the Secretary in furnishing the 
    information, at rates which the Secretary determines to be 
    reasonable (which rates shall include payment for the costs of 
    obtaining, verifying, maintaining, and comparing the information).
    ``(l) Restriction on Disclosure and Use.--Information in the 
Federal Parent Locator Service, and information resulting from 
comparisons using such information, shall not be used or disclosed 
except as expressly provided in this section, subject to section 6103 
of the Internal Revenue Code of 1986.
    ``(m) Information Integrity and Security.--The Secretary shall 
establish and implement safeguards with respect to the entities 
established under this section designed to--
        ``(1) ensure the accuracy and completeness of information in 
    the Federal Parent Locator Service; and
        ``(2) restrict access to confidential information in the 
    Federal Parent Locator Service to authorized persons, and restrict 
    use of such information to authorized purposes.
    ``(n) Federal Government Reporting.--Each department, agency, and 
instrumentality of the United States shall on a quarterly basis report 
to the Federal Parent Locator Service the name and social security 
number of each employee and the wages paid to the employee during the 
previous quarter, except that such a report shall not be filed with 
respect to an employee of a department, agency, or instrumentality 
performing intelligence or counterintelligence functions, if the head 
of such department, agency, or instrumentality has determined that 
filing such a report could endanger the safety of the employee or 
compromise an ongoing investigation or intelligence mission.''.
    (g) Conforming Amendments.--
        (1) To part d of title iv of the social security act.--
            (A) Section 454(8)(B) (42 U.S.C. 654(8)(B)) is amended to 
        read as follows:
            ``(B) the Federal Parent Locator Service established under 
        section 453;''.
            (B) Section 454(13) (42 U.S.C. 654(13)) is amended by 
        inserting ``and provide that information requests by parents 
        who are residents of other States be treated with the same 
        priority as requests by parents who are residents of the State 
        submitting the plan'' before the semicolon.
        (2) To federal unemployment tax act.--Section 3304(a)(16) of 
    the Internal Revenue Code of 1986 is amended--
            (A) by striking ``Secretary of Health, Education, and 
        Welfare'' each place such term appears and inserting 
        ``Secretary of Health and Human Services'';
            (B) in subparagraph (B), by striking ``such information'' 
        and all that follows and inserting ``information furnished 
        under subparagraph (A) or (B) is used only for the purposes 
        authorized under such subparagraph;'';
            (C) by striking ``and'' at the end of subparagraph (A);
            (D) by redesignating subparagraph (B) as subparagraph (C); 
        and
            (E) by inserting after subparagraph (A) the following new 
        subparagraph:
            ``(B) wage and unemployment compensation information 
        contained in the records of such agency shall be furnished to 
        the Secretary of Health and Human Services (in accordance with 
        regulations promulgated by such Secretary) as necessary for the 
        purposes of the National Directory of New Hires established 
        under section 453(i) of the Social Security Act, and''.
        (3) To state grant program under title iii of the social 
    security act.--Subsection (h) of section 303 (42 U.S.C. 503) is 
    amended to read as follows:
    ``(h)(1) The State agency charged with the administration of the 
State law shall, on a reimbursable basis--
        ``(A) disclose quarterly, to the Secretary of Health and Human 
    Services wage and claim information, as required pursuant to 
    section 453(i)(1), contained in the records of such agency;
        ``(B) ensure that information provided pursuant to subparagraph 
    (A) meets such standards relating to correctness and verification 
    as the Secretary of Health and Human Services, with the concurrence 
    of the Secretary of Labor, may find necessary; and
        ``(C) establish such safeguards as the Secretary of Labor 
    determines are necessary to insure that information disclosed under 
    subparagraph (A) is used only for purposes of section 453(i)(1) in 
    carrying out the child support enforcement program under title IV.
    ``(2) Whenever the Secretary of Labor, after reasonable notice and 
opportunity for hearing to the State agency charged with the 
administration of the State law, finds that there is a failure to 
comply substantially with the requirements of paragraph (1), the 
Secretary of Labor shall notify such State agency that further payments 
will not be made to the State until the Secretary of Labor is satisfied 
that there is no longer any such failure. Until the Secretary of Labor 
is so satisfied, the Secretary shall make no future certification to 
the Secretary of the Treasury with respect to the State.
    ``(3) For purposes of this subsection--
        ``(A) the term `wage information' means information regarding 
    wages paid to an individual, the social security account number of 
    such individual, and the name, address, State, and the Federal 
    employer identification number of the employer paying such wages to 
    such individual; and
        ``(B) the term `claim information' means information regarding 
    whether an individual is receiving, has received, or has made 
    application for, unemployment compensation, the amount of any such 
    compensation being received (or to be received by such individual), 
    and the individual's current (or most recent) home address.''.
        (4) Disclosure of certain information to agents of child 
    support enforcement agencies.--
            (A) In general.--Paragraph (6) of section 6103(l) of the 
        Internal Revenue Code of 1986 (relating to disclosure of return 
        information to Federal, State, and local child support 
        enforcement agencies) is amended by redesignating subparagraph 
        (B) as subparagraph (C) and by inserting after subparagraph (A) 
        the following new subparagraph:
            ``(B) Disclosure to certain agents.--The address and social 
        security account number (or numbers) of an individual with 
        respect to any individual with respect to whom child support 
        obligations are sought to be established or enforced may be 
        disclosed by any child support enforcement agency to any agent 
        of such agency which is under contract with such agency to 
        carry out the purposes described in subparagraph (C).''
            (B) Conforming amendments.--
                (i) Paragraph (3) of section 6103(a) of such Code is 
            amended by striking ``(l)(12)'' and inserting ``paragraph 
            (6) or (12) of subsection (l)''.
                (ii) Subparagraph (C) of section 6103(l)(6) of such 
            Code, as redesignated by subsection (a), is amended to read 
            as follows:
            ``(C) Restriction on disclosure.--Information may be 
        disclosed under this paragraph only for purposes of, and to the 
        extent necessary in, establishing and collecting child support 
        obligations from, and locating, individuals owing such 
        obligations.''
                (iii) The material following subparagraph (F) of 
            section 6103(p)(4) of such Code is amended by striking 
            ``subsection (l)(12)(B)'' and inserting ``paragraph (6)(A) 
            or (12)(B) of subsection (l)''.

SEC. 12317. COLLECTION AND USE OF SOCIAL SECURITY NUMBERS FOR USE IN 
              CHILD SUPPORT ENFORCEMENT.

    (a) State Law Requirement.--Section 466(a) (42 U.S.C. 666(a)), as 
amended by section 12315 of this Act, is amended by adding at the end 
the following new paragraph:
        ``(13) Recording of social security numbers in certain family 
    matters.--Procedures requiring that the social security number of--
            ``(A) any applicant for a professional license, commercial 
        driver's license, occupational license, or marriage license be 
        recorded on the application;
            ``(B) any individual who is subject to a divorce decree, 
        support order, or paternity determination or acknowledgment be 
        placed in the records relating to the matter; and
            ``(C) any individual who has died be placed in the records 
        relating to the death and be recorded on the death certificate.
    For purposes of subparagraph (A), if a State allows the use of a 
    number other than the social security number, the State shall so 
    advise any applicants.''.
    (b) Conforming Amendments.--Section 205(c)(2)(C) (42 U.S.C. 
405(c)(2)(C)), as amended by section 321(a)(9) of the Social Security 
Independence and Program Improvements Act of 1994, is amended--
        (1) in clause (i), by striking ``may require'' and inserting 
    ``shall require'';
        (2) in clause (ii), by inserting after the 1st sentence the 
    following: ``In the administration of any law involving the 
    issuance of a marriage certificate or license, each State shall 
    require each party named in the certificate or license to furnish 
    to the State (or political subdivision thereof), or any State 
    agency having administrative responsibility for the law involved, 
    the social security number of the party.'';
        (3) in clause (ii), by inserting ``or marriage certificate'' 
    after ``Such numbers shall not be recorded on the birth 
    certificate''.
        (4) in clause (vi), by striking ``may'' and inserting 
    ``shall''; and
        (5) by adding at the end the following new clauses:
                ``(x) An agency of a State (or a political subdivision 
            thereof) charged with the administration of any law 
            concerning the issuance or renewal of a license, 
            certificate, permit, or other authorization to engage in a 
            profession, an occupation, or a commercial activity shall 
            require all applicants for issuance or renewal of the 
            license, certificate, permit, or other authorization to 
            provide the applicant's social security number to the 
            agency for the purpose of administering such laws, and for 
            the purpose of responding to requests for information from 
            an agency operating pursuant to part D of title IV.
                ``(xi) All divorce decrees, support orders, and 
            paternity determinations issued, and all paternity 
            acknowledgments made, in each State shall include the 
            social security number of each party to the decree, order, 
            determination, or acknowledgement in the records relating 
            to the matter, for the purpose of responding to requests 
            for information from an agency operating pursuant to part D 
            of title IV.''.

          CHAPTER 3--STREAMLINING AND UNIFORMITY OF PROCEDURES

SEC. 12321. ADOPTION OF UNIFORM STATE LAWS.

    Section 466 (42 U.S.C. 666) is amended by adding at the end the 
following new subsection:
    ``(f) Uniform Interstate Family Support Act.--
        ``(1) Enactment and use.--In order to satisfy section 
    454(20)(A), on or after January 1, 1998, each State must have in 
    effect the Uniform Interstate Family Support Act, as approved by 
    the American Bar Association on February 9, 1993, together with any 
    amendments officially adopted before January 1, 1998 by the 
    National Conference of Commissioners on Uniform State Laws.
        ``(2) Employers to follow procedural rules of State where 
    employee works.--The State law enacted pursuant to paragraph (1) 
    shall provide that an employer that receives an income withholding 
    order or notice pursuant to section 501 of the Uniform Interstate 
    Family Support Act follow the procedural rules that apply with 
    respect to such order or notice under the laws of the State in 
    which the obligor works.

SEC. 12322. IMPROVEMENTS TO FULL FAITH AND CREDIT FOR CHILD SUPPORT 
              ORDERS.

    Section 1738B of title 28, United States Code, is amended--
        (1) in subsection (a)(2), by striking ``subsection (e)'' and 
    inserting ``subsections (e), (f), and (i)'';
        (2) in subsection (b), by inserting after the 2nd undesignated 
    paragraph the following:
        ```child's home State' means the State in which a child lived 
    with a parent or a person acting as parent for at least 6 
    consecutive months immediately preceding the time of filing of a 
    petition or comparable pleading for support and, if a child is less 
    than 6 months old, the State in which the child lived from birth 
    with any of them. A period of temporary absence of any of them is 
    counted as part of the 6-month period.'';
        (3) in subsection (c), by inserting ``by a court of a State'' 
    before ``is made'';
        (4) in subsection (c)(1), by inserting ``and subsections (e), 
    (f), and (g)'' after ``located'';
        (5) in subsection (d)--
            (A) by inserting ``individual'' before ``contestant''; and
            (B) by striking ``subsection (e)'' and inserting 
        ``subsections (e) and (f)'';
        (6) in subsection (e), by striking ``make a modification of a 
    child support order with respect to a child that is made'' and 
    inserting ``modify a child support order issued'';
        (7) in subsection (e)(1), by inserting ``pursuant to subsection 
    (i)'' before the semicolon;
        (8) in subsection (e)(2)--
            (A) by inserting ``individual'' before ``contestant'' each 
        place such term appears; and
            (B) by striking ``to that court's making the modification 
        and assuming'' and inserting ``with the State of continuing, 
        exclusive jurisdiction for a court of another State to modify 
        the order and assume'';
        (9) by redesignating subsections (f) and (g) as subsections (g) 
    and (h), respectively;
        (10) by inserting after subsection (e) the following new 
    subsection:
    ``(f) Recognition of Child Support Orders.--If 1 or more child 
support orders have been issued in this or another State with regard to 
an obligor and a child, a court shall apply the following rules in 
determining which order to recognize for purposes of continuing, 
exclusive jurisdiction and enforcement:
        ``(1) If only 1 court has issued a child support order, the 
    order of that court must be recognized.
        ``(2) If 2 or more courts have issued child support orders for 
    the same obligor and child, and only 1 of the courts would have 
    continuing, exclusive jurisdiction under this section, the order of 
    that court must be recognized.
        ``(3) If 2 or more courts have issued child support orders for 
    the same obligor and child, and more than 1 of the courts would 
    have continuing, exclusive jurisdiction under this section, an 
    order issued by a court in the current home State of the child must 
    be recognized, but if an order has not been issued in the current 
    home State of the child, the order most recently issued must be 
    recognized.
        ``(4) If 2 or more courts have issued child support orders for 
    the same obligor and child, and none of the courts would have 
    continuing, exclusive jurisdiction under this section, a court may 
    issue a child support order, which must be recognized.
        ``(5) The court that has issued an order recognized under this 
    subsection is the court having continuing, exclusive 
    jurisdiction.'';
        (11) in subsection (g) (as so redesignated)--
            (A) by striking ``Prior'' and inserting ``Modified''; and
            (B) by striking ``subsection (e)'' and inserting 
        ``subsections (e) and (f)'';
        (12) in subsection (h) (as so redesignated)--
            (A) in paragraph (2), by inserting ``including the duration 
        of current payments and other obligations of support'' before 
        the comma; and
            (B) in paragraph (3), by inserting ``arrears under'' after 
        ``enforce''; and
        (13) by adding at the end the following new subsection:
    ``(i) Registration for Modification.--If there is no individual 
contestant or child residing in the issuing State, the party or support 
enforcement agency seeking to modify, or to modify and enforce, a child 
support order issued in another State shall register that order in a 
State with jurisdiction over the nonmovant for the purpose of 
modification.''.

SEC. 12323. ADMINISTRATIVE ENFORCEMENT IN INTERSTATE CASES.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 12315 and 
12317(a) of this Act, is amended by adding at the end the following new 
paragraph:
        ``(14) Administrative enforcement in interstate cases.--
    Procedures under which--
            ``(A)(i) the State shall respond within 5 business days to 
        a request made by another State to enforce a support order; and
            ``(ii) the term `business day' means a day on which State 
        offices are open for regular business;
            ``(B) the State may, by electronic or other means, transmit 
        to another State a request for assistance in a case involving 
        the enforcement of a support order, which request--
                ``(i) shall include such information as will enable the 
            State to which the request is transmitted to compare the 
            information about the case to the information in the data 
            bases of the State; and
                ``(ii) shall constitute a certification by the 
            requesting State--

                    ``(I) of the amount of support under the order the 
                payment of which is in arrears; and
                    ``(II) that the requesting State has complied with 
                all procedural due process requirements applicable to 
                the case;

            ``(C) if the State provides assistance to another State 
        pursuant to this paragraph with respect to a case, neither 
        State shall consider the case to be transferred to the caseload 
        of such other State; and
            ``(D) the State shall maintain records of--
                ``(i) the number of such requests for assistance 
            received by the State;
                ``(ii) the number of cases for which the State 
            collected support in response to such a request; and
                ``(iii) the amount of such collected support.''.

SEC. 12324. USE OF FORMS IN INTERSTATE ENFORCEMENT.

    (a) Promulgation.--Section 452(a) (42 U.S.C. 652(a)) is amended--
        (1) by striking ``and'' at the end of paragraph (9);
        (2) by striking the period at the end of paragraph (10) and 
    inserting ``; and''; and
        (3) by adding at the end the following new paragraph:
        ``(11) not later than June 30, 1996, after consulting with the 
    State directors of programs under this part, promulgate forms to be 
    used by States in interstate cases for--
            ``(A) collection of child support through income 
        withholding;
            ``(B) imposition of liens; and
            ``(C) administrative subpoenas.''.
    (b) Use by States.--Section 454(9) (42 U.S.C. 654(9)) is amended--
        (1) by striking ``and'' at the end of subparagraph (C);
        (2) by inserting ``and'' at the end of subparagraph (D); and
        (3) by adding at the end the following new subparagraph:
            ``(E) no later than October 1, 1996, in using the forms 
        promulgated pursuant to section 452(a)(11) for income 
        withholding, imposition of liens, and issuance of 
        administrative subpoenas in interstate child support cases;''.

SEC. 12325. STATE LAWS PROVIDING EXPEDITED PROCEDURES.

    (a) State Law Requirements.--Section 466 (42 U.S.C. 666), as 
amended by section 12314 of this Act, is amended--
        (1) in subsection (a)(2), by striking the 1st sentence and 
    inserting the following: ``Expedited administrative and judicial 
    procedures (including the procedures specified in subsection (c)) 
    for establishing paternity and for establishing, modifying, and 
    enforcing support obligations.''; and
        (2) by inserting after subsection (b) the following new 
    subsection:
    ``(c) Expedited Procedures.--The procedures specified in this 
subsection are the following:
        ``(1) Administrative action by state agency.--Procedures which 
    give the State agency the authority to take the following actions 
    relating to establishment or enforcement of support orders, without 
    the necessity of obtaining an order from any other judicial or 
    administrative tribunal, and to recognize and enforce the authority 
    of State agencies of other States:
            ``(A) Genetic testing.--To order genetic testing for the 
        purpose of paternity establishment as provided in section 
        466(a)(5).
            ``(B) Financial or other information.--To subpoena any 
        financial or other information needed to establish, modify, or 
        enforce a support order, and to impose penalties for failure to 
        respond to such a subpoena.
            ``(C) Response to state agency request.--To require all 
        entities in the State (including for-profit, nonprofit, and 
        governmental employers) to provide promptly, in response to a 
        request by the State agency of that or any other State 
        administering a program under this part, information on the 
        employment, compensation, and benefits of any individual 
        employed by such entity as an employee or contractor, and to 
        sanction failure to respond to any such request.
            ``(D) Access to certain records.--To obtain access, subject 
        to safeguards on privacy and information security, to the 
        following records (including automated access, in the case of 
        records maintained in automated data bases):
                ``(i) Records of other State and local government 
            agencies, including--

                    ``(I) vital statistics (including records of 
                marriage, birth, and divorce);
                    ``(II) State and local tax and revenue records 
                (including information on residence address, employer, 
                income and assets);
                    ``(III) records concerning real and titled personal 
                property;
                    ``(IV) records of occupational and professional 
                licenses, and records concerning the ownership and 
                control of corporations, partnerships, and other 
                business entities;
                    ``(V) employment security records;
                    ``(VI) records of agencies administering public 
                assistance programs;
                    ``(VII) records of the motor vehicle department; 
                and
                    ``(VIII) corrections records.

                ``(ii) Certain records held by private entities, 
            including--

                    ``(I) customer records of public utilities and 
                cable television companies; and
                    ``(II) information (including information on assets 
                and liabilities) on individuals who owe or are owed 
                support (or against or with respect to whom a support 
                obligation is sought) held by financial institutions 
                (subject to limitations on liability of such entities 
                arising from affording such access), as provided 
                pursuant to agreements described in subsection (a)(18).

            ``(E) Change in payee.--In cases in which support is 
        subject to an assignment in order to comply with a requirement 
        imposed pursuant to part A or section 1912, or to a requirement 
        to pay through the State disbursement unit established pursuant 
        to section 454B, upon providing notice to obligor and obligee, 
        to direct the obligor or other payor to change the payee to the 
        appropriate government entity.
            ``(F) Income withholding.--To order income withholding in 
        accordance with subsections (a)(1) and (b) of section 466.
            ``(G) Securing assets.--In cases in which there is a 
        support arrearage, to secure assets to satisfy the arrearage 
        by--
                ``(i) intercepting or seizing periodic or lump-sum 
            payments from--

                    ``(I) a State or local agency, including 
                unemployment compensation, workers' compensation, and 
                other benefits; and
                    ``(II) judgments, settlements, and lotteries;

                ``(ii) attaching and seizing assets of the obligor held 
            in financial institutions;
                ``(iii) attaching public and private retirement funds; 
            and
                ``(iv) imposing liens in accordance with subsection 
            (a)(4) and, in appropriate cases, to force sale of property 
            and distribution of proceeds.
            ``(H) Increase monthly payments.--For the purpose of 
        securing overdue support, to increase the amount of monthly 
        support payments to include amounts for arrearages, subject to 
        such conditions or limitations as the State may provide.
    Such procedures shall be subject to due process safeguards, 
    including (as appropriate) requirements for notice, opportunity to 
    contest the action, and opportunity for an appeal on the record to 
    an independent administrative or judicial tribunal.
        ``(2) Substantive and procedural rules.--The expedited 
    procedures required under subsection (a)(2) shall include the 
    following rules and authority, applicable with respect to all 
    proceedings to establish paternity or to establish, modify, or 
    enforce support orders:
            ``(A) Locator information; presumptions concerning 
        notice.--Procedures under which--
                ``(i) each party to any paternity or child support 
            proceeding is required (subject to privacy safeguards) to 
            file with the tribunal and the State case registry upon 
            entry of an order, and to update as appropriate, 
            information on location and identity of the party, 
            including social security number, residential and mailing 
            addresses, telephone number, driver's license number, and 
            name, address, and name and telephone number of employer; 
            and
                ``(ii) in any subsequent child support enforcement 
            action between the parties, upon sufficient showing that 
            diligent effort has been made to ascertain the location of 
            such a party, the tribunal may deem State due process 
            requirements for notice and service of process to be met 
            with respect to the party, upon delivery of written notice 
            to the most recent residential or employer address filed 
            with the tribunal pursuant to clause (i).
            ``(B) Statewide jurisdiction.--Procedures under which--
                ``(i) the State agency and any administrative or 
            judicial tribunal with authority to hear child support and 
            paternity cases exerts statewide jurisdiction over the 
            parties; and
                ``(ii) in a State in which orders are issued by courts 
            or administrative tribunals, a case may be transferred 
            between local jurisdictions in the State without need for 
            any additional filing by the petitioner, or service of 
            process upon the respondent, to retain jurisdiction over 
            the parties.
        ``(3) Coordination with erisa.--Notwithstanding subsection (d) 
    of section 514 of the Employee Retirement Income Security Act of 
    1974 (relating to effect on other laws), nothing in this subsection 
    shall be construed to alter, amend, modify, invalidate, impair, or 
    supersede subsections (a), (b), and (c) of such section 514 as it 
    applies with respect to any procedure referred to in paragraph (1) 
    and any expedited procedure referred to in paragraph (2), except to 
    the extent that such procedure would be consistent with the 
    requirements of section 206(d)(3) of such Act (relating to 
    qualified domestic relations orders) or the requirements of section 
    609(a) of such Act (relating to qualified medical child support 
    orders) if the reference in such section 206(d)(3) to a domestic 
    relations order and the reference in such section 609(a) to a 
    medical child support order were a reference to a support order 
    referred to in paragraphs (1) and (2) relating to the same matters, 
    respectively.''.
    (b) Automation of State Agency Functions.--Section 454A, as added 
by section 12344(a)(2) and as amended by sections 12311 and 12312(c) of 
this Act, is amended by adding at the end the following new subsection:
    ``(h) Expedited Administrative Procedures.--The automated system 
required by this section shall be used, to the maximum extent feasible, 
to implement the expedited administrative procedures required by 
section 466(c).''.

                   CHAPTER 4--PATERNITY ESTABLISHMENT

SEC. 12331. STATE LAWS CONCERNING PATERNITY ESTABLISHMENT.

    (a) State Laws Required.--Section 466(a)(5) (42 U.S.C. 666(a)(5)) 
is amended to read as follows:
        ``(5) Procedures concerning paternity establishment.--
            ``(A) Establishment process available from birth until age 
        18.--
                ``(i) Procedures which permit the establishment of the 
            paternity of a child at any time before the child attains 
            18 years of age.
                ``(ii) As of August 16, 1984, clause (i) shall also 
            apply to a child for whom paternity has not been 
            established or for whom a paternity action was brought but 
            dismissed because a statute of limitations of less than 18 
            years was then in effect in the State.
            ``(B) Procedures concerning genetic testing.--
                ``(i) Genetic testing required in certain contested 
            cases.--Procedures under which the State is required, in a 
            contested paternity case (unless otherwise barred by State 
            law) to require the child and all other parties (other than 
            individuals found under section 454(29) to have good cause 
            for refusing to cooperate) to submit to genetic tests upon 
            the request of any such party, if the request is supported 
            by a sworn statement by the party--

                    ``(I) alleging paternity, and setting forth facts 
                establishing a reasonable possibility of the requisite 
                sexual contact between the parties; or
                    ``(II) denying paternity, and setting forth facts 
                establishing a reasonable possibility of the 
                nonexistence of sexual contact between the parties.

                ``(ii) Other requirements.--Procedures which require 
            the State agency, in any case in which the agency orders 
            genetic testing--

                    ``(I) to pay costs of such tests, subject to 
                recoupment (if the State so elects) from the alleged 
                father if paternity is established; and
                    ``(II) to obtain additional testing in any case if 
                an original test result is contested, upon request and 
                advance payment by the contestant.

            ``(C) Voluntary paternity acknowledgment.--
                ``(i) Simple civil process.--Procedures for a simple 
            civil process for voluntarily acknowledging paternity under 
            which the State must provide that, before a mother and a 
            putative father can sign an acknowledgment of paternity, 
            the mother and the putative father must be given notice, 
            orally and in writing, of the alternatives to, the legal 
            consequences of, and the rights (including, if 1 parent is 
            a minor, any rights afforded due to minority status) and 
            responsibilities that arise from, signing the 
            acknowledgment.
                ``(ii) Hospital-based program.--Such procedures must 
            include a hospital-based program for the voluntary 
            acknowledgment of paternity focusing on the period 
            immediately before or after the birth of a child, subject 
            to such good cause exceptions, taking into account the best 
            interests of the child, as the State may establish.
                ``(iii) Paternity establishment services.--

                    ``(I) State-offered services.--Such procedures must 
                require the State agency responsible for maintaining 
                birth records to offer voluntary paternity 
                establishment services.
                    ``(II) Regulations.--

                        ``(aa) Services offered by hospitals and birth 
                    record agencies.--The Secretary shall prescribe 
                    regulations governing voluntary paternity 
                    establishment services offered by hospitals and 
                    birth record agencies.
                        ``(bb) Services offered by other entities.--The 
                    Secretary shall prescribe regulations specifying 
                    the types of other entities that may offer 
                    voluntary paternity establishment services, and 
                    governing the provision of such services, which 
                    shall include a requirement that such an entity 
                    must use the same notice provisions used by, use 
                    the same materials used by, provide the personnel 
                    providing such services with the same training 
                    provided by, and evaluate the provision of such 
                    services in the same manner as the provision of 
                    such services is evaluated by, voluntary paternity 
                    establishment programs of hospitals and birth 
                    record agencies.
                ``(iv) Use of paternity acknowledgment affidavit.--Such 
            procedures must require the State to develop and use an 
            affidavit for the voluntary acknowledgment of paternity 
            which includes the minimum requirements of the affidavit 
            developed by the Secretary under section 452(a)(7) for the 
            voluntary acknowledgment of paternity, and to give full 
            faith and credit to such an affidavit signed in any other 
            State according to its procedures.
            ``(D) Status of signed paternity acknowledgment.--
                ``(i) Inclusion in birth records.--Procedures under 
            which the name of the father shall be included on the 
            record of birth of the child only if--

                    ``(I) the father and mother have signed a voluntary 
                acknowledgment of paternity; or
                    ``(II) a court or an administrative agency of 
                competent jurisdiction has issued an adjudication of 
                paternity.

            Nothing in this clause shall preclude a State agency from 
            obtaining an admission of paternity from the father for 
            submission in a judicial or administrative proceeding, or 
            prohibit the issuance of an order in a judicial or 
            administrative proceeding which bases a legal finding of 
            paternity on an admission of paternity by the father and 
            any other additional showing required by State law.
                ``(ii) Legal finding of paternity.--Procedures under 
            which a signed voluntary acknowledgment of paternity is 
            considered a legal finding of paternity, subject to the 
            right of any signatory to rescind the acknowledgment within 
            the earlier of--

                    ``(I) 60 days; or
                    ``(II) the date of an administrative or judicial 
                proceeding relating to the child (including a 
                proceeding to establish a support order) in which the 
                signatory is a party.

                ``(iii) Contest.--Procedures under which, after the 60-
            day period referred to in clause (ii), a signed voluntary 
            acknowledgment of paternity may be challenged in court only 
            on the basis of fraud, duress, or material mistake of fact, 
            with the burden of proof upon the challenger, and under 
            which the legal responsibilities (including child support 
            obligations) of any signatory arising from the 
            acknowledgment may not be suspended during the challenge, 
            except for good cause shown.
            ``(E) Bar on acknowledgment ratification proceedings.--
        Procedures under which judicial or administrative proceedings 
        are not required or permitted to ratify an unchallenged 
        acknowledgment of paternity.
            ``(F) Admissibility of genetic testing results.--
        Procedures--
                ``(i) requiring the admission into evidence, for 
            purposes of establishing paternity, of the results of any 
            genetic test that is--

                    ``(I) of a type generally acknowledged as reliable 
                by accreditation bodies designated by the Secretary; 
                and
                    ``(II) performed by a laboratory approved by such 
                an accreditation body;

                ``(ii) requiring an objection to genetic testing 
            results to be made in writing not later than a specified 
            number of days before any hearing at which the results may 
            be introduced into evidence (or, at State option, not later 
            than a specified number of days after receipt of the 
            results); and
                ``(iii) making the test results admissible as evidence 
            of paternity without the need for foundation testimony or 
            other proof of authenticity or accuracy, unless objection 
            is made.
            ``(G) Presumption of paternity in certain cases.--
        Procedures which create a rebuttable or, at the option of the 
        State, conclusive presumption of paternity upon genetic testing 
        results indicating a threshold probability that the alleged 
        father is the father of the child.
            ``(H) Default orders.--Procedures requiring a default order 
        to be entered in a paternity case upon a showing of service of 
        process on the defendant and any additional showing required by 
        State law.
            ``(I) No right to jury trial.--Procedures providing that 
        the parties to an action to establish paternity are not 
        entitled to a trial by jury.
            ``(J) Temporary support order based on probable paternity 
        in contested cases.--Procedures which require that a temporary 
        order be issued, upon motion by a party, requiring the 
        provision of child support pending an administrative or 
        judicial determination of parentage, if there is clear and 
        convincing evidence of paternity (on the basis of genetic tests 
        or other evidence).
            ``(K) Proof of certain support and paternity establishment 
        costs.--Procedures under which bills for pregnancy, childbirth, 
        and genetic testing are admissible as evidence without 
        requiring third-party foundation testimony, and shall 
        constitute prima facie evidence of amounts incurred for such 
        services or for testing on behalf of the child.
            ``(L) Standing of putative fathers.--Procedures ensuring 
        that the putative father has a reasonable opportunity to 
        initiate a paternity action.
            ``(M) Filing of acknowledgments and adjudications in state 
        registry of birth records.--Procedures under which voluntary 
        acknowledgments and adjudications of paternity by judicial or 
        administrative processes are filed with the State registry of 
        birth records for comparison with information in the State case 
        registry.''.
    (b) National Paternity Acknowledgment Affidavit.--Section 452(a)(7) 
(42 U.S.C. 652(a)(7)) is amended by inserting ``, and develop an 
affidavit to be used for the voluntary acknowledgment of paternity 
which shall include the social security number of each parent and, 
after consultation with the States, other common elements as determined 
by such designee'' before the semicolon.
    (c) Conforming Amendment.--Section 468 (42 U.S.C. 668) is amended 
by striking ``a simple civil process for voluntarily acknowledging 
paternity and''.

SEC. 12332. OUTREACH FOR VOLUNTARY PATERNITY ESTABLISHMENT.

    Section 454(23) (42 U.S.C. 654(23)) is amended by inserting ``and 
will publicize the availability and encourage the use of procedures for 
voluntary establishment of paternity and child support by means the 
State deems appropriate'' before the semicolon.

SEC. 12333. COOPERATION BY APPLICANTS FOR AND RECIPIENTS OF TEMPORARY 
              FAMILY ASSISTANCE.

    Section 454 (42 U.S.C. 654), as amended by sections 12301(b), 
12303(a), 12312(a), and 12313(a) of this Act, is amended--
        (1) by striking ``and'' at the end of paragraph (27);
        (2) by striking the period at the end of paragraph (28) and 
    inserting ``; and''; and
        (3) by inserting after paragraph (28) the following new 
    paragraph:
        ``(29) provide that the State agency responsible for 
    administering the State plan--
            ``(A) shall make the determination (and redetermination at 
        appropriate intervals) as to whether an individual who has 
        applied for or is receiving assistance under the State program 
        funded under part A or the State program under title XXI is 
        cooperating in good faith with the State in establishing the 
        paternity of, or in establishing, modifying, or enforcing a 
        support order for, any child of the individual by providing the 
        State agency with the name of, and such other information as 
        the State agency may require with respect to, the noncustodial 
        parent of the child, subject to such good cause exceptions, 
        taking into account the best interests of the child, as the 
        State may establish through the State agency, or at the option 
        of the State, through the State agencies administering the 
        State programs funded under part A and title XXI;
            ``(B) shall require the individual to supply additional 
        necessary information and appear at interviews, hearings, and 
        legal proceedings;
            ``(C) shall require the individual and the child to submit 
        to genetic tests pursuant to judicial or administrative order;
            ``(D) may request that the individual sign a voluntary 
        acknowledgment of paternity, after notice of the rights and 
        consequences of such an acknowledgment, but may not require the 
        individual to sign an acknowledgment or otherwise relinquish 
        the right to genetic tests as a condition of cooperation and 
        eligibility for assistance under the State program funded under 
        part A or the State program under title XXI; and
            ``(E) shall promptly notify the individual and the State 
        agency administering the State program funded under part A and 
        the State agency administering the State program under title 
        XXI of each such determination, and if noncooperation is 
        determined, the basis therefore.''.

             CHAPTER 5--PROGRAM ADMINISTRATION AND FUNDING

SEC. 12341. PERFORMANCE-BASED INCENTIVES AND PENALTIES.

    (a) Development of New System.--The Secretary of Health and Human 
Services, in consultation with State directors of programs under part D 
of title IV of the Social Security Act, shall develop a new incentive 
system to replace the system under section 458 of such Act. The new 
system shall provide additional payments to any State based on such 
State's performance under such a program.
    (b) Conforming Amendments to Present System.--Section 458 (42 
U.S.C. 658) is amended--
        (1) in subsection (a), by striking ``aid to families with 
    dependent children under a State plan approved under part A of this 
    title'' and inserting ``assistance under a program funded under 
    part A'';
        (2) in subsection (b)(1)(A), by striking ``section 402(a)(26)'' 
    and inserting ``section 407(a)(4)'';
        (3) in subsections (b) and (c)--
            (A) by striking ``AFDC collections'' each place it appears 
        and inserting ``title IV-A collections'', and
            (B) by striking ``non-AFDC collections'' each place it 
        appears and inserting ``non-title IV-A collections''; and
        (4) in subsection (c), by striking ``combined AFDC/non-AFDC 
    administrative costs'' both places it appears and inserting 
    ``combined title IV-A/non-title IV-A administrative costs''.
    (c) Calculation of IV-D Paternity Establishment Percentage.--
        (1) Section 452(g)(1) (42 U.S.C. 652(g)(1)) is amended in each 
    of subparagraphs (A) and (B), by striking ``75'' and inserting 
    ``90''.
        (2) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is amended in 
    the matter preceding clause (i)--
            (A) by striking ``paternity establishment percentage'' and 
        inserting ``IV-D paternity establishment percentage''; and
            (B) by striking ``(or all States, as the case may be)''.
        (3) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended by 
    adding at the end the following new sentence: ``In meeting the 90-
    percent paternity establishment requirement, a State may calculate 
    either the paternity establishment rate of cases in the program 
    funded under this part or the paternity establishment rate of all 
    out-of-wedlock births in the State.''.
        (4) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is amended--
            (A) by striking subparagraph (A) and redesignating 
        subparagraphs (B) and (C) as subparagraphs (A) and (B), 
        respectively;
            (B) in subparagraph (A) (as so redesignated), by striking 
        ``the percentage of children born out-of-wedlock in a State'' 
        and inserting ``the percentage of children in a State who are 
        born out-of-wedlock or for whom support has not been 
        established''; and
            (C) in subparagraph (B) (as so redesignated) by inserting 
        ``and securing support'' before the period.
    (d) Effective Dates.--
        (1) Incentive adjustments.--
            (A) In general.--The system developed under subsection (a) 
        and the amendments made by subsection (b) shall become 
        effective on October 1, 1997, except to the extent provided in 
        subparagraph (B).
            (B) Application of section 458.--Section 458 of the Social 
        Security Act, as in effect on the day before the date of the 
        enactment of this section, shall be effective for purposes of 
        incentive payments to States for fiscal years before fiscal 
        year 1999.
        (2) Penalty reductions.--The amendments made by subsection (c) 
    shall become effective with respect to calendar quarters beginning 
    on or after the date of the enactment of this Act.

SEC. 12342. FEDERAL AND STATE REVIEWS AND AUDITS.

    (a) State Agency Activities.--Section 454 (42 U.S.C. 654) is 
amended--
        (1) in paragraph (14), by striking ``(14)'' and inserting 
    ``(14)(A)'';
        (2) by redesignating paragraph (15) as subparagraph (B) of 
    paragraph (14); and
        (3) by inserting after paragraph (14) the following new 
    paragraph:
        ``(15) provide for--
            ``(A) a process for annual reviews of and reports to the 
        Secretary on the State program operated under the State plan 
        approved under this part, including such information as may be 
        necessary to measure State compliance with Federal requirements 
        for expedited procedures, using such standards and procedures 
        as are required by the Secretary, under which the State agency 
        will determine the extent to which the program is operated in 
        compliance with this part; and
            ``(B) a process of extracting from the automated data 
        processing system required by paragraph (16) and transmitting 
        to the Secretary data and calculations concerning the levels of 
        accomplishment (and rates of improvement) with respect to 
        applicable performance indicators (including IV-D paternity 
        establishment percentages to the extent necessary for purposes 
        of sections 452(g) and 458.''.
    (b) Federal Activities.--Section 452(a)(4) (42 U.S.C. 652(a)(4)) is 
amended to read as follows:
        ``(4)(A) review data and calculations transmitted by State 
    agencies pursuant to section 454(15)(B) on State program 
    accomplishments with respect to performance indicators for purposes 
    of subsection (g) of this section and section 458;
        ``(B) review annual reports submitted pursuant to section 
    454(15)(A) and, as appropriate, provide to the State comments, 
    recommendations for additional or alternative corrective actions, 
    and technical assistance; and
        ``(C) conduct audits, in accordance with the Government 
    auditing standards of the Comptroller General of the United 
    States--
            ``(i) at least once every 3 years (or more frequently, in 
        the case of a State which fails to meet the requirements of 
        this part concerning performance standards and reliability of 
        program data) to assess the completeness, reliability, and 
        security of the data, and the accuracy of the reporting 
        systems, used in calculating performance indicators under 
        subsection (g) of this section and section 458;
            ``(ii) of the adequacy of financial management of the State 
        program operated under the State plan approved under this part, 
        including assessments of--
                ``(I) whether Federal and other funds made available to 
            carry out the State program are being appropriately 
            expended, and are properly and fully accounted for; and
                ``(II) whether collections and disbursements of support 
            payments are carried out correctly and are fully accounted 
            for; and
            ``(iii) for such other purposes as the Secretary may find 
        necessary;''.
    (c) Effective Date.--The amendments made by this section shall be 
effective with respect to calendar quarters beginning 12 months or more 
after the date of the enactment of this Act.

SEC. 12343. REQUIRED REPORTING PROCEDURES.

    (a) Establishment.--Section 452(a)(5) (42 U.S.C. 652(a)(5)) is 
amended by inserting ``, and establish procedures to be followed by 
States for collecting and reporting information required to be provided 
under this part, and establish uniform definitions (including those 
necessary to enable the measurement of State compliance with the 
requirements of this part relating to expedited processes) to be 
applied in following such procedures'' before the semicolon.
    (b) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 12301(b), 12303(a), 12312(a), 12313(a), and 12333 
of this Act, is amended--
        (1) by striking ``and'' at the end of paragraph (28);
        (2) by striking the period at the end of paragraph (29) and 
    inserting ``; and''; and
        (3) by adding after paragraph (29) the following new paragraph:
        ``(30) provide that the State shall use the definitions 
    established under section 452(a)(5) in collecting and reporting 
    information as required under this part.''.

SEC. 12344. AUTOMATED DATA PROCESSING REQUIREMENTS.

    (a) Revised Requirements.--
        (1) In general.--Section 454(16) (42 U.S.C. 654(16)) is 
    amended--
            (A) by striking ``, at the option of the State,'';
            (B) by inserting ``and operation by the State agency'' 
        after ``for the establishment'';
            (C) by inserting ``meeting the requirements of section 
        454A'' after ``information retrieval system'';
            (D) by striking ``in the State and localities thereof, so 
        as (A)'' and inserting ``so as'';
            (E) by striking ``(i)''; and
            (F) by striking ``(including'' and all that follows and 
        inserting a semicolon.
        (2) Automated data processing.--Part D of title IV (42 U.S.C. 
    651-669) is amended by inserting after section 454 the following 
    new section:

``SEC. 454A. AUTOMATED DATA PROCESSING.

    ``(a) In General.--In order for a State to meet the requirements of 
this section, the State agency administering the State program under 
this part shall have in operation a single statewide automated data 
processing and information retrieval system which has the capability to 
perform the tasks specified in this section with the frequency and in 
the manner required by or under this part.
    ``(b) Program Management.--The automated system required by this 
section shall perform such functions as the Secretary may specify 
relating to management of the State program under this part, 
including--
        ``(1) controlling and accounting for use of Federal, State, and 
    local funds in carrying out the program; and
        ``(2) maintaining the data necessary to meet Federal reporting 
    requirements under this part on a timely basis.
    ``(c) Calculation of Performance Indicators.--In order to enable 
the Secretary to determine the incentive payments and penalty 
adjustments required by sections 452(g) and 458, the State agency 
shall--
        ``(1) use the automated system--
            ``(A) to maintain the requisite data on State performance 
        with respect to paternity establishment and child support 
        enforcement in the State; and
            ``(B) to calculate the IV-D paternity establishment 
        percentage for the State for each fiscal year; and
        ``(2) have in place systems controls to ensure the completeness 
    and reliability of, and ready access to, the data described in 
    paragraph (1)(A), and the accuracy of the calculations described in 
    paragraph (1)(B).
    ``(d) Information Integrity and Security.--The State agency shall 
have in effect safeguards on the integrity, accuracy, and completeness 
of, access to, and use of data in the automated system required by this 
section, which shall include the following (in addition to such other 
safeguards as the Secretary may specify in regulations):
        ``(1) Policies restricting access.--Written policies concerning 
    access to data by State agency personnel, and sharing of data with 
    other persons, which--
            ``(A) permit access to and use of data only to the extent 
        necessary to carry out the State program under this part; and
            ``(B) specify the data which may be used for particular 
        program purposes, and the personnel permitted access to such 
        data.
        ``(2) Systems controls.--Systems controls (such as passwords or 
    blocking of fields) to ensure strict adherence to the policies 
    described in paragraph (1).
        ``(3) Monitoring of access.--Routine monitoring of access to 
    and use of the automated system, through methods such as audit 
    trails and feedback mechanisms, to guard against and promptly 
    identify unauthorized access or use.
        ``(4) Training and information.--Procedures to ensure that all 
    personnel (including State and local agency staff and contractors) 
    who may have access to or be required to use confidential program 
    data are informed of applicable requirements and penalties 
    (including those in section 6103 of the Internal Revenue Code of 
    1986), and are adequately trained in security procedures.
        ``(5) Penalties.--Administrative penalties (up to and including 
    dismissal from employment) for unauthorized access to, or 
    disclosure or use of, confidential data.''.
        (3) Regulations.--The Secretary of Health and Human Services 
    shall prescribe final regulations for implementation of section 
    454A of the Social Security Act not later than 2 years after the 
    date of the enactment of this Act.
        (4) Implementation timetable.--Section 454(24) (42 U.S.C. 
    654(24)), as amended by section 12303(a)(1) of this Act, is amended 
    to read as follows:
        ``(24) provide that the State will have in effect an automated 
    data processing and information retrieval system--
            ``(A) by October 1, 1997, which meets all requirements of 
        this part which were enacted on or before the date of enactment 
        of the Family Support Act of 1988, and
            ``(B) by October 1, 1999, which meets all requirements of 
        this part enacted on or before the date of the enactment of the 
        Personal Responsibility and Work Opportunity Act of 1995, 
        except that such deadline shall be extended by 1 day for each 
        day (if any) by which the Secretary fails to meet the deadline 
        imposed by section 12344(a)(3) of the Personal Responsibility 
        and Work Opportunity Act of 1995;''.
    (b) Special Federal Matching Rate for Development Costs of 
Automated Systems.--
        (1) In general.--Section 455(a) (42 U.S.C. 655(a)) is amended--
            (A) in paragraph (1)(B)--
                (i) by striking ``90 percent'' and inserting ``the 
            percent specified in paragraph (3)'';
                (ii) by striking ``so much of''; and
                (iii) by striking ``which the Secretary'' and all that 
            follows and inserting ``, and''; and
            (B) by adding at the end the following new paragraph:
    ``(3)(A) The Secretary shall pay to each State, for each quarter in 
fiscal years 1996 and 1997, 90 percent of so much of the State 
expenditures described in paragraph (1)(B) as the Secretary finds are 
for a system meeting the requirements specified in section 454(16) (as 
in effect on September 30, 1995) but limited to the amount approved for 
States in the advance planning documents of such States submitted on or 
before May 1, 1995.
    ``(B)(i) The Secretary shall pay to each State, for each quarter in 
fiscal years 1997 through 2001, the percentage specified in clause (ii) 
of so much of the State expenditures described in paragraph (1)(B) as 
the Secretary finds are for a system meeting the requirements of 
sections 454(16) and 454A.
    ``(ii) The percentage specified in this clause is 80 percent.''.
        (2) Temporary limitation on payments under special federal 
    matching rate.--
            (A) In general.--The Secretary of Health and Human Services 
        may not pay more than $400,000,000 in the aggregate under 
        section 455(a)(3) of the Social Security Act for fiscal years 
        1996, 1997, 1998, 1999, and 2000.
            (B) Allocation of limitation among states.--The total 
        amount payable to a State under section 455(a)(3) of such Act 
        for fiscal years 1996, 1997, 1998, 1999, and 2000 shall not 
        exceed the limitation determined for the State by the Secretary 
        of Health and Human Services in regulations.
            (C) Allocation formula.--The regulations referred to in 
        subparagraph (B) shall prescribe a formula for allocating the 
        amount specified in subparagraph (A) among States with plans 
        approved under part D of title IV of the Social Security Act, 
        which shall take into account--
                (i) the relative size of State caseloads under such 
            part; and
                (ii) the level of automation needed to meet the 
            automated data processing requirements of such part.
    (c) Conforming Amendment.--Section 123(c) of the Family Support Act 
of 1988 (102 Stat. 2352; Public Law 100-485) is repealed.

SEC. 12345. TECHNICAL ASSISTANCE.

    (a) For Training of Federal and State Staff, Research and 
Demonstration Programs, and Special Projects of Regional or National 
Significance.--Section 452 (42 U.S.C. 652) is amended by adding at the 
end the following new subsection:
    ``(j) Out of any money in the Treasury of the United States not 
otherwise appropriated, there is hereby appropriated to the Secretary 
for each fiscal year an amount equal to 1 percent of the total amount 
paid to the Federal Government pursuant to section 457(a) during the 
immediately preceding fiscal year (as determined on the basis of the 
most recent reliable data available to the Secretary as of the end of 
the 3rd calendar quarter following the end of such preceding fiscal 
year), to cover costs incurred by the Secretary for--
        ``(1) information dissemination and technical assistance to 
    States, training of State and Federal staff, staffing studies, and 
    related activities needed to improve programs under this part 
    (including technical assistance concerning State automated systems 
    required by this part); and
        ``(2) research, demonstration, and special projects of regional 
    or national significance relating to the operation of State 
    programs under this part.''.
    (b) Operation of Federal Parent Locator Service.--Section 453 (42 
U.S.C. 653), as amended by section 12316 of this Act, is amended by 
adding at the end the following new subsection:
    ``(o) Recovery of Costs.--Out of any money in the Treasury of the 
United States not otherwise appropriated, there is hereby appropriated 
to the Secretary for each fiscal year an amount equal to 2 percent of 
the total amount paid to the Federal Government pursuant to section 
457(a) during the immediately preceding fiscal year (as determined on 
the basis of the most recent reliable data available to the Secretary 
as of the end of the 3rd calendar quarter following the end of such 
preceding fiscal year), to cover costs incurred by the Secretary for 
operation of the Federal Parent Locator Service under this section, to 
the extent such costs are not recovered through user fees.''.

SEC. 12346. REPORTS AND DATA COLLECTION BY THE SECRETARY.

    (a) Annual Report to Congress.--
        (1) Section 452(a)(10)(A) (42 U.S.C. 652(a)(10)(A)) is 
    amended--
            (A) by striking ``this part;'' and inserting ``this part, 
        including--''; and
            (B) by adding at the end the following new clauses:
                ``(i) the total amount of child support payments 
            collected as a result of services furnished during the 
            fiscal year to individuals receiving services under this 
            part;
                ``(ii) the cost to the States and to the Federal 
            Government of so furnishing the services; and
                ``(iii) the number of cases involving families--

                    ``(I) who became ineligible for assistance under 
                State programs funded under part A during a month in 
                the fiscal year; and
                    ``(II) with respect to whom a child support payment 
                was received in the month;''.

        (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
    amended--
            (A) in the matter preceding clause (i)--
                (i) by striking ``with the data required under each 
            clause being separately stated for cases'' and inserting 
            ``separately stated for (1) cases'';
                (ii) by striking ``cases where the child was formerly 
            receiving'' and inserting ``or formerly received'';
                (iii) by inserting ``or 1912'' after ``471(a)(17)''; 
            and
                (iv) by inserting ``(2)'' before ``all other'';
            (B) in each of clauses (i) and (ii), by striking ``, and 
        the total amount of such obligations'';
            (C) in clause (iii), by striking ``described in'' and all 
        that follows and inserting ``in which support was collected 
        during the fiscal year;'';
            (D) by striking clause (iv); and
            (E) by redesignating clause (v) as clause (vii), and 
        inserting after clause (iii) the following new clauses:
                ``(iv) the total amount of support collected during 
            such fiscal year and distributed as current support;
                ``(v) the total amount of support collected during such 
            fiscal year and distributed as arrearages;
                ``(vi) the total amount of support due and unpaid for 
            all fiscal years; and''.
        (3) Section 452(a)(10)(G) (42 U.S.C. 652(a)(10)(G)) is amended 
    by striking ``on the use of Federal courts and''.
        (4) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended--
            (A) in subparagraph (H), by striking ``and'';
            (B) in subparagraph (I), by striking the period and 
        inserting ``; and''; and
            (C) by inserting after subparagraph (I) the following new 
        subparagraph:
            ``(J) compliance, by State, with the standards established 
        pursuant to subsections (h) and (i).''.
        (5) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended by 
    striking all that follows subparagraph (J), as added by paragraph 
    (4).
    (b) Effective Date.--The amendments made by subsection (a) shall be 
effective with respect to fiscal year 1996 and succeeding fiscal years.

      CHAPTER 6--ESTABLISHMENT AND MODIFICATION OF SUPPORT ORDERS

SEC. 12351. SIMPLIFIED PROCESS FOR REVIEW AND ADJUSTMENT OF CHILD 
              SUPPORT ORDERS.

    Section 466(a)(10) (42 U.S.C. 666(a)(10)) is amended to read as 
follows:
        ``(10) Review and adjustment of support orders upon request.--
    Procedures under which the State shall review and adjust each 
    support order being enforced under this part upon the request of 
    either parent or the State if there is an assignment. Such 
    procedures shall provide the following:
            ``(A) In general.--
                ``(i) 3-year cycle.--Except as provided in 
            subparagraphs (B) and (C), the State shall review and, as 
            appropriate, adjust the support order every 3 years, taking 
            into account the best interests of the child involved.
                ``(ii) Methods of adjustment.--The State may elect to 
            review and, if appropriate, adjust an order pursuant to 
            clause (i) by--

                    ``(I) reviewing and, if appropriate, adjusting the 
                order in accordance with the guidelines established 
                pursuant to section 467(a) if the amount of the child 
                support award under the order differs from the amount 
                that would be awarded in accordance with the 
                guidelines; or
                    ``(II) applying a cost-of-living adjustment to the 
                order in accordance with a formula developed by the 
                State and permit either party to contest the 
                adjustment, within 30 days after the date of the notice 
                of the adjustment, by making a request for review and, 
                if appropriate, adjustment of the order in accordance 
                with the child support guidelines established pursuant 
                to section 467(a).

                ``(iii) No proof of change in circumstances 
            necessary.--Any adjustment under this subparagraph (A) 
            shall be made without a requirement for proof or showing of 
            a change in circumstances.
            ``(B) Automated method.--The State may use automated 
        methods (including automated comparisons with wage or State 
        income tax data) to identify orders eligible for review, 
        conduct the review, identify orders eligible for adjustment, 
        and apply the appropriate adjustment to the orders eligible for 
        adjustment under the threshold established by the State.
            ``(C) Request upon substantial change in circumstances.--
        The State shall, at the request of either parent subject to 
        such an order or of any State child support enforcement agency, 
        review and, if appropriate, adjust the order in accordance with 
        the guidelines established pursuant to section 467(a) based 
        upon a substantial change in the circumstances of either 
        parent.
            ``(D) Notice of right to review.--The State shall provide 
        notice not less than once every 3 years to the parents subject 
        to such an order informing them of their right to request the 
        State to review and, if appropriate, adjust the order pursuant 
        to this paragraph. The notice may be included in the order.''.

SEC. 12352. FURNISHING CONSUMER REPORTS FOR CERTAIN PURPOSES RELATING 
              TO CHILD SUPPORT.

    Section 604 of the Fair Credit Reporting Act (15 U.S.C. 1681b) is 
amended by adding at the end the following new paragraphs:
        ``(4) In response to a request by the head of a State or local 
    child support enforcement agency (or a State or local government 
    official authorized by the head of such an agency), if the person 
    making the request certifies to the consumer reporting agency 
    that--
            ``(A) the consumer report is needed for the purpose of 
        establishing an individual's capacity to make child support 
        payments or determining the appropriate level of such payments;
            ``(B) the paternity of the consumer for the child to which 
        the obligation relates has been established or acknowledged by 
        the consumer in accordance with State laws under which the 
        obligation arises (if required by those laws);
            ``(C) the person has provided at least 10 days' prior 
        notice to the consumer whose report is requested, by certified 
        or registered mail to the last known address of the consumer, 
        that the report will be requested; and
            ``(D) the consumer report will be kept confidential, will 
        be used solely for a purpose described in subparagraph (A), and 
        will not be used in connection with any other civil, 
        administrative, or criminal proceeding, or for any other 
        purpose.
        ``(5) To an agency administering a State plan under section 454 
    of the Social Security Act (42 U.S.C. 654) for use to set an 
    initial or modified child support award.''.

SEC. 12353. NONLIABILITY FOR FINANCIAL INSTITUTIONS PROVIDING FINANCIAL 
              RECORDS TO STATE CHILD SUPPORT ENFORCEMENT AGENCIES IN 
              CHILD SUPPORT CASES.

    (a) In General.--Notwithstanding any other provision of Federal or 
State law, a financial institution shall not be liable under any 
Federal or State law to any person for disclosing any financial record 
of an individual to a State child support enforcement agency attempting 
to establish, modify, or enforce a child support obligation of such 
individual.
    (b) Prohibition of Disclosure of Financial Record Obtained by State 
Child Support Enforcement Agency.--A State child support enforcement 
agency which obtains a financial record of an individual from a 
financial institution pursuant to subsection (a) may disclose such 
financial record only for the purpose of, and to the extent necessary 
in, establishing, modifying, or enforcing a child support obligation of 
such individual.
    (c) Civil Damages for Unauthorized Disclosure.--
        (1) Disclosure by state officer or employee.--If any person 
    knowingly, or by reason of negligence, discloses a financial record 
    of an individual in violation of subsection (b), such individual 
    may bring a civil action for damages against such person in a 
    district court of the United States.
        (2) No liability for good faith but erroneous interpretation.--
    No liability shall arise under this subsection with respect to any 
    disclosure which results from a good faith, but erroneous, 
    interpretation of subsection (b).
        (3) Damages.--In any action brought under paragraph (1), upon a 
    finding of liability on the part of the defendant, the defendant 
    shall be liable to the plaintiff in an amount equal to the sum of--
            (A) the greater of--
                (i) $1,000 for each act of unauthorized disclosure of a 
            financial record with respect to which such defendant is 
            found liable; or
                (ii) the sum of--

                    (I) the actual damages sustained by the plaintiff 
                as a result of such unauthorized disclosure; plus
                    (II) in the case of a willful disclosure or a 
                disclosure which is the result of gross negligence, 
                punitive damages; plus

            (B) the costs (including attorney's fees) of the action.
    (d) Definitions.--For purposes of this section--
        (1) Financial institution.--The term ``financial institution'' 
    means--
            (A) a depository institution, as defined in section 3(c) of 
        the Federal Deposit Insurance Act (12 U.S.C. 1813(c));
            (B) an institution-affiliated party, as defined in section 
        3(u) of such Act (12 U.S.C. 1813(v));
            (C) any Federal credit union or State credit union, as 
        defined in section 101 of the Federal Credit Union Act (12 
        U.S.C. 1752), including an institution-affiliated party of such 
        a credit union, as defined in section 206(r) of such Act (12 
        U.S.C. 1786(r)); and
            (D) any benefit association, insurance company, safe 
        deposit company, money-market mutual fund, or similar entity 
        authorized to do business in the State.
        (2) Financial record.--The term ``financial record'' has the 
    meaning given such term in section 1101 of the Right to Financial 
    Privacy Act of 1978 (12 U.S.C. 3401).
        (3) State child support enforcement agency.--The term ``State 
    child support enforcement agency'' means a State agency which 
    administers a State program for establishing and enforcing child 
    support obligations.

                CHAPTER 7--ENFORCEMENT OF SUPPORT ORDERS

SEC. 12361. INTERNAL REVENUE SERVICE COLLECTION OF ARREARAGES.

    (a) Collection of Fees.--Section 6305(a) of the Internal Revenue 
Code of 1986 (relating to collection of certain liability) is amended--
        (1) by striking ``and'' at the end of paragraph (3);
        (2) by striking the period at the end of paragraph (4) and 
    inserting ``, and'';
        (3) by adding at the end the following new paragraph:
        ``(5) no additional fee may be assessed for adjustments to an 
    amount previously certified pursuant to such section 452(b) with 
    respect to the same obligor.''; and
        (4) by striking ``Secretary of Health, Education, and Welfare'' 
    each place it appears and inserting ``Secretary of Health and Human 
    Services''.
    (b) Effective Date.--The amendments made by this section shall 
become effective October 1, 1997.

SEC. 12362. AUTHORITY TO COLLECT SUPPORT FROM FEDERAL EMPLOYEES.

    (a) Consolidation and Streamlining of Authorities.--Section 459 (42 
U.S.C. 659) is amended to read as follows:

``SEC. 459. CONSENT BY THE UNITED STATES TO INCOME WITHHOLDING, 
              GARNISHMENT, AND SIMILAR PROCEEDINGS FOR ENFORCEMENT OF 
              CHILD SUPPORT AND ALIMONY OBLIGATIONS.

    ``(a) Consent to Support Enforcement.--Notwithstanding any other 
provision of law (including section 207 of this Act and section 5301 of 
title 38, United States Code), effective January 1, 1975, moneys (the 
entitlement to which is based upon remuneration for employment) due 
from, or payable by, the United States or the District of Columbia 
(including any agency, subdivision, or instrumentality thereof) to any 
individual, including members of the Armed Forces of the United States, 
shall be subject, in like manner and to the same extent as if the 
United States or the District of Columbia were a private person, to 
withholding in accordance with State law enacted pursuant to 
subsections (a)(1) and (b) of section 466 and regulations of the 
Secretary under such subsections, and to any other legal process 
brought, by a State agency administering a program under a State plan 
approved under this part or by an individual obligee, to enforce the 
legal obligation of the individual to provide child support or alimony.
    ``(b) Consent to Requirements Applicable to Private Person.--With 
respect to notice to withhold income pursuant to subsection (a)(1) or 
(b) of section 466, or any other order or process to enforce support 
obligations against an individual (if the order or process contains or 
is accompanied by sufficient data to permit prompt identification of 
the individual and the moneys involved), each governmental entity 
specified in subsection (a) shall be subject to the same requirements 
as would apply if the entity were a private person, except as otherwise 
provided in this section.
    ``(c) Designation of Agent; Response to Notice or Process.--
        ``(1) Designation of agent.--The head of each agency subject to 
    this section shall--
            ``(A) designate an agent or agents to receive orders and 
        accept service of process in matters relating to child support 
        or alimony; and
            ``(B) annually publish in the Federal Register the 
        designation of the agent or agents, identified by title or 
        position, mailing address, and telephone number.
        ``(2) Response to notice or process.--If an agent designated 
    pursuant to paragraph (1) of this subsection receives notice 
    pursuant to State procedures in effect pursuant to subsection 
    (a)(1) or (b) of section 466, or is effectively served with any 
    order, process, or interrogatory, with respect to an individual's 
    child support or alimony payment obligations, the agent shall--
            ``(A) as soon as possible (but not later than 15 days) 
        thereafter, send written notice of the notice or service 
        (together with a copy of the notice or service) to the 
        individual at the duty station or last-known home address of 
        the individual;
            ``(B) within 30 days (or such longer period as may be 
        prescribed by applicable State law) after receipt of a notice 
        pursuant to such State procedures, comply with all applicable 
        provisions of section 466; and
            ``(C) within 30 days (or such longer period as may be 
        prescribed by applicable State law) after effective service of 
        any other such order, process, or interrogatory, respond to the 
        order, process, or interrogatory.
    ``(d) Priority of Claims.--If a governmental entity specified in 
subsection (a) receives notice or is served with process, as provided 
in this section, concerning amounts owed by an individual to more than 
1 person--
        ``(1) support collection under section 466(b) must be given 
    priority over any other process, as provided in section 466(b)(7);
        ``(2) allocation of moneys due or payable to an individual 
    among claimants under section 466(b) shall be governed by section 
    466(b) and the regulations prescribed under such section; and
        ``(3) such moneys as remain after compliance with paragraphs 
    (1) and (2) shall be available to satisfy any other such processes 
    on a first-come, first-served basis, with any such process being 
    satisfied out of such moneys as remain after the satisfaction of 
    all such processes which have been previously served.
    ``(e) No Requirement to Vary Pay Cycles.--A governmental entity 
that is affected by legal process served for the enforcement of an 
individual's child support or alimony payment obligations shall not be 
required to vary its normal pay and disbursement cycle in order to 
comply with the legal process.
    ``(f) Relief From Liability.--
        ``(1) Neither the United States, nor the government of the 
    District of Columbia, nor any disbursing officer shall be liable 
    with respect to any payment made from moneys due or payable from 
    the United States to any individual pursuant to legal process 
    regular on its face, if the payment is made in accordance with this 
    section and the regulations issued to carry out this section.
        ``(2) No Federal employee whose duties include taking actions 
    necessary to comply with the requirements of subsection (a) with 
    regard to any individual shall be subject under any law to any 
    disciplinary action or civil or criminal liability or penalty for, 
    or on account of, any disclosure of information made by the 
    employee in connection with the carrying out of such actions.
    ``(g) Regulations.--Authority to promulgate regulations for the 
implementation of this section shall, insofar as this section applies 
to moneys due from (or payable by)--
        ``(1) the United States (other than the legislative or judicial 
    branches of the Federal Government) or the government of the 
    District of Columbia, be vested in the President (or the designee 
    of the President);
        ``(2) the legislative branch of the Federal Government, be 
    vested jointly in the President pro tempore of the Senate and the 
    Speaker of the House of Representatives (or their designees), and
        ``(3) the judicial branch of the Federal Government, be vested 
    in the Chief Justice of the United States (or the designee of the 
    Chief Justice).
    ``(h) Moneys Subject to Process.--
        ``(1) In general.--Subject to paragraph (2), moneys paid or 
    payable to an individual which are considered to be based upon 
    remuneration for employment, for purposes of this section--
            ``(A) consist of--
                ``(i) compensation paid or payable for personal 
            services of the individual, whether the compensation is 
            denominated as wages, salary, commission, bonus, pay, 
            allowances, or otherwise (including severance pay, sick 
            pay, and incentive pay);
                ``(ii) periodic benefits (including a periodic benefit 
            as defined in section 228(h)(3)) or other payments--

                    ``(I) under the insurance system established by 
                title II;
                    ``(II) under any other system or fund established 
                by the United States which provides for the payment of 
                pensions, retirement or retired pay, annuities, 
                dependents' or survivors' benefits, or similar amounts 
                payable on account of personal services performed by 
                the individual or any other individual;
                    ``(III) as compensation for death under any Federal 
                program;
                    ``(IV) under any Federal program established to 
                provide `black lung' benefits; or
                    ``(V) by the Secretary of Veterans Affairs as 
                pension, or as compensation for a service-connected 
                disability or death; and

                ``(iii) worker's compensation benefits paid under 
            Federal or State law; but
            ``(B) do not include any payment--
                ``(i) by way of reimbursement or otherwise, to defray 
            expenses incurred by the individual in carrying out duties 
            associated with the employment of the individual; or
                ``(ii) as allowances for members of the uniformed 
            services payable pursuant to chapter 7 of title 37, United 
            States Code, as prescribed by the Secretaries concerned 
            (defined by section 101(5) of such title) as necessary for 
            the efficient performance of duty.
        ``(2) Certain amounts excluded.--In determining the amount of 
    any moneys due from, or payable by, the United States to any 
    individual, there shall be excluded amounts which--
            ``(A) are owed by the individual to the United States;
            ``(B) are required by law to be, and are, deducted from the 
        remuneration or other payment involved, including Federal 
        employment taxes, and fines and forfeitures ordered by court-
        martial;
            ``(C) are properly withheld for Federal, State, or local 
        income tax purposes, if the withholding of the amounts is 
        authorized or required by law and if amounts withheld are not 
        greater than would be the case if the individual claimed all 
        dependents to which he was entitled (the withholding of 
        additional amounts pursuant to section 3402(i) of the Internal 
        Revenue Code of 1986 may be permitted only when the individual 
        presents evidence of a tax obligation which supports the 
        additional withholding);
            ``(D) are deducted as health insurance premiums;
            ``(E) are deducted as normal retirement contributions (not 
        including amounts deducted for supplementary coverage); or
            ``(F) are deducted as normal life insurance premiums from 
        salary or other remuneration for employment (not including 
        amounts deducted for supplementary coverage).
    ``(i) Definitions.--For purposes of this section--
        ``(1) United states.--The term `United States' includes any 
    department, agency, or instrumentality of the legislative, 
    judicial, or executive branch of the Federal Government, the United 
    States Postal Service, the Postal Rate Commission, any Federal 
    corporation created by an Act of Congress that is wholly owned by 
    the Federal Government, and the governments of the territories and 
    possessions of the United States.
        ``(2) Child support.--The term `child support', when used in 
    reference to the legal obligations of an individual to provide such 
    support, means amounts required to be paid under a judgment, 
    decree, or order, whether temporary, final, or subject to 
    modification, issued by a court or an administrative agency of 
    competent jurisdiction, for the support and maintenance of a child, 
    including a child who has attained the age of majority under the 
    law of the issuing State, or a child and the parent with whom the 
    child is living, which provides for monetary support, health care, 
    arrearages or reimbursement, and which may include other related 
    costs and fees, interest and penalties, income withholding, 
    attorney's fees, and other relief.
        ``(3) Alimony.--
            ``(A) In general.--The term `alimony', when used in 
        reference to the legal obligations of an individual to provide 
        the same, means periodic payments of funds for the support and 
        maintenance of the spouse (or former spouse) of the individual, 
        and (subject to and in accordance with State law) includes 
        separate maintenance, alimony pendente lite, maintenance, and 
        spousal support, and includes attorney's fees, interest, and 
        court costs when and to the extent that the same are expressly 
        made recoverable as such pursuant to a decree, order, or 
        judgment issued in accordance with applicable State law by a 
        court of competent jurisdiction.
            ``(B) Exceptions.--Such term does not include--
                ``(i) any child support; or
                ``(ii) any payment or transfer of property or its value 
            by an individual to the spouse or a former spouse of the 
            individual in compliance with any community property 
            settlement, equitable distribution of property, or other 
            division of property between spouses or former spouses.
        ``(4) Private person.--The term `private person' means a person 
    who does not have sovereign or other special immunity or privilege 
    which causes the person not to be subject to legal process.
        ``(5) Legal process.--The term `legal process' means any writ, 
    order, summons, or other similar process in the nature of 
    garnishment--
            ``(A) which is issued by--
                ``(i) a court or an administrative agency of competent 
            jurisdiction in any State, territory, or possession of the 
            United States;
                ``(ii) a court or an administrative agency of competent 
            jurisdiction in any foreign country with which the United 
            States has entered into an agreement which requires the 
            United States to honor the process; or
                ``(iii) an authorized official pursuant to an order of 
            such a court or an administrative agency of competent 
            jurisdiction or pursuant to State or local law; and
            ``(B) which is directed to, and the purpose of which is to 
        compel, a governmental entity which holds moneys which are 
        otherwise payable to an individual to make a payment from the 
        moneys to another party in order to satisfy a legal obligation 
        of the individual to provide child support or make alimony 
        payments.''.
    (b) Conforming Amendments.--
        (1) To part d of title iv.--Sections 461 and 462 (42 U.S.C. 661 
    and 662) are repealed.
        (2) To title 5, united states code.--Section 5520a of title 5, 
    United States Code, is amended, in subsections (h)(2) and (i), by 
    striking ``sections 459, 461, and 462 of the Social Security Act 
    (42 U.S.C. 659, 661, and 662)'' and inserting ``section 459 of the 
    Social Security Act (42 U.S.C. 659)''.
    (c) Military Retired and Retainer Pay.--
        (1) Definition of court.--Section 1408(a)(1) of title 10, 
    United States Code, is amended--
            (A) by striking ``and'' at the end of subparagraph (B);
            (B) by striking the period at the end of subparagraph (C) 
        and inserting ``; and''; and
            (C) by adding after subparagraph (C) the following new 
        subparagraph:
            ``(D) any administrative or judicial tribunal of a State 
        competent to enter orders for support or maintenance (including 
        a State agency administering a program under a State plan 
        approved under part D of title IV of the Social Security Act), 
        and, for purposes of this subparagraph, the term `State' 
        includes the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, and American Samoa.''.
        (2) Definition of court order.--Section 1408(a)(2) of such 
    title is amended--
            (A) by inserting ``or a support order, as defined in 
        section 453(p) of the Social Security Act (42 U.S.C. 653(p)),'' 
        before ``which--'';
            (B) in subparagraph (B)(i), by striking ``(as defined in 
        section 462(b) of the Social Security Act (42 U.S.C. 662(b)))'' 
        and inserting ``(as defined in section 459(i)(2) of the Social 
        Security Act (42 U.S.C. 662(i)(2)))''; and
            (C) in subparagraph (B)(ii), by striking ``(as defined in 
        section 462(c) of the Social Security Act (42 U.S.C. 662(c)))'' 
        and inserting ``(as defined in section 459(i)(3) of the Social 
        Security Act (42 U.S.C. 662(i)(3)))''.
        (3) Public payee.--Section 1408(d) of such title is amended--
            (A) in the heading, by inserting ``(or for Benefit of)'' 
        before ``Spouse or''; and
            (B) in paragraph (1), in the 1st sentence, by inserting 
        ``(or for the benefit of such spouse or former spouse to a 
        State disbursement unit established pursuant to section 454B of 
        the Social Security Act or other public payee designated by a 
        State, in accordance with part D of title IV of the Social 
        Security Act, as directed by court order, or as otherwise 
        directed in accordance with such part D)'' before ``in an 
        amount sufficient''.
        (4) Relationship to part d of title iv.--Section 1408 of such 
    title is amended by adding at the end the following new subsection:
    ``(j) Relationship to Other Laws.--In any case involving an order 
providing for payment of child support (as defined in section 459(i)(2) 
of the Social Security Act) by a member who has never been married to 
the other parent of the child, the provisions of this section shall not 
apply, and the case shall be subject to the provisions of section 459 
of such Act.''.
    (d) Effective Date.--The amendments made by this section shall 
become effective 6 months after the date of the enactment of this Act.

SEC. 12363. ENFORCEMENT OF CHILD SUPPORT OBLIGATIONS OF MEMBERS OF THE 
              ARMED FORCES.

    (a) Availability of Locator Information.--
        (1) Maintenance of address information.--The Secretary of 
    Defense shall establish a centralized personnel locator service 
    that includes the address of each member of the Armed Forces under 
    the jurisdiction of the Secretary. Upon request of the Secretary of 
    Transportation, addresses for members of the Coast Guard shall be 
    included in the centralized personnel locator service.
        (2) Type of address.--
            (A) Residential address.--Except as provided in 
        subparagraph (B), the address for a member of the Armed Forces 
        shown in the locator service shall be the residential address 
        of that member.
            (B) Duty address.--The address for a member of the Armed 
        Forces shown in the locator service shall be the duty address 
        of that member in the case of a member--
                (i) who is permanently assigned overseas, to a vessel, 
            or to a routinely deployable unit; or
                (ii) with respect to whom the Secretary concerned makes 
            a determination that the member's residential address 
            should not be disclosed due to national security or safety 
            concerns.
        (3) Updating of locator information.--Within 30 days after a 
    member listed in the locator service establishes a new residential 
    address (or a new duty address, in the case of a member covered by 
    paragraph (2)(B)), the Secretary concerned shall update the locator 
    service to indicate the new address of the member.
        (4) Availability of information.--The Secretary of Defense 
    shall make information regarding the address of a member of the 
    Armed Forces listed in the locator service available, on request, 
    to the Federal Parent Locator Service established under section 453 
    of the Social Security Act.
    (b) Facilitating Granting of Leave for Attendance at Hearings.--
        (1) Regulations.--The Secretary of each military department, 
    and the Secretary of Transportation with respect to the Coast Guard 
    when it is not operating as a service in the Navy, shall prescribe 
    regulations to facilitate the granting of leave to a member of the 
    Armed Forces under the jurisdiction of that Secretary in a case in 
    which--
            (A) the leave is needed for the member to attend a hearing 
        described in paragraph (2);
            (B) the member is not serving in or with a unit deployed in 
        a contingency operation (as defined in section 101 of title 10, 
        United States Code); and
            (C) the exigencies of military service (as determined by 
        the Secretary concerned) do not otherwise require that such 
        leave not be granted.
        (2) Covered hearings.--Paragraph (1) applies to a hearing that 
    is conducted by a court or pursuant to an administrative process 
    established under State law, in connection with a civil action--
            (A) to determine whether a member of the Armed Forces is a 
        natural parent of a child; or
            (B) to determine an obligation of a member of the Armed 
        Forces to provide child support.
        (3) Definitions.--For purposes of this subsection--
            (A) The term ``court'' has the meaning given that term in 
        section 1408(a) of title 10, United States Code.
            (B) The term ``child support'' has the meaning given such 
        term in section 459(i) of the Social Security Act (42 U.S.C. 
        659(i)).
    (c) Payment of Military Retired Pay in Compliance With Child 
Support Orders.--
        (1) Date of certification of court order.--Section 1408 of 
    title 10, United States Code, as amended by section 362(c)(4) of 
    this Act, is amended--
            (A) by redesignating subsections (i) and (j) as subsections 
        (j) and (k), respectively; and
            (B) by inserting after subsection (h) the following new 
        subsection:
    ``(i) Certification Date.--It is not necessary that the date of a 
certification of the authenticity or completeness of a copy of a court 
order for child support received by the Secretary concerned for the 
purposes of this section be recent in relation to the date of receipt 
by the Secretary.''.
        (2) Payments consistent with assignments of rights to states.--
    Section 1408(d)(1) of such title is amended by inserting after the 
    1st sentence the following new sentence: ``In the case of a spouse 
    or former spouse who, pursuant to section 407(a)(4) of the Social 
    Security Act (42 U.S.C. 607(a)(4)), assigns to a State the rights 
    of the spouse or former spouse to receive support, the Secretary 
    concerned may make the child support payments referred to in the 
    preceding sentence to that State in amounts consistent with that 
    assignment of rights.''.
        (3) Arrearages owed by members of the uniformed services.--
    Section 1408(d) of such title is amended by adding at the end the 
    following new paragraph:
    ``(6) In the case of a court order for which effective service is 
made on the Secretary concerned on or after the date of the enactment 
of this paragraph and which provides for payments from the disposable 
retired pay of a member to satisfy the amount of child support set 
forth in the order, the authority provided in paragraph (1) to make 
payments from the disposable retired pay of a member to satisfy the 
amount of child support set forth in a court order shall apply to 
payment of any amount of child support arrearages set forth in that 
order as well as to amounts of child support that currently become 
due.''.
        (4) Payroll deductions.--The Secretary of Defense shall begin 
    payroll deductions within 30 days after receiving notice of 
    withholding, or for the 1st pay period that begins after such 30-
    day period.

SEC. 12364. VOIDING OF FRAUDULENT TRANSFERS.

    Section 466 (42 U.S.C. 666), as amended by section 321 of this Act, 
is amended by adding at the end the following new subsection:
    ``(g) Laws Voiding Fraudulent Transfers.--In order to satisfy 
section 454(20)(A), each State must have in effect--
        ``(1)(A) the Uniform Fraudulent Conveyance Act of 1981;
            ``(B) the Uniform Fraudulent Transfer Act of 1984; or
            ``(C) another law, specifying indicia of fraud which create 
        a prima facie case that a debtor transferred income or property 
        to avoid payment to a child support creditor, which the 
        Secretary finds affords comparable rights to child support 
        creditors; and
        ``(2) procedures under which, in any case in which the State 
    knows of a transfer by a child support debtor with respect to which 
    such a prima facie case is established, the State must--
            ``(A) seek to void such transfer; or
            ``(B) obtain a settlement in the best interests of the 
        child support creditor.''.

SEC. 12365. WORK REQUIREMENT FOR PERSONS OWING PAST-DUE CHILD SUPPORT.

    (a) In General.--Section 466(a) of the Social Security Act (42 
U.S.C. 666(a)), as amended by sections 12315, 12317(a), and 12323 of 
this Act, is amended by adding at the end the following new paragraph:
        ``(15) Procedures to ensure that persons owing past-due support 
    work or have a plan for payment of such support.--
            ``(A) In general.--Procedures under which the State has the 
        authority, in any case in which an individual owes past-due 
        support with respect to a child receiving assistance under a 
        State program funded under part A, to seek a court order that 
        requires the individual to--
                ``(i) pay such support in accordance with a plan 
            approved by the court, or, at the option of the State, a 
            plan approved by the State agency administering the State 
            program under this part; or
                ``(ii) if the individual is subject to such a plan and 
            is not incapacitated, participate in such work activities 
            (as defined in section 406(d)) as the court, or, at the 
            option of the State, the State agency administering the 
            State program under this part, deems appropriate.
            ``(B) Past-due support defined.--For purposes of 
        subparagraph (A), the term `past-due support' means the amount 
        of a delinquency, determined under a court order, or an order 
        of an administrative process established under State law, for 
        support and maintenance of a child, or of a child and the 
        parent with whom the child is living.''.
    (b) Conforming Amendment.--The flush paragraph at the end of 
section 466(a) (42 U.S.C. 666(a)) is amended by striking ``and (7)'' 
and inserting ``(7), and (15)''.

SEC. 12366. DEFINITION OF SUPPORT ORDER.

    Section 453 (42 U.S.C. 653) as amended by sections 12316 and 
12345(b) of this Act, is amended by adding at the end the following new 
subsection:
    ``(p) Support Order Defined.--As used in this part, the term 
`support order' means a judgment, decree, or order, whether temporary, 
final, or subject to modification, issued by a court or an 
administrative agency of competent jurisdiction, for the support and 
maintenance of a child, including a child who has attained the age of 
majority under the law of the issuing State, or a child and the parent 
with whom the child is living, which provides for monetary support, 
health care, arrearages, or reimbursement, and which may include 
related costs and fees, interest and penalties, income withholding, 
attorneys' fees, and other relief.''.

SEC. 12367. REPORTING ARREARAGES TO CREDIT BUREAUS.

    Section 466(a)(7) (42 U.S.C. 666(a)(7)) is amended to read as 
follows:
        ``(7) Reporting arrearages to credit bureaus.--
            ``(A) In general.--Procedures (subject to safeguards 
        pursuant to subparagraph (B)) requiring the State to report 
        periodically to consumer reporting agencies (as defined in 
        section 603(f) of the Fair Credit Reporting Act (15 U.S.C. 
        1681a(f)) the name of any noncustodial parent who is delinquent 
        in the payment of support, and the amount of overdue support 
        owed by such parent.
            ``(B) Safeguards.--Procedures ensuring that, in carrying 
        out subparagraph (A), information with respect to a 
        noncustodial parent is reported--
                ``(i) only after such parent has been afforded all due 
            process required under State law, including notice and a 
            reasonable opportunity to contest the accuracy of such 
            information; and
                ``(ii) only to an entity that has furnished evidence 
            satisfactory to the State that the entity is a consumer 
            reporting agency (as so defined).''.

SEC. 12368. LIENS.

    Section 466(a)(4) (42 U.S.C. 666(a)(4)) is amended to read as 
follows:
        ``(4) Liens.--Procedures under which--
            ``(A) liens arise by operation of law against real and 
        personal property for amounts of overdue support owed by a 
        noncustodial parent who resides or owns property in the State; 
        and
            ``(B) the State accords full faith and credit to liens 
        described in subparagraph (A) arising in another State, without 
        registration of the underlying order.''.

SEC. 12369. STATE LAW AUTHORIZING SUSPENSION OF LICENSES.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 12315, 
12317(a), 12323, and 12365 of this Act, is amended by adding at the end 
the following:
        ``(16) Authority to withhold or suspend licenses.--Procedures 
    under which the State has (and uses in appropriate cases) authority 
    to withhold or suspend, or to restrict the use of driver's 
    licenses, professional and occupational licenses, and recreational 
    licenses of individuals owing overdue support or failing, after 
    receiving appropriate notice, to comply with subpoenas or warrants 
    relating to paternity or child support proceedings.''.

SEC. 12370. INTERNATIONAL CHILD SUPPORT ENFORCEMENT.

    (a) Authority for International Agreements.--Part D of title IV, as 
amended by section 362(a) of this Act, is amended by adding after 
section 459 the following new section:

``SEC. 459A. INTERNATIONAL CHILD SUPPORT ENFORCEMENT.

    ``(a) Authority for Declarations.--
        ``(1) Declaration.--The Secretary of State, with the 
    concurrence of the Secretary of Health and Human Services, is 
    authorized to declare any foreign country (or a political 
    subdivision thereof) to be a foreign reciprocating country if the 
    foreign country has established, or undertakes to establish, 
    procedures for the establishment and enforcement of duties of 
    support owed to obligees who are residents of the United States, 
    and such procedures are substantially in conformity with the 
    standards prescribed under subsection (b).
        ``(2) Revocation.--A declaration with respect to a foreign 
    country made pursuant to paragraph (1) may be revoked if the 
    Secretaries of State and Health and Human Services determine that--
            ``(A) the procedures established by the foreign nation 
        regarding the establishment and enforcement of duties of 
        support have been so changed, or the foreign nation's 
        implementation of such procedures is so unsatisfactory, that 
        such procedures do not meet the criteria for such a 
        declaration; or
            ``(B) continued operation of the declaration is not 
        consistent with the purposes of this part.
        ``(3) Form of declaration.--A declaration under paragraph (1) 
    may be made in the form of an international agreement, in 
    connection with an international agreement or corresponding foreign 
    declaration, or on a unilateral basis.
    ``(b) Standards for Foreign Support Enforcement Procedures.--
        ``(1) Mandatory elements.--Child support enforcement procedures 
    of a foreign country which may be the subject of a declaration 
    pursuant to subsection (a)(1) shall include the following elements:
            ``(A) The foreign country (or political subdivision 
        thereof) has in effect procedures, available to residents of 
        the United States--
                ``(i) for establishment of paternity, and for 
            establishment of orders of support for children and 
            custodial parents; and
                ``(ii) for enforcement of orders to provide support to 
            children and custodial parents, including procedures for 
            collection and appropriate distribution of support payments 
            under such orders.
            ``(B) The procedures described in subparagraph (A), 
        including legal and administrative assistance, are provided to 
        residents of the United States at no cost.
            ``(C) An agency of the foreign country is designated as a 
        Central Authority responsible for--
                ``(i) facilitating child support enforcement in cases 
            involving residents of the foreign nation and residents of 
            the United States; and
                ``(ii) ensuring compliance with the standards 
            established pursuant to this subsection.
        ``(2) Additional elements.--The Secretary of Health and Human 
    Services and the Secretary of State, in consultation with the 
    States, may establish such additional standards as may be 
    considered necessary to further the purposes of this section.
    ``(c) Designation of United States Central Authority.--It shall be 
the responsibility of the Secretary of Health and Human Services to 
facilitate child support enforcement in cases involving residents of 
the United States and residents of foreign nations that are the subject 
of a declaration under this section, by activities including--
        ``(1) development of uniform forms and procedures for use in 
    such cases;
        ``(2) notification of foreign reciprocating countries of the 
    State of residence of individuals sought for support enforcement 
    purposes, on the basis of information provided by the Federal 
    Parent Locator Service; and
        ``(3) such other oversight, assistance, and coordination 
    activities as the Secretary may find necessary and appropriate.
    ``(d) Effect on Other Laws.--States may enter into reciprocal 
arrangements for the establishment and enforcement of child support 
obligations with foreign countries that are not the subject of a 
declaration pursuant to subsection (a), to the extent consistent with 
Federal law.''.
    (b) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 12301(b), 12303(a), 12312(b), 12313(a), 12333, and 
12343(b) of this Act, is amended--
        (1) by striking ``and'' at the end of paragraph (29);
        (2) by striking the period at the end of paragraph (30) and 
    inserting ``; and''; and
        (3) by adding after paragraph (30) the following new paragraph:
        ``(31)(A) provide that any request for services under this part 
    by a foreign reciprocating country or a foreign country with which 
    the State has an arrangement described in section 459A(d)(2) shall 
    be treated as a request by a State;
        ``(B) provide, at State option, notwithstanding paragraph (4) 
    or any other provision of this part, for services under the plan 
    for enforcement of a spousal support order not described in 
    paragraph (4)(B) entered by such a country (or subdivision); and
        ``(C) provide that no applications will be required from, and 
    no costs will be assessed for such services against, the foreign 
    reciprocating country or foreign obligee (but costs may at State 
    option be assessed against the obligor).''.

SEC. 12371. FINANCIAL INSTITUTION DATA MATCHES.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 12315, 
12317(a), 12323, 12365, and 12369 of this Act, is amended by adding at 
the end the following new paragraph:
        ``(17) Financial institution data matches.--
            ``(A) In general.--Procedures under which the State agency 
        shall enter into agreements with financial institutions doing 
        business in the State--
                ``(i) to develop and operate, in coordination with such 
            financial institutions, a data match system, using 
            automated data exchanges to the maximum extent feasible, in 
            which each such financial institution is required to 
            provide for each calendar quarter the name, record address, 
            social security number or other taxpayer identification 
            number, and other identifying information for each 
            noncustodial parent who maintains an account at such 
            institution and who owes past-due support, as identified by 
            the State by name and social security number or other 
            taxpayer identification number; and
                ``(ii) in response to a notice of lien or levy, 
            encumber or surrender, as the case may be, assets held by 
            such institution on behalf of any noncustodial parent who 
            is subject to a child support lien pursuant to paragraph 
            (4).
            ``(B) Reasonable fees.--The State agency may pay a 
        reasonable fee to a financial institution for conducting the 
        data match provided for in subparagraph (A)(i), not to exceed 
        the actual costs incurred by such financial institution.
            ``(C) Liability.--A financial institution shall not be 
        liable under any Federal or State law to any person--
                ``(i) for any disclosure of information to the State 
            agency under subparagraph (A)(i);
                ``(ii) for encumbering or surrendering any assets held 
            by such financial institution in response to a notice of 
            lien or levy issued by the State agency as provided for in 
            subparagraph (A)(ii); or
                ``(iii) for any other action taken in good faith to 
            comply with the requirements of subparagraph (A).
            ``(D) Definitions.--For purposes of this paragraph--
                ``(i) Financial institution.--The term `financial 
            institution' means any Federal or State commercial savings 
            bank, including savings association or cooperative bank, 
            Federal- or State-chartered credit union, benefit 
            association, insurance company, safe deposit company, 
            money-market mutual fund, or any similar entity authorized 
            to do business in the State; and
                ``(ii) Account.--The term `account' means a demand 
            deposit account, checking or negotiable withdrawal order 
            account, savings account, time deposit account, or money-
            market mutual fund account.''.

SEC. 12372. ENFORCEMENT OF ORDERS AGAINST PATERNAL OR MATERNAL 
              GRANDPARENTS IN CASES OF MINOR PARENTS.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 12315, 
12317(a), 12323, 12365, 12369, and 12371 of this Act, is amended by 
adding at the end the following new paragraph:
        ``(18) Enforcement of orders against paternal or maternal 
    grandparents.--Procedures under which, at the State's option, any 
    child support order enforced under this part with respect to a 
    child of minor parents, if the custodial parents of such child are 
    receiving assistance under the State program under part A, shall be 
    enforceable, jointly and severally, against the parents of the 
    noncustodial parents of such child.''.

                       CHAPTER 8--MEDICAL SUPPORT

SEC. 12376. CORRECTION TO ERISA DEFINITION OF MEDICAL CHILD SUPPORT 
              ORDER.

    (a) In General.--Section 609(a)(2)(B) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1169(a)(2)(B)) is amended--
        (1) by striking ``issued by a court of competent 
    jurisdiction'';
        (2) by striking the period at the end of clause (ii) and 
    inserting a comma; and
        (3) by adding, after and below clause (ii), the following:
        ``if such judgment, decree, or order (I) is issued by a court 
        of competent jurisdiction or (II) is issued through an 
        administrative process established under State law and has the 
        force and effect of law under applicable State law.''.
    (b) Effective Date.--
        (1) In general.--The amendments made by this section shall take 
    effect on the date of the enactment of this Act.
        (2) Plan amendments not required until january 1, 1996.--Any 
    amendment to a plan required to be made by an amendment made by 
    this section shall not be required to be made before the 1st plan 
    year beginning on or after January 1, 1996, if--
            (A) during the period after the date before the date of the 
        enactment of this Act and before such 1st plan year, the plan 
        is operated in accordance with the requirements of the 
        amendments made by this section; and
            (B) such plan amendment applies retroactively to the period 
        after the date before the date of the enactment of this Act and 
        before such 1st plan year.
    A plan shall not be treated as failing to be operated in accordance 
    with the provisions of the plan merely because it operates in 
    accordance with this paragraph.

SEC. 12377. ENFORCEMENT OF ORDERS FOR HEALTH CARE COVERAGE.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 12315, 
12317(a), 12323, 12365, 12369, 12371, and 12372 of this Act, is amended 
by adding at the end the following new paragraph:
        ``(19) Health care coverage.--Procedures under which all child 
    support orders enforced pursuant to this part shall include a 
    provision for the health care coverage of the child, and in the 
    case in which a noncustodial parent provides such coverage and 
    changes employment, and the new employer provides health care 
    coverage, the State agency shall transfer notice of the provision 
    to the employer, which notice shall operate to enroll the child in 
    the noncustodial parent's health plan, unless the noncustodial 
    parent contests the notice.''.

CHAPTER 9--ENHANCING RESPONSIBILITY AND OPPORTUNITY FOR NON-RESIDENTIAL 
                                PARENTS

SEC. 12381. GRANTS TO STATES FOR ACCESS AND VISITATION PROGRAMS.

    Part D of title IV (42 U.S.C. 651-669) is amended by adding at the 
end the following:

``SEC. 469A. GRANTS TO STATES FOR ACCESS AND VISITATION PROGRAMS.

    ``(a) In General.--The Administration for Children and Families 
shall make grants under this section to enable States to establish and 
administer programs to support and facilitate noncustodial parents' 
access to and visitation of their children, by means of activities 
including mediation (both voluntary and mandatory), counseling, 
education, development of parenting plans, visitation enforcement 
(including monitoring, supervision and neutral drop-off and pickup), 
and development of guidelines for visitation and alternative custody 
arrangements.
    ``(b) Amount of Grant.--The amount of the grant to be made to a 
State under this section for a fiscal year shall be an amount equal to 
the lesser of--
        ``(1) 90 percent of State expenditures during the fiscal year 
    for activities described in subsection (a); or
        ``(2) the allotment of the State under subsection (c) for the 
    fiscal year.
    ``(c) Allotments to States.--
        ``(1) In general.--The allotment of a State for a fiscal year 
    is the amount that bears the same ratio to the amount appropriated 
    for grants under this section for the fiscal year as the number of 
    children in the State living with only 1 biological parent bears to 
    the total number of such children in all States.
        ``(2) Minimum allotment.--The Administration for Children and 
    Families shall adjust allotments to States under paragraph (1) as 
    necessary to ensure that no State is allotted less than--
            ``(A) $50,000 for fiscal year 1996 or 1997; or
            ``(B) $100,000 for any succeeding fiscal year.
    ``(d) No Supplantation of State Expenditures for Similar 
Activities.--A State to which a grant is made under this section may 
not use the grant to supplant expenditures by the State for activities 
specified in subsection (a), but shall use the grant to supplement such 
expenditures at a level at least equal to the level of such 
expenditures for fiscal year 1995.
    ``(e) State Administration.--Each State to which a grant is made 
under this section--
        ``(1) may administer State programs funded with the grant, 
    directly or through grants to or contracts with courts, local 
    public agencies, or non-profit private entities;
        ``(2) shall not be required to operate such programs on a 
    statewide basis; and
        ``(3) shall monitor, evaluate, and report on such programs in 
    accordance with regulations prescribed by the Secretary.''.

                    CHAPTER 10--EFFECT OF ENACTMENT

SEC. 12391. EFFECTIVE DATES.

    (a) In General.--Except as otherwise specifically provided (but 
subject to subsections (b) and (c))--
        (1) the provisions of this subtitle requiring the enactment or 
    amendment of State laws under section 466 of the Social Security 
    Act, or revision of State plans under section 454 of such Act, 
    shall be effective with respect to periods beginning on and after 
    October 1, 1996; and
        (2) all other provisions of this subtitle shall become 
    effective upon the date of the enactment of this Act.
    (b) Grace Period for State Law Changes.--The provisions of this 
subtitle shall become effective with respect to a State on the later 
of--
        (1) the date specified in this subtitle, or
        (2) the effective date of laws enacted by the legislature of 
    such State implementing such provisions,
but in no event later than the 1st day of the 1st calendar quarter 
beginning after the close of the 1st regular session of the State 
legislature that begins after the date of the enactment of this Act. 
For purposes of the previous sentence, in the case of a State that has 
a 2-year legislative session, each year of such session shall be deemed 
to be a separate regular session of the State legislature.
    (c) Grace Period for State Constitutional Amendment.--A State shall 
not be found out of compliance with any requirement enacted by this 
subtitle if the State is unable to so comply without amending the State 
constitution until the earlier of--
        (1) 1 year after the effective date of the necessary State 
    constitutional amendment; or
        (2) 5 years after the date of the enactment of this Act.

     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.

    (a) In General.--Notwithstanding any other provision of law and 
except as provided in subsection (b), an alien who is not a qualified 
alien (as defined in section 12431) is not eligible for any Federal 
public benefit (as defined in subsection (c)).
    (b) Exceptions.--Subsection (a) shall not apply with respect to the 
following Federal public benefits:
        (1) Emergency medical services under title XIX or XXI of the 
    Social Security Act.
        (2) Short-term, non-cash, in-kind emergency disaster relief.
        (3)(A) Public health assistance for immunizations.
        (B) Public health assistance for testing and treatment of a 
    serious communicable disease if the Secretary of Health and Human 
    Services determines that it is necessary to prevent the spread of 
    such disease.
        (4) Programs, services, or assistance (such as soup kitchens, 
    crisis counseling and intervention, and short-term shelter) 
    specified by the Attorney General, in the Attorney General's sole 
    and unreviewable discretion after consultation with appropriate 
    Federal agencies and departments, which (A) deliver in-kind 
    services at the community level, including through public or 
    private nonprofit agencies; (B) do not condition the provision of 
    assistance, the amount of assistance provided, or the cost of 
    assistance provided on the individual recipient's income or 
    resources; and (C) are necessary for the protection of life or 
    safety.
        (5) Programs for housing or community development assistance or 
    financial assistance administered by the Secretary of Housing and 
    Urban Development, any program under title V of the Housing Act of 
    1949, or any assistance under section 306C of the Consolidated Farm 
    and Rural Development Act, to the extent that the alien is 
    receiving such a benefit on the date of the enactment of this Act.
    (c) Federal Public Benefit Defined.--
        (1) Except as provided in paragraph (2), for purposes of this 
    subtitle, the term ``Federal public benefit'' means a Federal 
    public benefit providing direct spending for--
            (A) any grant, contract, loan, professional license, or 
        commercial license provided by an agency of the United States 
        or by appropriated funds of the United States; and
            (B) any retirement, welfare, health, disability, public or 
        assisted housing, post-secondary education, food assistance, 
        unemployment benefit, or any other similar benefit for which 
        payments or assistance are provided to an individual, 
        household, or family eligibility unit by an agency of the 
        United States or by appropriated funds of the United States.
        (2) Such term shall not apply--
            (A) to any contract, professional license, or commercial 
        license for a nonimmigrant whose visa for entry is related to 
        such employment in the United States; or
            (B) with respect to benefits for an alien who as a work 
        authorized nonimmigrant or as an alien lawfully admitted for 
        permanent residence under the Immigration and Nationality Act 
        qualified for such benefits and for whom the United States 
        under reciprocal treaty agreements is required to pay benefits, 
        as determined by the Attorney General, after consultation with 
        the Secretary of State.

SEC. 12402. LIMITED ELIGIBILITY OF CERTAIN QUALIFIED ALIENS FOR CERTAIN 
              FEDERAL PROGRAMS.

    (a) Limited Eligibility for Specified Federal Programs.--
        (1) In general.--Notwithstanding any other provision of law and 
    except as provided in paragraph (2), an alien who is a qualified 
    alien (as defined in section 12431) is not eligible for any 
    specified Federal program (as defined in paragraph (3)).
        (2) Exceptions.--
            (A) Time-limited exception for refugees and asylees.--
        Paragraph (1) shall not apply to an alien until 5 years after 
        the date--
                (i) an alien is admitted to the United States as a 
            refugee under section 207 of the Immigration and 
            Nationality Act;
                (ii) an alien is granted asylum under section 208 of 
            such Act; or
                (iii) an alien's deportation is withheld under section 
            243(h) of such Act.
            (B) Certain permanent resident aliens.--Paragraph (1) shall 
        not apply to an alien who--
                (i) is lawfully admitted to the United States for 
            permanent residence under the Immigration and Nationality 
            Act; and
                (ii)(I) has worked 40 qualifying quarters of coverage 
            as defined under title II of the Social Security Act, and 
            (II) did not receive any Federal means-tested public 
            benefit (as defined in section 12403(c)) during any such 
            quarter.
            (C) Veteran and active duty exception.--Paragraph (1) shall 
        not apply to an alien who is lawfully residing in any State and 
        is--
                (i) a veteran (as defined in section 101 of title 38, 
            United States Code) with a discharge characterized as an 
            honorable discharge and not on account of alienage,
                (ii) on active duty (other than active duty for 
            training) in the Armed Forces of the United States, or
                (iii) the spouse or unmarried dependent child of an 
            individual described in clause (i) or (ii).
            (D) Transition for aliens currently receiving benefits.--
        Paragraph (1) shall apply to the eligibility of an alien for a 
        program for months beginning on or after January 1, 1997, if, 
        on the date of the enactment of this Act, the alien is lawfully 
        residing in any State and is receiving benefits under such 
        program on the date of the enactment of this Act.
        (3) Specified Federal program defined.--For purposes of this 
    subtitle, the term ``specified Federal program'' means any of the 
    following:
            (A) SSI.--The supplemental security income program under 
        title XVI of the Social Security Act.
            (B) Food stamps.--The food stamp program as defined in 
        section 3(h) of the Food Stamp Act of 1977.
    (b) Limited Eligibility for Designated Federal Programs.--
        (1) In general.--Notwithstanding any other provision of law and 
    except as provided in section 12403 and paragraph (2), a State is 
    authorized to determine the eligibility of an alien who is a 
    qualified alien (as defined in section 12431) for any designated 
    Federal program (as defined in paragraph (3)).
        (2) Exceptions.--Qualified aliens under this paragraph shall be 
    eligible for any designated Federal program.
            (A) Time-limited exception for refugees and asylees.--
                (i) An alien who is admitted to the United States as a 
            refugee under section 207 of the Immigration and 
            Nationality Act until 5 years after the date of an alien's 
            entry into the United States.
                (ii) An alien who is granted asylum under section 208 
            of such Act until 5 years after the date of such grant of 
            asylum.
                (iii) An alien whose deportation is being withheld 
            under section 243(h) of such Act until 5 years after such 
            withholding.
            (B) Certain permanent resident aliens.--An alien who--
                (i) is lawfully admitted to the United States for 
            permanent residence under the Immigration and Nationality 
            Act; and
                (ii)(I) has worked 40 qualifying quarters of coverage 
            to be a fully insured individual for old-age retirement 
            benefits under title II of the Social Security Act, (II) 
            did not receive any Federal means-tested public benefit (as 
            defined in section 12403(c)) during any such quarter, and 
            (III) at the time of application is otherwise eligible for 
            such benefits.
            (C) Veteran and active duty exception.--An alien who is 
        lawfully residing in any State and is--
                (i) a veteran (as defined in section 101 of title 38, 
            United States Code) with a discharge characterized as an 
            honorable discharge and not on account of alienage,
                (ii) on active duty (other than active duty for 
            training) in the Armed Forces of the United States, or
                (iii) the spouse or unmarried dependent child of an 
            individual described in clause (i) or (ii).
            (D) Transition for those currently receiving benefits.--An 
        alien who on the date of the enactment of this Act is lawfully 
        residing in any State and is receiving benefits under such 
        program on the date of the enactment of this Act shall continue 
        to be eligible to receive such benefits until January 1, 1997.
        (3) Designated federal program defined.--For purposes of this 
    subtitle, the term ``designated Federal program'' means any of the 
    following:
            (A) Temporary assistance for needy families.--The program 
        of block grants to States for temporary assistance for needy 
        families under part A of title IV of the Social Security Act.
            (B) Social services block grant.--The program of block 
        grants to States for social services under title XX of the 
        Social Security Act.
            (C) Medicaid and MediGrant.--The program of medical 
        assistance under title XIX and XXI of the Social Security Act.

SEC. 12403. FIVE-YEAR LIMITED ELIGIBILITY OF QUALIFIED ALIENS FOR 
              FEDERAL MEANS-TESTED PUBLIC BENEFIT.

    (a) In General.--Notwithstanding any other provision of law and 
except as provided in subsection (b), an alien who is a qualified alien 
(as defined in section 12431) and who enters the United States on or 
after the date of the enactment of this Act is not eligible for any 
Federal means-tested public benefit (as defined in subsection (c)) for 
a period of five years beginning on the date of the alien's entry into 
the United States with a status within the meaning of the term 
``qualified alien''.
    (b) Exceptions.--The limitation under subsection (a) shall not 
apply to the following aliens:
        (1) Exception for refugees and asylees.--
            (A) An alien who is admitted to the United States as a 
        refugee under section 207 of the Immigration and Nationality 
        Act.
            (B) An alien who is granted asylum under section 208 of 
        such Act.
            (C) An alien whose deportation is being withheld under 
        section 243(h) of such Act.
        (2) Veteran and active duty exception.--An alien who is 
    lawfully residing in any State and is--
            (A) a veteran (as defined in section 101 of title 38, 
        United States Code) with a discharge characterized as an 
        honorable discharge and not on account of alienage,
            (B) on active duty (other than active duty for training) in 
        the Armed Forces of the United States, or
            (C) the spouse or unmarried dependent child of an 
        individual described in subparagraph (A) or (B).
    (c) Federal Means-Tested Public Benefit Defined.--
        (1) Except as provided in paragraph (2), for purposes of this 
    subtitle, the term ``Federal means-tested public benefit'' means a 
    Federal public benefit providing direct spending (including cash, 
    medical, housing, and food assistance and social services) by the 
    Federal Government in which the eligibility of an individual, 
    household, or family eligibility unit for benefits, or the amount 
    of such benefits, or both are determined on the basis of income, 
    resources, or financial need of the individual, household, or unit.
        (2) Such term does not include the following:
            (A) Emergency medical services under title XIX or XXI of 
        the Social Security Act.
            (B) Short-term, non-cash, in-kind emergency disaster 
        relief.
            (C) Assistance or benefits under the National School Lunch 
        Act.
            (D) Assistance or benefits under the Child Nutrition Act of 
        1966.
            (E)(i) Public health assistance for immunizations.
            (ii) Public health assistance for testing and treatment of 
        a serious communicable disease if the Secretary of Health and 
        Human Services determines that it is necessary to prevent the 
        spread of such disease.
            (F) Payments for foster care and adoption assistance under 
        part B of title IV of the Social Security Act for a child who 
        would, in the absence of subsection (a), be eligible to have 
        such payments made on the child's behalf under such part, but 
        only if the foster or adoptive parent or parents of such child 
        are not described under subsection (a).
            (G) Programs, services, or assistance (such as soup 
        kitchens, crisis counseling and intervention, and short-term 
        shelter) specified by the Attorney General, in the Attorney 
        General's sole and unreviewable discretion after consultation 
        with appropriate Federal agencies and departments, which (i) 
        deliver in-kind services at the community level, including 
        through public or private nonprofit agencies; (ii) do not 
        condition the provision of assistance, the amount of assistance 
        provided, or the cost of assistance provided on the individual 
        recipient's income or resources; and (iii) are necessary for 
        the protection of life or safety.
            (H) Programs of student assistance under titles IV, V, IX, 
        and X of the Higher Education Act of 1965.
            (I) Means-tested programs under the Elementary and 
        Secondary Education Act of 1965.

       CHAPTER 2--ATTRIBUTION OF INCOME AND AFFIDAVITS OF SUPPORT

SEC. 12421. ATTRIBUTION OF SPONSOR'S INCOME AND RESOURCES TO ALIEN.

    (a) In General.--Notwithstanding any other provision of law and 
except as provided in subsection (c), in determining the eligibility 
and the amount of benefits of an alien for any means-tested public 
benefits program (as defined in subsection (e)) the income and 
resources of the alien shall be deemed to include the following:
        (1) The income and resources of any person who executed an 
    affidavit of support pursuant to section 213A of the Immigration 
    and Nationality Act (as added by section 12422) on behalf of such 
    alien.
        (2) The income and resources of the spouse (if any) of the 
    person.
    (b) Application.--Subsection (a) shall apply with respect to an 
alien until such time as the alien achieves United States citizenship 
through naturalization pursuant to chapter 2 of title III of the 
Immigration and Nationality Act.
    (c) Exceptions.--Subsection (a) shall not apply with respect to the 
following Federal public benefits:
        (1) Emergency medical services under title XIX or XXI of the 
    Social Security Act.
        (2) Short-term, non-cash, in-kind emergency disaster relief.
        (3) Assistance or benefits under the National School Lunch Act.
        (4) Assistance or benefits under the Child Nutrition Act of 
    1966.
        (5)(A) Public health assistance for immunizations.
        (B) Public health assistance for testing and treatment of a 
    serious communicable disease if the Secretary of Health and Human 
    Services determines that it is necessary to prevent the spread of 
    such disease.
        (6) Payments for foster care and adoption assistance under part 
    B of title IV of the Social Security Act for a child who would, in 
    the absence of subsection (a), be eligible to have such payments 
    made on the child's behalf under such part, but only if the foster 
    or adoptive parent or parents of such child are not described under 
    subsection (a).
        (7) Programs, services, or assistance (such as soup kitchens, 
    crisis counseling and intervention, and short-term shelter) 
    specified by the Attorney General, in the Attorney General's sole 
    and unreviewable discretion after consultation with appropriate 
    Federal agencies and departments, which (A) deliver in-kind 
    services at the community level, including through public or 
    private nonprofit agencies; (B) do not condition the provision of 
    assistance, the amount of assistance provided, or the cost of 
    assistance provided on the individual recipient's income or 
    resources; and (C) are necessary for the protection of life or 
    safety.
        (8) Programs of student assistance under titles IV, V, IX, and 
    X of the Higher Education Act of 1965.
    (d) Review of Income and Resources of Alien Upon Reapplication.--
Whenever an alien is required to reapply for benefits under any means-
tested public benefits program, the applicable agency shall review the 
income and resources attributed to the alien under subsection (a).
    (e) Means-Tested Public Benefits Program Defined.--The term 
``means-tested public benefits program'' means a program of Federal 
public benefits providing direct spending (including cash, medical, 
housing, and food assistance and social services) by the Federal 
government in which the eligibility of an individual, household, or 
family eligibility unit for benefits, or the amount of such benefits, 
or both are determined on the basis of income, resources, or financial 
need of the individual, household, or unit.
    (f) Application.--
        (1) If on the date of the enactment of this Act, a means-tested 
    public benefits program attributes a sponsor's income and resources 
    to an alien in determining the alien's eligibility and the amount 
    of benefits for an alien, this section shall apply to any such 
    determination beginning on the day after the date of the enactment 
    of this Act.
        (2) If on the date of the enactment of this Act, a means-tested 
    public benefits program does not attribute a sponsor's income and 
    resources to an alien in determining the alien's eligibility and 
    the amount of benefits for an alien, this section shall apply to 
    any such determination beginning 180 days after the date of the 
    enactment of this Act.

SEC. 12422. REQUIREMENTS FOR SPONSOR'S AFFIDAVIT OF SUPPORT.

    (a) In General.--Title II of the Immigration and Nationality Act is 
amended by inserting after section 213 the following new section:

            ``requirements for sponsor's affidavit of support

    ``Sec. 213A. (a) Enforceability.--(1) No affidavit of support may 
be accepted by the Attorney General or by any consular officer to 
establish that an alien is not excludable as a public charge under 
section 212(a)(4) unless such affidavit is executed as a contract--
        ``(A) which is legally enforceable against the sponsor by the 
    sponsored alien, the Federal Government, and by any State (or any 
    political subdivision of such State) which provides any means-
    tested public benefits program, but not later than 10 years after 
    the alien last receives any such benefit;
        ``(B) in which the sponsor agrees to financially support the 
    alien, so that the alien will not become a public charge; and
        ``(C) in which the sponsor agrees to submit to the jurisdiction 
    of any Federal or State court for the purpose of actions brought 
    under subsection (e)(2).
    ``(2) A contract under paragraph (1) shall be enforceable with 
respect to benefits provided to the alien until such time as the alien 
achieves United States citizenship through naturalization pursuant to 
chapter 2 of title III.
    ``(b) Forms.--Not later than 90 days after the date of enactment of 
this section, the Attorney General, in consultation with the Secretary 
of State and the Secretary of Health and Human Services, shall 
formulate an affidavit of support consistent with the provisions of 
this section.
    ``(c) Remedies.--Remedies available to enforce an affidavit of 
support under this section include any or all of the remedies described 
in section 3201, 3203, 3204, or 3205 of title 28, United States Code, 
as well as an order for specific performance and payment of legal fees 
and other costs of collection, and include corresponding remedies 
available under State law. A Federal agency may seek to collect amounts 
owed under this section in accordance with the provisions of subchapter 
II of chapter 37 of title 31, United States Code.
    ``(d) Notification of Change of Address.--
        ``(1) In general.--The sponsor shall notify the Attorney 
    General and the State in which the sponsored alien is currently a 
    resident within 30 days of any change of address of the sponsor 
    during the period specified in subsection (a)(2).
        ``(2) Penalty.--Any person subject to the requirement of 
    paragraph (1) who fails to satisfy such requirement shall be 
    subject to a civil penalty of--
            ``(A) not less than $250 or more than $2,000, or
            ``(B) if such failure occurs with knowledge that the alien 
        has received any means-tested public benefit, not less than 
        $2,000 or more than $5,000.
    ``(e) Reimbursement of Government Expenses.--(1)(A) Upon 
notification that a sponsored alien has received any benefit under any 
means-tested public benefits program, the appropriate Federal, State, 
or local official shall request reimbursement by the sponsor in the 
amount of such assistance.
    ``(B) The Attorney General, in consultation with the Secretary of 
Health and Human Services, shall prescribe such regulations as may be 
necessary to carry out subparagraph (A).
    ``(2) If within 45 days after requesting reimbursement, the 
appropriate Federal, State, or local agency has not received a response 
from the sponsor indicating a willingness to commence payments, an 
action may be brought against the sponsor pursuant to the affidavit of 
support.
    ``(3) If the sponsor fails to abide by the repayment terms 
established by such agency, the agency may, within 60 days of such 
failure, bring an action against the sponsor pursuant to the affidavit 
of support.
    ``(4) No cause of action may be brought under this subsection later 
than 10 years after the alien last received any benefit under any 
means-tested public benefits program.
    ``(5) If, pursuant to the terms of this subsection, a Federal, 
State, or local agency requests reimbursement from the sponsor in the 
amount of assistance provided, or brings an action against the sponsor 
pursuant to the affidavit of support, the appropriate agency may 
appoint or hire an individual or other person to act on behalf of such 
agency acting under the authority of law for purposes of collecting any 
moneys owed. Nothing in this subsection shall preclude any appropriate 
Federal, State, or local agency from directly requesting reimbursement 
from a sponsor for the amount of assistance provided, or from bringing 
an action against a sponsor pursuant to an affidavit of support.
    ``(f) Definitions.--For the purposes of this section--
        ``(1) Sponsor.--The term `sponsor' means an individual who--
            ``(A) is a citizen or national of the United States or an 
        alien who is lawfully admitted to the United States for 
        permanent residence;
            ``(B) is 18 years of age or over;
            ``(C) is domiciled in any State; and
            ``(D) is the person petitioning for the admission of the 
        alien under section 204.
        ``(2) Means-tested public benefits program defined.--The term 
    `means-tested public benefits program' means a program of Federal 
    public benefits providing direct spending (including cash, medical, 
    housing, and food assistance and social services) by the Federal 
    Government in which the eligibility of an individual, household, or 
    family eligibility unit for benefits, or the amount of such 
    benefits, or both are determined on the basis of income, resources, 
    or financial need of the individual, household, or unit.''.
    (b) Clerical Amendment.--The table of contents of such Act is 
amended by inserting after the item relating to section 213 the 
following:

``Sec. 213A. Requirements for sponsor's affidavit of support.''.

    (c) Effective Date.--Subsection (a) of section 213A of the 
Immigration and Nationality Act, as inserted by subsection (a) of this 
section, shall apply to affidavits of support executed on or after a 
date specified by the Attorney General, which date shall be not earlier 
than 60 days (and not later than 90 days) after the date the Attorney 
General formulates the form for such affidavits under subsection (b) of 
such section.
    (d) Benefits Not Subject to Reimbursement.--Requirements for 
reimbursement by a sponsor for benefits provided to a sponsored alien 
pursuant to an affidavit of support under section 213A of the 
Immigration and Nationality Act shall not apply with respect to the 
following:
        (1) Emergency medical services under title XIX or XXI of the 
    Social Security Act.
        (2) Short-term, non-cash, in-kind emergency disaster relief.
        (3) Assistance or benefits under the National School Lunch Act.
        (4) Assistance or benefits under the Child Nutrition Act of 
    1966.
        (5)(A) Public health assistance for immunizations.
        (B) Public health assistance for testing and treatment of a 
    serious communicable disease if the Secretary of Health and Human 
    Services determines that it is necessary to prevent the spread of 
    such disease.
        (6) Payments for foster care and adoption assistance under part 
    B of title IV of the Social Security Act for a child who would, in 
    the absence of subsection (a), be eligible to have such payments 
    made on the child's behalf under such part, but only if the foster 
    or adoptive parent or parents of such child are not described under 
    subsection (a).
        (7) Programs, services, or assistance (such as soup kitchens, 
    crisis counseling and intervention, and short-term shelter) 
    specified by the Attorney General, in the Attorney General's sole 
    and unreviewable discretion after consultation with appropriate 
    Federal agencies and departments, which (A) deliver in-kind 
    services at the community level, including through public or 
    private nonprofit agencies; (B) do not condition the provision of 
    assistance, the amount of assistance provided, or the cost of 
    assistance provided on the individual recipient's income or 
    resources; and (C) are necessary for the protection of life or 
    safety.
        (8) Programs of student assistance under titles IV, V, IX, and 
    X of the Higher Education Act of 1965.

SEC. 12423. COSIGNATURE OF ALIEN STUDENT LOANS.

    Section 484(b) of the Higher Education Act of 1965 (20 U.S.C. 
1091(b)) is amended by adding at the end the following new paragraph:
        ``(6) Notwithstanding sections 427(a)(2)(C), 428B(a), 
    428C(b)(4)(A), and 464(c)(1)(E), a student who is an alien lawfully 
    admitted for permanent residence under the Immigration and 
    Nationality Act shall not be eligible for a loan under this title 
    unless the loan is endorsed and cosigned by the alien's sponsor 
    under section 213A of the Immigration and Nationality Act or by 
    another individual who is a United States citizen.''.

                     CHAPTER 3--GENERAL PROVISIONS

SEC. 12431. DEFINITIONS.

    (a) In General.--Except as otherwise provided in this subtitle, the 
terms used in this subtitle have the same meaning given such terms in 
section 101(a) of the Immigration and Nationality Act.
    (b) Qualified Alien.--For purposes of this subtitle, the term 
``qualified alien'' means an alien who, at the time the alien applies 
for, receives, or attempts to receive a Federal public benefit, is--
        (1) an alien who is lawfully admitted for permanent residence 
    under the Immigration and Nationality Act,
        (2) an alien who is granted asylum under section 208 of such 
    Act,
        (3) a refugee who is admitted to the United States under 
    section 207 of such Act,
        (4) an alien who is paroled into the United States under 
    section 212(d)(5) of such Act for a period of at least 1 year,
        (5) an alien whose deportation is being withheld under section 
    243(h) of such Act, or
        (6) an alien who is granted conditional entry pursuant to 
    section 203(a)(7) of such Act as in effect prior to April 1, 1980.

SEC. 12432. REAPPLICATION FOR SSI BENEFITS.

    (a) Application and Notice.--Notwithstanding any other provision of 
law, in the case of an individual who is receiving supplemental 
security income benefits under title XVI of the Social Security Act as 
of the date of the enactment of this Act and whose eligibility for such 
benefits would terminate by reason of the application of section 
12402(a)(2)(D), the Commissioner of Social Security shall so notify the 
individual not later than 90 days after the date of the enactment of 
this Act.
    (b) Reapplication.--
        (1) In general.--Not later than 120 days after the date of the 
    enactment of this Act, each individual notified pursuant to 
    subsection (a) who desires to reapply for benefits under title XVI 
    of the Social Security Act shall reapply to the Commissioner of 
    Social Security.
        (2) Determination of eligibility.--Not later than 1 year after 
    the date of the enactment of this Act, the Commissioner of Social 
    Security shall determine the eligibility of each individual who 
    reapplies for benefits under paragraph (1) pursuant to the 
    procedures of such title XVI.

SEC. 12433. STATUTORY CONSTRUCTION.

    (a) Limitation.--
        (1) Nothing in this subtitle may be construed as an entitlement 
    or a determination of an individual's eligibility or fulfillment of 
    the requisite requirements for any Federal, State, or local 
    governmental program, assistance, or benefits. For purposes of this 
    subtitle, eligibility relates only to the general issue of 
    eligibility or ineligibility on the basis of alienage.
        (2) Nothing in this subtitle may be construed as addressing 
    alien eligibility for a basic public education as determined by the 
    Supreme Court of the United States under Plyler v. Doe (457 U.S. 
    202)(1982).
    (b) Not Applicable to Foreign Assistance.--This subtitle does not 
apply to any Federal, State, or local governmental program, assistance, 
or benefits provided to an alien under any program of foreign 
assistance as determined by the Secretary of State in consultation with 
the Attorney General.
    (c) Severability.--If any provision of this subtitle or the 
application of such provision to any person or circumstance is held to 
be unconstitutional, the remainder of this subtitle and the application 
of the provisions of such to any person or circumstance shall not be 
affected thereby.

Subtitle E--Teaching Hospital and Graduate Medical Education Trust Fund

                         CHAPTER 1--TRUST FUND

SEC. 12501. ESTABLISHMENT OF FUND; PAYMENTS TO TEACHING HOSPITALS.

    The Social Security Act (42 U.S.C. 300 et seq.) is amended by 
adding after title XXI the following title:

 ``TITLE XXII--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST 
                                  FUND

                       ``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.
    ``Sec. 2242. Direct costs; special rules regarding payments from 
              general account.
    ``Sec. 2243. Direct costs; authority for payments to consortia of 
              providers.

                    ``Part A--Establishment of Fund

``SEC. 2201. ESTABLISHMENT OF FUND.

    ``(a) In General.--There is established in the Treasury of the 
United States a fund to be known as the Teaching Hospital and Graduate 
Medical Education Trust Fund (in this title referred to as the `Fund'), 
consisting of amounts appropriated to the Fund in subsections (d), 
(f)(3), and (g), and amounts transferred to the Fund under section 
1886(j). Amounts in the Fund are available until expended.
    ``(b) Expenditures From Fund.--Amounts in the Fund are available to 
the Secretary for making payments under section 2211.
    ``(c) Accounts in Fund.--There are established within the Fund the 
following accounts:
        ``(1) The General MedicarePlus Incentive Account.
        ``(2) The General Indirect-Costs Medical Education Account.
        ``(3) The General Direct-Costs Medical Education Account.
        ``(4) The Medicare Indirect-Costs Medical Education Account.
        ``(5) The Medicare Direct-Costs Medical Education Account.
    ``(d) General Transfers to Fund.--
        ``(1) In general.--For fiscal year 1997 and each subsequent 
    fiscal year, there are appropriated to the Fund (effective on the 
    date specified in paragraph (2)), out of any money in the Treasury 
    not otherwise appropriated, the following amounts (as applicable to 
    the fiscal year involved):
            ``(A) For fiscal year 1997, $1,100,000,000.
            ``(B) For fiscal year 1998, $1,300,000,000.
            ``(C) For fiscal year 1999, $2,000,000,000.
            ``(D) For fiscal year 2000, $2,600,000,000.
            ``(E) For fiscal year 2001, $3,100,000,000.
            ``(F) For fiscal year 2002, $3,400,000,000.
            ``(G) For fiscal year 2003 and each subsequent fiscal year, 
        the greater of the amount appropriated for the preceding fiscal 
        year or an amount equal to the product of--
                ``(i) the amount appropriated for the preceding fiscal 
            year; and
                ``(ii) 1 plus the percentage increase in the nominal 
            gross domestic product for the one-year period ending upon 
            July 1 of such preceding fiscal year.
        ``(2) Effective date for annual appropriation.--For purposes of 
    paragraph (1), the date specified in this paragraph for a fiscal 
    year is the first day of the fiscal year.
        ``(3) Allocation for general medicareplus incentive account.--
    Of the amount appropriated in paragraph (1) for a fiscal year, 
    there shall be allocated to the General MedicarePlus Incentive 
    Account the following percentage (as applicable to the fiscal year 
    involved):
            ``(A) For fiscal year 1997, 20 percent.
            ``(B) For fiscal year 1998, 30 percent.
            ``(C) For fiscal year 1999, 40 percent.
            ``(D) For fiscal year 2000 and each subsequent fiscal year, 
        50 percent.
        ``(4) Allocations for general medical education accounts.--
            ``(A) In general.--Of the amount appropriated in paragraph 
        (1) for a fiscal year and remaining after the allocation 
        required in paragraph (3) for the year has been made--
                ``(i) there shall be allocated to the General Indirect-
            Costs Medical Education Account the percentage determined 
            under subparagraph (B)(ii); and
                ``(ii) there shall be allocated to the General Direct-
            Costs Medical Education Account the percentage determined 
            under subparagraph (B)(iii).
            ``(B) Determination of fixed percentages.--The Secretary of 
        Health and Human Services, acting through the Administrator of 
        the Health Care Financing Administration, shall determine the 
        following:
                ``(i) The total amount of payments that were made under 
            subsections (d)(5)(B) and (h) of section 1886 for fiscal 
            year 1994.
                ``(ii) The percentage of such total that was 
            constituted by payments under subsection (d)(5)(B) of such 
            section.
                ``(iii) The percentage of such total that was 
            constituted by payments under subsection (h) of such 
            section.
    ``(e) Transfers From Medicare Program.--Amounts shall, in 
accordance with section 1886(j), be transferred to the Fund from the 
trust funds established under parts A and B of title XVIII.
    ``(f) Investment.--
        ``(1) In general.--The Secretary of the Treasury shall invest 
    such amounts of the Fund as such Secretary determines are not 
    required to meet current withdrawals from the Fund. Such 
    investments may be made only in interest-bearing obligations of the 
    United States. For such purpose, such obligations may be acquired 
    on original issue at the issue price, or by purchase of outstanding 
    obligations at the market price.
        ``(2) Sale of obligations.--Any obligation acquired by the Fund 
    may be sold by the Secretary of the Treasury at the market price.
        ``(3) Availability of income.--Any interest derived from 
    obligations acquired by the Fund, and proceeds from any sale or 
    redemption of such obligations, are hereby appropriated to the 
    Fund.
    ``(g) Monetary Gifts to Fund.--There are appropriated to the Fund 
such amounts as may be unconditionally donated to the Federal 
Government as gifts to the Fund.

                ``Part B--Payments to Teaching Hospitals

                  ``Subpart 1--Requirement of Payments

``SEC. 2211. FORMULA PAYMENTS TO TEACHING HOSPITALS.

    ``(a) In General.--Subject to subsection (d), in the case of each 
teaching hospital that in accordance with subsection (b) submits to the 
Secretary a payment document for fiscal year 1997 or any subsequent 
fiscal year, the Secretary shall make payments for the year to the 
teaching hospital for the direct and indirect costs of operating 
approved medical residency training programs. Such payments shall be 
made from the Fund, and the total of the payments to the hospital for 
the fiscal year shall equal the sum of the following:
        ``(1) An amount determined under section 2221 (relating to the 
    MedicarePlus program).
        ``(2) An amount determined under section 2231 (relating to the 
    indirect costs of graduate medical education).
        ``(3) An amount determined under section 2241 (relating to the 
    direct costs of graduate medical education).
    ``(b) Payment Document.--For purposes of subsection (a), a payment 
document is a document containing such information as may be necessary 
for the Secretary to make payments under such subsection to a teaching 
hospital during a fiscal year. The document is submitted in accordance 
with this subsection if the document is submitted not later than the 
date specified by the Secretary, and the document is in such form and 
is made in such manner as the Secretary may require. This subsection is 
subject to section 2212.
    ``(c) Periodic Payments.--Payments under subsection (a) for a 
teaching hospital for a fiscal year shall be made periodically, at such 
intervals and in such amounts as the Secretary determines to be 
appropriate (subject to applicable Federal law regarding Federal 
payments).
    ``(d) Special Rules.--
        ``(1) Payments to consortia of providers.--In the case of 
    payments under subsection (a) that are determined under section 
    2241:
            ``(A) The requirement under such subsection to make the 
        payments to teaching hospitals is subject to the authority of 
        the Secretary under section 2243(a) to make payments to 
        qualifying consortia.
            ``(B) If the Secretary authorizes payments to a consortium 
        under section 2243(a), subsections (a) and (b) of this section 
        (other than subsection (a)(2)) apply to the consortium to the 
        same extent and in the same manner as the subsections apply to 
        teaching hospitals.
        ``(2) Hospitals in states with certain demonstration 
    projects.--Paragraph (2) of subsection (a) is subject to section 
    2232(d)(1)(B), and paragraph (3) of such subsection is subject to 
    section 2242(d)(1)(B).
    ``(e) Administrator of Programs.--This part, and the subsequent 
parts of this title, shall be carried out by the Secretary acting 
through the Administrator of the Health Care Financing Administration.
    ``(f) Approved Medical Residency Training Program.--For purposes of 
this title, the term `approved medical residency training program' has 
the meaning given such term in section 1886(h)(5)(A).

``SEC. 2212. ADDITIONAL PROVISIONS REGARDING ANNUAL PAYMENT DOCUMENT.

    ``(a) Periodic Reports.--In collecting information under section 
2211(b), the Secretary may require that information be submitted to the 
Secretary in periodic reports.
    ``(b) Information Relating to Medicare Program.--Information 
collected by the Secretary under section 2211(b) with respect to a 
teaching hospital for a fiscal year shall include information on the 
following:
        ``(1) The number of inpatient discharges for the fiscal year 
    attributable to individuals enrolled in the MedicarePlus program 
    under part C of title XVIII.
        ``(2) For each discharge with respect to which payment is 
    received from the Secretary pursuant to part A of title XVIII, the 
    diagnosis-related group within which the discharge is classified 
    (as determined in accordance with section 1886(d)(4)(A)).
        ``(3) The medicare patient load of the hospital (as defined in 
    section 1886(h)(3)(C)).

          ``Subpart 2--Amount Relating to MedicarePlus Program

``SEC. 2221. DETERMINATION OF AMOUNT RELATING TO MEDICAREPLUS PROGRAM.

    ``(a) In General.--For purposes of section 2211(a)(1), the amount 
determined under this section for a teaching hospital for a fiscal year 
is the product of--
        ``(1) the amount in the General MedicarePlus Incentive Account 
    on the date specified in section 2201(d)(2) (once the appropriation 
    under such section is made); and
        ``(2) the percentage determined for the hospital under 
    subsection (b) for the fiscal year.
    ``(b) Annual Hospital-Specific Percentage.--For purposes of 
subsection (a)(2), the percentage determined under this subsection for 
a teaching hospital for a fiscal year is the percentage constituted by 
the ratio of--
        ``(1) the number of inpatient discharges for the fiscal year 
    attributable to individuals enrolled in the MedicarePlus program 
    under part C of title XVIII; to
        ``(2) the sum of the respective numbers determined under 
    paragraph (1) for the fiscal year for all teaching hospitals.

  ``Subpart 3--Amount Relating to Indirect Costs of Graduate Medical 
                               Education

``SEC. 2231. DETERMINATION OF AMOUNT RELATING TO INDIRECT COSTS.

    ``(a) In General.--For purposes of section 2211(a)(2), the amount 
determined under this section for a teaching hospital for a fiscal year 
is the sum of--
        ``(1) the amount determined under subsection (b) (relating to 
    the General Indirect-Costs Medical Education Account); and
        ``(2) the amount determined under subsection (c) (relating to 
    the Medicare Indirect-Costs Medical Education Account), subject to 
    section 2232(d)(1)(B).
    ``(b) Payment From General Account.--
        ``(1) In general.--For purposes of subsection (a)(1), the 
    amount determined under this subsection for a teaching hospital for 
    a fiscal year is the product of--
            ``(A) the amount in the General Indirect-Costs Medical 
        Education Account on the date specified in section 2201(d)(2) 
        (once the appropriation under such section is made); and
            ``(B) the percentage determined for the hospital under 
        paragraph (2).
        ``(2) Fixed hospital-specific percentage.--
            ``(A) In general.--For purposes of paragraph (1)(B), the 
        percentage determined under this paragraph for a teaching 
        hospital is the mean average of the respective percentages 
        determined under subparagraph (C) for each fiscal year of the 
        applicable period (as defined in subparagraph (B)), adjusted by 
        the Secretary (upward or downward, as the case may be) on a pro 
        rata basis to the extent necessary to ensure that the sum of 
        the percentages determined under this paragraph for all 
        teaching hospitals is equal to 100 percent. The preceding 
        sentence is subject to section 2232.
            ``(B) Applicable period regarding relevant data; fiscal 
        years 1992 through 1994.--For purposes of this part, the term 
        `applicable period' means the period beginning on the first day 
        of fiscal year 1992 and continuing through the end of fiscal 
        year 1994.
            ``(C) Respective determinations for fiscal years of 
        applicable period.--For purposes of subparagraph (A), the 
        percentage determined under this subparagraph for a teaching 
        hospital for a fiscal year of the applicable period is the 
        percentage constituted by the ratio of--
                ``(i) the total amount of payments received by the 
            hospital under section 1886(d)(5)(B) for discharges 
            occurring during the fiscal year involved; to
                ``(ii) the sum of the respective amounts determined 
            under clause (i) for the fiscal year for all teaching 
            hospitals.
        ``(3) Availability of data.--If a teaching hospital received 
    the payments specified in paragraph (2)(C)(i) during the applicable 
    period but a complete set of the relevant data is not available to 
    the Secretary for purposes of determining an amount under such 
    paragraph for the fiscal year involved, the Secretary shall for 
    purposes of such subsection make an estimate on the basis of such 
    data as are available to the Secretary for the applicable period.
    ``(c) Payment From Medicare Account.--For purposes of subsection 
(a)(2), the amount determined under this subsection for a teaching 
hospital for a fiscal year is an amount determined in accordance with 
the methodology in effect under section 1886(d)(5)(B) for such year. 
Payments made under section 2211 pursuant to the preceding sentence 
shall be made from the Medicare Indirect-Costs Medical Education 
Account.

``SEC. 2232. INDIRECT COSTS; SPECIAL RULES REGARDING PAYMENTS FROM 
              GENERAL ACCOUNT.

    ``(a) Special Rule Regarding Fiscal Years 1995 and 1996.--
        ``(1) In general.--In the case of a teaching hospital whose 
    first payments under section 1886(d)(5)(B) were for discharges 
    occurring in fiscal year 1995 or in fiscal year 1996 (referred to 
    in this subsection individually as a `first payment year'), the 
    percentage determined under paragraph (2) for the hospital is 
    deemed to be the percentage applicable under section 2231(b)(2) to 
    the hospital, subject to paragraph (3).
        ``(2) Determination of fixed percentage.--For purposes of 
    paragraph (1), the percentage determined under this paragraph for a 
    teaching hospital is the percentage constituted by the ratio of the 
    amount determined under subparagraph (A) to the amount determined 
    under subparagraph (B), as follows:
            ``(A)(i) If the first payment year for the hospital is 
        fiscal year 1995, the amount determined under this subparagraph 
        is the total amount of payments received by the hospital under 
        section 1886(d)(5)(B) for discharges occurring during fiscal 
        year 1995.
            ``(ii) If the first payment year for the hospital is fiscal 
        year 1996, the amount determined under this subparagraph is an 
        amount equal to an estimate by the Secretary of the total 
        amount of payments that would have been paid to the hospital 
        under section 1886(d)(5)(B) for discharges occurring during 
        fiscal year 1995 if such section, as in effect for fiscal year 
        1996, had applied to the hospital for discharges occurring 
        during fiscal year 1995.
            ``(B)(i) If the first payment year for the hospital is 
        fiscal year 1995, the amount determined under this subparagraph 
        is the aggregate total of the payments received by teaching 
        hospitals under section 1886(d)(5)(B) for discharges occurring 
        during fiscal year 1995.
            ``(ii) If the first payment year for the hospital is fiscal 
        year 1996--
                ``(I) the Secretary shall make an estimate in 
            accordance with subparagraph (A)(ii) for all teaching 
            hospitals; and
                ``(II) the amount determined under this subparagraph is 
            the sum of the estimates made by the Secretary under 
            subclause (I).
        ``(3) Adjustment of percentage.--The percentage determined 
    under paragraph (2) shall be adjusted by the Secretary in 
    accordance with section 2231(b)(2)(A) to the extent determined by 
    the Secretary to be necessary with respect to a sum that equals 100 
    percent.
    ``(b) New Teaching Hospitals.--
        ``(1) In general.--In the case of a teaching hospital that did 
    not receive payments under section 1886(d)(5)(B) for any of the 
    fiscal years 1992 through 1996, the percentage determined under 
    paragraph (3) for the hospital is deemed to be the percentage 
    applicable under section 2231(b)(2) to the hospital, subject to 
    paragraphs (4) and (5).
        ``(2) Designated fiscal year regarding data.--The determination 
    under paragraph (3) of a percentage for a teaching hospital 
    described in paragraph (1) shall be made for the most recent fiscal 
    year for which the Secretary has sufficient data to make the 
    determination (referred to in this subsection as the `designated 
    fiscal year').
        ``(3) Determination of fixed percentage.--For purposes of 
    paragraph (1), the percentage determined under this paragraph for 
    the teaching hospital involved is the percentage constituted by the 
    ratio of the amount determined under subparagraph (A) to the amount 
    determined under subparagraph (B), as follows:
            ``(A) The amount determined under this subparagraph is an 
        amount equal to an estimate by the Secretary of the total 
        amount of payments that would have been paid to the hospital 
        under section 1886(d)(5)(B) for the designated fiscal year if 
        such section, as in effect for the first fiscal year for which 
        payments pursuant to this subsection are to be made to the 
        hospital, had applied to the hospital for the designated fiscal 
        year.
            ``(B) The Secretary shall make an estimate in accordance 
        with subparagraph (A) for all teaching hospitals. The amount 
        determined under this subparagraph is the sum of the estimates 
        made by the Secretary under the preceding sentence.
        ``(4) Adjustment of percentage.--The percentage determined 
    under paragraph (3) shall be adjusted by the Secretary in 
    accordance with section 2231(b)(2)(A) to the extent determined by 
    the Secretary to be necessary with respect to a sum that equals 100 
    percent.
        ``(5) Limitation.--This subsection does not apply to a teaching 
    hospital described in paragraph (1) if the hospital is in a State 
    for which a demonstration project under section 1814(b)(3) is in 
    effect.
    ``(c) Consolidations and Mergers.--In the case of two or more 
teaching hospitals that have each received payments pursuant to section 
2231 for one or more fiscal years and that undergo a consolidation or 
merger, the percentage applicable to the resulting teaching hospital 
for purposes of section 2231(b)(2) is the sum of the respective 
percentages that would have applied pursuant to such section if the 
hospitals had not undergone the consolidation or merger.
    ``(d) States With Certain Demonstration Projects.--
        ``(1) In general.--In the case of a teaching hospital in a 
    State for which a demonstration project under section 1814(b)(3) is 
    in effect--
            ``(A) the percentage determined under paragraph (2) for the 
        hospital is deemed to be the percentage applicable under 
        section 2231(b)(2) to the hospital; and
            ``(B) the hospital is not eligible for any payments from 
        the Medicare Indirect-Costs Medical Education Account.
        ``(2) Determination of fixed percentage.--For purposes of 
    paragraph (1)(A):
            ``(A) The Secretary shall make an estimate of the total 
        amount of payments that would have been received under section 
        1886(d)(5)(B) by the hospital involved with respect to each of 
        the fiscal years of the applicable period if such section (as 
        in effect for such fiscal years) had applied to the hospital 
        for such years.
            ``(B) The percentage determined under this paragraph for 
        the hospital for a fiscal year is a mean average percentage 
        determined for the hospital in accordance with the methodology 
        of section 2231(b)(2), except that the estimate made by the 
        Secretary under subparagraph (A) of this paragraph for a fiscal 
        year of the applicable period is deemed to be the amount that 
        applies for purposes of section 2231(b)(2)(C)(i) for such year.

   ``Subpart 4--Amount Relating to Direct Costs of Graduate Medical 
                               Education

``SEC. 2241. DETERMINATION OF AMOUNT RELATING TO DIRECT COSTS.

    ``(a) In General.--For purposes of section 2211(a)(3), the amount 
determined under this section for a teaching hospital for a fiscal year 
is the sum of--
        ``(1) the amount determined under subsection (b) (relating to 
    the General Direct-Costs Medical Education Account); and
        ``(2) the amount determined under subsection (c) (relating to 
    the Medicare Direct-Costs Medical Education Account), subject to 
    section 2242(d)(1)(B).
    ``(b) Payment From General Account.--
        ``(1) In general.--For purposes of subsection (a)(1), the 
    amount determined under this subsection for a teaching hospital for 
    a fiscal year is the product of--
            ``(A) the amount in the General Direct-Costs Medical 
        Education Account on the applicable date under section 
        2201(d)(2) (once the appropriation under such section is made); 
        and
            ``(B) the percentage determined for the hospital under 
        paragraph (2).
        ``(2) Fixed hospital-specific percentage.--
            ``(A) In general.--For purposes of paragraph (1)(B), the 
        percentage determined under this paragraph for a teaching 
        hospital is the mean average of the respective percentages 
        determined under subparagraph (B) for each fiscal year of the 
        applicable period (as defined in section 2231(b)(2)(B)), 
        adjusted by the Secretary (upward or downward, as the case may 
        be) on a pro rata basis to the extent necessary to ensure that 
        the sum of the percentages determined under this subparagraph 
        for all teaching hospitals is equal to 100 percent. The 
        preceding sentence is subject to section 2242.
            ``(B) Respective determinations for fiscal years of 
        applicable period.--For purposes of subparagraph (A), the 
        percentage determined under this subparagraph for a teaching 
        hospital for a fiscal year of the applicable period is the 
        percentage constituted by the ratio of--
                ``(i) the total amount of payments received by the 
            hospital under section 1886(h) for cost reporting periods 
            beginning during the fiscal year involved; to
                ``(ii) the sum of the respective amounts determined 
            under clause (i) for the fiscal year for all teaching 
            hospitals.
        ``(3) Availability of data.--If a teaching hospital received 
    the payments specified in paragraph (2)(B)(i) during the applicable 
    period but a complete set of the relevant data is not available to 
    the Secretary for purposes of determining an amount under such 
    paragraph for the fiscal year involved, the Secretary shall for 
    purposes of such paragraph make an estimate on the basis of such 
    data as are available to the Secretary for the applicable period.
    ``(c) Payment From Medicare Account.--For purposes of subsection 
(a)(2), the amount determined under this subsection for a teaching 
hospital for a fiscal year is an amount determined in accordance with 
the methodology in effect under section 1886(h) for such year. Payments 
made under section 2211 pursuant to the preceding sentence shall be 
made from the Medicare Direct-Costs Medical Education Account.

``SEC. 2242. DIRECT COSTS; SPECIAL RULES REGARDING PAYMENTS FROM 
              GENERAL ACCOUNT.

    ``(a) Special Rule Regarding Fiscal Years 1995 and 1996.--
        ``(1) In general.--In the case of a teaching hospital whose 
    first payments under section 1886(h) were for the cost reporting 
    period beginning in fiscal year 1995 or in fiscal year 1996 
    (referred to in this subsection individually as a `first payment 
    year'), the percentage determined under paragraph (2) for the 
    hospital is deemed to be the percentage applicable under section 
    2241(b)(2) to the hospital, subject to paragraph (3).
        ``(2) Determination of fixed percentage.--For purposes of 
    paragraph (1), the percentage determined under this paragraph for a 
    teaching hospital is the percentage constituted by the ratio of the 
    amount determined under subparagraph (A) to the amount determined 
    under subparagraph (B), as follows:
            ``(A)(i) If the first payment year for the hospital is 
        fiscal year 1995, the amount determined under this subparagraph 
        is the total amount of payments received by the hospital under 
        section 1886(h) for cost reporting periods beginning in fiscal 
        year 1995.
            ``(ii) If the first payment year for the hospital is fiscal 
        year 1996, the amount determined under this subparagraph is an 
        amount equal to an estimate by the Secretary of the total 
        amount of payments that would have been paid to the hospital 
        under section 1886(h) for cost reporting periods beginning in 
        fiscal year 1995 if such section, as in effect for fiscal year 
        1996, had applied to the hospital for fiscal year 1995.
            ``(B)(i) If the first payment year for the hospital is 
        fiscal year 1995, the amount determined under this subparagraph 
        is the aggregate total of the payments received by teaching 
        hospitals under section 1886(h) for cost reporting periods 
        beginning in fiscal year 1995.
            ``(ii) If the first payment year for the hospital is fiscal 
        year 1996--
                ``(I) the Secretary shall make an estimate in 
            accordance with subparagraph (A)(ii) for all teaching 
            hospitals; and
                ``(II) the amount determined under this subparagraph is 
            the sum of the estimates made by the Secretary under 
            subclause (I).
        ``(3) Adjustment of percentage.--The percentage determined 
    under paragraph (2) shall be adjusted by the Secretary in 
    accordance with section 2241(b)(2)(A) to the extent determined by 
    the Secretary to be necessary with respect to a sum that equals 100 
    percent.
    ``(b) New Teaching Hospitals.--
        ``(1) In general.--In the case of a teaching hospital that did 
    not receive payments under section 1886(h) for any of the fiscal 
    years 1992 through 1996, the percentage determined under paragraph 
    (3) for the hospital is deemed to be the percentage applicable 
    under section 2241(b)(2) to the hospital, subject to paragraphs (4) 
    and (5).
        ``(2) Designated fiscal year regarding data.--The determination 
    under paragraph (3) of a percentage for a teaching hospital 
    described in paragraph (1) shall be made for the most recent fiscal 
    year for which the Secretary has sufficient data to make the 
    determination (referred to in this subsection as the `designated 
    fiscal year').
        ``(3) Determination of fixed percentage.--For purposes of 
    paragraph (1), the percentage determined under this paragraph for 
    the teaching hospital involved is the percentage constituted by the 
    ratio of the amount determined under subparagraph (A) to the amount 
    determined under subparagraph (B), as follows:
            ``(A) The amount determined under this subparagraph is an 
        amount equal to an estimate by the Secretary of the total 
        amount of payments that would have been paid to the hospital 
        under section 1886(h) for the designated fiscal year if such 
        section, as in effect for the first fiscal year for which 
        payments pursuant to this subsection are to be made to the 
        hospital, had applied to the hospital for cost reporting 
        periods beginning in the designated fiscal year.
            ``(B) The Secretary shall make an estimate in accordance 
        with subparagraph (A) for all teaching hospitals. The amount 
        determined under this subparagraph is the sum of the estimates 
        made by the Secretary under the preceding sentence.
        ``(4) Adjustment of percentage.--The percentage determined 
    under paragraph (3) shall be adjusted by the Secretary in 
    accordance with section 2223(b)(2)(A) to the extent determined by 
    the Secretary to be necessary with respect to a sum that equals 100 
    percent.
        ``(5) Limitation.--This subsection does not apply to a teaching 
    hospital described in paragraph (1) if the hospital is in a State 
    for which a demonstration project under section 1814(b)(3) is in 
    effect.
    ``(c) Consolidations and Mergers.--In the case of two or more 
teaching hospitals that have each received payments pursuant to section 
2241 for one or more fiscal years and that undergo a consolidation or 
merger, the percentage applicable to the resulting teaching hospital 
for purposes of section 2241(b)(2) is the sum of the respective 
percentages that would have applied pursuant to such section if the 
hospitals had not undergone the consolidation or merger.
    ``(d) States With Certain Demonstration Projects.--
        ``(1) In general.--In the case of a teaching hospital in a 
    State for which a demonstration project under section 1814(b)(3) is 
    in effect--
            ``(A) the percentage determined under paragraph (2) for the 
        hospital is deemed to be the percentage applicable under 
        section 2241(b)(2) to the hospital; and
            ``(B) the hospital is not eligible for any payments from 
        the Medicare Direct-Costs Medical Education Account.
        ``(2) Determination of fixed percentage.--For purposes of 
    paragraph (1)(A):
            ``(A) The Secretary shall make an estimate of the total 
        amount of payments that would have been received under section 
        1886(h) by the hospital involved with respect to each of the 
        fiscal years of the applicable period if such section (as in 
        effect for such fiscal years) had applied to the hospital for 
        such years.
            ``(B) The percentage determined under this paragraph for 
        the hospital for a fiscal year is a mean average percentage 
        determined for the hospital in accordance with the methodology 
        of section 2241(b)(2), except that the estimate made by the 
        Secretary under subparagraph (A) of this paragraph for a fiscal 
        year of the applicable period is deemed to be the amount that 
        applies for purposes of section 2241(b)(2)(B)(i) for such year.

``SEC. 2243. DIRECT COSTS; AUTHORITY FOR PAYMENTS TO CONSORTIA OF 
              PROVIDERS.

    ``(a) In General.--In lieu of making payments to teaching hospitals 
pursuant to sections 2221 and 2241, the Secretary may make payments 
under this section to consortia that meet the requirements of 
subsection (b).
    ``(b) Qualifying Consortium.--For purposes of subsection (a), a 
consortium meets the requirements of this subsection if the consortium 
is in compliance with the following:
        ``(1) The consortium consists of a teaching hospital and one or 
    more of the following entities:
            ``(A) Schools of allopathic medicine or osteopathic 
        medicine.
            ``(B) Other teaching hospitals.
            ``(C) Approved medical residency training programs.
            ``(D) Federally qualified health centers.
            ``(E) Medical group practices.
            ``(F) Managed care entities.
            ``(G) Entities furnishing outpatient services.
            ``(H) Such other entities as the Secretary determines to be 
        appropriate.
        ``(2) The members of the consortium have agreed to collaborate 
    in the programs of graduate medical education that are operated by 
    such members.
        ``(3) With respect to the receipt by the consortium of payments 
    made pursuant to this section, the members of the consortium have 
    agreed on a method for allocating the payments among the members.
        ``(4) The consortium meets such additional requirements as the 
    Secretary may establish.
    ``(c) Payments From Accounts.--The total amount of payments to a 
qualifying consortium for a fiscal year pursuant to subsection (a) 
shall be the sum of--
        ``(1) the aggregate amount determined for the teaching 
    hospitals of the consortium pursuant to section 2221(a) (relating 
    to the General MedicarePlus Incentive Account);
        ``(2) the aggregate amount determined for the teaching 
    hospitals of the consortium pursuant to section 2241(a)(1) 
    (relating to the General Direct-Costs Account); and
        ``(3) an amount determined for the consortium in accordance 
    with the methodology in effect under section 1886(j)(2)(C)(i) for 
    the fiscal year (relating to the Medicare Direct-Costs Account).
    ``(d) Definition.--For purposes of this title, the term `qualifying 
consortium' means a consortium that meets the requirements of 
subsection (b).''.

               CHAPTER 2--AMENDMENTS TO MEDICARE PROGRAM

SEC. 12511. TRANSFER OF FUNDS.

    Section 1886 (42 U.S.C. 1395ww) is amended--
        (1) in subsection (d)(5)(B), in the matter preceding clause 
    (i), by striking ``The Secretary shall provide'' and inserting the 
    following: ``For discharges occurring on or before September 30, 
    1996, the Secretary shall provide'';
        (2) in subsection (h)--
            (A) in paragraph (1), in the first sentence, by striking 
        ``the Secretary shall provide'' and inserting ``the Secretary 
        shall, subject to paragraph (6), provide''; and
            (B) by adding at the end the following paragraph:
        ``(6) Limitation.--
            ``(A) In general.--The authority to make payments under 
        this subsection applies only with respect to cost reporting 
        periods ending on or before September 30, 1996, except as 
        provided in subparagraph (B).
            ``(B) Rule regarding portion of last cost reporting 
        period.--In the case of a cost reporting period that extends 
        beyond September 30, 1996, payments under this subsection shall 
        be made with respect to such portion of the period as has 
        lapsed as of such date.
            ``(C) Rule of construction.--This paragraph may not be 
        construed as authorizing any payment under section 1861(v) with 
        respect to graduate medical education.''; and
        (3) by adding at the end the following subsection:
    ``(j) Transfers to Teaching Hospital and Graduate Medical Education 
Trust Fund.--
        ``(1) Indirect costs of medical education.--
            ``(A) In general.--From the Federal Hospital Insurance 
        Trust Fund, the Secretary shall, for fiscal year 1997 and each 
        subsequent fiscal year, transfer to the Medicare Indirect-Costs 
        Medical Education Account under section 2201 an amount 
        determined by the Secretary in accordance with subparagraph 
        (B).
            ``(B) Determination of amounts.--The Secretary shall make 
        an estimate for the fiscal year involved of the nationwide 
        total of the amounts that would have been paid under subsection 
        (d)(5)(B) to hospitals during the fiscal year if such payments 
        had not been terminated for discharges occurring after 
        September 30, 1996. For purposes of subparagraph (A), the 
        amount determined under this subparagraph for the fiscal year 
        is the estimate made by the Secretary under the preceding 
        sentence.
            ``(C) Supplemental transfers.--If the Secretary determines 
        that the amount of a transfer under subparagraph (A) for a 
        fiscal year is insufficient for making payments in the amounts 
        required pursuant to section 2231(a)(2) for the year, the 
        Secretary shall make such additional transfers for the year 
        between the funds and accounts involved as the Secretary 
        determines to be necessary for making the payments.
        ``(2) Direct costs of medical education.--
            ``(A) In general.--From the Federal Hospital Insurance 
        Trust Fund and the Federal Supplementary Medical Insurance 
        Trust Fund, the Secretary shall, for fiscal year 1997 and each 
        subsequent fiscal year, transfer to the Medicare Direct-Costs 
        Medical Education Account (under section 2201) the sum of--
                ``(i) an amount determined by the Secretary in 
            accordance with subparagraph (B); and
                ``(ii) as applicable, an amount determined by the 
            Secretary in accordance with subparagraph (C)(ii).
            ``(B) Determination of amounts.--For each hospital (other 
        than a hospital that is a member of a qualifying consortium 
        referred to in subparagraph (C)), the Secretary shall make an 
        estimate for the fiscal year involved of the amount that would 
        have been paid under subsection (h) to the hospital during the 
        fiscal year if such payments had not been terminated for cost 
        reporting periods ending on or before September 30, 1996. For 
        purposes of subparagraph (A)(i), the amount determined under 
        this subparagraph for the fiscal year is the sum of all 
        estimates made by the Secretary under the preceding sentence.
            ``(C) Estimates regarding qualifying consortia.--If the 
        Secretary authorizes payments under section 2243(a) to one or 
        more qualifying consortia, the Secretary shall carry out the 
        following:
                ``(i) The Secretary shall establish a methodology for 
            making payments to qualifying consortia with respect to the 
            reasonable direct costs of such consortia in carrying out 
            programs of graduate medical education. The methodology 
            shall be the methodology established in subsection (h), 
            modified to the extent necessary to take into account the 
            participation in such programs of entities other than 
            hospitals.
                ``(ii) For each qualifying consortium, the Secretary 
            shall make an estimate for the fiscal year involved of the 
            amount that would have been paid to the consortium during 
            the fiscal year if, using the methodology under clause (i), 
            payments had been made to the consortium for the fiscal 
            year as reimbursements with respect to cost reporting 
            periods. For purposes of subparagraph (A)(ii), the amount 
            determined under this clause for the fiscal year is the sum 
            of all estimates made by the Secretary under the preceding 
            sentence.
            ``(D) Allocation between funds.--In providing for a 
        transfer under subparagraph (A) for a fiscal year, the 
        Secretary shall provide for an allocation of the amounts 
        involved between part A and part B (and the trust funds 
        established under the respective parts) as reasonably reflects 
        the proportion of direct graduate medical education costs of 
        hospitals associated with the provision of services under each 
        respective part.
            ``(E) Supplemental transfers.--If the Secretary determines 
        that the amount of a transfer under subparagraph (A) for a 
        fiscal year is insufficient for making payments in the amounts 
        required pursuant to sections 2241(a)(2) and 2243(c)(3) for the 
        year, the Secretary shall make such additional transfers for 
        the year between the funds and accounts involved as the 
        Secretary determines to be necessary for making the payments.
        ``(3) Applicability of certain amendments.--Amendments made to 
    subsection (d)(5)(B) and subsection (h) that are effective on or 
    after October 1, 1996, apply only for purposes of estimates under 
    paragraphs (1) and (2) and for purposes of determining the amount 
    of payments under section 2211. Such amendments do not require any 
    adjustment to amounts paid under subsection (d)(5)(B) or (h) with 
    respect to fiscal year 1996 or any prior fiscal year.
        ``(4) Relationship to certain demonstration projects.--In the 
    case of a State for which a demonstration project under section 
    1814(b)(3) is in effect, the Secretary, in making determinations of 
    the rates of increase under such section, shall include all amounts 
    transferred under this subsection. Such amounts shall be so 
    included to the same extent and in the same manner as amounts 
    determined under subsections (d)(5)(B) and (h) were included in 
    such determination under the provisions of this title in effect on 
    September 30, 1996.''.

                 Subtitle F--National Defense Stockpile

SEC. 12601. DISPOSAL OF CERTAIN MATERIALS IN NATIONAL DEFENSE STOCKPILE 
              FOR DEFICIT REDUCTION.

    (a) Disposals Required.--(1) During fiscal year 1996, the President 
shall dispose of all cobalt contained in the National Defense Stockpile 
that, as of the date of the enactment of this Act, is authorized for 
disposal under any law (other than this Act).
    (2) In addition to the disposal of cobalt under paragraph (1), the 
President shall dispose of additional quantities of cobalt and 
quantities of other materials contained in the National Defense 
Stockpile and specified in the table in subsection (b) so as to result 
in receipts to the United States in amounts equal to--
        (A) $21,000,000 during the fiscal year ending September 30, 
    1996;
        (B) $338,000,000 during the five-fiscal year period ending on 
    September 30, 2000; and
        (C) $649,000,000 during the seven-fiscal year period ending on 
    September 30, 2002.
    (b) Limitation on Disposal Quantity.--The total quantities of 
materials authorized for disposal by the President under subsection 
(a)(2) may not exceed the amounts 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     
------------------------------------------------------------------------

    (c) Deposit of Receipts.--Notwithstanding section 9 of the 
Strategic and Critical Materials Stock Piling Act (50 U.S.C. 98h), 
funds received as a result of the disposal of materials under 
subsection (a)(2) shall be deposited into the general fund of the 
Treasury for the purpose of deficit reduction.
    (d) Relationship to Other Disposal Authority.--The disposal 
authority provided in subsection (a)(2) is new disposal authority and 
is in addition to, and shall not affect, any other disposal authority 
provided by law regarding the materials specified in such subsection.
    (e) Termination of Disposal Authority.--The President may not use 
the disposal authority provided in subsection (a)(2) after the date on 
which the total amount of receipts specified in subparagraph (C) of 
such subsection is achieved.
    (f) Definition.--The term ``National Defense Stockpile'' means the 
National Defense Stockpile provided for in section 4 of the Strategic 
and Critical Materials Stock Piling Act (50 U.S.C. 98c).

 Subtitle G--Child Protection Block Grant Program and Foster Care and 
                          Adoption Assistance

SEC. 12701. ESTABLISHMENT OF PROGRAM.

    Title IV of the Social Security Act (42 U.S.C. 601 et seq.) is 
amended by striking subpart 2 of part B and inserting the following:

``Subpart 2--Block Grants to States for the Protection of Children and 
       Matching Payments for Foster Care and Adoption Assistance

``SEC. 430. ELIGIBLE STATES.

    ``(a) In General.--As used in this subpart, the term `eligible 
State' means a State that has submitted to the Secretary, not later 
than October 1, 1996, and every 3 years thereafter, a plan which has 
been signed by the chief executive officer of the State and that 
includes the following:
        ``(1) Outline of child protection program.--A written document 
    that outlines the activities the State intends to conduct to 
    achieve the child protection goals of the program funded under this 
    subpart, including the procedures to be used for--
            ``(A) receiving and assessing reports of child abuse or 
        neglect;
            ``(B) investigating such reports;
            ``(C) with respect to families in which abuse or neglect 
        has been confirmed, providing services or referral for services 
        for families and children where the State makes a determination 
        that the child may safely remain with the family;
            ``(D) protecting children by removing them from dangerous 
        settings and ensuring their placement in a safe environment;
            ``(E) providing training for individuals mandated to report 
        suspected cases of child abuse or neglect;
            ``(F) protecting children in foster care;
            ``(G) promoting timely adoptions;
            ``(H) protecting the rights of families, using adult 
        relatives as the preferred placement for children separated 
        from their parents where such relatives meet the relevant State 
        child protection standards;
            ``(I) providing services to individuals, families, or 
        communities, either directly or through referral, that are 
        aimed at preventing the occurrence of child abuse and neglect; 
        and
            ``(J) establishing and responding to citizen review panels 
        under section 434.
        ``(2) Certification of state law requiring the reporting of 
    child abuse and neglect.--A certification that the State has in 
    effect laws that require public officials and other professionals 
    to report, in good faith, actual or suspected instances of child 
    abuse or neglect.
        ``(3) Certification of procedures for screening, safety 
    assessment, and prompt investigation.--A certification that the 
    State has in effect procedures for receiving and responding to 
    reports of child abuse or neglect, including the reports described 
    in paragraph (2), and for the immediate screening, safety 
    assessment, and prompt investigation of such reports.
        ``(4) Certification of state procedures for removal and 
    placement of abused or neglected children.--A certification that 
    the State has in effect procedures for the removal from families 
    and placement of abused or neglected children and of any other 
    child in the same household who may also be in danger of abuse or 
    neglect.
        ``(5) Certification of provisions for immunity from 
    prosecution.--A certification that the State has in effect laws 
    requiring immunity from prosecution under State and local laws and 
    regulations for individuals making good faith reports of suspected 
    or known instances of child abuse or neglect.
        ``(6) Certification of provisions and procedures for 
    expungement of certain records.--A certification that the State has 
    in effect laws and procedures requiring the facilitation of the 
    prompt expungement of any records that are accessible to the 
    general public or are used for purposes of employment or other 
    background checks in cases determined to be unsubstantiated or 
    false.
        ``(7) Certification of provisions and procedures relating to 
    appeals.--A certification that not later then 2 years after the 
    date of the enactment of this subpart, the State shall have laws 
    and procedures in effect affording individuals an opportunity to 
    appeal an official finding of abuse or neglect.
        ``(8) Certification of state procedures for developing and 
    reviewing written plans for permanent placement of removed 
    children.--A certification that the State has in effect procedures 
    for ensuring that a written plan is prepared for children who have 
    been removed from their families. Such plan shall specify the goals 
    for achieving a permanent placement for the child in a timely 
    fashion, for ensuring that the written plan is reviewed every 6 
    months (until such placement is achieved), and for ensuring that 
    information about such children is collected regularly and recorded 
    in case records, and include a description of such procedures.
        ``(9) Certification of state program to provide independent 
    living services.--A certification that the State has in effect a 
    program to provide independent living services, for assistance in 
    making the transition to self-sufficient adulthood, to individuals 
    in the child protection program of the State who are 16, but who 
    are not 20 (or, at the option of the State, 22), years of age, and 
    who do not have a family to which to be returned.
        ``(10) Certification of state procedures to respond to 
    reporting of medical neglect of disabled infants.--
            ``(A) In general.--A certification that the State has in 
        place for the purpose of responding to the reporting of medical 
        neglect of infants (including instances of withholding of 
        medically indicated treatment from disabled infants with life-
        threatening conditions), procedures or programs, or both 
        (within the State child protective services system), to provide 
        for--
                ``(i) coordination and consultation with individuals 
            designated by and within appropriate health-care 
            facilities;
                ``(ii) prompt notification by individuals designated by 
            and within appropriate health-care facilities of cases of 
            suspected medical neglect (including instances of 
            withholding of medically indicated treatment from disabled 
            infants with life-threatening conditions); and
                ``(iii) authority, under State law, for the State child 
            protective service to pursue any legal remedies, including 
            the authority to initiate legal proceedings in a court of 
            competent jurisdiction, as may be necessary to prevent the 
            withholding of medically indicated treatment from disabled 
            infants with life-threatening conditions.
            ``(B) Withholding of medically indicated treatment.--As 
        used in subparagraph (A), the term `withholding of medically 
        indicated treatment' means the failure to respond to the 
        infant's life-threatening conditions by providing treatment 
        (including appropriate nutrition, hydration, and medication) 
        which, in the treating physician's or physicians' reasonable 
        medical judgment, will be most likely to be effective in 
        ameliorating or correcting all such conditions, except that 
        such term does not include the failure to provide treatment 
        (other than appropriate nutrition, hydration, or medication) to 
        an infant when, in the treating physician's or physicians' 
        reasonable medical judgment--
                ``(i) the infant is chronically and irreversibly 
            comatose;
                ``(ii) the provision of such treatment would--

                    ``(I) merely prolong dying;
                    ``(II) not be effective in ameliorating or 
                correcting all of the infant's life-threatening 
                conditions; or
                    ``(III) otherwise be futile in terms of the 
                survival of the infant; or

                ``(iii) the provision of such treatment would be 
            virtually futile in terms of the survival of the infant and 
            the treatment itself under such circumstances would be 
            inhumane.
        ``(11) Identification of child protection goals.--The 
    quantitative goals of the State child protection program.
        ``(12) Certification of child protection standards.--With 
    respect to fiscal years beginning on or after April 1, 1996, a 
    certification that the State--
            ``(A) has completed an inventory of all children who, 
        before the inventory, had been in foster care under the 
        responsibility of the State for 6 months or more, which 
        determined--
                ``(i) the appropriateness of, and necessity for, the 
            foster care placement;
                ``(ii) whether the child could or should be returned to 
            the parents of the child or should be freed for adoption or 
            other permanent placement; and
                ``(iii) the services necessary to facilitate the return 
            of the child or the placement of the child for adoption or 
            legal guardianship;
            ``(B) is operating, to the satisfaction of the Secretary--
                ``(i) a statewide information system from which can be 
            readily determined the status, demographic characteristics, 
            location, and goals for the placement of every child who is 
            (or, within the immediately preceding 12 months, has been) 
            in foster care;
                ``(ii) a case review system for each child receiving 
            foster care under the supervision of the State;
                ``(iii) a service program designed to help children--

                    ``(I) where appropriate, return to families from 
                which they have been removed; or
                    ``(II) be placed for adoption, with a legal 
                guardian, or if adoption or legal guardianship is 
                determined not to be appropriate for a child, in some 
                other planned, permanent living arrangement; and

                ``(iv) a preplacement preventive services program 
            designed to help children at risk for foster care placement 
            remain with their families; and
            ``(C)(i) has reviewed (or not later than October 1, 1997, 
        will review) State policies and administrative and judicial 
        procedures in effect for children abandoned at or shortly after 
        birth (including policies and procedures providing for legal 
        representation of such children); and
            ``(ii) is implementing (or not later than October 1, 1997, 
        will implement) such policies and procedures as the State 
        determines, on the basis of the review described in clause (i), 
        to be necessary to enable permanent decisions to be made 
        expeditiously with respect to the placement of such children.
        ``(13) Certification of reasonable efforts before placement of 
    children in foster care.--A certification that the State in each 
    case will--
            ``(A) make reasonable efforts prior to the placement of a 
        child in foster care, to prevent or eliminate the need for 
        removal of the child from the child's home, and to make it 
        possible for the child to return home; and
            ``(B) with respect to families in which abuse or neglect 
        has been confirmed, provide services or referral for services 
        for families and children where the State makes a determination 
        that the child may safely remain with the family.
        ``(14) Certification of cooperative efforts.--A certification 
    by the State, where appropriate, that all steps will be taken, 
    including cooperative efforts with the State agencies administering 
    the plans approved under parts A and D, to secure an assignment to 
    the State of any rights to support on behalf of each child 
    receiving foster care maintenance payments under this subpart.
    ``(b) Determinations.--The Secretary shall determine whether a plan 
submitted pursuant to subsection (a) contains the material required by 
subsection (a), other than the material described in paragraph (10) of 
such subsection. The Secretary may not require a State to include in 
such a plan any material not described in subsection (a).

``SEC. 431. GRANTS TO STATES FOR CHILD PROTECTION AND PAYMENTS FOR 
              FOSTER CARE AND ADOPTION ASSISTANCE.

    ``(a) Funding of Block Grants.--Each eligible State shall be 
entitled to receive from the Secretary for each fiscal year specified 
in subsection (c)(1) a grant in an amount equal to the State share of 
the child protection amount for the fiscal year.
    ``(b) Maintenance Payments.--
        ``(1) In general.--In addition to the grants described in 
    subsection (a), each eligible State shall be entitled to receive 
    from the Secretary for each quarter of each fiscal year specified 
    in subsection (c)(1) an amount equal to the sum of--
            ``(A) an amount equal to the Federal medical assistance 
        percentage (as defined in section 1905(b) of this Act as in 
        effect on the day before the date of enactment of this subpart) 
        of the total amount expended during such quarter as foster care 
        maintenance payments under the child protection program under 
        this subpart for children in foster family homes or child-care 
        institutions; plus
            ``(B) an amount equal to the Federal medical assistance 
        percentage (as defined in section 1905(b) of this Act (as so in 
        effect)) of the total amount expended during such quarter as 
        adoption assistance payments under the child protection program 
        under this subpart pursuant to adoption assistance agreements.
        ``(2) Estimates by the secretary.--
            ``(A) In general.--The Secretary shall, prior to the 
        beginning of each quarter, estimate the amount to which a State 
        will be entitled to receive under paragraph (1) for such 
        quarter, such estimates to be based on--
                ``(i) a report filed by the State containing its 
            estimate of the total sum to be expended in such quarter in 
            accordance with paragraph (1), and stating the amount 
            appropriated or made available by the State and its 
            political subdivisions for such expenditures in such 
            quarter, and if such amount is less than the State's 
            proportionate share of the total sum of such estimated 
            expenditures, the source or sources from which the 
            difference is expected to be derived;
                ``(ii) records showing the number of children in the 
            State receiving assistance under this subpart; and
                ``(iii) such other information as the Secretary may 
            find necessary.
            ``(B) Payments.--The Secretary shall pay to the States the 
        amounts so estimated under subparagraph (A), reduced or 
        increased to the extent of any overpayment or underpayment 
        which the Secretary determines was made under this subsection 
        to such State for any prior quarter and with respect to which 
        adjustment has not already been made under this paragraph.
            ``(C) Pro rata share.--The pro rata share to which the 
        United States is equitably entitled, as determined by the 
        Secretary, of the net amount recovered during any quarter by 
        the State or any political subdivision thereof with respect to 
        foster care and adoption assistance furnished under this 
        subpart shall be considered an overpayment to be adjusted under 
        this paragraph.
        ``(3) Allowance or disallowance of claim.--
            ``(A) In general.--Within 60 days after receipt of a State 
        claim for expenditures pursuant to paragraph (2)(A), the 
        Secretary shall allow, disallow, or defer such claim.
            ``(B) Notice.--Within 15 days after a decision to defer a 
        State claim, the Secretary shall notify the State of the 
        reasons for the deferral and of the additional information 
        necessary to determine the allowability of the claim.
            ``(C) Decision.--Within 90 days after receiving such 
        necessary information (in readily reviewable form), the 
        Secretary shall--
                ``(i) disallow the claim, if able to complete the 
            review and determine that the claim is not allowable; or
                ``(ii) in any other case, allow the claim, subject to 
            disallowance (as necessary)--

                    ``(I) upon completion of the review, if it is 
                determined that the claim is not allowable; or
                    ``(II) on the basis of findings of an audit or 
                financial management review.

    ``(c) Definitions.--As used in this section:
        ``(1) Child protection amount.--The term `child protection 
    amount' means--
            ``(A) $1,936,000,000 for fiscal year 1996;
            ``(B) $1,942,000,000 for fiscal year 1997;
            ``(C) $2,063,000,000 for fiscal year 1998;
            ``(D) $2,167,000,000 for fiscal year 1999;
            ``(E) $2,297,000,000 for fiscal year 2000;
            ``(F) $2,432,000,000 for fiscal year 2001; and
            ``(G) $2,593,000,000 for fiscal year 2002.
        ``(2) State share.--
            ``(A) In general.--The term `State share' means the 
        qualified child protection expenses of the State divided by the 
        sum of the qualified child protection expenses of all of the 
        States.
            ``(B) Qualified child protection expenses.--The term 
        `qualified child protection expenses' means, with respect to a 
        State the greater of--
                ``(i) the total amount of--

                    ``(I) \1/3\ of the total obligations to the State 
                under the provisions of law specified in clauses (i), 
                (ii), and (iii) of subparagraph (C) for fiscal years 
                1992, 1993, and 1994; and
                    ``(II) \1/3\ of the total claims submitted by the 
                State (without regard to disputed claims) under the 
                provision of law specified in subparagraph (C)(iv) for 
                fiscal years 1992, 1993, and 1994; or

                ``(ii) the total amount of--

                    ``(I) the total obligations to the State under the 
                provisions of law specified in clauses (i), (ii), and 
                (iii) of subparagraph (C) for fiscal year 1995; and
                    ``(II) the total claims submitted by the State 
                (without regard to disputed claims) under the provision 
                of law specified in subparagraph (C)(iv) for fiscal 
                year 1995.

            ``(C) Provisions of law.--The provisions of law specified 
        in this subparagraph are the following (as in effect on the day 
        before the date of enactment of this subpart):
                ``(i) Section 434 of this Act.
                ``(ii) Section 474(a)(4) of this Act.
                ``(iii) Section 474(a)(3) of this Act.
    ``(d) Use of Grant.--
        ``(1) In general.--A State to which a grant is made under this 
    section may use the grant in any manner that the State deems 
    appropriate to accomplish the child protection goals of the State 
    program funded under this subpart.
        ``(2) Timing of expenditures.--A State to which a grant is made 
    under this section for a fiscal year shall expend the total amount 
    of the grant not later than the end of the immediately succeeding 
    fiscal year.
        ``(3) Rule of interpretation.--This subpart shall not be 
    interpreted to prohibit short- and long-term foster care facilities 
    operated for profit from receiving funds provided under this 
    subpart.
    ``(e) Timing of Payments.--The Secretary shall pay each eligible 
State the amount of the grant payable to the State under this section 
in quarterly installments.
    ``(f) Penalties.--
        ``(1) For use of grant in violation of this subpart.--If an 
    audit conducted pursuant to chapter 75 of title 31, United States 
    Code, finds that an amount paid to a State under this section for a 
    fiscal year has been used in violation of this subpart, then the 
    Secretary shall reduce the amount of the grant that would (in the 
    absence of this paragraph) be payable to the State under this 
    section for the immediately succeeding fiscal year by the amount so 
    used, plus 5 percent of the grant paid under this section to the 
    State for such fiscal year.
        ``(2) For failure to maintain effort.--
            ``(A) In general.--If an audit conducted pursuant to 
        chapter 75 of title 31, United States Code, finds that the 
        amount expended by a State (other than from amounts provided by 
        the Federal Government) during the fiscal years specified in 
        subparagraph (B), to carry out the State program funded under 
        this subpart is less than the applicable percentage specified 
        in such subparagraph of the total amount expended by the State 
        (other than from amounts provided by the Federal Government) 
        during fiscal year 1995 under subpart 2 of part B and part E of 
        this title (as in effect on the day before the date of the 
        enactment of this subpart), then the Secretary shall reduce the 
        amount of the grant that would (in the absence of this 
        paragraph) be payable to the State under this section for the 
        immediately succeeding fiscal year by the amount of the 
        difference, plus 5 percent of the grant paid under this section 
        to the State for such fiscal year.
            ``(B) Specification of fiscal years and applicable 
        percentages.--The fiscal years and applicable percentages 
        specified in this subparagraph are as follows:
                ``(i) For fiscal years 1996 and 1997, 100 percent.
                ``(ii) For fiscal years 1998 through 2002, 75 percent.
        ``(3) For failure to submit required report.--
            ``(A) In general.--The Secretary shall reduce by 3 percent 
        the amount of the grant that would (in the absence of this 
        paragraph) be payable to a State under this section for a 
        fiscal year if the Secretary determines that the State has not 
        submitted the report required by section 436(b) for the 
        immediately preceding fiscal year, within 6 months after the 
        end of the immediately preceding fiscal year.
            ``(B) Rescission of penalty.--The Secretary shall rescind a 
        penalty imposed on a State under subparagraph (A) with respect 
        to a report for a fiscal year if the State submits the report 
        before the end of the immediately succeeding fiscal year.
        ``(4) For failure to comply with sampling methods 
    requirements.--The Secretary may reduce by not more than 1 percent 
    the amount of the grant that would (in the absence of this 
    paragraph) be payable to a State under this section for a 
    succeeding fiscal year if the Secretary determines that the State 
    has not complied with the Secretary's sampling methods requirements 
    under section 436(c)(2) during the prior fiscal year.
        ``(5) State funds to replace reductions in grant.--A State 
    which has a penalty imposed against it under this subsection for a 
    fiscal year shall expend additional State funds in an amount equal 
    to the amount of the penalty for the purpose of carrying out the 
    State program under this subpart during the immediately succeeding 
    fiscal year.
        ``(6) Reasonable cause exception.--The Secretary may not impose 
    a penalty on a State under this subsection with respect to a 
    requirement if the Secretary determines that the State has 
    reasonable cause for failing to comply with the requirement.
        ``(7) Corrective compliance plan.--
            ``(A) In general.--
                ``(i) Notification of violation.--Notwithstanding any 
            other provision of law, the Federal Government shall, 
            before assessing a penalty against a State under this 
            subsection, notify the State of the violation of law for 
            which the penalty would be assessed and allow the State the 
            opportunity to enter into a corrective compliance plan in 
            accordance with this subsection which outlines how the 
            State will correct any such violations and how the State 
            will insure continuing compliance with the requirements of 
            this subpart.
                ``(ii) 60-day period to propose a corrective compliance 
            plan.--Any State notified under clause (i) shall have 60 
            days in which to submit to the Federal Government a 
            corrective compliance plan to correct any violations 
            described in clause (i).
                ``(iii) Acceptance of plan.--The Federal Government 
            shall have 60 days to accept or reject the State's 
            corrective compliance plan and may consult with the State 
            during this period to modify the plan. If the Federal 
            Government does not accept or reject the corrective 
            compliance plan during the period, the corrective 
            compliance plan shall be deemed to be accepted.
            ``(B) Failure to correct.--If a corrective compliance plan 
        is accepted by the Federal Government, no penalty shall be 
        imposed with respect to a violation described in this 
        subsection if the State corrects the violation pursuant to the 
        plan. If a State has not corrected the violation in a timely 
        manner under the plan, some or all of the penalty shall be 
        assessed.
        ``(8) Limitation on amount of penalty.--
            ``(A) In general.--In imposing the penalties described in 
        this subsection, the Secretary shall not reduce any quarterly 
        payment to a State by more than 25 percent.
            ``(B) Carryforward of unrecovered penalties.--To the extent 
        that subparagraph (A) prevents the Secretary from recovering 
        during a fiscal year the full amount of all penalties imposed 
        on a State under this subsection for a prior fiscal year, the 
        Secretary shall apply any remaining amount of such penalties to 
        the grant payable to the State under section 431(a) for the 
        immediately succeeding fiscal year.
    ``(g) Treatment of Territories.--
        ``(1) In general.--A territory, as defined in section 
    1108(b)(1), shall carry out a child protection program in 
    accordance with the provisions of this subpart.
        ``(2) Payments.--Each territory, as so defined, shall be 
    entitled to receive from the Secretary for any fiscal year an 
    amount, in accordance with section 1108, which shall be used for 
    the purpose of carrying out a child protection program in 
    accordance with the provisions of this subpart.
    ``(h) Limitation on Federal Authority.--Except as expressly 
provided in this Act, the Secretary may not regulate the conduct of 
States under this subpart or enforce any provision of this subpart.

``SEC. 432. REQUIREMENTS FOR FOSTER CARE MAINTENANCE PAYMENTS.

    ``(a) In General.--Each State operating a program under this 
subpart shall make foster care maintenance payments under section 
431(b) with respect to a child who would meet the requirements of 
section 406(a) or of section 407 (as in effect on the day before the 
date of the enactment of this subpart) but for the removal of the child 
from the home of a relative (specified in section 406 (a) (as so in 
effect)), if--
        ``(1) the removal from the home occurred pursuant to a 
    voluntary placement agreement entered into by the child's parent or 
    legal guardian, or was the result of a judicial determination to 
    the effect that continuation therein would be contrary to the 
    welfare of such child and that reasonable efforts of the type 
    described in section 430(a)(13) have been made;
        ``(2) such child's placement and care are the responsibility 
    of--
            ``(A) the State; or
            ``(B) any other public agency with whom the State has made 
        an agreement for the administration of the State program under 
        this subpart which is still in effect;
        ``(3) such child has been placed in a foster family home or 
    child-care institution as a result of the voluntary placement 
    agreement or judicial determination referred to in paragraph (1); 
    and
        ``(4) such child--
            ``(A) would have been eligible to receive aid under the 
        eligibility standards under the State plan approved under 
        section 402 (as in effect on the day before the date of the 
        enactment of this subpart and adjusted for inflation, in 
        accordance with regulations issued by the Secretary) in or for 
        the month in which such agreement was entered into or court 
        proceedings leading to the removal of such child from the home 
        were initiated; or
            ``(B) would have received such aid in or for such month if 
        application had been made therefore, or the child had been 
        living with a relative specified in section 406(a) (as so in 
        effect) within 6 months prior to the month in which such 
        agreement was entered into or such proceedings were initiated, 
        and would have received such aid in or for such month if in 
        such month such child had been living with such a relative and 
        application therefore had been made.
    ``(b) Limitation on Foster Care Payments.--Foster care maintenance 
payments may be made under this subpart only on behalf of a child 
described in subsection (a) of this section who is--
        ``(1) in the foster family home of an individual, whether the 
    payments therefore are made to such individual or to a public or 
    private child-placement or child-care agency; or
        ``(2) in a child-care institution, whether the payments 
    therefore are made to such institution or to a public or private 
    child-placement or child-care agency, which payments shall be 
    limited so as to include in such payments only those items which 
    are included in the term `foster care maintenance payments' (as 
    defined in section 437(6)).
    ``(c) Voluntary Placements.--
        ``(1) Satisfaction of child protection standards.--
    Notwithstanding any other provision of this section, Federal 
    payments may be made under this subpart with respect to amounts 
    expended by any State as foster care maintenance payments under 
    this subpart, in the case of children removed from their homes 
    pursuant to voluntary placement agreements as described in 
    subsection (a), only if (at the time such amounts were expended) 
    the State has fulfilled all of the requirements of section 435(b) 
    or 430(a)(12).
        ``(2) Removal in excess of 180 days.--No Federal payment may be 
    made under this subpart with respect to amounts expended by any 
    State as foster care maintenance payments, in the case of any child 
    who was removed from such child's home pursuant to a voluntary 
    placement agreement as described in subsection (a) and has remained 
    in voluntary placement for a period in excess of 180 days, unless 
    there has been a judicial determination by a court of competent 
    jurisdiction (within the first 180 days of such placement) to the 
    effect that such placement is in the best interests of the child.
        ``(3) Deemed revocation of agreements.--In any case where--
            ``(A) the placement of a minor child in foster care 
        occurred pursuant to a voluntary placement agreement entered 
        into by the parents or guardians of such child as provided in 
        subsection (a); and
            ``(B) such parents or guardians request (in such manner and 
        form as the Secretary may prescribe) that the child be returned 
        to their home or to the home of a relative,
    the voluntary placement agreement shall be deemed to be revoked 
    unless the State opposes such request and obtains a judicial 
    determination, by a court of competent jurisdiction, that the 
    return of the child to such home would be contrary to the child's 
    best interests.

``SEC. 433. REQUIREMENTS FOR ADOPTION ASSISTANCE PAYMENTS.

    ``(a) In General.--A State operating a program under this subpart 
shall enter into adoption assistance agreements with the adoptive 
parents of children with special needs.
    ``(b) Payments Under Agreements.--Under any adoption assistance 
agreement entered into by a State with parents who adopt a child with 
special needs who meets the requirements of subsection (c), the State 
may make adoption assistance payments to such parents or through 
another public or nonprofit private agency, in amounts determined under 
subsection (d).
    ``(c) Children With Special Needs.--For purposes of subsection (b), 
a child meets the requirements of this subsection if such child--
        ``(1)(A) at the time adoption proceedings were initiated, met 
    the requirements of section 406(a) or section 407 (as in effect on 
    the day before the date of the enactment of this subpart) or would 
    have met such requirements except for such child's removal from the 
    home of a relative (specified in section 406(a) (as so in effect)), 
    either pursuant to a voluntary placement agreement with respect to 
    which Federal payments are provided under section 431(b) (or 403 
    (as so in effect)) or as a result of a judicial determination to 
    the effect that continuation therein would be contrary to the 
    welfare of such child;
        ``(B) meets all of the requirements of title XVI with respect 
    to eligibility for supplemental security income benefits; or
        ``(C) is a child whose costs in a foster family home or child-
    care institution are covered by the foster care maintenance 
    payments being made with respect to his or her minor parent;
        ``(2)(A) would have received aid under the eligibility 
    standards under the State plan approved under section 402 (as in 
    effect on the day before the date of the enactment of this subpart, 
    adjusted for inflation, in accordance with regulations issued by 
    the Secretary) in or for the month in which such agreement was 
    entered into or court proceedings leading to the removal of such 
    child from the home were initiated;
        ``(B) would have received such aid in or for such month if 
    application had been made therefore, or had been living with a 
    relative specified in section 406(a) (as so in effect) within 6 
    months prior to the month in which such agreement was entered into 
    or such proceedings were initiated, and would have received such 
    aid in or for such month if in such month such child had been 
    living with such a relative and application therefore had been 
    made; or
        ``(C) is a child described in subparagraph (A) or (B); and
        ``(3) has been determined by the State, pursuant to subsection 
    (g) of this section, to be a child with special needs.
    ``(d) Determination of Payments.--The amount of the payments to be 
made in any case under subsection (b) shall be determined through 
agreement between the adoptive parents and the State or a public or 
nonprofit private agency administering the program under this subpart, 
which shall take into consideration the circumstances of the adopting 
parents and the needs of the child being adopted, and may be readjusted 
periodically, with the concurrence of the adopting parents (which may 
be specified in the adoption assistance agreement), depending upon 
changes in such circumstances. However, in no case may the amount of 
the adoption assistance payment exceed the foster care maintenance 
payment which would have been paid during the period if the child with 
respect to whom the adoption assistance payment is made had been in a 
foster family home.
    ``(e) Payment Exception.--Notwithstanding subsection (d), no 
payment may be made to parents with respect to any child who has 
attained the age of 18 (or, where the State determines that the child 
has a mental or physical disability which warrants the continuation of 
assistance, the age of 21), and no payment may be made to parents with 
respect to any child if the State determines that the parents are no 
longer legally responsible for the support of the child or if the State 
determines that the child is no longer receiving any support from such 
parents. Parents who have been receiving adoption assistance payments 
under this subpart shall keep the State or public or nonprofit private 
agency administering the program under this subpart informed of 
circumstances which would, pursuant to this section, make them 
ineligible for such assistance payments, or eligible for assistance 
payments in a different amount.
    ``(f) Pre-adoption Payments.--For purposes of this subpart, 
individuals with whom a child who has been determined by the State, 
pursuant to subsection (g), to be a child with special needs is placed 
for adoption in accordance with applicable State and local law shall be 
eligible for adoption assistance payments during the period of the 
placement, on the same terms and subject to the same conditions as if 
such individuals had adopted such child.
    ``(g) Determination of Child With Special Needs.--For purposes of 
this section, a child shall not be considered a child with special 
needs unless--
        ``(1) the State has determined that the child cannot or should 
    not be returned to the home of the child's parents; and
        ``(2) the State had first determined--
            ``(A) that there exists with respect to the child a 
        specific factor or condition such as the child's ethnic 
        background, age, or membership in a minority or sibling group, 
        or the presence of factors such as medical conditions or 
        physical, mental, or emotional handicaps because of which it is 
        reasonable to conclude that such child cannot be placed with 
        adoptive parents without providing adoption assistance under 
        this subpart or medical assistance under title XIX or XXI; and
            ``(B) that, except where it would be against the best 
        interests of the child because of such factors as the existence 
        of significant emotional ties with prospective adoptive parents 
        while in the care of such parents as a foster child, a 
        reasonable, but unsuccessful, effort has been made to place the 
        child with appropriate adoptive parents without providing 
        adoption assistance under this section or medical assistance 
        under title XIX or XXI.

``SEC. 434. CITIZEN REVIEW PANELS.

    ``(a) Establishment.--Each State to which a grant is made under 
section 431(a) shall establish at least 3 citizen review panels.
    ``(b) Composition.--Each panel established under subsection (a) 
shall be broadly representative of the community from which drawn.
    ``(c) Frequency of Meetings.--Each panel established under 
subsection (a) shall meet not less frequently than quarterly.
    ``(d) Duties.--
        ``(1) In general.--Each panel established under subsection (a) 
    shall, by examining specific cases, determine the extent to which 
    the State and local agencies responsible for carrying out 
    activities under this subpart are doing so in accordance with the 
    State plan, with the child protection standards set forth in 
    section 430(a)(12) and 435, and with any other criteria that the 
    panel considers important to ensure the protection of children.
        ``(2) Confidentiality.--The members and staff of any panel 
    established under subsection (a) shall not disclose to any person 
    or government any information about any specific child protection 
    case with respect to which the panel is provided information.
    ``(e) State Assistance.--Each State that establishes a panel under 
subsection (a) shall afford the panel access to any information on any 
case that the panel desires to review, and shall provide the panel with 
staff assistance in performing its duties.
    ``(f) Reports.--Each panel established under subsection (a) shall 
make a public report of its activities after each meeting.

``SEC. 435. FOSTER CARE PROTECTION REQUIRED FOR ADDITIONAL FEDERAL 
              PAYMENTS.

    ``(a) Reduction of Grant.--A State shall not receive a grant under 
section 431(a) unless such State--
        ``(1) has conducted an inventory of all children who have been 
    in foster care under the responsibility of the State for a period 
    of 6 months preceding the inventory, and determined the 
    appropriateness of, and necessity for, the current foster 
    placement, whether the child can be or should be returned to his 
    parents or should be freed for adoption, and the services necessary 
    to facilitate either the return of the child or the placement of 
    the child for adoption or legal guardianship; and
        ``(2) has implemented and is operating to the satisfaction of 
    the Secretary--
            ``(A) a statewide information system from which the status, 
        demographic characteristics, location, and goals for the 
        placement of every child in foster care or who has been in such 
        care within the preceding 12 months can readily be determined;
            ``(B) a case review system (as defined in section 437(4)) 
        for each child receiving foster care under the supervision of 
        the State; and
            ``(C) a service program designed to help children, where 
        appropriate, return to families from which they have been 
        removed or be placed for adoption or legal guardianship.
    ``(b) Additional Requirements.--A State shall not receive a grant 
under section 431(a) unless such State--
        ``(1) has completed an inventory of the type specified in 
    subsection (a)(1);
        ``(2) has implemented and is operating the program and systems 
    specified in subsection (a)(2); and
        ``(3) has implemented a preplacement preventive service program 
    designed to help children remain with their families.
    ``(c) Presumption for Expenditures.--Any amounts expended by a 
State for the purpose of complying with the requirements of subsection 
(a) or (b) shall be conclusively presumed to have been expended for 
child welfare services.

``SEC. 436. DATA COLLECTION AND REPORTING.

    ``(a) Annual Reports on State Child Welfare Goals.--On the date 
that is 3 years after the effective date of this subpart and annually 
thereafter, each State to which a grant is made under section 431(a) 
shall submit to the Secretary a report that contains quantitative 
information on the extent to which the State is making progress toward 
achieving the goals of the State child protection program.
    ``(b) State Data Reports.--
        ``(1) Biannual reports.--Each State to which a grant is made 
    under section 431(a) shall biannually submit to the Secretary a 
    report that includes the following information with respect to each 
    child within the State receiving publicly-supported child welfare 
    services under the State program funded under this subpart:
            ``(A) Whether the child received services under the program 
        funded under this subpart.
            ``(B) The age, gender, and family income of the parents and 
        child.
            ``(C) The county of residence of the child.
            ``(D) Whether the child was removed from the family.
            ``(E) Whether the child entered foster care under the 
        responsibility of the State.
            ``(F) The type of out-of-home care in which the child was 
        placed (including institutional care, group home care, family 
        foster care, or relative placement).
            ``(G) The child's permanency planning goal, such as family 
        reunification, kinship care, adoption, or independent living.
            ``(H) Whether the child was released for adoption.
            ``(I) Whether the child exited from foster care, and, if 
        so, the reason for the exit, such as return to family, 
        placement with relatives, adoption, independent living, or 
        death.
            ``(J) Other information as required by the Secretary and 
        agreed to by a majority of the States, including information 
        necessary to ensure a that there is a smooth transition of data 
        from the Adoption and Foster Care Analysis and Reporting 
        Systems and the National Center on Abuse and Neglect Data 
        System to the data reporting system required under this 
        section.
        ``(2) Annual reports.--Each State to which a grant is made 
    under section 431(a) shall annually submit to the Secretary a 
    report that includes the following information:
            ``(A) The number of children reported to the State during 
        the year as alleged victims of abuse or neglect.
            ``(B) The number of children for whom an investigation of 
        alleged maltreatment resulted in a determination of 
        substantiated abuse or neglect, the number for whom a report of 
        maltreatment was unsubstantiated, and the number for whom a 
        report of maltreatment was determined to be false.
            ``(C) The number of families that received preventive 
        services.
            ``(D) The number of infants abandoned during the year, the 
        number of such infants who were adopted, and the length of time 
        between abandonment and adoption.
            ``(E) The number of deaths of children resulting from child 
        abuse or neglect.
            ``(F) The number of deaths occurring while children were in 
        the custody of the State.
            ``(G) The number of children served by the State 
        independent living program.
            ``(H) Quantitative measurements demonstrating whether the 
        State is making progress toward the child protection goals 
        identified by the State.
            ``(I) The types of maltreatment suffered by victims of 
        child abuse and neglect.
            ``(J) The number of abused and neglected children receiving 
        services.
            ``(K) The average length of stay of children in out-of-home 
        care.
            ``(L) The response of the State to the findings and 
        recommendations of the citizen review panels established under 
        section 434.
            ``(M) Other information as required by the Secretary and 
        agreed to by a majority of the States, including information 
        necessary to ensure a that there is a smooth transition of data 
        from the Adoption and Foster Care Analysis and Reporting 
        Systems and the National Center on Abuse and Neglect Data 
        System to the data reporting system required under this 
        section.
    ``(c) Authority of States to Use Estimates.--
        ``(1) In general.--A State may comply with a requirement to 
    provide precise numerical information described in subsection (b) 
    by submitting an estimate which is obtained through the use of 
    scientifically acceptable sampling methods.
        ``(2) Secretarial review of sampling methods.--The Secretary 
    shall periodically review the sampling methods used by a State to 
    comply with a requirement to provide information described in 
    subsection (b). The Secretary may require a State to revise the 
    sampling methods so used if such methods do not meet scientific 
    standards and shall impose the penalty described in section 
    431(f)(4) upon a State if a State has not complied with such 
    requirements.
    ``(d) Scope of State Program Funded Under This Subpart.--As used in 
subsection (b), the term `State program funded under this subpart' 
includes any equivalent State program.

``SEC. 437. DEFINITIONS.

    ``For purposes of this subpart, the following definitions shall 
apply:
        ``(1) Administrative review.--The term `administrative review' 
    means a review open to the participation of the parents of the 
    child, conducted by a panel of appropriate persons at least one of 
    whom is not responsible for the case management of, or the delivery 
    of services to, either the child or the parents who are the subject 
    of the review.
        ``(2) Adoption assistance agreement.--The term `adoption 
    assistance agreement' means a written agreement, binding on the 
    parties to the agreement, between the State, other relevant 
    agencies, and the prospective adoptive parents of a minor child 
    which at a minimum--
            ``(A) specifies the nature and amount of any payments, 
        services, and assistance to be provided under such agreement; 
        and
            ``(B) stipulates that the agreement shall remain in effect 
        regardless of the State of which the adoptive parents are 
        residents at any given time.
    The agreement shall contain provisions for the protection (under an 
    interstate compact approved by the Secretary or otherwise) of the 
    interests of the child in cases where the adoptive parents and 
    child move to another State while the agreement is effective.
        ``(3) Case plan.--The term `case plan' means a written document 
    which includes at least the following:
            ``(A) A description of the type of home or institution in 
        which a child is to be placed, including a discussion of the 
        appropriateness of the placement and how the agency which is 
        responsible for the child plans to carry out the voluntary 
        placement agreement entered into or judicial determination made 
        with respect to the child in accordance with section 432(a)(1).
            ``(B) A plan for assuring that the child receives proper 
        care and that services are provided to the parents, child, and 
        foster parents in order to improve the conditions in the 
        parents' home, facilitate return of the child to his or her own 
        home or the permanent placement of the child, and address the 
        needs of the child while in foster care, including a discussion 
        of the appropriateness of the services that have been provided 
        to the child under the plan.
            ``(C) To the extent available and accessible, the health 
        and education records of the child, including--
                ``(i) the names and addresses of the child's health and 
            educational providers;
                ``(ii) the child's grade level performance;
                ``(iii) the child's school record;
                ``(iv) assurances that the child's placement in foster 
            care takes into account proximity to the school in which 
            the child is enrolled at the time of placement;
                ``(v) a record of the child's immunizations;
                ``(vi) the child's known medical problems;
                ``(vii) the child's medications; and
                ``(viii) any other relevant health and education 
            information concerning the child determined to be 
            appropriate by the State.
        Where appropriate, for a child age 16 or over, the case plan 
        must also include a written description of the programs and 
        services which will help such child prepare for the transition 
        from foster care to independent living.
        ``(4) Case review system.--The term `case review system' means 
    a procedure for assuring that--
            ``(A) each child has a case plan designed to achieve 
        placement in the least restrictive (most family like) and most 
        appropriate setting available and in close proximity to the 
        parents' home, consistent with the best interest and special 
        needs of the child, which--
                ``(i) if the child has been placed in a foster family 
            home or child-care institution a substantial distance from 
            the home of the parents of the child, or in a State 
            different from the State in which such home is located, 
            sets forth the reasons why such placement is in the best 
            interests of the child; and
                ``(ii) if the child has been placed in foster care 
            outside the State in which the home of the parents of the 
            child is located, requires that, periodically, but not less 
            frequently than every 12 months, a caseworker on the staff 
            of the State in which the home of the parents of the child 
            is located, or of the State in which the child has been 
            placed, visit such child in such home or institution and 
            submit a report on such visit to the State in which the 
            home of the parents of the child is located;
            ``(B) the status of each child is reviewed periodically but 
        no less frequently than once every 6 months by either a court 
        or by administrative review (as defined in paragraph (1)) in 
        order to determine the continuing necessity for and 
        appropriateness of the placement, the extent of compliance with 
        the case plan, and the extent of progress which has been made 
        toward alleviating or mitigating the causes necessitating 
        placement in foster care, and to project a likely date by which 
        the child may be returned to the home or placed for adoption or 
        legal guardianship;
            ``(C) with respect to each such child, procedural 
        safeguards will be applied, among other things, to assure each 
        child in foster care under the supervision of the State of a 
        dispositional hearing to be held, in a family or juvenile court 
        or another court (including a tribal court) of competent 
        jurisdiction, or by an administrative body appointed or 
        approved by the court, no later than 18 months after the 
        original placement (and not less frequently than every 12 
        months thereafter during the continuation of foster care), 
        which hearing shall determine the future status of the child 
        (including whether the child should be returned to the parent, 
        should be continued in foster care for a specified period, 
        should be placed for adoption, or should (because of the 
        child's special needs or circumstances) be continued in foster 
        care on a permanent or long-term basis) and, in the case of a 
        child described in subparagraph (A)(ii), whether the out-of-
        State placement continues to be appropriate and in the best 
        interests of the child, and, in the case of a child who has 
        attained age 16, the services needed to assist the child to 
        make the transition from foster care to independent living; and 
        procedural safeguards shall also be applied with respect to 
        parental rights pertaining to the removal of the child from the 
        home of his parents, to a change in the child's placement, and 
        to any determination affecting visitation privileges of 
        parents; and
            ``(D) a child's health and education record (as described 
        in paragraph (3)(C)) is reviewed and updated, and supplied to 
        the foster parent or foster care provider with whom the child 
        is placed, at the time of each placement of the child in foster 
        care.
        ``(5) Child-care institution.--The term `child-care 
    institution' means a private child-care institution, or a public 
    child-care institution which accommodates no more than 25 children, 
    which is licensed by the State in which it is situated or has been 
    approved, by the agency of such State responsible for licensing or 
    approval of institutions of this type, as meeting the standards 
    established for such licensing, but the term shall not include 
    detention facilities, forestry camps, training schools, or any 
    other facility operated primarily for the detention of children who 
    are determined to be delinquent.
        ``(6) Foster care maintenance payments.--
            ``(A) In general.--The term `foster care maintenance 
        payments' means payments to cover the cost of (and the cost of 
        providing) food, clothing, shelter, daily supervision, school 
        supplies, a child's personal incidentals, liability insurance 
        with respect to a child, and reasonable travel to the child's 
        home for visitation. In the case of institutional care, such 
        term shall include the reasonable costs of administration and 
        operation of such institution as are necessarily required to 
        provide the items described in the preceding sentence.
            ``(B) Special rule.--In cases where--
                ``(i) a child placed in a foster family home or child-
            care institution is the parent of a son or daughter who is 
            in the same home or institution; and
                ``(ii) payments described in subparagraph (A) are being 
            made under this subpart with respect to such child,
        the foster care maintenance payments made with respect to such 
        child as otherwise determined under subparagraph (A) shall also 
        include such amounts as may be necessary to cover the cost of 
        the items described in that subparagraph with respect to such 
        son or daughter.
        ``(7) Foster family home.--The term `foster family home' means 
    a foster family home for children which is licensed by the State in 
    which it is situated or has been approved, by the agency of such 
    State having responsibility for licensing homes of this type, as 
    meeting the standards established for such licensing.
        ``(8) State.--The term `State' means the 50 States and the 
    District of Columbia.
        ``(9) Voluntary placement.--The term `voluntary placement' 
    means an out-of-home placement of a minor, by or with participation 
    of the State, after the parents or guardians of the minor have 
    requested the assistance of the State and signed a voluntary 
    placement agreement.
        ``(10) Voluntary placement agreement.--The term `voluntary 
    placement agreement' means a written agreement, binding on the 
    parties to the agreement, between the State, any other agency 
    acting on its behalf, and the parents or guardians of a minor child 
    which specifies, at a minimum, the legal status of the child and 
    the rights and obligations of the parents or guardians, the child, 
    and the agency while the child is in placement.''.

SEC. 12702. CONFORMING AMENDMENTS.

    (a) Repeal of Part E of Title IV of the Social Security Act.--Part 
E of title IV of the Social Security Act (42 U.S.C. 671-679) is hereby 
repealed.
    (b) Repeal of Section 13712 of the Omnibus Budget Reconciliation 
Act of 1993.--Section 13712 of the Omnibus Budget Reconciliation Act of 
1993 (42 U.S.C. 670 note) is hereby repealed.
    (c) Repeal of Section 435.--Section 435 of the Social Security Act, 
as amended by section 12701, is repealed on April 1, 1996.

SEC. 12703. EFFECTIVE DATE; TRANSITION RULE.

    (a) In General.--Except as otherwise provided in this subtitle, 
this subtitle and the amendments made by this subtitle shall take 
effect as if enacted on October 1, 1995.
    (b) Transition Rule.--
        (1) State option to continue programs.--
            (A) 9-month extension.--A State may continue the State 
        programs under subpart 2 of part B and part E of title IV of 
        the Social Security Act, as in effect on September 30, 1995 
        (for purposes of this paragraph, the ``State programs'') until 
        June 30, 1996.
            (B) No individual or family entitlement under continued 
        state programs.--Notwithstanding any other provision of law or 
        any rule of law, no individual or family is entitled to aid 
        under the State programs of any State on or after the date of 
        the enactment of this Act.
            (C) Limitations on federal obligations.--If a State elects 
        to continue the State programs pursuant to subparagraph (A), 
        the total obligations of the Federal Government to the State 
        under subpart 2 of part B and part E of title IV of the Social 
        Security Act (as such subpart and part are in effect on 
        September 30, 1995) after the date of the enactment of this Act 
        shall not exceed an amount equal to--
                (i) the grant to the State under section 431(a) (as in 
            effect pursuant to the amendment made by section 12701 of 
            this Act)); minus
                (ii) any obligations of the Federal Government to the 
            State under such subpart and part (as in effect on 
            September 30, 1995) with respect to expenditures by the 
            State during the period that begins on October 1, 1995, and 
            ends on the day before the date of the enactment of this 
            Act.
            (D) Submission of state plan for fiscal year 1996 deemed 
        acceptance of grant limitations and formula.--The submission of 
        a plan by a State under section 430(a) of the Social Security 
        Act (as in effect pursuant to the amendment made by section 
        12701 of this Act) for fiscal year 1996 is deemed to constitute 
        the State's acceptance of the grant reduction under 
        subparagraph (C) of this paragraph (including the formula for 
        computing the amount of the reduction).
        (2) Claims, actions, and proceedings.--The amendments made by 
    this subtitle shall not apply with respect to--
            (A) powers, duties, functions, rights, claims, penalties, 
        or obligations applicable to aid, assistance, or services 
        provided before the effective date of this subtitle under the 
        provisions amended; and
            (B) administrative actions and proceedings commenced before 
        such date, or authorized before such date to be commenced, 
        under such provisions.
        (3) Closing out account for those programs terminated or 
    substantially modified by this subtitle.--In closing out accounts, 
    Federal and State officials may use scientifically acceptable 
    statistical sampling techniques. Claims made under programs which 
    are repealed or substantially amended in this subtitle and which 
    involve State expenditures in cases where assistance or services 
    were provided during a prior fiscal year, shall be treated as 
    expenditures during fiscal year 1995 for purposes of reimbursement 
    even if payment was made by a State on or after October 1, 1995. 
    States shall complete the filing of all claims no later than 
    September 30, 1997. Federal department heads shall--
            (A) use the single audit procedure to review and resolve 
        any claims in connection with the close out of programs; and
            (B) reimburse States for any payments made for assistance 
        or services provided during a prior fiscal year from funds for 
        fiscal year 1995, rather than the funds authorized by this 
        subtitle.

                         Subtitle H--Child Care

SEC. 12801. SHORT TITLE AND REFERENCES.

    (a) Short Title.--This subtitle may be cited as the ``Child Care 
and Development Block Grant Amendments of 1995''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this subtitle an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858 et 
seq.).

SEC. 12802. AUTHORIZATION OF APPROPRIATIONS AND ENTITLEMENT AUTHORITY.

    (a) In General.--Section 658B (42 U.S.C. 9858) is amended to read 
as follows:

``SEC. 658B. AUTHORIZATION OF APPROPRIATIONS.

    ``There is authorized to be appropriated to carry out this 
subchapter $1,000,000,000 for each of the fiscal years 1996 through 
2002.''.
    (b) Social Security Act.--Part A of title IV of the Social Security 
Act (as amended by section 12101) is amended by adding at the end 
thereof the following new section:

``SEC. 418. FUNDING FOR CHILD CARE.

    ``(a) General Child Care Entitlement.--
        ``(1) General entitlement.--Subject to the amount appropriated 
    under paragraph (3), each State shall, for the purpose of providing 
    child care assistance, be entitled to payments under a grant under 
    this subsection for a fiscal year in an amount equal to--
            ``(A) the sum of the total amounts of Federal payments for 
        fiscal year 1994 to the State under section--
                ``(i) 402(g)(3)(A) of this Act (as such section was in 
            effect before October 1, 1995) for amounts expended for 
            child care pursuant to paragraph (1) of such section;
                ``(ii) 403(l)(1)(A) of this Act (as so in effect) for 
            amounts expended for child care pursuant to section 
            402(g)(1)(A) of this Act, in the case of a State with 
            respect to which section 1108 of this Act applies; and
                ``(iii) 403(n) of this Act (as so in effect) for child 
            care services pursuant to section 402(i) of this Act; or
            ``(B) the average of the sum of the total amount of Federal 
        payments for each of the fiscal years 1992 through 1994 to the 
        State under the sections referred to in subparagraph (A);
    whichever is greater.
        ``(2) Remainder.--
            ``(A) Grants.--The Secretary shall use any amounts 
        appropriated for a fiscal year under paragraph (3), and 
        remaining after grants are awarded under paragraph (1), to make 
        grants to States under this paragraph.
            ``(B) Amount.--Subject to subparagraph (C), the amount of a 
        grant awarded to a State for a fiscal year under this paragraph 
        shall be based on the formula used for determining the amount 
        of Federal payments to the State for fiscal year 1994 under 
        section 403(n) (as such section was in effect before October 1, 
        1995) for child care services pursuant to section 402(i) as 
        such amount relates to the total amount of such Federal 
        payments to all States for such fiscal year.
            ``(C) Matching requirement.--The Secretary shall pay to 
        each eligible State in a fiscal year an amount, under a grant 
        under subparagraph (A), equal to the Federal medical assistance 
        percentage for such State for fiscal year 1995 (as defined in 
        section 1905(b)) of so much of the expenditures by the State 
        for child care in such year as exceed the State set-aside for 
        such State under subparagraph (A) for such year and the amount 
        of State expenditures in fiscal year 1995 that equal the non-
        Federal share for the programs described in subparagraphs (A), 
        (B) and (C) of paragraph (1).
        ``(3) Appropriation.--There is authorized to be appropriated, 
    and there is appropriated, to carry out this section--
            ``(A) $1,170,000,000 for fiscal year 1996;
            ``(B) $1,240,000,000 for fiscal year 1997;
            ``(C) $1,320,000,000 for fiscal year 1998;
            ``(D) $1,400,000,000 for fiscal year 1999;
            ``(E) $1,500,000,000 for fiscal year 2000;
            ``(F) $1,625,000,000 for fiscal year 2001; and
            ``(G) $1,745,000,000 for fiscal year 2002.
        ``(4) Redistribution.--With respect to any fiscal year, if the 
    Secretary determines that amounts under any grant awarded to a 
    State under this subsection for such fiscal year will not be used 
    by such State for carrying out the purpose for which the grant is 
    made, the Secretary shall make such amounts available for carrying 
    out such purpose to 1 or more other States which apply for such 
    funds to the extent the Secretary determines that such other States 
    will be able to use such additional amounts for carrying out such 
    purpose. Such available amounts shall be redistributed to a State 
    pursuant to section 402(i) (as such section was in effect before 
    October 1, 1995) by substituting `the number of children residing 
    in all States applying for such funds' for `the number of children 
    residing in the United States in the second preceding fiscal year'. 
    Any amount made available to a State from an appropriation for a 
    fiscal year in accordance with the preceding sentence shall, for 
    purposes of this part, be regarded as part of such State's payment 
    (as determined under this subsection) for such year.
    ``(b) Use of Funds.--
        ``(1) In general.--Amounts received by a State under this 
    section shall only be used to provide child care assistance.
        ``(2) Use for certain populations.--A State shall ensure that 
    not less than 70 percent of the total amount of funds received by 
    the State in a fiscal year under this section are used to provide 
    child care assistance to families who are receiving assistance 
    under a State program under this part, families who are attempting 
    through work activities to transition off of such assistance 
    program, and families who are at risk of becoming dependent on such 
    assistance program.
    ``(c) Application of Child Care and Development Block Grant Act.--
Notwithstanding any other provision of law, amounts provided to a State 
under this section shall be transferred to the lead agency under the 
Child Care and Development Block Grant Act, integrated by the State 
into the programs established by the State under such Act, and be 
subject to requirements and limitations of such Act.
    ``(d) Transition Rule.--
        ``(1) In general.--Amounts obligated to a State under this 
    section for fiscal year 1996 shall not exceed--
            ``(A) the amount for which a State is eligible under this 
        section for such fiscal year; less
            ``(B) the amounts obligated to the State for such fiscal 
        year under the provisions of law referred to in subsection 
        (a)(1)(A) (as such provisions were in effect on the day before 
        the date of enactment of this section).
        ``(2) Acceptance of limitation.--The submission of a plan by a 
    State under section 401(a) for fiscal year 1996 is deemed to 
    constitute the State's acceptance of the grant reductions under 
    paragraph (1). If amounts are provided to a State under this 
    section prior to the submission of such a State plan, the 
    acceptance of such amounts by the State shall constitute the 
    State's acceptance of such reductions.''.

SEC. 12803. LEAD AGENCY.

    Section 658D(b) (42 U.S.C. 9858b(b)) is amended--
        (1) in paragraph (1)--
            (A) in subparagraph (A), by striking ``State'' the first 
        place that such appears and inserting ``governmental or 
        nongovernmental''; and
            (B) in subparagraph (C), by inserting ``with sufficient 
        time and Statewide distribution of the notice of such 
        hearing,'' after ``hearing in the State''; and
        (2) in paragraph (2), by striking the second sentence.

SEC. 12804. APPLICATION AND PLAN.

    Section 658E (42 U.S.C. 9858c) is amended--
        (1) in subsection (b)--
            (A) by striking ``implemented--'' and all that follows 
        through ``(2)'' and inserting ``implemented''; and
            (B) by striking ``for subsequent State plans'';
        (2) in subsection (c)--
            (A) in paragraph (2)--
                (i) in subparagraph (A)--

                    (I) in clause (i) by striking ``, other than 
                through assistance provided under paragraph (3)(C),''; 
                and
                    (II) by striking ``except'' and all that follows 
                through ``1992'', and inserting ``and provide a 
                detailed description of the procedures the State will 
                implement to carry out the requirements of this 
                subparagraph'';

                (ii) in subparagraph (B)--

                    (I) by striking ``Provide assurances'' and 
                inserting ``Certify''; and
                    (II) by inserting before the period at the end 
                ``and provide a detailed description of such 
                procedures'';

                (iii) in subparagraph (C)--

                    (I) by striking ``Provide assurances'' and 
                inserting ``Certify''; and
                    (II) by inserting before the period at the end 
                ``and provide a detailed description of how such record 
                is maintained and is made available'';

                (iv) by amending subparagraph (D) to read as follows:
            ``(D) Consumer education information.--Certify that the 
        State will collect and disseminate to parents of eligible 
        children and the general public, consumer education information 
        that will promote informed child care choices.'';
                (v) in subparagraph (E), to read as follows:
            ``(E) Compliance with state licensing requirements.--
                ``(i) In general.--Certify that the State has in effect 
            licensing requirements applicable to child care services 
            provided within the State, and provide a detailed 
            description of such requirements and of how such 
            requirements are effectively enforced. Nothing in the 
            preceding sentence shall be construed to require that 
            licensing requirements be applied to specific types of 
            providers of child care services.
                ``(ii) Uniform application of requirements.--A 
            certification under clause (i) shall include an assurance 
            by the State that the State shall apply all such licensing 
            requirements in a uniform manner to child care providers of 
            the same type regardless of whether a child care provider 
            is receiving assistance under this subchapter. Nothing in 
            this subchapter shall be construed to require that a State 
            apply, or prohibit a State from applying, licensing 
            requirements with respect to a particular type of child 
            care.
                ``(iii) Indian tribes and tribal organizations.--In 
            lieu of any licensing and regulatory requirements 
            applicable under State and local law, the Secretary, in 
            consultation with Indian tribes and tribal organizations, 
            shall develop minimum child care standards (that 
            appropriately reflect tribal needs and available resources) 
            that shall be applicable to Indian tribes and tribal 
            organizations receiving assistance under this 
            subchapter.''; and
                (vi) by striking subparagraphs (F), (G), (H), (I), and 
            (J) and inserting the following:
            ``(F) Meeting the needs of certain populations.--
        Demonstrate the manner in which the State will meet the 
        specific child care needs of families who are receiving 
        assistance under a State program under part A of title IV of 
        the Social Security Act, families who are attempting through 
        work activities to transition off of such assistance program, 
        and families who are at risk of becoming dependent on such 
        assistance program.'';
            (B) in paragraph (3)--
                (i) in subparagraph (A), by striking ``(B) and (C)'' 
            and inserting ``(B) through (D)'';
                (ii) in subparagraph (B)--

                    (I) by striking ``.--Subject to the reservation 
                contained in subparagraph (C), the'' and inserting 
                ``and related activities.--The'';
                    (II) in clause (i) by striking ``; and'' at the end 
                and inserting a period;
                    (III) by striking ``for--'' and all that follows 
                through ``section 658E(c)(2)(A)'' and inserting ``for 
                child care services on sliding fee scale basis, 
                activities that improve the quality or availability of 
                such services, and any other activity that the State 
                deems appropriate''; and
                    (IV) by striking clause (ii);

                (iii) by amending subparagraph (C) to read as follows:
            ``(C) Limitation on administrative costs.--Not more than 3 
        percent of the aggregate amount of funds available to the State 
        to carry out this subchapter by a State in each fiscal year may 
        be expended for administrative costs incurred by such State to 
        carry out all of its functions and duties under this 
        subchapter. As used in the preceding sentence, the term 
        `administrative costs' shall not include the costs of providing 
        direct services.''; and
                (iv) by adding at the end thereof the following:
            ``(D) Assistance for certain families.--A State shall 
        ensure that a substantial portion of the amounts available 
        (after the State has complied with the requirement of section 
        419(b)(2) of the Social Security Act) to the State to carry out 
        activities under this subchapter in each fiscal year is used to 
        provide assistance to low-income working families other than 
        families described in paragraph (2)(F).''; and
            (C) in paragraph (4)(A)--
                (i) by striking ``provide assurances'' and inserting 
            ``certify'';
                (ii) in the first sentence by inserting ``and shall 
            provide a summary of the facts relied on by the State to 
            determine that such rates are sufficient to ensure such 
            access'' before the period; and
                (iii) by striking the last sentence.

SEC. 12805. LIMITATION ON STATE ALLOTMENTS.

    Section 658F(b) (42 U.S.C. 9858d(b)) is amended--
        (1) in paragraph (1), by striking ``No'' and inserting ``Except 
    as provided for in section 658O(c)(6), no''; and
        (2) in paragraph (2), by striking ``referred to in section 
    658E(c)(2)(F)''.

SEC. 12806. ACTIVITIES TO IMPROVE THE QUALITY OF CHILD CARE.

    Section 658G (42 U.S.C. 9858e) is amended to read as follows:

``SEC. 658G. ACTIVITIES TO IMPROVE THE QUALITY OF CHILD CARE.

    ``A State that receives financial assistance under this subchapter, 
shall use not less than 3 percent of the total amounts received in each 
fiscal year for activities that are designed to provide comprehensive 
consumer education to parents and the public, activities that increase 
parental choice, and activities designed to improve the quality and 
availability of child care (such as resource and referral services).''.

SEC. 12807. ADMINISTRATION AND ENFORCEMENT.

    Section 658I(b) (42 U.S.C. 9858g(b)) is amended--
        (1) in paragraph (1), by striking ``, and shall have'' and all 
    that follows through ``(2)'';
        (2) by striking paragraph (2); and
        (3) by redesignating paragraph (3) as paragraph (2).

SEC. 12808. PAYMENTS.

    Section 658J(c) (42 U.S.C. 9858h(c)) is amended--
        (1) by striking ``expended'' and inserting ``obligated''; and
        (2) by striking ``3 fiscal years'' and inserting ``fiscal 
    year''.

SEC. 12809. ANNUAL REPORT AND AUDITS.

    Section 658K (42 U.S.C. 9858i) is amended--
        (1) in the section heading by striking ``annual report'' and 
    inserting ``reports'';
        (2) in subsection (a), to read as follows:
    ``(a) Reports.--
        ``(1) Collection of information by states.--
            ``(A) In general.--A State that receives funds to carry out 
        this subchapter shall collect the information described in 
        subparagraph (B) on a monthly basis.
            ``(B) Required information.--The information required under 
        this subparagraph shall include, with respect to a family unit 
        receiving assistance under this subchapter information 
        concerning--
                ``(i) family income;
                ``(ii) county of residence;
                ``(iii) the gender and age of children receiving such 
            assistance;
                ``(iv) whether the family includes only 1 parent;
                ``(v) the sources of family income, including the 
            amount obtained from (and separately identified)--

                    ``(I) employment, including self-employment;
                    ``(II) cash or other assistance under part A of 
                title IV of the Social Security Act;
                    ``(III) housing assistance;
                    ``(IV) assistance under the Food Stamp Act of 1977; 
                and
                    ``(V) other assistance programs;

                ``(vi) the number of months the family has received 
            benefits;
                ``(vii) the type of child care in which the child was 
            enrolled (such as family child care, home care, or center-
            based child care);
                ``(viii) whether the child care provider involved was a 
            relative;
                ``(ix) the cost of child care for such families; and
                ``(x) the average hours per week of such care
        during the period for which such information is required to be 
        submitted.
            ``(C) Submission to secretary.--A State described in 
        subparagraph (A) shall, on a quarterly basis, submit the 
        information required to be collected under subparagraph (B) to 
        the Secretary.
            ``(D) Sampling.--The Secretary may disapprove the 
        information collected by a State under this paragraph if the 
        State uses sampling methods to collect such information.
        ``(2) Biannual reports.--Not later than December 31, following 
    the end of the first fiscal year with respect to which the 
    amendments made by the Child Care and Development Block Grants 
    Amendments of 1995 apply, and every 6 months thereafter, a State 
    described in paragraph (1)(A) shall prepare and submit to the 
    Secretary a report that includes aggregate data concerning--
            ``(A) the number of child care providers that received 
        funding under this subchapter as separately identified based on 
        the types of providers listed in section 658Q(5);
            ``(B) the monthly cost of child care services, and the 
        portion of such cost that is paid for with assistance provided 
        under this subchapter, listed by the type of child care 
        services provided;
            ``(C) the number of payments made by the State through 
        vouchers, contracts, cash, and disregards under public benefit 
        programs, listed by the type of child care services provided;
            ``(D) the manner in which consumer education information 
        was provided to parents and the number of parents to whom such 
        information was provided; and
            ``(E) the total number (without duplication) of children 
        and families served under this subchapter;
    during the period for which such report is required to be 
    submitted.''; and
        (2) in subsection (b)--
            (A) in paragraph (1) by striking ``a application'' and 
        inserting ``an application'';
            (B) in paragraph (2) by striking ``any agency administering 
        activities that receive'' and inserting ``the State that 
        receives''; and
            (C) in paragraph (4) by striking ``entitles'' and inserting 
        ``entitled''.

SEC. 12810. ALLOTMENTS.

    Section 658O (42 U.S.C. 9858m) is amended--
        (1) in subsection (a)--
            (A) in paragraph (1)
                (i) by striking ``Possessions'' and inserting 
            ``possessions'';
                (ii) by inserting ``and'' after ``States,''; and
                (iii) by striking ``, and the Trust Territory of the 
            Pacific Islands''; and
            (B) in paragraph (2), by striking ``3 percent of the amount 
        appropriated under section 658B'' and inserting ``1 percent of 
        the aggregate amount of funds available to the State to carry 
        out this subchapter'';
        (2) in subsection (c)--
            (A) in paragraph (5) by striking ``our'' and inserting 
        ``out''; and
            (B) by adding at the end thereof the following new 
        paragraph:
        ``(6) Construction or renovation of facilities.--
            ``(A) Request for use of funds.--An Indian tribe or tribal 
        organization may submit to the Secretary a request to use 
        amounts provided under this subsection for construction or 
        renovation purposes.
            ``(B) Determination.--With respect to a request submitted 
        under subparagraph (A), and except as provided in subparagraph 
        (C), upon a determination by the Secretary that adequate 
        facilities are not otherwise available to an Indian tribe or 
        tribal organization to enable such tribe or organization to 
        carry out child care programs in accordance with this 
        subchapter, and that the lack of such facilities will inhibit 
        the operation of such programs in the future, the Secretary may 
        permit the tribe or organization to use assistance provided 
        under this subsection to make payments for the construction or 
        renovation of facilities that will be used to carry out such 
        programs.
            ``(C) Limitation.--The Secretary may not permit an Indian 
        tribe or tribal organization to use amounts provided under this 
        subsection for construction or renovation if such use will 
        result in a decrease in the level of child care services 
        provided by the tribe or organization as compared to the level 
        of such services provided by the tribe or organization in the 
        fiscal year preceding the year for which the determination 
        under subparagraph (A) is being made.
            ``(D) Uniform procedures.--The Secretary shall develop and 
        implement uniform procedures for the solicitation and 
        consideration of requests under this paragraph.''; and
        (3) in subsection (e), by adding at the end thereof the 
    following new paragraph:
        ``(4) Indian tribes or tribal organizations.--Any portion of a 
    grant or contract made to an Indian tribe or tribal organization 
    under subsection (c) that the Secretary determines is not being 
    used in a manner consistent with the provision of this subchapter 
    in the period for which the grant or contract is made available, 
    shall be allotted by the Secretary to other tribes or organizations 
    that have submitted applications under subsection (c) in accordance 
    with their respective needs.''.

SEC. 12811. DEFINITIONS.

    Section 658P (42 U.S.C. 9858n) is amended--
        (1) in paragraph (2), in the first sentence by inserting ``or 
    as a deposit for child care services if such a deposit is required 
    of other children being cared for by the provider'' after ``child 
    care services'';
        (2) by striking paragraph (3);
        (3) in paragraph (4)(B), by striking ``75 percent'' and 
    inserting ``85 percent'';
        (4) in paragraph (5)(B)--
            (A) by inserting ``great grandchild, sibling (if such 
        provider lives in a separate residence),'' after 
        ``grandchild,'';
            (B) by striking ``is registered and''; and
            (C) by striking ``State'' and inserting ``applicable'';
        (5) by striking paragraph (10);
        (6) in paragraph (3)--
            (A) by inserting ``or'' after ``Samoa,''; and
            (B) by striking ``, and the Trust Territory of the Pacific 
        Islands''; and
        (7) in paragraph (14)--
            (A) by striking ``The term'' and inserting the following:
            ``(A) In general.--The term''; and
            (B) by adding at the end thereof the following new 
        subparagraph:
            ``(B) Other organizations.--Such term includes a Native 
        Hawaiian Organization, as defined in section 4009(4) of the 
        Augustus F. Hawkins-Robert T. Stafford Elementary and Secondary 
        School Improvement Amendments of 1988 (20 U.S.C. 4909(4)) and a 
        private nonprofit organization established for the purpose of 
        serving youth who are Indians or Native Hawaiians.''.

                  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.

    Section 4(b)(2) of the National School Lunch Act (42 U.S.C. 
1753(b)(2)) is amended by inserting before the period at the end the 
following: ``for the 1995 school year and 1 cent more for each of the 
1996 and 1997 school years''.

SEC. 12902. DIRECT FEDERAL EXPENDITURES.

    (a) Administrative Expenses.--Section 6(a) of the National School 
Lunch Act (42 U.S.C. 1755(a)) is amended by striking the second and 
fourth sentences.
    (b) Amount of Commodity Assistance.--Section 6(e) of the Act is 
amended--
        (1) in paragraph (1), by striking subparagraph (E); and
        (2) in paragraph (2), by striking the second sentence and 
    inserting the following: ``Each State agency shall offer and 
    equitably distribute commodities among schools participating in the 
    school lunch program.''.
    (c) Breakfast Commodity Assistance.--Section 6 of the Act is 
amended--
        (1) by striking subsection (f); and
        (2) by redesignating subsection (g) as subsection (f).
    (d) Commodity Assistance.--
        (1) In general.--Section 6(f) of the Act (as redesignated by 
    subsection (c)) is amended by striking ``12 percent'' and inserting 
    ``8 percent''.
        (2) Effective date.--The amendment made by paragraph (1) shall 
    become effective on July 1, 1996.

SEC. 12903. VALUE OF FOOD ASSISTANCE.

    (a) In General.--Section 6(e)(1) of the National School Lunch Act 
(42 U.S.C. 1755(e)(1)) is amended--
        (1) in subparagraph (A)--
            (A) in the first sentence--
                (i) by inserting ``for free and reduced price meals'' 
            after ``thereof,'';
                (ii) by striking ``11 cents'' and inserting ``14.5 
            cents''; and
                (iii) by striking ``1982'' and inserting ``1998''; and
            (B) by inserting after the first sentence the following: 
        ``The national average value of donated foods, or cash payments 
        in lieu thereof, for paid meals, shall be 12 cents, adjusted on 
        July 1, 2001, and each July 1 thereafter to reflect changes in 
        the Price Index for Food Used in Schools and Institutions.''; 
        and
        (2) by striking subparagraph (B) and inserting the following:
            ``(B) Adjustments.--
                ``(i) In general.--Except as provided in subparagraph 
            (A), the value of food assistance for each meal shall be 
            adjusted each July 1 by the annual percentage change in a 
            3-month average value of the Price Index for Foods Used in 
            Schools and Institutions for March, April, and May of each 
            year.
                ``(ii) Method of adjustments.--Except as otherwise 
            provided in this subparagraph, in the case of each school 
            year, the Secretary shall--

                    ``(I) base the adjustment made under clause (i) on 
                the amount of the unrounded adjustment for the 
                preceding school year;
                    ``(II) adjust the resulting amount in accordance 
                with clause (i); and
                    ``(III) round the result to the nearest lower cent 
                increment.

                ``(iii) Adjustment on january 1, 1996.--On January 1, 
            1996, the Secretary shall adjust the value of food 
            assistance for all meals for the remainder of the school 
            year by rounding the previously established value of food 
            assistance to the nearest lower cent increment.''.
    (b) Effective Date.--The amendment made by subsection (a)(1) shall 
become effective on July 1, 1996.

SEC. 12904. REDUCED PRICE LUNCHES.

    (a) Maximum Price.--Section 9(b)(3) of the National School Lunch 
Act (42 U.S.C. 1758(b)(3)) is amended--
        (1) in the last sentence, by striking ``The'' and inserting 
    ``Except as provided in the succeeding 2 sentences, the''; and
        (2) by adding at the end the following: ``In the case of the 
    school year beginning July 1, 2000, the price charged for a reduced 
    price lunch shall not exceed 45 cents. In the case of the school 
    year beginning July 1, 2001, and each school year thereafter, the 
    price charged for a reduced price lunch shall not exceed 50 
    cents.''.
    (b) Reduced Price Meal Payment.--Section 11(a)(2) of the Act (42 
U.S.C. 1759a(a)(2)) is amended--
        (1) by striking ``cents and the'' and inserting ``cents. Except 
    as provided in the succeeding 2 sentences, the''; and
        (2) by adding at the end the following: ``In the case of the 
    school year beginning July 1, 2000, the special assistance factor 
    for reduced price lunches shall be 45 cents less than the special 
    assistance factor for free lunches. In the case of the school year 
    beginning July 1, 2001, and each school year thereafter, the 
    special assistance factor for reduced price lunches shall be 50 
    cents less than the special assistance factor for free lunches.''.

SEC. 12905. LUNCHES, BREAKFASTS, AND SUPPLEMENTS.

    (a) In General.--Section 11(a)(3)(B) of the National School Lunch 
Act (42 U.S.C. 1759a(a)(3)(B)) is amended--
        (1) by designating the second and third sentences as 
    subparagraphs (C) and (D), respectively; and
        (2) by striking subparagraph (D) (as so designated) and 
    inserting the following:
            ``(D) Rounding.--Except as otherwise provided in this 
        paragraph, in the case of each school year, the Secretary 
        shall--
                ``(i) base the adjustment made under this paragraph on 
            the amount of the unrounded adjustment for the preceding 
            school year;
                ``(ii) adjust the resulting amount in accordance with 
            subparagraphs (B) and (C); and
                ``(iii) round the result to the nearest lower cent 
            increment.
            ``(E) Adjustment on january 1 and july 1, 1996.--The 
        Secretary shall adjust the rates for breakfasts and supplements 
        on January 1, 1996, for the remainder of the school year, and 
        shall adjust the rates for lunches on July 1, 1996, by rounding 
        the previously established rates to the nearest lower cent 
        increment.
            ``(F) Adjustment for 24-month period beginning july 1, 
        1996.--In the case of the 24-month period beginning July 1, 
        1996, the national average payment rates for paid lunches, paid 
        breakfasts, and paid supplements shall be the same as the 
        national average payment rate for paid lunches, paid 
        breakfasts, and paid supplements, respectively, for the school 
        year beginning July 1, 1995, rounded to the nearest lower cent 
        increment.
            ``(G) Adjustment for school year beginning july 1, 1998.--
        In the case of the school year beginning July 1, 1998, the 
        Secretary shall--
                ``(i) base the adjustments made under this paragraph 
            for--

                    ``(I) paid lunches and paid breakfasts on the 
                amount of the unrounded adjustment for paid lunches for 
                the school year beginning July 1, 1995; and
                    ``(II) paid supplements on the amount of the 
                unrounded adjustment for paid supplements for the 
                school year beginning July 1, 1995;

                ``(ii) adjust each resulting amount in accordance with 
            subparagraph (C); and
                ``(iii) round each result to the nearest lower cent 
            increment.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
become effective on January 1, 1996.

SEC. 12906. SUMMER FOOD SERVICE PROGRAM FOR CHILDREN.

    (a) Establishment of Program.--Section 13(a) of the National School 
Lunch Act (42 U.S.C. 1761(a)) is amended--
        (1) in paragraph (1)--
            (A) in the first sentence, by striking ``initiate, 
        maintain, and expand'' and insert ``initiate and maintain''; 
        and
            (B) in subparagraph (E) in the second sentence, by striking 
        ``the Trust Territory of the Pacific Islands,''; and
        (2) in paragraph (7)(A), by striking ``Except as provided in 
    subparagraph (C), private'' and inserting ``Private''.
    (b) Service Institutions.--Section 13(b) of the Act is amended by 
striking ``(b)(1)'' and all that follows through the end of paragraph 
(1) and inserting the following:
    ``(b) Service Institutions.--
        ``(1) Payments.--
            ``(A) In general.--Except as otherwise provided in this 
        paragraph, payments to service institutions shall equal the 
        full cost of food service operations (which cost shall include 
        the costs of obtaining, preparing, and serving food, but shall 
        not include administrative costs).
            ``(B) Maximum amounts.--Subject to subparagraph (C), 
        payments to any institution under subparagraph (A) shall not 
        exceed--
                ``(i) $1.82 for each lunch and supper served;
                ``(ii) $1.13 for each breakfast served; and
                ``(iii) 46 cents for each meal supplement served.
            ``(C) Adjustments.--Amounts specified in subparagraph (B) 
        shall be adjusted each January 1 to the nearest lower cent 
        increment in accordance with the changes for the 12-month 
        period ending the preceding November 30 in the series for food 
        away from home of the Consumer Price Index for All Urban 
        Consumers published by the Bureau of Labor Statistics of the 
        Department of Labor. Each adjustment shall be based on the 
        unrounded adjustment for the prior 12-month period.''.
    (c) Administration of Service Institutions.--Section 13(b)(2) of 
the Act is amended--
        (1) in the first sentence, by striking ``four meals'' and 
    inserting ``3 meals, or 2 meals and 1 supplement,''; and
        (2) by striking the second sentence.
    (d) Reimbursements.--Section 13(c)(2) of the Act is amended--
        (1) by striking subparagraph (A);
        (2) in subparagraph (B)--
            (A) in the first sentence--
                (i) by striking ``, and such higher education 
            institutions,''; and
                (ii) by striking ``without application'' and inserting 
            ``upon showing residence in areas in which poor economic 
            conditions exist''; and
            (B) by adding at the end the following: ``The higher 
        education institutions referred to in the preceding sentence 
        shall be eligible to participate in the program under this 
        paragraph without application.'';
        (3) in subparagraph (C)(ii), by striking ``severe need''; and
        (4) by redesignating subparagraphs (B) through (E), as so 
    amended, as subparagraphs (A) through (D), respectively.
    (e) Permitting Offer Versus Serve.--Section 13(f) of the Act is 
amended--
        (1) by redesignating the first through seventh sentences as 
    paragraphs (1) through (7), respectively; and
        (2) by adding at the end the following:
        ``(8) Offer versus serve.--A school food authority 
    participating as a service institution may permit a child attending 
    a site on school premises operated directly by the authority to 
    refuse not more than 1 item of a meal that the child does not 
    intend to consume. A refusal of an offered food item shall not 
    affect the amount of payments made under this section to a school 
    for the meal.''.
    (f) Effective Date.--The amendments made by subsection (b) shall 
become effective on January 1, 1996.

SEC. 12907. CHILD CARE FOOD PROGRAM.

    (a) Establishment of Program.--Section 17 of the National School 
Lunch Act (42 U.S.C. 1766) is amended--
        (1) in the section heading, by striking ``and adult''; and
        (2) in the first sentence of subsection (a), by striking 
    ``initiate, maintain, and expand'' and inserting ``initiate and 
    maintain''.
    (b) Payments to Sponsor Employees.--Paragraph (2) of the last 
sentence of section 17(a) of the Act (42 U.S.C. 1766(a)) is amended--
        (1) by striking ``and'' at the end of subparagraph (B);
        (2) by striking the period at the end of subparagraph (C) and 
    inserting ``; and''; and
        (3) by adding at the end the following:
            ``(D) in the case of a family or group day care home 
        sponsoring organization that employs more than 1 employee, the 
        organization does not base payments to an employee of the 
        organization on the number of family or group day care homes 
        recruited, managed, or monitored.''.
    (c) Technical Assistance.--The last sentence of section 17(d)(1) of 
the Act is amended by striking ``, and shall provide technical 
assistance'' and all that follows through ``its application''.
    (d) Reimbursement of Child Care Institutions.--Section 17(f)(2)(B) 
of the Act (42 U.S.C. 1766(f)(2)(B)) is amended by striking ``two meals 
and two supplements or three meals and one supplement'' and inserting 
``two meals and one supplement''.
    (e) Improved Targeting of Day Care Home Reimbursements.--
        (1) Restructured day care home reimbursements.--Section 
    17(f)(3) of the Act is amended by striking ``(3)(A) Institutions'' 
    and all that follows through the end of subparagraph (A) and 
    inserting the following:
        ``(3) Reimbursement of family or group day care home sponsoring 
    organizations.--
            ``(A) Reimbursement factor.--
                ``(i) In general.--An institution that participates in 
            the program under this section as a family or group day 
            care home sponsoring organization shall be provided, for 
            payment to a home sponsored by the organization, 
            reimbursement factors in accordance with this subparagraph 
            for the cost of obtaining and preparing food and prescribed 
            labor costs involved in providing meals under this section.
                ``(ii) Tier i family or group day care homes.--

                    ``(I) Definition.--In this paragraph, the term 
                `tier I family or group day care home' means--

                        ``(aa) a family or group day care home that is 
                    located in a geographic area, as defined by the 
                    Secretary based on census data, in which at least 
                    50 percent of the children residing in the area are 
                    members of households whose incomes meet the income 
                    eligibility guidelines for free or reduced price 
                    meals under section 9;
                        ``(bb) a family or group day care home that is 
                    located in an area served by a school enrolling 
                    elementary students in which at least 50 percent of 
                    the total number of children enrolled are certified 
                    eligible to receive free or reduced price school 
                    meals under this Act or the Child Nutrition Act of 
                    1966 (42 U.S.C. 1771 et seq.); or
                        ``(cc) a family or group day care home that is 
                    operated by a provider whose household meets the 
                    income eligibility guidelines for free or reduced 
                    price meals under section 9 and whose income is 
                    verified by the sponsoring organization of the home 
                    under regulations established by the Secretary.

                    ``(II) Reimbursement.--Except as provided in 
                subclause (III), a tier I family or group day care home 
                shall be provided reimbursement factors under this 
                clause without a requirement for documentation of the 
                costs described in clause (i), except that 
                reimbursement shall not be provided under this 
                subclause for meals or supplements served to the 
                children of a person acting as a family or group day 
                care home provider unless the children meet the income 
                eligibility guidelines for free or reduced price meals 
                under section 9.
                    ``(III) Factors.--Except as provided in subclause 
                (IV), the reimbursement factors applied to a home 
                referred to in subclause (II) shall be the factors in 
                effect on the date of enactment of this subclause.
                    ``(IV) Adjustments.--The reimbursement factors 
                under this subparagraph shall be adjusted on August 1, 
                1996, July 1, 1997, and each July 1 thereafter, to 
                reflect changes in the Consumer Price Index for food at 
                home for the most recent 12-month period for which the 
                data are available. The reimbursement factors under 
                this subparagraph shall be rounded to the nearest lower 
                cent increment and based on the unrounded adjustment in 
                effect on June 30 of the preceding school year.

                ``(iii) Tier ii family or group day care homes.--

                    ``(I) In general.--

                        ``(aa) Factors.--Except as provided in 
                    subclause (II), with respect to meals or 
                    supplements served under this clause by a family or 
                    group day care home that does not meet the criteria 
                    set forth in clause (ii)(I), the reimbursement 
                    factors shall be 90 cents for lunches and suppers, 
                    25 cents for breakfasts, and 10 cents for 
                    supplements.
                        ``(bb) Adjustments.--The factors shall be 
                    adjusted on July 1, 1997, and each July 1 
                    thereafter, to reflect changes in the Consumer 
                    Price Index for food at home for the most recent 
                    12-month period for which the data are available. 
                    The reimbursement factors under this item shall be 
                    rounded down to the nearest lower cent increment 
                    and based on the unrounded adjustment for the 
                    preceding 12-month period.
                        ``(cc) Reimbursement.--A family or group day 
                    care home shall be provided reimbursement factors 
                    under this subclause without a requirement for 
                    documentation of the costs described in clause (i), 
                    except that reimbursement shall not be provided 
                    under this subclause for meals or supplements 
                    served to the children of a person acting as a 
                    family or group day care home provider unless the 
                    children meet the income eligibility guidelines for 
                    free or reduced price meals under section 9.

                    ``(II) Other factors.--A family or group day care 
                home that does not meet the criteria set forth in 
                clause (ii)(I) may elect to be provided reimbursement 
                factors determined in accordance with the following 
                requirements:

                        ``(aa) Children eligible for free or reduced 
                    price meals.--In the case of meals or supplements 
                    served under this subsection to children who are 
                    members of households whose incomes meet the income 
                    eligibility guidelines for free or reduced price 
                    meals under section 9, the family or group day care 
                    home shall be provided reimbursement factors set by 
                    the Secretary in accordance with clause (ii)(III).
                        ``(bb) Ineligible children.--In the case of 
                    meals or supplements served under this subsection 
                    to children who are members of households whose 
                    incomes do not meet the income eligibility 
                    guidelines, the family or group day care home shall 
                    be provided reimbursement factors in accordance 
                    with subclause (I).

                    ``(III) Information and determinations.--

                        ``(aa) In general.--If a family or group day 
                    care home elects to claim the factors described in 
                    subclause (II), the family or group day care home 
                    sponsoring organization serving the home shall 
                    collect the necessary income information, as 
                    determined by the Secretary, from any parent or 
                    other caretaker to make the determinations 
                    specified in subclause (II) and shall make the 
                    determinations in accordance with rules prescribed 
                    by the Secretary.
                        ``(bb) Categorical eligibility.--In making a 
                    determination under item (aa), a family or group 
                    day care home sponsoring organization may consider 
                    a child participating in or subsidized under, or a 
                    child with a parent participating in or subsidized 
                    under, a federally or State supported child care or 
                    other benefit program with an income eligibility 
                    limit that does not exceed the eligibility standard 
                    for free or reduced price meals under section 9 to 
                    be a child who is a member of a household whose 
                    income meets the income eligibility guidelines 
                    under section 9.
                        ``(cc) Factors for children only.--A family or 
                    group day care home may elect to receive the 
                    reimbursement factors prescribed under clause 
                    (ii)(III) solely for the children participating in 
                    a program referred to in item (bb) if the home 
                    elects not to have income statements collected from 
                    parents or other caretakers.

                    ``(IV) Simplified meal counting and reporting 
                procedures.--The Secretary shall prescribe simplified 
                meal counting and reporting procedures for use by a 
                family or group day care home that elects to claim the 
                factors under subclause (II) and by a family or group 
                day care home sponsoring organization that sponsors the 
                home. The procedures the Secretary prescribes may 
                include 1 or more of the following:

                        ``(aa) Setting an annual percentage for each 
                    home of the number of meals served that are to be 
                    reimbursed in accordance with the reimbursement 
                    factors prescribed under clause (ii)(III) and an 
                    annual percentage of the number of meals served 
                    that are to be reimbursed in accordance with the 
                    reimbursement factors prescribed under subclause 
                    (I), based on the family income of children 
                    enrolled in the home in a specified month or other 
                    period.
                        ``(bb) Placing a home into 1 of 2 or more 
                    reimbursement categories annually based on the 
                    percentage of children in the home whose households 
                    have incomes that meet the income eligibility 
                    guidelines under section 9, with each such 
                    reimbursement category carrying a set of 
                    reimbursement factors such as the factors 
                    prescribed under clause (ii)(III) or subclause (I) 
                    or factors established within the range of factors 
                    prescribed under clause (ii)(III) and subclause 
                    (I).
                        ``(cc) Such other simplified procedures as the 
                    Secretary may prescribe.

                    ``(V) Minimum verification requirements.--The 
                Secretary may establish any necessary minimum 
                verification requirements.''.

        (2) Grants to states to provide assistance to family or group 
    day care homes.--Section 17(f)(3) of the Act is amended by adding 
    at the end the following:
            ``(D) Grants to states to provide assistance to family or 
        group day care homes.--
                ``(i) In general.--

                    ``(I) Reservation.--From amounts made available to 
                carry out this section, the Secretary shall reserve 
                $5,000,000 of the amount made available for fiscal year 
                1996.
                    ``(II) Purpose.--The Secretary shall use the funds 
                made available under subclause (I) to provide grants to 
                States for the purpose of providing--

                        ``(aa) assistance, including grants, to family 
                    and day care home sponsoring organizations and 
                    other appropriate organizations, in securing and 
                    providing training, materials, automated data 
                    processing assistance, and other assistance for the 
                    staff of the sponsoring organizations; and
                        ``(bb) training and other assistance to family 
                    and group day care homes in the implementation of 
                    the amendment to subparagraph (A) made by section 
                    12907(e)(1) of the Balanced Budget Act of 1995.
                ``(ii) Allocation.--The Secretary shall allocate from 
            the funds reserved under clause (i)(I)--

                    ``(I) $30,000 in base funding to each State; and
                    ``(II) any remaining amount among the States, based 
                on the number of family day care homes participating in 
                the program in a State during fiscal year 1994 as a 
                percentage of the number of all family day care homes 
                participating in the program during fiscal year 1994.

                ``(iii) Retention of funds.--Of the amount of funds 
            made available to a State for fiscal year 1996 under clause 
            (i), the State may retain not to exceed 30 percent of the 
            amount to carry out this subparagraph.
                ``(iv) Additional payments.--Any payments received 
            under this subparagraph shall be in addition to payments 
            that a State receives under subparagraph (A).''.
        (3) Provision of data.--Section 17(f)(3) of the Act (as amended 
    by paragraph (2)) is further amended by adding at the end the 
    following:
            ``(E) Provision of data to family or group day care home 
        sponsoring organizations.--
                ``(i) Census data.--The Secretary shall provide to each 
            State agency administering a child care food program under 
            this section data from the most recent decennial census 
            survey or other appropriate census survey for which the 
            data are available showing which areas in the State meet 
            the requirements of subparagraph (A)(ii)(I)(aa). The State 
            agency shall provide the data to family or group day care 
            home sponsoring organizations located in the State.
                ``(ii) School data.--

                    ``(I) In general.--A State agency administering the 
                school lunch program under this Act or the school 
                breakfast program under the Child Nutrition Act of 1966 
                (42 U.S.C. 1771 et seq.) shall provide to approved 
                family or group day care home sponsoring organizations 
                a list of schools serving elementary school children in 
                the State in which not less than \1/2\ of the children 
                enrolled are certified to receive free or reduced price 
                meals. The State agency shall collect the data 
                necessary to create the list annually and provide the 
                list on a timely basis to any approved family or group 
                day care home sponsoring organization that requests the 
                list.
                    ``(II) Use of data from preceding school year.--In 
                determining for a fiscal year or other annual period 
                whether a home qualifies as a tier I family or group 
                day care home under subparagraph (A)(ii)(I), the State 
                agency administering the program under this section, 
                and a family or group day care home sponsoring 
                organization, shall use the most current available data 
                at the time of the determination.

                ``(iii) Duration of determination.--For purposes of 
            this section, a determination that a family or group day 
            care home is located in an area that qualifies the home as 
            a tier I family or group day care home (as the term is 
            defined in subparagraph (A)(ii)(I)), shall be in effect for 
            3 years (unless the determination is made on the basis of 
            census data, in which case the determination shall remain 
            in effect until more recent census data are available) 
            unless the State agency determines that the area in which 
            the home is located no longer qualifies the home as a tier 
            I family or group day care home.''.
        (4) Conforming amendments.--Section 17(c) of the Act is amended 
    by inserting ``except as provided in subsection (f)(3),'' after 
    ``For purposes of this section,'' each place it appears in 
    paragraphs (1), (2), and (3).
    (f) Reimbursement.--Section 17(f) of the Act is amended--
        (1) in paragraph (3)--
            (A) in subparagraph (B), by striking the third and fourth 
        sentences; and
            (B) in subparagraph (C)--
                (i) in clause (i)--

                    (I) by striking ``(i)'';
                    (II) in the first sentence, by striking ``and 
                expansion funds'' and all that follows through ``rural 
                areas'';
                    (III) by striking the second sentence; and
                    (IV) by striking ``and expansion funds'' each place 
                it appears; and

                (ii) by striking clause (ii); and
        (2) by striking paragraph (4).
    (g) Elimination of State Paperwork and Outreach Burden.--Section 17 
of the Act is amended by striking subsection (k) and inserting the 
following:
    ``(k) Training and Technical Assistance.--A State participating in 
the program established under this section shall provide sufficient 
training, technical assistance, and monitoring to facilitate effective 
operation of the program. The Secretary shall assist the State in 
developing plans to fulfill the requirements of this subsection.''.
    (h) Modification of Adult Care Food Program.--Section 17(o) of the 
Act is amended--
        (1) in the first sentence of paragraph (1)--
            (A) by striking ``adult day care centers'' and inserting 
        ``day care centers for chronically impaired disabled persons''; 
        and
            (B) by striking ``to persons 60 years of age or older or''; 
        and
        (2) in paragraph (2)--
            (A) in subparagraph (A)--
                (i) by striking ``adult day care center'' and inserting 
            ``day care center for chronically impaired disabled 
            persons''; and
                (ii) in clause (i)--

                    (I) by striking ``adult'';
                    (II) by striking ``adults'' and inserting 
                ``persons''; and
                    (III) by striking ``or persons 60 years of age or 
                older''; and

            (B) in subparagraph (B), by striking ``adult day care 
        services'' and inserting ``day care services for chronically 
        impaired disabled persons''.
    (i) Unneeded Provisions.--Section 17 of the Act is amended--
        (1) by striking subsections (b) and (q);
        (2) by redesignating subsections (c) through (p), as so 
    amended, as subsections (b) through (o), respectively; and
        (3) in subsection (e), as redesignated by paragraph (2)--
            (A) in paragraph (2)(A), by striking ``subsection (c)'' and 
        inserting ``subsection (b)''; and
            (B) in paragraph (3)(C), by striking ``subsection (d)'' and 
        inserting ``subsection (c)''.
    (j) Conforming Amendments.--
        (1) Section 11(a)(3)(A)(iv) of the Act (42 U.S.C. 
    1759a(a)(3)(A)(iv)) is amended by striking ``17(c)'' and inserting 
    ``17(b)''.
        (2) Section 17A(c) of the Act (42 U.S.C. 1766a(c)) is amended 
    by striking ``17(c)(3)'' and inserting ``17(b)(3)''.
        (3) Section 17B(f) of the Act (42 U.S.C. 1766b(f)) is amended--
            (A) in the subsection heading, by striking ``and Adult''; 
        and
            (B) in paragraph (1), by striking ``and adult''.
        (4) Section 18(e)(3)(B) of the Act (42 U.S.C. 1769(e)(3)(B)) is 
    amended by striking ``and adult''.
        (5) Section 25(b)(1)(C) of the Act (42 U.S.C. 1769f(b)(1)(C)) 
    is amended by striking ``and adult''.
        (6) Section 3(1) of the Healthy Meals for Healthy Americans Act 
    of 1994 (Public Law 103-448) is amended by striking ``and adult''.
    (k) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall become effective on the date 
    of the enactment of this Act.
        (2) Improved targeting of day care home reimbursements.--The 
    amendments made by paragraphs (1), (3), and (4) of subsection (e) 
    shall become effective on August 1, 1996.
        (3) Regulations.--
            (A) Interim regulations.--Not later than February 1, 1996, 
        the Secretary shall issue interim regulations to implement--
                (i) the amendments made by paragraphs (1), (3), and (4) 
            of subsection (e); and
                (ii) section 17(f)(3)(C) of the National School Lunch 
            Act (42 U.S.C. 1766(f)(3)(C)).
            (B) Final regulations.--Not later than August 1, 1996, the 
        Secretary shall issue final regulations to implement the 
        provisions of law referred to in subparagraph (A).
    (l) Study of Impact of Amendments on Program Participation and 
Family Day Care Licensing.--
        (1) In general.--The Secretary of Agriculture, in conjunction 
    with the Secretary of Health and Human Services, shall study the 
    impact of the amendments made by this section on--
            (A) the number of family day care homes participating in 
        the child care food program established under section 17 of the 
        National School Lunch Act (42 U.S.C. 1766);
            (B) the number of day care home sponsoring organizations 
        participating in the program;
            (C) the number of day care homes that are licensed, 
        certified, registered, or approved by each State in accordance 
        with regulations issued by the Secretary;
            (D) the rate of growth of the numbers referred to in 
        subparagraphs (A) through (C);
            (E) the nutritional adequacy and quality of meals served in 
        family day care homes that--
                (i) received reimbursement under the program prior to 
            the amendments made by this section but do not receive 
            reimbursement after the amendments made by this section; or
                (ii) received full reimbursement under the program 
            prior to the amendments made by this section but do not 
            receive full reimbursement after the amendments made by 
            this section; and
            (F) the proportion of low-income children participating in 
        the program prior to the amendments made by this section and 
        the proportion of low-income children participating in the 
        program after the amendments made by this section.
        (2) Required data.--Each State agency participating in the 
    child care food program under section 17 of the National School 
    Lunch Act (42 U.S.C. 1766) shall submit to the Secretary data on--
            (A) the number of family day care homes participating in 
        the program on July 31, 1996, and July 31, 1997;
            (B) the number of family day care homes licensed, 
        certified, registered, or approved for service on July 31, 
        1996, and July 31, 1997; and
            (C) such other data as the Secretary may require to carry 
        out this subsection.

SEC. 12908. PILOT PROJECTS.

    (a) Universal Free Pilot.--Section 18(d) of the National School 
Lunch Act (42 U.S.C. 1769(d)) is amended--
        (1) by striking paragraph (3); and
        (2) by redesignating paragraphs (4) and (5) as paragraphs (3) 
    and (4), respectively.
    (b) Demo Project Outside School Hours.--Section 18(e) of the Act is 
amended--
        (1) in paragraph (1)--
            (A) in subparagraph (A)--
                (i) by striking ``(A)''; and
                (ii) by striking ``shall'' and inserting ``may''; and
            (B) by striking subparagraph (B); and
        (2) by striking paragraph (5) and inserting the following:
        ``(5) Authorization of appropriations.--There are authorized to 
    be appropriated to carry out this subsection such sums as are 
    necessary for each of fiscal years 1997 and 1998.''.

SEC. 12909. INFORMATION CLEARINGHOUSE.

    Section 26 of the National School Lunch Act (42 U.S.C. 1769g) is 
repealed.

                     CHAPTER 2--CHILD NUTRITION ACT

SEC. 12921. SPECIAL MILK PROGRAM.

    (a) In General.--Section 3(a) of the Child Nutrition Act of 1966 
(42 U.S.C. 1772(a)) is amended--
        (1) in paragraph (3), by striking ``the Trust Territory of the 
    Pacific Islands'' and inserting ``the Commonwealth of the Northern 
    Mariana Islands''; and
        (2) by striking paragraph (8) and inserting the following:
        ``(8) Adjustments.--
            ``(A) In general.--Except as otherwise provided in this 
        paragraph, in the case of each school year, the Secretary 
        shall--
                ``(i) base the adjustment made under paragraph (7) on 
            the amount of the unrounded adjustment for the preceding 
            school year;
                ``(ii) adjust the resulting amount in accordance with 
            paragraph (7); and
                ``(iii) round the result to the nearest lower cent 
            increment.
            ``(B) Adjustment on january 1, 1996.--On January 1, 1996, 
        the Secretary shall adjust the minimum rate for the remainder 
        of the school year by rounding the previously established 
        minimum rate to the nearest lower cent increment.
            ``(C) Adjustment for 24-month period beginning july 1, 
        1996.--In the case of the 24-month period beginning July 1, 
        1996, the minimum rate shall be the same as the minimum rate in 
        effect on June 30, 1996.
            ``(D) Adjustment for school year beginning july 1, 1998.--
        In the case of the school year beginning July 1, 1998, the 
        Secretary shall--
                ``(i) base the adjustment made under paragraph (7) on 
            the amount of the unrounded adjustment for the minimum rate 
            for the school year beginning July 1, 1995;
                ``(ii) adjust the resulting amount to reflect changes 
            in the Producer Price Index for Fresh Processed Milk 
            published by the Bureau of Labor Statistics of the 
            Department of Labor for the most recent 12-month period for 
            which the data are available; and
                ``(iii) round the result to the nearest lower cent 
            increment.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
become effective on January 1, 1996.

SEC. 12922. FREE AND REDUCED PRICE BREAKFASTS.

    (a) In General.--Section 4(b) of the Child Nutrition Act of 1966 
(42 U.S.C. 1773(b)) is amended--
        (1) in the second sentence of paragraph (1)(B), by striking ``, 
    adjusted to the nearest one-fourth cent'' and inserting ``(as 
    adjusted pursuant to section 11(a) of the National School Lunch Act 
    (42 U.S.C. 1759a(a)))''; and
        (2) in paragraph (2)(B)(ii)--
            (A) by striking ``nearest one-fourth cent'' and inserting 
        ``nearest lower cent increment for the applicable school 
        year''; and
            (B) by inserting before the period at the end the 
        following: ``, and the adjustment required by this clause shall 
        be based on the unrounded adjustment for the preceding school 
        year''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
become effective on July 1, 1996.

SEC. 12923. CONFORMING REIMBURSEMENT FOR PAID BREAKFASTS AND LUNCHES.

    (a) In General.--The last sentence of section 4(b)(1)(B) of the 
Child Nutrition Act of 1966 (42 U.S.C. 1773(b)(1)(B)) is amended by 
striking ``8.25 cents'' and all that follows through ``Act)'' and 
inserting ``the same as the national average lunch payment for paid 
meals established under section 4(b) of the National School Lunch Act 
(42 U.S.C. 1753(b))''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on January 1, 1996.

SEC. 12924. SCHOOL BREAKFAST PROGRAM AUTHORIZATION.

    Section 4 of the Child Nutrition Act of 1966 (42 U.S.C. 1773) is 
amended by striking subsections (f) and (g).

SEC. 12925. MISCELLANEOUS PROVISIONS AND DEFINITIONS.

    Section 15 of the Child Nutrition Act of 1966 (42 U.S.C. 1784) is 
amended--
        (1) in paragraph (1), by striking ``the Trust Territory of the 
    Pacific Islands'' and inserting ``the Commonwealth of the Northern 
    Mariana Islands''; and
        (2) in the first sentence of paragraph (3)--
            (A) in subparagraph (A), by inserting ``and'' at the end; 
        and
            (B) by striking ``, and (C)'' and all that follows through 
        ``Governor of Puerto Rico''.

SEC. 12926. NUTRITION EDUCATION AND TRAINING.

    (a) Use of Funds.--Section 19(f) of the Child Nutrition Act of 1966 
(42 U.S.C. 1788(f)) is amended--
        (1) in paragraph (1)--
            (A) by striking subparagraph (B); and
            (B) in subparagraph (A)--
                (i) by striking ``(A)'';
                (ii) by striking clauses (ix) through (xix);
                (iii) by redesignating clauses (i) through (viii) and 
            (xx) as subparagraphs (A) through (H) and (I), 
            respectively; and
                (iv) in subparagraph (H), as so redesignated, by 
            inserting ``and'' at the end;
        (2) by striking paragraphs (2) and (4); and
        (3) by redesignating paragraph (3) as paragraph (2).
    (b) Authorization of Appropriations.--Section 19(i) of the Act is 
amended--
        (1) in the first sentence of paragraph (2)(A), by striking 
    ``and each succeeding fiscal year'';
        (2) by redesignating paragraphs (3) and (4) as paragraphs (4) 
    and (5), respectively; and
        (3) by inserting after paragraph (2) the following:
        ``(2) Fiscal years 1997 through 2002.--
            ``(A) In general.--There are authorized to be appropriated 
        to carry out this section $10,000,000 for each of fiscal years 
        1997 through 2002.
            ``(B) Grants.--
                ``(i) In general.--Grants to each State from the 
            amounts made available under subparagraph (A) shall be 
            based on a rate of 50 cents for each child enrolled in 
            schools or institutions within the State, except that no 
            State shall receive an amount less than $75,000 per fiscal 
            year.
                ``(ii) Insufficient funds.--If the amount made 
            available for any fiscal year is insufficient to pay the 
            amount to which each State is entitled under clause (i), 
            the amount of each grant shall be ratably reduced.''.

           Subtitle J--Food Stamps and Commodity Distribution

SEC. 13001. SHORT TITLE.

    This subtitle may be cited as the ``Food Stamp Reform and Commodity 
Distribution Act of 1995''.

                     CHAPTER 1--FOOD STAMP PROGRAM

SEC. 13011. DEFINITION OF CERTIFICATION PERIOD.

    Section 3(c) of the Food Stamp Act of 1977 (7 U.S.C. 2012(c)) is 
amended by striking ``Except as provided'' and all that follows and 
inserting the following: ``The certification period shall not exceed 12 
months, except that the certification period may be up to 24 months if 
all adult household members are elderly or disabled. A State agency 
shall have at least 1 contact with each certified household every 12 
months.''.

SEC. 13012. DEFINITION OF COUPON.

    Section 3(d) of the Food Stamp Act of 1977 (7 U.S.C. 2012(d)) is 
amended by striking ``or type of certificate'' and inserting ``type of 
certificate, authorization card, cash or check issued in lieu of a 
coupon, or an access device, including an electronic benefit transfer 
card or personal identification number,''.

SEC. 13013. TREATMENT OF CHILDREN LIVING AT HOME.

    The second sentence of section 3(i) of the Food Stamp Act of 1977 
(7 U.S.C. 2012(i)) is amended by striking ``(who are not themselves 
parents living with their children or married and living with their 
spouses)''.

SEC. 13014. OPTIONAL ADDITIONAL CRITERIA FOR SEPARATE HOUSEHOLD 
              DETERMINATIONS.

    Section 3(i) of the Food Stamp Act of 1977 (7 U.S.C. 2012(i)) is 
amended by inserting after the third sentence the following: 
``Notwithstanding the preceding sentences, a State may establish 
criteria that prescribe when individuals who live together, and who 
would be allowed to participate as separate households under the 
preceding sentences, shall be considered a single household, without 
regard to the common purchase of food and preparation of meals.''.

SEC. 13015. ADJUSTMENT OF THRIFTY FOOD PLAN.

    The second sentence of section 3(o) of the Food Stamp Act of 1977 
(7 U.S.C. 2012(o)) is amended--
        (1) by striking ``shall (1) make'' and inserting the following: 
    ``shall--
        ``(1) make'';
        (2) by striking ``scale, (2) make'' and inserting ``scale;
        ``(2) make'';
        (3) by striking ``Alaska, (3) make'' and inserting the 
    following: ``Alaska;
        ``(3) make''; and
        (4) by striking ``Columbia, (4) through'' and all that follows 
    through the end of the subsection and inserting the following: 
    ``Columbia; and
        ``(4) on October 1, 1996, and each October 1 thereafter, adjust 
    the cost of the diet to reflect the cost of the diet, in the 
    preceding June, and round the result to the nearest lower dollar 
    increment for each household size, except that on October 1, 1996, 
    the Secretary may not reduce the cost of the diet in effect on 
    September 30, 1996.''.

SEC. 13016. DEFINITION OF HOMELESS INDIVIDUAL.

    Section 3(s)(2)(C) of the Food Stamp Act of 1977 (7 U.S.C. 
2012(s)(2)(C)) is amended by inserting ``for not more than 90 days'' 
after ``temporary accommodation''.

SEC. 13017. STATE OPTION FOR ELIGIBILITY STANDARDS.

    Section 5(b) of the Food Stamp Act of 1977 (7 U.S.C. 2014(d)) is 
amended by striking ``(b) The Secretary'' and inserting the following:
    ``(b) Eligibility Standards.--Except as otherwise provided in this 
Act, the Secretary''.

SEC. 13018. EARNINGS OF STUDENTS.

    Section 5(d)(7) of the Food Stamp Act of 1977 (7 U.S.C. 2014(d)(7)) 
is amended by striking ``21'' and inserting ``19''.

SEC. 13019. ENERGY ASSISTANCE.

    (a) In General.--Section 5(d) of the Food Stamp Act of 1977 (7 
U.S.C. 2014(d)) is amended by striking paragraph (11) and inserting the 
following: ``(11) a 1-time payment or allowance made under a Federal or 
State law for the costs of weatherization or emergency repair or 
replacement of an unsafe or inoperative furnace or other heating or 
cooling device,''.
    (b) Conforming Amendments.--
        (1) Section 5(k) of the Act (7 U.S.C. 2014(k)) is amended--
            (A) in paragraph (1)--
                (i) in subparagraph (A), by striking ``plan for aid to 
            families with dependent children approved'' and inserting 
            ``program funded''; and
                (ii) in subparagraph (B), by striking ``, not including 
            energy or utility-cost assistance,'';
            (B) in paragraph (2), by striking subparagraph (C) and 
        inserting the following:
        ``(C) a payment or allowance described in subsection 
    (d)(11);''; and
            (C) by adding at the end the following:
        ``(4) Third-party energy assistance payments.--
            ``(A) Energy assistance payments.--For purposes of 
        subsection (d)(1), a payment made under a Federal or State law 
        to provide energy assistance to a household shall be considered 
        money payable directly to the household.
            ``(B) Energy assistance expenses.--For purposes of 
        subsection (e)(7), an expense paid on behalf of a household 
        under a Federal or State law to provide energy assistance shall 
        be considered an out-of-pocket expense incurred and paid by the 
        household.''.
        (2) Section 2605(f) of the Low-Income Home Energy Assistance 
    Act of 1981 (42 U.S.C. 8624(f)) is amended--
            (A) by striking ``(f)(1) Notwithstanding'' and inserting 
        ``(f) Notwithstanding'';
            (B) in paragraph (1), by striking ``food stamps,''; and
            (C) by striking paragraph (2).

SEC. 13020. DEDUCTIONS FROM INCOME.

    (a) In General.--Section 5 of the Food Stamp Act of 1977 (7 U.S.C. 
2014) is amended by striking subsection (e) and inserting the 
following:
    ``(e) Deductions From Income.--
        ``(1) Standard deduction.--The Secretary shall allow a standard 
    deduction for each household in the 48 contiguous States and the 
    District of Columbia, Alaska, Hawaii, Guam, and the Virgin Islands 
    of the United States of $134, $229, $189, $269, and $118, 
    respectively.
        ``(2) Earned income deduction.--
            ``(A) Definition of earned income.--In this paragraph, the 
        term `earned income' does not include income excluded by 
        subsection (d) or any portion of income earned under a work 
        supplementation or support program, as defined under section 
        16(b), that is attributable to public assistance.
            ``(B) Deduction.--Except as provided in subparagraph (C), a 
        household with earned income shall be allowed a deduction of 20 
        percent of all earned income (other than income excluded by 
        subsection (d)) to compensate for taxes, other mandatory 
        deductions from salary, and work expenses.
            ``(C) Exception.--The deduction described in subparagraph 
        (B) shall not be allowed with respect to determining an 
        overissuance due to the failure of a household to report earned 
        income in a timely manner.
        ``(3) Dependent care deduction.--
            ``(A) In general.--A household shall be entitled, with 
        respect to expenses (other than excluded expenses described in 
        subparagraph (B)) for dependent care, to a dependent care 
        deduction, the maximum allowable level of which shall be $200 
        per month for each dependent child under 2 years of age and 
        $175 per month for each other dependent, for the actual cost of 
        payments necessary for the care of a dependent if the care 
        enables a household member to accept or continue employment, or 
        training or education that is preparatory for employment.
            ``(B) Excluded expenses.--The excluded expenses referred to 
        in subparagraph (A) are--
                ``(i) expenses paid on behalf of the household by a 
            third party;
                ``(ii) amounts made available and excluded for the 
            expenses referred to in subparagraph (A) under subsection 
            (d)(3); and
                ``(iii) expenses that are paid under section 6(d)(4).
        ``(4) Deduction for child support payments.--
            ``(A) In general.--A household shall be entitled to a 
        deduction for child support payments made by a household member 
        to or for an individual who is not a member of the household if 
        the household member is legally obligated to make the payments.
            ``(B) Methods for determining amount.--The Secretary may 
        prescribe by regulation the methods, including calculation on a 
        retrospective basis, that a State agency shall use to determine 
        the amount of the deduction for child support payments.
        ``(5) Homeless shelter allowance.--A State agency may develop a 
    standard homeless shelter allowance, which shall not exceed $139 
    per month, for such expenses as may reasonably be expected to be 
    incurred by households in which all members are homeless 
    individuals but are not receiving free shelter throughout the 
    month. A State agency that develops the allowance may use the 
    allowance in determining eligibility and allotments for the 
    households, except that the State agency may prohibit the use of 
    the allowance for households with extremely low shelter costs.
        ``(6) Excess medical expense deduction.--
            ``(A) In general.--A household containing an elderly or 
        disabled member shall be entitled, with respect to expenses 
        other than expenses paid on behalf of the household by a third 
        party, to an excess medical expense deduction for the portion 
        of the actual costs of allowable medical expenses, incurred by 
        the elderly or disabled member, exclusive of special diets, 
        that exceeds $35 per month.
            ``(B) Method of claiming deduction.--
                ``(i) In general.--A State agency shall offer an 
            eligible household under subparagraph (A) a method of 
            claiming a deduction for recurring medical expenses that 
            are initially verified under the excess medical expense 
            deduction in lieu of submitting information or verification 
            on actual expenses on a monthly basis.
                ``(ii) Method.--The method described in clause (i) 
            shall--

                    ``(I) be designed to minimize the burden for the 
                eligible elderly or disabled household member choosing 
                to deduct the recurrent medical expenses of the member 
                pursuant to the method;
                    ``(II) rely on reasonable estimates of the expected 
                medical expenses of the member for the certification 
                period (including changes that can be reasonably 
                anticipated based on available information about the 
                medical condition of the member, public or private 
                medical insurance coverage, and the current verified 
                medical expenses incurred by the member); and
                    ``(III) not require further reporting or 
                verification of a change in medical expenses if such a 
                change has been anticipated for the certification 
                period.

        ``(7) Excess shelter expense deduction.--
            ``(A) In general.--A household shall be entitled, with 
        respect to expenses other than expenses paid on behalf of the 
        household by a third party, to an excess shelter expense 
        deduction to the extent that the monthly amount expended by a 
        household for shelter exceeds an amount equal to 50 percent of 
        monthly household income after all other applicable deductions 
        have been allowed.
            ``(B) Maximum amount of deduction.--In the case of a 
        household that does not contain an elderly or disabled 
        individual, the excess shelter expense deduction shall not 
        exceed--
                ``(i) in the 48 contiguous States and the District of 
            Columbia, $247 per month; and
                ``(ii) in Alaska, Hawaii, Guam, and the Virgin Islands 
            of the United States, $429, $353, $300, and $182 per month, 
            respectively.
            ``(C) Standard utility allowance.--
                ``(i) In general.--In computing the excess shelter 
            expense deduction, a State agency may use a standard 
            utility allowance in accordance with regulations 
            promulgated by the Secretary, except that a State agency 
            may use an allowance that does not fluctuate within a year 
            to reflect seasonal variations.
                ``(ii) Restrictions on heating and cooling expenses.--
            An allowance for a heating or cooling expense may not be 
            used in the case of a household that--

                    ``(I) does not incur a heating or cooling expense, 
                as the case may be;
                    ``(II) does incur a heating or cooling expense but 
                is located in a public housing unit that has central 
                utility meters and charges households, with regard to 
                the expense, only for excess utility costs; or
                    ``(III) shares the expense with, and lives with, 
                another individual not participating in the food stamp 
                program, another household participating in the food 
                stamp program, or both, unless the allowance is 
                prorated between the household and the other 
                individual, household, or both.

                ``(iii) Mandatory allowance.--

                    ``(I) In general.--A State agency may make the use 
                of a standard utility allowance mandatory for all 
                households with qualifying utility costs if--

                        ``(aa) the State agency has developed 1 or more 
                    standards that include the cost of heating and 
                    cooling and 1 or more standards that do not include 
                    the cost of heating and cooling; and
                        ``(bb) the Secretary finds that the standards 
                    will not result in an increased cost to the 
                    Secretary.

                    ``(II) Household election.--A State agency that has 
                not made the use of a standard utility allowance 
                mandatory under subclause (I) shall allow a household 
                to switch, at the end of a certification period, 
                between the standard utility allowance and a deduction 
                based on the actual utility costs of the household.

                ``(iv) Availability of allowance to recipients of 
            energy assistance.--

                    ``(I) In general.--Subject to subclause (II), if a 
                State agency elects to use a standard utility allowance 
                that reflects heating or cooling costs, the standard 
                utility allowance shall be made available to households 
                receiving a payment, or on behalf of which a payment is 
                made, under the Low-Income Home Energy Assistance Act 
                of 1981 (42 U.S.C. 8621 et seq.) or other similar 
                energy assistance program, if the household still 
                incurs out-of-pocket heating or cooling expenses in 
                excess of any assistance paid on behalf of the 
                household to an energy provider.
                    ``(II) Separate allowance.--A State agency may use 
                a separate standard utility allowance for households on 
                behalf of which a payment described in subclause (I) is 
                made, but may not be required to do so.
                    ``(III) States not electing to use separate 
                allowance.--A State agency that does not elect to use a 
                separate allowance but makes a single standard utility 
                allowance available to households incurring heating or 
                cooling expenses (other than a household described in 
                subclause (I) or (II) of subparagraph (C)(ii)) may not 
                be required to reduce the allowance due to the 
                provision (directly or indirectly) of assistance under 
                the Low-Income Home Energy Assistance Act of 1981 (42 
                U.S.C. 8621 et seq.).
                    ``(IV) Proration of assistance.--For the purpose of 
                the food stamp program, assistance provided under the 
                Low-Income Home Energy Assistance Act of 1981 (42 
                U.S.C. 8621 et seq.) shall be considered to be prorated 
                over the entire heating or cooling season for which the 
                assistance was provided.''.

    (b) Conforming Amendment.--Section 11(e)(3) of the Act (7 U.S.C. 
2020(e)(3)) is amended by striking ``. Under rules prescribed'' and all 
that follows through ``verifies higher expenses''.

SEC. 13021. VEHICLE ALLOWANCE.

    Section 5(g) of the Food Stamp Act of 1977 (7 U.S.C. 2014(g)) is 
amended by striking paragraph (2) and inserting the following:
        ``(2) Included assets.--
            ``(A) In general.--Subject to the other provisions of this 
        paragraph, the Secretary shall, in prescribing inclusions in, 
        and exclusions from, financial resources, follow the 
        regulations in force as of June 1, 1982 (other than those 
        relating to licensed vehicles and inaccessible resources).
            ``(B) Additional included assets.--The Secretary shall 
        include in financial resources--
                ``(i) any boat, snowmobile, or airplane used for 
            recreational purposes;
                ``(ii) any vacation home;
                ``(iii) any mobile home used primarily for vacation 
            purposes;
                ``(iv) subject to subparagraph (C), any licensed 
            vehicle that is used for household transportation or to 
            obtain or continue employment to the extent that the fair 
            market value of the vehicle exceeds $4,600; and
                ``(v) any savings or retirement account (including an 
            individual account), regardless of whether there is a 
            penalty for early withdrawal.
            ``(C) Excluded vehicles.--A vehicle (and any other 
        property, real or personal, to the extent the property is 
        directly related to the maintenance or use of the vehicle) 
        shall not be included in financial resources under this 
        paragraph if the vehicle is--
                ``(i) used to produce earned income;
                ``(ii) is necessary for the transportation of a 
            physically disabled household member; or
                ``(iii) is depended on by a household to carry fuel for 
            heating or water for home use and provides the primary 
            source of fuel or water, respectively, for the 
            household.''.

SEC. 13022. VENDOR PAYMENTS FOR TRANSITIONAL HOUSING COUNTED AS INCOME.

    Section 5(k)(2) of the Food Stamp Act of 1977 (7 U.S.C. 2014(k)(2)) 
is amended--
        (1) by striking subparagraph (F); and
        (2) by redesignating subparagraphs (G) and (H) as subparagraphs 
    (F) and (G), respectively.

SEC. 13023. DOUBLED PENALTIES FOR VIOLATING FOOD STAMP PROGRAM 
              REQUIREMENTS.

    Section 6(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 2015(b)(1)) 
is amended--
        (1) in clause (i), by striking ``six months'' and inserting ``1 
    year''; and
        (2) in clause (ii), by striking ``1 year'' and inserting ``2 
    years''.

SEC. 13024. DISQUALIFICATION OF CONVICTED INDIVIDUALS.

    Section 6(b)(1)(iii) of the Food Stamp Act of 1977 (7 U.S.C. 
2015(b)(1)(iii)) is amended--
        (1) in subclause (II), by striking ``or'' at the end;
        (2) in subclause (III), by striking the period at the end and 
    inserting ``; or''; and
        (3) by inserting after subclause (III) the following:
            ``(IV) a conviction of an offense under subsection (b) or 
        (c) of section 15 involving an item covered by subsection (b) 
        or (c) of section 15 having a value of $500 or more.''.

SEC. 13025. DISQUALIFICATION.

    (a) In General.--Section 6(d) of the Food Stamp Act of 1977 (7 
U.S.C. 2015(d)) is amended by striking ``(d)(1) Unless otherwise 
exempted by the provisions'' and all that follows through the end of 
paragraph (1) and inserting the following:
    ``(d) Conditions of Participation.--
        ``(1) Work requirements.--
            ``(A) In general.--No physically and mentally fit 
        individual over the age of 15 and under the age of 60 shall be 
        eligible to participate in the food stamp program if the 
        individual--
                ``(i) refuses, at the time of application and every 12 
            months thereafter, to register for employment in a manner 
            prescribed by the Secretary;
                ``(ii) refuses without good cause to participate in an 
            employment and training program under paragraph (4), to the 
            extent required by the State agency;
                ``(iii) refuses without good cause to accept an offer 
            of employment, at a site or plant not subject to a strike 
            or lockout at the time of the refusal, at a wage not less 
            than the higher of--

                    ``(I) the applicable Federal or State minimum wage; 
                or
                    ``(II) 80 percent of the wage that would have 
                governed had the minimum hourly rate under section 
                6(a)(1) of the Fair Labor Standards Act of 1938 (29 
                U.S.C. 206(a)(1)) been applicable to the offer of 
                employment;

                ``(iv) refuses without good cause to provide a State 
            agency with sufficient information to allow the State 
            agency to determine the employment status or the job 
            availability of the individual;
                ``(v) voluntarily and without good cause--

                    ``(I) quits a job; or
                    ``(II) reduces work effort and, after the 
                reduction, the individual is working less than 30 hours 
                per week; or

                ``(vi) fails to comply with section 20.
            ``(B) Household ineligibility.--If an individual who is the 
        head of a household becomes ineligible to participate in the 
        food stamp program under subparagraph (A), the household shall, 
        at the option of the State agency, become ineligible to 
        participate in the food stamp program for a period, determined 
        by the State agency, that does not exceed the lesser of--
                ``(i) the duration of the ineligibility of the 
            individual determined under subparagraph (C); or
                ``(ii) 180 days.
            ``(C) Duration of ineligibility.--
                ``(i) First violation.--The first time that an 
            individual becomes ineligible to participate in the food 
            stamp program under subparagraph (A), the individual shall 
            remain ineligible until the later of--

                    ``(I) the date the individual becomes eligible 
                under subparagraph (A);
                    ``(II) the date that is 1 month after the date the 
                individual became ineligible; or
                    ``(III) a date determined by the State agency that 
                is not later than 3 months after the date the 
                individual became ineligible.

                ``(ii) Second violation.--The second time that an 
            individual becomes ineligible to participate in the food 
            stamp program under subparagraph (A), the individual shall 
            remain ineligible until the later of--

                    ``(I) the date the individual becomes eligible 
                under subparagraph (A);
                    ``(II) the date that is 3 months after the date the 
                individual became ineligible; or
                    ``(III) a date determined by the State agency that 
                is not later than 6 months after the date the 
                individual became ineligible.

                ``(iii) Third or subsequent violation.--The third or 
            subsequent time that an individual becomes ineligible to 
            participate in the food stamp program under subparagraph 
            (A), the individual shall remain ineligible until the later 
            of--

                    ``(I) the date the individual becomes eligible 
                under subparagraph (A);
                    ``(II) the date that is 6 months after the date the 
                individual became ineligible;
                    ``(III) a date determined by the State agency; or
                    ``(IV) at the option of the State agency, 
                permanently.

            ``(D) Administration.--
                ``(i) Good cause.--The Secretary shall determine the 
            meaning of good cause for the purpose of this paragraph.
                ``(ii) Voluntary quit.--The Secretary shall determine 
            the meaning of voluntarily quitting and reducing work 
            effort for the purpose of this paragraph.
                ``(iii) Determination by state agency.--

                    ``(I) In general.--Subject to subclause (II) and 
                clauses (i) and (ii), a State agency shall determine--

                        ``(aa) the meaning of any term in subparagraph 
                    (A);
                        ``(bb) the procedures for determining whether 
                    an individual is in compliance with a requirement 
                    under subparagraph (A); and
                        ``(cc) whether an individual is in compliance 
                    with a requirement under subparagraph (A).

                    ``(II) Not less restrictive.--A State agency may 
                not determine a meaning, procedure, or determination 
                under subclause (I) to be less restrictive than a 
                comparable meaning, procedure, or determination under a 
                State program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.).

                ``(iv) Strike against the government.--For the purpose 
            of subparagraph (A)(v), an employee of the Federal 
            Government, a State, or a political subdivision of a State, 
            who is dismissed for participating in a strike against the 
            Federal Government, the State, or the political subdivision 
            of the State shall be considered to have voluntarily quit 
            without good cause.
                ``(v) Selecting a head of household.--

                    ``(I) In general.--For the purpose of this 
                paragraph, the State agency shall allow the household 
                to select any adult parent of a child in the household 
                as the head of the household if all adult household 
                members making application under the food stamp program 
                agree to the selection.
                    ``(II) Time for making designation.--A household 
                may designate the head of the household under subclause 
                (I) each time the household is certified for 
                participation in the food stamp program, but may not 
                change the designation during a certification period 
                unless there is a change in the composition of the 
                household.

                ``(vi) Change in head of household.--If the head of a 
            household leaves the household during a period in which the 
            household is ineligible to participate in the food stamp 
            program under subparagraph (B)--

                    ``(I) the household shall, if otherwise eligible, 
                become eligible to participate in the food stamp 
                program; and
                    ``(II) if the head of the household becomes the 
                head of another household, the household that becomes 
                headed by the individual shall become ineligible to 
                participate in the food stamp program for the remaining 
                period of ineligibility.''.

    (b) Conforming Amendment.--
        (1) The second sentence of section 17(b)(2) of the Act (7 
    U.S.C. 2026(b)(2)) is amended by striking ``6(d)(1)(i)'' and 
    inserting ``6(d)(1)(A)(i)''.
        (2) Section 20 of the Act (7 U.S.C. 2029) is amended by 
    striking subsection (f) and inserting the following:
    ``(f) Disqualification.--An individual or a household may become 
ineligible under section 6(d)(1) to participate in the food stamp 
program for failing to comply with this section.''.

SEC. 13026. CARETAKER EXEMPTION.

    Section 6(d)(2) of the Food Stamp Act of 1977 (7 U.S.C. 2015(d)(2)) 
is amended by striking subparagraph (B) and inserting the following: 
``(B) a parent or other member of a household with responsibility for 
the care of (i) a dependent child under the age of 6 or any lower age 
designated by the State agency that is not under the age of 1, or (ii) 
an incapacitated person;''.

SEC. 13027. EMPLOYMENT AND TRAINING.

    (a) In General.--Section 6(d)(4) of the Food Stamp Act of 1977 (7 
U.S.C. 2015(d)(4)) is amended--
        (1) in subparagraph (A)--
            (A) by striking ``Not later than April 1, 1987, each'' and 
        inserting ``Each'';
            (B) by inserting ``work,'' after ``skills, training,''; and
            (C) by adding at the end the following: ``Each component of 
        an employment and training program carried out under this 
        paragraph shall be delivered through a statewide workforce 
        development system, unless the component is not available 
        locally through the statewide workforce development system.'';
        (2) in subparagraph (B)--
            (A) in the matter preceding clause (i), by striking the 
        colon at the end and inserting the following: ``, except that 
        the State agency shall retain the option to apply employment 
        requirements prescribed under this subparagraph to a program 
        applicant at the time of application:'';
            (B) in clause (i), by striking ``with terms and 
        conditions'' and all that follows through ``time of 
        application''; and
            (C) in clause (iv)--
                (i) by striking subclauses (I) and (II); and
                (ii) by redesignating subclauses (III) and (IV) as 
            subclauses (I) and (II), respectively;
        (3) in subparagraph (D)--
            (A) in clause (i), by striking ``to which the application'' 
        and all that follows through ``30 days or less'';
            (B) in clause (ii), by striking ``but with respect'' and 
        all that follows through ``child care''; and
            (C) in clause (iii), by striking ``, on the basis of'' and 
        all that follows through ``clause (ii)'' and inserting ``the 
        exemption continues to be valid'';
        (4) in subparagraph (E), by striking the third sentence;
        (5) in subparagraph (G)--
            (A) by striking ``(G)(i) The State'' and inserting ``(G) 
        The State''; and
            (B) by striking clause (ii);
        (6) in subparagraph (H), by striking ``(H)(i) The Secretary'' 
    and all that follows through ``(ii) Federal funds'' and inserting 
    ``(H) Federal funds'';
        (7) in subparagraph (I)(i)(II), by striking ``, or was in 
    operation,'' and all that follows through ``Social Security Act'' 
    and inserting the following: ``), except that no such payment or 
    reimbursement shall exceed the applicable local market rate'';
        (8)(A) by striking subparagraphs (K) and (L) and inserting the 
    following:
            ``(K) Limitation on funding.--Notwithstanding any other 
        provision of this paragraph, the amount of funds a State agency 
        uses to carry out this paragraph (including under subparagraph 
        (I)) for participants who are receiving benefits under a State 
        program funded under part A of title IV of the Social Security 
        Act (42 U.S.C. 601 et seq.) shall not exceed the amount of 
        funds the State agency used in fiscal year 1995 to carry out 
        this paragraph for participants who were receiving benefits in 
        fiscal year 1995 under a State program funded under part A of 
        title IV of the Act (42 U.S.C. 601 et seq.).''; and
        (B) by redesignating subparagraphs (M) and (N) as subparagraphs 
    (L) and (M), respectively; and
        (9) in subparagraph (L), as redesignated by paragraph (8)(B)--
            (A) by striking ``(L)(i) The Secretary'' and inserting 
        ``(L) The Secretary''; and
            (B) by striking clause (ii).
    (b) Funding.--Section 16(h) of the Act (7 U.S.C. 2025(h)) is 
amended by striking ``(h)(1)(A) The Secretary'' and all that follows 
through the end of paragraph (1) and inserting the following:
    ``(h) Funding of Employment and Training Programs.--
        ``(1) In general.--
            ``(A) Amounts.--To carry out employment and training 
        programs, the Secretary shall reserve for allocation to State 
        agencies from funds made available for each fiscal year under 
        section 18(a)(1) the amount of--
                ``(i) for fiscal year 1996, $77,000,000;
                ``(ii) for fiscal year 1997, $80,000,000;
                ``(iii) for fiscal year 1998, $83,000,000;
                ``(iv) for fiscal year 1999, $86,000,000;
                ``(v) for fiscal year 2000, $89,000,000;
                ``(vi) for fiscal year 2001, $92,000,000; and
                ``(vii) for fiscal year 2002, $95,000,000.
            ``(B) Allocation.--The Secretary shall allocate the amounts 
        reserved under subparagraph (A) among the State agencies using 
        a reasonable formula (as determined by the Secretary) that 
        gives consideration to the population in each State affected by 
        section 6(o).
            ``(C) Reallocation.--
                ``(i) Notification.--A State agency shall promptly 
            notify the Secretary if the State agency determines that 
            the State agency will not expend all of the funds allocated 
            to the State agency under subparagraph (B).
                ``(ii) Reallocation.--On notification under clause (i), 
            the Secretary shall reallocate the funds that the State 
            agency will not expend as the Secretary considers 
            appropriate and equitable.
            ``(D) Minimum allocation.--Notwithstanding subparagraphs 
        (A) through (C), the Secretary shall ensure that each State 
        agency operating an employment and training program shall 
        receive not less than $50,000 in each fiscal year.''.
    (c) Additional Matching Funds.--Section 16(h)(2) of the Act (7 
U.S.C. 2025(h)(2)) is amended by inserting before the period at the end 
the following: ``, including the costs for case management and casework 
to facilitate the transition from economic dependency to self-
sufficiency through work''.
    (d) Reports.--Section 16(h) of the Act (7 U.S.C. 2025(h)) is 
amended--
        (1) in paragraph (5)--
            (A) by striking ``(5)(A) The Secretary'' and inserting 
        ``(5) The Secretary''; and
            (B) by striking subparagraph (B); and
        (2) by striking paragraph (6).

SEC. 13028. COMPARABLE TREATMENT FOR DISQUALIFICATION.

    (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 
2015) is amended--
        (1) by redesignating subsection (i), as added by section 12104, 
    as subsection (p); and
        (2) by inserting after subsection (h) the following:
    ``(i) Comparable Treatment for Disqualification.--
        ``(1) In general.--If a disqualification is imposed on a member 
    of a household for a failure of the member to perform an action 
    required under a Federal, State, or local law relating to a means-
    tested public assistance program, the State agency may impose the 
    same disqualification on the member of the household under the food 
    stamp program.
        ``(2) Rules and procedures.--If a disqualification is imposed 
    under paragraph (1) for a failure of an individual to perform an 
    action required under part A of title IV of the Social Security Act 
    (42 U.S.C. 601 et seq.), the State agency may use the rules and 
    procedures that apply under part A of title IV of the Act to impose 
    the same disqualification under the food stamp program.
        ``(3) Application after disqualification period.--A member of a 
    household disqualified under paragraph (1) may, after the 
    disqualification period has expired, apply for benefits under this 
    Act and shall be treated as a new applicant, except that a prior 
    disqualification under subsection (d) shall be considered in 
    determining eligibility.''.
    (b) State Plan Provisions.--Section 11(e) of the Act (7 U.S.C. 
2020(e)) is amended--
        (1) in paragraph (24), by striking ``and'' at the end;
        (2) in paragraph (25), by striking the period at the end and 
    inserting a semicolon; and
        (3) by adding at the end the following:
        ``(26) the guidelines the State agency uses in carrying out 
    section 6(i); and''.
    (c) Conforming Amendment.--Section 6(d)(2)(A) of the Act (7 U.S.C. 
2015(d)(2)(A)) is amended by striking ``that is comparable to a 
requirement of paragraph (1)''.

SEC. 13029. DISQUALIFICATION FOR RECEIPT OF MULTIPLE FOOD STAMP 
              BENEFITS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as amended 
by section 13028, is further amended by inserting after subsection (i) 
the following:
    ``(j) Disqualification for Receipt of Multiple Food Stamp 
Benefits.--An individual shall be ineligible to participate in the food 
stamp program as a member of any household for a 10-year period if the 
individual is found by a State agency to have made, or is convicted in 
a Federal or State court of having made, a fraudulent statement or 
representation with respect to the identity or place of residence of 
the individual in order to receive multiple benefits simultaneously 
under the food stamp program.''.

SEC. 13030. DISQUALIFICATION OF FLEEING FELONS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as amended 
by section 13029, is further amended by inserting after subsection (j) 
the following:
    ``(k) Disqualification of Fleeing Felons.--No member of a household 
who is otherwise eligible to participate in the food stamp program 
shall be eligible to participate in the program as a member of that or 
any other household during any period during which the individual is--
        ``(1) fleeing to avoid prosecution, or custody or confinement 
    after conviction, under the law of the place from which the 
    individual is fleeing, for a crime, or attempt to commit a crime, 
    that is a felony under the law of the place from which the 
    individual is fleeing or that, in the case of New Jersey, is a high 
    misdemeanor under the law of New Jersey; or
        ``(2) violating a condition of probation or parole imposed 
    under a Federal or State law.''.

SEC. 13031. COOPERATION WITH CHILD SUPPORT AGENCIES.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as amended 
by section 13030, is further amended by inserting after subsection (k) 
the following:
    ``(l) Custodial Parent's Cooperation With Child Support Agencies.--
        ``(1) In general.--At the option of a State agency, subject to 
    paragraphs (2) and (3), no natural or adoptive parent or other 
    individual (collectively referred to in this subsection as `the 
    individual') who is living with and exercising parental control 
    over a child under the age of 18 who has an absent parent shall be 
    eligible to participate in the food stamp program unless the 
    individual cooperates with the State agency administering the 
    program established under part D of title IV of the Social Security 
    Act (42 U.S.C. 651 et seq.)--
            ``(A) in establishing the paternity of the child (if the 
        child is born out of wedlock); and
            ``(B) in obtaining support for--
                ``(i) the child; or
                ``(ii) the individual and the child.
        ``(2) Good cause for noncooperation.--Paragraph (1) shall not 
    apply to the individual if good cause is found for refusing to 
    cooperate, as determined by the State agency in accordance with 
    standards prescribed by the Secretary in consultation with the 
    Secretary of Health and Human Services. The standards shall take 
    into consideration circumstances under which cooperation may be 
    against the best interests of the child.
        ``(3) Fees.--Paragraph (1) shall not require the payment of a 
    fee or other cost for services provided under part D of title IV of 
    the Social Security Act (42 U.S.C. 651 et seq.).
    ``(m) Non-Custodial Parent's Cooperation With Child Support 
Agencies.--
        ``(1) In general.--At the option of a State agency, subject to 
    paragraphs (2) and (3), a putative or identified non-custodial 
    parent of a child under the age of 18 (referred to in this 
    subsection as `the individual') shall not be eligible to 
    participate in the food stamp program if the individual refuses to 
    cooperate with the State agency administering the program 
    established under part D of title IV of the Social Security Act (42 
    U.S.C. 651 et seq.)--
            ``(A) in establishing the paternity of the child (if the 
        child is born out of wedlock); and
            ``(B) in providing support for the child.
        ``(2) Refusal to cooperate.--
            ``(A) Guidelines.--The Secretary, in consultation with the 
        Secretary of Health and Human Services, shall develop 
        guidelines on what constitutes a refusal to cooperate under 
        paragraph (1).
            ``(B) Procedures.--The State agency shall develop 
        procedures, using guidelines developed under subparagraph (A), 
        for determining whether an individual is refusing to cooperate 
        under paragraph (1).
        ``(3) Fees.--Paragraph (1) shall not require the payment of a 
    fee or other cost for services provided under part D of title IV of 
    the Social Security Act (42 U.S.C. 651 et seq.).
        ``(4) Privacy.--The State agency shall provide safeguards to 
    restrict the use of information collected by a State agency 
    administering the program established under part D of title IV of 
    the Social Security Act (42 U.S.C. 651 et seq.) to purposes for 
    which the information is collected.''.

SEC. 13032. DISQUALIFICATION RELATING TO CHILD SUPPORT ARREARS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as amended 
by section 13031, is further amended by inserting after subsection (m) 
the following:
    ``(n) Disqualification for Child Support Arrears.--
        ``(1) In general.--No individual shall be eligible to 
    participate in the food stamp program as a member of any household 
    during any month that the individual is delinquent in any payment 
    due under a court order for the support of a child of the 
    individual.
        ``(2) Exceptions.--Paragraph (1) shall not apply if--
            ``(A) a court is allowing the individual to delay payment; 
        or
            ``(B) the individual is complying with a payment plan 
        approved by a court or the State agency designated under part D 
        of title IV of the Social Security Act (42 U.S.C. 651 et seq.) 
        to provide support for the child of the individual.''.

SEC. 13033. WORK REQUIREMENT.

    (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 
2015), as amended by section 13032, is further amended by inserting 
after subsection (n) the following:
    ``(o) Work Requirement.--
        ``(1) Definition of work program.--In this subsection, the term 
    `work program' means--
            ``(A) a program under the Job Training Partnership Act (29 
        U.S.C. 1501 et seq.);
            ``(B) a program under section 236 of the Trade Act of 1974 
        (19 U.S.C. 2296); or
            ``(C) a program of employment or training operated or 
        supervised by a State or political subdivision of a State that 
        meets standards approved by the Governor of the State, 
        including a program under section 6(d)(4), other than a job 
        search program or a job search training program.
        ``(2) Work requirement.--Subject to the other provisions of 
    this subsection, no individual shall be eligible to participate in 
    the food stamp program as a member of any household if, during the 
    preceding 12-month period, the individual received food stamp 
    benefits for not less than 4 months during which the individual did 
    not--
            ``(A) work 20 hours or more per week, averaged monthly; or
            ``(B) participate in and comply with the requirements of a 
        work program for 20 hours or more per week, as determined by 
        the State agency; or
            ``(C) participate in a program under section 20 or a 
        comparable program established by a State or political 
        subdivision of a State.
        ``(3) Exception.--Paragraph (2) shall not apply to an 
    individual if the individual is--
            ``(A) under 18 or over 50 years of age;
            ``(B) medically certified as physically or mentally unfit 
        for employment;
            ``(C) a parent or other member of a household with 
        responsibility for a dependent child;
            ``(D) otherwise exempt under section 6(d)(2); or
            ``(E) a pregnant woman.
        ``(4) Waiver.--
            ``(A) In general.--On the request of a State agency, the 
        Secretary may waive the applicability of paragraph (2) to any 
        group of individuals in the State if the Secretary makes a 
        determination that the area in which the individuals reside--
                ``(i) has an unemployment rate of over 10 percent; or
                ``(ii) does not have a sufficient number of jobs to 
            provide employment for the individuals.
            ``(B) Report.--The Secretary shall report the basis for a 
        waiver under subparagraph (A) to the Committee on Agriculture 
        of the House of Representatives and the Committee on 
        Agriculture, Nutrition, and Forestry of the Senate.
        ``(5) Subsequent eligibility.--
            ``(A) In general.--Paragraph (2) shall cease to apply to an 
        individual if, during a 30-day period, the individual--
                ``(i) works 80 or more hours;
                ``(ii) participates in and complies with the 
            requirements of a work program for 80 or more hours, as 
            determined by a State agency; or
                ``(iii) participates in a program under section 20 or a 
            comparable program established by a State or political 
            subdivision of a State.
            ``(B) Limitation.--During the subsequent 12-month period, 
        the individual shall be eligible to participate in the food 
        stamp program for not more than 4 months during which the 
        individual does not--
                ``(i) work 20 hours or more per week, averaged monthly;
                ``(ii) participate in and comply with the requirements 
            of a work program for 20 hours or more per week, as 
            determined by the State agency; or
                ``(iii) participate in a program under section 20 or a 
            comparable program established by a State or political 
            subdivision of a State.''.
    (b) Transition Provision.--Prior to 1 year after the date of 
enactment of this Act, the term ``preceding 12-month period'' in 
section 6(o) of the Food Stamp Act of 1977, as amended by subsection 
(a), means the preceding period that begins on the date of enactment of 
this Act.

SEC. 13034. ENCOURAGE ELECTRONIC BENEFIT TRANSFER SYSTEMS.

    Section 7(i) of the Food Stamp Act of 1977 (7 U.S.C. 2016(i)) is 
amended--
        (1) by striking paragraph (1) and inserting the following:
        ``(1) Electronic Benefit Transfers.--
            ``(A) Implementation.--Each State agency shall implement an 
        electronic benefit transfer system in which household benefits 
        determined under section 8(a) or 24 are issued from and stored 
        in a central databank before October 1, 2002, unless the 
        Secretary provides a waiver for a State agency that faces 
        unusual barriers to implementing an electronic benefit transfer 
        system.
            ``(B) Timely implementation.--State agencies are encouraged 
        to implement an electronic benefit transfer system under 
        subparagraph (A) as soon as practicable.
            ``(C) State flexibility.--Subject to paragraph (2), a State 
        agency may procure and implement an electronic benefit transfer 
        system under the terms, conditions, and design that the State 
        agency considers appropriate.
            ``(D) Operation.--An electronic benefit transfer system 
        should take into account generally accepted standard operating 
        rules based on--
                ``(i) commercial electronic funds transfer technology;
                ``(ii) the need to permit interstate operation and law 
            enforcement monitoring; and
                ``(iii) the need to permit monitoring and 
            investigations by authorized law enforcement agencies.'';
        (2) in paragraph (2)--
            (A) by striking ``effective no later than April 1, 1992,'';
            (B) in subparagraph (A)--
                (i) by striking ``, in any 1 year,''; and
                (ii) by striking ``on-line'';
            (C) by striking subparagraph (D) and inserting the 
        following:
            ``(D)(i) measures to maximize the security of a system 
        using the most recent technology available that the State 
        agency considers appropriate and cost effective and which may 
        include personal identification numbers, photographic 
        identification on electronic benefit transfer cards, and other 
        measures to protect against fraud and abuse; and
            ``(ii) effective not later than 2 years after the effective 
        date of this clause, to the extent practicable, measures that 
        permit a system to differentiate items of food that may be 
        acquired with an allotment from items of food that may not be 
        acquired with an allotment.'';
            (D) in subparagraph (G), by striking ``and'' at the end;
            (E) in subparagraph (H), by striking the period at the end 
        and inserting ``; and''; and
            (F) by adding at the end the following:
            ``(I) procurement standards.''; and
        (3) by adding at the end the following:
        ``(7) Replacement of benefits.--Regulations issued by the 
    Secretary regarding the replacement of benefits and liability for 
    replacement of benefits under an electronic benefit transfer system 
    shall be similar to the regulations in effect for a paper food 
    stamp issuance system.
        ``(8) Replacement card fee.--A State agency may collect a 
    charge for replacement of an electronic benefit transfer card by 
    reducing the monthly allotment of the household receiving the 
    replacement card.
        ``(9) Optional photographic identification.--
            ``(A) In general.--A State agency may require that an 
        electronic benefit card contain a photograph of 1 or more 
        members of a household.
            ``(B) Other authorized users.--If a State agency requires a 
        photograph on an electronic benefit card under subparagraph 
        (A), the State agency shall establish procedures to ensure that 
        any other appropriate member of the household or any authorized 
        representative of the household may utilize the card.''.

SEC. 13035. VALUE OF MINIMUM ALLOTMENT.

    The proviso in section 8(a) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(a)) is amended by striking ``, and shall be adjusted'' and all 
that follows through ``$5''.

SEC. 13036. BENEFITS ON RECERTIFICATION.

    Section 8(c)(2)(B) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(c)(2)(B)) is amended by striking ``of more than one month''.

SEC. 13037. OPTIONAL COMBINED ALLOTMENT FOR EXPEDITED HOUSEHOLDS.

    Section 8(c) of the Food Stamp Act of 1977 (7 U.S.C. 2017(c)) is 
amended by striking paragraph (3) and inserting the following:
        ``(3) Optional combined allotment for expedited households.--A 
    State agency may provide to an eligible household applying after 
    the 15th day of a month, in lieu of the initial allotment of the 
    household and the regular allotment of the household for the 
    following month, an allotment that is equal to the total amount of 
    the initial allotment and the first regular allotment. The 
    allotment shall be provided in accordance with section 11(e)(3) in 
    the case of a household that is not entitled to expedited service 
    and in accordance with paragraphs (3) and (9) of section 11(e) in 
    the case of a household that is entitled to expedited service.''.

SEC. 13038. FAILURE TO COMPLY WITH OTHER MEANS-TESTED PUBLIC ASSISTANCE 
              PROGRAMS.

    Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 2017) is amended 
by striking subsection (d) and inserting the following:
    ``(d) Reduction of Public Assistance Benefits.--
        ``(1) In general.--If the benefits of a household are reduced 
    under a Federal, State, or local law relating to a means-tested 
    public assistance program for the failure of a member of the 
    household to perform an action required under the law or program, 
    for the duration of the reduction--
            ``(A) the household may not receive an increased allotment 
        as the result of a decrease in the income of the household to 
        the extent that the decrease is the result of the reduction; 
        and
            ``(B) the State agency may reduce the allotment of the 
        household by not more than 25 percent.
        ``(2) Rules and procedures.--If the allotment of a household is 
    reduced under this subsection for a failure to perform an action 
    required under part A of title IV of the Social Security Act (42 
    U.S.C. 601 et seq.), the State agency may use the rules and 
    procedures that apply under part A of title IV of the Act to reduce 
    the allotment under the food stamp program.''.

SEC. 13039. ALLOTMENTS FOR HOUSEHOLDS RESIDING IN CENTERS.

    Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 2017) is amended 
by adding at the end the following:
    ``(f) Allotments for Households Residing in Centers.--
        ``(1) In general.--In the case of an individual who resides in 
    a center for the purpose of a drug or alcoholic treatment program 
    described in the last sentence of section 3(i), a State agency may 
    provide an allotment for the individual to--
            ``(A) the center as an authorized representative of the 
        individual for a period that is less than 1 month; and
            ``(B) the individual, if the individual leaves the center.
        ``(2) Direct payment.--A State agency may require an individual 
    referred to in paragraph (1) to designate the center in which the 
    individual resides as the authorized representative of the 
    individual for the purpose of receiving an allotment.''.

SEC. 13040. CONDITION PRECEDENT FOR APPROVAL OF RETAIL FOOD STORES AND 
              WHOLESALE FOOD CONCERNS.

    Section 9(a)(1) of the Food Stamp Act of 1977 (7 U.S.C. 2018(a)(1)) 
is amended by adding at the end the following: ``No retail food store 
or wholesale food concern of a type determined by the Secretary, based 
on factors that include size, location, and type of items sold, shall 
be approved to be authorized or reauthorized for participation in the 
food stamp program unless an authorized employee of the Department of 
Agriculture, a designee of the Secretary, or, if practicable, an 
official of the State or local government designated by the Secretary 
has visited the store or concern for the purpose of determining whether 
the store or concern should be approved or reauthorized, as 
appropriate.''.

SEC. 13041. AUTHORITY TO ESTABLISH AUTHORIZATION PERIODS.

    Section 9(a) of the Food Stamp Act of 1977 (7 U.S.C. 2018(a)) is 
amended by adding at the end the following:
        ``(3) Authorization periods.--The Secretary shall establish 
    specific time periods during which authorization to accept and 
    redeem coupons, or to redeem benefits through an electronic benefit 
    transfer system, shall be valid under the food stamp program.''.

SEC. 13042. INFORMATION FOR VERIFYING ELIGIBILITY FOR AUTHORIZATION.

    Section 9(c) of the Food Stamp Act of 1977 (7 U.S.C. 2018(c)) is 
amended--
        (1) in the first sentence, by inserting ``, which may include 
    relevant income and sales tax filing documents,'' after ``submit 
    information''; and
        (2) by inserting after the first sentence the following: ``The 
    regulations may require retail food stores and wholesale food 
    concerns to provide written authorization for the Secretary to 
    verify all relevant tax filings with appropriate agencies and to 
    obtain corroborating documentation from other sources so that the 
    accuracy of information provided by the stores and concerns may be 
    verified.''.

SEC. 13043. WAITING PERIOD FOR STORES THAT FAIL TO MEET AUTHORIZATION 
              CRITERIA.

    Section 9(d) of the Food Stamp Act of 1977 (7 U.S.C. 2018(d)) is 
amended by adding at the end the following: ``A retail food store or 
wholesale food concern that is denied approval to accept and redeem 
coupons because the store or concern does not meet criteria for 
approval established by the Secretary may not, for at least 6 months, 
submit a new application to participate in the program. The Secretary 
may establish a longer time period under the preceding sentence, 
including permanent disqualification, that reflects the severity of the 
basis of the denial.''.

SEC. 13044. EXPEDITED COUPON SERVICE.

    Section 11(e)(9) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(9)) is amended--
        (1) in subparagraph (A)--
            (A) by striking ``five days'' and inserting ``7 days''; and
            (B) by inserting ``and'' at the end;
        (2) by striking subparagraphs (B) and (C);
        (3) by redesignating subparagraph (D) as subparagraph (B); and
        (4) in subparagraph (B), as redesignated by paragraph (3), by 
    striking ``, (B), or (C)''.

SEC. 13045. WITHDRAWING FAIR HEARING REQUESTS.

    Section 11(e)(10) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(10)) is amended by inserting before the semicolon at the end a 
period and the following: ``At the option of a State, at any time prior 
to a fair hearing determination under this paragraph, a household may 
withdraw, orally or in writing, a request by the household for the fair 
hearing. If the withdrawal request is an oral request, the State agency 
shall provide a written notice to the household confirming the 
withdrawal request and providing the household with an opportunity to 
request a hearing''.

SEC. 13046. DISQUALIFICATION OF RETAILERS WHO INTENTIONALLY SUBMIT 
              FALSIFIED APPLICATIONS.

    Section 12(b) of the Food Stamp Act of 1977 (7 U.S.C. 2021(b)) is 
amended--
        (1) in paragraph (2), by striking ``and'' at the end;
        (2) in paragraph (3), by striking the period at the end and 
    inserting ``; and''; and
        (3) by adding at the end the following:
        ``(4) for a reasonable period of time to be determined by the 
    Secretary, including permanent disqualification, on the knowing 
    submission of an application for the approval or reauthorization to 
    accept and redeem coupons that contains false information about a 
    substantive matter that was a part of the application.''.

SEC. 13047. DISQUALIFICATION OF RETAILERS WHO ARE DISQUALIFIED UNDER 
              THE WIC PROGRAM.

    Section 12 of the Food Stamp Act of 1977 (7 U.S.C. 2021) is amended 
by adding at the end the following:
    ``(g) Disqualification of Retailers Who Are Disqualified Under the 
WIC Program.--
        ``(1) In general.--The Secretary shall issue regulations 
    providing criteria for the disqualification under this Act of an 
    approved retail food store and a wholesale food concern that is 
    disqualified from accepting benefits under the special supplemental 
    nutrition program for women, infants, and children established 
    under section 17 of the Child Nutrition Act of 1966 (7 U.S.C. 
    1786).
        ``(2) Terms.--A disqualification under paragraph (1)--
            ``(A) shall be for the same length of time as the 
        disqualification from the program referred to in paragraph (1);
            ``(B) may begin at a later date than the disqualification 
        from the program referred to in paragraph (1); and
            ``(C) notwithstanding section 14, shall not be subject to 
        judicial or administrative review.''.

SEC. 13048. COLLECTION OF OVERISSUANCES.

    (a) Collection of Overissuances.--Section 13 of the Food Stamp Act 
of 1977 (7 U.S.C. 2022) is amended--
        (1) by striking subsection (b) and inserting the following:
    ``(b) Collection of Overissuances.--
        ``(1) In general.--Except as otherwise provided in this 
    subsection, a State agency shall collect any overissuance of 
    coupons issued to a household by--
            ``(A) reducing the allotment of the household;
            ``(B) withholding amounts from unemployment compensation 
        from a member of the household under subsection (c);
            ``(C) recovering from Federal pay or a Federal income tax 
        refund under subsection (d); or
            ``(D) any other means.
        ``(2) Cost effectiveness.--Paragraph (1) shall not apply if the 
    State agency demonstrates to the satisfaction of the Secretary that 
    all of the means referred to in paragraph (1) are not cost 
    effective.
        ``(3) Maximum reduction absent fraud.--If a household received 
    an overissuance of coupons without any member of the household 
    being found eligible to participate in the program under section 
    6(b)(1) and a State agency elects to reduce the allotment of the 
    household under paragraph (1)(A), the State agency shall not reduce 
    the monthly allotment of the household under paragraph (1)(A) by an 
    amount in excess of the greater of--
            ``(A) 10 percent of the monthly allotment of the household; 
        or
            ``(B) $10.
        ``(4) Procedures.--A State agency shall collect an overissuance 
    of coupons issued to a household under paragraph (1) in accordance 
    with the requirements established by the State agency for providing 
    notice, electing a means of payment, and establishing a time 
    schedule for payment.''; and
        (2) in subsection (d)--
            (A) by striking ``as determined under subsection (b) and 
        except for claims arising from an error of the State agency,'' 
        and inserting ``, as determined under subsection (b)(1),''; and
            (B) by inserting before the period at the end the 
        following: ``or a Federal income tax refund as authorized by 
        section 3720A of title 31, United States Code''.
    (b) Conforming Amendments.--Section 11(e)(8) of the Act (7 U.S.C. 
2020(e)(8)) is amended--
        (1) by striking ``and excluding claims'' and all that follows 
    through ``such section''; and
        (2) by inserting before the semicolon at the end the following: 
    ``or a Federal income tax refund as authorized by section 3720A of 
    title 31, United States Code''.
    (c) Retention Rate.--Section 16(a) of the Act (7 U.S.C. 2025(a)) is 
amended by striking ``25 percent during the period beginning October 1, 
1990'' and all that follows through ``error of a State agency'' and 
inserting the following: ``25 percent of the overissuances collected by 
the State agency under section 13, except those overissuances arising 
from an error of the State agency''.

SEC. 13049. AUTHORITY TO SUSPEND STORES VIOLATING PROGRAM REQUIREMENTS 
              PENDING ADMINISTRATIVE AND JUDICIAL REVIEW.

    Section 14(a) of the Food Stamp Act of 1977 (7 U.S.C. 2023(a)) is 
amended--
        (1) by redesignating the first through seventeenth sentences as 
    paragraphs (1) through (17), respectively; and
        (2) by adding at the end the following:
        ``(18) Suspension of stores pending review.--Notwithstanding 
    any other provision of this subsection, any permanent 
    disqualification of a retail food store or wholesale food concern 
    under paragraph (3) or (4) of section 12(b) shall be effective from 
    the date of receipt of the notice of disqualification. If the 
    disqualification is reversed through administrative or judicial 
    review, the Secretary shall not be liable for the value of any 
    sales lost during the disqualification period.''.

SEC. 13050. LIMITATION OF FEDERAL MATCH.

    Section 16(a)(4) of the Food Stamp Act of 1977 (7 U.S.C. 
2025(a)(4)) is amended by inserting after the comma at the end the 
following: ``but not including recruitment activities,''.

SEC. 13051. WORK SUPPLEMENTATION OR SUPPORT PROGRAM.

    Section 16 of the Food Stamp Act of 1977 (7 U.S.C. 2025) is amended 
by adding at the end the following:
    ``(c) Work Supplementation or Support Program.--
        ``(1) Definition of work supplementation or support program.--
    In this subsection, the term `work supplementation or support 
    program' means a program under which, as determined by the 
    Secretary, public assistance (including any benefits provided under 
    a program established by the State and the food stamp program) is 
    provided to an employer to be used for hiring and employing a 
    public assistance recipient who was not employed by the employer at 
    the time the public assistance recipient entered the program.
        ``(2) Program.--A State agency may elect to use an amount equal 
    to the allotment that would otherwise be issued to a household 
    under the food stamp program, but for the operation of this 
    subsection, for the purpose of subsidizing or supporting a job 
    under a work supplementation or support program established by the 
    State.
        ``(3) Procedure.--If a State agency makes an election under 
    paragraph (2) and identifies each household that participates in 
    the food stamp program that contains an individual who is 
    participating in the work supplementation or support program--
            ``(A) the Secretary shall pay to the State agency an amount 
        equal to the value of the allotment that the household would be 
        eligible to receive but for the operation of this subsection;
            ``(B) the State agency shall expend the amount received 
        under subparagraph (A) in accordance with the work 
        supplementation or support program in lieu of providing the 
        allotment that the household would receive but for the 
        operation of this subsection;
            ``(C) for purposes of--
                ``(i) sections 5 and 8(a), the amount received under 
            this subsection shall be excluded from household income and 
            resources; and
                ``(ii) section 8(b), the amount received under this 
            subsection shall be considered to be the value of an 
            allotment provided to the household; and
            ``(D) the household shall not receive an allotment from the 
        State agency for the period during which the member continues 
        to participate in the work supplementation or support program.
        ``(4) Other work requirements.--No individual shall be excused, 
    by reason of the fact that a State has a work supplementation or 
    support program, from any work requirement under section 6(d), 
    except during the periods in which the individual is employed under 
    the work supplementation or support program.
        ``(5) Length of participation.--A State agency shall provide a 
    description of how the public assistance recipients in the program 
    shall, within a specific period of time, be moved from supplemented 
    or supported employment to employment that is not supplemented or 
    supported.
        ``(6) Displacement.--A work supplementation or support program 
    shall not displace the employment of individuals who are not 
    supplemented or supported.''.

SEC. 13052. AUTHORIZATION OF PILOT PROJECTS.

    The last sentence of section 17(b)(1)(A) of the Food Stamp Act of 
1977 (7 U.S.C. 2026(b)(1)(A)) is amended by striking ``1995'' and 
inserting ``2002''.

SEC. 13053. EMPLOYMENT INITIATIVES PROGRAM.

    Section 17 of the Food Stamp Act of 1977 (7 U.S.C. 2026) is amended 
by striking subsection (d) and inserting the following:
    ``(d) Employment Initiatives Program.--
        ``(1) Election to participate.--
            ``(A) In general.--Subject to the other provisions of this 
        subsection, a State may elect to carry out an employment 
        initiatives program under this subsection.
            ``(B) Requirement.--A State shall be eligible to carry out 
        an employment initiatives program under this subsection only if 
        not less than 50 percent of the households that received food 
        stamp benefits during the summer of 1993 also received benefits 
        under a State program funded under part A of title IV of the 
        Social Security Act (42 U.S.C. 601 et seq.) during the summer 
        of 1993.
        ``(2) Procedure.--
            ``(A) In general.--A State that has elected to carry out an 
        employment initiatives program under paragraph (1) may use 
        amounts equal to the food stamp allotments that would otherwise 
        be issued to a household under the food stamp program, but for 
        the operation of this subsection, to provide cash benefits in 
        lieu of the food stamp allotments to the household if the 
        household is eligible under paragraph (3).
            ``(B) Payment.--The Secretary shall pay to each State that 
        has elected to carry out an employment initiatives program 
        under paragraph (1) an amount equal to the value of the 
        allotment that each household would be eligible to receive 
        under this Act but for the operation of this subsection.
            ``(C) Other provisions.--For purposes of the food stamp 
        program (other than this subsection)--
                ``(i) cash assistance under this subsection shall be 
            considered to be an allotment; and
                ``(ii) each household receiving cash benefits under 
            this subsection shall not receive any other food stamp 
            benefit for the period for which the cash assistance is 
            provided.
            ``(D) Additional payments.--Each State that has elected to 
        carry out an employment initiatives program under paragraph (1) 
        shall--
                ``(i) increase the cash benefits provided to each 
            household under this subsection to compensate for any State 
            or local sales tax that may be collected on purchases of 
            food by any household receiving cash benefits under this 
            subsection, unless the Secretary determines on the basis of 
            information provided by the State that the increase is 
            unnecessary on the basis of the limited nature of the items 
            subject to the State or local sales tax; and
                ``(ii) pay the cost of any increase in cash benefits 
            required by clause (i).
        ``(3) Eligibility.--A household shall be eligible to receive 
    cash benefits under paragraph (2) if an adult member of the 
    household--
            ``(A) has worked in unsubsidized employment for not less 
        than the preceding 90 days;
            ``(B) has earned not less than $350 per month from the 
        employment referred to in subparagraph (A) for not less than 
        the preceding 90 days;
            ``(C)(i) is receiving benefits under a State program funded 
        under part A of title IV of the Social Security Act (42 U.S.C. 
        601 et seq.); or
            ``(ii) was receiving benefits under a State program funded 
        under part A of title IV of the Social Security Act (42 U.S.C. 
        601 et seq.) at the time the member first received cash 
        benefits under this subsection and is no longer eligible for 
        the State program because of earned income;
            ``(D) is continuing to earn not less than $350 per month 
        from the employment referred to in subparagraph (A); and
            ``(E) elects to receive cash benefits in lieu of food stamp 
        benefits under this subsection.
        ``(4) Evaluation.--A State that operates a program under this 
    subsection for 2 years shall provide to the Secretary a written 
    evaluation of the impact of cash assistance under this subsection. 
    The State agency, with the concurrence of the Secretary, shall 
    determine the content of the evaluation.''.

SEC. 13054. REAUTHORIZATION OF PUERTO RICO NUTRITION ASSISTANCE 
              PROGRAM.

    The first sentence of section 19(a)(1)(A) of the Food Stamp Act of 
1977 (7 U.S.C. 2028(a)(1)(A)) is amended by striking ``$974,000,000'' 
and all that follows through ``fiscal year 1995'' and inserting 
``$1,143,000,000 for each of fiscal years 1995 and 1996, $1,182,000,000 
for fiscal year 1997, $1,223,000,000 for fiscal year 1998, 
$1,266,000,000 for fiscal year 1999, $1,310,000,000 for fiscal year 
2000, $1,357,000,000 for fiscal year 2001, and $1,404,000,000 for 
fiscal year 2002''.

SEC. 13055. SIMPLIFIED FOOD STAMP PROGRAM.

    (a) In General.--The Act (7 U.S.C. 2011 et seq.) is amended by 
adding at the end the following:

``SEC. 24. SIMPLIFIED FOOD STAMP PROGRAM.

    ``(a) Definition of Federal Costs.--In this section, the term 
`Federal costs' does not include any Federal costs incurred under 
section 17.
    ``(b) Election.--Subject to subsection (d), a State agency may 
elect to carry out a Simplified Food Stamp Program (referred to in this 
section as a `Program') in accordance with this section.
    ``(c) Operation of Program.--If a State agency elects to carry out 
a Program, within the State or a political subdivision of the State--
        ``(1) a household in which all members receive assistance under 
    a State program funded under part A of title IV of the Social 
    Security Act (42 U.S.C. 601 et seq.) shall automatically be 
    eligible to participate in the Program; and
        ``(2) subject to subsection (f), benefits under the Program 
    shall be determined under rules and procedures established by the 
    State under--
            ``(A) a State program funded under part A of title IV of 
        the Social Security Act (42 U.S.C. 601 et seq.);
            ``(B) the food stamp program (other than section 25); or
            ``(C) a combination of a State program funded under part A 
        of title IV of the Social Security Act (42 U.S.C. 601 et seq.) 
        and the food stamp program (other than section 25).
    ``(d) Approval of Program.--
        ``(1) State plan.--A State agency may not operate a Program 
    unless the Secretary approves a State plan for the operation of the 
    Program under paragraph (2).
        ``(2) Approval of plan.--The Secretary shall approve any State 
    plan to carry out a Program if the Secretary determines that the 
    plan--
            ``(A) complies with this section; and
            ``(B) contains sufficient documentation that the plan will 
        not increase Federal costs for any fiscal year.
    ``(e) Increased Federal Costs.--
        ``(1) Determination.--During each fiscal year and not later 
    than 90 days after the end of each fiscal year, the Secretary shall 
    determine whether a Program being carried out by a State agency is 
    increasing Federal costs under this Act above the Federal costs 
    incurred under the food stamp program in operation in the State or 
    political subdivision of the State for the fiscal year prior to the 
    implementation of the Program, adjusted for any changes in--
            ``(A) participation;
            ``(B) the income of participants in the food stamp program 
        that is not attributable to public assistance; and
            ``(C) the thrifty food plan under section 3(o).
        ``(2) Notification.--If the Secretary determines that the 
    Program has increased Federal costs under this Act for any fiscal 
    year or any portion of any fiscal year, the Secretary shall notify 
    the State agency not later than 30 days after the Secretary makes 
    the determination under paragraph (1).
        ``(3) Enforcement.--
            ``(A) Corrective action.--Not later than 90 days after the 
        date of a notification under paragraph (2), the State agency 
        shall submit a plan for approval by the Secretary for prompt 
        corrective action that is designed to prevent the Program from 
        increasing Federal costs under this Act.
            ``(B) Termination.--If the State agency does not submit a 
        plan under subparagraph (A) or carry out a plan approved by the 
        Secretary, the Secretary shall terminate the approval of the 
        State agency to operate a Program and the State agency shall be 
        ineligible to operate a future Program.
    ``(f) Rules and Procedures.--
        ``(1) In general.--In operating a Program, a State or political 
    subdivision of a State may follow the rules and procedures 
    established by the State or political subdivision under a State 
    program funded under part A of title IV of the Social Security Act 
    (42 U.S.C. 601 et seq.) or under the food stamp program.
        ``(2) Standardized deductions.--In operating a Program, a State 
    may standardize the deductions provided under section 5(e). In 
    developing the standardized deduction, the State shall consider the 
    work expenses, dependent care costs, and shelter costs of 
    participating households.
        ``(3) Requirements.--In operating a Program, a State or 
    political subdivision shall comply with the requirements of--
            ``(A) subsections (a) through (g) of section 7;
            ``(B) section 8(a) (except that the income of a household 
        may be determined under a State program funded under part A of 
        title IV of the Social Security Act (42 U.S.C. 601 et seq.));
            ``(C) subsection (b) and (d) of section 8;
            ``(D) subsections (a), (c), (d), and (n) of section 11;
            ``(E) paragraphs (8), (12), (17), (19), (21), (26), and 
        (27) of section 11(e);
            ``(F) section 11(e)(10) (or a comparable requirement 
        established by the State under a State program funded under 
        part A of title IV of the Social Security Act (42 U.S.C. 601 et 
        seq.)); and
            ``(G) section 16.
        ``(4) Limitation on eligibility.--Notwithstanding any other 
    provision of this section, a household may not receive benefits 
    under this section as a result of the eligibility of the household 
    under a State program funded under part A of title IV of the Social 
    Security Act (42 U.S.C. 601 et seq.), unless the Secretary 
    determines that any household with income above 130 percent of the 
    poverty guidelines is not eligible for the program.''.
    (b) State Plan Provisions.--Section 11(e) of the Act (7 U.S.C. 
2020(e)), as amended by section 13028(b), is further amended by adding 
at the end the following:
        ``(27) if a State agency elects to carry out a Simplified Food 
    Stamp Program under section 24, the plans of the State agency for 
    operating the program, including--
            ``(A) the rules and procedures to be followed by the State 
        to determine food stamp benefits;
            ``(B) how the State will address the needs of households 
        that experience high shelter costs in relation to the incomes 
        of the households; and
            ``(C) a description of the method by which the State will 
        carry out a quality control system under section 16(c).''.
    (c) Conforming Amendments.--
        (1) Section 8 of the Act (7 U.S.C. 2017), as amended by section 
    13039, is further amended--
            (A) by striking subsection (e); and
            (B) by redesignating subsection (f) as subsection (e).
        (2) Section 17 of the Act (7 U.S.C. 2026) is amended--
            (A) by striking subsection (i); and
            (B) by redesignating subsections (j) through (l) as 
        subsections (i) through (k), respectively.

SEC. 13056. STATE FOOD ASSISTANCE BLOCK GRANT.

    (a) In General.--The Food Stamp Act of 1977 (7 U.S.C. 2011 et 
seq.), as amended by section 13055, is further amended by adding at the 
end the following:

``SEC. 25. STATE FOOD ASSISTANCE BLOCK GRANT.

    ``(a) Definitions.--In this section:
        ``(1) Food assistance.--The term `food assistance' means 
    assistance that may be used only to obtain food, as defined in 
    section 3(g).
        ``(2) State.--The term `State' means each of the 50 States, the 
    District of Columbia, Guam, and the Virgin Islands of the United 
    States.
    ``(b) Establishment.--The Secretary shall establish a program to 
make grants to States in accordance with this section to provide--
        ``(1) food assistance to needy individuals and families 
    residing in the State; and
        ``(2) funds for administrative costs incurred in providing the 
    assistance.
    ``(c) Election.--
        ``(1) In general.--A State may annually elect to participate in 
    the program established under subsection (b) if the State--
            ``(A) has fully implemented an electronic benefit transfer 
        system that operates in the entire State;
            ``(B) has a payment error rate under section 16(c) that is 
        not more than 6 percent as announced most recently by the 
        Secretary; or
            ``(C) has a payment error rate in excess of 6 percent and 
        agrees to contribute non-Federal funds for the fiscal year of 
        the grant, for benefits and administration of the State's food 
        assistance program, the amount determined under paragraph (2).
        ``(2) State mandatory contributions.--
            ``(A) In general.--In the case of a State that elects to 
        participate in the program under paragraph (1)(C), the State 
        shall agree to contribute, for a fiscal year, an amount equal 
        to--
            ``(A)(i) the benefits issued in the State; multiplied by
            ``(ii) the payment error rate of the State; minus
            ``(B)(i) the benefits issued in the State; multiplied by
            ``(ii) 6 percent.
            ``(B) Determination.--Notwithstanding sections 13 and 14, 
        the calculation of the contribution shall be based solely on 
        the determination of the Secretary of the payment error rate.
            ``(C) Data.--For purposes of implementing subparagraph (A) 
        for a fiscal year, the Secretary shall use the data for the 
        most recent fiscal year available.
        ``(3) Election limitation.--
            ``(A) Re-entering food stamp program.--A State that elects 
        to participate in the program under paragraph (1) may in a 
        subsequent year decline to elect to participate in the program 
        and instead participate in the food stamp program in accordance 
        with the other sections of this Act.
            ``(B) Limitation.--Subsequent to re-entering the food stamp 
        program under subparagraph (A), the State shall only be 
        eligible to participate in the food stamp program in accordance 
        with the other sections of this Act and shall not be eligible 
        to elect to participate in the program established under 
        subsection (b).
        ``(4) Program exclusive.--
            ``(A) In general.--A State that is participating in the 
        program established under subsection (b) shall not be subject 
        to, or receive any benefit under, this Act except as provided 
        in this section.
            ``(B) Contract with federal government.--Nothing in this 
        section shall prohibit a State from contracting with the 
        Federal Government for the provision of services or materials 
        necessary to carry out a program under this section.
    ``(d) Lead Agency.--A State desiring to receive a grant under this 
section shall designate, in an application submitted to the Secretary 
under subsection (e)(1), an appropriate State agency responsible for 
the administration of the program under this section as the lead 
agency.
    ``(e) Application and Plan.--
        ``(1) Application.--To be eligible to receive assistance under 
    this section, a State shall prepare and submit to the Secretary an 
    application at such time, in such manner, and containing such 
    information as the Secretary shall by regulation require, 
    including--
            ``(A) an assurance that the State will comply with the 
        requirements of this section;
            ``(B) a State plan that meets the requirements of paragraph 
        (3); and
            ``(C) an assurance that the State will comply with the 
        requirements of the State plan under paragraph (3).
        ``(2) Annual plan.--The State plan contained in the application 
    under paragraph (1) shall be submitted for approval annually.
        ``(3) Requirements of plan.--
            ``(A) Lead agency.--The State plan shall identify the lead 
        agency.
            ``(B) Use of block grant funds.--The State plan shall 
        provide that the State shall use the amounts provided to the 
        State for each fiscal year under this section--
                ``(i) to provide food assistance to needy individuals 
            and families residing in the State, other than residents of 
            institutions who are ineligible for food stamps under 
            section 3(i); and
                ``(ii) to pay administrative costs incurred in 
            providing the assistance.
            ``(C) Groups served.--The State plan shall describe how and 
        to what extent the program will serve specific groups of 
        individuals and families and how the treatment will differ from 
        treatment under the food stamp program under the other sections 
        of this Act of the individuals and families, including--
                ``(i) elderly individuals and families;
                ``(ii) migrants or seasonal farmworkers;
                ``(iii) homeless individuals and families;
                ``(iv) individuals and families who live in 
            institutions eligible under section 3(i);
                ``(v) individuals and families with earnings; and
                ``(vi) members of Indian tribes or tribal 
            organizations.
            ``(D) Assistance for entire state.--The State plan shall 
        provide that benefits under this section shall be available 
        throughout the entire State.
            ``(E) Notice and hearings.--The State plan shall provide 
        that an individual or family who applies for, or receives, 
        assistance under this section shall be provided with notice of, 
        and an opportunity for a hearing on, any action under this 
        section that adversely affects the individual or family.
            ``(F) Assessment of Needs.--The State plan shall assess the 
        food and nutrition needs of needy persons residing in the 
        State.
            ``(G) Eligibility standards.--The State plan shall describe 
        the income, resource, and other eligibility standards that are 
        established for the receipt of assistance under this section.
            ``(H) Receiving benefits in more than 1 jurisdiction.--The 
        State plan shall establish a system for the exchange of 
        information with other States to verify the identity and 
        receipt of benefits by recipients.
            ``(I) Privacy.--The State plan shall provide for 
        safeguarding and restricting the use and disclosure of 
        information about any individual or family receiving assistance 
        under this section.
            ``(J) Other information.--The State plan shall contain such 
        other information as may be required by the Secretary.
        ``(4) Approval of application and plan.--The Secretary shall 
    approve an application and State plan that satisfies the 
    requirements of this section.
    ``(f) No individual or family entitlement to assistance.--Nothing 
in this section--
        ``(1) entitles any individual or family to assistance under 
    this section; or
        ``(2) limits the right of a State to impose additional 
    limitations or conditions on assistance under this section.
    ``(g) Benefits for Aliens.--
        ``(1) Eligibility.--No individual who is an alien shall be 
    eligible to receive benefits under a State plan approved under 
    subsection (e)(4) if the individual is not eligible to participate 
    in the food stamp program due to the alien status of the 
    individual.
        ``(2) Income.--The State plan shall provide that the income of 
    an alien shall be determined in accordance with section 5(i).
    ``(h) Employment and Training.--
        ``(1) Work requirements.--No individual or household shall be 
    eligible to receive benefits under a State plan funded under this 
    section if the individual or household is not eligible to 
    participate in the food stamp program under subsection (d) or (o) 
    of section 6.
        ``(2) Work programs.--Each State shall implement an employment 
    and training program in accordance with the terms and conditions of 
    section 6(d)(4) for individuals under the program and shall be 
    eligible to receive funding under section 16(h).
    ``(i) Enforcement.--
        ``(1) Review of compliance with state plan.--The Secretary 
    shall review and monitor State compliance with this section and the 
    State plan approved under subsection (e)(4).
        ``(2) Noncompliance.--
            ``(A) In general.--If the Secretary, after reasonable 
        notice to a State and opportunity for a hearing, finds that--
                ``(i) there has been a failure by the State to comply 
            substantially with any provision or requirement set forth 
            in the State plan approved under subsection (e)(4); or
                ``(ii) in the operation of any program or activity for 
            which assistance is provided under this section, there is a 
            failure by the State to comply substantially with any 
            provision of this section;
        the Secretary shall notify the State of the finding and that no 
        further grants will be made to the State under this section 
        (or, in the case of noncompliance in the operation of a program 
        or activity, that no further grants to the State will be made 
        with respect to the program or activity) until the Secretary is 
        satisfied that there is no longer any failure to comply or that 
        the noncompliance will be promptly corrected.
            ``(B) Other penalties.--In the case of a finding of 
        noncompliance made pursuant to subparagraph (A), the Secretary 
        may, in addition to, or in lieu of, imposing the penalties 
        described in subparagraph (A), impose other appropriate 
        penalties, including recoupment of money improperly expended 
        for purposes prohibited or not authorized by this section and 
        disqualification from the receipt of financial assistance under 
        this section.
            ``(C) Notice.--The notice required under subparagraph (A) 
        shall include a specific identification of any additional 
        penalty being imposed under subparagraph (B).
        ``(3) Issuance of regulations.--The Secretary shall establish 
    by regulation procedures for--
            ``(A) receiving, processing, and determining the validity 
        of complaints made to the Secretary concerning any failure of a 
        State to comply with the State plan or any requirement of this 
        section; and
            ``(B) imposing penalties under this section.
    ``(j) Grant.--
        ``(1) In general.--For each fiscal year, the Secretary shall 
    pay to a State that has an application approved by the Secretary 
    under subsection (e)(4) an amount that is equal to the grant of the 
    State under subsection (m) for the fiscal year, adjusted for any 
    reduction required under subsection (m)(2).
        ``(2) Method of Grant.--The Secretary shall make a grant to a 
    State for a fiscal year under this section by issuing 1 or more 
    letters of credit for the fiscal year, with necessary adjustments 
    on account of overpayments or underpayments, as determined by the 
    Secretary.
        ``(3) Spending of grants by state.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        a grant to a State determined under subsection (m)(1) for a 
        fiscal year may be expended by the State only in the fiscal 
        year.
            ``(B) Carryover.--The State may reserve up to 10 percent of 
        a grant determined under subsection (m)(1) for a fiscal year to 
        provide assistance under this section in subsequent fiscal 
        years, except that the reserved funds may not exceed 30 percent 
        of the total grant received under this section for a fiscal 
        year.
        ``(4) Food assistance and administrative expenditures.--In each 
    fiscal year, not more than 6 percent of the Federal and State funds 
    required to be expended by a State under this section shall be used 
    for administrative expenses.
        ``(5) Provision of food assistance.--A State may provide food 
    assistance under this section in any manner determined appropriate 
    by the State, such as electronic benefit transfer limited to food 
    purchases, coupons limited to food purchases, or direct provision 
    of commodities.
    ``(k) Quality Control.--Each State participating in the program 
established under this section shall maintain a system in accordance 
with, and shall be subject to section 16(c), including sanctions and 
eligibility for incentive payment under section 16(c).
    ``(l) Nondiscrimination.--
        ``(1) In general.--The Secretary shall not provide financial 
    assistance for any program, project, or activity under this section 
    if any person with responsibilities for the operation of the 
    program, project, or activity discriminates with respect to the 
    program, project, or activity because of race, religion, color, 
    national origin, sex, or disability.
        ``(2) Enforcement.--The powers, remedies, and procedures set 
    forth in title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d 
    et seq.) may be used by the Secretary to enforce paragraph (1).
    ``(m) Grant Calculation.--
        ``(1) State grant.--
            ``(A) In general.--Except as provided in subparagraph (B), 
        from the amounts made available under section 18 for each 
        fiscal year, the Secretary shall provide a grant to each State 
        participating in the program established under this section an 
        amount that is equal to the sum of--
                ``(i) the greater of, as determined by the Secretary--

                    ``(I) the total dollar value of all benefits issued 
                under the food stamp program established under this Act 
                by the State during fiscal year 1994; or
                    ``(II) the average per fiscal year of the total 
                dollar value of all benefits issued under the food 
                stamp program by the State during each of fiscal years 
                1992 through 1994; and

                ``(ii) the greater of, as determined by the Secretary--

                    ``(I) the total amount received by the State for 
                administrative costs under section 16 for fiscal year 
                1994; or
                    ``(II) the average per fiscal year of the total 
                amount received by the State for administrative costs 
                under section 16 for each of fiscal years 1992 through 
                1994.

            ``(B) Insufficient funds.--If the Secretary finds that the 
        total amount of grants to which States would otherwise be 
        entitled for a fiscal year under subparagraph (A) will exceed 
        the amount of funds that will be made available to provide the 
        grants for the fiscal year, the Secretary shall reduce the 
        grants made to States under this subsection, on a pro rata 
        basis, to the extent necessary.
        ``(2) Reduction.--The Secretary shall reduce the grant of a 
    State by the amount a State has agreed to contribute under 
    subsection (c)(1)(C).''.
    (b) Employment and Training Funding.--Section 16(h) of the Act (7 
U.S.C. 2025(a)), as amended by section 13027(d)(2), is further amended 
by adding at the end the following:
        ``(6) Block grant states.--Each State electing to operate a 
    program under section 25 shall--
            ``(A) receive the greater of--
                ``(i) the total dollar value of the funds received 
            under paragraph (1) by the State during fiscal year 1994; 
            or
                ``(ii) the average per fiscal year of the total dollar 
            value of all funds received under paragraph (1) by the 
            State during each of fiscal years 1992 through 1994; and
            ``(B) be eligible to receive funds under paragraph (2), 
        within the limitations in section 6(d)(4)(K).''.
    (c) Research On Optional State Food Assistance Block Grant.--
Section 17 of the Act (7 U.S.C. 2026), as amended by section 
13055(c)(2), is further amended by adding at the end the following:
    ``(l) Research on Optional State Food Assistance Block Grant.--The 
Secretary may conduct research on the effects and costs of a State 
program carried out under section 25.''.

SEC. 13057. AMERICAN SAMOA.

    The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), as amended by 
section 13056, is further amended by adding at the end the following:

``SEC. 26. TERRITORY OF AMERICAN SAMOA.

    ``From amounts made available to carry out this Act, the Secretary 
may pay to the Territory of American Samoa not more than $5,300,000 for 
each of fiscal years 1996 through 2002 to finance 100 percent of the 
expenditures for the fiscal year for a nutrition assistance program 
extended under section 601(c) of Public Law 96-597 (48 U.S.C. 
1469d(c)).''.

SEC. 13058. ASSISTANCE FOR COMMUNITY FOOD PROJECTS.

    The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), as amended by 
section 13057, is further amended by adding at the end the following:

``SEC. 27. ASSISTANCE FOR COMMUNITY FOOD PROJECTS.

    ``(a) Definition of Community Food Projects.--In this section, the 
term `community food project' means a community-based project that 
requires a 1-time infusion of Federal assistance to become self-
sustaining and that is designed to--
        ``(1) meet the food needs of low-income people;
        ``(2) increase the self-reliance of communities in providing 
    for their own food needs; and
        ``(3) promote comprehensive responses to local food, farm, and 
    nutrition issues.
    ``(b) Authority To Provide Assistance.--
        ``(1) In general.--From amounts made available to carry out 
    this Act, the Secretary may make grants to assist eligible private 
    nonprofit entities to establish and carry out community food 
    projects.
        ``(2) Limitation on grants.--The total amount of funds provided 
    as grants under this section for any fiscal year may not exceed 
    $2,500,000.
    ``(c) Eligible Entities.--To be eligible for a grant under 
subsection (b), a private nonprofit entity must--
        ``(1) have experience in the area of--
            ``(A) community food work, particularly concerning small 
        and medium-sized farms, including the provision of food to 
        people in low-income communities and the development of new 
        markets in low-income communities for agricultural producers; 
        or
            ``(B) job training and business development activities for 
        food-related activities in low-income communities;
        ``(2) demonstrate competency to implement a project, provide 
    fiscal accountability, collect data, and prepare reports and other 
    necessary documentation; and
        ``(3) demonstrate a willingness to share information with 
    researchers, practitioners, and other interested parties.
    ``(d) Preference for Certain Projects.--In selecting community food 
projects to receive assistance under subsection (b), the Secretary 
shall give a preference to projects designed to--
        ``(1) develop linkages between 2 or more sectors of the food 
    system;
        ``(2) support the development of entrepreneurial projects;
        ``(3) develop innovative linkages between the for-profit and 
    nonprofit food sectors; or
        ``(4) encourage long-term planning activities and multi-system, 
    interagency approaches.
    ``(e) Matching Funds Requirements.--
        ``(1) Requirements.--The Federal share of the cost of 
    establishing or carrying out a community food project that receives 
    assistance under subsection (b) may not exceed 50 percent of the 
    cost of the project during the term of the grant.
        ``(2) Calculation.--In providing for the non-Federal share of 
    the cost of carrying out a community food project, the entity 
    receiving the grant shall provide for the share through a payment 
    in cash or in kind, fairly evaluated, including facilities, 
    equipment, or services.
        ``(3) Sources.--An entity may provide for the non-Federal share 
    through State government, local government, or private sources.
    ``(f) Term of Grant.--
        ``(1) Single grant.--A community food project may be supported 
    by only a single grant under subsection (b).
        ``(2) Term.--The term of a grant under subsection (b) may not 
    exceed 3 years.
    ``(g) Technical Assistance and Related Information.--
        ``(1) Technical assistance.--In carrying out this section, the 
    Secretary may provide technical assistance regarding community food 
    projects, processes, and development to an entity seeking the 
    assistance.
        ``(2) Sharing Information.--
            ``(A) In general.--The Secretary may provide for the 
        sharing of information concerning community food projects and 
        issues among and between government, private for-profit and 
        nonprofit groups, and the public through publications, 
        conferences, and other appropriate forums.
            ``(B) Other interested parties.--The Secretary may share 
        information concerning community food projects with 
        researchers, practitioners, and other interested parties.
    ``(h) Evaluation.--
        ``(1) In general.--The Secretary shall provide for the 
    evaluation of the success of community food projects supported 
    using funds under this section.
        ``(2) Report.--Not later than January 30, 2002, the Secretary 
    shall submit a report to Congress regarding the results of the 
    evaluation.''.

               CHAPTER 2--COMMODITY DISTRIBUTION PROGRAMS

SEC. 13071. EMERGENCY FOOD ASSISTANCE PROGRAM.

    (a) Definitions.--Section 201A of the Emergency Food Assistance Act 
of 1983 (Public Law 98-8; 7 U.S.C. 612c note) is amended to read as 
follows:

``SEC. 201A. DEFINITIONS.

    ``In this Act:
        ``(1) Additional commodities.--The term `additional 
    commodities' means commodities made available under section 214 in 
    addition to the commodities made available under sections 202 and 
    203D.
        ``(2) Average monthly number of unemployed persons.--The term 
    `average monthly number of unemployed persons' means the average 
    monthly number of unemployed persons in each State in the most 
    recent fiscal year for which information concerning the number of 
    unemployed persons is available, as determined by the Bureau of 
    Labor Statistics of the Department of Labor.
        ``(3) Eligible recipient agency.--The term `eligible recipient 
    agency' means a public or nonprofit organization--
            ``(A) that administers--
                ``(i) an emergency feeding organization;
                ``(ii) a charitable institution (including a hospital 
            and a retirement home, but excluding a penal institution) 
            to the extent that the institution serves needy persons;
                ``(iii) a summer camp for children, or a child 
            nutrition program providing food service;
                ``(iv) a nutrition project operating under the Older 
            Americans Act of 1965 (42 U.S.C. 3001 et seq.), including a 
            project that operates a congregate nutrition site and a 
            project that provides home-delivered meals; or
                ``(v) a disaster relief program;
            ``(B) that has been designated by the appropriate State 
        agency, or by the Secretary; and
            ``(C) that has been approved by the Secretary for 
        participation in the program established under this Act.
        ``(4) Emergency feeding organization.--The term `emergency 
    feeding organization' means a public or nonprofit organization that 
    administers activities and projects (including the activities and 
    projects of a charitable institution, a food bank, a food pantry, a 
    hunger relief center, a soup kitchen, or a similar public or 
    private nonprofit eligible recipient agency) providing nutrition 
    assistance to relieve situations of emergency and distress through 
    the provision of food to needy persons, including low-income and 
    unemployed persons.
        ``(5) Food bank.--The term `food bank' means a public or 
    charitable institution that maintains an established operation 
    involving the provision of food or edible commodities, or the 
    products of food or edible commodities, to food pantries, soup 
    kitchens, hunger relief centers, or other food or feeding centers 
    that, as an integral part of their normal activities, provide meals 
    or food to feed needy persons on a regular basis.
        ``(6) Food pantry.--The term `food pantry' means a public or 
    private nonprofit organization that distributes food to low-income 
    and unemployed households, including food from sources other than 
    the Department of Agriculture, to relieve situations of emergency 
    and distress.
        ``(7) Poverty line.--The term `poverty line' has the same 
    meaning given the term in section 673(2) of the Community Services 
    Block Grant Act (42 U.S.C. 9902(2)).
        ``(8) Soup kitchen.--The term `soup kitchen' means a public or 
    charitable institution that, as an integral part of the normal 
    activities of the institution, maintains an established feeding 
    operation to provide food to needy homeless persons on a regular 
    basis.
        ``(9) Total value of additional commodities.--The term `total 
    value of additional commodities' means the actual cost of all 
    additional commodities made available under section 214 that are 
    paid by the Secretary (including the distribution and processing 
    costs incurred by the Secretary).
        ``(10) Value of additional commodities allocated to each 
    state.--The term `value of additional commodities allocated to each 
    State' means the actual cost of additional commodities made 
    available under section 214 and allocated to each State that are 
    paid by the Secretary (including the distribution and processing 
    costs incurred by the Secretary).''.
    (b) State Plan.--Section 202A of the Act (7 U.S.C. 612c note) is 
amended to read as follows:

``SEC. 202A. STATE PLAN.

    ``(a) In General.--To receive commodities under this Act, a State 
shall submit a plan of operation and administration every 4 years to 
the Secretary for approval. The plan may be amended at any time, with 
the approval of the Secretary.
    ``(b) Requirements.--Each plan shall--
        ``(1) designate the State agency responsible for distributing 
    the commodities received under this Act;
        ``(2) set forth a plan of operation and administration to 
    expeditiously distribute commodities under this Act;
        ``(3) set forth the standards of eligibility for recipient 
    agencies; and
        ``(4) set forth the standards of eligibility for individual or 
    household recipients of commodities, which shall require--
            ``(A) individuals or households to be comprised of needy 
        persons; and
            ``(B) individual or household members to be residing in the 
        geographic location served by the distributing agency at the 
        time of applying for assistance.
    ``(c) State Advisory Board.--The Secretary shall encourage each 
State receiving commodities under this Act to establish a State 
advisory board consisting of representatives of all interested 
entities, both public and private, in the distribution of commodities 
received under this Act in the State.''.
    (c) Authorization of Appropriations for Administrative Funds.--
Section 204(a)(1) of the Act (7 U.S.C. 612c note) is amended--
        (1) in the first sentence--
            (A) by striking ``1991 through 1995'' and inserting ``1996 
        through 2002''; and
            (B) by striking ``for State and local'' and all that 
        follows through ``under this title'' and inserting ``to pay for 
        the direct and indirect administrative costs of the State 
        related to the processing, transporting, and distributing to 
        eligible recipient agencies of commodities provided by the 
        Secretary under this Act and commodities secured from other 
        sources''; and
        (2) by striking the fourth sentence.
    (d) Delivery of Commodities.--Section 214 of the Act (7 U.S.C. 612c 
note) is amended--
        (1) by striking subsections (a) through (e) and (j);
        (2) by redesignating subsections (f) through (i) as subsections 
    (a) through (d), respectively;
        (3) in subsection (b), as redesignated by paragraph (2)--
            (A) in the first sentence, by striking ``subsection (f) or 
        subsection (j) if applicable,'' and inserting ``subsection 
        (a)''; and
            (B) in the second sentence, by striking ``subsection (f)'' 
        and inserting ``subsection (a)'';
        (4) by striking subsection (c), as redesignated by paragraph 
    (2), and inserting the following:
    ``(c) Administration.--
        ``(1) In general.--Commodities made available for each fiscal 
    year under this section shall be delivered at reasonable intervals 
    to States based on the grants calculated under subsection (a), or 
    reallocated under subsection (b), before December 31 of the 
    following fiscal year.
        ``(2) Entitlement.--Each State shall be entitled to receive the 
    value of additional commodities determined under subsection (a).''; 
    and
        (5) in subsection (d), as redesignated by paragraph (2), by 
    striking ``or reduce'' and all that follows through ``each fiscal 
    year''.
    (e) Technical Amendments.--The Act (7 U.S.C. 612c note) is 
amended--
        (1) in the first sentence of section 203B(a), by striking ``203 
    and 203A of this Act'' and inserting ``203A'';
        (2) in section 204(a), by striking ``title'' each place it 
    appears and inserting ``Act'';
        (3) in the first sentence of section 210(e), by striking 
    ``(except as otherwise provided for in section 214(j))''; and
        (4) by striking section 212.
    (f) Report on EFAP.--Section 1571 of the Food Security Act of 1985 
(Public Law 99-198; 7 U.S.C. 612c note) is repealed.
    (g) Availability of Commodities Under the Food Stamp Program.--The 
Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), as amended by section 
13058, is further amended by adding at the end the following:

``SEC. 28. AVAILABILITY OF COMMODITIES FOR THE EMERGENCY FOOD 
              ASSISTANCE PROGRAM.

    ``(a) Purchase of Commodities.--From amounts appropriated under 
this Act, for each of fiscal years 1997 through 2002, the Secretary 
shall purchase $300,000,000 of a variety of nutritious and useful 
commodities of the types that the Secretary has the authority to 
acquire through the Commodity Credit Corporation or under section 32 of 
the Act entitled `An Act to amend the Agricultural Adjustment Act, and 
for other purposes', approved August 24, 1935 (7 U.S.C. 612c), and 
distribute the commodities to States for distribution in accordance 
with section 214 of the Emergency Food Assistance Act of 1983 (Public 
Law 98-8; 7 U.S.C. 612c note).
    ``(b) Basis for Commodity Purchases.--In purchasing commodities 
under subsection (a), the Secretary shall, to the extent practicable 
and appropriate, make purchases based on--
        ``(1) agricultural market conditions;
        ``(2) preferences and needs of States and distributing 
    agencies; and
        ``(3) preferences of recipients.''.
    (h) Effective Date.--The amendments made by subsection (d) shall 
become effective on October 1, 1996.

                       Subtitle K--Miscellaneous

SEC. 13101. FOOD STAMP ELIGIBILITY.

    Section 6(f) of the Food Stamp Act of 1977 (7 U.S.C. 2015(f)) is 
amended by striking the third sentence and inserting the following: 
``The State agency shall, at its option, consider either all income and 
financial resources of the individual rendered ineligible to 
participate in the food stamp program under this subsection, or such 
income, less a pro rata share, and the financial resources of the 
ineligible individual, to determine the eligibility and the value of 
the allotment of the household of which such individual is a member.''.

SEC. 13102. REDUCTION IN BLOCK GRANTS FOR SOCIAL SERVICES.

    Section 2003(c) of the Social Security Act (42 U.S.C. 1397b) is 
amended--
        (1) by striking ``and'' at the end of paragraph (4); and
        (2) by striking paragraph (5) and inserting the following:
        ``(5) $2,800,000,000 for each of the fiscal years 1990 through 
    1996; and
        ``(6) $2,240,000,000 for each fiscal year after fiscal year 
    1996.''.

             Subtitle L--Reform of the Earned Income Credit

SEC. 13200. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this subtitle 
an amendment or repeal is expressed in terms of an amendment to, or 
repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Internal 
Revenue Code of 1986.

SEC. 13201. EARNED INCOME CREDIT DENIED TO INDIVIDUALS NOT AUTHORIZED 
              TO BE EMPLOYED IN THE UNITED STATES.

    (a) In General.--Section 32(c)(1) (relating to individuals eligible 
to claim the earned income credit) is amended by adding at the end the 
following new subparagraph:
            ``(F) Identification number requirement.--The term 
        `eligible individual' does not include any individual who does 
        not include on the return of tax for the taxable year--
                ``(i) such individual's taxpayer identification number, 
            and
                ``(ii) if the individual is married (within the meaning 
            of section 7703), the taxpayer identification number of 
            such individual's spouse.''.
    (b) Special Identification Number.--Section 32 is amended by adding 
at the end the following new subsection:
    ``(l) Identification Numbers.--Solely for purposes of subsections 
(c)(1)(F) and (c)(3)(D), a taxpayer identification number means a 
social security number issued to an individual by the Social Security 
Administration (other than a social security number issued pursuant to 
clause (II) (or that portion of clause (III) that relates to clause 
(II)) of section 205(c)(2)(B)(i) of the Social Security Act).''.
    (c) Extension of Procedures Applicable to Mathematical or Clerical 
Errors.--Section 6213(g)(2) (relating to the definition of mathematical 
or clerical errors) is amended by striking ``and'' at the end of 
subparagraph (D), by striking the period at the end of subparagraph (E) 
and inserting a comma, and by inserting after subparagraph (E) the 
following new subparagraphs:
            ``(F) an omission of a correct taxpayer identification 
        number required under section 32 (relating to the earned income 
        credit) to be included on a return, and
            ``(G) an entry on a return claiming the credit under 
        section 32 with respect to net earnings from self-employment 
        described in section 32(c)(2)(A) to the extent the tax imposed 
        by section 1401 (relating to self-employment tax) on such net 
        earnings has not been paid.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 13202. REPEAL OF EARNED INCOME CREDIT FOR INDIVIDUALS WITHOUT 
              CHILDREN.

    (a) In General.--Subparagraph (A) of section 32(c)(1) (defining 
eligible individual) is amended to read as follows:
            ``(A) In general.--The term `eligible individual' means any 
        individual who has a qualifying child for the taxable year.''.
    (b) Conforming Amendments.--Each of the tables contained in 
paragraphs (1) and (2) of section 32(b) are amended by striking the 
items relating to no qualifying children.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 13203. MODIFICATION OF EARNED INCOME CREDIT AMOUNT AND PHASEOUT.

    (a) Modification of Phaseout.--Subparagraph (B) of section 32(a)(2) 
is amended to read as follows:
            ``(B) the sum of--
                ``(i) the initial phaseout percentage of so much of the 
            adjusted gross income (or, if greater, the earned income) 
            of the taxpayer for the taxable year as exceeds the initial 
            phaseout amount but does not exceed the final phaseout 
            amount, plus
                ``(ii) the final phaseout percentage of so much of the 
            adjusted gross income (or, if greater, the earned income) 
            of the taxpayer for the taxable year as exceeds the final 
            phaseout amount.''
    (b) Percentages and Amounts.--
        (1) In general.--Subsection (b) of section 32, as amended by 
    section 1102(b), is amended to read as follows:
    ``(b) Percentages and Amounts.--
        ``(1) Percentages.--The credit percentage, the initial phaseout 
    percentage, and the final phaseout percentage shall be determined 
    as follows:

                                                                                                                
   ``In the case of an eligible                                 The initial phaseout       The final phaseout   
         individual with:          The credit percentage is:       percentage is:            percentage is:     
                                                                                                                
1 qualifying child...............              34                       15.98                      20           
2 or more qualifying children....              36                       21.06                      25           
                                                                                                                

  
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        ``(2) Amounts.--The earned income amount, the initial phaseout 
    amount, and the final phaseout amount shall be determined as 
    follows:

                                                                                                                
   ``In the case of an eligible     The earned income amount    The initial phaseout       The final phaseout   
         individual with:                     is:                    amount is:                amount is:       
                                                                                                                
1 qualifying child...............            $6,340                    $11,630                   $14,850        
2 or more qualifying children....            $8,910                    $11,630                 $17,750''.       
                                                                                                                

  
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        (2) Increase in credit for lower-income families having 2 or 
    more qualifying children.--Subsection (d) of section 32 is amended 
    to read as follows:
    ``(d) Increase in Credit for Lower-Income Families Having 2 or More 
Qualifying Children.--
        ``(1) In general.--If an eligible individual has 2 or more 
    qualifying children, for purposes of applying paragraphs (1) and 
    (2)(A) of subsection (a)--
            ``(A) the amount of the taxpayer's earned income shall be 
        treated as being equal to \10/9\ of such income (determined 
        without regard to this paragraph), and
            ``(B) the earned income amount shall be treated as being 
        equal to \10/9\ of such amount (determined without regard to 
        this paragraph).
        ``(2) Phaseout of benefit.--If the applicable income of the 
    taxpayer for the taxable year exceeds $14,000 ($17,000 in the case 
    of a joint return), the amount of each increase under paragraph (1) 
    shall be reduced (but not below zero) by an amount which bears the 
    same ratio to such increase (determined without regard to this 
    subparagraph) as such excess bears to $4,000.
        ``(3) Applicable income.--For purposes of this subsection, the 
    term `applicable income' means adjusted gross income or, if 
    greater, earned income.''
        (3) Conforming amendments.--
            (A) Subsection (j) of section 32 is amended--
                (i) by striking ``subsection (b)(2)(A)'' and inserting 
            ``subsection (b)(2) or (d)'',
                (ii) by striking ``1994'' and inserting ``1996'', and
                (iii) by striking ``1993'' and inserting ``1995''.
            (B) Subsection (e) of section 32 is amended to read as 
        follows:
    ``(e) Other Special Rules.--
        ``(1) Married individuals.--In the case of an individual who is 
    married (within the meaning of section 7703), this section shall 
    apply only if a joint return is filed for the taxable year.
        ``(2) Taxable year must be full taxable year.--Except in the 
    case of a taxable year closed by reason of the death of an 
    individual, no credit shall be allowable under this section in the 
    case of a taxable year covering a period of less than 12 months.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 13204. RULES RELATING TO DENIAL OF EARNED INCOME CREDIT ON BASIS 
              OF DISQUALIFIED INCOME.

    (a) Definition of Disqualified Income.--Paragraph (2) of section 
32(i) (defining disqualified income) is amended by striking ``and'' at 
the end of subparagraph (B), by striking the period at the end of 
subparagraph (C) and inserting ``, and'', and by adding at the end the 
following new subparagraph:
            ``(D) the excess (if any) of--
                ``(i) the aggregate income from all passive activities 
            for the taxable year (determined without regard to any 
            amount described in a preceding subparagraph), over
                ``(ii) the aggregate losses from all passive activities 
            for the taxable year (as so determined).
    For purposes of subparagraph (D), the term `passive activity' has 
    the meaning given such term by section 469.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 13205. MODIFICATION OF ADJUSTED GROSS INCOME DEFINITION FOR EARNED 
              INCOME CREDIT.

    (a) In General.--Subsections (a)(2), (c)(1)(C), (d), and (f)(2)(B) 
of section 32, as amended by the preceding sections of this subtitle, 
are each amended by striking ``adjusted gross income'' each place it 
appears and inserting ``modified adjusted gross income''.
    (b) Modified Adjusted Gross Income Defined.--Section 32(c) 
(relating to definitions and special rules) is amended by adding at the 
end the following new paragraph:
        ``(5) Modified adjusted gross income.--
            ``(A) In general.--The term `modified adjusted gross 
        income' means adjusted gross income--
                ``(i) increased by the sum of the amounts described in 
            subparagraph (B), and
                ``(ii) determined without regard to--

                    ``(I) the amounts described in subparagraph (C), or
                    ``(II) the deduction allowed under section 172.

            ``(B) Nontaxable income taken into account.--Amounts 
        described in this subparagraph are--
                ``(i) social security benefits (as defined in section 
            86(d)) received by the taxpayer during the taxable year to 
            the extent not included in gross income,
                ``(ii) amounts which--

                    ``(I) are received during the taxable year by (or 
                on behalf of) a spouse pursuant to a divorce or 
                separation instrument (as defined in section 71(b)(2)), 
                and
                    ``(II) under the terms of the instrument are fixed 
                as payable for the support of the children of the payor 
                spouse (as determined under section 71(c)),

            but only to the extent such amounts exceed $6,000,
                ``(iii) interest received or accrued during the taxable 
            year which is exempt from tax imposed by this chapter, and
                ``(iv) amounts received as a pension or annuity, and 
            any distributions or payments received from an individual 
            retirement plan, by the taxpayer during the taxable year to 
            the extent not included in gross income.
        Clause (iv) shall not include any amount which is not 
        includible in gross income by reason of section 402(c), 
        403(a)(4), 403(b)(8), 408(d) (3), (4), or (5), or 457(e)(10).
            ``(C) Certain amounts disregarded.--An amount is described 
        in this subparagraph if it is--
                ``(i) the amount of losses from sales or exchanges of 
            capital assets in excess of gains from such sales or 
            exchanges to the extent such amount does not exceed the 
            amount under section 1211(b)(1),
                ``(ii) the net loss from the carrying on of trades or 
            businesses, computed separately with respect to--

                    ``(I) trades or businesses (other than farming) 
                conducted as sole proprietorships,
                    ``(II) trades or businesses of farming conducted as 
                sole proprietorships, and
                    ``(III) other trades or business,

                ``(iii) the net loss from estates and trusts, and
                ``(iv) the excess (if any) of amounts described in 
            subsection (i)(2)(C)(ii) over the amounts described in 
            subsection (i)(2)(C)(i) (relating to nonbusiness rents and 
            royalties).
        For purposes of clause (ii), there shall not be taken into 
        account items which are attributable to a trade or business 
        which consists of the performance of services by the taxpayer 
        as an employee.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 13206. PROVISIONS TO IMPROVE TAX COMPLIANCE.

    (a) Increase in Penalties for Return Preparers.--
        (1) Understatement penalty.--Section 6694 (relating to 
    understatement of income tax liability by income tax return 
    preparer) is amended--
            (A) by striking ``$250'' in subsection (a) and inserting 
        ``$500'', and
            (B) by striking ``$1,000'' in subsection (b) and inserting 
        ``$2,000''.
        (2) Other assessable penalties.--Section 6695 (relating to 
    other assessable penalties) is amended--
            (A) by striking ``$50'' and ``$25,000'' in subsections (a), 
        (b), (c), (d), and (e) and inserting ``$100'' and ``$50,000'', 
        respectively, and
            (B) by striking ``$500'' in subsection (f) and inserting 
        ``$1,000''.
    (b) Aiding and Abetting Penalty.--Section 6701(b) (relating to 
amount of penalty) is amended--
        (1) by striking ``$1,000'' in paragraph (1) and inserting 
    ``2,000'', and
        (2) by striking ``10,000'' in paragraph (2) and inserting 
    ``20,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to penalties with respect to taxable years beginning after 
December 31, 1995.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.
```