I

104TH CONGRESS

2D SESSION H. R. 2903

To provide for deficit reduction and achieve a balanced budget by fiscal

year 2002.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 26, 1996

Mr. KASICH (by request): introduced the following bill; which was referred to

the Committee on the Budget, and in addition to the Committees on

Ways and Means, Commerce, Banking and Financial Services, the Judiciary, Agriculture, Economic and Educational Opportunities, Government

Reform and Oversight, House Oversight, National Security, Veterans’ Affairs, Resources, International Relations, and Rules, for a period to be

subsequently determined by the Speaker, in each case for consideration

of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To provide for deficit reduction and achieve a balanced

budget by fiscal year 2002.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

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

5 of 1995 for Economic Growth and Fairness’’.

6 SEC. 2. TABLE OF CONTENTS.

7 This Act is organized into titles as follows:
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Title I—Banking, Housing, and Related Provisions

Title II—Spectrum Allocation Provisions

Title III—Medicaid

Title IV—Medicare

Title V—Welfare Reform

Title VI—Federal Retirement Provisions

Title VII—Veterans Provisions

Title VIII—Asset Sales, User Fees, and other Mandatory Provisions

Title IX—Revenues

Title X—Budget Enforcement

1 TITLE I—BANKING, HOUSING,

2 AND RELATED PROVISIONS

3 Subtitle A—Financial Institutions

4 SEC. 2011. SPECIAL ASSESSMENT TO CAPITALIZE SAIF.

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

6 (f), the Board of Directors shall impose a special assess7 ment on the SAIF-assessable deposits of each insured de8 pository at a rate applicable to all such institutions that

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

10 (after taking into account the adjustments described in

11 subsections (g) through (j)) will cause the Savings Asso12 ciation Insurance Fund to achieve the designated reserve

13 ratio on the first business day of January 1996.

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

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

17 (1) the monthly Savings Association Insurance

18 Fund balance most recently calculated;

19 (2) data on insured deposits reported in the

20 most recent reports of condition filed not later than
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1 70 days before the date of enactment of this Act by

2 insured depository institutions; and

3 (3) any other factors that the Board of Direc4 tors deems appropriate.

5 (c) DATE OF DETERMINATION.—For purposes of

6 subsection (a), the amount of the SAIF-assessable depos7 its of an insured depository institution shall be determined

8 as of March 31, 1995.

9 (d) DATE PAYMENT DUE.—The special assessment

10 imposed under this section shall be—

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

12 1996; and

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

14 (A) the first business day of January

15 1996; or

16 (B) such other date as the Corporation

17 shall prescribe, but not later than 60 days after

18 the date of enactment of this Act.

19 (e) ASSESSMENT DEPOSITED IN SAIF.—Notwith20 standing any other provisions of law, the proceeds of the

21 special assessment imposed under this section shall be de22 posited in the Savings Association Insurance Fund.

23 (f) EXEMPTIONS FOR CERTAIN INSTITUTIONS.—

24 (1) EXEMPTION FOR WEAK INSTITUTIONS.—

25 The Board of Directors may, by order, in its sole
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1 discretion, exempt any insured depository institution

2 that the Board of Directors determines to be weak,

3 from paying the special assessment imposed under

4 this section if the Board of Directors determines

5 that the exemption would reduce risk to the Savings

6 Association Insurance Fund.

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

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

9 Board of Directors shall prescribe guidelines setting

10 forth the criteria that the Board of Directors will

11 use in exempting institutions under paragraph (1).

12 Such guidelines shall be published in the Federal

13 Register.

14 (3) EXEMPTION FOR CERTAIN NEWLY CHAR15 TERED AND OTHER DEFINED INSTITUTIONS.—

16 (A) IN GENERAL.—In addition to the insti17 tutions exempted from paying the special as18 sessment under paragraph (1), the Board of

19 Directors shall exempt any insured depository

20 institution from payment of the special assess21 ment if the institution—

22 (i) was in existence on October 1,

23 1995, and held no SAIF-assessable depos24 its prior to January 1, 1993;

25 (ii) is a Federal savings bank which—
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1 (I) was established de novo in

2 April 1994 in order to acquire the de3 posits of a savings association which

4 was in default or in danger of default;

5 and

6 (II) received minority interim

7 capital assistance from the Resolution

8 Trust Corporation under section

9 21A(w) of the Federal Home Loan

10 Bank Act in connection with the ac11 quisition of any such savings associa12 tion; or

13 (iii) is a savings association, the de14 posits of which are insured by the Savings

15 Association Insurance Fund, which—

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

17 chartered as a Federal savings bank

18 insured by the Federal Savings and

19 Loan Insurance Corporation for the

20 purpose of acquiring all or substan21 tially all of the assets and assuming

22 all or substantially all of the deposit

23 liabilities of a national bank in a

24 transaction consummated after July

25 1, 1986; and
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1 (II) as of the date of that trans2 action, had assets of less than

3 $150,000,000.

4 (B) DEFINITION.—For purposes of this

5 paragraph, an institution shall be deemed to

6 have held SAIF-assessable deposits prior to

7 January 1, 1993, if—

8 (i) it directly held SAIF-assessable in9 sured deposits prior to that date; or

10 (ii) it succeeded to, acquired, pur11 chased, or otherwise holds any SAIF-as12 sessable deposits as of the date of enact13 ment of this Act that were SAIF-assess14 able deposits prior to January 1, 1993.

15 (4) EXEMPT INSTITUTIONS REQUIRED TO PAY

16 ASSESSMENTS AT FORMER RATES.—

17 (A) PAYMENTS TO SAIF AND DIF.—Any in18 sured depository institution that the Board of

19 Directors exempts under this subsection from

20 paying the special assessment imposed under

21 this section shall pay semiannual assessments—

22 (i) during calendar years 1996 and

23 1997, into the Savings Association Insur24 ance Fund, based on SAIF-assessable de25 posits of that institution, at assessment
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1 rates calculated under the schedule in ef2 fect for Savings Association Insurance

3 Fund members on June 30, 1995; and

4 (ii) during calendar years 1998 and

5 1999—

6 (I) into the Deposit Insurance

7 Fund, based on SAIF-assessable de8 posits of that institution as of Decem9 ber 31, 1997, at assessment rates cal10 culated under the schedule in effect

11 for Savings Association Insurance

12 Fund members on June 30, 1995; or

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

14 if the Bank Insurance Fund and the

15 Savings Association Insurance Fund

16 are not merged into the Deposit In17 surance Fund.

18 (B) OPTIONAL PRO RATA PAYMENT OF

19 SPECIAL ASSESSMENT.—This paragraph shall

20 not apply with respect to any insured depository

21 institution (or successor insured depository in22 stitution) that has paid, during any calendar

23 year from 1997 through 1999, upon such terms

24 as the Corporation may announce, an amount

25 equal to the product of—
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1 (i) 12.5 percent of the special assess2 ment that the institution would have been

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

4 Board of Directors had not exempted the

5 institution; and

6 (ii) the number of full semiannual pe7 riods remaining between the date of the

8 payment and December 31, 1999.

9 (g) SPECIAL ELECTION FOR CERTAIN INSTITUTIONS

10 FACING HARDSHIP AS A RESULT OF THE SPECIAL AS11 SESSMENT.—

12 (1) ELECTION AUTHORIZED.—If—

13 (A) an insured depository institution, or

14 any depository institution holding company

15 which, directly or indirectly, controls such insti16 tution, is subject to terms or covenants in any

17 debt obligation or preferred stock outstanding

18 on September 13, 1995; and

19 (B) the payment of the special assessment

20 under subsection (a) would pose a significant

21 risk of causing such depository institution or

22 holding company to default or violate any such

23 term or covenant,

24 the depository institution may elect, with the ap25 proval of the Corporation, to pay such special as-
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1 sessment in accordance with paragraphs (2) and (3)

2 in lieu of paying such assessment in the manner re3 quired under subsection (a).

4 (2) 1ST ASSESSMENT.—An insured depository

5 institution which makes an election under paragraph

6 (1) shall pay an assessment of 50 percent of the

7 amount of the special assessment that would other8 wise apply under subsection (a), by the date on

9 which such special assessment is otherwise due

10 under subsection (d).

11 (3) 2D ASSESSMENT.—An insured depository

12 institution which makes an election under paragraph

13 (1) shall pay a 2d assessment, by the date estab14 lished by the Board of Directors in accordance with

15 paragraph (4), in an amount equal to the product of

16 51 percent of the rate determined by the Board of

17 Directors under subsection (a) for determining the

18 amount of the special assessment and the SAIF-as19 sessable deposits of the institution on March 31,

20 1996, or such other date in calendar year 1996 as

21 the Board of Directors determines to be appropriate.

22 (4) DUE DATE OF 2D ASSESSMENT.—The date

23 established by the Board of Directors for the pay24 ment of the assessment under paragraph (3) by a

25 depository institution shall be the earliest practicable
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1 date which the Board of Directors determines to be

2 appropriate, which is at least 15 days after the date

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

4 (5) SUPPLEMENTAL SPECIAL ASSESSMENT.—

5 An insured depository institution which makes an

6 election under paragraph (1) shall pay a supple7 mental special assessment, at the same time the pay8 ment under paragraph (3) is made, in an amount

9 equal to the product of—

10 (A) 50 percent of the rate determined by

11 the Board of Directors under subsection (a) for

12 determining the amount of the special assess13 ment; and

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

15 SAIF-assessable deposits used by the Board of

16 Directors for determining the amount of the 1st

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

18 the SAIF-assessable deposits used by the Board

19 for determining the amount of the 2d assess20 ment under paragraph (3).

21 (h) ADJUSTMENT OF SPECIAL ASSESSMENT FOR

22 CERTAIN BANK INSURANCE FUND MEMBER BANKS.—

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

24 the special assessment imposed under this section

25 with respect to a Bank Insurance Fund member
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1 bank, the amount of any deposits of any insured de2 pository institution which section 5(d)(3) of the Fed3 eral Deposit Insurance Act treats as insured by the

4 Savings Association Insurance Fund shall be re5 duced by 20 percent—

6 (A) if the adjusted attributable deposit

7 amount of the Bank Insurance Fund member

8 bank is less than 50 percent of the total domes9 tic deposits of that member bank as of June 30,

10 1995; or

11 (B) if, as of June 30, 1995, the Bank In12 surance Fund member—

13 (i) had an adjusted attributable de14 posit amount equal to less than 75 percent

15 of the total assessable deposits of that

16 member bank;

17 (ii) had total assessable deposits

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

19 (iii) was owned or controlled by a

20 bank holding company that owned or con21 trolled insured depository institutions hav22 ing an aggregate amount of deposits in23 sured or treated as insured by the Bank

24 Insurance Fund greater than the aggre25 gate amount of deposits insured or treated
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1 as insured by the Savings Association In2 surance Fund.

3 (2) ADJUSTED ATTRIBUTABLE DEPOSIT

4 AMOUNT.—For purposes of this subsection, the ‘‘ad5 justed attributable deposit amount; shall be deter6 mined in accordance with section 5(d)(3)(C) of the

7 Federal Deposit Insurance Act.

8 (i) ADJUSTMENT TO THE ADJUSTED ATTRIBUTABLE

9 DEPOSIT AMOUNT FOR CERTAIN BANK INSURANCE FUND

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

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

12 (1) in subparagraph (C), by striking ‘‘The ad13 justed attributable deposit amount’’ and inserting

14 ‘‘Except as provided in subparagraph (K), the ad15 justed attributable deposit amount’’; and

16 (2) by adding at the end the following new sub17 paragraph:

18 ‘‘(K) ADJUSTMENT OF ADJUSTED ATTRIB19 UTABLE DEPOSIT AMOUNT.—The amount deter20 mined under subparagraph (C)(i) for deposits

21 acquired by March 31, 1995, shall be reduced

22 by 20 percent for purposes of computing the

23 adjusted attributable deposit amount for the

24 payment of any assessment for any semiannual

25 period after December 31, 1995 (other than the
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1 special assessment imposed under section

2 2011(a) of the Balanced Budget Act of 1995),

3 for a Bank Insurance Fund member bank that,

4 as of June 30, 1995—

5 ‘‘(i) had an adjusted attributable de6 posit amount that was less than 50 percent

7 of the total deposits of that member bank;

8 or

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

10 deposit amount equal to less than 75 per11 cent of the total assessable deposits of that

12 member bank;

13 ‘‘(II) had total assessable deposits

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

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

16 bank holding company that owned or con17 trolled insured depository institutions hav18 ing an aggregate amount of deposits in19 sured or treated as insured by the Bank

20 Insurance Fund greater than the aggre21 gate amount of deposits insured or treated

22 as insured by the Savings Association In23 surance Fund.’’.

24 (j) ADJUSTMENT OF SPECIAL ASSESSMENT FOR

25 CERTAIN SAVINGS ASSOCIATIONS.—
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1 (1) SPECIAL ASSESSMENT REDUCTION.—For

2 purposes of computing the special assessment im3 posed under this section, in the case of any con4 verted association, the amount of any deposits of

5 such association which were insured by the Savings

6 Association Insurance Fund as of March 31, 1995,

7 shall be reduced by 20 percent.

8 (2) CONVERTED ASSOCIATION.—For purposes

9 of this subsection, the term ‘‘converted association’’

10 means—

11 (A) any Federal savings association—

12 (i) that is a member of the Savings

13 Association Insurance Fund and that has

14 deposits subject to assessment by that

15 fund which did not exceed $4,000,000,000,

16 as of March 31, 1995; and

17 (ii) that had been, or is a successor by

18 merger, acquisition, or otherwise to an in19 stitution that had been, a State savings

20 bank, the deposits of which were insured

21 by the Federal Deposit Insurance Corpora22 tion prior to August 9, 1989, that con23 verted to a Federal savings association

24 pursuant to section 5(i) of the Home Own25 ers Loan Act prior to January 1, 1985;
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1 (B) a State depository institution that is a

2 member of the Savings Association Insurance

3 Fund that had been a State savings bank prior

4 to October 15, 1982, and was a Federal savings

5 association on August 9, 1989;

6 (C) an insured bank that—

7 (i) was established de novo in order to

8 acquire the deposits of a savings associa9 tion in default or in danger of default;

10 (ii) did not open for business before

11 acquiring the deposits of such savings as12 sociation; and

13 (iii) was a Savings Association Insur14 ance Fund member as of the date of enact15 ment of this Act; and

16 (D) an insured bank that—

17 (i) resulted from a savings association

18 before December 19, 1991, in accordance

19 with section 5(d)(2)(G) of the Federal De20 posit Insurance Act; and

21 (ii) had an increase in its capital in

22 conjunction with the conversion in an

23 amount equal to more than 75 percent of

24 the capital of the institution on the day be25 fore the date of the conversion.
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1 SEC. 2012. FINANCING CORPORATION ASSESSMENTS

2 SHARED PROPORTIONALLY BY ALL INSURED

3 DEPOSITORY INSTITUTIONS.

4 (a) IN GENERAL.—Section 21 of the Federal Home

5 Loan Bank Act (12 U.S.C. 1441) is amended—

6 (1) in subsection (f)(2)—

7 (A) in the matter immediately preceding

8 subparagraph (A)—

9 (i) by striking ‘‘Savings Association

10 Insurance Fund member’’ and inserting

11 ‘‘insured depository institution’’; and

12 (ii) by striking ‘‘members’’ and insert13 ing ‘‘institutions’’; and

14 (B) by striking ‘‘, except that—’’ and all

15 that follows through the end of the paragraph

16 and inserting ‘‘, except that—

17 ‘‘(A) the Financing Corporation shall have

18 first priority to make the assessment; and

19 ‘‘(B) no limitation under clause (i) or (iii)

20 of section 7(b)(2)(A) of the Federal Deposit In21 surance Act shall apply for purposes of this

22 paragraph.’’; and

23 (2) in subsection (k)—

24 (A) by striking ‘‘section—’’ and inserting

25 ‘‘section, the following definitions shall apply:’’;

26 (B) by striking paragraph (1);
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1 (C) by redesignating paragraphs (2) and

2 (3) as paragraphs (1) and (2), respectively; and

3 (D) by adding at the end the following new

4 paragraph:

5 ‘‘(3) INSURED DEPOSITORY INSTITUTION.—The

6 term ‘insured depository institution’ has the same

7 meaning as in section 3 of the Federal Deposit In8 surance Act.’’.

9 (b) CONFORMING AMENDMENT.—Section 7(b)(2) of

10 the Federal Deposit Insurance Act (12 U.S.C. 1817(b)(2))

11 is amended by striking subparagraph (D).

12 (c) EFFECTIVE DATE.—This section and the amend13 ments made by this section shall become effective on Janu14 ary 1, 1996.

15 SEC. 2013. MERGER OF BIF AND SAIF.

16 (a) IN GENERAL.—

17 (1) MERGER.—The Bank Insurance Fund and

18 the Savings Association Insurance Fund shall be

19 merged into the Deposit Insurance Fund established

20 by section 11(a)(4) of the Federal Deposit Insurance

21 Act, as amended by this section.

22 (2) DISPOSITION OF ASSETS AND LIABIL23 ITIES.—All assets and liabilities of the Bank Insur24 ance Fund and the Savings Association Insurance
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1 Fund shall be transferred to the Deposit Insurance

2 Fund.

3 (3) NO SEPARATE EXISTENCE.—The separate

4 existence of the Bank Insurance Fund and the Sav5 ings Association Insurance Fund shall cease.

6 (b) SPECIAL RESERVE OF THE DEPOSIT INSURANCE

7 FUND.—

8 (1) IN GENERAL.—Immediately before the

9 merger of the Bank Insurance Fund and the Sav10 ings Association Insurance Fund, if the reserve ratio

11 of the Savings Association Insurance Fund exceeds

12 the designated reserve ratio, the amount by which

13 that reserve ratio exceeds the designated reserve

14 ratio shall be placed in the Special Reserve of the

15 Deposit Insurance Fund, established under section

16 11(a)(5) of the Federal Deposit Insurance Act, as

17 amended by this section.

18 (2) DEFINITION.—For purposes of this sub19 section, the term ‘‘reserve ratio’’ means the ratio of

20 the net worth of the Savings Association Insurance

21 Fund to aggregate estimated insured deposits held

22 in all Savings Association Insurance Fund members.

23 (c) EFFECTIVE DATE.—This section and the amend24 ments made by this section shall become effective on Janu-
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1 ary 1, 1998, if no insured depository institution is a sav2 ings association on that date.

3 (d) TECHNICAL AND CONFORMING AMENDMENTS.—

4 (1) DEPOSIT INSURANCE FUND.—Section

5 11(a)(4) of the Federal Deposit Insurance Act (12

6 U.S.C. 1821(a)(4)) is amended—

7 (A) by redesignating subparagraph (B) as

8 subparagraph (C);

9 (B) by striking subparagraph (A) and in10 serting the following:

11 ‘‘(A) ESTABLISHMENT.—There is estab12 lished the Deposit Insurance Fund, which the

13 Corporation shall—

14 ‘‘(i) maintain and administer;

15 ‘‘(ii) use to carry out its insurance

16 purposes in the manner provided by this

17 subsection; and

18 ‘‘(iii) invest in accordance with section

19 13(a).

20 ‘‘(B) USES.—The Deposit Insurance Fund

21 shall be available to the Corporation for use

22 with respect to Deposit Insurance Fund mem23 bers.’’; and
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1 (C) by striking ‘‘(4) GENERAL PROVISIONS

2 RELATING TO FUNDS.—’’ and inserting the fol3 lowing:

4 ‘‘(4) ESTABLISHMENT OF THE DEPOSIT INSUR5 ANCE FUND.—’’.

6 (2) OTHER REFERENCES.—Section 11(a)(4)(C)

7 of the Federal Deposit Insurance Act (12 U.S.C.

8 1821(a)(4)(C), as redesignated by paragraph (1) of

9 this subsection) is amended by striking ‘‘Bank In10 surance Fund and the Savings Association Insur11 ance Fund’’ and inserting ‘‘Deposit Insurance

12 Fund’’.

13 (3) DEPOSITS INTO FUND.—Section 11(a)(4) of

14 the Federal Deposit Insurance Act (12 U.S.C.

15 1821(a)(4)) is amended by adding at the end the

16 following new subparagraph:

17 ‘‘(D) DEPOSITS.—All amounts assessed

18 against insured depository institutions by the

19 Corporation shall be deposited in the Deposit

20 Insurance Fund.’’

21 (4) SPECIAL RESERVE OF DEPOSITS.—Section

22 11(a)(5) of the Federal Deposit Insurance Act (12

23 U.S.C. 1821(a)(5)) is amended to read as follows:

24 ‘‘(5) SPECIAL RESERVE OF DEPOSIT INSUR25 ANCE FUND.—
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1 ‘‘(A) ESTABLISHMENT.—

2 ‘‘(i) IN GENERAL.—There is estab3 lished a Special Reserve of the Deposit In4 surance Fund, which shall be administered

5 by the Corporation and shall be invested in

6 accordance with section 13(a).

7 ‘‘(ii) LIMITATION.—The Corporation

8 shall not provide any assessment credit, re9 fund, or other payment from any amount

10 in the Special Reserve.

11 ‘‘(B) EMERGENCY USE OF SPECIAL RE12 SERVE.—Notwithstanding subparagraph (A)(ii),

13 the Corporation may, in its sole discretion,

14 transfer amounts from the Special Reserve to

15 the Deposit Insurance Fund, for the purposes

16 set forth in paragraph (4), only if—

17 ‘‘(i) the reserve ratio of the Deposit

18 Insurance Fund is less than 50 percent of

19 the designated reserve ratio; and

20 ‘‘(ii) the Corporation expects the re21 serve ratio of the Deposit Insurance Fund

22 to remain at less than 50 percent of the

23 designated reserve ratio for each of the

24 next 4 calendar quarters.
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1 ‘‘(C) EXCLUSION OF SPECIAL RESERVE IN

2 CALCULATING RESERVE RATIO.—Notwithstand3 ing any other provision of law, any amounts in

4 the Special Reserve shall be excluded in cal5 culating the reserve ratio of the Deposit Insur6 ance Fund under section 7.’’.

7 (5) FEDERAL HOME LOAN BANK ACT.—Section

8 21B(f)(2)(C)(ii) of the Federal Home Loan Bank

9 Act (12 U.S.C. 1441b(f)(2)(C)(ii)) is amended—

10 (A) in subclause (I), by striking ‘‘to Sav11 ings Associations Insurance Fund members’’

12 and inserting ‘‘to insured depository institu13 tions, and their successors, which were Savings

14 Association Insurance Fund members on Sep15 tember 1, 1995’’; and

16 (B) in subclause (II), by striking ‘‘to Sav17 ings Associations Insurance Fund members’’

18 and inserting ‘‘to insured depository institu19 tions, and their successors, which were Savings

20 Association Insurance Fund members on Sep21 tember 1, 1995’’.

22 (6) REPEALS.—

23 (A) SECTION 3.—Section 3(y) of the Fed24 eral Deposit Insurance Act (12 U.S.C. 1813(y))

25 is amended to read as follows:
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1 ‘‘(y) DEFINITIONS RELATING TO THE DEPOSIT IN2 SURANCE FUND.—The term—

3 ‘‘(1) DEPOSIT INSURANCE FUND.—The term

4 ‘Deposit Insurance Fund’ means the fund estab5 lished under section 11(a)(4).

6 ‘‘(2) RESERVE RATIO.—The term ‘reserve ratio’

7 means the ratio of the net worth of the Deposit In8 surance Fund to aggregate estimated insured depos9 its held in all insured depository institutions.

10 ‘‘(3) DESIGNATED RESERVE RATIO.—The des11 ignated reserve ratio of the Deposit Insurance Fund

12 for each year shall be—

13 ‘‘(A) 1.25 percent of estimated insured de14 posits; or

15 ‘‘(B) a higher percentage of estimated in16 sured deposits that the Board of Directors de17 termines to be justified for that year by cir18 cumstances raising a significant risk of sub19 stantial future losses to the fund.’’.

20 (B) SECTION 7.—Section 7 of the Federal

21 Deposit Insurance Act (12 U.S.C. 1817) is

22 amended—

23 (i) by striking subsection (l);
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1 (ii) by redesignating subsections (m)

2 and (n) as subsections (l) and (m), respec3 tively; and

4 (iii) in subsection (b)(2), by striking

5 subparagraphs (B) and (F), and by redes6 ignating subparagraphs (C), (E), (G), and

7 (H) as subparagraphs (B) through (E), re8 spectively.

9 (C) SECTION 11.—Section 11(a) of the

10 Federal Deposit Insurance Act (12 U.S.C.

11 1821(a)) is amended—

12 (i) by striking paragraphs (6) and (7);

13 and

14 (ii) by redesignating paragraph (8) as

15 paragraph (6).

16 (7) SECTION 5136 OF THE REVISED STAT17 UTES.—Paragraph Eleventh of section 5136 of the

18 Revised Statutes (12 U.S.C. 24) is amended in the

19 fifth sentence, by striking ‘‘affected deposit insur20 ance fund’’ and inserting ‘‘Deposit Insurance

21 Fund’’.

22 (8) INVESTMENTS PROMOTING PUBLIC WEL23 FARE; LIMITATIONS ON AGGREGATE INVEST24 MENTS.—The 23d undesignated paragraph of sec25 tion 9 of the Federal Reserve Act (12 U.S.C. 338a)
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1 is amended in the fourth sentence, by striking ‘‘af2 fected deposit insurance fund’’ and inserting ‘‘De3 posit Insurance Fund’’.

4 (9) ADVANCES TO CRITICALLY

5 UNDERCAPITALIZED DEPOSITORY INSTITUTIONS.—

6 Section 10B(b)(3)(A)(ii) of the Federal Reserve Act

7 (12 U.S.C. 347b(b)(3)(A)(ii)) is amended by striking

8 ‘‘any deposit insurance fund in’’ and inserting ‘‘the

9 Deposit Insurance Fund of’’.

10 (10) AMENDMENTS TO THE BALANCED BUDGET

11 AND EMERGENCY DEFICIT CONTROL ACT OF 1985.—

12 Section 255(g)(1)(A) of the Balanced Budget and

13 Emergency Deficit Control Act of 1985 (2 U.S.C.

14 905(g)(1)(A)) is amended—

15 (A) by striking ‘‘Bank Insurance Fund’’

16 and inserting ‘‘Deposit Insurance Fund’’; and

17 (B) by striking ‘‘Federal Deposit Insur18 ance Corporation, Savings Association Insur19 ance Fund;’’.

20 (11) FURTHER AMENDMENTS TO THE FEDERAL

21 HOME LOAN BANK ACT.—The Federal Home Loan

22 Bank Act (12 U.S.C. 1421 et seq.) is amended—

23 (A) in section 11(k) (12 U.S.C.

24 1431(k))—
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1 (i) in the subsection heading, by strik2 ing, ‘‘SAIF’’ and inserting ‘‘THE DEPOSIT

3 INSURANCE FUND’’; and

4 (ii) by striking ‘‘Savings Association

5 Insurance Fund’’ each place such term ap6 pears and inserting ‘‘Deposit Insurance

7 Fund’’;

8 (B) in section 21A(b)(4)(B) (12 U.S.C.

9 1441a(b)(4)(B)), by striking ‘‘affected deposit

10 insurance fund’’ and inserting ‘‘Deposit Insur11 ance Fund’’;

12 (C) in section 21A(b)(6)(B) (12 U.S.C.

13 1441a(b)(6)(B))—

14 (i) in the subparagraph heading, by

15 striking ‘‘SAIF-INSURED BANKS’’ and in16 serting ‘‘CHARTER CONVERSIONS’’; and

17 (ii) by striking ‘‘Savings Association

18 Insurance Fund member’’ and inserting

19 ‘‘savings association’’;

20 (D) in section 21A(b)(10)(A)(iv)(II) (12

21 U.S.C. 1441a(b)(10)(A)(iv)(II)), by striking

22 ‘‘Savings Association Insurance Fund’’ and in23 serting ‘‘Deposit Insurance Fund’’;

24 (E) in section 21B(e) (12 U.S.C.

25 1441b(e))—
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1 (i) in paragraph (5), by inserting ‘‘as

2 of the date of funding’’ after ‘‘Savings As3 sociation Insurance Fund members’’ each

4 place such term appears;

5 (ii) by striking paragraph (7); and

6 (iii) by redesignating paragraph (8) as

7 paragraph (7); and

8 (F) in section 21B(k) (12 U.S.C.

9 1441b(k))—

10 (i) by striking paragraph (8); and

11 (ii) by redesignating paragraphs (9)

12 and (10) as paragraphs (8) and (9), re13 spectively.

14 (12) AMENDMENTS TO THE HOME OWNERS’

15 LOAN ACT.—The Home Owners’ Loan Act (12

16 U.S.C. 1461 et seq.) is amended—

17 (A) in section 5 (12 U.S.C. 1464)—

18 (i) in subsection (c)(5)(A), by striking

19 ‘‘that is a member of the Bank Insurance

20 Fund’’;

21 (ii) in subsection (c)(6), by striking

22 ‘‘As used in this subsection—’’ and insert23 ing ‘‘For purposes of this subsection, the

24 following definitions shall apply:’’;
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1 (iii) in subsection (o)(1), by striking

2 ‘‘that is a Bank Insurance Fund member’’;

3 (iv) in subsection (o)(2)(A), by strik4 ing ‘‘a Bank Insurance Fund member until

5 such time as it changes its status to a Sav6 ings Association Insurance Fund member’’

7 and inserting ‘‘insured by the Deposit In8 surance Fund’’;

9 (v) in subsection (t)(5)(D)(iii)(II), by

10 striking ‘‘affected deposit insurance fund’’

11 and inserting ‘‘Deposit Insurance Fund’’;

12 (vi) in subsection (t)(7)(C)(i)(I), by

13 striking ‘‘affected deposit insurance fund’’

14 and inserting ‘‘Deposit Insurance Fund’’;

15 and

16 (vii) in subsection (v)(2)(A)(i), by

17 striking ‘‘, the Savings Association Insur18 ance Fund’’ and inserting ‘‘or the Deposit

19 Insurance Fund’’; and

20 (B) in section 10 (12 U.S.C. 1467a)—

21 (i) in subsection (e)(1)(A)(iii)(VII), by

22 adding ‘‘or’’ at the end;

23 (ii) in subsection (e)(1)(A)(iv), by

24 adding ‘‘and’’ at the end;
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1 (iii) in subsection (e)(1)(B), by strik2 ing ‘‘Savings Association Insurance Fund

3 or Bank Insurance Fund’’ and inserting

4 ‘‘Deposit Insurance Fund’’;

5 (iv) in subsection (e)(2), by striking

6 ‘‘Savings Association Insurance Fund or

7 the Bank Insurance Fund’’ and inserting

8 ‘‘Deposit Insurance Fund’’; and

9 (v) in subsection (m)(3), by striking

10 subparagraph (E), and by redesignating

11 subparagraphs (F), (G), and (H) as sub12 paragraphs (E), (F), and (G), respectively.

13 (13) AMENDMENTS TO THE NATIONAL HOUSING

14 ACT.—The National Housing Act (12 U.S.C. 1701

15 et seq.) is amended—

16 (A) in section 317(b)(1)(B) (12 U.S.C.

17 1723i(b)(1)(B)), by striking ‘‘Bank Insurance

18 Fund for banks or through the Savings Asso19 ciation Insurance Fund for savings associa20 tions’’ and inserting ‘‘Deposit Insurance Fund’’;

21 and

22 (B) in section 526(b)(1)(B)(ii) (12 U.S.C.

23 1735f–14(b)(1)(B)(ii)), by striking ‘‘Bank In24 surance Fund for banks and through the Sav25 ings Association Insurance Fund for savings as-
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1 sociations’’ and inserting ‘‘Deposit Insurance

2 Fund’’.

3 (14) FURTHER AMENDMENTS TO THE FEDERAL

4 DEPOSIT INSURANCE ACT.—The Federal Deposit In5 surance Act (12 U.S.C. 1811 et seq.) is amended—

6 (A) in section 3(a)(1) (12 U.S.C.

7 1813(a)(1)), by striking subparagraph (B) and

8 inserting the following:

9 ‘‘(B) includes any former savings associa10 tion.’’;

11 (B) in section 5(b)(5) (12 U.S.C.

12 1815(b)(5)), by striking ‘‘the Bank Insurance

13 Fund or the Savings Association Insurance

14 Fund;’’ and inserting ‘‘Deposit Insurance

15 Fund,’’;

16 (C) in section 5(d) (12 U.S.C. 1815(d)),

17 by striking paragraphs (2) and (3);

18 (D) in section 5(d)(1) (12 U.S.C.

19 1815(d)(1))—

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

21 ‘‘reserve ratios in the Bank Insurance

22 Fund and the Savings Association Insur23 ance Fund’’ and inserting ‘‘the reserve

24 ratio of the Deposit Insurance Fund’’;
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1 (ii) by striking subparagraph (B) and

2 inserting the following:

3 ‘‘(2) FEE CREDITED TO THE DEPOSIT INSUR4 ANCE FUND.—The fee paid by the depository insti5 tution under paragraph (1) shall be credited to the

6 Deposit Insurance Fund.’’;

7 (iii) by striking ‘‘(1) UNINSURED IN8 STITUTIONS.—’’; and

9 (iv) by redesignating subparagraphs

10 (A) and (C) as paragraphs (1) and (3), re11 spectively, and moving the margins 2 ems

12 to the left;

13 (E) in section 5(e) (12 U.S.C. 1815(e))—

14 (i) in paragraph (5)(A), by striking

15 ‘‘Bank Insurance Fund or the Savings As16 sociation Insurance Fund’’ and inserting

17 ‘‘Deposit Insurance Fund’’;

18 (ii) by striking paragraph (6); and

19 (iii) by redesignating paragraphs (7),

20 (8), and (9) as paragraphs (6), (7), and

21 (8), respectively;

22 (F) in section 6(5) (12 U.S.C. 1816(5)),

23 by striking ‘‘Bank Insurance Fund or the Sav24 ings Association Insurance Fund’’ and inserting

25 ‘‘Deposit Insurance Fund’’;
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1 (G) in section 7(b) (12 U.S.C. 1817(b))—

2 (i) in paragraph (1)(D), by striking

3 ‘‘each deposit insurance fund’’ and insert4 ing ‘‘the Deposit Insurance Fund’’;

5 (ii) in clauses (i)(I) and (iv) of para6 graph (2)(A), by striking ‘‘each deposit in7 surance fund’’ each place such term ap8 pears and inserting ‘‘the Deposit Insurance

9 Fund’’;

10 (iii) in paragraph (2)(A)(iii), by strik11 ing ‘‘a deposit insurance fund’’ and insert12 ing ‘‘the Deposit Insurance Fund’’;

13 (iv) by striking clause (iv) of para14 graph (2)(A);

15 (v) in paragraph (2)(C) (as redesig16 nated by paragraph (6)(B) of this sub17 section)—

18 (I) by striking ‘‘any deposit in19 surance fund’’ and inserting ‘‘the De20 posit Insurance Fund’’; and

21 (II) by striking ‘‘that fund’’ each

22 place such term appears and inserting

23 ‘‘the Deposit Insurance Fund’’;
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1 (vi) in paragraph (2)(D) (as redesig2 nated by paragraph (6)(B) of this sub3 section)—

4 (I) in the subparagraph heading,

5 by striking ‘‘FUNDS ACHIEVE’’ and in6 serting ‘‘FUND ACHIEVES’’; and

7 (II) by striking ‘‘a deposit insur8 ance fund’’ and inserting ‘‘the Deposit

9 Insurance Fund’’;

10 (vii) in paragraph (3)—

11 (I) in the paragraph heading, by

12 striking ‘‘FUNDS’’ and inserting

13 ‘‘FUND’’;

14 (II) by striking ‘‘that fund’’ each

15 place such term appears and inserting

16 the ‘‘the Deposit Insurance Fund’’;

17 (III) in subparagraph (A), by

18 striking ‘‘Except as provided in para19 graph (2)(F), if’’ and inserting ‘‘If’’;

20 (IV) in subparagraph (A) by

21 striking ‘‘any deposit insurance fund’’

22 and inserting ‘‘the Deposit Insurance

23 Fund’’; and
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1 (V) by striking subparagraphs

2 (C) and (D) and inserting the follow3 ing:

4 ‘‘(C) AMENDING SCHEDULE.—The Cor5 poration may, by regulation, amend a schedule

6 promulgated under subparagraph (B).’’; and

7 (viii) in paragraph (6)—

8 (I) by striking ‘‘any such assess9 ment’’ and inserting ‘‘any such assess10 ment is necessary’’;

11 (II) by striking ‘‘(A) is nec12 essary—’’;

13 (III) by striking subparagraph

14 (B);

15 (IV) by redesignating clauses (i),

16 (ii), and (iii) as subparagraphs (A),

17 (B), and (C), respectively, and moving

18 the margin 2 ems to the left; and

19 (V) in subparagraph (C) (as re20 designated), by striking ‘‘; and’’ and

21 inserting a period;

22 (H) in section 11(f)(1) (12 U.S.C.

23 1821(f)(1)), by striking ‘‘, except that—’’ and

24 all that follows through the end of the para25 graph and inserting a period;
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1 (I) in section 11(i)(3) (12 U.S.C.

2 1821(i)(3))—

3 (i) by striking subparagraph (B);

4 (ii) by redesignating subparagraph

5 (C) as subparagraph (B); and

6 (iii) in subparagraph (B) (as redesig7 nated), by striking ‘‘subparagraphs (A)

8 and (B)’’ and inserting ‘‘subparagraph

9 (A)’’;

10 (J) in section 11A(a) (12 U.S.C.

11 1821a(a))—

12 (i) in paragraph (2), by striking ‘‘LI13 ABILITIES.—’’ and all that follows through

14 ‘‘Except’’ and inserting ‘‘LIABILITIES.—

15 Except’’;

16 (ii) by striking paragraph (2)(B); and

17 (iii) in paragraph (3), by striking ‘‘the

18 Bank Insurance Fund, the Savings Asso19 ciation Insurance Fund,’’ and inserting

20 ‘‘the Deposit Insurance Fund,’’;

21 (K) in section 11A(b) (12 U.S.C.

22 1821a(b)), by striking paragraph (4);

23 (L) in section 11a(f) (12 U.S.C. 1821a(f)),

24 by striking ‘‘Savings Association Insurance
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1 Fund’’ and inserting ‘‘Deposit Insurance

2 Fund’’;

3 (M) in section 13 (12 U.S.C. 1823)—

4 (i) in subsection (a)(1), by striking

5 ‘‘Bank Insurance Fund, the Savings Asso6 ciation Insurance Fund,’’ and inserting

7 ‘‘Deposit Insurance Fund, the Special Re8 serve of the Deposit Insurance Fund,’’;

9 (ii) in subsection (c)(4)(E)—

10 (I) in the subparagraph heading,

11 by striking ‘‘FUNDS’’ and inserting

12 ‘‘FUND’’; and

13 (II) in clause (i), by striking

14 ‘‘any insurance fund’’ and inserting

15 ‘‘the Deposit Insurance Fund’’;

16 (iii) in subsection (c)(4)(G)(ii)—

17 (I) by striking ‘‘appropriate in18 surance fund’’ and inserting ‘‘Deposit

19 Insurance Fund’’;

20 (II) by striking ‘‘the members of

21 the insurance fund (of which such in22 stitution is a member)’’ and inserting

23 ‘‘insured depository institutions’’;
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1 (III) by striking ‘‘each mem2 ber’s’’ and inserting ‘‘each insured de3 pository institution’s’’; and

4 (IV) by striking ‘‘the member’s’’

5 each place such term appears and in6 serting ‘‘the institution’s’’;

7 (iv) in subsection (c), by striking

8 paragraph (11);

9 (v) in subsection (h), by striking

10 ‘‘Bank Insurance Fund’’ and inserting

11 ‘‘Deposit Insurance Fund’’;

12 (vi) in subsection (K)(4)(B)(i), by

13 striking ‘‘Savings Association Insurance

14 Fund’’ and inserting ‘‘Deposit Insurance

15 Fund’’; and

16 (vii) in subsection (k)(5)(A), by strik17 ing ‘‘Savings Association Insurance Fund’’

18 and inserting ‘‘Deposit Insurance Fund’’;

19 (N) in section 14(a) (12 U.S.C. 1824(a))

20 in the fifth sentence—

21 (i) by striking ‘‘Bank Insurance Fund

22 or the Savings Association Insurance

23 Fund’’ and inserting ‘‘Deposit Insurance

24 Fund’’; and
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1 (ii) by striking ‘‘each such fund’’ and

2 inserting ‘‘the Deposit Insurance Fund’’;

3 (O) in section 14(b) (12 U.S.C. 1824(b)),

4 by striking ‘‘Bank Insurance Fund or Savings

5 Association Insurance Fund’’ and inserting

6 ‘‘Deposit Insurance Fund’’;

7 (P) in section 14(c) (12 U.S.C. 1824(c)),

8 by striking paragraph (3);

9 (Q) in section 14(d) (12 U.S.C.

10 1824(d))—

11 (i) by striking ‘‘BIF’’ each place such

12 term appears and inserting ‘‘DIF’’; and

13 (ii) by striking ‘‘Bank Insurance

14 Fund’’ each place such term appears and

15 inserting ‘‘Deposit Insurance Fund’’;

16 (R) in section 15(c)(5) (12 U.S.C.

17 1825(c)(5))—

18 (i) by striking ‘‘the Bank Insurance

19 Fund or Savings Association Insurance

20 Fund, respectively’’ each place such term

21 appears and inserting ‘‘the Deposit Insur22 ance Fund’’; and

23 (ii) in subparagraph (B), by striking

24 ‘‘the Bank Insurance Fund or the Savings

25 Association Insurance Fund, respectively’’
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1 and inserting ‘‘the Deposit Insurance

2 Fund’’;

3 (S) in section 17(a) (12 U.S.C. 1827(a))—

4 (i) in the subsection heading, by strik5 ing ‘‘BIF, SAIF,’’ and inserting ‘‘THE DE6 POSIT INSURANCE FUND’’; and

7 (ii) in paragraph (1), by striking ‘‘the

8 Bank Insurance Fund, the Savings Asso9 ciation Insurance Fund’’ each place such

10 term appears and inserting ‘‘the Deposit

11 Insurance Fund’’;

12 (T) in section 17(d) (12 U.S.C. 1827(d)),

13 by striking ‘‘the Bank Insurance Fund, the

14 Savings Association Insurance Fund,’’ each

15 place such term appears and inserting ‘‘the De16 posit Insurance Fund’’;

17 (U) in section 18(m)(3) (12 U.S.C.

18 1828(m)(3))—

19 (i) by striking ‘‘Savings Association

20 Insurance Fund’’ each place such term ap21 pears and inserting ‘‘Deposit Insurance

22 Fund’’; and

23 (ii) in subparagraph (C), by striking

24 ‘‘or the Bank Insurance Fund’’;
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1 (V) in section 18(p) (12 U.S.C. 1828(p)),

2 by striking ‘‘deposit insurance funds’’ and in3 serting ‘‘Deposit Insurance Fund’’;

4 (W) in section 24 (12 U.S.C. 1831a) in

5 subsections (a)(1) and (d)(1)(A), by striking

6 ‘‘appropriate deposit insurance fund’’ each

7 place such term appears and inserting ‘‘Deposit

8 Insurance Fund’’;

9 (X) in section 28 (12 U.S.C. 1831e), by

10 striking ‘‘affected deposit insurance fund’’ each

11 place such term appears and inserting ‘‘Deposit

12 Insurance Fund’’;

13 (Y) by striking section 31 (12 U.S.C.

14 1831h);

15 (Z) in section 36(i)(3) (12 U.S.C.

16 1831m(i)(3)) by striking ‘‘affected deposit in17 surance fund’’ and inserting ‘‘Deposit Insur18 ance Fund’’;

19 (AA) in section 38(a) (12 U.S.C.

20 1831o(a)) in the subsection heading, by striking

21 ‘‘FUNDS’’ and inserting ‘‘FUND’’;

22 (BB) in section 38(k) (12 U.S.C.

23 1831o(k))—
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1 (i) in paragraph (1), by striking ‘‘a

2 deposit insurance fund’’ and inserting ‘‘the

3 Deposit Insurance Fund’’; and

4 (ii) in paragraph (2)(A)—

5 (I) by striking ‘‘A deposit insur6 ance fund’’ and inserting ‘‘The De7 posit Insurance Fund’’; and

8 (II) by striking ‘‘the deposit in9 surance fund’s outlays’’ and inserting

10 ‘‘the outlays of the Deposit Insurance

11 Fund’’; and

12 (CC) in section 38(o) (12 U.S.C.

13 1831o(o))—

14 (i) by striking ‘‘ASSOCIATIONS.—’’

15 and all that follows through ‘‘Subsections

16 (e)(2)’’ and inserting ‘‘ASSOCIATIONS.—

17 Subsections (e)(2)’’;

18 (ii) by redesignating subparagraphs

19 (A), (B), and (C) as paragraphs (1), (2),

20 and (3), respectively, and moving the mar21 gins 2 ems to the left; and

22 (iii) in paragraph (1) (as redesig23 nated), by redesignating clauses (i) and (ii)

24 as subparagraphs (A) and (B), respec-
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1 tively, and moving the margins 2 ems to

2 the left.

3 (15) AMENDMENTS TO THE FINANCIAL INSTI4 TUTIONS REFORM, RECOVERY, AND ENFORCEMENT

5 ACT OF 1989.—The Financial Institutions Reform,

6 Recovery, and Enforcement Act (Public Law 101–

7 73; 103 Stat. 183) is amended—

8 (A) in section 951(b)(3)(B) (12 U.S.C.

9 1833a(b)(3)(B)), by striking ‘‘Bank Insurance

10 Fund, the Savings Association Insurance

11 Fund,’’ and inserting ‘‘Deposit Insurance

12 Fund’’; and

13 (B) in section 1112(c)(1)(B) (12 U.S.C.

14 3341(c)(1)(B)), by striking ‘‘Bank Insurance

15 Fund, the Savings Association Insurance

16 Fund,’’ and inserting ‘‘Deposit Insurance

17 Fund’’.

18 (16) AMENDMENT TO THE BANK ENTERPRISE

19 ACT OF 1991.—Section 232(a)(1) of the Bank Enter20 prise Act of 1991 (12 U.S.C. 1834(a)(1)) is amend21 ed by striking ‘‘section 7(b)(2)(H)’’ and inserting

22 ‘‘section 7(b)(2)(G)’’.

23 (17) AMENDMENT TO THE BANK HOLDING

24 COMPANY ACT.—Section 2(j)(2) of the Bank Hold25 ing Company Act of 1956 (12 U.S.C. 1841(j)(2)) is
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1 amended by striking ‘‘Savings Association Insurance

2 Fund’’ and inserting ‘‘Deposit Insurance Fund’’.

3 SEC. 2014. CREATION OF SAIF SPECIAL RESERVE.

4 Section 11(a)(6) of the Federal Deposit Insurance

5 Act (12 U.S.C. 1821(a)(6)) is amended by adding at the

6 end the following new subparagraph:

7 ‘‘(L) ESTABLISHMENT OF SAIF SPECIAL

8 RESERVE.—

9 ‘‘(i) ESTABLISHMENT.—If, on Janu10 ary 1, 1998, the reserve ratio of the Sav11 ings Association Insurance Fund exceeds

12 the designated reserve ratio, there is estab13 lished a Special Reserve of the Savings As14 sociation Insurance Fund, which shall be

15 administered by the Corporation and shall

16 be invested in accordance with section

17 13(a).

18 ‘‘(ii) AMOUNTS IN SPECIAL RE19 SERVE.—If, on January 1, 1998, the re20 serve ratio of the Savings Association In21 surance Fund exceeds the designated re22 serve ratio, the amount by which the re23 serve ratio exceeds the designated reserve

24 ratio shall be placed in the Special Reserve
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1 of the Savings Association Insurance Fund

2 established by clause (i).

3 ‘‘(iii) LIMITATION.—The Corporation

4 shall not provide any assessment credit, re5 fund, or other payment from any amount

6 in the Special Reserve of the Savings Asso7 ciation Insurance Fund.

8 ‘‘(iv) EMERGENCY USE OF SPECIAL

9 RESERVE.—Notwithstanding clause (iii),

10 the Corporation may, in its sole discretion,

11 transfer amounts from the Special Reserve

12 of the Savings Association Insurance Fund

13 to the Savings Association Insurance Fund

14 for the purposes set forth in paragraph

15 (4), only if—

16 ‘‘(I) the reserve ratio of the Sav17 ings Association Insurance Fund is

18 less than 50 percent of the designated

19 reserve ratio; and

20 ‘‘(II) the Corporation expects the

21 reserve ratio of the Savings Associa22 tion Insurance Fund to remain at less

23 than 50 percent of the designated re24 serve ratio for each of the next 4 cal25 endar quarters.
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1 ‘‘(v) EXCLUSION OF SPECIAL RE2 SERVE IN CALCULATING RESERVE

3 RATIO.—Notwithstanding any other provi4 sion of law, any amounts in the Special

5 Reserve of the Savings Association Insur6 ance Fund shall be excluded in calculating

7 the reserve ratio of the Savings Association

8 Insurance Fund.’’.

9 SEC. 2015. REFUND OF AMOUNTS IN DEPOSIT INSURANCE

10 FUND IN EXCESS OF DESIGNATED RESERVE

11 AMOUNT.

12 Subsection (e) of section 7 of the Federal Deposit In13 surance Act (12 U.S.C. 1817(e)) is amended to read as

14 follows:

15 ‘‘(e) REFUNDS.—

16 ‘‘(1) OVERPAYMENTS.—In the case of any pay17 ment of an assessment by an insured depository in18 stitution in excess of the amount due to the Cor19 poration, the Corporation may—

20 ‘‘(A) refund the amount of the excess pay21 ment to the insured depository institution; or

22 ‘‘(B) credit such excess amount toward the

23 payment of subsequent semiannual assessments

24 until such credit is exhausted.
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1 ‘‘(2) BALANCE IN INSURANCE FUND IN EXCESS

2 OF DESIGNATED RESERVE.—

3 ‘‘(A) IN GENERAL.—Subject to subpara4 graphs (B) and (C), if, as of the end of any

5 semiannual assessment period, the amount of

6 the actual reserves in—

7 ‘‘(i) the Bank Insurance Fund (until

8 the merger of such fund into the Deposit

9 Insurance Fund pursuant to section 2013

10 of the Balanced Budget Act of 1995); or

11 ‘‘(ii) the Deposit Insurance Fund

12 (after the establishment of such fund),

13 exceeds the balance required to meet the des14 ignated reserve ratio applicable with respect to

15 such fund, such excess amount shall be re16 funded to insured depository institutions by the

17 Corporation on such basis as the Board of Di18 rectors determines to be appropriate, taking

19 into account the factors considered under the

20 risk-based assessment system.

21 ‘‘(B) REFUND NOT TO EXCEED PREVIOUS

22 SEMIANNUAL ASSESSMENT.—The amount of

23 any refund under this paragraph to any mem24 ber of a deposit insurance fund for any semi25 annual assessment period may not exceed the
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1 total amount of assessments paid by such mem2 ber to the insurance fund with respect to such

3 period.

4 ‘‘(C) REFUND LIMITATION FOR CERTAIN

5 INSTITUTIONS.—No refund may be made under

6 this paragraph with respect to the amount of

7 any assessment paid for any semiannual assess8 ment period by any insured depository institu9 tions described in clause (v) of subsection

10 (b)(2)(A).’’.

11 SEC. 2016. ASSESSMENT RATES FOR SAIF MEMBERS MAY

12 NOT BE LESS THAN ASSESSMENT RATES FOR

13 BIF MEMBERS.

14 Section 7(b)(2)(C) of the Federal Deposit Insurance

15 Act (12 U.S.C. 1817)(2)(E), as redesignated by section

16 2013(d)(6) of this Act) is amended—

17 (1) by striking ‘‘and’’ at the end of clause (i);

18 (2) by striking the period at the end of clause

19 (ii) and inserting ‘‘; and’’; and

20 (3) by adding at the end of the following new

21 clause:

22 ‘‘(iii) notwithstanding any other provi23 sion of this subsection, during the period

24 beginning on the date of enactment of the

25 Balanced Budget Act of 1995, and ending
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1 on January 1, 1998, the assessment rate

2 for a Savings Association Insurance Fund

3 member may not be less than the assess4 ment rate for a Bank Insurance Fund

5 member that poses a comparable risk to

6 the deposit insurance fund.’’.

7 SEC. 2017. ASSESSMENTS AUTHORIZED ONLY IF NEEDED

8 TO MAINTAIN THE RESERVE RATIO OF A DE9 POSIT INSURANCE FUND.

10 (a) IN GENERAL.—Section 7(b)(2)(A)(i) of the Fed11 eral Deposit Insurance Act (12 U.S.C. 1817(b)(2)(A)(i))

12 is amended in the matter preceding subclause (I) by in13 serting ‘‘when necessary, and only to the extent nec14 essary’’ after ‘‘insured depository institutions’’.

15 (b) LIMITATION ON ASSESSMENT.—Section

16 7(b)(2)(A)(iii) of the Federal Deposit Insurance Act (12

17 U.S.C. 1817(b)(2)(A)(iii)) is amended to read as follows:

18 ‘‘(iii) LIMITATION ON ASSESSMENT.—

19 Except as provided in clause (v), the Board

20 of Directors shall not set semiannual as21 sessments with respect to a deposit insur22 ance fund in excess of the amount need23 ed—
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1 ‘‘(I) to maintain the reserve ratio

2 of the fund at the designated reserve

3 ratio; or

4 ‘‘(II) if the reserve ratio is less

5 than the designated reserve ratio, to

6 increase the reserve ratio to the des7 ignated reserve ratio.’’.

8 (c) EXCEPTION TO LIMITATION ON ASSESSMENTS.—

9 Section 7(b)(2)(A) of the Federal Deposit Insurance Act

10 (12 U.S.C. 1817(b)(2)(A)) is amended by adding at the

11 end of the following new clause:

12 ‘‘(v) EXCEPTION TO LIMITATION ON

13 ASSESSMENTS.—The Board of Directors

14 may set semiannual assessments in excess

15 of the amount permitted under clauses (i)

16 and (iii) with respect to insured depository

17 institutions that exhibit financial, oper18 ational, or compliance weaknesses ranging

19 from moderately severe to unsatisfactory,

20 or are not well capitalized, as that term is

21 defined in section 38.’’.
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1 SEC. 2018. LIMITATION ON AUTHORITY OF OVERSIGHT

2 BOARD TO CONTINUE TO EMPLOY MORE

3 THAN 18 OFFICERS AND EMPLOYEES.

4 (a) IN GENERAL.—Section 21A(a) of the Federal

5 Home Loan Bank Act (12 U.S.C. 1441a(a)) is amended

6 by adding at the end the following new paragraph:

7 ‘‘(17) PHASED-DOWN OPERATION OF OVER8 SIGHT BOARD FOLLOWING TERMINATION OF COR9 PORATION.—

10 ‘‘(A) TERMINATION OF AUTHORITY TO EM11 PLOY STAFF.—Except as provided in subpara12 graph (B), the authority of the Thrift Depositor

13 Protection Oversight Board under paragraph

14 (5) to establish officer and employee positions,

15 to compensate officers and employees of the

16 Board, and to provide other benefits for officers

17 and employees of the Board shall terminate as

18 of December 31, 1995.

19 ‘‘(B) LIMITED AUTHORITY FOR EMPLOY20 ING STAFF.—The Thrift Depositor Protection

21 Oversight Board may employ not more than 18

22 individuals, excluding any employee of any

23 other department or agency utilized by the

24 Board, to carry out the functions of the Board

25 during the period beginning on January 1,

26 1996 and ending on May 1, 1996, other than
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1 employees whose employment is in the process

2 of being terminated in accordance with sub3 paragraph (C).

4 ‘‘(C) TERMINATION OF EMPLOYMENT OF

5 ADDITIONAL EMPLOYEES REQUIRED TO BE

6 COMMENCED.—The Thrift Depositor Protection

7 Oversight Board shall commence terminating,

8 not later than December 31, 1995, and in ac9 cordance with title 5, United States Code, and

10 applicable regulations of the Office of Personnel

11 Management, the employment of any employee

12 of the Board whose continued employment by

13 the Board after such date is inconsistent with

14 the requirement of subparagraph (B).’’.

15 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

16 Section 21A(a)(5) of the Federal Home Loan Bank Act

17 (12 U.S.C. 1441a(a)(5)) is amended in subparagraphs

18 (B), (C), (D), and (E), by inserting ‘‘subject to paragraph

19 (17)’’, after the closing parenthesis of the subparagraph

20 designation in each such subparagraph.

21 SEC. 2019. DEFINITIONS.

22 For purposes of this subtitle—

23 (1) the term ‘‘Bank Insurance Fund’’ means

24 the fund established pursuant to section

25 (11)(a)(5)(A) of the Federal Deposit Insurance Act,
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1 as that section existed on the day before the date of

2 enactment of this Act;

3 (2) the terms ‘‘Bank Insurance Fund member’’

4 and ‘‘Savings Association Insurance Fund member’’

5 have the same meanings as in section 7(l) of the

6 Federal Deposit Insurance Act;

7 (3) the terms ‘‘bank’’, ‘‘Board of Directors’’,

8 ‘‘Corporation’’, ‘‘insured depository institution’’,

9 ‘‘Federal savings association’’, ‘‘savings association’’,

10 ‘‘State savings bank’’, and ‘‘State depository institu11 tion’’ have the same meanings as in section 3 of the

12 Federal Deposit Insurance Act;

13 (4) the term ‘‘Deposit Insurance Fund’’ means

14 the fund established under section 11(a)(4) of the

15 Federal Deposit Insurance Act, as amended by sec16 tion 2013(d) of this Act;

17 (5) the term ‘‘depository institution holding

18 company’’ has the same meaning as in section 3 of

19 the Federal Deposit Insurance Act;

20 (6) the term ‘‘designated reserve ratio’’ has the

21 same meaning as in section 7(b)(2)(A)(iv) of the

22 Federal Deposit Insurance Act;

23 (7) the term ‘‘Savings Association Insurance

24 Fund’’ means the fund established pursuant to sec25 tion 11(a)(6)(A) of the Federal Deposit Insurance
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1 Act, as that section existed on the day before the

2 date of enactment of this Act; and

3 (8) the term ‘‘SAIF-assessable deposit’’

4 means—

5 (A) a deposit that is subject to assessment

6 for purposes of the Savings Association Insur7 ance Fund under the Federal Deposit Insur8 ance Act; and

9 (B) a deposit that section 5(d)(3) of the

10 Federal Deposit Insurance Act treats as in11 sured by the Savings Association Insurance

12 Fund.

13 Subtitle B—Housing

14 SEC. 2051. ANNUAL ADJUSTMENT FACTORS FOR OPERAT15 ING COSTS ONLY; RESTRAINT ON RENT IN16 CREASES.

17 (a) ANNUAL ADJUSTMENT FACTORS FOR OPERATING

18 COSTS ONLY.—Section 8(c)(2)(A) of the United States

19 Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is

20 amended—

21 (1) by striking ‘‘(2)(A)’’ and inserting

22 ‘‘(2)(A)(i)’’;

23 (2) by striking the second sentence and all that

24 follows through the end of the subparagraph; and
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1 (3) by adding at the end of the following new

2 clause:

3 ‘‘(ii) Each assistance contract under this section shall

4 provide that—

5 ‘‘(I) if the maximum monthly rent for a unit in

6 a new construction or substantial rehabilitation

7 project to be adjusted using an annual adjustment

8 factor exceeds 100 percent of the fair market rent

9 for an existing dwelling unit in the market area, the

10 Secretary shall adjust the rent using an operating

11 costs factor that increases the rent to reflect in12 creases in operating costs in the market area; and

13 ‘‘(II) if the owner of a unit in a project de14 scribed in subclause (I) demonstrates that the ad15 justed rent determined under subclause (I) would

16 not exceed the rent for an unassisted unit of similar

17 quality, type, and age in the same market area, as

18 determined by the Secretary, the Secretary shall use

19 the otherwise applicable annual adjustment factor.’’.

20 (b) RESTRAINT ON SECTION 8 RENT INCREASES.—

21 Section 8(c)(2)(A) of the United States Housing Act of

22 1937 (42 U.S.C. 1437f(c)(2)(A)), as amended by sub23 section (a), is amended by adding at the end the following

24 new clause:
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1 ‘‘(iii)(I) Subject to subclause (II), with respect to any

2 unit assisted under this section that it occupied by the

3 same family at the time of the most recent annual rental

4 adjustment, if the assistance contract provides for the ad5 justment of the maximum monthly rent by applying an

6 annual adjustment factor, and if the rent for the unit is

7 otherwise eligible for an adjustment based on the full

8 amount of the annual adjustment factor, 0.01 shall be

9 subtracted from the amount of the annual adjustment fac10 tor, except that the annual adjustment factor shall not be

11 reduced to less than 1.0.

12 ‘‘(II) With respect to any unit described in subclause

13 (I) that is assisted under the certificate program, the ad14 justed rent shall not exceed the rent for a comparable un15 assisted unit of similar quality, type, and age in the mar16 ket area in which the unit is located.’’.

17 (c) EFFECTIVE DATE.—The amendments made by

18 this section shall become effective on October 1, 1995.

19 SEC. 2052. FORECLOSURE AVOIDANCE AND BORROWER AS20 SISTANCE.

21 (a) FORECLOSURE AVOIDANCE.—Except as provided

22 in subsection (e), the last sentence of section 204(a) of

23 the National Housing Act (12 U.S.C. 1710(a)) is amended

24 by inserting before the period the following: ‘‘: And pro25 vided further, That the Secretary may pay insurance bene-
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1 fits to the mortgagee to recompense the mortgagee for its

2 actions to provide an alternative to foreclosure of a mort3 gage that is in default, which actions may include such

4 actions as special forbearance, loan modification, and

5 deeds in lieu of foreclosure, all upon such terms and condi6 tions as the mortgagee shall determine in the mortgagee’s

7 sole discretion within guidelines provided by the Secretary,

8 but which may not include assignment of a mortgage to

9 the Secretary: And provided further, That for purposes of

10 the preceding proviso, no action authorized by the Sec11 retary and no action taken, nor any failure to act, by the

12 Secretary or the mortgagee shall be subject to judicial re13 view’’.

14 (b) AUTHORITY TO ASSIST MORTGAGORS IN DE15 FAULT.—Except as provided in subsection (e), section 230

16 of the National Housing Act (12 U.S.C. 1715u) is amend17 ed to read as follows:

18 ‘‘AUTHORITY TO ASSIST MORTGAGORS IN DEFAULT

19 ‘‘SEC. 230. (a) PAYMENT OF PARTIAL CLAIM.—The

20 Secretary may establish a program for payment of a par21 tial insurance claim to a mortgagee that agrees to apply

22 the claim amount to payment of a mortgage on a 1- to

23 4-family residence that is in default. Any such payment

24 under such program to the mortgagee shall be made in

25 the Secretary’s sole discretion and on terms and conditions

26 acceptable to the Secretary, except that—
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1 ‘‘(1) the amount of the payment shall be in an

2 amount determined by the Secretary, which shall not

3 exceed an amount equivalent to 12 monthly mort4 gage payments and any costs related to the default

5 that are approved by the Secretary; and

6 ‘‘(2) the mortgagor shall agree to repay the

7 amount of the insurance claim to the Secretary upon

8 terms and conditions acceptable to the Secretary.

9 The Secretary may pay the mortgagee, from the appro10 priate insurance fund, in connection with any activities

11 that the mortgagee is required to undertake concerning

12 repayment by the mortgagor of the amount owed to the

13 Secretary.

14 ‘‘(b) ASSIGNMENT.—

15 ‘‘(1) PROGRAM AUTHORITY.—The Secretary

16 may establish a program for assignment to the Sec17 retary, upon request of the mortgagee, of a mort18 gage on a 1- to 4-family residence insured under this

19 Act.

20 ‘‘(2) PROGRAM REQUIREMENTS.—The Sec21 retary may accept assignment of a mortgage under

22 a program under this subsection only if—

23 ‘‘(A) the mortgage was in default;

24 ‘‘(B) the mortgagee has modified the mort25 gage to cure the default and provide for mort-
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1 gage payments within the reasonable ability of

2 the mortgagor to pay at interest rates not ex3 ceeding current market interest rates; and

4 ‘‘(C) the Secretary arranges for servicing

5 of the assigned mortgage by a mortgagee

6 (which may include the assigning mortgagee)

7 through procedures that the Secretary has de8 termined to be in the best interests of the ap9 propriate insurance fund.

10 ‘‘(3) PAYMENT OF INSURANCE BENEFITS.—

11 Upon accepting assignment of a mortgage under the

12 program under this subsection, the Secretary may

13 pay insurance benefits to the mortgagee from the

14 appropriate insurance fund in an amount that the

15 Secretary determines to be appropriate, but which

16 may not exceed the amount necessary to compensate

17 the mortgagee for the assignment and any losses

18 and expenses resulting from the mortgage modifica19 tion.

20 ‘‘(c) PROHIBITION OF JUDICIAL REVIEW.—No deci21 sion by the Secretary to exercise or forego exercising any

22 authority under this section shall be subject to judicial re23 view.

24 ‘‘(d) SAVINGS PROVISION.—Any mortgage for which

25 the mortgagor has applied to the Secretary, before the
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1 date of the enactment of the Balanced Budget Act of

2 1995, for assignment pursuant to subsection (c) of this

3 section as in effect before such date of enactment shall

4 continue to be governed by the provisions of this section

5 in effect immediately before such date of enactment.

6 ‘‘(e) APPLICABILITY OF OTHER LAWS.—No provision

7 of this Act or any other law shall be construed to require

8 the Secretary to provide an alternative to foreclosure for

9 mortgagees with mortgages on 1- to 4-family residences

10 insured by the Secretary under this Act, or to accept as11 signments of such mortgages.’’.

12 (c) APPLICABILITY OF AMENDMENTS.—Except as

13 provided in subsection (e), the amendments made by sub14 sections (a) and (b) shall apply only with respect to mort15 gages insured under the National Housing Act that are

16 originated on or after October 1, 1995.

17 (d) REGULATIONS.—Not later than the expiration of

18 the 60-day period beginning on the date of the enactment

19 of this Act, the Secretary of Housing and Urban Develop20 ment shall issue interim regulations to implement this sec21 tion and the amendments made by this section.

22 (e) EFFECTIVENESS AND APPLICABILITY.—If this

23 Act is enacted after the date of the enactment of the De24 partments of Veterans Affairs and Housing and Urban
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1 Development, and Independent Agencies Appropriations

2 Act, 1996—

3 (1) subsections (a), (b), (c), and (d) of this sec4 tion shall not take effect; and

5 (2) subsection (c) of the section relating to fore6 closure avoidance and borrower assistance in title II

7 of the Departments of Veterans Affairs and Housing

8 and Urban Development, and Independent Agencies

9 Appropriations Act, 1996, is amended by striking

10 ‘‘only with respect to mortgages insured under the

11 National Housing Act that are originated before Oc12 tober 1, 1995’’ and inserting ‘‘to mortgages origi13 nated before, on, and after October 1, 1995’’.

14 TITLE II—COMMUNICATIONS

15 AND SPECTRUM ALLOCATION

16 PROVISIONS

17 SEC. 3001. SPECTRUM AUCTIONS.

18 (a) EXTENSION AND EXPANSION OF AUCTION AU19 THORITY.—

20 (1) AMENDMENTS.—Section 309(j) of the Com21 munications Act of 1934 (47 U.S.C. 309(j)) is

22 amended—

23 (A) by striking paragraphs (1) and (2) and

24 inserting the following:
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1 ‘‘(1) GENERAL AUTHORITY.—If, consistent with

2 the obligations described in paragraph (6)(E), mutu3 ally exclusive applications are accepted for any ini4 tial license or construction permit, then the Commis5 sion shall grant such license or permit to a qualified

6 applicant through a system of competitive bidding

7 that meets the requirements of this subsection.

8 ‘‘(2) EXEMPTIONS.—The competitive bidding

9 authority granted by this subsection shall not apply

10 to licenses or construction permits issued by the

11 Commission—

12 ‘‘(A) that, as the result of the Commission

13 carrying out the obligations described in para14 graph (6)(E), are not mutually exclusive;

15 ‘‘(B) for public safety radio services, in16 cluding non-Government uses the sole or prin17 cipal purpose of which is to protect the safety

18 of life, health, and property and which are not

19 made commercially available to the public; or

20 ‘‘(C) for initial licenses or construction

21 permits for new terrestrial digital television

22 services assigned by the Commission to existing

23 terrestrial broadcast licensees to replace their

24 current television licenses, unless—
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1 ‘‘(i) the Commission, not later than

2 180 days after the date of enactment of

3 the Balanced Budget Act of 1995, after

4 notice and public comment, submits to

5 Congress a report on the use of the au6 thority provided in this subsection for the

7 assignment of initial licenses or construc8 tion permits for use of the electromagnetic

9 spectrum allocated but not assigned as of

10 the date of enactment of that Act for tele11 vision broadcast services; and

12 ‘‘(ii) the Congress amends this sub13 section to authorize the use of the author14 ity provided by this subsection for such li15 censes or permits.

16 Except as provided in this subparagraph, the

17 Commission may not assign initial licenses or

18 construction permits under this title to terres19 trial commercial television broadcast licensees

20 to replace their existing broadcast licenses be21 fore November 15, 1996.’’; and

22 (B) by striking ‘‘1998’’ in paragraph (11)

23 and inserting ‘‘2002’’.

24 (2) CONFORMING AMENDMENT.—Subsection (i)

25 of section 309 of such Act is repealed.
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1 (3) EFFECTIVE DATE.—The amendment made

2 by paragraph (1)(A) shall not apply with respect to

3 any license or permit for a terrestrial radio or tele4 vision broadcast station for which the Federal Com5 munications Commission has accepted mutually ex6 clusive applications on or before the date of enact7 ment of this Act.

8 (b) COMMISSION OBLIGATION TO MAKE ADDITIONAL

9 SPECTRUM AVAILABLE BY AUCTION.—

10 (1) IN GENERAL.—The Federal Communica11 tions Commission shall complete all actions nec12 essary to permit the assignment by September 30,

13 2002, by competitive bidding pursuant to service

14 309(i) of the Communications Act of 1934 (47

15 U.S.C. 309(j) of licenses for the use of bands of fre16 quencies that—

17 (A) individually span not less than 25

18 megahertz, unless a combination of smaller

19 bands can, notwithstanding the provisions of

20 paragraph (7) of such section, reasonably be ex21 pected to produce greater receipts;

22 (B) in the aggregate span not less than

23 100 megahertz;

24 (C) are located below 3 gigahertz; and
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1 (D) have not, as of the date of enactment

2 of this Act—

3 (i) been designated by Commission

4 regulation for assignment pursuant to such

5 section;

6 (ii) been identified by the Secretary of

7 Commerce pursuant to section 113 of the

8 National Telecommunications and Infor9 mation Administration Organization Act;

10 or

11 (iii) been reserved for Federal Govern12 ment use pursuant to section 305 of the

13 Communications Act of 1934 (47 U.S.C.

14 305).

15 The Commission shall conduct the competitive

16 bidding for not less than one-half of such aggre17 gate spectrum by September 30, 2000.

18 (2) CRITERIA FOR REASSIGNMENT.—In making

19 available bands of frequencies for competitive bid20 ding pursuant to paragraph (1), the Commission

21 shall—

22 (A) seek to promote the most efficient use

23 of the spectrum;

24 (B) take into account the cost to incum25 bent licensees of relocating existing uses to
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1 other bands of frequencies or other means of

2 communication;

3 (C) take into account the needs of public

4 safety radio services;

5 (D) comply with the requirements of inter6 national agreements concerning spectrum allo7 cations; and

8 (E) take into account the costs to satellite

9 service providers that could result from multiple

10 auctions of like spectrum internationally for

11 global satellite systems.

12 (3) NOTIFICATION TO NTIA.—The Commission

13 shall notify the Secretary of Commerce if—

14 (A) the Commission is not able to provide

15 for the effective relocation of incumbent licens16 ees to bands of frequencies that are available to

17 the Commission for assignment; and

18 (B) the Commission has identified bands

19 of frequencies that are—

20 (i) suitable for the relocation of such

21 licensees; and

22 (ii) allocated for Federal Government

23 use, but that could be reallocated pursuant

24 to part B of the National Telecommuni25 cations and Information Administration
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1 Organization Act (as amended by this sec2 tion).

3 (c) IDENTIFICATION AND REALLOCATION OF FRE4 QUENCIES.—The National Telecommunications and Infor5 mation Administration Organization Act (47 U.S.C. 901

6 et seq.) is amended—

7 (1) in section 113, by adding at the end the fol8 lowing new subsections:

9 ‘‘(f) ADDITIONAL REALLOCATION REPORT.—If the

10 Secretary receives a notice from the Commission pursuant

11 to section 3001(b)(3) of the Balanced Budget Act of 1995,

12 the Secretary shall prepare and submit to the President

13 and the Congress a report recommending for reallocation

14 for use other than by Federal Government stations under

15 section 305 of the 1934 Act (47 U.S.C. 305), bands of

16 frequencies that are suitable for the uses identified in the

17 Commission’s notice.

18 ‘‘(g) RELOCATION OF FEDERAL GOVERNMENT STA19 TIONS.—

20 ‘‘(1) IN GENERAL.—In order to expedite the ef21 ficient use of the electromagnetic spectrum and not22 withstanding section 3302(b) of title 31, United

23 States Code, any Federal entity which operates a

24 Federal Government station may accept payment in

25 advance or in-kind reimbursement of costs, or a
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1 combination of payment in advance and in-kind re2 imbursement, from any person to defray entirely the

3 expenses of relocating the Federal entity’s oper4 ations from one or more radio spectrum frequencies

5 to another frequency or frequencies, including, with6 out limitation, the costs of any modification, replace7 ment, ore reissuance of equipment, facilities, operat8 ing manuals, regulations, or other expenses incurred

9 by that entity. Any such payment shall be deposited

10 in the account of such Federal entity in the Treas11 ury of the United States. Funds deposited according

12 to this paragraph shall be available, without appro13 priation or fiscal year limitation, only for the oper14 ations of the Federal entity for which such funds

15 were deposited under this paragraph.

16 ‘‘(2) PROCESS FOR RELOCATION.—Any person

17 seeking to relocate a Federal Government station

18 that has been assigned a frequency within a band al19 located for mixed Federal and non-Federal use may

20 submit a petition for such relocation to NTIA. The

21 NTIA shall limit or terminate the Federal Govern22 ment station’s operating license when the following

23 requirements are met:

24 ‘‘(A) the person seeking relocation of the

25 Federal Government station has guaranteed to
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1 defray entirely, through payment in advance,

2 in-kind reimbursement of costs, or a combina3 tion thereof, all relocation costs incurred by the

4 Federal entity, including all engineering, equip5 ment, site acquisition and construction, and

6 regulatory fee costs;

7 ‘‘(B) the person seeking relocation com8 pletes all activities necessary for implementing

9 the relocation, including construction of replace10 ment facilities (if necessary and appropriate)

11 and identifying and obtaining on the Federal

12 entity’s behalf new frequencies for use by the

13 relocated Federal Government station (where

14 such station is not relocating to spectrum re15 served exclusively for Federal use);

16 ‘‘(C) any necessary replacement facilities,

17 equipment modifications, or other changes have

18 been implemented and tested to ensure that the

19 Federal Government station is able to success20 fully accomplish its purposes; and

21 ‘‘(D) NTIA has determined that the pro22 posed use of the spectrum frequency band to

23 which the Federal entity will relocate its oper24 ations is—
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1 ‘‘(i) consistent with obligations under2 taken by the United States in international

3 agreements and with United States na4 tional security and public safety interests;

5 and

6 ‘‘(ii) suitable for the technical charac7 teristics of the band and consistent with

8 other uses of the band.

9 In exercising its authority under subparagraph

10 (d)(i), NTIA shall consult with the Secretary of

11 Defense, the Secretary of State, or other appro12 priate officers of the Federal Government.

13 ‘‘(3) RIGHT TO RECLAIM.—If within one year

14 after the relocation the Federal Government station

15 demonstrates to the Commission that the new facili16 ties or spectrum are not comparable to the facilities

17 or spectrum from which the Federal Government

18 station was relocated, the person seeking such relo19 cation must take reasonable steps to remedy any de20 fects or pay the Federal entity for the costs of re21 turning the Federal Government station to the spec22 trum from which such station was relocated.

23 ‘‘(h) FEDERAL ACTION TO EXPEDITE SPECTRUM

24 TRANSFER.—Any Federal Government station which op25 erates on electromagnetic spectrum that has been identi-
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1 fied for reallocation for mixed Federal and non-Federal

2 use in any reallocation report under subsection (a) shall,

3 to the maximum extent practicable through the use of the

4 authority granted under subsection (g) and any other ap5 plicable provision of law, take action to relocate its spec6 trum use to other frequencies that are reserved for Fed7 eral use or to consolidate its spectrum use with other Fed8 eral Government stations in a manner that maximizes the

9 spectrum available for non-Federal use. Subsection (c)(4)

10 of this section shall not apply to the extent that a non11 Federal user seeks to relocate or relocates a Federal power

12 agency under subsection (g).

13 ‘‘(i) DEFINITION.—For purposes of this section, the

14 term ‘Federal entity’ means any department, agency, or

15 other instrumentality of the Federal Government that uti16 lizes a Government station license obtained under section

17 305 of the 1934 Act (47 U.S.C. 305).’’; and

18 (2) in section 114(a)(1), by striking ‘‘(a) or

19 (d)(1)’’ and inserting ‘‘(a), (d)(1), or (f)’’.

20 (d) IDENTIFICATION AND REALLOCATION OF

21 AUCTIONABLE FREQUENCIES.—The National Tele22 communications and Information Administration Organi23 zation Act (47 U.S.C. 901 et seq.) is amended—

24 (1) in section 113(b)—
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1 (A) by striking the heading of paragraph

2 (1) and inserting ‘‘INITIAL REALLOCATION RE3 PORT.—’’;

4 (B) by inserting ‘‘in the first report re5 quired by subsection (a)’’ after ‘‘recommend for

6 reallocation’’ in paragraph (1);

7 (C) by inserting ‘‘or (3)’’ after ‘‘paragraph

8 (1)’’ each place it appears in paragraph (2);

9 and

10 (D) by inserting after paragraph (2) the

11 following new paragraph:

12 ‘‘(3) SECOND REALLOCATION REPORT.—In ac13 cordance with the provisions of this section, the Sec14 retary shall recommend for reallocation in the sec15 ond report required by subsection (a), for use other

16 than by Federal Government stations under section

17 305 of the 1934 Act (47 U.S.C. 305), a single fre18 quency band that spans not less than an additional

19 20 megahertz, that is located below 3 gigahertz, and

20 that meets the criteria specified in paragraphs (1)

21 through (5) of subsection (a).’’; and

22 (2) in section 115—

23 (A) in subsection (b), by striking ‘‘the re24 port required by section 113(a)’’ and inserting
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1 ‘‘the initial reallocation report required by sec2 tion 113(a)’’; and

3 (B) by adding at the end the following new

4 subsection:

5 ‘‘(c) ALLOCATION AND ASSIGNMENT OF FRE6 QUENCIES IDENTIFIED IN THE SECOND REALLOCATION

7 REPORT.—With respect to the frequencies made available

8 for reallocation pursuant to section 113(b)(3), the Com9 mission shall, not later than 1 year after receipt of the

10 second reallocation report required by such section, pre11 pare, submit to the President and the Congress, and im12 plement, a plan for the allocation and assignment under

13 the 1934 Act of such frequencies. Such plan shall propose

14 the immediate allocation and assignment of all such fre15 quencies in accordance with section 309(j) of the 1934 Act

16 (47 U.S.C. 309(j).’’.

17 SEC. 3002. AUCTION OF RECAPTURED ANALOG LICENSES.

18 (a) ANALOG SPECTRUM REVERSION.—

19 (1) LIMITATIONS ON TERMS OF ANALOG TELE20 VISION LICENSES (‘‘REVERSION DATE’’).—No analog

21 television license may be renewed for a period that

22 extends beyond the earlier of December 31, 2005 or

23 one year after the date the Commission finds, based

24 on annual surveys conducted pursuant to paragraph

25 (2), that at least 95% of households in the United
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1 States have the capability to receive and display tele2 vision signals, other than television signals transmit3 ted pursuant to an analog television license. Follow4 ing such date, only advanced television licenses shall

5 be issued.

6 (2) ANNUAL SURVEY.—The Department of

7 Commerce shall, each calendar year from 1998 to

8 2005, conduct a survey to estimate the percentage

9 of households in the United States that have the ca10 pability to receive and display television signals other

11 than signals transmitted pursuant to an analog tele12 vision license.

13 (3) SPECTRUM REVERSION.—(A) The Commis14 sion shall ensure that, as analog television licenses

15 expire pursuant to paragraph (a)(1), spectrum pre16 viously used for the broadcast of analog television is

17 reclaimed and organized in such manner as to maxi18 mize the deployment of new and existing services.

19 (B) Licensees for new services shall be selected

20 by competitive bidding. The FCC shall complete the

21 competitive bidding procedure by March 1, 2002.

22 (4) MINIMUM SERVICE OBLIGATION.—(A) The

23 Commission, by regulation, shall establish proce24 dures to ensure that, within the year prior to the re25 version date defined in paragraph (1), the advanced
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1 television licensees shall provide each household

2 without the capability to receive and display tele3 vision signals other than television signals transmit4 ted pursuant to an analog television license, if such

5 household requests, with the capability to receive

6 and display advanced television service.

7 (B) Each advanced television service licensee

8 shall provide, each day for the duration of its li9 cense, at least one non-subscription television service

10 that meets or exceeds minimum technical and other

11 standards established by the Commission as well as

12 any other regulations pursuant to the Communica13 tions Act of 1934, as amended, and the Children’s

14 Television Act of 1990. In setting these minimum

15 technical standards, the Commission shall, to the ex16 tent technically feasible, ensure that picture and

17 audio quality are at least as good as provided to re18 cipients under current Commission rules for Na19 tional Television Systems Committee (NTSC) sig20 nals and shall adopt such technical and other re21 quirements as may be necessary or appropriate to

22 assure the quality of the signal used to provide ad23 vanced television services, including regulations that

24 set the minimum number of hours per day that such

25 signal must be transmitted. The Commission shall
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1 revoke the license of any advanced television licensee

2 who fails to meet this condition of the license. The

3 Commission shall promulgate regulations to assure

4 the dissemination of converter boxes or devices nec5 essary to ensure access to digital TV to all house6 holds that desire this access at a reasonable cost.

7 The Commission in these regulations shall—

8 (A) ensure that consumers receive only one

9 such rebate per household; and

10 (B) implement a mechanism by which re11 sponsibility for cost sharing can be equitably al12 located. To the extent possible, the digital con13 verter boxes distributed in accordance with this

14 section shall utilize an affordable technology to

15 process digital signals for reception on analog

16 television sets.

17 (5) PUBLIC INTEREST OBLIGATION.—Nothing

18 in this section shall be construed as relieving an ad19 vanced television licensee from its obligation to serve

20 the public interest, convenience, and necessity.

21 (b) DEFINITIONS.—As used in this section—

22 (1) the term ‘‘advanced television services’’

23 means television services provided using digital or

24 other advanced technology to enhance audio quality

25 and video resolution, as further defined in the Opin-
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1 ion, Report, and Order of the Commission entitled

2 ‘‘Advanced Television Systems and Their Impact

3 Upon the Existing Television Service,’’ MM Docket

4 No. 87–268; and

5 (2) the term ‘‘analog television licenses’’ means

6 licenses issued pursuant to CFR 73.682 et seq. and

7 in effect November 13, 1995.

8 TITLE III—MEDICAID

9 SEC. 11300. TABLE OF CONTENTS OF SUBTITLE.

10 The table of contents of this subtitle is as follows:

TITLE III—MEDICAID

Sec. 11300. Table of contents of subtitle.

PART 1—FEDERAL PAYMENTS

Sec. 11301. Limitations on average per beneficiary rate of growth in Federal

financial participation.

Sec. 11302. Reduction of disproportionate share payments.

Sec. 11303. Medicaid eligibility quality control (MEQC) requirements.

PART 2—ELIGIBILITY

Sec. 11311. Extension of coverage to additional individuals, subject to povertyrelated or caseload limits.

Sec. 11312. Elimination of authority for new eligibility expansion demonstrations.

Sec. 11313. Upper income limit on ‘‘less restrictive’’ eligibility methodologies.

PART 3—MANAGED CARE

Sec. 11321. Primary care case management services as State option without

need for wavier.

Sec. 11322. State options to restrict choice of providers.

Sec. 11323. Elimination of restrictions on risk contracts.

Sec. 11324. 6-month guaranteed eligibility for all individuals enrolled in managed care.

Sec. 11325. Requirements to ensure quality of and access to care under managed care plans.

PART 4—BENEFITS

Sec. 11331. Home- and community-based services as State option without need

for waiver.

Sec. 11332. Elimination of requirement to pay for private insurance.

Sec. 11333. Benefits for individuals covered during transition to work.
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PART 5—PROVIDER PARTICIPATION AND PAYMENT RATES

Sec. 11341. Methods for establishing provider payment rates.

Sec. 11343. Elimination of obstetrical and pediatric payment rate requirements.

PART 6—STATE PLAN ADMINISTRATION

Sec. 11351. MMIS requirements.

Sec. 11352. Elimination of personnel requirements.

Sec. 11353. Elimination of requirements for cooperative agreements with health

agencies.

Sec. 11355. State review of mentally ill or retarded nursing facility residents

upon change in physical or mental condition.

Sec. 11356. Nurse aide training in Medicare and Medicaid nursing facilities

subject to extended survey and under certain other conditions.

Sec. 11357. Combined State plan submission.

Sec. 11358. Public Process for developing State plan amendments.

PART 7—EFFECTIVE DATE

Sec. 11361. Effective date.

1 PART 1—FEDERAL PAYMENTS

2 SEC. 11301. LIMITATIONS ON AVERAGE PER BENEFICIARY

3 RATE OF GROWTH IN FEDERAL FINANCIAL

4 PARTICIPATION.

5 (a) IN GENERAL.—Title XIX of the Social Security

6 Act is amended—

7 (1) by redesignating section 1931 as section

8 1932, and

9 (2) by inserting after section 1930 the following

10 new section:

11 ‘‘LIMITATION ON FEDERAL FINANCIAL PARTICIPATION

12 BASED ON AVERAGE PER BENEFICIARY EXPENDITURES

13 ‘‘SEC. 1931. (a) AGGREGATE LIMIT.—

14 ‘‘(1) IN GENERAL.—Subject to the succeeding

15 provisions of this section, the total amount of pay16 ments in grant awards to a State under section
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1 1903(a) for the 4 quarters in each of fiscal years

2 1997 through 2002 shall not exceed the sum of the

3 limits, specified under paragraph (2), for each group

4 of medicaid enrollees (as defined in subsection

5 (b)(1)) for the State for the fiscal year. Such pay6 ment limit shall be based on the total net matchable

7 medicaid expenditures for the State for the fiscal

8 year as defined and specified under subsection

9 (c)(4).

10 ‘‘(2) GROUP LIMITS.—The limit under this

11 paragraph for a group of medicaid enrollees for a

12 State for a fiscal year is the product of the following

13 factors:

14 ‘‘(A) The average per enrollee matchable

15 expenditure limit for the group for the State for

16 the fiscal year (determined under subsection

17 (c)(1)).

18 ‘‘(B) The number of full-time equivalent

19 individuals in the group in the State in the fis20 cal year (determined under subsection (d)).

21 ‘‘(C) The Federal medical assistance per22 centage for the State for the fiscal year (as de23 fined in section 1905(b)).

24 ‘‘(3) Exception for portion of medical assistance

25 provided under approved waivers.—
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1 ‘‘(A) IN GENERAL.—In the case of a State

2 which provides medical assistance under its

3 State plan under this title pursuant to a waiver

4 granted under section 1115 (as of [date of in5 troduction of proposal]) on a Statewide basis

6 (or under such a waiver that covers a substate

7 area with a population of at least 9 million), the

8 Secretary shall provide for an adjustment in the

9 application of this section so that—

10 ‘‘(i) the limitation on total payments

11 under paragraph (1) does not apply to

12 Federal financial participation attributable

13 to the medical assistance (and related ad14 ministrative expenditures) provided under

15 such a waiver; and

16 ‘‘(ii) the average per enrollee match17 able expenditure limit established under

18 subsection (c) and applicable to a group of

19 medicaid enrollees is equal to such limit

20 multiplied by the nonwaiver proportion (as

21 defined in subparagraph (B)) for that

22 group.

23 ‘‘(B) NONWAIVER PROPORTION.—In sub24 paragraph (A)(ii), the ‘nonwaiver proportion’
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1 for a group of medicaid enrollees for a State for

2 a fiscal year is the ratio of—

3 ‘‘(i) the amount of the Federal finan4 cial participation that the Secretary esti5 mates would have been expended (in the

6 absence of this section) for medical assist7 ance (and related administrative expendi8 tures) for the group for the State for the

9 fiscal year for items and services not cov10 ered under the waiver, to

11 ‘‘(ii) the total amount of the Federal

12 financial participation that the Secretary

13 estimates would have been expended (in

14 the absence of this section) for medical as15 sistance (and related administrative ex16 penditures) for the group for the State for

17 the fiscal year (whether or not covered

18 under the waiver).

19 ‘‘(4) NO APPLICATION TO VACCINE PROGRAM.—

20 Nothing in this section shall be construed as apply21 ing any limitation to payments for the purchase and

22 delivery of qualified pediatric vaccines under section

23 1928.

24 ‘‘(b) DEFINITIONS RELATING TO GROUPS OF MEDIC25 AID ENROLLEES.—In this section:
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1 ‘‘(1) IN GENERAL.—Each of the following shall

2 be considered a separate ‘group of medicaid enroll3 ees’:

4 ‘‘(A) Nondisabled medicaid children.

5 ‘‘(B) Nondisabled medicaid adults.

6 ‘‘(C) Elderly medicaid beneficiaries.

7 ‘‘(D) Disabled medicaid beneficiaries.

8 ‘‘(2) NONDISABLED MEDICAID CHILDREN.—

9 The term ‘nondisabled medicaid child’ means a med10 icaid enrollee who—

11 ‘‘(A) is under 21 years of age,

12 ‘‘(B) is not the custodial parent of a child,

13 and

14 ‘‘(C) is not a disabled medicaid beneficiary.

15 ‘‘(3) NONDISABLED MEDICAID ADULTS.—The

16 term ‘nondisabled medicaid adult’ means a medicaid

17 enrollee who—

18 ‘‘(A) is under 65 years of age,

19 ‘‘(B) is not a disabled medicaid bene20 ficiary, and

21 ‘‘(C)(i) is at least 21 years of age or (ii)

22 is the custodial parent of a child.

23 ‘‘(4) ELDERLY MEDICAID BENEFICIARY.—The

24 term ‘elderly medicaid beneficiary’ means a medicaid

25 enrollee who is at least 65 years of age.
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1 ‘‘(5) DISABLED MEDICAID BENEFICIARIES.—

2 The term ‘disabled medicaid beneficiary’ means a

3 medicaid enrollee who—

4 ‘‘(A) is under 65 years of age, and

5 ‘‘(B) has been determined to meet the

6 standards for being blind or disabled under the

7 supplemental income security program under

8 title XVI.

9 ‘‘(6) MEDICAID ENROLLEE.—The term ‘medic10 aid enrollee’ means, with respect to a State medical

11 assistance program under this title, an individual

12 who is enrolled with such program, but does not in13 clude an individual who is eligible only for medicare

14 cost-sharing benefits under the program as—

15 ‘‘(A) a qualified medicare beneficiary (as

16 defined in section 1905(p)(1)),

17 ‘‘(B) a qualified disabled and working indi18 vidual (as defined in section 1905(s)), or

19 ‘‘(C) an individual described in section

20 1902(a)(10)(E)(iii).

21 ‘‘(c) AVERAGE PER ENROLLEE MATCHABLE EX22 PENDITURE LIMIT; TOTAL NET MATCHABLE MEDICAID

23 EXPENDITURES DEFINED.—

24 ‘‘(1) IN GENERAL.—For purposes of this sec25 tion, the average ‘per enrollee matchable expenditure
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1 limit’, for a group of medicaid enrollees for a

2 State—

3 ‘‘(A) for fiscal year 1997 is equal to the

4 average base per enrollee amount (as defined

5 under paragraph (2)(A)) for the group for the

6 State multiplied by the allowable growth multi7 plier (under paragraph (3)) for each of fiscal

8 years 1996 and 1997; and

9 ‘‘(B) for a succeeding fiscal year is equal

10 to the per enrollee matchable expenditure limit

11 under this paragraph for the preceding fiscal

12 year multiplied by the allowable growth multi13 plier for that succeeding fiscal year.

14 Before the beginning of each of fiscal years 1997

15 through 2002, the Secretary shall determine and

16 publish each State’s average per enrollee matchable

17 expenditure limit under this paragraph for each

18 group of medicaid enrollees.

19 ‘‘(2) BASE PER ENROLLEE AMOUNT.—

20 ‘‘(A) IN GENERAL.—In this section, the

21 ‘base average per enrollee amount’, for a group

22 of medicaid enrollees for a State, is equal to—

23 ‘‘(i) the sum of (i) the base medical

24 assistance amount (determined under sub25 paragraph (C)) for the group and State,
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1 and (ii) the base administrative cost

2 amount (determined under subparagraph

3 (D)) for group and the State; divided by

4 ‘‘(ii) the number of full-year equiva5 lent medicaid enrollees in the group in the

6 State in fiscal year 1995 (as determined

7 pursuant to subsection (d)).

8 ‘‘(B) DETERMINATION OF NET MATCH9 ABLE MEDICAID EXPENDITURES FOR FISCAL

10 YEAR 1995.—In order to determine base average

11 per enrollee amounts for a State, the Secretary

12 shall—

13 ‘‘(i) determine the amount of the total

14 net matchable medicaid expenditures (as

15 defined in paragraph (4)) for the State for

16 fiscal year 1995, and

17 ‘‘(ii) separately identify—

18 ‘‘(I) the portion of such amount

19 attributable to medical assistance, and

20 ‘‘(II) the portion of such amount

21 attributable to administrative costs.

22 The Secretary shall base the determination

23 under clause (i) on the expenditures reported by

24 the State on line 11 of HCFA Form 64 for the
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1 4 quarters of fiscal year 1995, subject to the

2 adjustments described in paragraph (4)(B)).

3 ‘‘(C) BASE MEDICAL ASSISTANCE AMOUNT

4 FOR EACH GROUP.—For each State for each

5 group of medicaid enrollees, the Secretary shall

6 determine a ‘base medical assistance amount’

7 equal to the amount, of the portion of the total

8 net matchable medicaid expenditures for fiscal

9 year 1995 for the State attributed to medical

10 assistance under subparagraph (B)(ii)(I), that

11 the Secretary finds is attributable to items and

12 services furnished to individuals in such group

13 for the State .

14 ‘‘(D) BASE ADMINISTRATIVE COST

15 AMOUNT FOR EACH GROUP.—For each State

16 for each group of medicaid enrollees, the Sec17 retary shall determine a ‘base administrative

18 cost amount’ equal to the amount that bears

19 the same ratio to the portion of the total net

20 matchable medicaid expenditures for fiscal year

21 1995 for the State attributed to administrative

22 costs under subparagraph (B)(ii)(II) as the

23 base medical assistance amount for the group

24 (as determined under subparagraph (C) for the

25 State) bears to the sum of the base medical as-
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1 sistance amounts for all the groups for the

2 State.

3 ‘‘(3) ALLOWABLE GROWTH MULTIPLIER.—In

4 this subsection, the ‘allowable growth multiplier’

5 for—

6 ‘‘(A) fiscal year 1996 is 6.5 percent.

7 ‘‘(B) fiscal year 1997 is 6.5 percent.

8 ‘‘(C) fiscal year 1998 is 6.5 percent.

9 ‘‘(D) fiscal year 1999 is 6.0 percent.

10 ‘‘(E) fiscal year 2000 is 5.5 percent.

11 ‘‘(F) fiscal year 2001 is 5.0 percent.

12 ‘‘(G) fiscal year 2002 is 4.5 percent.

13 ‘‘(4) EQUITY ADJUSTOR IN ALLOWABLE

14 GROWTH MULTIPLIER FOR STATES WITH LOW PER

15 CAPITA EXPENDITURES.—

16 ‘‘(A) FISCAL YEAR 1997.—If the [per bene17 ficiary base amount described in paragraph (

18 ) for the base fiscal year] for a State for a

19 [group of medicare enrollees]—

20 ‘‘(i) does not exceed 80 percent of the

21 national, weighted average of such [per

22 beneficiary base amounts] for such group

23 for all States for the year, then, the deter24 mining the per beneficiary limit for such

25 State and group for fiscal year 1997, the
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1 allowable growth multiplier for each of fis2 cal years 1996 and 1997 shall be increased

3 by 2.0 percentage points;

4 ‘‘(ii) exceeds 80 percent, but does not

5 exceed 90 percent, of such national,

6 weighted average, then, in determining the

7 per beneficiary limit for such State and

8 group for fiscal year 1997, the allowable

9 growth multiplier for each of fiscal years

10 ‘‘(4) TOTAL NET MATCHABLE MEDICAID EX11 PENDITURES.—

12 ‘‘(A) IN GENERAL.—In this section, the

13 term ‘total net matchable medicaid expendi14 tures’ means, for a State for a fiscal year, the

15 total net expenditures for the State under this

16 title for the 4 quarters of the fiscal year for

17 which payments may be made under section

18 1903, reduced by the amount of such expendi19 tures that the Secretary determines is attrib20 utable to expenditures described in subsection

21 (e).

22 ‘‘(B) USE OF FORMS AND ADJUSTMENT.—

23 The total net matchable medicaid expenditures

24 for a State for a fiscal year shall be determined

25 by the Secretary based on reports submitted by
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1 the State under section 1903 for quarters in

2 the fiscal year and as adjusted by the Secretary

3 by January 31 of the succeeding fiscal year to

4 take into account disallowances and similar ad5 justments for expenditures not described in sub6 section (e).

7 ‘‘(d) DETERMINATION OF NUMBER OF FULL-YEAR

8 EQUIVALENT INDIVIDUALS.—

9 ‘‘(1) IN GENERAL.—For purposes of this sec10 tion, the number of full-year equivalent individuals

11 in each group of medicaid enrollees for a State for

12 a fiscal year shall be determined, subject to para13 graphs (2) and (3), based on reports submitted by

14 the State of the Secretary.

15 ‘‘(2) PART-YEAR ENROLLEES.—In the case of

16 individuals who were not a medicaid enrollee for the

17 entire fiscal year (or are within a group of medicaid

18 enrollees for only part of a fiscal year), the number

19 shall take into account only the portion of the year

20 in which they were such enrollees or within such

21 group.

22 ‘‘(3) SECRETARIAL OVERSIGHT.—In order to

23 ensure the accuracy of the numbers reported by

24 States under this subsection, the Secretary is au25 thorized—
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1 ‘‘(A) to require documentation, whether on

2 a sample or other basis,

3 ‘‘(B) to audit such reports (or to require

4 the performance of independent audits), and

5 ‘‘(C) to revise the numbers so reported.

6 ‘‘(e) EXPENDITURES NOT SUBJECT TO (OR COUNT7 ED IN) LIMITATION.—For purposes of this section, the fol8 lowing expenditures (for which payments may be made to

9 a State under section 1903(a)) shall not be counted in

10 computing base medical assistance amounts or base ad11 ministrative cost amounts under subsection (c)(2) and

12 Federal financial participation with respect to such ex13 penditures shall not be subject to the limit established

14 under subsection (a)(1):

15 ‘‘(1) DISPROPORTIONATE SHARE PAYMENT AD16 JUSTMENTS.—Expenditures attributable to payment

17 adjustments made under section 1923.

18 ‘‘(2) MEDICARE COST-SHARING.—Expenditures

19 for medical assistance for medicare cost-sharing, as

20 defined in section 1905(p)(3).

21 ‘‘(3) INDIAN HEALTH PROGRAMS.—Expendi22 tures for medical assistance for services provided

23 by—

24 ‘‘(A) the Indian Health Service,
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1 ‘‘(B) an Indian health program operated

2 by an Indian tribe or tribal organization pursu3 ant to a contract, grant, cooperative agreement,

4 or compact with the Indian Health Service pur5 suant to the Indian Self-Determination Act (25

6 U.S.C. 450 et seq.), and

7 ‘‘(C) an urban Indian health program op8 erated by an urban Indian organization pursu9 ant to a grant or contract with the Indian

10 Health Service pursuant to title V of the Indian

11 Health Care Improvement Act (25 U.S.C. 1601

12 et seq.).

13 ‘‘(4) INFORMATION SYSTEMS.—Expenditures

14 described in subparagraph (A)(i) and (B) of section

15 1903(a)(2).

16 ‘‘(5) NURSING FACILITY PREADMISSION

17 SCREENING, RESIDENT REVIEW, AND SURVEY AND

18 CERTIFICATION ACTIVITIES.—Expenditures de19 scribed in subparagraphs (C) and (D) of section

20 1903(a)(2).

21 ‘‘(6) SAVE.—Expenditures attributable to im22 plementation of the immigration status verification

23 system (described in section 1137(d)) pursuant to

24 section 1903(a)(4).
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1 ‘‘(7) FRAUD AND ABUSE ACTIVITIES.—Expendi2 tures for activities of State medicaid fraud control

3 units pursuant to section 1903(a)(6).’’.

4 (b) ENFORCEMENT-RELATED PROVISIONS.—

5 (1) ASSURING ACTUAL PAYMENTS TO STATES

6 CONSISTENT WITH LIMITATION.—Section 1903(d) of

7 such Act (42 U.S.C. 1396(d)) is amended—

8 (A) in paragraph (2)(A), by striking ‘‘The

9 Secretary’’ and inserting ‘‘Subject to paragraph

10 (7), the Secretary’’, and

11 (B) by adding at the end the following new

12 paragraph:

13 ‘‘(7)(A) The Secretary shall take such steps as are

14 necessary to assure that payments under this subsection

15 for quarters in a fiscal year (and for the entire fiscal year)

16 are consistent with the limitation established under section

17 1931 for the fiscal year. Such steps may include limiting

18 such payments for one or more quarters in a fiscal year

19 based on—

20 ‘‘(i) an appropriate proportion of the limitation

21 under section 1931(a) for the fiscal year involved,

22 and

23 ‘‘(ii) numbers of individuals within each group

24 of medicaid enrollees, as reported under subpara25 graph (B) for a recent previous quarter.
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1 ‘‘(B) Each State shall include, in its report filed

2 under paragraph (1)(A) for a calendar quarter—

3 ‘‘(i) the actual number of individuals within

4 each group of medicaid enrollees described in section

5 1931(b)(1) for the second previous calendar quarter

6 and (based on the data available) for the previous

7 calendar quarter, and

8 ‘‘(ii) an estimate of such numbers for the cal9 endar quarter involved.

10 as well as expenditures (other than expenditures described

11 in section 1931(e)) attributable to each such group for

12 such periods.

13 ‘‘(C) In order to implement section 1931 and this

14 subsection, the Secretary shall—

15 ‘‘(i) change HCFA Form 37 to require States

16 to separate out spending projections by groups of

17 medicaid enrollees, and

18 ‘‘(ii) change HCFA Form 64 to include enroll19 ment data and to permit the attribution of expendi20 tures to such groups.

21 The Secretary shall provide for the auditing of information

22 reported under clause (ii).

23 ‘‘(D) The Secretary shall take such actions as may

24 be necessary to assure the accuracy of the base per en25 rollee amounts determined under section 1931(c)(2).’’.
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1 (2) UPPER INCOME LIMIT ON ‘‘LESS RESTRIC2 TIVE’’ ELIGIBILITY METHODOLOGIES.—Section

3 1902(r)(2) of such Act (42 U.S.C. 1396a(r)(2)) is

4 amended—

5 (A) in subparagraph (A), by inserting

6 ‘‘(except as provided in subparagraph (C))’’

7 after ‘‘no more restrictive’’, and

8 (B) by adding at the end the following new

9 subparagraph:

10 ‘‘(C) The methodology described in subparagraph (A)

11 shall not result in an income eligibility limit (based on

12 gross income) that is greater than the greater of—

13 ‘‘(i) 150 percent of the poverty line (as defined

14 in section 673(2) of the Community Services Block

15 Grant Act (42 U.S.C. 9902(2)), including any revi16 sion required by such section), or

17 ‘‘(ii) the income eligibility limit applicable under

18 the State plan in effect in fiscal year 1995 (taking

19 into account any such limit applicable under a waiv20 er under section 1115).’’.

21 (c) APPLICATION OF ENHANCED MATCHING RATE

22 FOR DEVELOPMENT OF INFORMATION SYSTEMS.—Sec23 tion 1903(a)(3)(A)(i) of such Act (42 U.S.C.

24 1396b(a)(3)(A)(i)) is amended by inserting before the

25 comma at the end the following: ‘‘and including informa-
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1 tion systems necessary to assure compliance with report2 ing requirements identified as necessary to carry out sec3 tion lll of the [Omnibus Budget Reconciliation Act

4 of 1995]’’.

5 (d) CONFORMING AMENDMENT.—Section 1903(a) of

6 such Act (42 U.S.C. 1396b(a)), in the matter preceding

7 paragraph (1), is amended by inserting ‘‘or section 1931’’

8 after ‘‘except as otherwise provided in this section’’.

9 (e) CONFORMING AMENDMENTS.—

10 (1) Section 1903(a) is amended in the matter

11 preceding paragraph (1) by inserting ‘‘or section

12 1931’’ after ‘‘except as otherwise provided in the

13 section’’.

14 (2) Section 1903 is amended by adding after

15 subsection (w) the following new subsections:

16 ‘‘(x) Notwithstanding any other provision of this Act,

17 no State shall be entitled to payment under this title—

18 ‘‘(1) with respect to expenditures after Septem19 ber 30, 1996, that exceed the limitation on Federal

20 financial participation specified in section 1931; or

21 ‘‘(2) with respect to an expenditure made or

22 other obligation incurred by a State before October

23 1, 1996, unless the State has submitted to the Sec24 retary, not later than June 30, 1997, a claim for
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1 Federal financial participation in such expenditure

2 or obligation.’’.

3 TITLE IV—MEDICARE SAVINGS

4 (a) AMENDMENTS TO SOCIAL SECURITY ACT.—Ex5 cept as otherwise specifically provided, whenever in this

6 title an amendment is expressed in terms of an amend7 ment to or repeal of a section or other provision, the ref8 erence is considered to be made to that section or other

9 provision of the Social Security Act.

10 PART 1—PROVISIONS RELATING TO PART A

11 SEC. 11101. UPDATES FOR PPS HOSPITALS.

12 (a) UPDATE FACTORS.—Section 1886(b)(3)(B)(i)

13 (42 U.S.C. 1395ww(b)(3)(B)(i)) is amended by striking

14 subclauses (XII) and (XIII) and inserting the following:

15 ‘‘(XII) for each of the fiscal years 1997 through

16 2000, the market basket percentage increase minus

17 1.0 percentage points for hospitals in all areas,

18 ‘‘(XIII) for fiscal years 2001 and 2002, the

19 market basket percentage increase minus 1.5 per20 centage points for hospitals in all areas, and

21 ‘‘(XIV) for fiscal year 2003 and each subse22 quent fiscal year, the market basket percentage in23 crease for hospitals in all areas.’’.

24 (b) ADJUSTMENTS FOR CASE MIX WHEN

25 RECALIBRATING DRGS.—
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1 (1) IN GENERAL.—Section 1886(d)(3) (42

2 U.S.C. 1395ww(d)(3)) is amended by adding at the

3 end the following:

4 ‘‘(F) ADJUSTING FOR ESTIMATED CHANGE IN

5 CASE MIX.—

6 ‘‘(i) IN GENERAL.—Effective for dis7 charges occurring in a fiscal year in which the

8 Secretary implements significant changes (as

9 defined by the Secretary) in the diagnosis-relat10 ed group classification system and thereafter,

11 the Secretary may (subject to clause (ii)) adjust

12 the standardized amounts to take into account

13 estimated case mix increase not attributable to

14 real case mix increase anticipated to occur dur15 ing the fiscal year to which the standardized

16 amounts apply.

17 ‘‘(ii) REFINEMENT.—With regard to the

18 adjustment described in clause (i), if the Sec19 retary determines, based on data taken from

20 the fiscal year to which the adjustment applied,

21 that the amount of the adjustment varied from

22 the actual amount of case mix increase not at23 tributable to real case mix increase by more

24 than 0.25 percentage points, the Secretary shall
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1 make a prospective adjustment to the standard2 ized amounts to correct for the variance.’’.

3 (2) PROPAC RECOMMENDATIONS.—Section

4 1886(e)(2)(A) (42 U.S.C. 1395ww(e)(2)(A)) is

5 amended by adding at the end the following: ‘‘With

6 respect to subsection (d) hospitals, the Commission’s

7 recommendation regarding the appropriate percent8 age change shall take into account the anticipated

9 difference during the fiscal year between the change

10 in the average weighting factor and the change in

11 real case mix.’’.

12 SEC. 11102. MAINTAINING SAVINGS FROM TEMPORARY RE13 DUCTION IN PPS CAPITAL RATES.

14 Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A))

15 is amended by adding at the end the following: ‘‘In addi16 tion to the reduction described in the preceding sentence,

17 for discharges occurring after September 30, 1995, the

18 Secretary shall reduce by 15.7 percent the unadjusted

19 standard Federal capital payment rate (as described in

20 section 412.308(c) of volume 42 of the Code of Federal

21 Regulations), as in effect on September 30, 1995) and

22 shall reduce by 15.7 percent the unadjusted hospital-spe23 cific rate (as described in section 412.328(e)(1) of volume

24 42 of the Code of Federal Regulations), as in effect on

25 September 30, 1995).’’.
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1 SEC. 11103. REDUCTIONS IN DISPROPORTIONATE SHARE

2 PAYMENT ADJUSTMENTS.

3 (a) IN GENERAL.—Section 1886(d)(5)(F) (42 U.S.C.

4 1395ww(d)(5)(F)) is amended—

5 (1) in clause (ii), by striking ‘‘The amount’’

6 and inserting ‘‘Subject to clause (ix), the amount’’,

7 and

8 (2) by adding at the end the following:

9 ‘‘(ix) FISCAL YEAR 1999 AND LATER.—For

10 discharges occurring on or after October 1,

11 1998, the payment amount otherwise deter12 mined under clause (ii) shall be reduced by 10

13 percent.’’.

14 (b) CONFORMING AMENDMENT RELATING TO DE15 TERMINATION OF STANDARDIZED AMOUNTS.—Section

16 1886(d)(2)(C)(iv) (42 U.S.C. 1395ww(d)(2)(C)(iv)) is

17 amended inserting the following before the period: ‘‘, and

18 the Secretary shall not take into account any reductions

19 in the amount of such additional payments resulting from

20 the amendments made by section 11103(a) of the Bal21 anced Budget Act of 1995 for Economic Growth and Fair22 ness’’.

23 SEC. 11104. REDUCTION IN ADJUSTMENT FOR INDIRECT

24 MEDICAL EDUCATION.

25 (a) IN GENERAL.—Section 1886(d)(5)(B)(ii) (42

26 U.S.C. 1395ww(d)(5)(B)(ii)) is amended by striking all
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1 after ‘‘occurring’’ and inserting the following: ‘‘the indi2 rect teaching adjustment factor for discharges occurring—

3 ‘‘(I) on or after January 1, 1996, and be4 fore October 1, 1996, is equal to 1.77 ×

5 (((1+r) to the nth power) – 1),

6 ‘‘(II) during fiscal years 1997 through

7 1999, is equal to 1.67 × (((1+r) to the nth

8 power) – 1),

9 ‘‘(III) during the fiscal year 2000, is equal

10 to 1.55 × (((1+r) to nth power) – 1), and

11 ‘‘(IV) during the fiscal years beginning

12 with 2001, is equal to 1.47 × (((1+r) to the

13 nth power) – 1),

14 where ‘r’ is the ratio of the hospital’s full-time equiv15 alent interns and residents to beds in ‘n’ equals

16 .405.’’.

17 (b) CONFORMING AMENDMENT RELATING TO DE18 TERMINATION OF STANDARDIZED AMOUNTS.—Section

19 1886(d)(2)(C)(i) (42 U.S.C. 1395ww(d)(2)(C)(i)) is

20 amended by adding at the end the following: ‘‘, except that

21 the Secretary shall not take into account any reductions

22 in the amount of additional payments under subsection

23 (d)(5)(B)(ii) resulting from the amendments made by sec24 tion 11104(a) of the Balanced Budget Act of 1995 for

25 Economic Growth and Fairness,’’.
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1 (c) ALTERNATIVE TO RESTANDARDIZATION OF

2 COSTS.—Section 1886(d)(3)(A) (42 U.S.C.

3 1395ww(d)(3)(A)) is amended by adding at the end the

4 following:

5 ‘‘(vi) ALTERNATIVE TO

6 RESTANDARDIZATION OF COSTS.—Notwith7 standing clauses (i) through (v), if changes

8 in the amount of payment under sub9 sections (d)(3)(E), (d)(5)(B), or (d)(5)(F)

10 would otherwise require the Secretary top

11 restandardize hospital costs under sub12 section (d)(2)(C), the Secretary may com13 pute payments amounts under the sub14 paragraph in a manner that assures the

15 aggregate payments under this subsection

16 in a fiscal year not greater or less than

17 those that would have been made in the

18 year if the Secretary had restandardized

19 hospital costs under subsection (d)(2)(C).’’.

20 (d) EFFECTIVE DATE.—The amendments made by

21 the previous subsections apply to discharges occurring

22 after 1995.

23 SEC. 11105. REVISIONS IN DETERMINATION OF AMOUNT OF

24 PAYMENT FOR MEDICAL EDUCATION.

25 (a) INDIRECT MEDICAL EDUCATION.—
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1 (1) IN GENERAL.—Section 1886(d)(5)(B) (42

2 U.S.C. 1395ww(d)(5)(B)) is amended—

3 (A) in clause (ii) (as amended by section

4 111104(a) of the Act), by inserting before the

5 period ’’, subject to clause (vii)’’, and

6 (B) by adding at the end the following:

7 ‘‘(v) LIMITATIONS ON NUMBERS OF INTERNS

8 AND RESIDENTS.—In determining such adjustment

9 with respect to a hospital for discharges occurring

10 on or after October 1, 1995—

11 ‘‘(I) except as provided in clause (vi), the

12 total number of interns and residents may not

13 exceed the number of interns and residents with

14 respect to the hospital’s cost reporting period

15 ending on or before December 31, 1995, and

16 ‘‘(II) except as provided in subclause (vi),

17 the number of interns and residents who are

18 not who are not primary care residents as de19 fined in section 1886 (h)(5)(H) or residents in

20 obstetrics and gynecology, may not exceed the

21 number of such residents as of such cost report22 ing period.

23 ‘‘(vi) ADJUSTMENTS TO LIMITS.—The Secretary

24 shall adjust the number of interns and residents in

25 clause (v)—
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1 ‘‘(I) by applying a weighting factor of 0.50

2 with respect to each intern or resident who was

3 not in an initial residency period as defined in

4 Section 1886(h)(5)(F),

5 ‘‘(II) by including any interns and resi6 dents that qualify under clause (iv), and

7 ‘‘(III) as appropriate, where a hospital has

8 a significant increase in the number of primary

9 care or obstetrics and gynecology interns and

10 residents after June 30, 1995.

11 ‘‘(vii) LIMITATION ON RESIDENT-TO-BED

12 RATIO.—For purposes of clause (ii), ‘r’ may not ex13 ceed the ratio of the number of interns and residents

14 as determined under clause (v) with respect to the

15 hospital for its most recent cost reporting period

16 ending on or before December 31, 1995, to the hos17 pital’s available beds (as defined by the Secretary)

18 during such cost reporting period.’’.

19 (2) PAYMENT FOR INTERNS AND RESIDENTS

20 PROVIDING OFF-SITE SERVICES.—Section

21 1886(d)(5)(B)(iv) (U.S.C. 42 1395ww(d)(5)(B)(iv)

22 is amended to read as follows:

23 ‘‘(iv) OFF-SITE SERVICES.—All the

24 time spent by an intern or resident in pa25 tient care activities under an approved
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1 medical residency training program shall

2 be counted towards the determination of

3 full-time equivalency at an entity in a non4 hospital setting, if the hospital incurs all,

5 or substantially all, of the costs for the

6 training program in that setting.’’.

7 (b) DIRECT MEDICAL EDUCATION.—

8 (1) LIMITATION OF NUMBER OF RESIDENTS.—

9 Section 1886(h)(4) (42 U.S.C. 1395ww(h)(4)) is

10 amended by adding at the end the following:

11 ‘‘(F) LIMITATION OF NUMBER OF RESI12 DENTS FOR CERTAIN FISCAL YEARS.—Such

13 rules shall provide that for purposes of a cost

14 reporting period beginning on or after October

15 1, 1995—

16 ‘‘(i) the total number of full-time

17 equivalent residents (as determined under

18 this paragraph) with respect to an ap19 proved medical residency training program

20 may not exceed the number of full-time

21 equivalent residents with respect to the

22 ending on or before December 31, 1995,

23 and

24 ‘‘(ii) the number of a hospital’s full25 time-equivalent residents as determined
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1 under this paragraph who are not primary

2 care residents (as defined in paragraph

3 (5)(H)) or residents in obstetrics and gyn4 ecology may not exceed the number of such

5 residents as of such cost reporting period.

6 ‘‘(G) ADJUSTMENTS TO LIMITATIONS.—

7 The Secretary may adjust the limitations speci8 fied in subparagraph (F) if a hospital has a sig9 nificant increase in the number of primary care

10 or obstetrics and gynecology interns or resi11 dents after June 30, 1995.’’.

12 (2) CONTINUATION OF FREEZE ON UPDATES TO

13 FTE RESIDENT AMOUNTS.—Section

14 1886(h)(2)(D)(ii) (42 U.S.C. 1395ww(h)(2)(D)(ii))

15 is amended by striking ‘‘fiscal year 1994 or fiscal

16 year 1995’’ and inserting ‘‘fiscal years 1994 through

17 2000’’.

18 (3) PERMITTING PAYMENT TO NON-HOSPITAL

19 PROVIDERS.—Section 1886 (42 U.S.C. 1395ww)) is

20 amended by adding at the end the following:

21 ‘‘(j) PAYMENT TO NON-HOSPITAL PROVIDERS.—Be22 ginning with cost reporting periods beginning on or after

23 July 1, 1996, the Secretary may make payments (in such

24 amounts and in such form, and from each of the trust

25 funds under this title, as the Secretary considers appro-
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1 priate) to Federally Qualified Health Centers (as defined

2 in section 1861(aa)(4)) and Rural Health Clinics (as de3 fined in section 1861(aa)(2)) and eligible organizations

4 with contracts under part C for the direct costs of medical

5 education, if such costs are incurred in the operation of

6 an approved medical residence training program described

7 in subsection (h). The Secretary may designate additional

8 entities as eligible organizations for such payments as the

9 Secretary determines to be appropriate.’’.

10 (c) APPLICATION TO COST CONTRACTS.—Section

11 1886(j) of the Social Security Act (42 U.S.C. 1395ww(j))

12 (as added by subsection (b)(3) of this section) applies to

13 contracts under section 1876(h) of that Act (42 U.S.C.

14 1395mm).

15 (d) EFFECTIVE DATE.—The amendments made by

16 the previous subsections apply to hospital cost reporting

17 periods beginning on or after October 1, 1995.

18 (e) COMMISSION ON MEDICAL EDUCATION AND

19 WORKFORCE PRIORITIES.—

20 (1) IN GENERAL.—There is established within

21 the Department of Health and Human Services a

22 Commission to be known as the National Commis23 sion on Medical Education and Workforce Priorities

24 (hereafter in this subsection referred to as the

25 ‘‘Commission’’).
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1 (2) DUTIES.—The Commission shall have the

2 following responsibilities:

3 (A) To develop and recommend to the Sec4 retary specific policies to address the preserva5 tion of the research and educational capacity of

6 the Nation’s academic health centers and the

7 supply, composition, and support of the future

8 health care workforce. The Commission shall

9 examine—

10 (i) the financing of graduate medical

11 education,

12 (ii) issues relating to children’s and

13 specialty hospitals,

14 (iii) policies regarding international

15 medical school graduates, and

16 (iv) the relationship of graduate medi17 cal education funding and service-gen18 erated income.

19 (B) To make recommendations concerning

20 the most effective allocation of training re21 sources to ensure that the numbers and com22 petencies of health care professionals are re23 sponsive to the Nation’s needs.

24 (3) COMPOSITION.—
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1 (A) QUALIFICATIONS.—The Commission

2 shall consist of 15 members appointed by the

3 Secretary, and shall to the extent feasible in4 clude—

5 (i) individuals nationally recognized

6 for expertise in health economics, medical

7 education financing, medical practice, is8 sues relating to the composition of the

9 health care workforce, research on and de10 velopment of technological and scientific

11 advances in health care, and other related

12 fields; and

13 (ii) health care professionals including

14 physicians (both faculty and non-faculty),

15 consumers, a dean and a chief executive of16 ficer or an academic health center or a

17 teaching hospital, and representatives from

18 health insurance organizations, managed

19 care organizations, and medical workforce

20 accrediting organizations.

21 (B) NATIONAL REPRESENTATION.—To the

22 extent feasible, the membership of the Commis23 sion—

24 (i) shall represent the various geo25 graphic regions of the United States,
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1 (ii) shall reflect the racial, ethnic, and

2 gender composition of the United States;

3 and

4 (iii) shall be broadly representative of

5 medical schools, academic health centers,

6 teaching hospitals, and schools involved in

7 the training of non-physician providers of

8 health services.

9 (4) TERMS OF OFFICE.—Members of the Com10 mission shall first be appointed no later than July

11 1, 1996, for a term of two and one half years.

12 (5) EX OFFICIO MEMBERS.—In addition to the

13 members appointed pursuant to paragraph (3), the

14 Commission shall include—

15 (A) the Secretary of Health and Human

16 Services, the Secretary of Veterans Affairs, and

17 the Secretary of Defense (or a designee of each

18 such official); and

19 (B) such additional individuals as may be

20 designated by the Secretary from among Fed21 eral officers or employees.

22 (6) CHAIR.—The Secretary shall designate an

23 individual from among the members appointed pur24 suant to paragraph (3)(A) to serve as the chair of

25 the Commission.
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1 (7) QUORUM.—Nine members of the Commis2 sion shall constitute a quorum, but a lesser number

3 may hold hearings.

4 (8) VACANCIES.—Any vacancy in the Commis5 sion shall not affect its power to function.

6 (9) COMPENSATION.—Each member of the

7 Commission who is not otherwise employed by the

8 United States Government shall receive compensa9 tion at a rate equal to the daily rate prescribed for

10 GS–18 under the General Schedule under section

11 5332 of title 5, United States Code, for each day,

12 including travel time, such member is engaged in the

13 actual performance of duties as a member of the

14 Commission. A member of the Commission who is

15 an officer or employee of the United States Govern16 ment shall serve without additional compensation.

17 All members of the Commission shall be reimbursed

18 for travel, subsistence, and other necessary expenses

19 incurred by them in the performance of their duties.

20 (10) CERTAIN AUTHORITIES AND DUTIES.—In

21 order to carry out the provisions of this subsection,

22 the Commission is authorized to—

23 (A) collect such information, hold such

24 hearings, and sit and act at such times and

25 places, either as a whole or by subcommittee,
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1 and request the attendance and testimony of

2 such witnesses and the production of such docu3 ments as the Commission may consider advis4 able; and

5 (B) request the cooperation and assistance

6 of Federal departments, agencies, and instru7 mentalities, and such departments, agencies,

8 and instrumentalities are authorized to provide

9 such cooperation and assistance.

10 (11) REPORTS.—The Commission shall submit

11 to the Secretary a preliminary report not later than

12 July 1, 1997, and a final report not later than July

13 1, 1998, making recommendations on the matters

14 specified in paragraph (2).

15 (12) TERMINATION.—The Commission shall

16 terminate as of December 31, 1998.

17 (13) AUTHORIZATION OF APPROPRIATIONS.—

18 There is authorized to be appropriated to the Sec19 retary of Health and Human Services for use in car20 rying out this subsection not more than $250,000

21 for each of fiscal years 1996, 1997, 1998. Funds ap22 propriated for fiscal year 1998 shall remain available

23 until expended.
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1 SEC. 11106. ELIMINATION OF IME AND DSH PAYMENTS AT2 TRIBUTABLE TO OUTLIER PAYMENTS.

3 (a) INDIRECT MEDICAL EDUCATION.—Section

4 1886(d)(5)(B)(i)(I) (42 U.S.C. 1395ww(d)(5)(B)(i)(I)) is

5 amended by inserting ‘‘, for cases qualifying for additional

6 payment under subparagraph (A)(i),’’ before ‘‘the amount

7 paid to the hospital under subparagraph (A)’’.

8 (b) DISPROPORTIONATE SHARE ADJUSTMENTS.—

9 Section 1886(d)(5)(F)(ii)(I) (42 U.S.C.

10 1395ww(d)(5)(F)(ii)(I)) is amended by inserting ‘‘, for

11 cases qualifying for additional payment under subpara12 graph (A)(i),’’ before ‘‘the amount paid to the hospital

13 under subparagraph (A)’’.

14 (c) COST OUTLIER PAYMENTS.—Section

15 1886(d)(5)(A)(ii) (42 U.S.C. 1395ww(d)(5)(A)(ii)) is

16 amended by striking ‘‘exceed the applicable DRG prospec17 tive payment rate’’ and inserting ‘‘exceed the sum of the

18 applicable DRG prospective payment rate plus any

19 amounts payable under paragraphs (d)(5)(B) and

20 (d)(5)(F)’’.

21 (d) EFFECTIVE DATE.—The amendments made by

22 the previous subsections apply to discharges occurring on

23 or after October 1, 1995.

24 SEC. 11107. TREATMENT OF TRANSFER CASES.

25 Section 1886(d)(5)(I) (42 U.S.C. 1395ww(d)(5)(I))

26 of the Act is amended by adding at the end the following:
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1 ‘‘(iii) CERTAIN TRANSFERS.—Effective for discharges

2 occurring on or after October 1, 1995, transfer cases (as

3 otherwise defined by the Secretary) shall also include cases

4 in which a patient is transferred from a subsection (d)

5 hospital to a hospital or hospital unit that is not a sub6 section (d) hospital (under section 1886(d)(1)(B) and im7 plementing regulations) or to a skilled nursing facility for

8 the purpose of receiving extended care services.’’.

9 SEC. 11108. MORATORIUM ON NEW LONG TERM CARE HOS10 PITAL EXCLUSIONS.

11 Section 1886(d)(1)(B)(iv) (42 U.S.C.

12 1395ww(d)(1)(B)(iv)) is amended by inserting ‘‘(and had

13 such an average on the date of enactment of the Balanced

14 Budget Act of 1995 for Economic Growth and Fairness)’’

15 before the comma.

16 SEC. 11109. PAYMENTS TO HOSPITALS EXCLUDED FROM

17 PPS.

18 (a) REDUCTIONS IN UPDATES.—Section

19 1886(b)(3)(B)(ii) (42 U.S.C. 1395ww(b)(4)(B)(ii)) is

20 amended—

21 (1) in subclause (V)

22 (A) by striking ‘‘through 1997’’ and insert23 ing ‘‘through 1995’’, and

24 (B) by striking ‘‘and’’,
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1 (2) by renumbering subclause (VI) as (VIII),

2 and

3 (3) by inserting after subclause (V) the follow4 ing:

5 ‘‘(VI) fiscal years 1996 through 2000, the mar6 ket basket percentage increase minus 1.0 percentage

7 point,

8 ‘‘(VII) fiscal years 2001 and 2002, the market

9 basket percentage increase minus 1.5 percentage

10 points, and’’.

11 (b) REBASING FOR PPS-EXEMPT HOSPITALS.—Sec12 tion 1886(b)(3)(A) (42 U.S.C. 1395ww(b)(3)(A)) is

13 amended to read as follows:

14 ‘‘(3)(A) TARGET AMOUNT.—

15 ‘‘(i) CALCULATION OF TARGET AMOUNT.—Sub16 ject to clauses (ii) and (iii), and except as provided

17 in subparagraphs (C), (D), and (E), for purposes of

18 this subsection, the term ‘target amount’ means—

19 ‘‘(I) with respect to the first 12-month cost

20 reporting period in which this subparagraph is

21 applied to the hospital, the average allowable

22 operating costs of inpatient hospital services (as

23 defined in subsection (a)(4)) recognized under

24 this title for such hospital for the hospital’s two

25 most recent 12-month cost reporting periods be-
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1 ginning on or after October 1, 1990, subject to

2 the floor and ceiling for target amounts as spec3 ified in clause (ii), and increased by the applica4 ble percentage increases under subparagraph

5 (B)(ii) for the hospital’s succeeding cost report6 ing periods beginning before fiscal year 1996,

7 or

8 ‘‘(II) with respect to a later cost reporting

9 period, the target amount for the preceding cost

10 reporting period, increased by the applicable

11 percentage increase under subparagraph (B)(ii).

12 ‘‘(ii) FLOOR AND CEILING.—Subject to clause

13 (iii), the target amount determined under this sub14 paragraph for a hospital or unit shall not be less

15 than 70 percent nor more than 150 percent of the

16 national mean (adjusted by an appropriate wage

17 index) of the operating costs of inpatient hospital

18 services determined under this paragraph for hos19 pitals (and units thereof as applicable) of each type

20 of hospital described in subsection (d)(1)(B) for the

21 cost reporting periods noted in clause (i)(I) and up22 dated by the applicable percentage increase under

23 subparagraph (B)(ii).
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1 ‘‘(iii) NEW HOSPITALS.—In the case of a hos2 pital that does not have a cost reporting period be3 ginning before October 1, 1990—

4 ‘‘(I) with respect to cost reporting periods

5 beginning during the hospital’s first two fiscal

6 years of operation, the amount of payment

7 made under this title with respect to operating

8 costs of inpatient hospital services (as defined

9 in subsection (a)(4)) shall be the reasonable

10 costs for providing such services, except that

11 such amount may not exceed 150 percent of the

12 national mean as determined and updated in

13 clause (ii),

14 ‘‘(II) with respect to a later cost reporting

15 period, clauses (i) and (ii) shall apply to such

16 hospital except that the target amount for the

17 hospital shall be the average allowable operating

18 costs of inpatient hospital services (as defined

19 in subsection (a)(4)) recognized under this title

20 for the hospital’s first two 12-month cost re21 porting periods beginning at least one year

22 after the hospital accepts its first patient.’’.

23 (c) EXCEPTIONS AND ADJUSTMENTS.—Section

24 1886(b)((4)(A)(i) (42 U.S.C. 1395ww(b)(4)(A)(i)) is
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1 amended by inserting the following after the first sen2 tence: * * *.

3 SEC. 11110. REDUCTIONS TO CAPITAL PAYMENTS FOR PPS4 EXEMPT HOSPITALS.

5 Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is

6 amended by adding at the end the following new subpara7 graph:

8 ‘‘(T) REDUCTIONS FOR PPS-EXEMPT HOS9 PITALS.—Such regulations shall provide that, in de10 termining the amount of the payments that may be

11 made under this title with respect to the capital-re12 lated costs of inpatient hospital services furnished by

13 a hospital that is not a subsection (d) hospital (as

14 defined in section 1886(d)(1)(B)) or a subsection (d)

15 Puerto Rico hospital (as defined in section

16 1886(d)(9)(A)), the Secretary shall reduce the

17 amounts of such payments otherwise established

18 under this title by 15 percent for payment attrib19 utable to portions of cost reporting periods occurring

20 during each of the fiscal years 1996 through 2005.’’.
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1 SEC. 11111. MAINTAINING SAVINGS RESULTING FROM TEM2 PORARY FREEZE ON PAYMENT INCREASES

3 FOR SKILLED NURSING FACILITIES.

4 (a) BASING UPDATES TO PER DIEM COST LIMITS

5 EFFECTIVE FOR FISCAL YEAR 1996 ON LIMITS FOR FIS6 CAL YEAR 1993.—

7 (1) IN GENERAL.—The last sentence of section

8 1888(a) (42 U.S.C. 1395yy(a)) is amended by add9 ing at the end the following: ‘‘, except that the limits

10 effective October 1, 1995 shall be based on the lim11 its effective on October 1, 1992 and shall not take

12 into account any changes in the routine service costs

13 of skilled nursing facilities occurring during cost re14 porting periods which began during fiscal year 1994

15 or fiscal year 1995.’’.

16 (2) NO EXCEPTIONS PERMITTED BASED ON

17 AMENDMENT.—The Secretary of Health and Human

18 Services shall not consider the amendment made by

19 paragraph (1) in making any adjustments pursuant

20 to section 1888(c) of the Social Security Act.

21 (b) PAYMENTS DETERMINED ON PROSPECTIVE

22 BASIS.—Prospective payments made to skilled nursing fa23 cilities under section 1888(d) of the Social Security Act

24 for cost reporting periods beginning on or after October

25 1, 1995, shall be based on the rates effective for cost re26 porting periods beginning October 1, 1992, and before Oc-
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1 tober 1, 1993, and shall not take into account any changes

2 in the costs of services occurring during cost reporting pe3 riods which began during fiscal year 1994 or fiscal year

4 1995.

5 SEC. 11112. INTERIM PROSPECTIVE PAYMENT FOR SKILLED

6 NURSING FACILITIES.

7 (a) IN GENERAL.—Section 1888 (42 U.S.C. 1395yy)

8 is amended by adding at the end the following:

9 ‘‘(e) PAYMENT ON AN INTERIM PROSPECTIVE

10 BASIS.—The Secretary shall, for cost reporting periods

11 beginning on or after October 1, 1996, provide for pay12 ment for routine service costs (excluding capital-related

13 costs) of extended care services in accordance with a pro14 spective payment system established by the Secretary in

15 the amounts provided in subsection (f), subject to the ex16 ceptions and limitations in subsections (g) and (h).

17 ‘‘(f) DETERMINATION OF PAYMENT AMOUNTS.—

18 ‘‘(1) PER DIEM BASIS.—The amount of pay19 ment under subsection (e) shall be determined on a

20 per diem basis.

21 ‘‘(2) USE OF BASE YEAR COSTS UPDATED BY

22 MARKET BASKET.—The Secretary shall compute the

23 routine service costs per diem in a base year (deter24 mined by the Secretary) for each skilled nursing fa25 cility, and shall update the per diem rate on the
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1 basis of a market basket, excluding increases in rou2 tine service costs associated with fiscal year 1994

3 and fiscal year 1995, and other factors as the Sec4 retary determines appropriate.

5 ‘‘(3) LIMITATION ON BASE YEAR COSTS.—The

6 base year routine service costs used to determine the

7 per diem rate applicable to a skilled nursing facility

8 may not exceed the following limits:

9 ‘‘(A) RURAL AREAS.—With respect to

10 skilled nursing facilities located in rural areas,

11 the limit shall be equal to 112 percent of the

12 mean per diem routine service costs in a base

13 year (determined by the Secretary) for free14 standing skilled nursing facilities located in

15 rural areas within the same region.

16 ‘‘(B) URBAN AREAS.—With respect to

17 skilled nursing facilities located in urban areas,

18 the limit shall be equal to 112 percent of the

19 mean per diem routine service costs in a base

20 year (determined by the Secretary) for free21 standing skilled nursing facilities located in

22 urban areas within the same region.

23 ‘‘(C) DEFINITIONS.—For purposes of this

24 subsection, urban and rural areas shall be de25 termined in the same manner as for purposes of
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1 subsection (a), and the term ‘‘region’’ shall

2 have the same meaning as under section

3 1886(d)(2)(D).

4 ‘‘(D) WAGE ADJUSTMENTS.—In establish5 ing limits under this subsection, the Secretary

6 may make appropriate adjustments to the

7 labor-related portion of the costs based upon on

8 a wage index and other factors as the Secretary

9 determines appropriate.

10 ‘‘(4) NEW SKILLED NURSING FACILITIES.—

11 Skilled nursing facilities entering the Medicare pro12 gram subsequent to the base period, determined in

13 subsection (f)(1), shall receive a routine payment

14 rate equal to the mean per diem routine costs of

15 skilled nursing facilities in the urban or rural area

16 in which they are located by region. The Secretary

17 shall compute these payment rates using per diem

18 costs in a base year (determined by the Secretary)

19 and shall update the rates on the basis of a market

20 basket and other factors as the Secretary determines

21 appropriate.

22 ‘‘(5) LOW MEDICARE VOLUME FACILITIES.—Ef23 fective for cost reporting periods beginning on or

24 after October 1, 1996, low Medicare volume skilled

25 nursing facilities, as described in subsection (d),
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1 shall receive payment for routine service costs as

2 otherwise set forth in subsections (e) through (j), ex3 cept that they may elect to receive payment on the

4 basis of the rates described in subsection (f)(4).

5 ‘‘(6) CASE MIX ADJUSTMENTS.—The Secretary

6 may make prospective adjustments to the routine

7 payment rates to account for changes in facility pa8 tient mix (case mix) as the Secretary determines ap9 propriate. Such adjustments shall be made in a

10 manner which does not increase expenditures for the

11 routine costs of skilled nursing facility services be12 yond what would otherwise occur.

13 ‘‘(g) HOLD HARMLESS PAYMENTS.—

14 ‘‘(1) IN GENERAL.—Subject to paragraphs (2)

15 and (3), a facility’s per diem payment rate based on

16 the application of subsections (e) and (f) is the

17 greater of—

18 ‘‘(A) its per diem payment amount in the

19 base year, and

20 ‘‘(B) its base year cost per diem up to the

21 regional limit plus any exception amounts that

22 may have been granted in the base year (ad23 justed by the market basket).

24 ‘‘(2) LIMIT.—The payment rate determined

25 under paragraph (1) shall not exceed the facility’s
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1 cost per diem incurred in the base year adjusted by

2 the market basket.

3 ‘‘(3) NEW ENTITY EXCEPTION.—Subparagraph

4 (1)(A) does not apply if the per diem payment

5 amount in the base year was determined on the

6 basis of an exemption under subsection (f)(4).

7 ‘‘(h) UPPER LIMITS ON REASONABLE COSTS.—The

8 Secretary, in making determinations on the reasonable

9 costs (both capital and operating) of ancillary services pro10 vided by skilled nursing facilities under part A, shall uti11 lize as an upper limit, the carrier fee schedules applicable

12 to such services as specified in sections 1834 and 1848.

13 This subsection shall not have the effect of mitigating

14 other limits on the reasonable costs of ancillary services

15 currently in effect under Part A such as those specified

16 in section 1861(v)(5)(A).

17 ‘‘(i) ELIMINATION OF EXCEPTIONS AND EXEMP18 TIONS.—Exceptions, as described in subsection (c), and

19 exemptions, as described in the applicable regulations, are

20 eliminated for cost reporting periods beginning on or after

21 October 1, 1996.’’.

22 (b) CONSOLIDATED BILLING AND UNIFORM COD23 ING.—

24 (1) IN GENERAL.—Section 1862(a) (42 U.S.C.

25 1395y(a)) is amended—
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1 (A) by striking ‘‘or’’ at the end of para2 graph (14),

3 (B) by striking the period at the end of

4 paragraph (15) and adding a semicolon, and

5 (C) by inserting after paragraph (15) the

6 following:

7 ‘‘(16) which are other than physicians’ services,

8 services described by sections 1861(s)(2)(K)(i)

9 through (iii), certified nurse-midwife services, quali10 fied psychologist services, and services of a certified

11 registered nurse anesthetist, and which are fur12 nished to an individual who is a resident of a skilled

13 nursing facility by an entity other than the skilled

14 nursing facility, unless the services are furnished

15 under arrangements (as defined in section

16 1861(w)(1)) with the entity made by the skilled

17 nursing facility; or

18 ‘‘(17) which are on a claim submitted by a

19 skilled nursing facility under this title, unless the

20 claim uses the HCFA common procedure coding sys21 tem.’’.

22 (2) CONFORMING AMENDMENT.—Section

23 1866(a)(1)(H) (42 U.S.C. 1395cc(a)(1)(H)) is

24 amended—
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1 (A) by striking ‘‘(i)’’ and inserting ‘‘(I)’’

2 and striking ‘‘(ii)’’ and inserting ‘‘(II)’’,

3 (B) by striking ‘‘(H)’’ and inserting

4 ‘‘(H)(i)’’, and

5 (C) by adding at the end the following:

6 ‘‘(ii) in the case of skilled nursing facilities which pro7 vide services for which payment may be made under this

8 title, to have all items and services (other than physicians’

9 services, and other than services described by section

10 1861(s)(2)(K)(i) through (iii), certified nurse-midwife

11 services, qualified psychologist services, and services of a

12 certified registered nurse anesthetist)—

13 ‘‘(I) that are furnished to an individual who is

14 a resident of the skilled nursing facility, and

15 ‘‘(II) for which the individual is entitled to have

16 payment made under this title, furnished by the

17 skilled nursing facility or otherwise under arrange18 ments (as defined in section 1861(w)(1)) made by

19 the skilled nursing facility,’’.

20 (3) EFFECTIVE DATE.—the amendments made

21 by the preceding paragraphs are effective for serv22 ices furnished on or after October 1, 1996.
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1 SEC. 11113. FULL PROSPECTIVE PAYMENT SYSTEM FOR

2 SKILLED NURSING FACILITIES.

3 (a) IN GENERAL.—Section 1888 (42 U.S.C. 1395yy)

4 is amended by striking subsections (e) through (i) (as

5 added by section 11112(a) of this Act) and adding the

6 following:

7 ‘‘(e) FULL PROSPECTIVE PAYMENT SYSTEM.—

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

9 for payment for all costs of extended care services

10 (including routine service costs, ancillary costs, and

11 capital related costs) in accordance with a prospec12 tive payment system established by the Secretary.

13 ‘‘(2) BUDGET SAVINGS.—Prior to implementing

14 the prospective payment system described in para15 graph (1) in a budget neutral fashion, the Secretary

16 shall reduce, by 7 percent, the per diem rates for

17 routine costs, and the reasonable costs for ancillary

18 services and capital for skilled nursing facilities as

19 such rates and costs are in effect on September 30,

20 1998.’’.

21 (b) EFFECTIVE DATE.—The amendments made by

22 the preceding subsection apply to cost reporting periods

23 beginning on or after October 1, 1998.
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1 SEC. 11114. SALARY EQUIVALENCY GUIDELINES FOR THER2 APY SERVICES.

3 Section 1861(v)(5) (42 U.S.C. 1395x(v)(5)) is

4 amended—

5 (1) by redesignating subparagraph (B) as sub6 paragraph (D),

7 (2) in subparagraph (D), as redesignated, by

8 adding ‘‘(B), or (C),’’ after ‘‘subparagraph (A),’’,

9 (3) by inserting the following after subpara10 graph (A):

11 ‘‘(B) SALARY EQUIVALENCY GUIDELINES FOR

12 THERAPY SERVICES.—

13 ‘‘(i) IN GENERAL.—Effective for services fur14 nished on or after January 1, 1996, the Secretary

15 shall establish guidelines relating to occupational

16 therapy services and speech-language pathology serv17 ices, and revise guidelines established under the sub18 paragraph (A) relating to respiratory therapy serv19 ices and physical therapy services using the meth20 odology described in clause (ii).

21 ‘‘(ii) CALCULATION OF AMOUNTS.—The guide22 lines for each therapy shall be equal to the sum of:

23 ‘‘(I) the sum of an hourly salary rate, plus

24 fringe benefits, plus a rental expense factor (in

25 the same base year), and
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1 ‘‘(II) an overhead factor (excluding rental

2 expenses) equal to 28 percent of the amount de3 termined in subclause (I),

4 adjusted by geographical area using the methodology

5 contained in the final regulation of the Secretary of

6 Health and Human Services published on page

7 44928 of volume 48 of the Federal Register on Sep8 tember 30, 1983, updated annually from the base

9 year to the current year by an inflation factor.

10 ‘‘(iii) DATA.—The data used in establishing the

11 guidelines under clause (ii) shall be—

12 ‘‘(I) in the case of hourly salary rates, for

13 each therapy, the 75th percentile of salaries

14 paid to therapists working full-time in an em15 ployment relationship in the area, from the

16 most recent available Bureau of Labor Statis17 tics (BLS) hospital salary data for each, in18 creased by 10 percent,

19 ‘‘(II) in the case of fringe benefits, for

20 each therapy, an aggregate factor derived from

21 hospital cost reports ending in fiscal year 1991

22 for BLS survey areas used in subclause (I),

23 ‘‘(III) in the case of the rental expense fac24 tor, for each therapy, an amount derived from

25 local area rental income data compiled by the
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1 Building Owners and Managers Association

2 International for 1991, for BLS survey areas

3 used in subclause (I),

4 ‘‘(IV) in the case of the inflation factor,

5 for each therapy, an amount equal to the aver6 age of Employment Cost Indices for wages and

7 benefits of Civilian Hospital, Professional Tech8 nical and Clerical Workers, and Private Execu9 tives, Administrators and Managers, and the

10 Consumer Price Indices-Urban for Housing and

11 all items less food and energy, weighted by the

12 relative proportion that each component rep13 resents of the guidelines amounts.

14 ‘‘(C) USE OF ADDITIONAL DATA.—Nothing in sub15 paragraph (B) shall preclude the Secretary from updating

16 the guidelines using such data sources and methodology

17 as the Secretary determine to be appropriate, except that

18 any changes to the data sources will be made through rule19 making in a manner that does not increase aggregate

20 spending for such services beyond what would otherwise

21 occur.’’, and

22 (4) by adding at the end the following:

23 ‘‘(E) NO EXCEPTION FOR PREVIOUS CONTRACTS.—

24 In applying limitations under section 1861(v)(5), the Sec25 retary shall not recognize an exception for a provider that
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1 entered into a written binding contract or contingency

2 contract with a therapist, provider or other organization

3 prior to the date the initial guidelines are published.’’.

4 SEC. 11115. REMOVAL OF GRADUATE MEDICAL EDUCATION,

5 INDIRECT MEDICAL EDUCATION, AND DIS6 PROPORTIONATE SHARE HOSPITAL PAY7 MENTS FROM THE CALCULATION OF THE AD8 JUSTED AVERAGE PER CAPITA COST.

9 (a) EXCLUSION OF GRADUATE MEDICAL EDU10 CATION, INDIRECT MEDICAL EDUCATION, AND DIS11 PROPORTIONATE SHARE HOSPITAL PAYMENTS FROM THE

12 CALCULATION OF THE ADJUSTED AVERAGE PER CAPITA

13 COST.—Section 1851H(2) (as added by subtitle B of this

14 title) is amended by adding at the end the following:

15 ‘‘Starting in calendar year 1998, the AAPCC shall not in16 clude estimated amounts that would have been paid for

17 indirect medical education costs under section

18 1886(d)(5)(B), disproportionate share payment adjust19 ments under section 1886(d)(5)(F), and direct graduate

20 medical education costs under section 1886(h).’’.

21 (b) PAYMENTS FOR GRADUATE EDUCATION PRO22 GRAMS.—Section 1851F (as added by subtitle B of this

23 title) is amended by adding at the end the following:

24 ‘‘(k) PAYMENTS FOR GRADUATE MEDICAL EDU25 CATION PROGRAMS.—
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1 ‘‘(1) ADDITIONAL PAYMENTS.—

2 ‘‘(A) ADDITIONAL PAYMENT TO BE

3 MADE.—Starting in calendar year 1998, each

4 contract with an eligible organization under this

5 section shall provide for an additional payment

6 for Medicare’s share of allowable direct grad7 uate medical education costs incurred by such

8 organization for an approved medical residency

9 program.

10 ‘‘(B) LIMITATION FOR RISK CONTRACTS.—

11 The sum of such payments to all eligible orga12 nizations having a risk contract under this sec13 tion shall not exceed 75 percent of the amount

14 that would otherwise have been payable to the

15 organization if the estimated amounts for direct

16 graduate medical education costs under section

17 1886(h) had been included in the AAPCC.

18 ‘‘(2) ALLOWABLE COSTS.—If the eligible orga19 nization has an approved program, the Secretary

20 shall determine the allowable costs as follows:

21 ‘‘(A) RISK CONTRACTS.—In the case of an

22 eligible organization having a risk contract

23 under this section, and that incurs all or sub24 stantially all of the costs of the approved medi25 cal residency program, the allowable costs for
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1 such program shall equal the national average

2 per resident amount times the number of full3 time-equivalent residents in the program.

4 ‘‘(B) OTHER CONTRACTS.—In the case of

5 other eligible organizations, the allowable costs

6 shall equal the lesser of—

7 ‘‘(i) the direct graduate medical edu8 cation costs incurred by the organization,

9 and

10 ‘‘(ii) the national average per resident

11 amount times the number of full-time12 equivalent residents in the program.

13 ‘‘(3) COSTS UNDER CONTRACTS WITH HOS14 PITALS.—If the eligible organization has a written

15 agreement with a hospital or other entity that has

16 an approved medical residency program, the allow17 able costs shall include such payments specified in

18 the agreement for direct graduate medical education

19 costs incurred for resident time spent in patient care

20 related activities. Allowable costs under this para21 graph shall not exceed 75 percent of the amount

22 that would have been included in the AAPCC to ac23 count direct graduate medical education costs (if

24 such costs had not been removed by the last sen25 tence of section 1851H(2).
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1 ‘‘(4) DEFINITIONS.—As used in this sub2 section—

3 ‘‘(A) the terms ‘approved medical residency

4 program’, ‘direct graduate medical education

5 costs’, and ‘full-time-equivalent residents’ have

6 the same meanings as under section 1886(h),

7 ‘‘(B) the term ‘Medicare’s share’ means

8 the amount determined by multiplying the eligi9 ble organization’s allowable costs for an ap10 proved medical residency program by the ratio

11 of the number of individuals enrolled with the

12 organization under this section to the total

13 number of individuals enrolled with the organi14 zation,

15 ‘‘(C) the term ‘national average per resi16 dent amount’ means an amount estimated by

17 the Secretary to equal the weighted average

18 amount that would be paid per full-time-equiva19 lent resident under section 1886(h) for the cal20 endar year (determined separately for primary

21 care residency programs (including obstetrics

22 and gynecology residency programs) and for

23 other residency programs).’’.

24 (c) ADDITIONAL PAYMENTS TO HOSPITALS FOR

25 MANAGED CARE ENROLLEES.—Section 1886(d) (42
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1 U.S.C. 1395ww(d)) is amended by adding at the end the

2 following:

3 ‘‘(11) ADDITIONAL PAYMENTS TO HOSPITALS FOR

4 MANAGED CARE ENROLLEES.—

5 ‘‘(A) IN GENERAL.—For portions of cost re6 porting periods occurring on or after January 1,

7 1998, the Secretary shall provide for an additional

8 payment amount for subsection (d) hospitals for

9 services furnished to individuals who are enrolled in

10 an organization having a contract with an eligible

11 organization under part C and who are entitled to

12 part A.

13 ‘‘(B) AMOUNT OF PAYMENT.—Subject to sub14 paragraph (F), the amount of such payment shall be

15 determined by multiplying (i) the sum of the

16 amounts determined under subparagraphs (C) and

17 (D), by (ii) the product of the number of discharges

18 determined under subparagraph (E) and the esti19 mated average per discharge amount that would oth20 erwise have been paid under section 1886(d)(1)(A)

21 if the individuals had not been enrolled in an organi22 zation having a contract with an eligible organiza23 tion under part C.

24 ‘‘(C) INDIRECT TEACHING ADJUSTMENT FAC25 TOR.—The Secretary shall determine an indirect
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1 teaching adjustment factor equal to 1.11×(((1+r) to

2 the nth power)¥1), where ‘r’ and ‘n’ have the same

3 meaning as in section 1886(d)(5)(B).

4 ‘‘(D) DISPROPORTIONATE SHARE ADJUST5 MENT.—The Secretary shall determine a dispropor6 tionate share adjustment factor equal to the dis7 proportionate share adjustment percentage applica8 ble to the hospital under section 1886(d)(5)(F).

9 ‘‘(E) DETERMINATION OF NUMBER OF DIS10 CHARGES.—The Secretary shall determine the num11 ber of discharges as equal to the lesser of—

12 ‘‘(i) the number of discharges during the

13 current cost reporting period attributable to in14 dividuals who are enrolled in an organization

15 having a risk contract and who are entitled to

16 part A of this title, and

17 ‘‘(ii) the number of discharges paid under

18 section 1886(d) during the hospital’s cost re19 porting period beginning in fiscal year 1992

20 minus the number of discharges paid under sec21 tion 1886(d) during the hospital’s current cost

22 reporting period.

23 ‘‘(F) ADJUSTMENT FOR SAVINGS.—At the be24 ginning of each calendar year, the Secretary shall

25 make an adjustment in the amounts otherwise pay-
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1 able under this paragraph so that the estimated pay2 ments under this paragraph for the discharges oc3 curring in that calendar year, together with the esti4 mated amounts payable under section 1851F for

5 that calendar year, equal 75 percent of the amounts

6 the Secretary estimates would otherwise have been

7 payable under section 1851F during that calendar

8 year if the adjusted average per capita cost deter9 mined under section 1851F included estimated

10 amounts for indirect medical education costs, dis11 proportionate share payment adjustments, and di12 rect graduate medical education costs.’’.

13 (d) USE OF INTERIM FINAL REGULATIONS.—The

14 Secretary of Health and Human Services may issue regu15 lations on an interim final basis to implement this title

16 and the amendments made by this title.

17 SEC. 11116. SOLE COMMUNITY HOSPITALS.

18 (a) REBASING THE TARGET AMOUNT.—Section

19 1886(b)(3)(C) (42 U.S.C. 13955ww (b)(3)(C)) is amend20 ed—

21 (1) by striking ‘‘or’’ at the end of clause (iii),

22 (2) in clause (iv)—

23 (A) by striking ‘‘and each subsequent fiscal

24 year’’, and
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1 (B) by striking the period at the end and

2 adding a comma,

3 (3) by inserting after clause (iv) the following:

4 ‘‘(v) with respect to discharges occurring in fis5 cal year 1996, the average of—

6 ‘‘(I) the allowable operating costs of inpa7 tient hospital services (as defined in subsection

8 (a)(4)) recognized under this title for the hos9 pital’s cost reporting period (if any) beginning

10 during fiscal year 1992 increased (in a

11 compounded manner) by the applicable percent12 age increases applied to such hospital under

13 this paragraph for cost reporting periods begin14 ning in fiscal year 1993 and for discharges oc15 curring in fiscal years 1994, 1995, and 1996,

16 and

17 ‘‘(II) the allowable operating costs of inpa18 tient hospital services (as defined in subsection

19 (a)(4)) recognized under this title for the hos20 pital’s cost reporting period (if any) beginning

21 during fiscal year 1993 increased (in a

22 compounded manner) by the applicable percent23 age increase applied to such hospital under this

24 paragraph for discharges occurring in fiscal

25 years 1994, 1995, and 1996, or
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1 ‘‘(vi) With respect to discharges occurring in

2 fiscal year 1997 and each subsequent fiscal year, the

3 target amount for the preceding year (determined

4 without application of clause (viii)) increased by the

5 applicable percentage increase under subparagraph

6 (B)(iv).’’, and

7 (4) by adding at the end the following:

8 ‘‘Notwithstanding clauses (v) and (vi), the target amount

9 with respect to discharges occurring in fiscal year 1996

10 and each subsequent fiscal year shall be the higher of the

11 amount determined under clause (v) or (vi) (as applicable)

12 and the target amount with respect to discharges occur13 ring in fiscal year 1995 (as determined under clause (iv))

14 increased by the applicable percentage increase under sub15 paragraph (B)(iv) for discharges occurring in fiscal year

16 1996. The Secretary may substitute more recent cost re17 porting periods for those specified in subclause (v) but no

18 more often than every four fiscal years.’’.

19 (b) ELIMINATING THE VOLUME ADJUSTMENT.—Sec20 tion 1886(d)(5)(D)(ii) (42 U.S.C. 1395ww(d)(5)(D)(ii)) is

21 amended by striking ‘‘In’’ and inserting ‘‘For cost report22 ing periods beginning before October 1, 1995, in’’.
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1 SEC. 11117. RURAL PRIMARY CARE HOSPITAL PROGRAM.

2 (a) IN GENERAL.—The heading to section 1820 (42

3 U.S.C. 1395i–4)) is amended to read ‘‘RURAL PRIMARY

4 CARE HOSPITAL PROGRAM’’.

5 (b) EXPANSION OF PROGRAM TO ALL STATES.—Sec6 tion 1820(a)(1) (42 U.S.C. 1395i–4(a)(1)) is amended by

7 striking ‘‘not more than 7’’ after ‘‘shall make grants to’’.

8 (c) MORATORIUM ON NEW ESSENTIAL ACCESS COM9 MUNITY HOSPITAL DESIGNATIONS.—Section 1820 (42

10 U.S.C. 1395i–4)) is amended—

11 (1) in subsections (a)(3) and (b)(1)(C), by

12 striking ‘‘essential access community hospitals or’’

13 after ‘‘as’’,

14 (2) in subsection (c)(1)(B), by striking ‘‘an es15 sential access community hospital’’ after ‘‘is des16 ignated as’’,

17 (3) in subsection (d)(1), by striking ‘‘essential

18 access community hospitals or’’ after ‘‘facilities in

19 the State as’’,

20 (4) in subsection (d)(2), by striking ‘‘or an es21 sential access community hospital’’ after ‘‘rural pri22 mary care hospital’’,

23 (5) by striking subsection (e),

24 (6) in subsection (g)(1), by amending subpara25 graph (A) to read as follows:
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1 ‘‘(A) at least one hospital that is not a

2 rural primary care hospital. and’’,

3 (7) in subsection (i)—

4 (A) in the heading, by striking ‘‘HOS5 PITALS OR’’ and ‘‘BY SECRETARY’’,

6 (B) by striking paragraphs (1) and (2)(C),

7 (C) in paragraph (2)(A)(ii), by striking

8 ‘‘subparagraph (B)’’ and inserting ‘‘paragraph

9 (2)’’,

10 (D) by redesignating paragraph (2) as (1),

11 (E) by striking the subparagraph designa12 tion ‘‘(B)’’ and inserting ‘‘(2) FACILITIES

13 DESIGNATED BY THE SEC- RETARY.—’’,

14 (F) by striking the heading to paragraph

15 (1) (as redesignated by subparagraph (D) of

16 this paragraph) and the subparagraph designa17 tion ‘‘(A)’’ and inserting ‘‘FACILITIES DES18 IGNATED BY THE STATE.—’’, and

19 (G) by redesignating clauses (i) through

20 (iii) of paragraph (1) (as redesignated by sub21 paragraph (D) of this paragraph) as subpara22 graphs (A) through (C), and

23 (8) in paragraphs (1) and (2) of subsection (j),

24 by striking ‘‘an essential access community hospital

25 or’’ each time it appears.
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1 (d) CONTINUING PARTICIPATION OF RURAL PRI2 MARY CARE HOSPITALS.—Section 1820(h)(1)(A) (42

3 U.S.C. 1395i–4(h)(1)(A)) (as redesignated by subsection

4 (c)(7) of this section) is amended by inserting before the

5 semicolon the following: ‘‘(or in a State which the Sec6 retary finds would receive a grant under such subsection

7 during a fiscal year if funds were appropriated for grants

8 under such subsection for the fiscal year)’’.

9 (e) DESIGNATION OF NONPROFIT OR PUBLIC HOS10 PITALS.—Section 1820(f)(1)(A) (42 U.S.C. 1395i–

11 4(f)(1)(A)) is amended by inserting ‘‘is a nonprofit or pub12 lic hospital, and is’’ after ‘‘(A)’’.

13 (f) ESTABLISHING A MINIMUM SEPARATION DIS14 TANCE BETWEEN FACILITIES.—Section 1820(f)(1) (42

15 U.S.C. 1395i–4(f)(1)) is amended—

16 (1) by striking ‘‘and’’ at the end of subpara17 graph (G),

18 (2) by striking the period at the end of sub19 paragraph (H) and adding a semicolon, and

20 (3) by adding at the end the following:

21 ‘‘(I) is located at least a 35-mile drive from

22 any rural primary care hospital or hospital, or

23 is certified by the State as being a necessary

24 provider of health care services to residents in
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1 the area, because of local geography or service

2 patterns.’’.

3 (g) REMOVAL OF REQUIREMENT FOR PRIOR COMPLI4 ANCE WITH HOSPITAL STANDARDS.—Section

5 1820(f)(1)(B) (42 U.S.C. 1395i–4(f)(1)(B)) is amended

6 by striking ‘‘and had not been found, on the basis of a

7 survey under section 1864, to be in violation of any re8 quirement to participate as a hospital under this title’’.

9 (h) LIMITATION ON NUMBER OF INPATIENT BEDS.—

10 The matter in section 1820(f)(1)(F) (42 U.S.C. 1395i–

11 4(f)(1)(F)) preceding clause (i) is amended by striking

12 ‘‘6’’ and inserting ‘‘15’’.

13 (i) LIMITATION ON LENGTH OF INPATIENT STAYS.—

14 Section 1820(f) (42 U.S.C. 1395i–4(f)) is amended—

15 (1) in the matter in paragraph (1)(F) preceding

16 clause (i), by striking ‘‘subject to paragraph (4),’’,

17 (2) in paragraph (1)(F)(i), by striking ‘‘72

18 hours’’ and inserting ‘‘96 hours’’, and

19 (3) by striking paragraph (4).

20 (j) CONFORMING CHANGE.—Section 1814(a)(8) (42

21 U.S.C. 1395f(a)(8)) is amended by striking ‘‘within 72

22 hours’’ and inserting ‘‘within 96 hours’’.

23 (k) PERMITTING RURAL PRIMARY CARE HOSPITALS

24 TO MAINTAIN SWING BEDS.—Section 1820(f)(3) (42

25 U.S.C. 1395i–4(f)(3)) is amended—
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1 (1) in the first sentence, by striking everything

2 after ‘‘are used for the furnishing of extended care

3 services’’ up to the period, and

4 (2) by amending the second sentence to read as

5 follows: ‘‘Nothing in this subsection shall be con6 strued to prohibit a rural primary care hospital from

7 entering into an agreement under section 1883

8 under which its facilities are used for the furnishing

9 of extended care services.’’.

10 (l) CONFORMING CHANGE.—Section 1883 (42 U.S.C.

11 1395tt) is amended by striking ‘‘hospital’’ each place it

12 appears and inserting ‘‘hospital or rural primary care hos13 pital’’.

14 (m) CHANGE IN PAYMENT METHODOLOGY.—Section

15 1814(l)(1) (42 U.S.C. 1395f(l)(1)) is amended by striking

16 ‘‘services—’’ and all that follows and inserting ‘‘services

17 is the reasonable cost of the rural primary care hospital

18 in providing such services, as determined under section

19 1861(v).’’.

20 (n) ELIMINATION OF DEADLINE FOR DEVELOPMENT

21 OF PROSPECTIVE PAYMENT SYSTEM.—Section 1814(l)

22 (42 U.S.C. 1395f(l)(1)) is amended—

23 (1) by striking paragraph (2), and

24 (2) by striking ‘‘(l)(1)’’ and inserting ‘‘(l)’’.
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1 (o) NO CHANGE IN PAYMENT TO EXISTING ESSEN2 TIAL ACCESS COMMUNITY HOSPITALS.—Clauses (iii)(III)

3 and (v) of Section 1886(d)(5)(D) (42 U.S.C.

4 1395ww(d)(5)(D)) are each amended by—

5 (1) inserting ‘‘was’’ after ‘‘is located in a rural

6 area and’’, and

7 (2) inserting ‘‘as in effect on the day before ef8 fective date of the Balanced Budget Act of 1995 for

9 Economic Growth and Fairness’’ after ‘‘section

10 1820(I)(1)’’.

11 (p) CONFORMING AMENDMENT.—Section 1820(c)(3)

12 (42 U.S.C. 1395i–4(c)(3)) is amended by striking

13 ‘‘(i)(2)(C)’’ and inserting ‘‘(i)(2)’’;

14 (q) TECHNICAL AMENDMENT.—Section

15 1820(f)(1)(A) (42 U.S.C. 1395i–4(f)(1)(A)) is amended

16 by striking ‘‘section 1866(d)(2)(D)’’ and inserting ‘‘sec17 tion 1886(d)(2)(D)’’.

18 SEC. 11118. RESPITE BENEFIT.

19 (a) ENTITLEMENT.—Section 1832(a)(2) (42 U.S.C.

20 1395k(a)(2)) is amended by—

21 (1) striking ‘‘and’’ at the end of subparagraph

22 (I),

23 (2) striking the period at the end of subpara24 graph (J) and inserting ‘‘; and’’, and
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1 (3) inserting at the end the following new sub2 paragraph:

3 ‘‘(K) respite services for no more than 32

4 hours each year’’.

5 (b) CONDITIONS AND LIMITATIONS ON PAYMENT.—

6 (1) PAYMENT RATE.—Section 1833(a)(2) (42

7 U.S.C. 13951(a)(2)) is amended by—

8 (A) adding a new subparagraph (G) to

9 read as follows:

10 ‘‘(G)(i) with respect to respite services,

11 payment shall be made at a rate equal to $7.50

12 per hour for 1996 and at a rate to be deter13 mined by the Secretary in subsequent years;

14 and

15 ‘‘(ii) notwithstanding any provisions of sec16 tion 1861(v), in the case of respite services fur17 nished by a home health agency (or other orga18 nization designated by the Secretary pursuant

19 to regulations), payment to the agency or other

20 organization for respite services may not exceed

21 110 percent of the hourly respite allowance

22 times the number of hours of respite for which

23 the agency authorizes payment.’’
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1 (2) CONDITIONS OF PAYMENT.—Section

2 1835(a)(2) (42 U.S.C. 1395n-(a)(2)) is amended

3 by—

4 (A) striking ‘‘and’’ at the end of subpara5 graph (E),

6 (B) striking the period at the end of sub7 paragraph (F) and inserting ‘‘; and’’, and

8 (C) inserting at the end the following new

9 subparagraph:

10 ‘‘(G) In the case of respite services, that

11 the individual for whom payment is claimed is

12 severely impaired due to irreversible dementia

13 (the individual has scored three or more errors

14 on the Short Portable Mental Status Question15 naire) and either needs assistance in at least

16 one out of five activities of daily living (bathing,

17 dressing, transferring, toileting, and eating) or

18 in at least one out of four instrumental activi19 ties of daily living (meal preparation, medica20 tion management, money management, and

21 telephoning), or needs constant supervision be22 cause of one or more behavioral problems.’’

23 (3) FAMILY DESIGNATION OF RESPITE SERV24 ICES PROVIDER AND CARE GIVER.—Section
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1 1835(a)(2) (42 U.S.C. 1295n(a)(2)) is amended

2 by—

3 (A) by adding at the end the following new

4 sentences: ‘‘In the case of respite services which

5 are the subject of the certification described in

6 subparagraph (G), the entity or individual pro7 viding the care for which respite is sought shall

8 designate a respite services caregiver either

9 through a home health agency or (if the Sec10 retary designates other organizations to provide

11 or arrange for such services) other organization.

12 The agency or organization shall determine the

13 amount of respite entitlement remaining in the

14 calendar year and inform the entity or individ15 ual of the extent to which respite services may

16 be authorized. When services have been pro17 vided, the entity or individual shall inform the

18 agency or organization, which shall then make

19 payment to the caregiver. Where additional pay20 ment is made on behalf of the beneficiary, the

21 agency or organization shall assure the entity

22 or individual is informed of the limits applicable

23 to such amount. No payment may be made

24 under this title for respite services if the charge

25 to the patient per hour for care by respite aides
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1 exceeds by more than two dollars the hourly

2 rates established under this title.’’

3 (c) DEFINITIONS.—Section 1861 (42 U.S.C. 1395x)

4 is amended—

5 (1) in subsection (m)—

6 (A) by striking ‘‘and’’ at the end of para7 graph (6);

8 (B) by adding ‘‘and’’ at the end of para9 graph (7); and

10 (C) by inserting after paragraph (7) the

11 following:

12 ‘‘(8) respite services as described in subsection

13 (oo);’’,

14 (2) in subsection (o)—

15 (A) by striking ‘‘and’’ at the end of para16 graph (6);

17 (B) by adding ‘‘and’’ at the end of para18 graph (7); and

19 (C) by inserting after paragraph (7) the

20 following:

21 ‘‘(8) agrees to provide or arrange for respite

22 services as described in subsection (oo);’’, and

23 (3) by adding at the end the following:

24 ‘‘(oo) RESPITE SERVICES; RESPITE AIDES; RESPITE

25 PROVIDERS.—
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1 ‘‘(1) RESPITE SERVICES.—The term ‘respite

2 services’ means temporary care provided to individ3 uals who meet the requirements of section

4 1835(a)(2) for the purposes of ensuring periodic

5 time-off for co-resident primary informal caregivers.

6 Although respite providers may provide assistance

7 with personal care and/or household maintenance ac8 tivities, their primary function is to provide protec9 tive supervision for persons with Alzheimer’s and re10 lated dementias whose memory, orientation, judg11 ment, and reasoning abilities have become so im12 paired that, for safety’s sake , they require the con13 stant attention or close physical proximity of another

14 person at all or almost all hours of the day or night.

15 ‘‘(2) RESPITE AIDES.—The term ‘respite aides’

16 means individuals who have been designated by the

17 Secretary as qualified to act as caregivers for pur18 poses of providing the services described in para19 graph (1). Respite aides may be nurse aides as iden20 tified in section 1819, home health aides as identi21 fied in section 1891, or other individuals licensed by

22 the State or recognized by the Secretary as having

23 the skills necessary to provide such services.

24 ‘‘(3) RESPITE PROVIDERS.—The term ‘respite

25 providers’ means organizations identified by the Sec-
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1 retary in regulations as qualified to provide or ar2 range for respite services under this title. The Sec3 retary may establish by regulation any requirements

4 for respite providers as the Secretary determines ap5 propriate.’’.

6 (d) PAYMENT FROM SUPPLEMENTARY MEDICAL IN7 SURANCE TRUST FUND FOR RESPITE SERVICES FUR8 NISHED TO INDIVIDUALS WITH ONLY HOSPITAL INSUR9 ANCE COVERAGE.—(Section 1812(a) (42 U.S.C. 1395(a))

10 is amended by—

11 (1) striking ‘‘and’’ and the end of paragraph

12 (3),

13 (2) striking the period at the end of paragraph

14 (4), and inserting ’’; and’’, and

15 (3) inserting at the end the following new para16 graph:

17 ‘‘(5) respite services, described in section

18 1832(a)(2)(K), except that such services shall be

19 furnished under the Supplementary Medical Insur20 ance Program.’’

21 (e) EXCLUSION OF ADDITIONAL PART B COSTS

22 FROM DETERMINATION OF PART B MONTHLY PRE23 MIUM.—Section 1839(a)(5) (42 U.S.C. 1395r(a)), as

24 added by section 11147(f) of this Act, is further amended

25 by—
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1 (1) inserting ‘‘AND RESPITE BENEFIT’’ after

2 ‘‘HOME HEALTH’’, and

3 (2) inserting before the period the following:

4 ‘‘and for respite services as described in section

5 1832(a)(2)(K).’’

6 (f) SUNSET.—The amendments made by this shall be

7 effective for services furnished through fiscal year 2005.

8 PART 2—PROVISIONS RELATING TO PART B

9 SEC. 11121. PAYMENTS FOR PHYSICIANS’ SERVICES.

10 (a) ESTABLISHING UPDATE TO CONVERSION FACTOR

11 TO MATCH SPENDING UNDER SUSTAINABLE GROWTH

12 RATE.—

13 (1) UPDATE.—

14 (A) IN GENERAL.—Section 1848(d)(3) (42

15 U.S.C. 1395w–4(d)(3)) is amended to read as

16 follows:

17 ‘‘(3) UPDATE.—

18 ‘‘(A) IN GENERAL.—Unless Congress oth19 erwise provides, subject to subparagraph (E),

20 for purposes of this section the update for a

21 year (beginning with 1997) is equal to the

22 product of—

23 ‘‘(i) 1 plus the Secretary’s estimate of

24 the percentage increase in the MEI (de-
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1 scribed in section 1842(i)(3)) for the year

2 (divided by 100), and

3 ‘‘(ii) 1 plus the Secretary’s estimate of

4 the update adjustment factor for the year

5 (divided by 100),

6 minus 2 and multiplied by 100.

7 ‘‘(B) UPDATE ADJUSTMENT FACTOR.—The

8 ‘update adjustment factor’ for a year is equal to

9 the quotient of—

10 ‘‘(i) the difference between (I) the

11 sum of the allowed expenditures for physi12 cians’ services furnished during each of the

13 years 1995 through the year involved and

14 (II) the sum of the amount of actual ex15 penditures for physicians’ services fur16 nished during each of the years 1995

17 through the previous year, divided by

18 ‘‘(ii) the Secretary’s estimate of al19 lowed expenditures for physicians’ services

20 furnished during the year.

21 ‘‘(C) DETERMINATION OF ALLOWED EX22 PENDITURES.—For purposes of subparagraph

23 (B), allowed expenditures for physicians’ serv24 ices shall be determined as follows (as esti25 mated by the Secretary):
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1 ‘‘(i) 1995.—In the case of allowed ex2 penditures for 1995, such expenditures

3 shall be equal to actual expenditures for

4 services furnished during the 12-month pe5 riod ending with June 30, 1995.

6 ‘‘(ii) 1996 AND LATER YEARS.—In the

7 case of allowed expenditures for 1996 and

8 each subsequent year, such expenditures

9 shall be equal to allowed expenditures for

10 the previous year, increased by the sustain11 able growth rate under subsection (f) for

12 the fiscal year which begins during the

13 year.

14 ‘‘(D) DETERMINATION OF ACTUAL EX15 PENDITURES.—For purposes of subparagraph

16 (B), the amount of actual expenditures for phy17 sicians’ services furnished during a year shall

18 be equal to the amount of expenditures for such

19 services during the 12-month period ending

20 with June of the previous year.

21 ‘‘(E) RESTRICTION ON VARIATION FROM

22 MEDICARE ECONOMIC INDEX.—Notwithstanding

23 the amount of the update adjustment factor de24 termined under subparagraph (B), the update
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1 in the conversion factor under this paragraph

2 for a year may not be—

3 ‘‘(i) greater than 103 percent of 1

4 plus the Secretary’s estimate of the per5 centage increase in the MEI (described in

6 section 1842(i)(3)) for the year (divided by

7 100), minus 1 and multiplied by 100, or

8 ‘‘(ii) less than 93 percent of 1 plus

9 the Secretary’s estimate of the percentage

10 increase in the MEI (described in section

11 1842(i)(3)) for the year (divided by 100),

12 minus 1 and multiplied by 100.’’.

13 (B) EFFECTIVE DATE.—The amendments

14 made by subparagraph (A) apply to physicians’

15 services furnished on or after January 1, 1997.

16 (2) CONFORMING AMENDMENTS.—

17 (A) SECTION 1848(d)(2).—Section

18 1848(d)(2)(A) (42 U.S.C. 1395w–4(d)(2)(A)) is

19 amended—

20 (i) in the matter preceding clause

21 (i)—

22 (I) by striking ‘‘(or updates) in

23 the conversion factor (or factors)’’

24 and inserting ‘‘in the conversion fac25 tor’’,
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1 (II) by striking ‘‘(beginning with

2 1991)’’ and inserting ‘‘(beginning

3 with 1996)’’, and

4 (III) by striking the second sen5 tence,

6 (ii) by amending clause (ii) to read as

7 follows:

8 ‘‘(ii) such factors as enter into the

9 calculation of the update adjustment factor

10 as described in paragraph (3)(B); and ’’,

11 (iii) by amending clause (iii) to read

12 as follows:

13 ‘‘(iii) access to services.’’,

14 (iv) by striking clauses (iv), (v), and

15 (vi), and

16 (v) by striking the last sentence.

17 (B) SECTION 1848(d)(2)(b).—Section

18 1848(d)(2)(B) (42 U.S.C. 1395w–4(d)(2)(B))

19 is amended—

20 (i) by striking ‘‘and’’ at the end of

21 clause (iii),

22 (ii) by striking the period at the end

23 of clause (iv) and adding ‘‘; and’’, and

24 (iii) by adding at the end the follow25 ing new clause:
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1 ‘‘(v) changes in volume or intensity of

2 services.’’.

3 (C) REDESIGNATION OF SUBPARA4 GRAPH.—Section 1848(d)(2) (42 U.S.C.

5 1395w–4(d)(2)) is further amended—

6 (i) by striking subparagraphs (C),

7 (D), and (E),

8 (ii) by redesignating striking subpara9 graph (F) as subparagraph (C), and

10 (iii) in subparagraph (C), as redesig11 nated, by striking ‘‘(or updates) in the con12 version factor (or factors)’’ and inserting

13 ‘‘in the conversion factor’’.

14 (b) REPLACEMENT OF VOLUME PERFORMANCE

15 STANDARD WITH SUSTAINABLE GROWTH RATE.—

16 (1) IN GENERAL.—Section 1848(f) (42 U.S.C.

17 1395w–4(f)) is amended by striking paragraphs (2)

18 through (5) and inserting the following:

19 ‘‘(2) SPECIFICATION OF GROWTH RATE.—

20 ‘‘(A) FISCAL YEAR 1996.—The sustainable

21 growth rate for all physicians’ services for fiscal

22 year 1996 shall be equal to the product of—

23 ‘‘(i) 1 plus the Secretary’s estimate of

24 the percentage increase in the MEI (de-
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1 scribed in section 1842(i)(3)) for 1996 (di2 vided by 100),

3 ‘‘(ii) 1 plus the Secretary’s estimate of

4 the percentage change (divided by 100) in

5 the average number of individuals enrolled

6 under this part (other than private plan

7 enrollees) from fiscal year 1995 to fiscal

8 year 1996,

9 ‘‘(iii) 1 plus the Secretary’s estimate

10 of the projected percentage growth in real

11 gross domestic product per capita (divided

12 by 100) from fiscal year 1995 to fiscal

13 year 1996, plus 1 percentage point, and

14 ‘‘(iv) 1 plus the Secretary’s estimate

15 of the percentage change (divided by 100)

16 in expenditures for all physicians’ services

17 in fiscal year 1996 (compared with fiscal

18 year 1995) which will result from changes

19 in law (including the Balanced Budget Act

20 of 1995 for Economic Growth and Fair21 ness), determined without taking into ac22 count estimated changes in expenditures

23 due to changes in the volume and intensity

24 of physicians’ services or change in expend25 itures resulting from changes in the update
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1 to the conversion factor under subsection

2 (d),

3 minus 1 and multiplied by 100.

4 ‘‘(B) SUBSEQUENT YEARS.—The sustain5 able growth rate for all physicians’ services for

6 fiscal year 1997 and each subsequent year shall

7 be equal to the product of—

8 ‘‘(i) 1 plus the Secretary’s estimate of

9 the percentage increase in the MEI for the

10 fiscal year involved (described in section

11 1842(i)(3)) (divided by 100),

12 ‘‘(ii) 1 plus the Secretary’s estimate of

13 the percentage change (divided by 100) in

14 the average number of individuals enrolled

15 under this part (other than private plan

16 enrollees) from the previous fiscal year to

17 the fiscal year involved,

18 ‘‘(iii) 1 plus the Secretary’s estimate

19 of the projected percentage growth in real

20 gross domestic product per capita (divided

21 by 100) from the previous fiscal year to

22 the fiscal year involved, plus 1 percentage

23 point, and

24 ‘‘(iv) 1 plus the Secretary’s estimate

25 of the percentage change (divided by 100)
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1 in expenditures for all physicians’ services

2 in the fiscal year (compared with the pre3 vious fiscal year) which will result from

4 changes in law, determined without taking

5 into account estimated changes in expendi6 tures due to changes in the volume and in7 tensity of physicians’ services or change in

8 expenditures resulting from changes in the

9 update to the conversion factor under sub10 section (d), minus 1 and multiplied by 100.

11 ‘‘(3) DEFINITIONS.—In this subsection:

12 ‘‘(A) SERVICES INCLUDED IN PHYSICIANS’

13 SERVICES.—The term ‘physicians’ services’ in14 cludes other items and services (such as clinical

15 diagnostic laboratory test and radiology serv16 ices), specified by the Secretary, that are com17 monly performed or furnished by a physician or

18 in a physician’s office, but does not include

19 services furnished to an eligible organization en20 rollee.

21 ‘‘(B) ELIGIBLE ORGANIZATION EN22 ROLLEE.—The term ‘eligible organization en23 rollee’ means, with respect to a fiscal year, an

24 individual enrolled under this part who has

25 elected to receive benefits under this title
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1 through an eligible organization with a contract

2 under part C (and, through 2000, enrollment

3 with an organization with a contract under sec4 tion 1876(h).’’.

5 (2) CONFORMING AMENDMENTS.—Section

6 1848(f) (42 U.S.C. 1395w–4(f)) is amended—

7 (A) in the heading, by striking ‘‘VOLUME

8 PERFORMANCE STANDARD RATES OF IN9 CREASE’’ and inserting ‘‘SUSTAINABLE GROWTH

10 RATE’’,

11 (B) in paragraph (1)—

12 (i) in the heading, by striking ‘‘VOL13 UME PERFORMANCE STANDARD RATES OF

14 INCREASE’’ and inserting ‘‘SUSTAINABLE

15 GROWTH RATE’’,

16 (ii) in subparagraph (A), in the mat17 ter preceding clause (i), by striking ‘‘per18 formance standard rates of increase’’ and

19 inserting ‘‘sustainable growth rate’’, and

20 (iii) in subparagraph (A), by striking

21 ‘‘HMO enrollees’’ each place it appears

22 and inserting ‘‘eligible organization enroll23 ees’’,
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1 (C) in subparagraph (B), by striking ‘‘per2 formance standard rates of increase’’ and in3 serting ‘‘sustainable growth rate’’, and

4 (D) in subparagraph (C)—

5 (i) in the heading, by striking ‘‘PER6 FORMANCE STANDARD RATES OF IN7 CREASE’’ and inserting ‘‘SUSTAINABLE

8 GROWTH RATE’’,

9 (ii) in the first sentence, by striking

10 ‘‘with 1991), the performance standard

11 rates of increase’’ and all that follows

12 through the first period and inserting

13 ‘‘with 1997), the sustainable growth rate

14 for the fiscal year beginning in that year.’’,

15 and

16 (iii) in the second sentence, by strik17 ing ‘‘January 1, 1990, the performance

18 standard rate of increase under subpara19 graph (D) for fiscal year 1990’’ and insert20 ing ‘‘January 1, 1997, the sustainable

21 growth rate for fiscal year 1997’’.

22 (c) ESTABLISHMENT OF SINGLE CONVERSION FAC23 TOR FOR 1996.—

24 (1) IN GENERAL.—Section 1848(d)(1) (42

25 U.S.C. 1395w–4(d)(1)) is amended—
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1 (A) by redesignating subparagraph (C) as

2 subparagraph (D), and

3 (B) by inserting after subparagraph (B)

4 the following:

5 ‘‘(C) SPECIAL RULE FOR 1996.—For

6 1996, the conversion factor under this sub7 section shall be $35.42 for all physicians’

8 services, except that, for surgical services

9 (as defined in subsection (j)(i), the conver10 sion factor for 1996 shall be $38.10.’’.

11 (2) CONFORMING AMENDMENTS.—Section 1848

12 (42 U.S.C. 1395w–4) is amended—

13 (A) by striking ‘‘(or factors)’’ each place it

14 appears in subsection (d)(1)(A) and

15 (d)(1)(D)(ii) (as redesignated by paragraph

16 (1)(a),

17 (B) in subsection (d)(1)(A), by striking ‘‘or

18 updates’’,

19 (C) in subsection (d)(1)(D)(ii) (as redesig20 nated by paragraph (1)(A)), by striking ‘‘(or

21 updates)’’, and

22 (D) in subsection (i)(1)(C), by striking

23 ‘‘conversion factors’’ and inserting ‘‘the conver24 sion factor’’.
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1 SEC. 11122. PRACTICE EXPENSE RELATIVE VALUE UNITS.

2 (a) EXTENSION TO 1997.—Section 1848(c)(2)(E)(i)

3 (42 U.S.C. 1395w–4(c)(2)(E)(i)) is amended—

4 (1) by striking ‘‘and’’ at the end of subclause

5 (II),

6 (2) by striking the period at the end of

7 subclause (III) and inserting ‘‘, and’’, and

8 (3) by inserting at the end the following:

9 ‘‘(IV) 1997, by an additional 25 percent of

10 such excess.’’

11 (b) CHANGE IN FLOOR ON REDUCTIONS AND SERV12 ICES COVERED.—Clauses (ii) and (iii)(II) of Section

13 1848(c)(2)(E) (42 U.S.C. 1395w–4(c)(2)(E)) are each

14 amended by inserting ‘‘(or 115 percent in the case of

15 1997)’’ after ‘‘128 percent’’.

16 SEC. 11123. SINGLE FEE FOR SURGERY.

17 (a) IN GENERAL.—Section 1848(a) (42 U.S.C.

18 1395w–4(a)) is amended by adding at the end the follow19 ing:

20 ‘‘(5) SINGLE FEE FOR SURGERY.—

21 ‘‘(A) GENERAL RULE.—Payment under

22 this part for surgical services (as defined by the

23 Secretary under subsection (j)(1)), when a sep24 arate payment is also made for the services of

25 a physician or physician assistant acting as an

26 assistant at surgery, may not (except as pro-
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1 vided in subparagraph (B)), when added to the

2 separate payment made for the services of that

3 other practitioner, exceed the amount that

4 would be paid for the surgical services if a sepa5 rate payment were not made for the services of

6 that practitioner.

7 ‘‘(B) EXCEPTIONS.—The Secretary may

8 specify surgery procedures or situations to

9 which subparagraph (A) shall not apply.’’

10 (b) CONFORMING AMENDMENT.—Section

11 1848(g)(2)(D) (42 U.S.C. 1395w–4(g)(2)(D)) is amended

12 by inserting ‘‘(or the lower amount under subsection

13 (a)(5))’’ after ‘‘subsection (a)’’.

14 (c) EFFECTIVE DATE.—The amendments made by

15 the preceding subsections apply to services furnished on

16 or after January 1, 1996.

17 SEC. 11124. INCENTIVES TO CONTROL HIGH VOLUME FOR

18 IN-HOSPITAL PHYSICIANS’ SERVICES.

19 (a) IN GENERAL.—

20 (1) LIMITATIONS DESCRIBED.—Part B of title

21 XVIII is amended by adding at the end the follow22 ing:

23 ‘‘SEC. 1849. INCENTIVES TO CONTROL HIGH VOLUME FOR

24 IN-HOSPITAL PHYSICIANS’ SERVICES.

25 ‘‘(a) SERVICES SUBJECT TO REDUCTION.—
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1 ‘‘(1) DETERMINATION OF HOSPITAL-SPECIFIC

2 PER ADMISSION RELATIVE VALUE.—Not later than

3 October 1 of each year (beginning with 1998), the

4 Secretary shall determine for each hospital—

5 ‘‘(A) the hospital-specific per admission

6 relative value under subsection (b)(2) for the

7 following year, and

8 ‘‘(B) whether such hospital-specific relative

9 value is projected to exceed the allowable aver10 age per admission relative value applicable to

11 the hospital for the following year under sub12 section (b)(1).

13 ‘‘(2) REDUCTION FOR SERVICES AT HOSPITALS

14 EXCEEDING ALLOWABLE AVERAGE PER ADMISSION

15 RELATIVE VALUE.—If the Secretary determines

16 (under paragraph (1)) that a medical staff’s hos17 pital-specific per admission relative value for a year

18 (beginning with 1999) is projected to exceed the al19 lowable average per admission relative value applica20 ble to the medical staff for the year, the Secretary

21 shall reduce (in accordance with subsection (c)) the

22 amount of payment otherwise determined under this

23 part for each physician’s service furnished during

24 the year to an inpatient of the hospital by an indi-
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1 vidual who is a member of the hospital’s medical

2 staff.

3 ‘‘(3) TIMING OF DETERMINATION; NOTICE TO

4 MEDICAL STAFFS AND CARRIERS.—Not later than

5 October 1 of each year (beginning with 1998), the

6 Secretary shall notify the medical executive commit7 tee of each hospital (as set forth in the Standards

8 of the Joint Commission on the Accreditation of

9 Health Organizations) of the determinations made

10 with respect to the medical staff under paragraph

11 (1).

12 ‘‘(b) DETERMINATION OF ALLOWABLE AVERAGE PER

13 ADMISSION RELATIVE VALUE AND HOSPITAL—SPECIFIC

14 PER ADMISSION RELATIVE VALUES.—

15 ‘‘(1) ALLOWABLE AVERAGE PER ADMISSION

16 RELATIVE VALUE.—

17 ‘‘(A) URBAN HOSPITALS.—In the case of a

18 hospital located in an urban area, the allowable

19 average per admission relative value established

20 under this subsection for 1999 and 2000 is

21 equal to 125 percent and for years after 2000

22 is 120 percent of the median of 1997 hospital23 specific per admission relative values deter24 mined under paragraph (2) for all hospital

25 medical staffs.
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1 ‘‘(B) RURAL HOSPITALS.—In the case of a

2 hospital located in a rural area, the allowable

3 average per admission relative value established

4 under this subsection for 1999 and each suc5 ceeding year, is equal to 140 percent of the me6 dian of the 1997 hospital-specific per admission

7 relative values determined under paragraph (2)

8 for all hospital medical staffs.

9 ‘‘(2) HOSPITAL-SPECIFIC PER ADMISSION REL10 ATIVE VALUE.—

11 ‘‘(A) IN GENERAL.—The hospital-specific

12 per admission relative value projected for a hos13 pital (other than a teaching hospital) for a cal14 endar year, shall be equal to the average per

15 admission relative value (as determined under

16 section 1848(c)(2)) for physicians’ services fur17 nished to inpatients of the hospital by the hos18 pital’s medical staff (excluding interns and resi19 dents) during the second year preceding such

20 calendar year, adjusted for variations in case21 mix and disproportionate share status among

22 hospitals (as determined by the Secretary under

23 subparagraph (C)).

24 ‘‘(B) SPECIAL RULE FOR TEACHING HOS25 PITALS.—The hospital-specific relative value
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1 projected for a teaching hospital in a calendar

2 year shall be equal to the sum of—

3 ‘‘(i) the average per admission relative

4 value (as determined under section

5 1848(c)(2)) for physicians’ services fur6 nished to inpatients of the hospital by the

7 hospital’s medical staff (excluding interns

8 and residents) during the second year pre9 ceding such calendar year, and

10 ‘‘(ii) the equivalent per admission rel11 ative value (as determined under section

12 1848(c)(2)) for physicians’ services fur13 nished to inpatients of the hospital by in14 terns and residents of the hospital during

15 the second year preceding such calendar

16 year, adjusted for variations in case-mix,

17 disproportionate share status, and teaching

18 status among hospitals (as determined by

19 the Secretary under subparagraph (C)).

20 The Secretary shall determine such equiva21 lent relative value unit per admission for

22 interns and residents based on the best

23 available data and may make such adjust24 ment in the aggregate.
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1 ‘‘(C) ADJUSTMENT FOR TEACHING AND

2 DISPROPORTIONATE SHARE HOSPITALS.—The

3 Secretary shall adjust the allowable per admis4 sion relative values otherwise determined under

5 this paragraph to take into account the needs

6 of teaching hospitals and hospitals receiving ad7 ditional payments under subparagraphs (F) and

8 (G) of section 1886(d)(5). The adjustment for

9 teaching status or disproportionate share shall

10 not be less than zero.

11 ‘‘(c) AMOUNT OF REDUCTION.—The amount of pay12 ment otherwise made under this part for a physician’s

13 service that is subject to a reduction under subsection (a)

14 during a year shall be reduced 15 percent, in the case of

15 a service furnished by a member of the medical staff of

16 the hospital for which the Secretary determines under sub17 section (a)(1) that the hospital medical staff’s projected

18 relative value per admission exceeds the allowable average

19 per admission relative value.

20 ‘‘(d) RECONCILIATION OF REDUCTIONS BASED ON

21 HOSPITAL-SPECIFIC RELATIVE VALUE PER ADMISSION

22 WITH ACTUAL RELATIVE VALUES.—

23 ‘‘(1) DETERMINATION OF ACTUAL AVERAGE

24 PER ADMISSION RELATIVE VALUE.—Not later than

25 October 1 of each year (beginning with 2000), the
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1 Secretary shall determine the actual average per ad2 mission relative value (as determined pursuant to

3 section 1848(c)(2)) for the physicians’ services fur4 nished by members of a hospitals medical staff to in5 patients of the hospital during the previous year, on

6 the basis of claims for payment for such services

7 that are submitted to the Secretary not later than

8 90 days after the last day of such previous year. The

9 actual average per admission relative value shall be

10 adjusted by the appropriate case-mix, disproportion11 ate share factor, and teaching factor for the hospital

12 medical staff (as determined by the Secretary under

13 subsection (b)(2)(C)). Notwithstanding any other

14 provision of this title, no payment may be made

15 under this part for any physician’s service furnished

16 by a member of a hospital’s medical staff to an inpa17 tient of the hospital during a year unless such claim

18 is submitted to the Secretary for payment for such

19 service not later than 90 days after the last day of

20 the year.

21 ‘‘(2) RECONCILIATION WITH REDUCTIONS

22 TAKEN.—In the case of a hospital for which the pay23 ment amounts for physicians’ services furnished by

24 members of the hospital’s medical staff to inpatients
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1 of the hospital were reduced under this section for

2 a year—

3 ‘‘(A) if the actual average per admission

4 relative value for such hospital’s medical staff

5 during the year (as determined by the Secretary

6 under paragraph (1)) did not exceed the allow7 able average per admission relative value appli8 cable to the hospital’s medical staff under sub9 section (b)(1) for the year, the Secretary shall

10 reimburse the fiduciary agent for the medical

11 staff by the amount by which payments for

12 such services were reduced for the year under

13 subsection (c), including interest at an appro14 priate rate determined by the Secretary;

15 ‘‘(B) if the actual average per admission

16 relative value for such hospital’s medical staff

17 during the year exceeded the allowable average

18 per admission relative value applicable to the

19 hospital’s medical staff under subsection (a)(1)

20 for the year, the Secretary shall reimburse the

21 fiduciary agent for the medical staff the amount

22 withheld under subsection (c) multiplied by the

23 ‘final ratio’, including interest at an appropriate

24 rate determined by the Secretary. The final

25 ratio described in the previous sentence shall be
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1 determined by dividing the difference between

2 the initial ratio and 0.85, by 0.15, where the

3 initial ratio is determined by dividing the medi4 cal staff’s allowable average per admission rel5 ative value for a year (as determined under sub6 section (a)(1)) by the medical staff’s actual hos7 pital-specific per admission relative value for

8 such year, but in no case shall the initial ratio

9 be less than 0.85.

10 ‘‘(3) MEDICAL EXECUTIVE COMMITTEE OF A

11 HOSPITAL.—Each medical executive committee of a

12 hospital whose medical staff is projected to exceed

13 the allowable relative value per admission for a year,

14 shall have one year from the date of notification that

15 such medical staff is projected to exceed the allow16 able relative value per admission to designate a fidu17 ciary agent for the medical staff to receive and dis18 burse any appropriate withhold amount made by the

19 carrier.

20 ‘‘(4) ALTERNATIVE REIMBURSEMENT TO MEM21 BERS OF STAFF.—At the request of a fiduciary

22 agent for the medical staff, if the fiduciary agent for

23 the medical staff is owed the reimbursement de24 scribed in paragraph (2)(B) for excess reductions in

25 payments during a year, the Secretary shall make
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1 such reimbursement to the members of the hospital’s

2 medical staff, on a pro-rata basis according to the

3 proportion of expenditures for physicians’ services

4 furnished to inpatients of the hospital during the

5 year that were furnished by each member of the

6 medical staff.

7 ‘‘(e) DEFINITIONS.—In this section, the following

8 definitions apply:

9 ‘‘(1) MEDICAL STAFF.—An individual furnish10 ing a physician’s service is considered to be on the

11 medical staff of a hospital—

12 ‘‘(A) if (in accordance with requirements

13 for hospitals established by the Joint Commis14 sion on Accreditation of Health Organiza15 tions)—

16 ‘‘(i) the individual is subject to by17 laws, rules, and regulations established by

18 the hospital to provide a framework for the

19 self-governance of medical staff activities,

20 ‘‘(ii) subject to such bylaws, rules, and

21 regulations, the individual has clinical

22 privileges granted by the hospital’s govern23 ing body, and

24 ‘‘(iii) under such clinical privileges,

25 the individual may provide physicians’
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1 services independently within the scope of

2 the individual’s clinical privileges, or

3 ‘‘(B) if such physician provides at least one

4 service to a medicare beneficiary in such hos5 pital.

6 ‘‘(2) RURAL AREA; URBAN AREA.—The terms

7 ‘rural area’ and ‘urban area’ have the meaning given

8 such terms under section 1886(d)(2)(D).

9 ‘‘(3) TEACHING HOSPITAL.—The term ‘hos10 pital’ means a hospital which has a teaching pro11 gram approved as specified in section 1861(b)(6).

12 ‘‘(4) HOSPITAL.—The term ‘hospital’ means a

13 subsection (d) hospital as defined in section 1886(d).

14 ‘‘(5) PHYSICIANS’ SERVICES.—The term ‘physi15 cians’ services’ means those services described in

16 section 1848(j)(3).

17 (2) CONFORMING AMENDMENTS.—

18 (A) SECTION 1833 (a).—Section

19 1833(a)(1)(N) (42 U.S.C. 13951(a)(1)(N)) is

20 amended by inserting ‘‘(subject to reduction

21 under section 1849)’’ after ‘‘1848(a)(1)’’.

22 (B) SECTION 1848 (a).—Section

23 1848(a)(1)(B) (42 U.S.C. 1395w–4(a)(1)(B)) is

24 amended by striking ‘‘this subsection,’’ and in25 serting ‘‘this subsection and section 1849,’’.
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1 (b) REQUIRING PHYSICIANS TO IDENTIFY HOSPITAL

2 AT WHICH SERVICE FURNISHED.—Section

3 1848(g)(4)(A)(i) (42 U.S.C. 1395w–4(g)(4)(A)(i)) is

4 amended by striking ‘‘beneficiary,’’ and inserting ‘‘bene5 ficiary (and, in the case of a service furnished to an inpa6 tient of a hospital, report the hospital identification num7 ber on such claim form),’’.

8 (c) EFFECTIVE DATES.—

9 (1) SUBSECTION (a).—The amendments made

10 by subsection (a) apply to services furnished on or

11 after January 1, 1999.

12 (2) SUBSECTION (b).—The amendments made

13 by subsection (b) apply to services furnished on or

14 after January 1, 1998.

15 SEC. 11125. AMBULATORY SURGICAL CENTER SERVICE UP16 DATES.

17 Section 1833(i)(2)(C) (42 U.S.C. 13951(i)(2)(C)) is

18 amended—

19 (1) by striking ‘‘1996’’ and inserting ‘‘2003’’,

20 and

21 (2) by inserting after the subparagraph des22 ignation ‘‘(C)’’ the following: ‘‘Notwithstanding the

23 second sentence of subparagraph (A) or the second

24 sentence of subparagraph (B), with respect to fiscal

25 years 1996 through 2002, the Secretary shall in-
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1 crease amounts for facility services by the percent2 age increase in the consumer price index for all

3 urban consumers (U.S. city average) as estimated by

4 the Secretary for the 12-month period ending with

5 the midpoint of the year involved, reduced by two

6 percentage points.’’

7 SEC. 11126. OXYGEN AND OXYGEN EQUIPMENT.

8 (a) IN GENERAL.—Section 1834(a)(9)(C) (42 U.S.C.

9 1395m(a)(9)(C)) is amended—

10 (1) by striking ‘‘and’’ at the end of clause (iii),

11 (2) in clause (iv)—

12 (A) by striking ‘‘a subsequent year’’ and

13 inserting ‘‘1993, 1994, and 1995’’, and

14 (B) by striking the period at the end and

15 adding ‘‘; and’’, and

16 (3) by adding at the end the following:

17 ‘‘(v) in each of year beginning with

18 1996 is the national limited monthly pay19 ment rate computed under subparagraph

20 (B) for the item for the year reduced by

21 the applicable percentage described in sub22 paragraph (D) (but in no case may the

23 amount determined under this clause be

24 less than 70 percent of such national lim25 ited payment rate).’’.
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1 (b) APPLICABLE PERCENTAGE DESCRIBED.—Section

2 1834(a)(9) (42 U.S.C. 1395m(a)(9)) is amended by add3 ing at the end the following:

4 ‘‘(D) APPLICABLE PERCENTAGE DE5 SCRIBED.—In clause (v) of subparagraph (C),

6 the ‘applicable percentage’ with respect to a

7 year described in that clause is—

8 ‘‘(i) for 1996, 20 percent,

‘‘(ii) for 1997, 212 9 ⁄3 percent,

‘‘(iii) for 1998, 231 10 ⁄3 percent,

11 ‘‘(iv) for 1999, 25 percent,

‘‘(v) for 2000, 262 12 ⁄3 percent,

‘‘(vi) for 2001, 281 13 ⁄3 percent, and

14 ‘‘(vii) for 2002 and thereafter, 30 per15 cent.’’.

16 SEC. 11127. PAYMENT LIMITS FOR HMOS AND CMPS WITH

17 RISK CONTRACTS.

18 (a) IN GENERAL.—Section 1851F(e)(2)(C) (as added

19 by subtitle B of this title) is amended—

20 (1) by inserting ‘‘, subject to adjustment to

21 take into account the provisions of the succeeding

22 clauses’’ before the period,

23 (2) by striking ‘‘The annual’’ and inserting ‘‘(i)

24 IN GENERAL.—The annual’’, and
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1 (3) by adding at the end the following new

2 clauses:

3 ‘‘(ii) CEILING.—The portion of the annual per

4 capita rate of payment for each such class attrib5 utable to payments made from the Federal Supple6 mentary Medical Insurance Trust Fund may not ex7 ceed 95 percent of the following amount (unless the

8 portion of the annual per capita rate of payment for

9 each such class attributable to payments made from

10 the Federal Hospital Insurance Trust Fund is less

11 than 95 percent of the weighted national average of

12 all adjusted average per capita costs determined

13 under paragraph (4) for that class that are attrib14 utable to payments made from the Federal Hospital

15 Insurance Trust Fund):

16 ‘‘(I) 1996.—For 1996, 150 percent of the

17 weighted national average of all adjusted aver18 age per capita costs determined under para19 graph (4) for that class that are attributable to

20 payments made from such Trust Fund, plus 80

21 percent of the amount by which (if any) the ad22 justed average per capita cost for that class ex23 ceeds 150 percent of that weighted national av24 erage.
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1 ‘‘(II) 1997.—For 1997, 150 percent of the

2 weighted national average of all adjusted aver3 age per capita costs determined under para4 graph (4) for that class that are attributable to

5 payments made from such Trust Fund, plus 60

6 percent of the amount by which (if any) the ad7 justed average per capita cost for that class ex8 ceeds 150 percent of that weighted national av9 erage.

10 ‘‘(III) 1998.—For 1998, 150 percent of

11 the weighted national average of all adjusted

12 average per capta costs determined under para13 graph (4) for that class that are attributable to

14 payments made from such Trust Fund, plus 40

15 percent of the amount by which (if any) the ad16 justed average per capita cost for that class ex17 ceeds 150 percent of that weighted national av18 erage.

19 ‘‘(IV) 1999.—For 1999, 150 percent of

20 the weighted national average of all adjusted

21 average per capita costs determined under para22 graph (4) for that class that are attributable to

23 payments made from such Trust Fund, plus 20

24 percent of the amount by which (if any) the ad25 justed average per capita cost for that class ex-
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1 ceeds 150 percent of that weighted national av2 erage.

3 ‘‘(V) 2000 AND LATER YEARS.—For 2000

4 and each succeeding year (subject to the estab5 lishment by the Secretary of alternative limits

6 under clause (vi)), 150 percent of the weighted

7 national average of all adjusted average per

8 capita costs determined under paragraph (4)

9 for that class that are attributable to payments

10 made from such Trust Fund.

11 ‘‘(iii) FLOOR.—For 1996 and succeeding years,

12 the portion of the annual per capita rate of payment

13 for each such class attributable to payments made

14 from the Federal Supplementary Medical Insurance

15 Trust Fund may not be less than 80 percent of 95

16 percent of the weighted national average of all ad17 justed average per capita costs determined under

18 paragraph (4) for that class that are attributable to

19 payments made from such Trust Fund, unless the

20 portion of the annual per capita rate of payment for

21 each such class attributable to payments made from

22 the Federal Hospital Insurance Trust Fund is great23 er than 95 percent of the weighted national average

24 of all adjusted average per capita costs determined

25 under paragraph (4) for that class that are attrib-
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1 utable to payments made from the Federal Hospital

2 Insurance Trust Fund.

3 ‘‘(iv) FUTURE REVISIONS.—For 2001 and suc4 ceeding years, the Secretary may revise any of the

5 percentages otherwise applicable during a year under

6 the preceding clauses (other than clause (i)), but

7 only if the aggregate payments made under this title

8 to eligible organizations under risk-sharing contracts

9 during the year is not greater than the aggregate

10 payments that would have been made under this title

11 to such organizations during the year if the Sec12 retary had not revised the percentages.

13 ‘‘(v) DISREGARD OF ESRD COSTS.—For pur14 poses of clauses (ii) and (iii), in determining the

15 weighted average of all adjusted average per capita

16 costs determined under paragraph (4) for a class,

17 the Secretary shall not take into account any costs

18 associated with individuals entitled to benefits under

19 this title under section 226A.’’.

20 (b) CONFORMING AMENDMENT.—Section 1851F(e)

21 (as added by subtitle B of this title)) is amended by insert22 ing ‘‘, adjusted to take into account the limitations im23 posed by clauses (ii) through (iv) of paragraph (2)(C)’’

24 before the period.
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1 SEC. 11128. WAIVE COST-SHARING FOR MAMMOGRAPHY.—

2 (a) DIAGNOSTIC MAMMOGRAPHY.—Section 1861(s)

3 (42 U.S.C. 1395x(s)) is amended—

4 (1) in paragraph (3), by striking ‘‘including di5 agnostic mammography if conducted by a facility

6 that has a certificate (or provisional certificate) is7 sued under section 354 of the Public Health Service

8 Act’’,

9 (2) by striking ‘‘and’’ at the end of paragraph

10 (15),

11 (3) by striking the period at the end of para12 graph (16) and inserting ‘‘; and’’, and

13 (4) by adding at the end the following:

14 ‘‘(17) diagnostic mammography, if conducted

15 by a facility that has a certificate (or provisional cer16 tificate) issued under section 354 of the Public

17 Health Service Act.’’.

18 (b) PAYMENT FOR SCREENING MAMMOGRAPHY.—

19 Section 1834(c)(1)(C) (42 U.S.C. 1395m(c)(1)(C)) is

20 amended by striking ‘‘, subject to the deductible estab21 lished under section 1833(b),’’ and ‘‘80 percent of’’.

22 (c) WAIVER OF DEDUCTIBLE.—The first sentence of

23 section 1833(b) (42 U.S.C. 1395l(b)) is amended by—

24 (1) striking ‘‘and’’ before ‘‘(4)’’, and

25 (2) inserting the following before the period: ‘‘,

26 and (5) such deductible shall not apply with respect
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1 to screening and diagnostic mammography described

2 in section 1861(s)(13) and section 1861(s)(17).’’

3 (d) WAIVER OF COINSURANCE.—Section 1833(a)(1)

4 (42 U.S.C. 1395l(a)(1)) is amended by—

5 (1) striking ‘‘and’’ at the end of clause (O),

6 (2) inserting after clause (P) the following: ‘‘,

7 and

8 ‘‘(Q) with respect to diagnostic mammography

9 described in section 1861(s)(17), the amount paid

10 shall be 100 percent of the fee schedule amount pro11 vided under section 1848.’’.

12 (e) WAIVER OF COINSURANCE IN HOSPITAL OUT13 PATIENT DEPARTMENTS.—The third sentence of section

14 1866(a)(2)(A) (42 U.S.C. 1395cc(a)(2)(A)) is amended by

15 inserting after ‘‘1861(s)(10)(A)’’ the following: ‘‘, with re16 spect to items and services described in section

17 1861(s)(13), with respect to items and services described

18 in section 1861(s)(17),’’.

19 (f) EFFECTIVE DATE.—The amendments made by

20 the preceding subsections apply to services furnished on

21 or after January 1, 1997.

22 SEC. 11129. ANNUAL MAMMOGRAMS.

23 (a) PROVIDING ANNUAL SCREENING MAMMOGRAPHY

24 FOR WOMEN OVER AGE 49.—Section 1834(c)(2)(A) (42

25 U.S.C. 1395m) (c)(2)(A)) is amended—
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1 (1) in clause (iv), by striking ‘‘but under 63

2 years of age,’’ and

3 (2) by striking clause (v).

4 (b) EFFECTIVE DATE.—The amendment made by

5 subsection (a) applies to services furnished on or after

6 January 1, 1997.

7 SEC. 11130. COVERAGE OF COLORECTAL SCREENING.

8 (a) IN GENERAL.—Section 1834 (42 U.S.C. 1395m)

9 is amended by inserting after subsection (c) the following:

10 ‘‘(d) FREQUENCY AND PAYMENT LIMITS FOR

11 SCREENING FECAL-OCCULT BLOOD TESTS, SCREENING

12 FLEXIBLE SIGMOIDOSCOPIES AND SCREENING

13 COLONOSCOPY.—

14 ‘‘(1) FREQUENCY LIMITS FOR SCREENING

15 FECAL-OCCULT BLOOD TESTS.—Subject to revision

16 by the Secretary under paragraph (4), no payment

17 may be made under this part for a screening fecal18 occult blood test provided in an individual for the

19 purpose of early detection of colon cancer if the test

20 is performed—

21 ‘‘(A) in the case of an individual under 65

22 years of age, more frequently than is provided

23 in a periodicity schedule established by the Sec24 retary for purposes of this subparagraph, or
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1 ‘‘(B) in the case of any other individual,

2 within the 11 months following the month in

3 which a previous screening fecal-occult blood

4 test was performed.

5 ‘‘(2) SCREENING FLEXIBLE

6 SIGMOIDOSCOPIES.—

7 ‘‘(A) PAYMENT AMOUNT.—The Secretary

8 shall establish a payment amount under section

9 1848 with respect to screening flexible

10 sigmoidoscopies provided for the purpose of

11 early detection of colon cancer that is consistent

12 with payment amounts under such section for

13 similar or related services, except that such

14 payment amount shall be established without

15 regard to subsection (a)(2)(A) of such section.

16 ‘‘(B) FREQUENCY LIMITS.—Subject to re17 vision by the Secretary under paragraph (4), no

18 payment may be made under this part for a

19 screening flexible sigmoidoscopy provided to an

20 individual for the purpose of early detection of

21 colon cancer if the procedure is performed—

22 ‘‘(i) in the case of an individual under

23 65 years of age, more frequently than is

24 provided in a periodicity schedule estab-
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1 lished by the Secretary for purposes of this

2 subparagraph, or

3 ‘‘(ii) in the case of any other individ4 ual, within the 59 months following the

5 month in which a previous screening flexi6 ble sigmoidoscopy was performed.

7 ‘‘(3) SCREENING COLONOSCOPY FOR INDIVID8 UALS AT HIGH RISK FOR COLORECTAL CANCER.—

9 ‘‘(A) PAYMENT AMOUNT.—The Secretary

10 shall establish a payment amount under section

11 1848 with respect to screening colonoscopy for

12 individuals at high risk for colorectal cancer (as

13 determined in accordance with criteria estab14 lished by the Secretary) provided for the pur15 pose of early detection of colon cancer that is

16 consistent with payment amounts under such

17 section for similar or related services, except

18 that such payment amount shall be established

19 without regard to subsection (a)(2)(A) of such

20 section.

21 ‘‘(B) FREQUENCY LIMIT.—Subject to revi22 sion by the Secretary under paragraph (4), no

23 payment may be made under this part for a

24 screening colonoscopy for individuals at high

25 risk for colorectal cancer provided to an individ-
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1 ual for the purpose of early detection of colon

2 cancer if the procedure is performed within the

3 47 months following the month in which a pre4 vious screening colonoscopy was performed.

5 ‘‘(C) FACTORS CONSIDERED IN ESTAB6 LISHING CRITERIA FOR DETERMINING INDIVID7 UALS AT HIGH RISK.—In establishing criteria

8 for determining whether an individual is at high

9 risk for colorectal cancer for purposes of this

10 paragraph, the Secretary shall take into consid11 eration family history, prior experience of can12 cer, a history of chronic digestive disease condi13 tion, and the presence of any appropriate recog14 nized gene markers for colorectal cancer.

15 ‘‘(4) REVISION OF FREQUENCY.—

16 ‘‘(A) REVIEW.—The Secretary shall review

17 periodically the appropriate frequency for per18 forming screening fecal-occult blood tests,

19 screening flexible sigmoidoscopies, and screen20 ing colonoscopy based on age and such other

21 factors and the Secretary believes to be perti22 nent.

23 ‘‘(B) REVISION OF FREQUENCY.—The Sec24 retary, taking into consideration the review

25 made under clause (i), may revise from time to
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1 time the frequency with which such tests and

2 procedures may be paid for under this sub3 section.’’.

4 (b) CONFORMING AMENDMENTS.—

5 (1) SECTION 1833(a).—Paragraphs (1)(D) and

6 (2)(D) of section 1833(a) (42 U.S.C. 13951(a)) are

7 each amended by striking ‘‘subsection (h)(1),’’ and

8 inserting ‘‘subsection (h)(1) or section 1834(d)(1),’’.

9 (2) SECTION 1848(a)(2)(A).—Clauses (i) and (ii)

10 of section 1848(a)(2)(A) (42 U.S.C.

11 13951(a)(2)(A)) are each amended by striking ‘‘a

12 service’’ and inserting ‘‘a service (other than a

13 screening flexible sigmoidoscopy provided to an indi14 vidual for the purpose of early detection of colon

15 cancer or a screening colonoscopy provided to an in16 dividual at high risk for colorectal cancer for the

17 purpose of early detection of colon cancer)’’.

18 (3) SECTION 1862(a).—Section 1862(a) (42

19 U.S.C. 1395y(a)) is amended—

20 (A) in paragraph (1)—

21 (i) by striking ‘‘and’’ at the end of

22 subparagraph (E),

23 (ii) by striking the semicolon at the

24 end of subparagraph (F) and inserting

25 ‘‘and’’, and
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1 (iii) by adding at the end the follow2 ing:

3 ‘‘(G) in the case of screening fecal-occult

4 blood tests, screening flexible sigmoidoscopies,

5 and screening colonoscopy provided for the pur6 pose of early detection of colon cancer, which

7 are performed more frequently than is covered

8 under section 1834(d);’’, and

9 (B) in paragraph (7), by striking ‘‘para10 graph (1)(B) or under paragraph (1)(F)’’ and

11 inserting ‘‘subparagraphs (B), (F), or (G) of

12 paragraph (1)’’.

13 (c) EFFECTIVE DATE.—The amendments made by

14 the preceding subsections apply to services furnished on

15 or after January 1, 1996.

16 SEC. 11131. PAYMENTS FOR VACCINES AND VACCINE AD17 MINISTRATION.

18 (a) PAYMENT AMOUNTS FOR THE ADMINISTRATION

19 OF CERTAIN VACCINES.—

20 (1) IN GENERAL.—Section 1833(k) (42 U.S.C.

21 13951(k)) is amended to read as follows:

22 ‘‘(k) PAYMENT AMOUNT FOR CERTAIN VACCINES.—

23 ‘‘(1) IN GENERAL.—The payment amount

24 under this part for the administration of a vaccine

25 described in section 1861(s)(10) shall be equal to—
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1 ‘‘(A)(i) for a vaccine administered in 1996

2 not in connection with the furnishing of another

3 service, $9.00, and

4 ‘‘(ii) for a vaccine administered in 1996 in

5 connection with the furnishing of another serv6 ice, $4.00, and

7 ‘‘(B) for a vaccine administered in any

8 subsequent year, the amount determined under

9 subparagraph (A), or under this subparagraph,

10 for the previous year, increased by the update

11 under section 1848(d)(3) for that subsequent

12 year for physicians’ services (described in sec13 tion 1848(d)(3)(A)(ii)(I)).

14 ‘‘(2) CROSS REFERENCE.—For a limitation on

15 actual charges for items and services described in

16 section 1861(s)(10), see paragraphs (1) and (2) of

17 section 1848(g).’’.

18 (2) CONFORMING AMENDMENT TO SECTION

19 1832(a)(1).—Section 1832(a)(1) (42 U.S.C.

20 1395k(a)(1)) is amended by striking ‘‘and (D)’’ and

21 inserting ‘‘, (D), and (K)’’.

22 (3) CONFORMING AMENDMENTS TO SECTION

23 1832(a)(2).—Section 1832(a)(2) (42 U.S.C.

24 1395k(a)(2)) is amended—
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1 (A) in subparagraph (B), by striking ‘‘de2 scribed in subparagraph (G) or subparagraph

3 (I)’’ and inserting ‘‘or services described in sub4 paragraph (G), (I), or (K)’’,

5 (B) in subparagraph (D), by inserting be6 fore the semicolon the following: ‘‘, other than,

7 in either case, services described in subpara8 graph (K)’’,

9 (C) in subparagraph (H), by inserting be10 fore the semicolon the following: ‘‘, other than

11 services described in subparagraph (K)’’,

12 (D) in subparagraph (I), by striking the

13 final ‘‘and’’,

14 (E) in subparagraph (J), by striking the

15 period and adding ‘‘; and’’, and

16 (F) by adding at the end the following:

17 ‘‘(K) administration of vaccines by provid18 ers of services, or as rural health clinic or Fed19 erally qualified health center services.’’.

20 (4) CONFORMING AMENDMENTS TO SECTION

21 1833(a)(1).—Section 1833(a)(1)(B) (42 U.S.C.

22 13951(a)(1)(B)) is amended—

23 (A) by striking ‘‘items and services de24 scribed’’ and inserting ‘‘vaccines listed’’, and
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1 (B) by inserting at the end the following:

2 ‘‘and, with respect to the administration of

3 those vaccines, the amounts described in sub4 section (k)(1),’’

5 (5) CONFORMING AMENDMENTS TO SECTION

6 1833(a)(2).—Section 1833(a)(2) (42 U.S.C.

7 13951(a)(2)) is amended—

8 (A) in the matter preceding subparagraph

9 (A), by striking ‘‘and (I)’’ and inserting ‘‘, (I),

10 and (K)’’, and

11 (B) in the matter in subparagraph (A) pre12 ceding clause (i), by striking ‘‘items and serv13 ices described’’ and inserting ‘‘vaccines listed’’.

14 (6) CONFORMING AMENDMENT TO SECTION

15 1833(a)(3).—Section 1833(a)(3) (42 U.S.C.

16 13951(a)(3)) is amended by striking ‘‘items and

17 services described’’ and inserting ‘‘vaccines listed’’.

18 (7) CONFORMING AMENDMENTS TO SECTION

19 1833(a)(6).—Section 1833(a)(6) (42 U.S.C.

20 13951(a)(6)) is amended—

21 (A) by inserting ‘‘other than services de22 scribed in section 1832(a)(2)(K)’’ after ‘‘serv23 ices’’, and

24 (B) by striking ‘‘and’’.
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1 (8) CONFORMING AMENDMENT TO SECTION

2 1833(a)(7).—Section 1833(a)(7) (42 U.S.C.

3 13951(a)(7)) is amended by striking the period and

4 adding at the end ‘‘; and’’.

5 (9) CROSS REFERENCE.—Section 1833(a) (42

6 U.S.C. 13951(a)) is amended by adding at the end

7 the following:

8 ‘‘(8) in the case of services described in section

9 1832(a)(2)(k), the amount described in subsection

10 (k)(1).’’.

11 (10) CONFORMING AMENDMENT TO SECTION

12 1834(g).—Section 1834(g)(2) (42 U.S.C.

13 1395m(g)(2)) is amended by inserting ‘‘(other than

14 services described in section 1832(a)(2)(K))’’ after

15 ‘‘hospital services’’.

16 (11) CONFORMING AMENDMENTS TO SECTION

17 1842(b).—

18 (A) INITIAL MATTER IN PARAGRAPH

19 (3)(b).—The matter in section 1842(b)(3)(B)

20 (42 U.S.C. 1395u(b)(3)(B)) preceding clause

21 (i) is amended by inserting ‘‘, where payment

22 under this part for a service is on a basis other

23 than a cost basis,’’ after ‘‘carrier, and’’.

24 (B) PARAGRAPH (3)(b)(ii).—Section

25 1842(b)(3)(B)(ii)(I) (42 U.S.C.
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1 1395u(b)(3)(B)(ii)(I)) is amended by inserting

2 ‘‘(or other payment basis)’’ after ‘‘reasonable

3 charge’’.

4 (12) CONFORMING AMENDMENTS TO SECTION

5 1848(g).—

6 (A) PARAGRAPH (1).—The first sentence

7 of section 1848(g)(1) (42 U.S.C. 1395w–

8 4(g)(1)) is amended by inserting ‘‘or items and

9 services described in section 1861(s)(10)’’ after

10 ‘‘January 1, 1991)’’.

11 (B) PARAGRAPH (2).—Section

12 1848(g)(2)(C) (42 U.S.C. 1395w–4(g)(2)(C)) is

13 amended by adding at the end the following:

14 ‘‘For items and services described in section

15 1861(s)(10) furnished in a year after 1994, the

16 ‘limiting charge’ shall be 115 percent of the ap17 plicable amount described in section

18 1833(k)(1).’’.

19 (b) ELIMINATION OF COINSURANCE AND DEDUCT20 IBLE FOR HEPATITIS B VACCINE.—Section

21 1833(a)(1)(B) (42 U.S.C. 13951(a)(1)(B)), the matter in

22 subparagraph (A) of section 1833(a)(2) (42 U.S.C.

23 13951(a)(2)) preceding clause (i), section 1833(a)(3) (42

24 U.S.C. 13951(a)(3)), paragraph (1) of the first sentence

25 of section 1833(b) (42 U.S.C. 13951(b)), and the third
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1 sentence of section 1866(a)(2)(A) (42 U.S.C.

2 1395cc(a)(2)(A)) are each amended by striking

3 ‘‘1861(s)(10)(A)’’ and inserting ‘‘1861(s)(10)’’.

4 (c) REPEAL OF OBSOLETE PROVISIONS.—

5 (1) SOCIAL SECURITY ACT.—Section

6 1861(s)(10)(A) (42 U.S.C. 1395x(s)(10)(A)) is

7 amended by striking ‘‘, subject to section 4071(b) of

8 the Omnibus Reconciliation Act of 1987,’’.

9 (2) OBRA–1987.—Section 4071(b) of the Om10 nibus Budget Reconciliation Act of 1987 is repealed.

11 PART 3—PROVISIONS RELATING TO PARTS A

12 AND B

13 SEC. 11141. CENTERS OF EXCELLENCE.

14 (a) IN GENERAL.—Title XVIII is amended by insert15 ing after section 1888 the following:

16 ‘‘SEC. 1889. CENTERS OF EXCELLENCE.

17 ‘‘(a) IN GENERAL.—The Secretary shall use a com18 petitive process to contract with centers of excellence for

19 cataract surgery, coronary artery by-pass surgery, and

20 such other services as the Secretary determines to be ap21 propriate. Payment under this title shall be made for serv22 ices subject to such contracts on the basis of negotiated

23 or all-inclusive rates as follows:

24 ‘‘(1) COVERAGE OF URBAN AREA.—The center

25 shall cover services provided in an urban area (as
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1 defined in section 1886(d)(2)(D)) for years begin2 ning with fiscal year 1996.

3 ‘‘(2) SAVINGS REQUIRED.—The amount of pay4 ment made by the Secretary to the center under this

5 title for services covered under the project shall be

6 less than the aggregate amount of the payments

7 that the Secretary would have made to the center for

8 such services had the project not been in effect.

9 ‘‘(3) TYPES OF SERVICES.—The Secretary shall

10 make payments to the center on such a basis for the

11 following services furnished to individuals entitled to

12 benefits under this title:

13 ‘‘(A) Facility, professional, and related

14 services relating to cataract surgery.

15 ‘‘(B) Coronary artery bypass surgery and

16 related services.

17 ‘‘(C) Such other services as the Secretary

18 and the center may agree to cover under the

19 agreement.

20 ‘‘(b) REBATE OF PORTION OF SAVINGS.—In the case

21 of any services furnished by a center under subsection (a),

22 the Secretary shall make a payment to each individual to

23 whom such services are furnished at such time and in such

24 manner as the Secretary may provide, in an amount equal

25 to 10 percent of the amount by which—
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1 ‘‘(1) the amount of payment that would have

2 been made by the Secretary under this title to the

3 center for such services if the services had not been

4 provided at the center, exceeds

5 ‘‘(2) the amount of payment made by the Sec6 retary under this title to the center for such serv7 ices.’’.

8 (b) EFFECTIVE DATE.—The amendments made by

9 subsection (a) apply to services furnished on or after Octo10 ber 1, 1996.

11 SEC. 11142. MAINTAINING SAVINGS RESULTING FROM TEM12 PORARY FREEZE ON PAYMENT INCREASES

13 FOR HOME HEALTH SERVICES.

14 (a) BASING UPDATES TO PER VISIT COST LIMITS ON

15 LIMITS FOR FISCAL YEAR 1993.—Section

16 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is

17 amended by adding at the end the following sentence: ‘‘In

18 establishing limits under this subparagraph, the Secretary

19 may not take into account any changes in the costs of

20 the provision of services furnished by home health agencies

21 with respect to cost reporting periods which began on or

22 after July 1, 1994, and before July 1, 1996.’’.

23 (b) NO EXCEPTIONS PERMITTED BASED ON AMEND24 MENT.—The Secretary of Health and Human Services

25 shall not consider the amendment made by subsection (a)
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1 in making any exemptions and exceptions pursuant to sec2 tion 1861(v)(1)(L)(ii) of the Social Security Act.

3 SEC. 11143. INTERIM PAYMENTS FOR HOME HEALTH SERV4 ICES.

5 (a) REDUCTIONS IN COST LIMITS.—Section

6 1861(v)(1)(L)(i) (42 U.S.C. 1395x(v)(1)(L)(i)) is amend7 ed—

8 (1) by inserting ‘‘and before October 1, 1996,’’

9 after ‘‘July 1, 1987’’ in subclause (III),

10 (2) by striking the period at the end of the

11 matter following subclause (III), and inserting ‘‘,

12 and’’, and

13 (3) by adding at the end the following new

14 subclause:

15 ‘‘(IV) October 1, 1996, 105 percent of the me16 dian of the labor-related and nonlabor per visit costs

17 for freestanding home health agencies.’’.

18 (b) DELAY IN UPDATES.—Section 1861(v)(1)(L)(iii)

19 (42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking

20 ‘‘July 1, 1996’’ and inserting ‘‘October 1, 1996’’.

21 (c) ADDITIONS TO COST LIMITS.—Section

22 1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended by

23 adding at the end the following:

24 ‘‘(iv) LIMITS FOR FISCAL YEARS 1997

25 THROUGH 1999.—For services furnished by
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1 home health agencies for cost reporting pe2 riods beginning on or after October 1,

3 1996, but before October 1, 1999, the Sec4 retary shall provide for an interim system

5 of limits. Payment shall be the lower of—

6 ‘‘(I) costs determined under the

7 preceding provisions of this subpara8 graph, or

9 ‘‘(II) an agency-specific per bene10 ficiary annual limitation calculated

11 from the agency’s 12-month cost re12 porting period ending on or after Jan13 uary 1, 1994, and on or before De14 cember 31, 1994, based on reasonable

15 costs (including nonroutine medical

16 supplies), updated by the home health

17 market basket index. The per bene18 ficiary limitation shall be multiplied

19 by the agency’s unduplicated census

20 count of patients (entitled to benefits

21 under this title) for the year subject

22 to the limitation to determine the ag23 gregate agency specific per beneficiary

24 limitation.
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1 ‘‘(v) SPECIAL RULES.—For services

2 furnished by home health agencies for cost

3 reporting periods beginning on or after Oc4 tober 1, 1996, the following rules shall

5 apply:

6 ‘‘(I) For new providers and those

7 providers without a 12-month cost re8 porting period ending in calendar year

9 1994, the per beneficiary limitation

10 shall be equal to the mean of these

11 limits (or the Secretary’s best esti12 mates thereof) applied to home health

13 agencies as determined by the Sec14 retary. Home health agencies that

15 have altered their corporate structure

16 or name shall not be considered new

17 provides for payment purposes.

18 ‘‘(II) For beneficiaries who use

19 services furnished by more than one

20 home health agency, the per bene21 ficiary limitations shall be prorated

22 among agencies.

23 ‘‘(vi) BONUS PAYMENTS.—Home

24 health agencies whose cost or utilization

25 experience is below 125 percent of the
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1 mean national or census region aggregate

2 per beneficiary cost or utilization experi3 ence for 1994, or best estimates thereof,

4 and whose year-end reasonable costs are

5 below the agency-specific per beneficiary

6 limitation, shall receive payments equal to

7 50 percent of the difference between the

8 agency’s reasonable costs and its limit for

9 fiscal years 1997, 1998, and 1999. Such

10 payments may not exceed 5 percent of

11 such agency’s aggregate Medicare reason12 able cost in a year.

13 ‘‘(vii) MODIFICATIONS FOR REGIONAL

14 OR NATIONAL VARIATIONS IN UTILIZA15 TION.—Effective January 1, 1997, or as

16 soon as feasible, the Secretary shall modify

17 the agency-specific per beneficiary annual

18 limitation described in clause (iv) to pro19 vide for regional or national variations in

20 utilization. For purposes of determining

21 payment under clause (iv), the limit shall

22 be calculated through a blend of 75 per23 cent of the agency-specific cost or utiliza24 tion experience in 1994 with 25 percent of

25 the national or census region cost or utili-
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1 zation experience in 1994, or the Sec2 retary’s best estimates thereof.’’.

3 (d) USE OF INTERIM FINAL REGULATIONS.—The

4 Secretary shall implement the payment limits described in

5 section 1861(v)(1)(L)(iv) of the Social Security Act by

6 publishing in the Federal Register a notice of interim final

7 payment limits by August 1, 1996, and allowing for a pe8 riod of public comment thereon. Payments subject to these

9 limits will be effective for cost reporting periods beginning

10 on or after October 1, 1996, without the necessity for con11 sideration of comments received, but the Secretary shall,

12 by Federal Register notice, affirm or modify the limits

13 after considering those comments.

14 (e) DEVELOPMENT OF CASE MIX SYSTEM.—The Sec15 retary shall expand research on a prospective payment sys16 tem for home health agencies that shall tie prospective

17 payments to an episode of care, including an intensive ef18 fort to develop a reliable case mix adjuster that explains

19 a significant amount of the variances in costs.

20 (f) SUBMISSION OF DATA FOR CASE MIX SYSTEM.—

21 Effective for cost reporting periods beginning on or after

22 October 1, 1998, the Secretary may require all home

23 health agencies to submit such additional information as

24 the Secretary deems necessary for the development of a

25 reliable case mix system.
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1 SEC. 11144. PROSPECTIVE PAYMENT FOR HOME HEALTH

2 SERVICES.

3 Title XVIII is amended by adding at the end the fol4 lowing:

5 ‘‘SEC. 1893. PROSPECTIVE PAYMENT FOR HOME HEALTH

6 SERVICES.

7 ‘‘(a) IN GENERAL.—Notwithstanding section

8 1861(v), the Secretary shall, for cost reporting periods be9 ginning on or after October 1, 1999, provide for payments

10 for home health services in accordance with a prospective

11 payment system, which pays home health agencies on a

12 per episode basis, established by the Secretary.

13 ‘‘(b) ELEMENTS OF SYSTEM.—Such a system shall

14 include the following:

15 ‘‘(1) BASED ON A PER EPISODE AMOUNT.—All

16 services covered and paid on a reasonable cost basis

17 under the medicare home health benefit as of the

18 date of the enactment of the Balanced Budget Act

19 of 1995 for Economic Growth and Fairness, includ20 ing medical supplies, shall be subject to the per epi21 sode amount. In defining an episode of care, the

22 Secretary shall consider an appropriate length of

23 time for an episode, the use of services, and the

24 number of visits provided within an episode, poten25 tial changes in the mix of services provided within

26 an episode and their cost, and a general system de-
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1 sign that will provide for continued access to quality

2 services. The per episode amount shall be based on

3 the most current audited cost report data available

4 to the Secretary

5 ‘‘(2) USE OF CASE MIX.—The Secretary shall

6 employ an appropriate case mix adjustment that ex7 plains a significant amount of the variation in cost.

8 ‘‘(3) ANNUAL ADJUSTMENTS.—The episode

9 payment amount shall be adjusted annually by the

10 home health market basket index. The labor portion

11 of the episode amount shall be adjusted for geo12 graphic differences in labor-related costs based on

13 the most current hospital wage index.

14 ‘‘(4) OUTLIERS.—The Secretary may designate

15 a payment provision for outliers, recognizing the

16 need to adjust payments due to unusual variations

17 in the type or amount of medically necessary care.

18 ‘‘(5) COORDINATION BY HOME HEALTH AGEN19 CY.—A home health agency shall be responsible for

20 coordinating all care for a beneficiary. If a bene21 ficiary elects to transfer to, or receive services from,

22 another home health agency within an episode pe23 riod, the episode payment shall be prorated between

24 home health agencies.
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1 ‘‘(c) SAVINGS.—Prior to implementing the prospec2 tive system described in subsections (a) and (b) in a budg3 et neutral fashion, the Secretary shall first reduce, by 15

4 percent, the cost limits, per beneficiary limits, and actual

5 costs, described in section 1861(v)(1)(L)(iv), as such lim6 its are in effect on September 30, 1999.’’.

7 SEC. 11145. PAYMENT BASED ON LOCATION WHERE HOME

8 HEALTH SERVICE IS FURNISHED.

9 (a) CONDITIONS OF PARTICIPATION.—Section 1891

10 (42 U.S.C. 1395bbb) is amended by adding at the end

11 the following:

12 ‘‘(g) PAYMENT ON BASIS OF LOCATION OF SERV13 ICE.—A home health agency shall submit claims for pay14 ment of home health services under this title only on the

15 basis of the geographic location at which the service is fur16 nished, as determined by the Secretary.’’.

17 (b) WAGE ADJUSTMENT.—Section 1861(v)(1)(L)(iii)

18 (42 U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking

19 ‘‘agency is located’’ and inserting ‘‘service is furnished’’.

20 (c) EFFECTIVE DATE.—The amendments made by

21 previous subsections apply to services furnished on or after

22 October 1, 1996.
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1 SEC. 11146. ELIMINATION OF PERIODIC INTERIM PAY2 MENTS FOR HOME HEALTH AGENCIES.

3 (a) IN GENERAL.—Section 1815(e)(2) (42 U.S.C.

4 1395g(e)(2)) is amended—

5 (1) by inserting ‘‘and’’ at the end of subpara6 graph (C),

7 (2) by striking subparagraph (D), and

8 (3) by redesignating subparagraph (E) as (D).

9 (b) EFFECTIVE DATE.—The amendments made by

10 subsection (a) apply to payments made on or after October

11 1, 1999.

12 SEC. 11147. ESTABLISHMENT OF POST-HOSPITAL HOME

13 HEALTH BENEFIT UNDER PART A AND

14 TRANSFER OF OTHER HOME HEALTH SERV15 ICES TO PART B.

16 (a) IN GENERAL.—Section 1812(a)(3) (42 U.S.C.

17 1395d(a)(3)) is amended—

18 (1) by inserting ‘‘post-hospital’’ before ‘‘home

19 health services’’, and

20 (2) by inserting ‘‘for up to 100 visits during

21 any spell of illness (or, in the case of an individual

22 who is not enrolled in the insurance program estab23 lished by part B, home health services)’’ before the

24 semicolon.

25 (b) POST-HOSPITAL HOME HEALTH SERVICES.—

26 Section 1861 (42 U.S.C. 1395x), as amended by section
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1 11118, is further amended by adding at the end the fol2 lowing:

3 ‘‘(pp) POST-HOSPITAL HOME HEALTH SERVICES.—

4 The term ‘post-hospital home health services’ means home

5 health services furnished to an individual under a plan of

6 treatment established when the individual was an inpa7 tient of a hospital or rural primary care hospital for not

8 less than 3 consecutive days before discharge, if home

9 health services are initiated for such individual within 30

10 days after discharge from the hospital or rural primary

11 care hospital.’’.

12 (c) CONFORMING AMENDMENTS.—Section 1812(b)

13 (42 U.S.C. 1395d(b)) is amended—

14 (1) by striking ‘‘or’’ at the end of paragraph

15 (2);

16 (2) by striking the period at the end of para17 graph (3) and inserting ‘‘; or’’, and

18 (3) by adding at the end the following:

19 ‘‘(4) post-hospital home health services fur20 nished to the individual during such spell of illness

21 after such services had been furnished to the individ22 ual for 100 visits during such spell.’’.

23 (d) CLARIFICATION OF PART-TIME OR INTERMIT24 TENT NURSING CARE.—Section 1861(m) (42 U.S.C.

25 1395x(m)) is amended by adding at the end the following:
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1 ‘‘For purposes of paragraphs (1) and (4), the term ‘part2 time or intermittent services’ means skilled nursing and

3 home health aide services furnished any number of days

4 per week as long as they are furnished (combined) less

5 than 8 hours each day and 28 or less hours each week

6 (or, subject to review on a case-by-case basis as to the

7 need for care, less than 8 hours each day and 35 or less

8 hours per week). For purposes of sections 1814(a)(2)(C)

9 and 1835(a)(2)(A), ‘intermittent’ means skilled nursing

10 care that is either provided or needed on fewer than 7

11 days each week, or less than 8 hours or each day of skilled

12 nursing and home health services combined for periods of

13 21 days or less (with extensions in exceptional cir14 cumstances when the need for additional care is finite and

15 predictable).’’.

16 (e) PAYMENTS UNDER PART B.—Subparagraph (A)

17 of section 1833(a)(2) (42 U.S.C. 13951(a)(2)) is amended

18 to read as follows:

19 ‘‘(A) with respect to home health services

20 (other than a covered osteoporosis drug (as de21 fined in section 1861(kk)), and to items and

22 services described in section 1861(s)(10)(A),

23 the amounts determined under section

24 1861(v)(1)(L) or section 1893, or, if such serv25 ices are furnished by a public provider of serv-
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1 ices, or by another provider which demonstrates

2 to the satisfaction of the Secretary that a sig3 nificant portion of its patients are low-income

4 (and requests that payment be made under this

5 provision), free of charge or at nominal charges

6 to the public, the amount determined in accord7 ance with section 1814(b)(2);’’.

8 (f) EXCLUSION OF ADDITIONAL PART B COSTS

9 FROM DETERMINATION OF PART B MONTHLY PRE10 MIUM.—Section 1839(a) (42 U.S.C. 1395r(a)) is amend11 ed—

12 (A) in the second sentence of paragraph (1), by

13 inserting ‘‘(except as provided in paragraph (5))’’

14 before the period, and

15 (B) by adding at the end the following:

16 ‘‘(5) EXCLUSION OF HOME HEALTH COSTS.—In es17 timating the benefits and administrative costs which will

18 be payable from the Federal Supplementary Medical In19 surance Trust Fund for a year (beginning with 1997), the

20 Secretary shall exclude an estimate of any benefits and

21 administrative costs attributable to home health services

22 for which payment would have been made under part A

23 during the year but for paragraph (4) of section 1812(b),

24 or home health services furnished under part A that are

25 not post-hospital home health services.’’
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1 (g) PAYMENTS FROM SUPPLEMENTARY MEDICAL IN2 SURANCE TRUST FUND FOR CERTAIN HOME HEALTH

3 SERVICES FURNISHED UNDER PART A.—Section 1815(a)

4 (42 U.S.C. 1395g(a)) is amended by inserting after

5 ‘‘Trust Fund’’ the following: ‘‘or in the case of home

6 health services that are not post-hospital home health

7 services, from the Federal Supplementary Medical Insur8 ance Trust Fund)’’.

9 (h) EFFECTIVE DATE.—The amendments made by

10 the preceding subsections apply to spells of illness begin11 ning on or after October 1, 1996.

12 SEC. 11148. PERMANENT EXTENSION OF CERTAIN SECOND13 ARY PAYER PROVISIONS.

14 (a) WORKING DISABLED.—Section 1862(b)(1)(B) is

15 amended by striking clause (iii).

16 (b) INDIVIDUAL WITH END STAGE RENAL DIS17 EASE.—Section 1862(b)(1)(C) is amended—

18 (1) in the first sentence, by striking ‘‘12-

19 month’’ each place it occurs and inserting ‘‘18-

20 month’’, and

21 (2) by striking the second sentence.

22 (c) IRS-SSA-HCFA DATA MATCH.—

23 (1) SOCIAL SECURITY ACT.—Section

24 1862(b)(5)(C) is amended by striking clause (iii).
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1 (2) INTERNAL REVENUE CODE.—Section

2 6103(l)(12) of the Internal Revenue Code of 1986 is

3 amended by striking subparagraph (F).

4 PART 4—MEDICARE PART B PREMIUM

5 SEC. 11161. PART B PREMIUM.

6 (a) IN GENERAL.—The first and second sentences of

7 section 1839(a)(3) (42 U.S.C. 1395r(a)(3)) are amended

8 to read as follows: ‘‘The Secretary shall, during September

9 of each year, determine and promulgate a monthly pre10 mium rate for the succeeding calendar year. That monthly

11 premium rate shall be equal to 50 percent of the monthly

12 actuarial rate for enrollees age 65 and over, determined

13 according to paragraph (1), for that succeeding calendar

14 year.’’.

15 (b) CONFORMING AND TECHNICAL AMENDMENTS.—

16 Section 1839 (42 U.S.C. 1395r) is amended—

17 (1) in subsection (a)(2), by striking ‘‘(b) and

18 (e)’’ and inserting ‘‘(b), (c), and (f)’’,

19 (2) in the third sentence of subsection (a)(3)—

20 (A) by inserting ‘‘rate’’ after ‘‘premium’’,

21 and

22 (B) by striking ‘‘and the derivation of the

23 dollar amounts specified in this paragraph’’,

24 (3) by striking subsection (e), and
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1 (4) by redesignating subsection (g) and (e) and

2 inserting that subsection after subsection (d).

3 (c) EFFECTIVE DATE.—The amendments made by

4 the preceding subsections apply to premiums for months

5 after December 1995.

6 Subtitle B—Expanded Medicare

7 Choice

8 SEC. 11201. EXPANDED CHOICE UNDER MEDICARE.

9 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

10 seq.) is amended by inserting after section 1804 the fol11 lowing:

12 ‘‘OPTION TO ENROLL IN MANAGED CARE PLANS

13 ‘‘SEC. 1805. Every individual entitled to benefits

14 under part A and enrolled under part B or enrolled under

15 part B only shall be eligible to enroll under part C with

16 any eligible organization with which the Secretary has en17 tered into a contract under part C and which serves the

18 geographic area in which the individual resides.’’.

19 (b) EFFECTIVE DATE.—The amendment made by

20 subsection (a) applies to enrollments whose periods begin

21 after 1996.

22 SEC. 11202. BROADER CHOICE AMONG MANAGED CARE OR23 GANIZATIONS.

24 (a) IN GENERAL.—Title XVIII (42 U.S.C. 1395 et

25 seq.) is amended—
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1 (1) by redesignating part C (42 U.S.C. 1395x

2 et seq.) as part D, and

3 (2) by inserting after part B (42 U.S.C. 1395j

4 et seq.) the following:

5 ‘‘PART C—MANAGED CARE ORGANIZATIONS

6 ‘‘SEC. 1851A. TYPES OF MANAGED CARE ORGANIZATIONS.

7 ‘‘(a) ELIGIBLE ORGANIZATIONS.—For purposes of

8 this part, the term ‘eligible organization’ means a public

9 or private entity, organized under the laws of any State,

10 that is—

11 ‘‘(1) a qualified health maintenance organiza12 tion (QHMO),

13 ‘‘(2) a competitive medical plan (CMP),

14 ‘‘(3) a preferred provider organization (PPO),

15 or

16 ‘‘(4) a provider sponsored organization (PSO).

17 ‘‘(b) QUALIFIED HEALTH MAINTENANCE ORGANIZA18 TION (QHMO).—For purposes of this part, the term

19 ‘qualified health maintenance organization’ means such as

20 organization (as defined in section 1310(d) of the Public

21 Health Service Act) that meets the requirements of sub22 paragraphs (B) and (E) of subsection (c)(1).

23 ‘‘(c) COMPETITIVE MEDICAL PLAN (CMP).—
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1 ‘‘(1) IN GENERAL.—For purposes of this part,

2 the term ‘competitive medical plan’ means an entity

3 that meets the following requirements:

4 ‘‘(A) MINIMUM SERVICES TO ALL MEM5 BERS.—The entity provides to enrolled mem6 bers at least the following health care services:

7 ‘‘(i) Physicians’ services performed by

8 physicians (as defined in section

9 1861(r)(1)).

10 ‘‘(ii) Inpatient hospital services.

11 ‘‘(iii) Laboratory, X-ray, emergency,

12 and preventive services.

13 ‘‘(iv) Out-of-area coverage.

14 ‘‘(B) PROVISION OF PHYSICIANS’ SERV15 ICES.—The entity provides physicians’ services

16 primarily (i) directly through physicians who

17 are either employees or partners of such organi18 zation, or (ii) through contracts with individual

19 physicians or one or more groups of physicians

20 (organized on a group practice or individual

21 practice basis).

22 ‘‘(C) COMPENSATION ON PREPAID RISK

23 BASIS.—The entity is compensated (except for

24 deductibles, coinsurance, and copayments) for

25 the provision of health care services to enrolled
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1 members by a payment which is paid on a peri2 odic basis without regard to the date the health

3 care services are provided and which is fixed

4 without regard to the frequency, extent, or kind

5 of health care service actually provided to a

6 member.

7 ‘‘(D) ASSUMPTION OF RISK.—The entity

8 assumes full financial risk on a prospective

9 basis for the provision of the health care serv10 ices listed in subparagraph (A), except that

11 such entity may—

12 ‘‘(i) obtain insurance or make other

13 arrangements for the cost of providing to

14 any enrolled member health care services

15 listed in subparagraph (A) the aggregate

16 value of which exceeds $5,000 in any year,

17 ‘‘(ii) obtain insurance or make other

18 arrangements for the cost of health care

19 services listed in subparagraph (A) pro20 vided to its enrolled members other than

21 through the entity because medical neces22 sity required their provision before they

23 could be secured through the entity,

24 ‘‘(iii) obtain insurance or make other

25 arrangements for not more than 90 per-
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1 cent of the amount by which its costs for

2 any of its fiscal years exceed 115 percent

3 of its income for such fiscal year, and

4 ‘‘(iv) make arrangements with physi5 cians or other health professionals, health

6 care institutions, or any combination of

7 such individuals or institutions to assume

8 all or part of the financial risk on a pro9 spective basis for the provision of basic

10 health services by the physicians or other

11 health professionals or through the institu12 tions.

13 ‘‘(E) FISCAL SOUNDNESS; PROVISION

14 AGAINST INSOLVENCY.—The entity meets

15 standards for fiscal soundness (including stand16 ards for provision against the risk of insol17 vency) applicable to Federally qualified health

18 maintenance organizations under title XIII of

19 the Public Health Service Act.

20 ‘‘(2) EXCEPTION FOR CERTAIN GRAND21 FATHERED CONTRACTS.—Paragraph (1)(A)(ii) shall

22 not apply to an entity which had contracted with a

23 single State agency administering a State plan ap24 proved under title XIX for the provision of services

25 (other than inpatient hospital services) to individuals
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1 eligible for such services under such State plan on

2 a prepaid risk basis prior to 1970.

3 ‘‘(d) PREFERRED PROVIDER ORGANIZATION

4 (PPO).—

5 ‘‘(1) IN GENERAL.—For purposes of this part,

6 the term ‘preferred provider organization’ means an

7 entity that meets the following requirements:

8 ‘‘(A) MINIMUM SERVICES TO ALL MEM9 BERS.—The entity provides at least physicians’

10 services performed by physicians (as defined in

11 section 1861(r)(1)).

12 ‘‘(B) PROVISION OF PHYSICIAN SERVICES;

13 FISCAL SOUNDNESS.—The entity meets the re14 quirements of subparagraphs (B) and (E) of

15 subsection (c)(1).

16 ‘‘(C) ASSUMPTION OF RISK.—The entity

17 meets the requirements of subsection (c)(1)(D)

18 with respect to members enrolled with the orga19 nization under this part.

20 ‘‘(2) DETERMINATION OF PRIVATE MEMBER21 SHIP.—In applying the provisions of sections

22 1851E(g) and 1851F(e)(1)(B)(i) and (f)(1)(B)(i)

23 (concerning minimum private enrollment) to an or24 ganization that meets the requirements of paragraph

25 (1), individuals for whom the organization has as-
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1 sumed substantial financial risk shall be considered

2 to be members of the organization.

3 ‘‘(e) PROVIDER SPONSORED ORGANIZATION

4 (PSO).—

5 ‘‘(1) IN GENERAL.—For purposes of this part,

6 the term ‘provider sponsored organization’ means an

7 entity that meets the following requirements:

8 ‘‘(A) TYPE OF ENTITY.—The entity is a

9 hospital, a group of affiliated hospitals, or an

10 affiliated group consisting of a hospital or hos11 pitals and physicians (as defined in section

12 1861(r)(1)).

13 ‘‘(B) MINIMUM SERVICES TO ALL MEM14 BERS.—The entity provides at least physicians’

15 services performed by physicians (as defined in

16 section 1861(r)(1)) and inpatient hospital serv17 ices.

18 ‘‘(C) DIRECT PROVISION OF SERVICES.—

19 The entity provides directly a substantial por20 tion of the services covered under this title (as

21 determined by the Secretary, which may vary

22 for rural or under served areas).

23 ‘‘(D) ASSUMPTION OF RISK.—The entity

24 meets the requirements of subsection (c)(1)(D)
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1 with respect to members enrolled with the orga2 nization under this part.

3 ‘‘(E) FISCAL SOUNDNESS; PROVISION

4 AGAINST INSOLVENCY.—The entity meets re5 quirements for fiscal soundness and provision

6 against insolvency developed by the Secretary.

7 ‘‘(2) DETERMINATION OF PRIVATE MEMBER8 SHIP.—In applying the provisions of sections

9 1851E(g) and 1851F(e)(1)(B)(i) and (f)(1)(B)(i)

10 (concerning minimum private enrollment) to an or11 ganization that meets the requirements of paragraph

12 (1), individuals for whom the organization has as13 sumed substantial financial risk shall be considered

14 to be members of the organization.

15 ‘‘(3) LIMITED PREEMPTION OF STATE LAW.—

16 Except as otherwise provided in the next sentence,

17 an organization that meets the requirements of

18 paragraph (1) may provide health benefits to indi19 viduals enrolled with the organization under this

20 part without regard to any State law that imposes

21 requirements different from those under paragraph

22 (1)(E)) (concerning fiscal soundness and provision

23 against insolvency), or that imposes requirements (in

24 other respects) that differ from those imposed on

25 other organizations which provide health care bene-
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1 fits only through (or preferentially through) certain

2 entities. If the Secretary determines that a State has

3 licensing standards which are substantially equiva4 lent to the requirements of such paragraph (1)(E),

5 that the State has a process for issuing licenses on

6 a timely basis, and that the State does not impose

7 requirements (in other respects) that differ from

8 those imposed on other organizations which provide

9 health care benefits only through (or preferentially

10 through) certain entities, the Secretary shall require

11 the organization to obtain a license from the State.

12 ‘‘SEC. 1851B. ENROLLMENT AND DISENROLLMENT.

13 ‘‘(a) IN GENERAL.—

14 ‘‘(1) SECRETARY’S RESPONSIBILITY.—The Sec15 retary shall carry out enrollment and termination of

16 enrollment of individuals with eligible organizations.

17 ‘‘(2) INDIVIDUAL OPTIONS.—An individual may,

18 as prescribed by regulations—

19 ‘‘(A) enroll under this part with an eligible

20 organization; and

21 ‘‘(B) terminate enrollment with such orga22 nization—

23 ‘‘(i) as of the beginning of the first

24 calendar month following the date on
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1 which the request is made for such termi2 nation;

3 ‘‘(ii) as of the date determined in ac4 cordance with regulations, in the case of fi5 nancial insolvency of the organization; and

6 ‘‘(iii) retroactively to the date of en7 rollment, in such special circumstances as

8 the Secretary may designate.

9 ‘‘(b) INFORMATION CONCERNING ENROLLMENT.—

10 ‘‘(1) STANDARDIZED COMPARATIVE MATE11 RIALS.—The Secretary shall develop and distribute

12 standardized comparative materials about eligible or13 ganizations and medicare supplemental policies (as

14 defined in section 1882(g)(1)) to enable individuals

15 to compare benefits, costs, and quality indicators.

16 ‘‘(2) COST-SHARING BY PARTICIPATING ORGANI17 ZATIONS.—Each eligible organization with a con18 tract under this part shall pay the Secretary for its

19 pro rata share (as determined by the Secretary) of

20 the estimated costs to be incurred by the Secretary

21 in carrying out the requirements of the preceding

22 sentence, the first sentence of subsection (a)(1), and

23 section 4360 of the Omnibus Reconciliation Act of

24 1990. Those payments are appropriated to defray
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1 the costs described in the preceding sentence, to re2 main available until expended.

3 ‘‘(2) REVIEW OF MARKETING MATERIALS.—The

4 Secretary may prescribe the procedures and condi5 tions under which an eligible organization that has

6 entered into a contract with the Secretary under this

7 subsection may furnish information about the orga8 nization to enrollees and individuals eligible to enroll

9 under this part. No brochures, application forms, or

10 other promotional or informational material may be

11 distributed by an organization to (or for the use of)

12 such individuals unless at least 45 days before its

13 distribution, the organization has submitted the ma14 terial to the Secretary for review, and the Secretary

15 has not disapproved the distribution of the material.

16 The Secretary shall review all such material submit17 ted and shall disapprove such material if the Sec18 retary determines, in the Secretary’s discretion, that

19 the material is materially inaccurate or misleading

20 or otherwise makes a material misrepresentation.

21 ‘‘(c) PERIODS OF ENROLLMENT.—

22 ‘‘(1) STANDARD ENROLLMENT OPPORTUNI23 TIES.—Subject to the provisions of this section, an

24 organization with a contract under this part shall
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1 permit enrollment under this part by any individ2 ual—

3 ‘‘(A) during the month of each year speci4 fied by the Secretary for all eligible organiza5 tions;

6 ‘‘(B) during the individual’s initial enroll7 ment period in the program under part B (as

8 described in section 1837(d));

9 ‘‘(C) during a special enrollment period in

10 the program under part B (for individuals for11 merly electing employment-based coverage) de12 scribed in section 1837(i)(3); and

13 ‘‘(D) during the 90-day period beginning

14 30 days before the date the individual takes up

15 residence in the service area of the organiza16 tion.

17 ‘‘(2) SPECIAL ENROLLMENT PERIOD FOR INDI18 VIDUALS LOSING COVERAGE BY ANOTHER ORGANIZA19 TION.—

20 ‘‘(A) IN GENERAL.—Subject to other pro21 visions of this section, if a contract with an or22 ganization under this part is not renewed or

23 otherwise terminated, or is renewed in a man24 ner that discontinues coverage for individuals

25 residing in part of the service area, each other
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1 organization with a contract under this part

2 shall permit enrollment under this part by af3 fected individuals enrolled with such other orga4 nization on the effective date of such termi5 nation or discontinuation of coverage.

6 ‘‘(B) ENROLLMENT PERIOD.—The enroll7 ment period required by subparagraph (A) shall

8 be for 30 days and shall begin 30 days after the

9 date that the Secretary provides notice of such

10 requirement.

11 ‘‘(2) ACCEPTANCE OR DENIAL OF APPLICA12 TION.—An eligible organization shall enroll individ13 uals under this part in the order of application, and

14 may deny enrollment of such an individual only if

15 the enrollment—

16 ‘‘(A) would exceed the limits of the organi17 zation’s capacity (as determined by the Sec18 retary);

19 ‘‘(B) would result in an enrolled population

20 substantially nonrepresentative, as determined

21 in accordance with regulations of the Secretary,

22 of the population in the geographic area served

23 by the organization; or

24 ‘‘(C) would result in the organization’s

25 failing to meet the requirements of sections
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1 1851E(g) and 1851F(e)(1)(B)(i) and

2 (f)(1)(B)(i) (concerning minimum private en3 rollment).

4 ‘‘(3) EFFECTIVE DATE OF ENROLLMENT.—An

5 individual’s enrollment with an eligible organization

6 under this part shall be effective—

7 ‘‘(A) in the case of an enrollment under

8 paragraph (1)(A), on the first day of the third

9 month beginning after the end of the enroll10 ment period;

11 ‘‘(B) in the case of an enrollment under

12 paragraph (1)(B), as specified by section

13 1838(a);

14 ‘‘(C) in the case of an enrollment under

15 paragraph (1)(C), as specified by section

16 1838(e);

17 ‘‘(D) in the case of an enrollment under

18 paragraph (1)(D), on the first day of the first

19 month following the month in which the individ20 ual enrolled; and

21 ‘‘(E) in the case of an enrollment under

22 paragraph (2), 30 days after the end of the

23 open enrollment period, or, if the Secretary de24 termines that such date is not feasible, such

25 other date as the Secretary specifies.
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1 ‘‘(d) ENROLLMENT OR TERMINATION FOR HEALTH

2 REASONS PROHIBITED.—An eligible organization—

3 ‘‘(1) shall not refuse to enroll, and shall not

4 expel or refuse to re-enroll, any individual eligible to

5 enroll or enrolled with the organization under this

6 part because of the individual’s health status or re7 quirements for health care services;

8 ‘‘(2) shall include in any marketing materials a

9 statement of the requirements of paragraph (1); and

10 ‘‘(3) shall notify each such individual of the re11 quirements of paragraph (1) at the time of the indi12 vidual’s enrollment.

13 ‘‘SEC. 1851C. BENEFITS.

14 ‘‘(a) BASIC BENEFITS.—

15 ‘‘(1) IN GENERAL.—An eligible organization

16 must provide to members enrolled under this part,

17 either directly or through providers and other per18 sons that meet the applicable requirements of this

19 title and part A of title XI—

20 ‘‘(A) services covered under parts A and B

21 of this title, for those members entitled to bene22 fits under part A and enrolled under part B, or

23 ‘‘(B) services covered under part B, for

24 those members enrolled only under such part,
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1 which are available to individuals residing in the ge2 ographic area served by the organization.

3 ‘‘(2) PPO REQUIRED TO AFFORD ‘POINT OF

4 SERVICE’ OPTION.—An eligible organization that

5 contracts as a preferred provider organization under

6 this part, in addition to providing services in accord7 ance with paragraph (1), shall also pay for any serv8 ice furnished to a member enrolled under this part

9 (in the amounts, if any, that otherwise would be

10 paid under this title) by any entity that may furnish

11 that service under this title (other than an entity

12 through which the organization provides services, or

13 other than a service with respect to which the orga14 nization is required to provide for reimbursement

15 under subsection (h)(2) (concerning urgently needed

16 services provided outside the organization).

17 ‘‘(3) PSO PROHIBITED FROM AFFORDING

18 ‘POINT OF SERVICE’ OPTION.—An eligible organiza19 tion that contracts as a provider sponsored organiza20 tion under this part may not pay for any service de21 scribed in subsection (d) that is furnished to a num22 ber enrolled under this part.

23 ‘‘(b) ADDITIONAL BENEFITS OR OTHER ADJUST24 MENT UNDER RISK PLANS.—
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1 ‘‘(1) REQUIREMENT WHERE ADJUSTED COMMU2 NITY RATES BELOW PAYMENT RATES.—Each con3 tract under section 1851F(e) shall provide for ad4 justment in accordance with this subsection, if—

5 ‘‘(A) the adjusted community rate for serv6 ices under parts A and B (as reduced for the

7 actual value of the coinsurance and deductibles

8 under those parts) for members enrolled under

9 this part with the organization and entitled to

10 benefits under part A and enrolled in part B,

11 or

12 ‘‘(B) the adjusted community rate for serv13 ices under part B (as reduced for the actuarial

14 value of the coinsurance and deductibles under

15 that part) for members enrolled under this part

16 B only is less than the average of the per capita

17 rates of payment to be made under section

18 1851F(e)(2) at the beginning of an annual con19 tract period for members enrolled under this

20 part with the organization and entitled to bene21 fits under part A and enrolled in part B, or en22 rolled in part B only, respectively.

23 ‘‘(2) SELECTION BY ORGANIZATION OF ADDI24 TIONAL BENEFITS.—An eligible organization to

25 which paragraph (1) applies shall either—
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1 ‘‘(A) provide to members described in

2 paragraph (1)(A) or (1)(B), as applicable, the

3 additional benefits described in paragraph (3)

4 which are selected by the eligible organization

5 and which the Secretary finds are at least equal

6 in value to the difference between the average

7 per capita payment and the adjusted commu8 nity rate (as so reduced); or

9 ‘‘(B) elect an alternative, in accordance

10 with paragraph (4).

11 ‘‘(3) ADDITIONAL BENEFITS.—The additional

12 benefits referred to in paragraph (2) are—

13 ‘‘(A) the reduction of the premium rate or

14 other charges made with respect to services fur15 nished by the organization to members enrolled

16 under this part; or

17 ‘‘(B) the provision of additional health

18 benefits; or both.

19 ‘‘(4) ALTERNATIVES TO ADDITIONAL BENE20 FITS.—An eligible organization to which paragraph

21 (1) applies—

22 ‘‘(A) may elect to receive a lesser payment

23 such that there is no longer a difference be24 tween the AAPCC and adjusted community rate

25 (as so reduced); and
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1 ‘‘(B) may (with the approval of the Sec2 retary) provide that a part of the value of such

3 additional benefits be withheld and reserved by

4 the Secretary as provided in paragraph (5).

5 ‘‘(5) BENEFIT STABILIZATION FUND.—An orga6 nization having a contract under section 1851F(e)

7 may (with the approval of the Secretary) provide

8 that a part of the value of additional benefits other9 wise required to be provided by reason of paragraph

10 (1) be withheld and reserved in the Federal Hospital

11 Insurance Trust Fund and in the Federal Supple12 mentary Medical Insurance Trust Fund (in such

13 proportions as the Secretary determines to be appro14 priate) by the Secretary for subsequent annual con15 tract periods, to the extent required to stabilize and

16 prevent undue fluctuations in the additional benefits

17 offered in those subsequent periods by the organiza18 tion in accordance with paragraph (3). Any of such

19 value of additional benefits which is not provided to

20 members of the organization in accordance with

21 paragraph (3) prior to the end of such period, shall

22 revert for the use of such trust funds.

23 ‘‘(6) DETERMINATION OF PER CAPITA RATES.—

24 If the Secretary finds that there is insufficient en25 rollment experience to determine an average of the
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1 per capita rates of payment to be made under sec2 tion 1851F(e)(2) at the beginning of a contract pe3 riod, the Secretary may determine such an average

4 based on the enrollment experience of other con5 tracts entered into under this part.

6 ‘‘(c) SUPPLEMENTAL BENEFITS.—

7 ‘‘(1) SUBJECT TO SECRETARY’S APPROVAL.—

8 An eligible organization may provide to individuals

9 enrolled under this part (without affording such in10 dividuals an option to decline such coverage), such

11 additional health care services as the Secretary may

12 approve. The Secretary shall approve any such addi13 tional services unless the Secretary determines that

14 including such additional services will substantially

15 discourage enrollment by covered individuals with

16 the organization.

17 ‘‘(2) AT ENROLLEES’ OPTION.—Such an orga18 nization may provide to such individuals such addi19 tional health care services as such individuals may

20 elect, at their option, to have covered.

21 ‘‘(3) DISCLOSURE OF PREMIUM.—Such an or22 ganization shall furnish to such individuals informa23 tion on the portion of its premium rate or other

24 charges applicable to such additional services.
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1 ‘‘(d) STANDARIZED PACKAGES OF ADDITIONAL BEN2 EFITS.—Any health care service described in subsection

3 (b) or (c) that is included in a standardized package of

4 benefits specified by the Secretary may be offered only as

5 part of that standardized package.

6 ‘‘(e) AVAILABILITY AND ACCESSIBILITY OF SERV7 ICES.—

8 ‘‘(1) SERVICES PROVIDED THROUGH THE ORGA9 NIZATION.—An eligible organization with a contract

10 under this part must make the services it has con11 tracted to provide to individuals enrolled with the or12 ganization under this part—

13 ‘‘(A) available and accessible to each such

14 individual, within the area served by the organi15 zation, with reasonable promptness and in a

16 manner with assures continuity, and

17 ‘‘(B) when medically necessary, available

18 and accessible twenty-four hours a day and

19 seven days a week.

20 ‘‘(2) SERVICES PROVIDED OUTSIDE THE ORGA21 NIZATION.—An eligible organization with a contract

22 under this part must provide for reimbursement with

23 respect to services described in paragraph (1) pro24 vided to such an individual other than through the

25 organization, if—
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1 ‘‘(A) the services were medically necessary

2 and immediately required because of an unfore3 seen illness, injury, or condition; and

4 ‘‘(B) it was not reasonable given the cir5 cumstances to obtain the services through the

6 organization.

7 ‘‘SEC. 1851D. LIABILITY OF BENEFICIARY AND THIRD PAR8 TIES.

9 ‘‘(a) LIMITS ON LIABILITY FOR REQUIRED BENE10 FITS.—

11 ‘‘(1) LIMITATION TO ACTUARIAL VALUE OF

12 FEE-FOR-SERVICE COVERAGE.—Total charges by an

13 eligible organization to individuals enrolled with the

14 organization under this part, with respect to services

15 described in section 1851C(a)—

16 ‘‘(A) shall include no amounts other than

17 the individual’s share of premiums, deductibles,

18 coinsurance, and copayments; and

19 ‘‘(B) shall not exceed the actuarial value of

20 the deductibles and coinsurance that would be

21 applicable under this title on the average to

22 such individuals if they were not members of an

23 eligible organization.

24 ‘‘(2) ALTERNATIVE DATA.—If the Secretary

25 finds that adequate data are not available for the de-
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1 termination required under paragraph (1) with re2 spect to an eligible organization, the Secretary may

3 substitute the actuarial value of the deductibles and

4 coinsurance applicable on the average to individuals

5 in the area, in the State, or in the United States,

6 eligible to enroll under this part with the organiza7 tion, or other appropriate data.

8 ‘‘(b) LIMITS ON PREMIUM FOR SUPPLEMENTAL BEN9 EFITS.—If an eligible organization provides to its mem10 bers enrolled under this part supplemental benefits in ac11 cordance with section 1851C, the sum of—

12 ‘‘(1) the portion of such organization’s premium

13 rate charged, with respect to such supplemental ben14 efits, to members enrolled under this part, and

15 ‘‘(2) the deductibles, coinsurance, and

16 copayments charged, with respect to such services to

17 such members shall not exceed the adjusted commu18 nity rate for such services.

19 ‘‘(c) LIMITATION ON AMOUNTS AN OUT-OF-PLAN

20 PHYSICIAN OR OTHER ENTITY MAY COLLECT.—

21 ‘‘(1) A physician or other entity (other than a

22 provider of services) that does not have a contract

23 establishing payment amounts for services furnished

24 to an individual enrolled under this part with an eli25 gible organization shall accept as payment in full for
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1 services that are furnished to such an individual the

2 amounts that the physician or other entity could col3 lect if the indvidiual were not so enrolled. Any pen4 alty or other provision of law that applies to such

5 payments with respect to an individual entitled to

6 benefits under this title (but not enrolled with an eli7 gible organization under this part) shall also apply

8 with respect to an individual so enrolled.

9 ‘‘(2) For similar requirements applicable to pro10 viders of services, see section 1866(a)(1)(O).

11 ‘‘(d) PLAN AS A SECONDARY PAYER.—Notwithstand12 ing any other provision of law, an eligible organization

13 may (in the case of the provision of services for which the

14 Medicare program is a secondary payer under section

15 1862(b)(2)) charge or authorize the provider of such serv16 ices to charge, in accordance with the charges allowed

17 under such law or policy—

18 ‘‘(1) the insurance carrier, employer, or other

19 entity which under such law, plan, or policy is to pay

20 for the provision of such services, or

21 ‘‘(2) such member to the extent that the mem22 ber has been paid under such law, plan, or policy for

23 such services.
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1 ‘‘SEC. 1851E. BENEFICIARY PROTECTIONS.

2 ‘‘(a) EXPLANATION OF RIGHTS AND RESTRIC3 TIONS.—Each eligible organization shall provide each en4 rollee, at the time of enrollment and not less frequently

5 than annually thereafter, an explanation of the enrollee’s

6 rights under this part and other important information,

7 including the following:

8 ‘‘(1) COVERAGE.—The enrollee’s rights to bene9 fits from the organization, and benefit limitations,

10 including—

11 ‘‘(A) out-of-area coverage provided by the

12 organization,

13 ‘‘(B) the organization’s coverage of emer14 gency services and urgently needed care, and

15 ‘‘(C) the restrictions on payments under

16 this title for services furnished other than by or

17 through the organization.

18 ‘‘(2) TERMINATION OF COVERAGE.—An expla19 nation that—

20 ‘‘(A) the organization may terminate or

21 refuse to renew the contract under this part;

22 and

23 ‘‘(B) termination of such contract could re24 sult in termination of enrollment of individuals

25 with the organization.
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1 ‘‘(3) PATIENT RIGHTS.—Safeguards on enroll2 ees’ rights, including—

3 ‘‘(A) appeal rights of enrollees,

4 ‘‘(B) the right to be informed about var5 ious treatment options, and

6 ‘‘(C) the right to decline treatment.

7 ‘‘(4) EMERGENCIES.—The appropriate use of

8 the 911 emergency telephone system in the case of

9 medical emergencies.

10 ‘‘(5) FRAUD AND ABUSE REPORTING.—The

11 processes for reporting potential fraud or abuse.

12 ‘‘(b) NOTIFICATION OF TERMINATION OPTION IN

13 MARKETING MATERIALS.—Each eligible organization

14 with a contract under this part shall include the informa15 tion required by subsection (a)(2) in any marketing mate16 rials described in section 1851B(b)(3) that are distributed

17 by an eligible organization to individuals eligible to enroll

18 under this part with the organization.

19 ‘‘(c) GRIEVANCE MECHANISM.—An eligible organiza20 tion with a contract under this part must provide mean21 ingful procedures for hearing and resolving grievances be22 tween the organization (including any entity or individual

23 through which the organization provides health care serv24 ices) and members enrolled with the organization under

25 this part.
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1 ‘‘(d) COVERAGE DETERMINATIONS AND APPEALS.—

2 ‘‘(1) DETERMINATION BY ORGANIZATION.—An

3 eligible organization with a contract under this part

4 shall have a procedure for determining whether an

5 individual enrolled with the organization under this

6 part is entitled to receive a health service described

7 in section 1851C(a) and the amount (if any) that

8 the individual is required to pay for that service,

9 which includes the following elements:

10 ‘‘(A) TIMELY REVIEW.—The organization

11 shall provide for review of a coverage issue

12 within 30 days of a request by such individual,

13 and for reconsideration, where requested, within

14 60 days after the initial review.

15 ‘‘(B) EXPEDITED REVIEW IN URGENT

16 CASES.—The organization shall have an expe17 dited process for review and reconsideration of

18 a coverage issue in cases in which delayed treat19 ment may place the health of such individual in

20 jeopardy, risk serious impairment of bodily

21 functions, or limit medically appropriate treat22 ment options.

23 ‘‘(2) REVIEW BY EXTERNAL CONTRACTOR.—An

24 individual dissatisfied with a determination under

25 paragraph (1) concerning such individual’s coverage
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1 under a contract under this part is entitled to a

2 hearing before an independent reviewer designated

3 by the Secretary.

4 ‘‘(3) APPEAL TO SECRETARY.—An individual

5 dissatisfied with a determination under paragraph

6 (2) concerning such individual’s coverage under a

7 contract under this part is entitled, if the amount in

8 controversy is $100 or more, to a hearing before the

9 Secretary to the same extent as is provided in sec10 tion 205(b), and in any such hearing the Secretary

11 shall make the eligible organization a party. If the

12 amount in controversy is $1,000 or more, the indi13 vidual or eligible organization shall, upon notifying

14 the other party, be entitled to judicial review of the

15 Secretary’s final decision as provided in section

16 205(g), and both the individual and the eligible or17 ganization shall be entitled to be parties to that judi18 cial review. In applying sections 205(b) and 205(g)

19 as provided in this subparagraph, and in applying

20 section 205(l) thereto, any reference therein to the

21 Commissioner of Social Security or the Social Secu22 rity Administration shall be considered a reference

23 to the Secretary or the Department of Health and

24 Human Services, respectively.

25 ‘‘(e) QUALITY ASSURANCE.—
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1 ‘‘(1) INTERNAL QUALITY ASSURANCE (IQA) PRO2 GRAM.—

3 ‘‘(A) IN GENERAL.—Subject to subpara4 graph (B), an eligible organization must have

5 arrangements, established in accordance with

6 regulations of the Secretary, for an ongoing

7 quality assurance program for health care serv8 ices provided to individuals enrolled with the or9 ganization under this part that—

10 ‘‘(i) focuses on health outcomes; and

11 ‘‘(ii) provides for review by physicians

12 and other health care professionals of the

13 process followed in the provision of such

14 health care services.

15 ‘‘(B) ACCEPTANCE OF ACCREDITATION IN

16 SATISFACTION OF IQA STANDARDS.—If (or to

17 the extent that) an eligible organization has

18 been accredited by an accrediting body whose

19 standards with respect to one or more of the

20 elements of an internal quality assurance pro21 gram are at least as stringent as such stand22 ards pursuant to subparagraph (A), the organi23 zation shall be deemed to meet the require24 ments of such subparagraph (A) with respect to

25 such program elements.
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1 ‘‘(2) EXTERNAL QUALITY REVIEW.—

2 ‘‘(A) REQUIREMENTS.—Each contract with

3 an eligible organization under this part shall

4 provide that the organization will maintain an

5 agreement with—

6 ‘‘(i) a utilization and quality control

7 peer review organization (which has a con8 tract with the Secretary under part B of

9 title XI for the area in which the eligible

10 organization is located);

11 ‘‘(ii) an entity selected by the Sec12 retary under section 1154(a)(4)(C); or

13 ‘‘(iii) an independent quality review

14 and improvement organization selected by

15 the organization and approved by the Sec16 retary,

17 under which the review organization will per18 form functions under section 1154(a)(4)(B) and

19 section 1154(a)(14) (other than those per20 formed under contracts described in section

21 1866(a)(1)(F)) with respect to services, fur22 nished by the eligible organization, for which

23 payment may be made under this title.

24 ‘‘(B) QUALITY REVIEW AS COVERED SERV25 ICE.—For purposes of payment under this title,
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1 the cost of such agreement to the eligible orga2 nization shall be considered a cost incurred by

3 a provider of services in providing covered serv4 ices under this title and shall be paid directly

5 by the Secretary to the review organization on

6 behalf of such eligible organization in accord7 ance with a schedule established by the Sec8 retary.

9 ‘‘(C) PAYMENT FROM TRUST FUNDS.—

10 Such payments—

11 ‘‘(i) shall be transferred in appro12 priate proportions from the Federal Hos13 pital Insurance Trust Fund and from the

14 Supplemental Medical Insurance Trust

15 Fund, without regard to amounts appro16 priated in advance in appropriation Acts,

17 in the same manner as transfers are made

18 for payment for services provided directly

19 to beneficiaries, and

20 ‘‘(ii) shall not be less in the aggregate

21 for such organizations for a fiscal year

22 that the amounts the Secretary determines

23 to be sufficient to cover the costs of such

24 organizations’ conducting activities de25 scribed in subparagraph (A) with respect
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1 to such eligible organizations under part B

2 of title XI.

3 ‘‘(f) BENEFICIARY ADVANCE DIRECTIVES CONCERN4 ING MEDICAL TREATMENT.—A contract under this part

5 shall provide that an eligible organization shall meet the

6 requirements of section 1866(f) (relating to maintaining

7 written policies and procedures respecting advance direc8 tives).

9 ‘‘(g) PRIVATE ENROLLMENT REQUIREMENTS.—

10 ‘‘(1) 50 PERCENT REQUIREMENT.—Subject to

11 section 11205 of the Balanced Budget Act of 1995

12 for Economic Growth and Fairness, each eligible or13 ganization with which the Secretary enters into a

14 contract under this part shall have, for the duration

15 of such contract, an enrolled membership (without

16 consideration of members enrolled in the program

17 under title XIX) at least one-half of which consists

18 of individuals who are not entitled to benefits under

19 this title.

20 ‘‘(2) EXCEPTIONS.—The Secretary may modify

21 or waive the requirement imposed by paragraph (1)

22 only in the following circumstances:

23 ‘‘(A) AREA WITH LARGE MEDICARE POPU24 LATION.—If more than 50 percent of the popu25 lation of the area served by the organization
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1 consists of individuals who are entitled to bene2 fits under this title.

3 ‘‘(B) INITIAL PERIOD FOR GOVERNMENTAL

4 CONTRACTOR.—In the case of an eligible orga5 nization that is owned and operated by a gov6 ernmental entity, only with respect to a period

7 of three years beginning on the date the organi8 zation first enters into a contract under this

9 part, and only if the organization has taken and

10 is making reasonable efforts to enroll individ11 uals who are not entitled to benefits under this

12 title,

13 ‘‘(C) UNDERSERVED RURAL AREA.—If the

14 organization serves an underserved rural area.

15 ‘‘(D) CONTRACTOR WITH GOOD PAST

16 RECORD.—If the organization has had contracts

17 under this part for a total of at least three

18 years, has complied with all applicable require19 ments during that period, maintains a level of

20 enrollment of individuals not entitled to benefits

21 under this title determined by the Secretary,

22 and complies with any additional monitoring re23 quirements established by the Secretary.

24 ‘‘(E) CONTRACTOR WITH GOOD RECORD IN

25 ANOTHER GEOGRAPHIC AREA.—If—
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1 ‘‘(i) the Secretary has not previously

2 entered into a contract with the organiza3 tion under this part in the same geo4 graphic area (or has entered into contracts

5 for a total of three years or less),

6 ‘‘(ii) the organization (or a parent

7 company that controls the organization)

8 has entered into (or subsidiaries of the or9 ganization or parent company have entered

10 into) contracts under this part for at least

11 three different geographic areas—

12 ‘‘(I) for which no waiver has been

13 granted under this paragraph and

14 during the course of which there has

15 been compliance with all applicable re16 quirements; or

17 ‘‘(II) for which a waiver has been

18 granted under subparagraph (D);

19 ‘‘(iii) the organization (or parent com20 pany) demonstrates to the Secretary a

21 long-term business and financial commit22 ment to the geographic area served by the

23 organization, and the Secretary determines

24 that a waiver is necessary to promote com25 petition in that area; and
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1 ‘‘(iv) the organization complies with

2 all applicable requirements and any addi3 tional monitoring requirements established

4 by the Secretary.

5 ‘‘(3) SUBSTITUTION OF QUALITY MEASURE6 MENT SYSTEM.—For conditions under which the re7 quirements of this subsection will be replaced by re8 quirements of a quality measurement system, see

9 section 11205 of the Balanced Budget Act of 1995

10 for Economic Growth and Fairness.

11 ‘‘(h) ACCESS TO SPECIALTY CARE AND CASE MAN12 AGEMENT.—Each eligible organization shall ensure that

13 enrollees with chronic illnesses or disabilities, and other

14 enrollees as appropriate, shall have access to medically ap15 propriate specialty care and medically appropriate case

16 management.

17 ‘‘(i) RESTRICTIONS ON PHYSICIAN INCENTIVE

18 PLANS.—

19 ‘‘(1) CRITERIA.—Each contract with an eligible

20 organization under this part shall provide that the

21 organization may not operate any physician incentive

22 plan (as defined in paragraph (2)) unless the follow23 ing requirements are met:

24 ‘‘(A) NO INDUCEMENT TO LIMIT CARE.—

25 No specific payment is made directly or indi-
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1 rectly under the plan to a physician or physi2 cian group as an inducement to reduce or limit

3 medically necessary services provided with re4 spect to a specific individual enrolled with the

5 organization.

6 ‘‘(B) REQUIREMENTS WHERE PHYSICIAN

7 AT FINANCIAL RISK.—If the plan places a phy8 sician or physician group at substantial finan9 cial risk (as determined by the Secretary) for

10 services not provided by the physician or physi11 cian group, the organization—

12 ‘‘(i) provides stop-loss protection for

13 the physician or group that is adequate

14 and appropriate, based on standards devel15 oped by the Secretary that take into ac16 count the number of physicians placed at

17 such substantial financial risk in the group

18 or under the plan and the number of indi19 viduals enrolled with the organization who

20 receive services from the physician or the

21 physician group, and

22 ‘‘(ii) conducts periodic surveys of both

23 individuals enrolled and individuals pre24 viously enrolled with the organization to

25 determine the degree of access of such in-
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1 dividuals to services provided by the orga2 nization and satisfaction with the quality

3 of such services.

4 ‘‘(C) DISCLOSURE TO SECRETARY.—The

5 organization provides the Secretary with de6 scriptive information regarding the plan, suffi7 cient to permit the Secretary to determine

8 whether the plan is in compliance with the re9 quirements of this paragraph.

10 ‘‘(2) DEFINITION OF ‘PHYSICIAN INCENTIVE

11 PLAN’.—In this subsection, the term ‘physician in12 centive plan’ means any compensation arrangement

13 between an eligible organization and a physician or

14 physician group that may directly or indirectly have

15 the effect of reducing or limiting services provided

16 with respect to individuals enrolled with the organi17 zation.’’.

18 ‘‘SEC. 1851F. PAYMENTS TO MEDICAREPLUS ORGANIZA19 TIONS.

20 ‘‘(a) PAYMENTS TO ORGANIZATIONS.—

21 ‘‘(1) MONTHLY PAYMENT.—

22 ‘‘(A) IN GENERAL.—Under a contract

23 under paragraph (1) the Secretary shall make

24 monthly payments under this section in advance

25 to each eligible organization, with respect to
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1 coverage of an individual under this part in a

2 payment area for a month, in an amount equal

to 1 3 ⁄12 of the annual capitation rate (as cal4 culated under subsection (c)) with respect to

5 that individual for that area, adjusted for such

6 risk factors as age, disability status, gender, in7 stitutional status, and such other factors as the

8 Secretary determines to be appropriate, so as to

9 ensure actuarial equivalence. The Secretary

10 may add to, modify, or substitute for such fac11 tors, if such changes will improve the deter12 mination of actuarial equivalence.

13 ‘‘(B) SPECIAL RULE FOR END-STAGE

14 RENAL DISEASE.—The Secretary shall establish

15 a separate rate of payment to an eligible orga16 nization with respect to any individual deter17 mined to have end-stage renal disease and en18 rolled in a plan of the organization. Such rate

19 of payment shall be actuarially equivalent to

20 rates paid to other enrollees in the payment

21 area (or such other area as specified by the

22 Secretary).

23 ‘‘(2) ADJUSTMENT TO REFLECT NUMBER OF

24 ENROLLEES.—
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1 ‘‘(A) IN GENERAL.—The amount of pay2 ment under this subsection may be retroactively

3 adjusted to take into account any differences

4 between the actual number of individuals en5 rolled with an organization under this part and

6 the number of such individuals estimated to be

7 so enrolled in determining the amount of the

8 advance payment.

9 ‘‘(B) SPECIAL RULE FOR CERTAIN EN10 ROLLEES.—

11 ‘‘(i) IN GENERAL.—Subject to clause

12 (ii), the Secretary may make retroactive

13 adjustments under subparagraph (A) to

14 take into account individuals enrolled dur15 ing the period beginning on the date on

16 which the individual enrolls with an eligible

17 organization under a plan operated, spon18 sored, or contributed to by the individual’s

19 employer or former employer (or the em20 ployer or former employer of the individ21 ual’s spouse) and ending on the date on

22 which the individual is enrolled in the or23 ganization under this part, except that for

24 purposes of making such retroactive ad-
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1 justments under this subparagraph, such

2 period may not exceed 90 days.

3 ‘‘(ii) EXCEPTION.—No adjustment

4 may be made under clause (i) with respect

5 to any individual who does not certify that

6 the organization provided the individual

7 with the disclosure statement described in

8 section 1851(E)(a) at the time the individ9 ual enrolled with the organization.

10 ‘‘(b) ANNUAL ANNOUNCEMENT OF PAYMENT

11 RATES.—

12 ‘‘(1) ANNUAL ANNOUNCEMENT.—The Secretary

13 shall annually determine, and shall announce (in a

14 manner intended to provide notice to interested par15 ties) not later than August 1 before the calendar

16 year concerned—

17 ‘‘(A) the annual capitation rate for each

18 payment area for the year, and

19 ‘‘(B) the risk and other factors to be used

20 in adjusting such rates under subsection

21 (a)(1)(A) for payments for months in that year.

22 ‘‘(2) ADVANCE NOTICE OF METHODOLOGICAL

23 CHANGES.—At least 45 days before making the an24 nouncement under paragraph (2) for a year, the

25 Secretary shall provide for notice to eligible organi-
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1 zations of proposed changes to be made in the meth2 odology from the methodology and assumptions used

3 in the previous announcement and shall provide such

4 organizations an opportunity to comment on such

5 proposed changes.

6 ‘‘(3) EXPLANATION OF ASSUMPTIONS.—In each

7 announcement made under paragraph (1) for a year,

8 the Secretary shall include an explanation of the as9 sumptions and changes in methodology used in the

10 announcement in sufficient detail so that eligible or11 ganizations can compute monthly adjusted capitation

12 rates for individuals in each payment area which is

13 in whole or in part within the service area of such

14 an organization.

15 ‘‘(c) CALCULATION OF ANNUAL CAPITATION

16 RATES.—

17 ‘‘(1) IN GENERAL.—For purposes of this part,

18 the annual capitation rate for a payment area for a

19 contract year consisting of a calendar year, is equal

20 to the greatest of the following:

21 ‘‘(A) BLENDED CAPITATION RATE.—The

22 sum of—

23 ‘‘(i) area-specific percentage for the

24 year (as specified under paragraph (2) for

25 the year) of the annual area-specific
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1 MedicarePlus capitation rate for the year

2 for the MedicarePlus payment area, as de3 termined under paragraph (3), and

4 ‘‘(ii) national percentage (as specified

5 under paragraph (2) for the year) of the

6 input-price-adjusted annual national

7 MedicarePlus capitation, rate for the year,

8 as determined under paragraph (4),

9 multiplied by a budget neutrality adjustment

10 factor determined under paragraph (5).

11 ‘‘(B) MINIMUM AMOUNT.—

12 ‘‘(i) For 1996, $310.

13 ‘‘(ii) For 1997, $325.

14 ‘‘(iii) For a succeeding year, is the

15 minimum amount specified in this sub16 paragraph for the preceding year increased

17 by national per capita growth percentage,

18 specified under paragraph (6) for that suc19 ceeding year.

20 ‘‘(C) MINIMUM INCREASE OF 3 PERCENT

21 OVER PREVIOUS YEAR’S RATE.—

22 ‘‘(i) For 1996, 102 percent of the an23 nual per capita rate of payment for 1995

24 determined under section 1876(a)(1)(C)

25 for the payment area.
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1 ‘‘(ii) For a subsequent year, 102 per2 cent of the annual capitation rate under

3 this subsection for the area for the pre4 vious year.

5 ‘‘(2) AREA-SPECIFIC AND NATIONAL PERCENT6 AGES.—For purposes of paragraph (1)(A)—

7 ‘‘(A) for 1996 and 1997, the ‘area-specific

8 percentage’ is 90 percent and the ‘national per9 centage’ is 10 percent,

10 ‘‘(B) for 1998, the ‘area-specific percent11 age’ is 85 percent and the ‘national percentage’

12 is 15 percent,

13 ‘‘(C) for 1999, the ‘area-specific percent14 age’ is 80 percent and the ‘national percentage’

15 is 20 percent,

16 ‘‘(D) for 2000, the ‘area-specific percent17 age’ is 75 percent and the ‘national percentage’

18 is 25 percent, and

19 ‘‘(E) for a year after 2000, the ‘area-spe20 cific percentage’ is 70 percent and the ‘national

21 percentage’ is 30 percent.

22 ‘‘(3) ANNUAL AREA-SPECIFIC MEDICARE

23 CHOICE CAPITATION RATE.—

24 ‘‘(A) IN GENERAL.—For purposes of para25 graph (1)(A), subject to subparagraph (B), the
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1 annual area-specific Medicare Choice capitation

2 rate for a Medicare Choice payment area—

3 ‘‘(i) for 1996 is the annual per capita

4 rate of payment for 1995 determined

5 under section 1876(a)(1)(C) for the pay6 ment area, increased by the national aver7 age per capita growth percentage for 1996

8 (as defined in paragraph (6)); or

9 ‘‘(ii) for a subsequent year is the an10 nual area-specific capitation rate for the

11 previous year determined under this para12 graph for the payment area, increased by

13 the national average per capita growth per14 centage for such subsequent year.

15 ‘‘(B) REMOVAL OF MEDICAL EDUCATION

16 AND DISPROPORTIONATE SHARE HOSPITAL PAY17 MENTS FROM CALCULATION OF ADJUSTED AV18 ERAGE PER CAPITA COST.—In determining the

19 annual area-specific Medicare Choice capitation

20 rate for 1997 under subparagraph (A)(i), the

21 average annual per capita rate of payment for

22 1996 determined under (A)(i) shall be deter23 mined as though the Secretary had excluded

24 from such rate any amounts which the Sec-
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1 retary estimated would have been payable under

2 this title during the year for—

3 ‘‘(i) payment adjustments under sec4 tion 1886(d)(5)(F) for hospitals serving a

5 disproportionate share of low-income pa6 tients; and

7 ‘‘(ii) the indirect costs of medical edu8 cation under section 1886(d)(5)(B) or for

9 direct graduate medical education costs

10 under section 1886(h).

11 ‘‘(4) INPUT-PRICE-ADJUSTED ANNUAL NA12 TIONAL CAPITATION RATE.—

13 ‘‘(A) IN GENERAL.—For purposes of para14 graph (1)(A), the input-price-adjusted annual

15 national capitation rate for a payment area for

16 a year is equal to the sum, for all the types of

17 medicare services (as classified by the Sec18 retary), of the plan (for each such type) of—

19 ‘‘(i) the national standardized annual

20 capitation rate (determined under subpara21 graph (B)) for the year,

22 ‘‘(ii) the proportion of such rate for

23 the year which is attributable to such type

24 of services, and
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1 ‘‘(iii) an index that reflects (for that

2 year and that type of services) the relative

3 input price of such services in the area

4 compared to the national average input

5 price of such services.

6 In applying clause (iii), the Secretary shall, sub7 ject to subparagraph (C), apply those indices

8 under this title that are used in applying (or

9 updating) national payment rates for specific

10 areas and localities.

11 ‘‘(B) NATIONAL STANDARDIZED ANNUAL

12 CAPITATION RATE.—In subparagraph (A)(i),

13 the ‘national standardized annual capitation

14 rate’ for a year is equal to—

15 ‘‘(i) the sum (for all payment areas)

16 of the product of (I) the annual area-spe17 cific capitation rate for that year for the

18 area under paragraph (3), and (II) the av19 erage number of medicare beneficiaries re20 siding in that area in the year; divided by

21 ‘‘(ii) the total average number of med22 icare beneficiaries residing in all the pay23 ment areas for that year.

24 ‘‘(C) SPECIAL RULES FOR 1996.—In apply25 ing this paragraph for 1996—
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1 ‘‘(i) medicare services shall be divided

2 into 2 types of services: part A services

3 and part B services;

4 ‘‘(ii) the proportions described in sub5 paragraph (A)(ii) for such types of services

6 shall be—

7 ‘‘(I) for part A services, the ratio

8 (expressed as a percentage) of the av9 erage annual per capita rate of pay10 ment for the area for part A for 1995

11 to the total average annual per capita

12 rate of payment for the area for parts

13 A and B for 1995, and

14 ‘‘(II) for part B services, 100

15 percent minus the ratio described in

16 subclause (I);

17 ‘‘(iii) for the part A services, 70 per18 cent of payments attributable to such serv19 ices shall be adjusted by the index used

20 under section 1886(d)(3)(E) to adjust pay21 ment rates for relative hospital wage levels

22 for hospitals located in the payment area

23 involved;

24 ‘‘(iv) for part B services—
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1 ‘‘(I) 66 percent of payments at2 tributable to such services shall be ad3 justed by the index of the geographic

4 area factors under section 1848(e)

5 used to adjust payment rates for phy6 sicians’ services furnished in the pay7 ment area, and

8 ‘‘(II) of the remaining 34 percent

9 of the amount of such payments, 70

10 percent shall be adjusted by the index

11 described in clause (iii);

12 ‘‘(v) the index values shall be com13 puted based only on the beneficiary popu14 lation who are 65 years of age or older

15 who are not determined to have end stage

16 renal disease.

17 The Secretary may continue to apply the rules

18 described in this subparagraph (or similar

19 rules) for 1997.

20 ‘‘(5) BUDGET NEUTRALITY ADJUSTMENT FAC21 TOR.—For each year, the Secretary shall compute a

22 budget neutrality adjustment factor so that the ag23 gregate of the payments under this part shall not ex24 ceed the aggregate payments that would have been

25 made under this part if the area-specific percentage
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1 for the year had been 100 percent and the national

2 percentage had been 0 percent.

3 ‘‘(6) NATIONAL AVERAGE PER CAPITA GROWTH

4 PERCENTAGE DEFINED.—In this part, the ‘‘national

5 average per capita growth percentage shall be the

6 percentage determined by the Secretary on an an7 nual basis (not later than August 1st before the cal8 endar year concerned) to reflect the Secretary’s esti9 mate of the projected per capita rate of growth in

10 private health insurance expenditures adjusted to re11 flect differences between the average benefit package

12 under private insurance and the Medicare benefit

13 package and differences in utilization and intensity

14 of services between the general insured population

15 and Medicare beneficiaries. In determining this per16 centage, the Secretary shall consider the traditional

17 fee-for-service growth rates to ensure there is not a

18 wide disparity between fee for service growth rates

19 and the national average per capita growth rate. Un20 less the Secretary otherwise determines, the national

21 average per capita growth percentage shall be 7 per22 cent.

23 ‘‘(d) PAYMENT AREA DEFINED.—

24 ‘‘(1) IN GENERAL.—In this part, except as pro25 vided in paragraph (3), the term ‘payment area’
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1 means a county, or equivalent area specified by the

2 Secretary.

3 ‘‘(2) RULE FOR ESRD BENEFICIARIES.—In the

4 case of individuals who are determined to have end

5 stage renal disease, the payment area shall be each

6 State.

7 ‘‘SEC. 1851G. SANCTIONS.

8 ‘‘(a) VIOLATIONS SUBJECT TO CIVIL MONEY PEN9 ALTIES.—In addition to any other remedies authorized by

10 law, the Secretary may impose a civil money penalty in

11 accordance with subsection (c) on an eligible organization

12 with a contract under this part that has committed any

13 of the following violations:

14 ‘‘(1) FAILURE TO PROVIDE MEDICALLY NEC15 ESSARY CARE.—The organization has failed substan16 tially to provide medically necessary items and serv17 ices that are required (under law or under the con18 tract) to be provided to an individual covered under

19 the contract, if the failure has adversely affected (or

20 has substantial likelihood of adversely affecting) the

21 individual.

22 ‘‘(2) EXCESSIVE PREMIUMS.—The organization

23 has imposed premiums on individuals enrolled under

24 this part in excess of the premiums permitted.
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1 ‘‘(3) DISCONTINUATION OF COVERAGE.—The

2 organization has expelled or refused to re-enroll an

3 individual in violation of the provisions of this part.

4 ‘‘(4) DISCOURAGING ENROLLMENT.—The orga5 nization has engaged in any practice that would rea6 sonably be expected to have the effect of denying or

7 discouraging enrollment (except as permitted by this

8 part) by eligible individuals with the organization

9 whose medical condition or history indicates a need

10 for substantial future medical services.

11 ‘‘(5) FALSE INFORMATION.—The organization

12 has misrepresented or falsified information fur13 nished—

14 ‘‘(A) to the Secretary under this part, or

15 ‘‘(B) to an individual or to any other entity

16 under this part.

17 ‘‘(6) FAILURE TO COOPERATE WITH EXTERNAL

18 QUALITY REVIEW.—The organization fails to cooper19 ate in the performance of the review required under

20 section 1851E(e)(2).

21 ‘‘(7) PHYSICIAN INCENTIVE PLAN VIOLA22 TIONS.—The organization fails to comply with the

23 requirements of section 1851E(i).

24 ‘‘(8) RELATIONSHIP WITH EXCLUDED INDIVID25 UAL OR ENTITY.—The organization.—
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1 ‘‘(A) employs or contracts with any indi2 vidual or entity that is excluded from participa3 tion under this title under section 1128 or

4 1128A for the provision of health care, utiliza5 tion review, medical social work, or administra6 tive services; or

7 ‘‘(B) employs or contracts with any entity

8 for the provision (directly or indirectly) through

9 such an excluded individual or entity of such

10 services.

11 ‘‘(b) VIOLATIONS SUBJECT TO INTERMEDIATE SANC12 TIONS.—In addition to any other remedies authorized by

13 law, the Secretary may impose an intermediate sanction

14 in accordance with subsection (d) on an eligible organiza15 tion with a contract under this part that has committed

16 any of the following violations:

17 ‘‘(1) VIOLATION SUBJECT TO CIVIL MONEY

18 PENALTY.—Any violation specified in subsection (a).

19 ‘‘(2) GROUNDS FOR TERMINATION OF CON20 TRACT.—Any violation that would be grounds for

21 termination of the contract with the organization

22 pursuant to section 1851F(b)(2).

23 ‘‘(3) FAILURE TO MAKE PROMPT PAYMENT.—

24 Failure to make prompt payment as required by sec25 tion 1851F(d).
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1 ‘‘(4) DELAYED COVERAGE DETERMINATIONS.—

2 Failure to meet timeliness standards for coverage

3 determinations under section 1851E(d)(1).

4 ‘‘(5) INSUFFICIENT PRIVATE ENROLLMENT.—

5 Failure to meet the minimum requirements of sec6 tion 1851E(g).

7 ‘‘(c) CIVIL MONEY PENALTIES.—

8 ‘‘(1) AMOUNT OF PENALTY.—The Secretary

9 may impose, on an eligible organization determined

10 to have committed a violation specified in subsection

11 (a), civil money penalties not to exceed the sum of

12 the following amounts, as applicable:

13 ‘‘(A) for each such determination, not

14 more than—

15 ‘‘(i) $100,000 in the case of a deter16 mination under subsection (a)(4) or

17 (a)(5)(i); or

18 ‘‘(ii) $25,000, in the case of any other

19 such determination;

20 ‘‘(B) with respect to a determination under

21 subsection (a)(2), double the excess amount

22 charged (and the excess amount charged shall

23 be deducted from the penalty and returned to

24 the individual concerned); and
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1 ‘‘(C) with respect to a determination under

2 subsection (a)(4), $15,000 for each individual

3 not enrolled as a result of the practice involved.

4 ‘‘(2) ADMINISTRATIVE PROCEDURE.—The pro5 visions of section 1128A (other than subsections (a)

6 and (b) shall apply to a civil money penalty under

7 this section in the same manner as they apply to a

8 civil money penalty or proceeding under section

9 1128A(a).

10 ‘‘(d) INTERMEDIATE SANCTIONS.—The Secretary

11 may impose, on an eligible organization determined to

12 have committed a violation specified in subsection (a) or

13 (b), either or both of the following sanctions.

14 ‘‘(1) SUSPENSION OF ENROLLMENT.—Suspen15 sion of enrollment of individuals with the organiza16 tion under this part after the date the Secretary no17 tifies the organization of a determination under sub18 section (a) or (b) and until the Secretary is satisfied

19 that the basis for such determination has been cor20 rected and is not likely to recur.

21 ‘‘(2) SUSPENSION OF PAYMENT.—Suspension of

22 payment to the organization under this part for indi23 viduals enrolled after the date the Secretary notifies

24 the organization of a determination under subsection

25 (a) or (b) and until the Secretary is satisfied that
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1 the basis for such determination has been corrected

2 and is not likely to recur.

3 ‘‘SEC. 1851H. DEFINITIONS.

4 ‘‘(a) ADJUSTED COMMUNITY RATE.—

5 ‘‘(1) IN GENERAL.—For purposes of this part,

6 the term ‘adjusted community rate’ for a service or

7 services means, at the election of an eligible organi8 zation, either—

9 ‘‘(A) the rate of payment for that service

10 or services which the Secretary annually deter11 mines would apply to a member enrolled under

12 this part with an eligible organization if the

13 rate of payment were determined under a com14 munity rating system’ (as defined in section

15 1302(8) of the Public Health Service Act, other

16 than subparagraph (C)), or

17 ‘‘(B) such portion of the weighted aggre18 gate premium, which the Secretary annually es19 timates would apply to a member enrolled

20 under this part with the eligible organization,

21 as the Secretary annually estimates is attrib22 utable to that service or services, adjusted in

23 accordance with paragraph (2).

24 ‘‘(2) ADJUSTMENT OF DIFFERENCES IN UTILI25 ZATION.—The rate determined in accordance with
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1 subparagraphs (A) and (B) of paragraph (1) shall

2 be adjusted for—

3 ‘‘(A) the differences between the utilization

4 characteristics of the members enrolled with the

5 eligible organization under this part and utiliza6 tion characteristics of the other members of the

7 organization; or

8 ‘‘(B) (if the Secretary finds that adequate

9 data are not available to calculate the adjust10 ment pursuant to subparagraph (A)) the dif11 ferences between—

12 ‘‘(i) the utilization characteristics of

13 members in other eligible organizations, or

14 individuals in the area, in the State, or in

15 the United States, eligible to enroll under

16 this part with an eligible organization, and

17 ‘‘(ii) the utilization characteristics of

18 the rest of the population in the area, in

19 the State, or in the United States, respec20 tively.

21 ‘‘(b) ADJUSTED AVERAGE PER CAPITA COST

22 (AAPCC).—For purposes of this part, the term ‘AAPCC’

23 (adjusted average per capita cost) means the average per

24 capita amount that the Secretary estimates in advance (on

25 the basis of actual experience, or retrospective actuarial
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1 equivalent based upon an adequate sample and other in2 formation and data, in a geographic area served by an

3 eligible organization or in a similar area, with appropriate

4 adjustments to assure actuarial equivalence) would be pay5 able in any contract year for services covered under parts

6 A and B, or part B only, and types of expenses otherwise

7 reimbursable under parts A and B, or part B only (includ8 ing administrative costs incurred by organizations de9 scribed in sections 1816 and 1842), if the services were

10 to be furnished by other than an eligible organization or,

11 in the case of services covered only under section

12 1861(s)(2)(H), if the services were to be furnished by a

13 physician or as an incident to a physician’s service.’’.

14 (b) REPEAL OF SUPERSEDED PROVISION.—Section

15 1876 (42 U.S.C. 1395mm) is repealed, except to the ex16 tent provided in subsection (e).

17 (c) CONFORMING AMENDMENTS.—

18 (1) Section 1154(a)(4)(B) (42 U.S.C. 1320c–

19 3(a)(4)(B)) is amended—

20 (A) in the first sentence, by striking ‘‘risk21 sharing contract under section 1876’’ and in22 serting ‘‘contract under part C of title XVIII’’,

23 and

24 (B) in the second sentence, by striking ‘‘a

25 health maintenance organization or competitive
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1 medical plan under section 1876’’ and inserting

2 ‘‘an eligible organization under part C of title

3 XVIII’’.

4 (2) The second sentence of section

5 1154(a)(4)(C) (42 U.S.C. 1320c–3(A)(4)(C)) is

6 amended by striking ‘‘section 1876’’ and inserting

7 ‘‘part C of title XVIII’’.

8 (3) Section 1866(a)(1)(O) (42 U.S.C.

9 1395cc(a)(1)(O)) is amended by striking ‘‘risk-shar10 ing contract under section 1876’’ and inserting

11 ‘‘contract under part C’’.

12 (4) The matter in the first sentence of section

13 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) preceding sub14 paragraph (A) is amended by striking ‘‘1876(c)(8)’’

15 and inserting ‘‘1851E(f)’’.

16 (5) Section 1866(f)(2)(E) (42 U.S.C.

17 1395cc(f)(2)(E)) is amended by striking ‘‘1876(b)’’

18 and inserting ‘‘1851A(a)’’.

19 (6) Section 1882(f)(1) is amended—

20 (A) by striking ‘‘1876(b) and inserting

21 ‘‘1851A’’; and

22 (B) by striking ‘‘section 1876’’ and insert23 ing ‘‘part C’’.

24 (d) EFFECTIVE DATE.—Except to the extent other25 wise provided, the amendments made by the preceding
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1 subsections apply to items and services furnished after

2 1996.

3 (e) TRANSITION PROVISIONS FOR COST CON4 TRACTS.—

5 (1) REPEAL OF AUTHORITY FOR COST CON6 TRACTS DELAYED TO 2001.—The amendments made

7 by the preceding subsections (other than the amend8 ments specified in paragraph (2)) do not apply to

9 items and services furnished before 2001 under a

10 contract under section 1876(h) of the Social Secu11 rity Act (42 U.S.C. 1395mm(h)).

12 (2) PROVISIONS WHOSE EFFECT IS NOT DE13 LAYED.—The effective dates of the following provi14 sions of part C of the Social Security Act (as en15 acted by subsection (a)(2) of this section) shall not

16 be delayed by reason of paragraph (1):

17 (A) DEFINITION OF QUALIFIED HMO.—

18 Section 1851A(b).

19 (B) ENROLLMENT AND

20 DISENROLLMENT.—Section 1851B.

21 (C) BENEFICIARY PROTECTIONS.—Sub22 sections (a) (explanation of patients’ rights and

23 restrictions), (c) (grievance mechanism), (d)

24 (coverage determinations and appeals), and (g)
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1 (private enrollment requirements) of section

2 1851E.

3 (3) OPTION RESTRICTED TO GRANDFATHERED

4 ORGANIZATIONS.—With respect to services provided

5 after 1995 but before 2001, the Secretary may enter

6 into contracts under subsection (h) of section 1876

7 of the Social Security Act (42 U.S.C. 1395mm) only

8 with entities with which the Secretary has entered

9 into contracts under that subsection for all or part

10 of 1995, or to which payments have been made dur11 ing 1995 under section 1833(a)(1)(A) of that Act

12 (42 U.S.C. 13951(a)(1)(A)).

13 (f) REGULATIONS.—

14 (1) CONTINUITY OF CURRENT REGULATIONS.—

15 Regulations in effect (or available in proposed form)

16 on December 31, 1996, that apply to section 1876

17 of the Social Security Act (42 U.S.C. 1395mm) shall

18 apply to part C of title XVIII of that Act (as en19 acted by subsection (a)(2) of this section), except to

20 the extent that the regulations are inconsistent with

21 the provisions of that part.

22 (2) INTERIM FINAL REGULATIONS.—The Sec23 retary may issue regulations before 1998 for part C

24 of title XVIII of the Social Security Act (as enacted
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1 by subsection (a)(2) of this section) on an interim

2 final basis.

3 (g) CONSIDERATION OF EXPERIENCE UNDER SEC4 TION 1876 IN SATISFACTION OF REQUIREMENTS OF PART

5 C.—Any requirement in part C of title XVIII of the Social

6 Security Act (as enacted by subsection (a)(2) of this sec7 tion) that (in a particular context) relates to matters that

8 occurred before 1997 shall be satisfied if the correspond9 ing requirement was satisfied under section 1876 (42

10 U.S.C. 1395mm) of that Act.

11 (h) ENROLLMENT TRANSITION RULE.—An individ12 ual who is enrolled on December 31, 1996, with an eligible

13 organization under section 1876 of the Social Security Act

14 (42 U.S.C. 1395mm) shall be considered to be enrolled

15 with that organization on January 1, 1997, under part

16 C of title XVIII of that Act (as added by subsection (a)(2)

17 of this section) if that organization has a contract under

18 that part for providing services on January 1, 1997 (un19 less the individual has disenrolled effective on that date).

20 (i) IMMEDIATE EFFECTIVE DATE FOR CERTAIN RE21 QUIREMENTS FOR DEMONSTRATIONS.—Section

22 1851B(b)(2) of the Social Security Act (as enacted by

23 subsection (a)(2) of this section) (requiring contribution

24 to certain costs related to the enrollment process compara-
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1 tive materials) applies to demonstrations occurring after

2 the date of enactment of this Act.

3 SEC. 11203. DEVELOPMENT OF STANDARDS FOR FISCAL

4 SOUNDNESS AND REQUIREMENTS AGAINST

5 RISK OF INSOLVENCY.

6 The Secretary of Health and Human Services, in con7 sultation with the National Association of Insurance Com8 missioners, organizations that provide or pay for health

9 care services, and consumer organizations, shall develop

10 (and publish as an interim final rule by July 1, 1996)

11 standards for fiscal soundness and requirements concern12 ing adequate provision against the risk of insolvency for

13 provider sponsored organizations that have entered into

14 contracts under part C of title XVIII of the Social Secu15 rity Act (as enacted by section 11202(a)(2) of this Act).

16 The Secretary may also publish, as an interim final rule

17 by that date, any additional requirements related to such

18 organizations.

19 SEC. 11204. APPLICABILITY OF MEDICARE RATES TO EN20 ROLLEES WHO USE AN OUT-OF-PLAN PRO21 VIDER OF SERVICES.

22 (a) Section 1866(a)(1)(O) (42 U.S.C.

23 1395cc(a)(1)(O)) is amended—

24 (1) by striking ‘‘in the case of hospitals and

25 skilled nursing facilities,’’;
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1 (2) by striking ‘‘inpatient hospital and extended

2 care services that are covered under this title and’’

3 and inserting ‘‘services that’’; and

4 (3) by striking ‘‘(in the case of hospitals) or

5 limits (in the case of skilled nursing facilities)’’.

6 (b) The amendment made by subsection (a) applies

7 to services furnished after 1996.

8 SEC. 11205. SUBSTITUTION OF QUALITY MEASUREMENT

9 SYSTEM FOR PRIVATE ENROLLMENT RE10 QUIREMENT.

11 (a) PROMULGATION OF REGULATIONS.—The Sec12 retary of Health and Human Services, after consulting

13 with representatives from managed health care plans (in14 cluding representatives of provider service organizations),

15 consumer organizations, and other major purchasers of

16 managed care services—

17 (1) shall publish proposed regulations by July

18 1, 1997, requiring the collection, analysis, and re19 porting of data that will permit measurement of out20 comes and other indices of the quality of managed

21 care plans;

22 (2) shall publish final regulations after complet23 ing review of comments on the proposed regulations

24 published pursuant to paragraph (1).
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1 (b) REVISION OF BENEFICIARY PROTECTION RE2 QUIREMENT.—As of the effective date of final regulations

3 published pursuant to subsection (a), section 1851E(g)

4 (as enacted by section 11202(a)(2) of this Act) is amended

5 to read as follows:

6 ‘‘(g) QUALITY MEASUREMENT SYSTEM.—Each eligi7 ble organization with which the Secretary enters into a

8 contract under this part shall meet the requirements of

9 the quality measurement system established by the Sec10 retary in regulations.’’.

11 SEC. 11206. HMO COMPETITIVE PRICING AND RELATED

12 DEMONSTRATIONS.

13 (a) AMENDMENT EFFECTIVE ON DATE OF ENACT14 MENT.—Section 402(b) of the Social Security Amend15 ments of 1967 (42 U.S.C. 1395b–1(b)) is amended by in16 serting after the first sentence the following: ‘‘The Sec17 retary may also waive, in the case of such an experiment

18 or demonstration project, compliance with the require19 ments of sections 1876 and 1882 of that Act.

20 ‘‘(2) REPORT TO CONGRESS ON COMPETITIVE

21 PRICING DEMONSTRATION.—Not later then January

22 1, 2002, the Secretary shall report to Congress on

23 specific recommendations for a new payment meth24 odology for eligible organizations with contracts
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1 under Part C to be based on the results of the com2 petitive pricing demonstrations.’’.

3 (b) AMENDMENT EFFECTIVE FOR 1997–2000.—

4 (1) The second sentence of section (402)(b) of

5 the Social Security Amendments of 1967 (42 U.S.C.

6 1395B–1(b)) (as added by subsection (a) of this sec7 tion) is amended by inserting ‘‘and part C of title

8 XVIII’’ after ‘‘1882’’.

9 (2) The amendment made by paragraph (1) ap10 plies to activities occurring after 1996.

11 (c) AMENDMENT EFFECTIVE AFTER 2000.—

12 (1) The second sentence of section 402(b) of

13 the Social Security Amendments of 1967 (42 U.S.C.

14 1395b–1(b)) (as added by subsection (a) and

15 amended by subsection (b) of this section) is further

16 amended by striking ‘‘sections 1876 and 1882’’ and

17 inserting ‘‘section 1882’’.

18 (2) The amendment made by paragraph (1) ap19 plies to activities occurring after 2000.

20 SEC. 11207. ELIMINATION OF HEALTH CARE PREPAYMENT

21 PLAN OPTION FOR ENTITIES ELIGIBLE TO

22 PARTICIPATE UNDER PART C.

23 (a) ELIMINATION OF OPTION.—

24 (1) IN GENERAL.—Section 1833(a)(1)(A) (42

25 U.S.C. 13951(a)(1)(A)) is amended by inserting
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1 after ‘‘prepayment basis’’ the following: ‘‘(and either

2 is sponsored by a union or employer, or does not

3 provide, or provide benefits for, any inpatient hos4 pital services)’’.

5 (2) EFFECTIVE DATE.—The amendment made

6 by subparagraph (A) applies to services furnished

7 after 1996.

8 (b) MEDIGAP AMENDMENT.—Section 1882(g) (42

9 U.S.C. 1395ss(g)) is amended by striking ‘‘, during the

10 period beginning on the date specified in subsection

11 (p)(1)(C) and ending on December 31, 1995,’’.

12 SEC. 11208. MEDIGAP REFORMS.

13 (a) UNIFORM ENROLLMENT PERIODS.—

14 (1) IN GENERAL.—Section 1882(s)(2)(A) (42

15 U.S.C. 1395ss(s)(2)(A)) is amended by striking ‘‘an

16 application is submitted’’ and all that follows and in17 serting the following: ‘‘an application is submitted—

18 ‘‘(i) prior to or during the 6-month period be19 ginning with the first month as of the first day on

20 which the individual is 65 years of age or older and

21 is enrolled for benefits under part B;

22 ‘‘(ii) during an annual 30-day period specified

23 by the Secretary; or

24 ‘‘(iii) during a period specified by the Secretary

25 in the circumstances described in section
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1 1851B(c)(2) (with respect to an individual losing

2 coverage through an organization’s termination of

3 contract or discontinuation of coverage).’’.

4 (2) EFFECTIVE DATE.—The amendment made

5 by the paragraph (1) is effective after 1996.

6 (b) STANDARDIZED INFORMATION.—

7 (1) IN GENERAL.—

8 (A)(i) Section 1882 (42 U.S.C. 1395ss) is

9 amended by adding at the end the following:

10 ‘‘(u) Each entity that offers a medicare supplemental

11 policy shall pay the Secretary for its pro rata share (a

12 determined by the Secretary) of the estimated costs to be

13 incurred by the Secretary in carrying out the requirements

14 of the first sentence of section 1851B(b)(1) and section

15 4360 of the Omnibus Reconciliation Act of 1990. Those

16 payments are appropriated to defray the costs described

17 in the preceding sentence, to remain available until ex18 pended.’’.

19 (ii) Section 1882(c)(5) (42 U.S.C.

20 1395ss(c)(5)) is amended by striking ‘‘(t)’’ and

21 inserting ‘‘(u)’’.

22 (B) Section 4360(g) of the Omnibus Rec23 onciliation Act of 1990 (42 U.S.C. 1395b–4(g))

24 is amended to read as follows:
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1 ‘‘(g) FUNDING.—For funding provisions, see section

2 1851B(b)(2), and section 1882(u), of the Social Security

3 Act.’’.

4 (2) EFFECTIVE DATE.—The amendments made

5 by the preceding paragraphs apply to demonstra6 tions occurring after the date of enactment of this

7 Act, and to other activities occurring after 1996.

8 (c) COMMUNITY RATING.—

9 (1) IN GENERAL.—Section 1882(c) (42 U.S.C.

10 1395ss(c)) is amended—

11 (A) by striking ‘‘and’’ at the end of para12 graph (4),

13 (B) by striking the period at the end of

14 paragraph (5) and adding ‘‘; and’’, and

15 (C) by adding after paragraph (5) the fol16 lowing: ‘‘(6) provides for the same premium for

17 each enrollee.’’.

18 (2) CONFORMING AMENDMENT.—Section

19 1882(b)(1)(B) (42 U.S.C. 1395ss(b)(1)(B)) is

20 amended by striking ‘‘(5)’’ and inserting ‘‘(6)’’.

21 (3) EFFECTIVE DATE AND TRANSITIONAL PRO22 VISIONS.—The amendments made by the preceding

23 paragraphs apply to policies and plans as of the be24 ginning of 1997 (whether issued before or after that

25 time), subject to such transitional rules as the Sec-
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1 retary may develop after consulting with the Na2 tional Association of Insurance Commissioners.

3 (d) LONG-TERM CARE INSURANCE SAFE HARBOR.—

4 (1) IN GENERAL.—Section 1882(d)(3)(C) is

5 amended—

6 (A) by striking ‘‘or (iii)’’ and inserting

7 ‘‘(iii)’’; and

8 (B) by inserting before the period the fol9 lowing: ‘‘, or (iv) the sale or issuance of a

10 health insurance policy (or rider to an insur11 ance contract which is not a health insurance

12 policy) providing benefits only for long-term

13 care, nursing home care, home health care, or

14 community-based care, or any combination

15 thereof, that coordinates against or excludes

16 items and services available under this title, if

17 such coordination or exclusion is disclosed in

18 the policy’s outline of coverage.’’.

19 (2) EFFECTIVE DATE AND OTHER RULES.—

20 (A) The amendments made by this section

21 shall take effect as if included in the enactment

22 of section 4354 of the Omnibus Budget Rec23 onciliation Act of 1990 (hereafter referred to as

24 ‘‘OBRA–1990’’).
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1 (B) No penalty shall be imposed under sec2 tion 1882(d)(3)(A)(i) of the Social Security Act

3 for any set or omission occurring after the ef4 fective date of the amendments made by section

5 4354 of OBRA–90 and before the date of the

6 enactment of this Act relating to the sale of a

7 health insurance policy described in section

8 1882(d)(3)(C)(iv) of the Social Security Act.

9 SEC. 11209. STANDARDIZED BENEFITS PACKAGES.

10 (a) MANAGED CARE.—The Secretary, no later than

11 July 1, 1996, after consulting with the National Associa12 tion of Insurance Commissioners, consumer groups, man13 aged care plans, providers of health care, and insurers,

14 shall develop standard packages of benefits (in addition

15 to the benefits covered under title XVIII of the Social Se16 curity Act (42 U.S.C. 1395 et seq.)) that may be offered

17 by eligible organizations under part C of that title (as

18 added by section 11202(a)(2) of this Act).

19 (b) MEDIGAP.—

20 (1)(A) The Secretary shall request the National

21 Association of Insurance Commissioners, in con22 sultation with consumer groups, managed care

23 plans, providers of health care, and insurers, to ex24 amine (and recommend by March 1, 1997, any re25 structuring needed for) the standard benefit pack-
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1 ages developed under section 1882(p)(2) of the So2 cial Security Act (42 U.S.C. 1395ss(p)(2)) in order

3 to facilitate to the maximum extent feasible compari4 son across medicare supplemental policies and bene5 fits offered by eligible organizations under section

6 1876.

7 (B) The Secretary, no later than May 1, 1997,

8 after taking into account any recommendations

9 made under subparagraph (A) by the National Asso10 ciation of Insurance Commissioners, shall restruc11 ture, as needed, those standard benefit packages.

12 (2)(A) Section 1882(p) (42 U.S.C. 1395ss(p))

13 is amended by adding at the end the following:

14 ‘‘(11) The groups or packages of benefits (in15 cluding the core group of basic benefits) under para16 graph (2) shall be modified by any changes made by

17 the Secretary under section 11209(b)(1)(B) of the

18 Balanced Budget Act of 1995 for Economic Growth

19 and Fairness.’’.

20 (B) The amendment made by subparagraph (A)

21 applies to services provided after 1997.

22 MEDICAID LANGUAGE EXPLANATION

23 The proposal would include language with establish24 ing a per capita cap on the average per beneficiary rate

25 of growth in the Medicaid program.
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1 There would be an ‘‘equity adjustor’’ to states with

2 low per capita expenditures (i.e., their growth rates would

3 be higher than other states). The national average growth

4 rate, however, would be tagged to grow by a national index

5 (compensating for the ‘‘equity adjustor’’).

6 With respect to savings in the disproportionate share

7 hospital program, we would phase out the current dis8 proportionate share program and phase in a retargeted

9 disproportionate share program identical to the Coalition’s

10 bill.

11 Funding levels would be as follows:

1996 1997 1998 1999 2000 2001 2002

Phase-out 10.7 8.0 5.3 2.6 0.0 0.0 0.0

Phase-in . 0.0 1.3 2.7 4.0 5.0 5.0 5.0

Total ... 10.7 9.3 8.0 6.6 5.0 5.0 5.0

12 The program would also include a mandatory set13 aside of payments of $290 million for federally qualified

14 health centers and $125 million for rural health centers

15 in FY 1997 to be increased annually by the overall rate

16 of Medicaid growth in the previous year. We estimate this

17 would cost approximately $3 billion over the six year pe18 riod.

19 In addition, we would include language from the con20 ference report for the $3.5 billion for payments to states

21 for costs incurred for the provision of care to undocu22 mented aliens.
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1 ‘‘(b) FOR UNDOCUMENTED IMMIGRANTS.—

2 ‘‘(1) IN GENERAL.—Each of the 15 States with

3 the largest number of illegal immigrants (as esti4 mated by the Statistics Division of the Immigration

5 and Naturalization Service as of October, 1992)

6 shall be entitled, for each of fiscal years 1996

7 through 2000, to an amount bearing the same ratio

8 to the amount specified in paragraph (2) as the ille9 gal immigrant population in all 15 such States.

10 ‘‘(2) AMOUNTS AUTHORIZED.—For purposes of

11 paragraph (1) amounts authorized to be appro12 priated are—

13 ‘‘(A) $631,000,000 for fiscal year 1996;

14 ‘‘(B) $664,000,000 for fiscal year 1997;

15 ‘‘(C) $699,000,000 for fiscal year 1998;

16 ‘‘(D) $735,000,000 for fiscal year 1999;

17 and

18 ‘‘(E) $771,000,000 for fiscal year 2000.

19 ‘‘(3) ANNUAL REPORT.—Not later than 90 days

20 after the end of each fiscal year in which a State re21 ceives or uses amounts pursuant to this subsection,

22 the State shall submit to the Secretary, and make

23 available to the public, a report on its use of such

24 amounts in such fiscal year which includes:
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1 ‘‘(A) a listing of each of the providers re2 ceiving payment from such amounts and the

3 amount of such payments; and

4 ‘‘(B) such information as the Secretary

5 may require to provide an assurance that serv6 ices provided with such payments were consist7 ent with the limitations under section 1903(v).

8 ‘‘(c) EXTENDED AVAILABILITY OF FUNDS.—

9 Amounts appropriated pursuant to this section and not

10 required by a State for the purposes of this section in a

11 fiscal year may be used by the State for such purposes

12 in any subsequent fiscal year, and shall remain available

13 until expended.

14 ‘‘(d) STATE ASSURANCES.—Each State receiving

15 transitional assistance payments under this section shall

16 provide assurances satisfactory to the Secretary—

17 ‘‘(1) in the case of payments under subsection

18 (a), that such payments will be used by the State to

19 make payments to health care providers for services

20 which would otherwise be uncompensated; and

21 ‘‘(2) in the case of payments under subsection

22 (b), that such payments will be used by the State to

23 make payments for emergency health care services

24 for illegal immigrants in accordance with section

25 1903(v).’’.
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1 (2) PAYMENTS TO STATES.—Section 1903(a) is

2 amended—

3 (A) by striking the period at the end of

4 paragraph (7) and inserting ‘‘; plus’’; and

5 (B) by adding after paragraph (7) the fol6 lowing new paragraph;

7 ‘‘(8) an amount equal to 100 percent

8 of payments authorized pursuant to section

9 1923A’’.

10 (3) SUNSET.—Effective October 1, 2000, the

11 amendments made by this subsection are repealed.

12 SEC. 11303. MEDICAID ELIGIBILITY QUALITY CONTROL

13 (MEQC) REQUIREMENTS.

14 Section 1903(u) is amended—

15 (1) in paragraph (1)(A), to read as follows:

16 ‘‘(A) Notwithstanding subsection (a), the

17 Secretary shall reduce the aggregate Federal

18 payment limit applicable to a State for fiscal

19 year 1997 or any succeeding fiscal year by the

20 amount, if any, equal to the sum of the prod21 ucts, for each group defined in section 1931(b),

22 of—

23 ‘‘(i) the number of excess erroneous

24 enrollments of individuals in each such

25 group; and
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1 ‘‘(ii) the per beneficiary rate applica2 ble to such group for such fiscal year pur3 suant to section 1931(c).’’;

4 (2) in paragraph (1)(C), by striking ‘‘erroneous

5 excess payments for medical assistance’’ and insert6 ing ‘‘excess erroneous enrollments’’;

7 (3) by striking subparagraphs (D) and (E) of

8 paragraph (1) and inserting the following:

9 ‘‘(D) CALCULATION FACTORS.—For pur10 poses of this subsection—

11 ‘‘(i) ERRONEOUS ENROLLMENTS.—

12 The term ‘erroneous enrollments’ means,

13 with respect to a group defined in section

14 1931(b), the number of individuals that a

15 State reports, pursuant to section

16 1931(c)(4), as enrolled in such group who

17 either (I) should have been so reported as

18 enrolled in another such group which has

19 a lower per beneficiary base rate, or (II)

20 were ineligible for medical assistance under

21 the State plan.

22 ‘‘(ii) EXCLUSION FROM ERRONEOUS

23 ENROLLMENTS.—The term ‘erroneous en24 rollments’ does not include any enroll25 ment—
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1 ‘‘(I) of individuals whose eligi2 bility was determined exclusively by

3 the Commissioner of Social Security

4 under an agreement pursuant to sec5 tion 1634, and such other classes of

6 individuals as the Secretary may by

7 regulation prescribe whose eligibility

8 was determined in part under such an

9 agreement;

10 ‘‘(II) resulting from the failure of

11 an individual to cooperate or give cor12 rect information with respect to third13 party liability as required under sec14 tion 1912(a)(1)(C) or 402(a)(26)(C);

15 or

16 ‘‘(III) during a presumptive eligi17 bility period (as defined in section

18 1920(b)(1)).

19 ‘‘(iii) EXCESS ERRONEOUS ENROLL20 MENTS.—The term ‘excess erroneous en21 rollments’ means, with respect to a group

22 of individuals defined in section 1931(b),

23 erroneous enrollments in excess of 3 per24 cent of total enrollments of individuals in

25 such group.’’; and
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1 (4) in paragraph (2), by striking ‘‘erroneous ex2 cess payments’’ and inserting ‘‘excess erroneous en3 rollments’’.

4 PART 2—ELIGIBILITY

5 SEC. 11311. EXTENSION OF COVERAGE TO ADDITIONAL IN6 DIVIDUALS, SUBJECT TO POVERTY-RELATED

7 OR CASELOAD LIMITS.

8 (a) EXPANDED ELIGIBILITY.—Section 1902(a)(10)

9 is amended by adding after subparagraph (F) the follow10 ing new paragraph:

11 ‘‘(G) at the option of a State, for making

12 medical assistance available to one of the fol13 lowing groups of individuals who would other14 wise be ineligible for such assistance:

15 ‘‘(i) individuals whose income does not

16 exceed a limit established by the State, not

17 greater than 150 percent of the Federal

18 poverty line; or * * *

19 (b) DISREGARD OF ADDITIONAL ENROLLEES IN CAL20 CULATION OF FEDERAL PAYMENT LIMIT.—Section

21 1931(c)(4)(A), as added by section 11301 of this Act, is

22 amended by adding at the end the following new clause:

23 ‘‘(iii) EXPANDED ELIGIBILITY DIS24 REGARD.—The numbers reported by the

25 State shall not include any individuals en-
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1 rolled in the State program under this title

2 pursuant to section 1902(a)(10)(G).’’.

3 SEC. 11312. ELIMINATION OF AUTHORITY FOR NEW ELIGI4 BILITY EXPANSION DEMONSTRATIONS.

5 Section 1115(a)(1) is amended by inserting ‘‘(except

6 that waivers of requirements of section 1902 with respect

7 to eligibility of individuals for medical assistance shall not

8 be granted (but may be extended or modified) on or after

9 October 1, 1996)’’ after ‘‘project’’.

10 SEC. 11313. UPPER INCOME LIMIT ON ‘‘LESS RESTRICTIVE’’

11 ELIGIBILITY METHODOLOGIES.

12 Section 1902(r)(2) is amended—

13 (1) in paragraph (A), by inserting ‘‘(except as

14 provided in subparagraph (C))’’ after ‘‘no more re15 strictive’’; and

16 (2) by adding at the end the following new sub17 paragraph:

18 ‘‘(C) The methodology described in subparagraph (A)

19 shall not result in an income eligibility limit (based on

20 gross income) higher than the higher of—

21 ‘‘(i) 150 percent of the Federal poverty line; or

22 ‘‘(ii) the income eligibility limit applicable under

23 the State plan in effect in fiscal year 1995 (taking

24 into account any such limit applicable under a waiv25 er under section 1115).’’.
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1 PART 3—MANAGED CARE

2 SEC. 11321. PRIMARY CARE CASE MANAGEMENT SERVICES

3 AS STATE OPTION WITHOUT NEED FOR WAIV4 ER.

5 (a) PRIMARY CARE CASE MANAGEMENT SERVICES

6 DEFINED.—Section 1905 is amended by adding at the end

7 of the following new subsection:

8 ‘‘(t)(1) The term ‘primary care case management sys9 tem’ means a State program under which individuals eligi10 ble for medical assistance under the State plan under this

11 title are enrolled with primary care case managers and are

12 entitled to receive health care items and services covered

13 under the State plan and specified in such program only

14 as approved (and arranged or provided) by such man15 agers.

16 ‘‘(2) The term ‘primary care case manager’ means

17 a provider that has entered into a primary care case man18 agement contract with the State agency and that is—

19 ‘‘(A) a physician, a physician group practice, or

20 an entity employing or having other arrangements

21 with physicians who provide case management serv22 ices; or

23 ‘‘(B) at State option—

24 ‘‘(i) a nurse practitioner (as described in

25 section 1905(a)(21);
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1 ‘‘(ii) a certified nurse-midwife (as defined

2 in section 1861(gg)); or

3 ‘‘(iii) a physician assistant (as defined in

4 section 1861(aa)(5).

5 ‘‘(3) The term ‘primary care case management con6 tract’ means a contract with a State agency under which

7 a primary care case manager undertakes to locate, coordi8 nate and monitor covered primary care, covered primary

9 care and other services, or covered services specified by

10 the State, to all individuals enrolled with the primary care

11 case manager, and which provides for—

12 ‘‘(A) reasonable and adequate hours of oper13 ation, including 24-hour availability of information,

14 referral, and treatment with respect to medical

15 emergencies;

16 ‘‘(B) restriction of enrollment to individuals re17 siding sufficiently near a service delivery site of the

18 entity to be able to reach such site within a reason19 able time using available and affordable modes of

20 transportation;

21 ‘‘(C) employment of, or contracts or other ar22 rangements with, sufficient numbers of physicians

23 and other appropriate health car professionals to en24 sure that services under the contract can be fur-
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1 nished to enrollees promptly and without com2 promise to quality of care;

3 ‘‘(D) a prohibition on discrimination on the

4 basis of health status or requirements for health

5 services in enrollment, disenrollment, reenrollment,

6 or disenrollment of individuals eligible for medical

7 assistance under this title; and

8 ‘‘(E) a right for enrollees to terminate such en9 rollment without cause during the first month of

10 each enrollment period, each such enrollment period

11 not to exceed six months in duration, and to termi12 nate their enrollment at any time for cause.

13 ‘‘(4) The term ‘primary care’ includes all health care

14 services customarily provided by or under the supervision

15 of, and all laboratory services customarily provided by or

16 through, a general practitioner, family medicine physician,

17 internal medicine physician, obstetrician/gynecologist, or

18 pediatrician.’’.

19 (b) INCLUSION IN DEFINITION OF MEDICAL ASSIST20 ANCE.—Section 1905(a) is amended—

21 (1) by striking ‘‘and’’ at the end of paragraph

22 (24);

23 (2) by redesignating paragraph (25) as para24 graph (26); and
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1 (3) by inserting after paragraph (24) the fol2 lowing new paragraph:

3 ‘‘(25) primary care case management services

4 (as defined in subsection (t)); and’’.

5 (c) STATE PLAN REQUIREMENT.—Section 1902(a) is

6 amended—

7 (1) by striking ‘‘and’’ at the end of paragraph

8 (61);

9 (2) by striking the period at the end of para10 graph (62) and inserting ‘‘; and’’; and

11 (3) by adding after paragraph (62) the follow12 ing new paragraph:

13 ‘‘(63) provide that any primary care case man14 agement services furnished under the plan will be

15 furnished in accordance with the provisions of sec16 tion 1905(t).’’.

17 (d) REPEAL OF WAIVER AUTHORITY.—Section

18 1915(b) is amended by striking paragraph (1) and redes19 ignating paragraphs (2), (3), and (4) as paragraphs (1),

20 (2), and (3), respectively.

21 (e) EXCEPTION TO FREEDOM OF CHOICE.—For

22 State option to mandate enrollment in primary care case

23 management programs, see section 11322.
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1 SEC. 11322. STATE OPTIONS TO RESTRICT CHOICE OF PRO2 VIDERS.

3 (a) MANDATORY ENROLLMENT IN MANAGED

4 CARE.—Section 1915(a) is amended by inserting at the

5 end the following new paragraph:

6 ‘‘(3) requires individuals eligible for medical as7 sistance for items or services under the State plan

8 to enroll with an entity that provides or arranges for

9 services for enrollees under a contract pursuant to

10 section 1903(m), or with a primary care case man11 ager (as defined in section 1905(t)) (and/or restricts

12 the number of provider agreements with such enti13 ties under the State plan, consistent with quality of

14 care), if—

15 ‘‘(A)(i) individuals are permitted to choose

16 between at least 2 such entities, or 2 such man17 agers, or an entity and a manager, each of

18 which has sufficient capacity to provide services

19 to enrollees; or

20 ‘‘(ii) with respect to a rural area—

21 ‘‘(I) individuals who are required to

22 enroll with a single entity are afforded the

23 option in appropriate circumstances to ob24 tain covered services by an alternative pro25 vider; and
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1 ‘‘(II) an individual who is offered no

2 alternative to a single entity or manager is

3 given a choice between at least two provid4 ers within such entity or through such

5 manager;

6 ‘‘(iii)(I) the State does not restrict the par7 ticipation of any Indian health program speci8 fied in section 1931(d)(1)(C); and

9 ‘‘(II) in any case in which the State directs

10 the enrollment of an individual who is an In11 dian (as defined in section 4 of the Indian

12 Health Care Improvement Act of 1976) in ac13 cordance with this subsection, such individual is

14 enrolled with a participating entity specified in

15 subclause (I), if any;

16 ‘‘(B) the State restricts such individuals

17 from changing their enrollment without cause

18 for periods no longer than six months (and per19 mits enrollees to change enrollment for cause at

20 any time); and

21 ‘‘(C) such restrictions do not apply to pro22 viders of family planning services (as defined in

23 section 1905(a)(4)(C)) and are not conditions

24 for payment of medicare cost sharing pursuant

25 to section 1905(p)(3).’’.
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1 (b) STATE OPTION FOR SIX-MONTH LOCK-IN IN

2 RISK-BASED ARRANGEMENTS.—Section 1903(m)(2) is

3 amended—

4 (1) in paragraph (A)(vi)—

5 (A) by striking ‘‘(I) as provided under sub6 paragraph (F),’’; and

7 (B) by striking all that follows ‘‘to termi8 nate such enrollment’’ and inserting ‘‘in accord9 ance with the provisions of subparagraph (F);’’;

10 and

11 (2) in subparagraph (F), by striking ‘‘In the

12 case of—’’ and all that follows through ‘‘a State

13 plan’’ and inserting ‘‘A State plan’’.

14 SEC. 11323. ELIMINATION OF RESTRICTIONS ON RISK CON15 TRACTS.

16 (a) 75 PERCENT LIMIT ON MEDICARE AND MEDIC17 AID ENROLLMENT.—

18 (1) IN GENERAL.—Section 1903(m)(2)(A) is

19 amended by striking clause (ii).

20 (2) CONFORMING AMENDMENTS.—Section

21 1903(m)(2) is amended—

22 (A) by striking subparagraphs (C), (D),

23 and (E); and

24 (B) in subparagraph (G), by striking

25 ‘‘clauses (i) and (ii)’’ and inserting ‘‘clause (i)’’.
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1 (b) SECRETARIAL APPROVAL OF CONTRACTS OVER

2 $100,000.—Section 1903(m)(2)(A) is amended in clause

3 (iii) by striking all that follow ‘‘actuarially sound basis’’

4 and inserting a semicolon.

5 (c) ADDITIONAL AMENDMENTS.—For additional

6 amendments to section 1903(m)(2)(A), see section

7 11341(b).

8 SEC. 11324. 6-MONTH GUARANTEED ELIGIBILITY FOR ALL

9 INDIVIDUALS ENROLLED IN MANAGED CARE.

10 Section 1902(e)(2) is amended—

11 (1) by striking ‘‘who is enrolled’’ and all that

12 follows through ‘‘section 1903(m)(2)(A)’’ and insert13 ing ‘‘who is enrolled with a health maintenance orga14 nization (as defined in section 1903(m)), with a pri15 mary care case manager (as defined in section

16 1905(t),’’; and

17 (2) by inserting before the period ‘‘or by or

18 through such case manager’’.

19 SEC. 11325. REQUIREMENTS TO ENSURE QUALITY OF AND

20 ACCESS TO CARE UNDER MANAGED CARE

21 PLANS.

22 Section 1902(a), as amended by section 11321(c), is

23 amended—

24 (1) in paragraph (62), by striking ‘‘; and’’ at

25 the end and inserting a semicolon;
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1 (2) by striking the period at the end of para2 graph (63) and inserting ‘‘; and’’; and

3 (3) by adding after paragraph (63) the follow4 ing new paragraph:

5 ‘‘(64) provide, with respect to all agreements

6 between the State agency and entities described in

7 section 1903(m), section 1905(t), and other provid8 ers of managed care services—

9 ‘‘(A) that the State agency will develop

10 and implement a quality improvement strategy,

11 consistent with standards established by the

12 Secretary, which includes—

13 ‘‘(i) standards for the provision of

14 services under such agreements designed to

15 ensure reasonable access of enrolled indi16 viduals to covered services meeting applica17 ble standards for quality and safety;

18 ‘‘(ii) procedures for monitoring per19 formance of entities under such agree20 ments, including—

21 ‘‘(I) procedures for collection

22 from (or reporting by) providers of

23 patient data; and

24 ‘‘(II) procedures for analysis of

25 such data;
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1 ‘‘(B) that providers entering into such

2 agreements under which payment is made on a

3 prepaid capitated or other risk basis shall be re4 quired—

5 ‘‘(i) to demonstrate a capacity to de6 liver covered services to all enrolled individ7 uals; and

8 ‘‘(ii) to maintain an internal quality

9 assurance program, meeting such stand10 ards as the Secretary may establish in reg11 ulations, which includes a grievance proc12 ess.’’.

13 PART 4—BENEFITS

14 SEC. 11331. HOME- AND COMMUNITY-BASED SERVICES AS

15 STATE OPTION WITHOUT NEED FOR WAIVER.

16 (a) ELIMINATION OF WAIVER RESTRICTION.—Sec17 tion 1915(c) is relocated and redesignated as subsection

18 (u) of section 1905, and is amended—

19 (1) in paragraph (1), by striking everything

20 through ‘‘pursuant to a written plan’’ and inserting

21 ‘‘The term ‘home- and community-based services’

22 means items and services (other than room and

23 board) which are provided in accordance with the

24 provisions of this subsection, and pursuant to a writ25 ten plan’’;
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1 (2) in paragraph (2)—

2 (A) by striking the matter that precedes

3 subparagraph (A) and inserting ‘‘A State agen4 cy that elects to provide home- and community5 based services as defined in this subsection

6 shall ensure that—’’;

7 (B) by adding ‘‘and’’ at the end of sub8 paragraph (B);

9 (C) by striking the semicolon at the end of

10 subparagraph (C) and inserting a period; and

11 (D) by striking subparagraphs (D) and

12 (E);

13 (3) in paragraph (3), to read as follows:

14 ‘‘(3) A State plan may provide—

15 ‘‘(i) that home- and community-based serv16 ices furnished under the plan shall not be sub17 ject to the provisions of section 1902(a)(1) (re18 lating to statewideness), section 1902(a)(10)(B)

19 (relating to comparability), or section

20 1902(a)(10)(C)(i)(III) (relating to income and

21 resource rules applicable in the community),

22 and

23 ‘‘(ii) for purposes of post-eligibility treat24 ment of income, for disregard of a greater

25 amount for the maintenance needs of the indi-
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1 vidual than amounts specified in regulations

2 with respect to a similarly situated institu3 tionalized individual.’’;

4 (4) in paragraph (4)—

5 (A) by striking the matter preceding sub6 paragraph (A) and inserting ‘‘A State plan pro7 viding for home- and community-based services

8 may—’’;

9 (B) in subparagraph (A)—

10 (i) by striking ‘‘benefits under such

11 waiver’’ and inserting ‘‘such benefits’’;

12 (ii) by striking ‘‘under such waiver’’

13 and inserting ‘‘for such benefits’’; and

14 (iii) by striking ‘‘if the waiver did not

15 apply’’ and inserting ‘‘if institutionalized’’;

16 and

17 (C) by striking the final sentence; and

18 (5) by striking paragraphs (6) through (10).

19 (b) INCLUSION IN DEFINITION OF ‘‘MEDICAL AS20 SISTANCE’’.—Section 1905(a)(22) is amended to read

21 ‘‘home- and community-based services (as defined in sub22 section (u));’’.

23 (c) STATE PLAN REQUIREMENT.—Section 1902(a),

24 as amended by sections 11321(c) and 11325, is amend25 ed—
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1 (1) by striking ‘‘and’’ at the end of paragraph

2 (63);

3 (2) by striking the period at the end of para4 graph (64) and inserting ‘‘; and’’; and

5 (3) by adding after paragraph (64) the follow6 ing new paragraph:

7 ‘‘(65) provide that any home- and community8 based services furnished under the plan will be fur9 nished in accordance with the provisions of section

10 1905(u).’’.

11 (d) REPEAL OF SUPERSEDED PROVISIONS.—

12 (1) Sections 1929 and 1930 are repealed.

13 (2) Section 1905(a) is amended by striking

14 paragraph (23).

15 SEC. 11332. ELIMINATION OF REQUIREMENTS TO PAY FOR

16 PRIVATE INSURANCE.

17 (a) REPEAL OF STATE PLAN PROVISION.—

18 (1) Section 1902(a)(25) is amended—

19 (A) by striking subparagraph (G); and

20 (B) by redesignating subparagraphs (H)

21 and (I) as subparagraphs (G) and (H), respec22 tively.

23 (b) REPEAL OF ENROLLMENT REQUIREMENTS.—

24 Section 1906 is repealed.
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1 (c) REINSTATEMENT OF STATE OPTION.—Section

2 1905(a) is amended, in the matter preceding clause (i),

3 by inserting ‘‘(including, at State option, through pur4 chase or payment of enrollee costs of health insurance)’’

5 after ‘‘The term ‘medical assistance’ means payment’’.

6 SEC. 11333. BENEFITS FOR INDIVIDUALS COVERED DURING

7 TRANSITION TO WORK.

8 (a) PAYMENT OF GROUP HEALTH COINSURANCE AT

9 MEDICAID RATES.—

10 (1) Section 1925(a)(4)(B) is amended—

11 (A) by striking ‘‘and’’ at the end of clause

12 (i)(II);

13 (B) by striking the period at the end of

14 clause (ii); and

15 (C) by adding after clause (ii) the following

16 new clause:

17 ‘‘(iii) the State may limit the amount

18 of any deductible or copayment for any

19 health care item or service to the applica20 ble portion of the amount the State would

21 pay if such item or service had been fur22 nished by a provider participating in the

23 program under the State plan.’’.

24 (2) Section 1925(b)(4)(D) is amended by add25 ing at the end the following new sentence: ‘‘If the
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1 State elects to pay such deductibles and coinsurance,

2 the State may limit the amount of such payments as

3 provided in subsection (a)(4)(C)(iii).’’.

4 (b) ELIMINATION OF PREMIUM LIMIT.—Section

5 1925 (b)(5)(C) is repealed.

6 (c) PROVISION CONCERNING REPORTING REQUIRE7 MENTS MADE OPTIONAL.—

8 (1) REPORTING REQUIREMENT.—Section

9 1925(b)(2)(B) is amended to read as follows:

10 ‘‘(B) REPORTING REQUIREMENTS.—Each

11 State may require, as a condition for additional

12 extended assistance under this subsection, re13 ports by the family at such times and contain14 ing such information as the State may specify

15 concerning gross monthly earnings and costs

16 for child care.’’.

17 (2) STATE OPTION TO TERMINATE BENEFITS

18 FOR FAILURE TO REPORT.—Section 1925(b)(3)(A)

19 is amended (a) in clause (iii), by striking

20 ‘‘(2)(B)(ii)’’ each place it appears and inserting

21 ‘‘(2)(B)’’.
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1 PART 5—PROVIDER PARTICIPATION AND

2 PAYMENT RATES

3 SEC. 11341. METHODS FOR ESTABLISHING PROVIDER PAY4 MENT RATES.

5 (a) PLAN AMENDMENTS.—Section 1902(a)(13) is

6 amended—

7 (1) by striking all that precedes subparagraph

8 (D) and inserting the following:

9 ‘‘(13) provide—

10 ‘‘(A) for a public process for determination of

11 rates of payment under the plan (including any pay12 ment adjustments under section 1923) for nursing

13 facility services and services of intermediate care fa14 cilities for the mentally retarded under which—

15 ‘‘(i) proposed rates are published, and pro16 viders, beneficiaries and their representatives,

17 and other concerned State residents are given a

18 reasonable opportunity for review and comment

19 thereon; and

20 ‘‘(ii) final rates are published, together

21 with justifications based on the administrative

22 record; and’’;

23 (2) by redesignating subsections (D) and (E) as

24 subsections (B) and (C), respectively;
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1 (3) in subparagraph (B), as redesignated, by

2 striking everything through ‘‘of 100 percent of

3 costs’’ and inserting the following:

4 ‘‘(B) for payment under the plan—

5 ‘‘(i) for all services described in clause (B)

6 or (C) of section 1905(a)(2) furnished on or be7 fore September 30, 1998; and

8 ‘‘(ii) for services described in clause (i) fur9 nished on or after October 1, 1998, by an en10 tity described in section 1931(d)(1)(C) of 100

11 percent of costs’’; and

12 (4) by striking subsection (F).

13 (b) STUDY AND REPORT TO CONGRESS.—The Sec14 retary shall conduct a study of the effect on access to serv15 ices, and quality and safety of services, of the rate-setting

16 methods used by States pursuant to section 1902(a)(13)

17 of the Social Security Act, as amended by subsection (a),

18 and shall submit a report to the Congress on the conclu19 sions from such study, together with any legislative rec20 ommendations, not later than the date four years after

21 enactment of this Act.

22 SEC. 11343. ELIMINATION OF OBSTETRICAL AND PEDI23 ATRIC PAYMENT RATE REQUIREMENTS.

24 Section 1926 is repealed.
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1 PART 6—STATE PLAN ADMINISTRATION

2 SEC. 11351. MMIS REQUIREMENTS.

3 (a) IN GENERAL.—Section 1903(r) is amended—

4 (1) by striking all that precedes paragraph (5)

5 and inserting the following:

6 ‘‘(r) MEDICAID MANAGEMENT INFORMATION SYS7 TEMS (MMIS).—(1) IN GENERAL.—In order to receive

8 payments under subsection (a) for use of automated data

9 systems in administration of the State plan under this

10 title, a State must have in operation mechanized claims

11 processing and information retrieval systems that meet the

12 requirements of this subsection and that the Secretary has

13 found to be—

14 ‘‘(A) adequate to provide efficient, economical,

15 and effective administration of such State plan;

16 ‘‘(B) compatible with the claims processing and

17 information retrieval systems used in the adminis18 tration of title XVIII, and for this purpose—

19 ‘‘(i) having a uniform identification coding

20 system for providers, other payees, and bene21 ficiaries under this title or title XVIII;

22 ‘‘(ii) providing liaison between States and

23 carriers and intermediaries with agreements

24 under title XVIII to facilitate timely exchange

25 of appropriate data; and
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1 ‘‘(iii) providing for exchange of data be2 tween the States and the Secretary with respect

3 to persons sanctioned under this title or title

4 XVIII;

5 ‘‘(C) capable of providing accurate and timely

6 data;

7 ‘‘(D) able to accommodate receipt of provider

8 claims in standard formats to the extent specified by

9 the Secretary; and

10 ‘‘(E) able to transmit electronically such data

11 as is specified by the Secretary.’’.

12 (2) in paragraph (5)—

13 (A) by striking all that precedes clause (i)

14 and inserting the following:

15 ‘‘(2) In order to meet the requirements of this para16 graph, mechanized claims processing and information re17 trieval systems must meet the following requirements:’’;

18 (B) in clause (iii), by striking ‘‘under para19 graph (6)’’; and

20 (C) by redesignating clauses (i) through

21 (iii) as paragraphs (A) through (C); and

22 (3) by striking paragraphs (6), (7), and (8).

23 (b) CONFORMING AMENDMENTS.—Section

24 1902(a)(25)(A)(ii) is amended—
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1 (1) by striking ‘‘, and’’ at the end of subclause

2 (I) and inserting a semicolon;

3 (2) by relocating the matter in subclause (I)

4 immediately after ‘‘which plan shall’’, after striking

5 the intervening hyphen and the subclause designa6 tion; and

7 (3) by striking subclause (II).

8 SEC. 11352. ELIMINATION OF PERSONNEL REQUIREMENTS.

9 Section 1902(a)(4) is amended—

10 (1) in subparagraph (A), to read as follows:

11 ‘‘(A) provide such methods of administration as

12 found by the Secretary to be necessary for the prop13 er and efficient operation of the plan;’’;

14 (2) by striking subparagraph (B); and

15 (3) by redesignating subparagraph (C) as sub16 paragraph (B).

17 SEC. 11353. ELIMINATION OF REQUIREMENTS FOR COOP18 ERATIVE AGREEMENTS WITH HEALTH AGEN19 CIES.

20 Section 1902(a)(11) is repealed.
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1 SEC. 11355. STATE REVIEW OF MENTALLY ILL OR RE2 TARDED NURSING FACILITY RESIDENTS

3 UPON CHANGE IN PHYSICAL OR MENTAL

4 CONDITION.

5 (a) STATE REVIEW ON CHANGE IN RESIDENT’S CON6 DITION.—Section 1919(e)(7)(B)(iii) is amended to read as

7 follows:

8 ‘‘(iii) Review required upon change in resi9 dent’s condition.—A review and determination

10 under clause (i) or (ii) must be conducted

11 promptly after a nursing facility has notified

12 the State mental health authority or State men13 tal retardation or developmental disability au14 thority, as applicable, with respect to a mentally

15 ill or mentally retarded resident, that there has

16 been a significant change in the resident’s phys17 ical or mental condition.’’.

18 (b) CONFORMING AMENDMENTS.—

19 (1) Section 1919(b)(3)(E) is amended by add20 ing at the end the following: ‘‘In addition, a nursing

21 facility shall notify the State mental health authority

22 or State mental retardation or developmental disabil23 ity authority, as applicable, promptly after a signifi24 cant change in the physical or mental condition of

25 a resident who is mentally ill or mentally retarded.’’.
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1 (2) The heading to section 1919(e)(7)(B) is

2 amended by striking ‘‘annual’’.

3 (3) The heading to section 1919(e)(7)(D)(i) is

4 amended by striking ‘‘annual’’.

5 SEC. 11356. NURSE AID TRAINING IN MEDICARE AND MED6 ICAID NURSING FACILITIES SUBJECT TO EX7 TENDED SURVEY AND UNDER CERTAIN

8 OTHER CONDITIONS.

9 (a) MEDICARE.—Section 1819(f)(2)(B)(iii)(I) is

10 amended, in the matter preceding sub-subclause (a), by

11 striking ‘‘by or in a skilled nursing facility’’ and inserting

12 ‘‘by a skilled nursing facility (or in such a facility, unless

13 the State determines that there is no other such program

14 offered within a reasonable distance, provides notice of the

15 approval to the State long-term care ombudsman, and

16 assures, through an oversight effort, that an adequate en17 vironment exists for such a program)’’.

18 (b) MEDICAID.—Section 1919(f)(2)(B)(iii)(I) is

19 amended, in the matter preceding sub-subclause (a), by

20 striking ‘‘by or in a nursing facility’’ and inserting ‘‘by

21 a nursing facility (or in such a facility, unless the State

22 determines that there is no other such program offered

23 within a reasonable distance, provides notice of the ap24 proval to the State long-term care ombudsman, and
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1 assures, through an oversight effort, that an adequate en2 vironment exists for such a program)’’.

3 SEC. 11357. COMBINED STATE PLAN SUBMISSION.

4 (a) IN GENERAL.—A State may submit to the Sec5 retary of Health and Human Services a single State plan

6 (with any amendments) to carry out—

7 (1) the long-term care grant program estab8 lished by subtitle E;

9 (2) the program of health insurance for the

10 temporarily unemployed established by subtitle G;

11 and

12 (3) the medical assistance program under title

13 XIX of the Social Security Act.

14 (b) EFFECT OF COMBINED SUBMISSION.—A State

15 plan submitted pursuant to subsection (a) must meet all

16 requirements of each of the programs specified in such

17 subsection.

18 (c) TIMETABLE FOR APPROVAL.—The Secretary

19 shall, within 90 days after receipt of a State plan submit20 ted pursuant to subsection (a), either approve or dis21 approve the plan, or inform the State that specified addi22 tional information is needed to permit review of the plan.
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1 SEC. 11358. PUBLIC PROCESS FOR DEVELOPING STATE

2 PLAN AMENDMENTS.

3 Section 1902(a), as amended by sections 11321(c),

4 11325, and 11331(c), is amended—

5 (1) by striking ‘‘and’’ at the end of paragraph

6 (64);

7 (2) by striking the period at the end of para8 graph (65) and inserting ‘‘; and’’; and

9 (3) by adding after paragraph (65) the follow10 ing new paragraph:

11 ‘‘(66) a process for development of amendments

12 to the State plan that affords an opportunity for re13 view and comment to interested persons and groups,

14 including beneficiaries, providers, Indian tribes, trib15 al organizations, Indian Health Service facilities,

16 and urban Indian health organizations.’’.

17 PART 7—EFFECTIVE DATE

18 SEC. 11361. EFFECTIVE DATE.

19 (a) IN GENERAL.—Except where otherwise specifi20 cally provided, the provisions of and amendments made

21 by this subtitle shall be effective with respect to State pro22 grams under title XIX of the Social Security Act on and

23 after October 1, 1996.

24 (b) EXTENSION FOR STATE LAW AMENDMENT.—In

25 the case of a State plan under title XIX of the Social Se26 curity Act which the Secretary of Health and Human
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1 Services determines requires State legislation in order for

2 the plan to meet the additional requirements imposed by

3 the amendments made by subsection (a), the State plan

4 shall not be regarded as failing to comply with the require5 ments of such title solely on the basis of its failure to meet

6 these additional requirements before the first day of the

7 first calendar quarter beginning after the close of the first

8 regular session of the State legislature that begins after

9 the date of enactment of this Act. For purposes of the

10 previous sentence, in the case of a State that has a 2-

11 year legislative session, each year of such session shall be

12 deemed to be a separate regular session of the State legis13 lature.

14 Subtitle D—Fraud and Abuse

15 SEC. 11401. SHORT TITLE; TABLE OF CONTENTS OF SUB16 TITLE.

17 (a) SHORT TITLE.—This subtitle may be cited as the

18 ‘‘Federal Health Care Payment Integrity Act of 1995’’.

19 (b) TABLE OF CONTENTS OF SUBTITLE.—The table

20 of contents of this subtitle is as follows:

TABLE OF CONTENTS

Sec. 11401. Short title; table of contents of subtitle.

PART 1—AMENDMENTS TO CURRENT LAW ENFORCEMENT AUTHORITIES

Sec. 11402. Extension of current civil money penalties.

Sec. 11403. Exclusion of persons who defraud Medicare.

Sec. 11404. Illegal remuneration with respect to health care benefit programs

Sec. 11405. Amendments to PRO (quality of care) sanctions provisions.

Sec. 11406. Final adverse action data base.

Sec. 11407. Expansion of authority of medicaid fraud control units.
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Sec. 11408. Recovery of overpayments from bankrupt providers.

Sec. 11409. Grants to States to revoke licenses of unqualified providers.

Sec. 11410. Authorization for interception of wire, oral or electronic communications.

PART 2—RESOURCES FOR ANTI-FRAUD ACTIVITIES

Sec. 11421. Medicare anti-fraud and abuse program.

Sec. 11422. Medicare beneficiary integrity system.

Sec. 11423. Government-side anti-fraud reinvestment fund.

PART 3—AMENDMENTS TO CRIMINAL LAW

Sec. 11431. Health care fraud.

Sec. 11432. Forfeitures for federal health care offenses.

Sec. 11433. Injunctive relief relating to federal health care offenses.

Sec. 11434. Grand jury disclosure.

Sec. 11435. False statements.

Sec. 11436. Obstruction of criminal investigations, audits or inspections of federal health care offenses.

Sec. 11437. Theft or embezzlement.

Sec. 11438. Laundering of monetary instruments.

Sec. 11439. Authorized investigative demand procedures.

PART 4—MEDICARE IMPROVEMENTS

Subpart A—Coordination of Benefits

Sec. 11441. Clarification of time and filing limitations.

Sec. 11442. Clarification of liability of third party administrators.

Sec. 11443. Clarification of payment amounts to Medicare.

Sec. 11444. Conditions for double damages.

Sec. 11445. Repeal of excise tax.

Sec. 11446. Information requirements.

Sec. 11447. Technical changes concerning minimum sizes of group health

plans.

Subpart B—Contractor Reform

Sec. 11451. Increased flexibility in contracting for medicare claims processing.

Subpart C—Provisions Relating to Part B of Medicare

Sec. 11461. Replacement of reasonable charge methodology by fee schedules.

Sec. 11462. Application of inherent reasonableness to surgical dressings.

Sec. 11463. Application of competitive acquisition process to certain part B

items and services.

Sec. 11464. Application of competitive acquisition process to laboratory services.

Sec. 11465. Changes in payments for clinical laboratory tests.

Subaprt D—Provisions Relating to Parts A and B of Medicare

Sec. 11471. Disclosure of taxpayer identifying numbers and other information.

Sec. 11472. Use of wage index for area in which home health services are furnished.
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1 PART 1—AMENDMENTS TO CURRENT LAW

2 ENFORCEMENT AUTHORITIES

3 SEC. 11402. EXTENSION OF CURRENT CIVIL MONEY PEN4 ALTIES.

5 (a) GENERAL CIVIL MONEY PENALTIES.—Section

6 1128A (42 U.S.C. 1320a–7a) is amended—

7 (1) in the third sentence of subsection (a), by

8 striking ‘‘programs under title XVIII’’ and inserting

9 ‘‘Federal health care program (as defined in sub10 section (m))’’;

11 (2) in subsection (f)—

12 (A) by redesignating paragraph (3) as

13 paragraph (4); and

14 (B) by inserting after paragraph (2) the

15 following new paragraph:

16 ‘‘(3) With respect to amounts recovered arising

17 out of a claim under a Federal health care program

18 (as defined in subsection (m)), the portion of such

19 amounts as is determined to have been paid by the

20 program shall be repaid to the program, and the

21 portion of such amount attributable to the amounts

22 recovered under this section by reason of the amend23 ments made by the Federal Health Care Payment

24 Integrity Act of 1995 (as estimated by the Sec25 retary) shall be deposited into the Health Care
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1 Fraud and Abuse Control Account established under

2 section 11423 of such Act.’’;

3 (3) in subsection (i)—

4 (A) in paragraph (2), by striking ‘‘title V,

5 XVIII, XIX, or XX of this Act’’ and inserting

6 ‘‘a Federal health care program (as defined in

7 subsection (m))’’;

8 (B) in paragraph (4), by striking ‘‘a health

9 insurance or medical services program under

10 title XVIII or XIX of this Act’’ and inserting

11 ‘‘a Federal health care program (as so de12 fined)’’; and

13 (C) in paragraph (5), by striking ‘‘title V,

14 XVIII, XIX, or XX’’ and inserting ‘‘a Federal

15 health care program (as so defined)’’; and

16 (4) by adding at the end the following new sub17 section:

18 ‘‘(m)(1) For purposes of this section, with respect to

19 a Federal health care program not contained in this Act,

20 references to the Secretary in this section shall be deemed

21 to be references to the Secretary of Administrator of the

22 department or agency with jurisdiction over such program

23 and references to the Inspector General of the Department

24 of Health and Human Services in this section shall be

25 deemed to be references to the Inspector General and any
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1 other office with primary enforcement authority of the ap2 plicable department or agency. With respect to investiga3 tions of an employee welfare benefit plan as defined in

4 section 3 of the Employee Retirement Income Security

5 Act, the agency or department shall be deemed to be the

6 Department of Labor.

7 ‘‘(2)(A) The Secretary and Administrator of the de8 partments and agencies referred to in paragraph (1) may

9 include, in any action pursuant to this section, claims

10 within the Jurisdiction of other Federal departments or

11 agencies as long as the following conditions are satisfied:

12 ‘‘(i) The case involves primarily claims submit13 ted to the Federal health care programs of the de14 partment or agency initiating the action.

15 ‘‘(ii) The Secretary of Administrator and the

16 Inspector General of the department or agency initi17 ating the action gives notice and an opportunity to

18 participate in the investigation to the Secretary or

19 Administrator and the Inspector General of the de20 partment or agency with primary jurisdiction over

21 the Federal health care programs to which the

22 claims were submitted. With respect to actions in23 volving an employee welfare benefit plan as defined

24 in section 3 of the Employee Retirement Income Se25 curity Act, the department with primary jurisdiction
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1 shall be deemed to be the Department of Labor for

2 purposes of this notice.

3 ‘‘(B) If the conditions specified in subparagraph (A)

4 are fulfilled, the Inspector General of the department or

5 agency initiating the action is authorized to exercise all

6 powers granted under the Inspector General Act of 1978

7 with respect to the claims submitted to the other depart8 ments or agencies to the same manner and extent as pro9 vided in that Act with respect to claims submitted to such

10 departments or agencies.’’.

11 (b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

12 OR CONTROL INTEREST IN PARTICIPATING ENTITY.—

13 Section 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—

14 (1) by striking ‘‘or’’ at the end of paragraph

15 (a)(D);

16 (2) by striking ‘‘, or’’ at the end of paragraph

17 (2) and inserting a semicolon;

18 (3) by striking the semicolon at the end of

19 paragraph (3) and inserting ‘‘; or’’; and

20 (4) by inserting after paragraph (3) the follow21 ing new paragraph:

22 ‘‘(4) in the case of a person who is not an orga23 nization, agency, or other entity, is excluded from

24 participating in a program under title XVIII or a

25 State health care program in accordance with this
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1 subsection or under section 1128 and who, at the

2 time of a violation of this subsection, retains a direct

3 or indirect ownership or control interest of 5 percent

4 or more, or an ownership or control interest (as de5 fined in section 1124(a)(3)) in, or who is an officer

6 or managing employee (as defined in section

7 1126(b)) of, an entity that is participating in a pro8 gram under title XVIII or a State health care pro9 gram;’’.

10 (c) EMPLOYER BILLING FOR SERVICES FURNISHED,

11 DIRECTED, OR PRESCRIBED BY AN EXCLUDED EM12 PLOYEE.—Section 1128A(a)(1) (42 U.S.C. 1320a–

13 7a(a)(1)) is amended—

14 (1) by striking ‘‘or’’ at the end of subparagraph

15 (C);

16 (2) by striking ‘‘; or’’ at the end of subpara17 graph (D) and inserting ‘‘, or’’; and

18 (3) by adding at the end the following new sub19 paragraph:

20 ‘‘(E) is for a medical or other item or serv21 ice furnished, directed, or prescribed by an indi22 vidual who is an employee or agent of the per23 son during a period in which such employee or

24 agent was excluded from the program under

25 which the claim was made on any of the
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1 grounds for exclusion described in subpara2 graph (D);’’.

3 (d) MODIFICATIONS OF AMOUNTS OF PENALTIES

4 AND ASSESSMENTS.—Section 1128A(a) (42 U.S.C.

5 1320a–7a(a)), as amended by subsection (b), is amended

6 in the matter following paragraph (4)—

7 (1) by striking ‘‘$2,000’’ and inserting

8 $10,000’’;

9 (2) by inserting ‘‘; in cases under paragraph

10 (4), $10,000 for each day the prohibited relationship

11 occurs’’ after ‘‘false or misleading information was

12 given’’; and

13 (3) by striking ‘‘twice the amount’’ and insert14 ing ‘‘3 times the amount’’.

15 (e) CLAIMS FOR ITEM OR SERVICE BASED ON INCOR16 RECT CODING.—Section 1128A(a)(1)(A) (42 U.S.C.

17 1320a–7a(a)(1)(A)) is amended by striking ‘‘claimed,’’

18 and inserting ‘‘claimed, including any person who engages

19 in a pattern or practice of presenting or causing to be pre20 sented a claim for an item or service that is based on a

21 code that the person knows or should know will result in

22 a greater payment to the person that the code the person

23 knows or should know is applicable to the item or service

24 actually provided’’.
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1 (f) PERMITTING SECRETARY TO IMPOSE CIVIL

2 MONEY PENALTY.—Section 1128A(b) (42 U.S.C. 1320a–

3 7a(b)) is amended by adding the following new subpara4 graph:

5 ‘‘(3) Any person (including any organization,

6 agency, or other entity, but excluding a beneficiary

7 as defined in subsection (i)(5)) who the Secretary

8 determines has violated section 1128B(b) of this

9 title shall be subject to a civil monetary penalty of

10 not more that $10,000 for each such violation. In

11 addition, such person shall be subject to an assess12 ment of not more than twice the total amount of the

13 remuneration offered, paid, solicited, or received in

14 violation of section 1128B(b). The total amount of

15 remuneration subject to all assessments shall be cal16 culated without regard to whether some portion

17 thereof also may have been intended to serve a pur18 pose other than one proscribed by section

19 1128B(b).’’.

20 (g) PROHIBITION AGAINST OFFERING INDUCEMENTS

21 TO INDIVIDUALS ENROLLED UNDER PROGRAMS.—

22 (1) OFFER OF REMUNERATION.—Section

23 1128A(a) (42 U.S.C. 1320a–7a(a)) as amended by

24 subsection (b) of this section, is amended—
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1 (A) by striking ‘‘or’’ at the end of para2 graph (3) and inserting a semicolon;

3 (B) by inserting ‘‘or’’ after the semicolon

4 at the end of paragraph (4); and

5 (C) by inserting after paragraph (4) the

6 following new paragraph:

7 ‘‘(5) offers to or transfers remuneration to

8 any individual eligible for benefits under a Fed9 eral health program that such person knows or

10 should know is likely to influence such individ11 ual to order or receive from a particular pro12 vider, practitioner, or supplier any item or serv13 ice for which payment may be made, in whole

14 or in part, under such program;’’.

15 (2) REMUNERATION DEFINED.—Section

16 2238A(i) (42 U.S.C. 1320a–7a(i)) is amended by

17 adding the following new paragraph:

18 ‘‘(6) The term ‘remuneration’ includes the waiv19 er of coinsurance and deductible amounts (or any

20 part thereof), and transfers of items or services for

21 free or for other than fair market value. The term

22 ‘remuneration’ does not include—

23 ‘‘(A) the waiver of coinsurance and deduct24 ible amounts by a person, if—
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1 ‘‘(i) the waiver is not offered as part

2 of any advertisement or solicitation;

3 ‘‘(ii) the person does not routinely

4 waive coinsurance or deductible amounts;

5 and

6 ‘‘(iii) the person—

7 ‘‘(I) waives the coinsurance and

8 deductible amount after determining

9 in good faith that the individual is in

10 financial need;

11 ‘‘(II) fails to collect coinsurance

12 or deductible amounts after making

13 reasonable collection efforts; or

14 (III) provides for any permissible

15 waiver as specified in section

16 1128B(b)(3) or in regulations issued

17 by the Secretary;

18 ‘‘(B) differentials in coinsurance and de19 ductible amounts as part of a benefit plan de20 sign as long as the differentials have been dis21 closed in writing to all beneficiaries, third party

22 payors, and providers, to whom claims are pre23 sented and as long as the differentials meet the

24 standards as defined in regulations promulgated
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1 by the Secretary not later than 180 days after

2 the date of the enactment of this Act; or

3 ‘‘(C) incentives given to individuals to pro4 mote the delivery of preventive care as deter5 mined by the Secretary in regulations as pro6 mulgated.’’.

7 (h) DEFINITION OF FEDERAL HEALTH CARE PRO8 GRAM.—Section 1128A (42 U.S.C. 1320a–7b) is amended

9 by adding at the end the following new subsection:

10 ‘‘(m) FEDERAL HEALTH CARE PROGRAM.—For pur11 poses of this section, the term ‘Federal health care pro12 gram’ means—

13 ‘‘(1) any plan or program (except a plan de14 scribed in section 3(1) of the Employee Retirement

15 Income Security Act) that provides health benefits,

16 whether directly, through insurance, or otherwise,

17 which is funded, in whole or in part, by the United

18 States Government; or

19 ‘‘(2) any State health care program, as defined

20 in section 1128(h).’’.

21 SEC. 11403. EXCLUSION OF PERSONS WHO DEFRAUD MEDI22 CARE.

23 (a) MINIMUM PERIOD OF EXCLUSION FOR CERTAIN

24 INDIVIDUALS AND ENTITIES SUBJECT TO PERMISSIVE

25 EXCLUSION FROM MEDICARE AND STATE HEALTH CARE
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1 PROGRAMS.—Section 1128(c)(3) (42 U.S.C. 1320a–

2 7(c)(3)) is amended by adding at the end the following

3 new subparagraphs:

4 ‘‘(D) In the case of an exclusion of an individ5 ual or entity under paragraph (1), (2), or (3) of sub6 section (b), the period of the exclusion shall be 3

7 years, unless the Secretary determines in accordance

8 with published regulations that a longer period is

9 appropriate because of aggravating circumstances.

10 ‘‘(E) In the case of an exclusion of an individ11 ual or entity under subsection (b)(4) or (b)(5), the

12 period of the exclusion shall not be less than the pe13 riod during which the individual or entity’s license to

14 provide health care is revoked, suspended, or surren15 dered, or the individual or the entity is excluded or

16 suspended from a Federal or State health care pro17 gram.

18 ‘‘(F) In the case of an exclusion of an individ19 ual or entity under subsection (b)(6)(B), the period

20 of the exclusion shall be not less than 1 year.’’.

21 (b) PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

22 OWNERSHIP OR CONTROL INTEREST IN SANCTIONED EN23 TITIES.—Section 1128(b) (42 U.S.C. 1320a–7(b)) is

24 amended by adding at the end the following new para25 graph:
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1 ‘‘(15) INDIVIDUALS CONTROLLING A SANC2 TIONED ENTITY.—Any individual who has a direct

3 or indirect ownership or control interest of 5 percent

4 or more, or an ownership or control interest (as de5 fined in section 1124(a)(3)) in, or who is an officer

6 or managing employee (as defined in section

7 1126(b)) of, an entity—

8 ‘‘(A) that has been convicted of any of9 fense described in subsection (a) or in para10 graph (1), (2), or (3) of this subsection; or

11 ‘‘(B) that has been excluded from partici12 pation under a program title XVIII or under a

13 State health care program.’’.

14 (c) SANCTIONS AGAINST PROVIDERS FOR EXCESSIVE

15 FEES OR PRICES.—Section 1128(b)(6)(A) (42 U.S.C.

16 1320a–7(b)(6)(A)) is amended—

17 (1) by inserting after ‘‘substantially in excess of

18 such individual’s or entity’s usual charges’’ the fol19 lowing: ‘‘(as specified by the Secretary in regula20 tions)’’; and

21 (2) by striking ‘‘(or in applicable cases, sub22 stantially in excess of such individuals or entities’

23 costs)’’ and inserting ‘‘, costs or fees’’ before ‘‘for

24 such items or services.’’.
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1 (d) APPLICABILITY OF THE BANKRUPTCY CODE TO

2 PROGRAM SANCTIONS.—

3 (1) Section 1128 (42 U.S.C. 1320a–7) is

4 amended by adding at the end the following new

5 subsection:

6 ‘‘(j) An exclusion imposed under this sec7 tion is not subject to the automatic stay im8 posed under the Bankruptcy Code, 11 U.S.C.

9 § 362.’’.

10 (2) Section 1128A(a) (42 U.S.C. 1320a–7a) is

11 amended by adding at the end the following sen12 tence: ‘‘An exclusion imposed under this section is

13 not subject to the automatic stay which is imposed

14 under 11 U.S.C. § 362, and any penalties and as15 sessments imposed under this section shall be

16 nondischargeable under the Bankruptcy Code (11

17 U.S.C. § 101 et seq.).’’.

18 (3) Section 1892(a)(4) (42 U.S.C.

19 1395ccc(a)(4)) is amended by adding at the end the

20 following sentence: ‘‘An exclusion imposed under

21 paragraph (2)(C)(ii) or paragraph (3)(B) is not sub22 ject to the automatic stay which is imposed under

23 the Bankruptcy Code (11 U.S.C. § 362).’’.
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1 SEC. 11404. ILLEGAL REMUNERATION WITH RESPECT TO

2 HEALTH CARE BENEFIT PROGRAMS.

3 (a) IN GENERAL.—Chapter 11 of title 18, United

4 States Code, is amended by adding at the end the follow5 ing:

6 ‘‘§ 227. Illegal remuneration with respect to health

7 care benefit programs

8 ‘‘(a) Whoever knowingly and willfully solicits or re9 ceives any remuneration (including any kickback, bribe, or

10 rebate) directly or indirectly, overtly or covertly, in cash

11 or in kind—

12 ‘‘(1) in return for referring any individual to a

13 person for the furnishing or arranging for the fur14 nishing of any item or service for which payment

15 may be made in whole or in part by any health care

16 benefit program; or

17 ‘‘(2) in return for purchasing, leasing, ordering,

18 or arranging for or recommending purchasing, leas19 ing or ordering any good, facility, service, or item

20 for which payment may be made in whole or in part

21 by any health care benefit program, or attempting to

22 do so,

23 shall be fined under this title or imprisoned for not more

24 than 5 years, or both.

25 ‘‘(b) Whoever knowingly and willfully offers or pays

26 any remuneration (including any kickback, bribe, or re-
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1 bate) directly or indirectly, overtly, or covertly, in cash or

2 in kind to any person to induce such person—

3 ‘‘(1) to refer an individual to a person for the

4 furnishing or arranging for the furnishing of any

5 item or service for which payment may be made in

6 whole or in part by any health benefit program; or

7 ‘‘(2) to purchase, lease, order, or arrange for or

8 recommend purchasing, leasing, or ordering any

9 good, facility, service, or item for which payment

10 may be made in whole or in part by any health bene11 fit program or attempts to do so,

12 shall be fined under this title or imprisoned for not more

13 than 5 years, or both.

14 ‘‘(c) Subsections (a) and (b) shall not apply to—

15 ‘‘(1) a discount or other reduction in price ob16 tained by a provider of services or other entity under

17 a health care benefit program if the reduction in

18 price is properly disclosed and appropriately re19 flected in the costs claimed or charges made by the

20 provider or entity under a health care benefit pro21 gram;

22 ‘‘(2) any amount paid by an employer to an em23 ployee (who has a bona fide employment relationship

24 with such employer) for employment in the provision

25 of covered items or services if the amount of the re-
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1 muneration under the arrangement is consistent

2 with the fair market value of the services and is not

3 determined in a manner that takes into account (di4 rectly or indirectly) the volume or value of any refer5 rals;

6 ‘‘(3) any amount paid by a vendor of goods or

7 services to a person authorized to act as a purchas8 ing agent for a group of individuals or entities who

9 are furnishing services reimbursed under a health

10 care benefit program if—

11 ‘‘(A) the person has a written contract,

12 with each such individual or entity, which speci13 fies the amount to be paid the person, which

14 amount may be a fixed amount or a percentage

15 of the value of the purchases made by each

16 such individual or entity under the contract,

17 and

18 ‘‘(B) in the case of an entity that is a pro19 vider of services (as defined in section 1861(u)

20 of the Social Security Act, the person discloses

21 (in such form and manner as the Secretary of

22 Health and Human Services requires) to the

23 entity and, upon request, to the Secretary the

24 amount received from each such vendor with re-
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1 spect to purchases made by or on behalf of the

2 entity;

3 ‘‘(4) a waiver of any coinsurance under part B

4 of title XVIII of the Social Security Act by a feder5 ally qualified health care center with respect to an

6 individual who qualifies for subsidized services under

7 a provision of the Public Health Service Act; and

8 ‘‘(5) any payment practice specified by the Sec9 retary of Health and Human Services in regulations

10 promulgated pursuant to section 14(a) of the Medi11 care and Medicaid Patient and Program Protection

12 act of 1987.

13 ‘‘(d) Any person injured in his business or property

14 by reason of a violation of this section or section 226 of

15 this title may sue therefor in any appropriate United

16 States district court and shall recover threefold the dam17 ages such person sustains and the cost of the suit, includ18 ing a reasonable attorney’s fee.

19 ‘‘(e) As used in this section, ‘health care benefit pro20 gram’ has the meaning given such term in section 1347(b)

21 of this title.’’.

22 (b) CLERICAL AMENDMENT.—The table of sections

23 at the beginning of chapter 11 of title 18, United States

24 Code, is amended by adding at the end the following:

‘‘227. Illegal remuneration with respect to health care benefit programs.’’.
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1 (c) CONFORMING AMENDMENT.—Section 1128B of

2 the Social Security Act (42 U.S.C. 1320a–7b) is amended

3 by striking subsection (b).

4 SEC. 11405. AMENDMENTS TO PRO (QUALITY OF CARE)

5 SANCTIONS PROVISIONS.

6 (a) MINUMUM PERIOD OF EXCLUSION FOR PRACTI7 TIONERS AND PERSONS FAILING TO MEET STATUTORY

8 OBLIGATIONS.—

9 (1) IN GENERAL.—Section 1156(b)(1) (42

10 U.S.C. 1320c–5(b)(1)) is amended in the second

11 sentence by striking ‘‘may prescribe)’’ and inserting

12 ‘‘may prescribe, except that such period may not be

13 less than 1 year).’’.

14 (2) CONFORMING AMENDMENT.—Section

15 1156(b)(2) (42 U.S.C. 1320c–5(b)(2)) is amended

16 by striking ‘‘shall remain’’ and inserting ‘‘shall (sub17 ject to the minimum period specified in the second

18 sentence of paragraph (1)) remain’’.

19 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI20 TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)

21 (42 U.S.C. 1320c–5(b)(1) is amended—

22 (1) in the second sentence, by striking ‘‘and de23 termines’’ and all that follows through ‘‘such obliga24 tions,’’; and

25 (2) by striking the third sentence.
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1 (c) SANCTIONS AGAINST PRACTITIONERS AND PER2 SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLI3 GATIONS.—Section 1156(b)(3) (42 U.S.C. 1320c–5(b)(3))

4 is amended by striking ‘‘the actual or estimated cost’’ and

5 inserting ‘‘up to $10,000 for each instance.’’

6 SEC. 11406. FINAL ADVERSE ACTION DATA BASE.

7 (a) GENERAL PURPOSE.—Not later than January 1,

8 1997, the Secretary of Health and Human Services (in

9 this section referred to as the ‘‘Secretary’’) shall establish

10 a national health care fraud and abuse data collection pro11 gram or the reporting of final adverse actions against

12 health care providers, suppliers, or practitioners as re13 quired by subsection (b), with access as set forth in sub14 section (c).

15 (b) REPORTING OF INFORMATION.—

16 (1) IN GENERAL.—Each government agency

17 and Federal health care program shall (and each

18 other health plan may) report to the Secretary any

19 final adverse action taken against a health care pro20 vider, supplier, or practitioner.

21 (2) INFORMATION TO BE REPORTED.—The in22 formation to be reported under paragraph (1) in23 cludes:
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1 (A) The name and TIN (as defined in sec2 tion 7701(a)(41) of the Internal Revenue Code

3 of 1986) of—

4 (i) any health care provider, supplier,

5 or practitioner that is the subject of a final

6 adverse action, and

7 (ii) any individual with a relationship

8 specified in section 1128(b)(8)(A) to an

9 entity described in clause (i).

10 (B) The name (if know) of any health care

11 entity with which a health care provider, sup12 plier, or practitioner is affiliated or associated.

13 (C) The nature of the final adverse action

14 and whether such action is on appeal.

15 (D) A description of the acts of omissions

16 and injuries upon which the final adverse action

17 was based, and such other information as the

18 Secretary determines by regulation is required

19 for appropriate interpretation of information re20 ported under this section.

21 (3) CONFIDENTIALITY.—In determining what

22 information is required, the Secretary shall include

23 procedures to ensure that the privacy of individuals

24 receiving health care services is appropriately pro25 tected.
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1 (4) TIMING AND FORM OF REPORTING.—The

2 information required to be reported under this sub3 section shall be reported regularly (but less often

4 than monthly) and in such form and manner as the

5 Secretary prescribes. Such information shall first be

6 required to be reported on a date specified by the

7 Secretary.

8 (c) DISCLOSURE AND CORRECTION OF INFORMA9 TION.—

10 (1) DISCLOSURE.—With respect to the informa11 tion about final adverse actions reported to the Sec12 retary under this section respecting a health care

13 provider, supplier, or practitioner, the Secretary

14 shall, by regulation, provide for—

15 (A) disclosure of the information, upon re16 quest, to the health care provider, supplier, or

17 licensed practitioner, and

18 (B) procedures in the case of disputed ac19 curacy of the information.

20 (2) CORRECTIONS.—Each Government agency

21 and health plan shall report corrections of informa22 tion already reported about any final adverse action

23 taken against a health care provider, supplier, or

24 practitioner, in such form and manner that the Sec25 retary prescribes by regulation.
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1 (d) ACCESS TO REPORTED INFORMATION.—

2 (1) AVAILABILITY.—The information in this

3 database shall be available to Federal and State gov4 ernment agencies, health plans, and the public pur5 suant to procedures that the Secretary shall provide

6 by regulation.

7 (2) FEES FOR DISCLOSURE.—The Secretary

8 may establish or approve reasonable fees for the dis9 closure of information in this database (other than

10 with respect to requests by Federal agencies). The

11 amount of such a fee may be sufficient to recover

12 the full costs of carrying out the provisions of this

13 section, including reporting, disclosure and adminis14 tration. Such fees shall be available to the Secretary

15 or, in the Secretary’s discretion to the agency des16 ignated under this section to cover such costs.

17 (e) PROTECTION FROM LIABILITY FOR REPORT18 ING.—No person or entity, including the agency des19 ignated by the Secretary in subsection (b)(5) shall be held

20 liable in any civil action with respect to any report made

21 as required by this section, without knowledge of the fal22 sity of the information contained in the report.

23 (f) DEFINITIONS AND SPECIAL RULES.—For pur24 poses of this section:
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1 (1)(A) The term ‘‘final adverse action’’ in2 cludes:

3 (i) Civil judgments against a health care

4 provider or practitioner in Federal or State

5 court related to the delivery of a health care

6 item or service.

7 (ii) Federal or State criminal convictions

8 related to the delivery of a health care item or

9 service.

10 (iii) Actions by Federal or State agencies

11 responsible for the licensing and certifications

12 of health care providers, suppliers, and licensed

13 health care practitioners, including—

14 (I) formal or official actions, such as

15 revocation or suspension of a license (and

16 the length of any such suspension), rep17 rimand, censure or probation,

18 (II) any other loss of license, or the

19 right to apply for or renew a license of the

20 provider, supplier, or practitioner, whether

21 by operation of law, voluntary surrender,

22 non-renewable or otherwise, or

23 (III) any other negative action or

24 finding by such Federal or State agency

25 that, is publicly available information.
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1 (iv) Exclusion from participation in Fed2 eral or State health care programs.

3 (v) Any other adjudicated actions or deci4 sions that the Secretary shall establish by regu5 lation.

6 (B) The term does not include any action with

7 respect to a malpractice claim.

8 (2) The terms ‘‘licensed health care practi9 tioner’’, ‘‘licensed practitioner’’, and ‘‘practitioner’’

10 mean, with respect to a State, an individual who is

11 licensed or otherwise authorized by the State to pro12 vide health care services (or any individual who,

13 without authority holds himself or herself out to be

14 so licensed or authorized).

15 (3) The term ‘‘health care provider’’ means a

16 provider of services as defined in section 1861(u) of

17 the Social Security Act, and any person or entity, in18 cluding a health maintenance organization, group

19 medical practice, or any other entity listed by the

20 Secretary in regulation, that provides health care

21 services.

22 (4) The term ‘‘supplier’’ means a supplier of

23 health care items and services described in section

24 1819(a) and (b), and section 1861 of the Social Se25 curity Act.
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1 (5) The term ‘‘Government agency’’ shall in2 clude:

3 (A) The Department of Justice.

4 (B) The Department of Health and

5 Human Services.

6 (C) Any other Federal agency that either

7 administers or provides payment for the deliv8 ery of health care services, including, but not

9 limited to the Department of Defense and the

10 Veterans’ Administration.

11 (D) State law enforcement agencies.

12 (E) State medicaid fraud and abuse units.

13 (F) Federal or State agencies responsible

14 for the licensing and certification of health care

15 providers and licensed health care practitioners.

16 (6) the term ‘‘Federal health care program’’

17 has the meaning given such term in section

18 1128B(b) of the Social Security Act.

19 (7) The term ‘‘health plan’’ has the meaning

20 given such term in section 1347 of title 18 of the

21 United States Code.

22 (8) For purposes of paragraph (1), the exist23 ence of a conviction shall be determined under sec24 tion 1128 of the Social Security Act.
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1 (g) CONFORMING AMENDMENT.—Section 1921(d)

2 (42 U.S.C. 1396r-2(d)) is amended by inserting ‘‘and sec3 tion 105 of the Federal Health Care Payment Integrity

4 Act of 1995 after ‘‘section 422 of the Health Care Quality

5 Improvement Act of 1986’’.

6 SEC. 11407. EXPANSION OF AUTHORITY OF MEDICAID

7 FRAUD CONTROL UNITS.

8 (a) EXTENSION OF CONCURRENT AUTHORITY TO IN9 VESTIGATE AND PROSECUTE FRAUD IN OTHER FEDERAL

10 PROGRAMS.—Section 1903(q)(3) (42 U.S.C. 1396b(q)(3))

11 is amended by striking ‘‘in connection with’’ and all that

12 follows and inserting the following:

13 ‘‘in connection with—

14 ‘‘(A) any aspect of the provision of medical

15 assistance and the activities of providers of

16 such assistance under the State plan under this

17 title; and

18 ‘‘(B) (in cases where the entity’s function

19 is also described by subparagraph (A), and

20 upon the approval of the relevant Federal agen21 cy) any aspect of the provision of health care

22 services and activities of providers of such serv23 ices under any Federal health care program (as

24 defined in section 1128B(b)(1)).’’.
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1 (b) EXTENSION OF AUTHORITY TO INVESTIGATE

2 AND PROSECUTE PATIENT ABUSE IN NON-MEDICAID

3 BOARD AND CARE FACILITIES.—Section 1903(q)(4) (42

4 U.S.C. 1396(b)(q)(4)) is amended to read as follows:

5 ‘‘(4)(A) The entity has—

6 ‘‘(i) procedures for reviewing complaints of

7 abuse or neglect of patients in health care fa8 cilities which receive payments under the State

9 plan under this title;

10 ‘‘(ii) at the option of the entity, procedures

11 for reviewing complaints of abuse or neglect of

12 patients residing in board and care facilities;

13 and

14 ‘‘(iii) procedures for acting upon such com15 plaints under the criminal laws of the State or

16 for referring such complaints to other State

17 agencies for action.

18 ‘‘(B) For purposes of this paragraph, the term

19 ‘board and care facility’ means a residential setting

20 which receives payment from or on behalf of two or

21 more unrelated adults who reside in such facility,

22 and for whom one or both of the following is pro23 vided:

24 ‘‘(i) Nursing care services provided by, or

25 under the supervision of, a registered nurse, li-
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1 censed practical nurse, or licensed nursing as2 sistant.

3 ‘‘(ii) Personal care services that assist resi4 dents with the activities of daily living, includ5 ing personal hygiene, dressing, bathing, eating,

6 toileting, ambulation, transfer, positioning, self7 medication, body care, travel to medical serv8 ices, essential shopping, meal preparation, laun9 dry, and housework.’’.

10 (c) AUTHORITY OF INSPECTORS GENERAL.—Nothing

11 in this Act affects the authority of the Inspectors General

12 of the Department of Veterans Affairs, the Department

13 of Defense, and other health care agencies under the In14 spector General Act of 1978 to conduct investigations, au15 dits, inspections, and evaluations of programs and oper16 ations of their respective agencies, including health care

17 programs and operations.

18 SEC. 11408. RECOVERY OF MEDICARE OVERPAYMENTS

19 FROM BANKRUPT PROVIDERS.

20 (a) MEDICARE PART A.—Section 1815(d) (42 U.S.C.

21 1395g(d)) is amended by adding at the end the following

22 sentence: ‘‘Amounts due to the program under this part

23 are not dischargeable under any title of the Bankruptcy

24 Code (11 U.S.C. 101 et seq.).’’.
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1 (b) MEDICARE PART B.—Section 1833(j) (42 U.S.C.

2 13951(j)) is amended by adding at the end the following

3 sentence: ‘‘Amounts due to the program under this part

4 are not dischargeable under any title of the Bankruptcy

5 Code (11 U.S.C. 101 et seq.).’’.

6 SEC. 11409. GRANTS TO STATES TO REVOKE LICENSES OF

7 UNQUALIFIED PROVIDERS.

8 The Secretary of Health and Human Services is au9 thorized to make grants to States for activities necessary

10 to revoke the licenses, certification, or other State author11 ization of health care professionals and entities determined

12 to be unqualified for such authorization on the basis of

13 exclusion from Federal health care programs under sec14 tion 1128 or 1128A or for any other reason.

15 SEC. 11410. AUTHORIZATION FOR INTERCEPTION OF WIRE,

16 ORAL OR ELECTRONIC COMMUNICATIONS.

17 (a) Section 2516(1)(c) of title 18, United States

18 Code, is amended—

19 (1) by inserting ‘‘section 226 (bribery and graft

20 in connection with health care), section 227 (illegal

21 remunerations,’’ after ‘‘section 224 (bribery in sport22 ing contests),’’; and

23 (2) by inserting ‘‘section 1347 (health care

24 fraud),’’ after ‘‘section 1344 (relating to bank

25 fraud),’’.
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1 (b) DEFINITIONS.—Section 1961(1) of title 18, Unit2 ed States Code, is amended—

3 (1) by inserting ‘‘sections 226 and 227 (relating

4 to bribery and graft, and illegal remuneration in

5 connection with health care),’’ after ‘‘section 224

6 (relating to sports bribery),’’;

7 (2) by inserting ‘‘section 669 (relating to theft

8 or embezzlement in connection with health care),’’

9 after ‘‘section 664 (relating to embezzlement from

10 pension and welfare funds),’’; and

11 (3) by inserting ‘‘section 1347 (relating to

12 health care fraud),’’ after ‘‘section 1344 (relating to

13 financial institution fraud),’’.

14 PART 2—RESOURCES FOR ANTI-FRAUD

15 ACTIVITIES

16 SEC. 11421. HEALTH CARE FINANCING ADMINISTRATION

17 AND HHS INSPECTOR GENERAL FUNDING.

18 (a) FINDINGS AND STATEMENT OF PURPOSE.—

19 (1) FINDINGS.—The Congress finds that—

20 (A) a significant amount of funds ex21 pended on the Medicare program are lost to

22 fraud, medically unnecessary services and other

23 abuse; and

24 (B) The Department of Health and

25 Human Services through activities of the Office
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1 of Inspector General and Health Care Financ2 ing Administration is effective in combating

3 Medicare fraud and abuse and returning

4 misspent funds to the Federal Treasury.

5 (2) PURPOSE.—It is the purpose of this Act

6 to—

7 (A) protect, to the maximum extent prac8 ticable, the Medicare and Medicaid programs

9 from further losses due to fraud and abuse;

10 (B) test methods by which the savings that

11 these activities generate can be properly ac12 counted for when determining funding levels;

13 and

14 (C) ensure an adequate source of five-year

15 funding for HHS Medicare anti-fraud and

16 abuse activities.

17 (b) ESTABLISHMENT OF MEDICARE ANTI-FRAUD

18 AND ABUSE PROGRAM.—Title XI (42 U.S.C. 1301 et seq.)

19 is amended by adding at the end thereof the following new

20 part:

21 ‘‘PART C—MEDICARE ANTI-FRAUD AND ABUSE

22 PROGRAM

23 ‘‘PURPOSE

24 ‘‘SEC. 1171. The purpose of this part is to provide

25 funding for activities of the Office of Inspector General
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1 related to preventing and detecting fraud and abuse in the

2 programs under title XVIII and determining the accuracy

3 and appropriateness of expenditures under such programs.

4 ‘‘FUNDING AVAILABLE

5 ‘‘SEC. 1172. (a) COVERED ANTI-FRAUD AND ABUSE

6 ACTIVITIES.—Funding from the trust funds established

7 under title XVIII shall be available, in accordance with

8 subsection (b), for activities conducted by the Inspector

9 General, either directly or by contract, pursuant to this

10 Act or the Inspector General Act of 1978, for the purposes

11 of—

12 ‘‘(1) Prosecuting matters related to the pro13 grams under title XVIII through criminal, civil, and

14 administrative proceedings.

15 ‘‘(2) Conducting investigations relating to such

16 programs.

17 ‘‘(3) Performing financial and performance au18 dits of programs and operations relating to the such

19 programs.

20 ‘‘(4) Performing inspections and other evalua21 tions relating to such programs.

22 ‘‘(5) Conducting provider and consumer edu23 cation activities regarding the requirements of this

24 title and title XVIII.
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1 ‘‘(b) PAYMENTS FROM TRUST FUNDS.—Obligations

2 incurred by the Inspector General in carrying out the ac3 tivities designated in subsection (a) shall be paid from—

4 ‘‘(1) funds in the Federal Hospital Insurance

5 Trust Fund; and

6 ‘‘(2) funds in the Federal Supplementary Medi7 cal Insurance Trust Fund, in the amounts set forth

8 in subsection (c), allocated between those funds as

9 the Secretary shall deem fair and equitable after

10 taking into consideration the expenses attributable

11 to each of the programs under title XVIII. The Sec12 retary shall make such transfers of moneys between

13 those funds as may be appropriate to settle accounts

14 between them in cases where expenses properly pay15 able from one fund have been paid from the other

16 fund.

17 ‘‘(c) PAYMENT AMOUNTS.—Total amounts paid from

18 the Trust Funds in accordance with subsection (b) shall

19 equal—

20 ‘‘(1) $130 million for fiscal year 1996;

21 ‘‘(2) $181 million for fiscal year 1997;

22 ‘‘(3) $204 million for fiscal year 1998;

23 ‘‘(4) $223 million for fiscal year 1999; and

24 ‘‘(5) $244 million for fiscal year 2000.’’.
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1 SEC. 11422. ESTABLISHMENT OF THE MEDICARE BENE2 FICIARY INTEGRITY SYSTEM.

3 (a) IN GENERAL.—Part C of title XVIII (42 U.S.C.

4 1395x et seq.) is amended by inserting after section 1889

5 the following:

6 ‘‘BENEFICIARY INTEGRITY SYSTEM

7 ‘‘SEC. 1890. (a) Obligations incurred for beneficiary

8 integrity system activities for each of fiscal years 1996

9 through 2000 shall be paid from funds in the Federal

10 Hospital Insurance Trust Fund and the Federal Supple11 mentary Medical Insurance Trust Fund, in the amounts

12 set forth in subsection (b), allocated between those funds

13 as the Secretary shall deem fair and equitable after taking

14 into consideration the expenses attributable to each of the

15 programs under this title. The Secretary shall make such

16 transfers or moneys between those funds as may be appro17 priate to settle accounts between them in cases where ex18 penses properly payable from one fund have been paid

19 from the other fund.

20 ‘‘(b) Total amounts paid from the Trust Funds in

21 accordance with subsection (a) shall equal—

22 ‘‘(1) $430,000,000 for fiscal year 1996,

23 ‘‘(2) $490,000,000 for fiscal year 1997,

24 ‘‘(3) $550,000,000 for fiscal year 1998,

25 ‘‘(4) $620,000,000 for fiscal year 1999, and

26 ‘‘(5) $670,000,000 for fiscal year 2000.
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1 ‘‘(c) For purposes of this section, beneficiary integ2 rity system activities consist of the following:

3 ‘‘(1) Review of activities of providers of services

4 or other persons in connection with this title, includ5 ing medical and utilization review and fraud review.

6 ‘‘(2) Audit of cost reports.

7 ‘‘(3) Determination as to whether payment

8 should not be, or should not have been, made under

9 this title by reason of section 1862(b), and recovery

10 of payments that should not have been made.

11 ‘‘(4) Education of providers of services, bene12 ficiaries, and other persons with respect to payment

13 integrity and beneficiary integrity system issues.’’.

14 (b) EFFECTIVE DATE.—The amendment made by

15 subsection (a) applies to obligations incurred after fiscal

16 year 1995.

17 SEC. 11423. GOVERNMENT-WIDE ANTI-FRAUD REINVEST18 MENT FUND.

19 (a) ESTABLISHMENT.—

20 (1) IN GENERAL.—There is hereby established

21 the Health Care Fraud and Abuse Control Account.

22 The Health Care Fraud and Abuse Control Account

23 shall consist of—

24 (A) such gifts and bequests as may be

25 made as provided in subparagraph (B);
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1 (B) such amounts as may be deposited in

2 the Health Care Fraud and Abuse Control Ac3 count as provided in title XI of the Social Secu4 rity Act; and

5 (C) such amounts as are transferred to the

6 Health Care Fraud and Abuse Control Account

7 under paragraph (3), but in no year shall more

8 than $10 million be transferred or otherwise de9 posited to the Health Care Fraud and Abuse

10 Control Account.

11 (2) AUTHORIZATION TO ACCEPT GIFTS.—The

12 Health Care Fraud and Abuse Control Account is

13 authorized to accept on behalf of the United States

14 money gifts and bequests made unconditionally to

15 the Health Care Fraud and Abuse Control Account

16 for the benefit of the Health Care Fraud and Abuse

17 Control Program or any activity financed through

18 the Health Care Fraud and Abuse Control Account,

19 but not to exceed $10 million.

20 (3) TRANSFER OF AMOUNTS.—The Secretary of

21 the Treasury shall transfer to the Health Care

22 Fraud and Abuse Control Account, under rules simi23 lar to the rules in section 9601 of the Internal Reve24 nue Code of 1986, an amount equal to the sum of

25 the following:
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1 (A) Civil monetary penalties and assess2 ments recovered (including voluntary settlement

3 agreements) under titles XI, XVIII, and XIX of

4 the Social Security Act (except as otherwise

5 provided by law); the Program Fraud Civil

6 Remedies Act (31 U.S.C. 3801 et seq.) and

7 other civil monetary penalties and assessments

8 imposed in health care cases.

9 (B) Penalties and damages otherwise cred10 itable to Miscellaneous Receipts, Treasury, ob11 tained (including voluntary settlement agree12 ments) under the False Claims Act (31 U.S.C.

13 3729 et seq.), in cases involving claims related

14 to the provision of health care items and serv15 ices (other than funds awarded to a relator or

16 for the damages sustained by the health plan

17 because of the acts governed by section 3729).

18 (b) GENERAL USE OF FUNDS.—

19 (1) IN GENERAL.—Amounts in the Health Care

20 Fraud and Abuse Control Account shall be paid, at

21 the discretion jointly of the Attorney General and

22 the Secretary of Health and Human Services (acting

23 through the Inspector General of the Department of

24 Health and Human Services) to cover the costs (in25 cluding equipment, salaries and benefits, and travel
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1 and training) of activities designed to prevent and

2 detect health care fraud and abuse, and to promote

3 economy and efficiency in Federal health care pro4 grams, such as health care fraud investigations, au5 dits, and inspections, including the costs of—

6 (A) prosecuting health care matters

7 (through criminal, civil, and administrative pro8 ceedings);

9 (B) investigations;

10 (C) financial and performance audits of

11 health care programs and operations;

12 (D) inspections and other evaluations; and

13 (E) provider and consumer education re14 garding compliance with the provisions of this

15 title.

16 (2) ERISA PLANS.—Any recoveries in connec17 tion with an employee welfare benefit plan as de18 fined in section 3 of the Employee Retirement In19 come Security Act of 1974 (18 U.S.C. 1002) shall

20 first be used to make whole participants and bene21 ficiaries of the employee welfare benefit plan.

22 (3) FUNDS USED TO SUPPLEMENT AGENCY AP23 PROPRIATIONS.—It is intended that disbursements

24 made from the Health Care Fraud and Abuse con25 trol Account be fairly apportioned among all Federal
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1 health care agencies and be used to increase and not

2 supplant the recipient agency’s appropriated operat3 ing budget.

4 (4) ANNUAL REPORT.—The Secretary and the

5 Attorney General shall submit jointly an annual re6 port to Congress on the amount of revenue which is

7 generated and disbursed by the Health Care Fraud

8 and Abuse Control Account in each fiscal year.

9 PART 3—AMENDMENTS TO CRIMINAL LAW

10 SEC. 11431. HEALTH CARE FRAUD.

11 IN GENERAL.—

12 (1) FINES AND IMPRISONMENT FOR HEALTH

13 CARE FRAUD VIOLATIONS.—Chapter 63 of title 18,

14 United States Code, is amended by adding at the

15 end the following new section:

16 ‘‘§ 1347. Health care fraud

17 ‘‘(a) Whoever knowingly and willfully executes, or at18 tempts to execute, a scheme or artifice—

19 ‘‘(1) to defraud any health plan or other per20 son, in connection with the delivery of or payment

21 for health care benefits, items, or services; or

22 ‘‘(2) to obtain, by means of false or fraudulent

23 pretenses, representations, or promises, any of the

24 money or property owned by, or under the custody

25 or control of, any health plan, or person in connec-
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1 tion with the delivery of or payment for health care

2 benefits, items, and services;

3 shall be fined under this title or imprisoned not more than

4 10 years, or both. If the violation results in serious bodily

5 injury (as defined in section 1365(g)(3) of this title), such

6 person may be imprisoned for any term of years.

7 ‘‘(b) For purposes of this section, the term ‘ health

8 plan means a plan or program that provides health bene9 fits, whether directly, through insurance, or otherwise, and

10 includes—

11 ‘‘(1) a policy of health insurance;

12 ‘‘(2) a contract of a service benefit organiza13 tion;

14 ‘‘(3) a membership agreement with a health

15 maintenance organization or other prepaid health

16 plan; and

17 ‘‘(4) an employee welfare benefit plan or a mul18 tiple employer welfare arrangement (as those terms

19 are defined in section 3 of the Employee Retirement

20 Income Security Act of 1974 (29 U.S.C. 1002).’’.

21 (2) CLERICAL AMENDMENT.—The table of sec22 tions at the beginning of chapter 63 of title 18,

23 United States Code, is amended by adding at the

24 end the following:

‘‘1347. Health care fraud.’’.
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1 SEC. 11432. FORFEITURES FOR FEDERAL HEALTH CARE OF2 FENSES.

3 IN GENERAL.—Section 982(a) of title 18, United

4 States Code, is amended by adding after paragraph (5)

5 the following new paragraph:

6 ‘‘(6)(A) the court, in imposing sentence on a

7 person convicted of a Federal health care offense,

8 shall order the person to forfeit property, real or

9 personal, that constitutes or is derived, directly or

10 indirectly, from proceeds traceable to the commission

11 of the offense.

12 ‘‘(B) For purposes of this paragraph, the term

13 ‘Federal health care offense’ means a violation of, or

14 a criminal conspiracy to violate—

15 ‘‘(i) section 1347 of this title;

16 ‘‘(ii) section 1128B of the Social Security

17 Act;

18 ‘‘(iii) sections 287, 371, 664, 666, 1001,

19 1027, 1341, 1343, 1920, of 1954 of this title

20 if the violation or conspiracy relates to health

21 care fraud; or

22 ‘‘(iv) section 501 or 511 of the Employee

23 Retirement Income Security Act of 1974, if the

24 violation or conspiracy relates to health care

25 fraud.’’.
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1 SEC. 11433. INJUNCTIVE RELIEF RELATING TO FEDERAL

2 HEALTH CARE OFFENSES.

3 (a) IN GENERAL.—Section 1345(a)(1) of title 18,

4 United States Code, is amended—

5 (1) by striking ‘‘or’’ at the end of subparagraph

6 (A);

7 (2) by inserting ‘‘or’’ at the end of subpara8 graph (B); and

9 (3) by adding at the end the following new sub10 paragraph:

11 ‘‘(C) committing or about to commit a

12 Federal health care offense (as defined in sec13 tion 982(a)(6)(B) of this title);’’.

14 (b) FREEZING OF ASSETS.—Section 1345(a)(2) of

15 title 18, United States Code, is amended by inserting ‘‘or

16 a Federal health care offense (as defined in section

17 982(a)(6)(B))’’ after ‘‘title)’’.

18 SEC. 11434. GRAND JURY DISCLOSURE.

19 Section 3322 of title 18, United States Code, is

20 amended—

21 (1) by redesignating subsections (c) and (d) as

22 subsections (d) and (e), respectively; and

23 (2) by inserting after subsection (b) the follow24 ing new subsection:
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1 ‘‘(c) A person who is privy to grand jury infor2 mation concerning a Federal health care offense (as de3 fined in section 982(a)(6)(B))—

4 ‘‘(1) received in the course of duty as an attor5 ney for the Government; or

6 ‘‘(2) disclosed under rule 6(a)(3)(A)(ii) of the

7 Federal Rules of Criminal Procedure;

8 may disclose that information to an attorney for the

9 Government to use in any investigation or civil pro10 ceeding relating to health care fraud.’’.

11 SEC. 11435. FALSE STATEMENTS.

12 (a) IN GENERAL.—Chapter 47 of title 18, United

13 States Code, is amended by adding at the end the follow14 ing new section:

15 ‘‘§ 1033. False statements relating to health care mat16 ters

17 ‘‘(a) Whoever, in any matter involving a health plan,

18 knowingly and willfully falsifies, conceals, or covers up by

19 any trick, scheme, or device a material fact, or makes any

20 false, fictitious, or fraudulent statements or representa21 tions, or makes or uses any false writing or document

22 knowing the same to contain any false, fictitious, or fraud23 ulent statement or entry, shall be fined under this title

24 or imprisoned not more than 5 years, or both.
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1 ‘‘(b) For purposes of this section, the term ‘health

2 plan’ has the meaning given such term in section

3 1347(b).’’.

4 (b) CLERICAL AMENDMENT.—The table of sections

5 at the beginning of chapter 47 of title 18, United States

6 Code, is amended by adding at the end the following:

‘‘1033. False statements relating to health care matters.’’.

7 SEC. 11436. OBSTRUCTION OF CRIMINAL INVESTIGATIONS,

8 AUDITS OR INSPECTIONS OF FEDERAL

9 HEALTH CARE OFFENSES.

10 (a) IN GENERAL.—Chapter 73 of title 18, United

11 States Code, is amended by adding at the end the follow12 ing new section:

13 ‘‘§ 1518. Obstruction of criminal investigations, audits

14 or inspections of Federal health care of15 fenses.

16 ‘‘(a) IN GENERAL.—Whoever willfully prevents, ob17 structs, misleads, delays or attempts to present, obstruct,

18 mislead, or delay the communication of information or

19 records relating to a Federal health care offense to a Fed20 eral agent or employee involved in the investigation, audit,

21 inspection or other related activity shall be fined under

22 this title or imprisoned not more than 5 years, or both.

23 ‘‘(b) FEDERAL HEALTH CARE OFFENSE.—As used

24 in this section the term ‘Federal health care offense’ has
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1 the same meaning given such term in section 982(a)(6)(B)

2 of this title.

3 ‘‘(c) CRIMINAL INVESTIGATOR.—As used in this sec4 tion the term ‘criminal investigator’ means any individual

5 duly authorized by a department, agency, or armed force

6 of the Untied States to conduct or engage in investigations

7 for prosecutions for violations of health care offenses.’’.

8 (b) CLERICAL AMENDMENT.—The table of sections

9 at the beginning of chapter 73 of title 18, United States

10 Code, is amended by adding at the end the following:

‘‘1518. Obstruction of Criminal Investigations, Audits, or Inspections of Federal

Health Care Offenses.’’.

11 SEC. 11437. THEFT OR EMBEZZLEMENT.

12 (a) IN GENERAL.—Chapter 31 of title 18, United

13 States Code, is amended by adding at the end the follow14 ing new section: ‘‘§ 669. Theft or embezzlement in connec15 tion with health care.

16 ‘‘(a) IN GENERAL.—Whoever willfully embezzles,

17 steals, or otherwise without authority willfully and unlaw18 fully converts to the use of any person other than the

19 rightful owner, or intentionally misapplies any of the mon20 eys, funds, securities, premiums, credits, property, or

21 other assets of a health plan, shall be fined under this

22 title or imprisoned not more than 10 years, or both.
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1 ‘‘(b) HEALTH PLAN.—As, used in this section the

2 term ‘health plan’ has the meaning given such term in

3 section 1347(b).’’.

4 (b) CLERICAL AMENDMENT.—The table of sections

5 at the beginning of chapter 31 of title 18, United States

6 Code, is amended by adding at the end the following:

‘‘669. Theft or Embezzlement in Connection with Health care.’’.

7 SEC. 11438. LAUNDERING OF MONETARY INSTRUMENTS.

8 Section 1956(c)(7) of title 18, United States Code,

9 is amended by adding at the end the following new sub10 paragraph:

11 ‘‘(F) Any act or activity constituting an offense

12 involving a Federal health care offense as that term

13 is defined in section 982(a)(6)(B) of this title.’’.

14 SEC. 11439. AUTHORIZED INVESTIGATIVE DEMAND PROCE15 DURES.

16 (a) IN GENERAL.—Chapter 233 of title 18, United

17 States Code, is amended by adding after section 3485 the

18 following new section:

19 ‘‘§ 3486. Authorized investigative demand procedures.

20 ‘‘(a) AUTHORIZATION.—

21 ‘‘(1) In any investigation relating to functions

22 set forth in paragraph (2), the Attorney General or

23 designee may issue in writing and cause to be served

24 a subpoena compelling production of any records (in25 cluding any books, papers, documents, electronic
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1 media, or other objects or tangible things), which

2 may be relevant to an authorized law enforcement

3 inquiry, that a person or legal entity may possess or

4 have care, custody, or control. A custodian of

5 records may be required to give testimony concern6 ing the production and authentication of such

7 records. The production of records may be required

8 from any place in any State or in any territory, or

9 other place subject to the jurisdiction of the United

10 States at any designated place; except that such pro11 duction shall not be required more than 500 miles

12 distant from the place where the subpoena is served.

13 Witnesses summoned under this section shall be paid

14 the same fees and mileage that are paid witnesses

15 in the courts of the United States. A subpoena re16 quiring the production of records shall describe the

17 objects required to be produced and prescribe a re18 turn date within a reasonable period of time within

19 which the objects can be assembled and made avail20 able.

21 ‘‘(2) Investigative demands utilizing an admin22 istrative subpoena are authorized for any investiga23 tion with respect to any act or activity constituting

24 or involving health car fraud, including a scheme or

25 artifice—
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1 ‘‘(A) to defraud any health plan or other

2 person, in connection with the delivery of or

3 payment for health care benefits, items, or serv4 ices; or

5 ‘‘(B) to obtain, by means of false or fraud6 ulent pretenses, representations, or promises,

7 any of the money or property owned by, or

8 under the custody or control or, any health

9 plan, or person in connection with the delivery

10 of or payment for health care benefits, items, or

11 services.

12 ‘‘(b) SERVICE.—A subpoena issued under this section

13 may be served by any person designated in the subpoena

14 to serve it. Service upon a natural person may be made

15 by personal delivery of the subpoena to such person. Serv16 ice may be made upon a domestic or foreign association

17 which is subject to suit under a common name, by deliver18 ing the subpoena to an officer, to a managing or general

19 agent, or to any other agency authorized by appointment

20 or by law to receive service of process. The affidavit of

21 the person serving the subpoena entered on a true copy

22 thereof by the person serving it shall be proof of service.

23 ‘‘(c) ENFORCEMENT.—In the case of contumacy by

24 or refusal to obey a subpoena issued to any person, the

25 Attorney General may invoke the aid of any court of the
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1 United States within the Jurisdiction of which the inves2 tigation is carried on or of which the subpoenaed person

3 is an inhabitant, or in which such person carries on busi4 ness or may be found, to compel compliance with the sub5 poena. The court may issue an order requiring the subpoe6 naed person to appear before the Attorney General to

7 produce records, if so ordered, or to give testimony touch8 ing the matter under investigation. Any failure to obey

9 the order of the court may be punished by the court as

10 a contempt thereof. All process in any such case may be

11 served in any Judicial district in which such person may

12 be found.

13 ‘‘(d) IMMUNITY FROM CIVIL LIABILITY.—Notwith14 standing any Federal, State, or local law, any person, in15 cluding officers, agents, and employees receiving a sub16 poena under this section, who complies in good faith with

17 the subpoena and thus produces the materials sought,

18 shall not be liable in any court of any State or the United

19 States to any customer or other persons for such produc20 tion or for nondisclosure of that production to the cus21 tomer.

22 ‘‘(e) USE IN ACTION AGAINST INDIVIDUALS.—

23 ‘‘(1) Health information about an individual

24 that is disclosed under this section may not be used

25 in, or disclosed to any person for use in, any admin-
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1 istrative, civil, or criminal action or investigation di2 rected against the individual who is the subject of

3 the information unless the action or investigation

4 arises out of and is directly related to receipt of

5 health care or payment for health care or action in6 volving a fraudulent claim related to health; or if au7 thorized by an appropriate order of a court of com8 petent jurisdiction, granted after application showing

9 good cause therefore.

10 ‘‘(2) In assessing good cause, the court shall

11 weigh the public interest and the need for disclosure

12 against the injury to the patient, to the physician13 patient relationship, and to the treatment services.

14 ‘‘(3) Upon the granting of such order, the

15 court, in determining the extent to which any disclo16 sure of all or any part of any record is necessary,

17 shall impose appropriate safeguards against unau18 thorized disclosure.

19 ‘‘(f) HEALTH PLAN.—As used in this section the

20 term ‘health plan’ has the meaning given such term in

21 section 1347(b).’’.

22 (b) CLERICAL AMENDMENT.—The table of sections

23 for chapter 223 of title 18, United States Code, is amend24 ed by inserting after the item relating to section 3405 the
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1 following new item: § 3486. Authorized investigative de2 mand procedures’’.

3 (c) CONFORMING AMENDMENT.—Section

4 1510(b)(3)(B) of title 18, United States Code, is amended

5 by inserting ‘‘or a Department of Justice subpoena (issued

6 under section 3486),’’ after ‘‘subpoena’’.

7 PART 4—MEDICARE IMPROVEMENTS

8 Subpart A—Coordination of Benefits

9 SEC. 11441. CLARIFICATION OF TIME AND FILING LIMITA10 TIONS.

11 (a) IN GENERAL.—Section 1862(b)(2)(B) (42 U.S.C.

12 1395y(b)(2)(B)) is amended by adding at the end of the

13 following:

14 ‘‘(v) TIME, FILING, AND RELATED PROVI15 SIONS UNDER PRIMARY PLAN.—Requirements

16 under a primary plan as to the filing of a claim,

17 time limitations for the filing of a claim, infor18 mation not maintained by the Secretary, or no19 tification or pre-admission review, shall not

20 apply to a claim by the United States under

21 clause (ii) or (iii).’’.

22 (b) EFFECTIVE DATE.—The amendment made by

23 subsection (a) applies to items and services furnished after

24 1990.
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1 SEC. 11442. CLARIFICATION OF LIABILITY OF THIRD PARTY

2 ADMINISTRATORS.

3 (a) IN GENERAL.—Section 1862(b)(2)(B)(ii) (42

4 U.S.C. 1395(b)(2)(B)(ii)) is amended by inserting ‘‘, or

5 which determines claims under the primary plan’’ after

6 ‘‘primary plan’’.

7 (b) CLAIMS BETWEEN PARTIES OTHER THAN THE

8 UNITED STATES.—Section 1862(b)(2)(B) (42 U.S.C.

9 1395y(b)(2)(B)) (as amended by section 11441(a) of this

10 Act) is further amended by adding at the end the follow11 ing:

12 ‘‘(vi) CLAIMS BETWEEN PARTIES OTHER THAN

13 THE UNITED STATES.—A claim by the United States

14 under clause (ii) or (iii) shall not preclude claims be15 tween other parties.’’.

16 (c) EFFECTIVE DATE.—The amendments made by

17 the previous subsections apply to items and services fur18 nished after 1990.

19 SEC. 11443. CLARIFICATION OF PAYMENT AMOUNTS TO

20 MEDICARE.

21 (a) IN GENERAL.—Section 1862(b)(2)(B)(i) (42

22 U.S.C. 1395y(b)(2)(B)(i)) is amended to read as follows:

23 ‘‘(i) REPAYMENT REQUIRED.—

24 ‘‘(I) Any payment under this title, with re25 spect to any item or service for which payment

26 by a primary plan is required under the preced-
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1 ing provisions of this subsection, shall be condi2 tioned on reimbursement to the appropriate

3 Trust Fund established by this title when notice

4 or other information is received that payment

5 for that item or service has been or should have

6 been made under those provisions. If reimburse7 ment is not made to the appropriate Trust

8 Fund before the expiration of the 60-day period

9 that begins on the date such notice or other in10 formation is received, the Secretary may charge

11 interest (beginning with the date on which the

12 notice or other information is received) on the

13 amount of the reimbursement until reimburse14 ment is made (at a rate determined by the Sec15 retary in accordance with regulations of the

16 Secretary of the Treasury applicable to charges

17 for late payments).

18 ‘‘(II) The amount owned by a primary

19 plan under the first sentence of subclause (I) is

20 the lesser of the full primary payment required

21 (if that amount is readily determinable) and the

22 amount paid under this title for that item or

23 service.’’.

24 (b) CONFORMING AND TECHNICAL AMENDMENTS.—
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1 (1) Subparagraphs (A)(i)(I) and (B)(i) of sec2 tion 1862(b)(1) (42 U.S.C. 1395y(b)(1)) are each

3 amended by inserting ‘‘(or eligible to be covered)’’

4 after ‘‘covered’’.

5 (2) Section 1862(b)(1)(C)(ii) (42 U.S.C.

6 1395y(b)(1)(C)(ii)) is amended by striking ‘‘covered

7 by such plan’’.

8 (3) The matter in section 1862(b)(2)(A) (42

9 U.S.C. 1395y(b)(2)(A)) preceding clause (i) is

10 amended by striking ‘‘, except as provided in sub11 paragraph (B),’’.

12 (c) EFFECTIVE DATE.—The amendments made by

13 the previous subsections apply to items and services fur14 nished after 1990.

15 SEC. 11444. CONDITIONS FOR DOUBLE DAMAGES.

16 (a) IN GENERAL.—Section 1862(b)(2)(B)(ii) (42

17 U.S.C. 1395y(b)(2)(B)(ii)) is amended—

18 (1) by striking ‘‘, in accordance with paragraph

19 (3)(A)’’, and

20 (2) by inserting ‘‘, unless the entity dem21 onstrates that it did not know, and could not have

22 known, of its obligation to pay’’ after ‘‘against that

23 entity.’’
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1 (b) CONFORMING AMENDMENT.—Section

2 1862(b)(3)(A) is amended by striking ‘‘(or appropriate re3 imbursement)’’.

4 SEC. 11445. REPEAL OF EXCISE TAX.

5 (a) IN GENERAL.—Chapter 47 of the Internal Reve6 nue Code of 1986 (26 U.S.C. 5000) is repealed.

7 (b) CONFORMING AMENDMENT TO THE INTERNAL

8 REVENUE CODE OF 1986.—The table of chapters of sub9 title D of the Internal Revenue Code of 1986 (26 U.S.C.

10 4001 et seq.) is amended by striking the listing for chapter

11 47.

12 (c) CONFORMING AMENDMENTS TO THE SOCIAL SE13 CURITY ACT.—

14 (1) Section 1862(b)(1)(A) (42 U.S.C.

15 1395y(b)(1)(A)) is amended by striking clause (v).

16 (2) The matter in section 1862(b)(1)(C) (42

17 U.S.C. 1395y(b)(1)(C)) preceding clause (i) is

18 amended by striking ‘‘plan (as defined in subpara19 graph (A)(v))—’’ and inserting ‘‘plan—’’.

20 (3) Section 1862(b)(1)(E) (42 U.S.C.

21 1395y(b)(1)(E)) is amended by adding at the end

22 the following:

23 ‘‘(iv) GROUP HEALTH PLAN DEFINED.—

24 The term ‘group health plan’ means a plan (in25 cluding a self-insured plan) of, or contributed to
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1 by, an employer or employee organization to

2 provide health care (directly or otherwise) to

3 the employees, former employees, the employer,

4 others associated or formerly associated with

5 the employer in a business relationship, or their

6 families.’’.

7 (4) Section 1862(b)(3) (42 U.S.C. 1395y(b)(3))

8 is amended—

9 (A) by striking subparagraph (B), and

10 (B) by redesignating subparagraph (C) as

11 (B).

12 (5) Subparagraph (A) of the first sentence of

13 section 1837(i)(1) (42 U.S.C. 1395p(i)(1)), subpara14 graph (B) of the first sentence of section 1837(i)(2)

15 (42 U.S.C. 1395p(i)(2)), section 1837(i)(3)(A) (42

16 U.S.C. 1395p(i)(3)(A)), and clause (2) of the second

17 sentence of section 1839(b) (42 U.S.C. 1395r(b)),

18 are each amended by striking ‘‘1862(b)(1)(A)(v)’’

19 and inserting ‘‘1862(b)(1)(E)(iv)’’.

20 (d) EFFECTIVE DATE.—The amendment made by

21 subsection (a) applies, with respect to the Internal Reve22 nue Code of 1986, to expenses incurred after 1994.
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1 SEC. 11446. INFORMATION REQUIREMENTS.

2 (a) INFORMATION FROM GROUP HEALTH PLANS.—

3 Section 1862(b) (42 U.S.C. 1395y(b)) is amended by add4 ing at the end the following:

5 ‘‘(7) INFORMATION FROM GROUP HEALTH

6 PLANS.—

7 ‘‘(A) Provision of information by group

8 health plans.—The administrator of a group

9 health plan (other than a plan exempt, under

10 paragraph (1)(E)(v), from the requirements of

11 paragraph (1)) shall provide to the Secretary

12 any or all of the information elements listed in

13 subparagraph (C), and in such manner and at

14 such times (but not more frequently than four

15 times per year), as the Secretary may specify,

16 with respect to each individual covered under

17 the plan and entitled to benefits under this

18 title.

19 ‘‘(B) PROVISION OF INFORMATION BY EM20 PLOYERS AND EMPLOYEE ORGANIZATIONS.—An

21 employer (or employee organization) that main22 tains or participates in a group health plan

23 (other than a plan exempt, under paragraph

24 (1)(E)(v), from the requirements of paragraph

25 (1)) shall provide to the administrator of the

26 plan any or all of the information elements list-
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1 ed in subparagraph (C), and in such manner

2 and at such times (but not more frequently

3 than four times per year), as the Secretary may

4 specify, with respect to each individual covered

5 under the plan and entitled to benefits under

6 this title.

7 ‘‘(C) INFORMATION ELEMENTS TO BE PRO8 VIDED.—The information elements to be pro9 vided under subparagraph (A) or (B) are:

10 ‘‘(i) ELEMENTS CONCERNING THE IN11 DIVIDUAL.—

12 ‘‘(I) The individual’s name.

13 ‘‘(II) The individual’s date of

14 birth.

15 ‘‘(II) The individual’s sex.

16 ‘‘(IV) The individual’s social se17 curity insurance number.

18 ‘‘(V) The number assigned by the

19 Secretary to the individual for claims

20 under this title.

21 ‘‘(VI) The family relationship of

22 the individual to the person who has

23 current or former employment status

24 with the employer.
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1 ‘‘(ii) ELEMENTS CONCERNING THE

2 FAMILY MEMBER WITH CURRENT OR

3 FORMER EMPLOYMENT STATUS.—

4 ‘‘(I) The name of the person in

5 the individual’s family who has cur6 rent or former employment status

7 with the employer.

8 ‘‘(II) That person’s social secu9 rity insurance number.

10 ‘‘(III) The number or other iden11 tifier assigned by the plan to that per12 son.

13 ‘‘(IV) The periods of coverage for

14 that person under the plan.

15 ‘‘(V) The employment status of

16 that person (current or former) dur17 ing those periods of coverage.

18 ‘‘(VI) The classes (of that per19 son’s family members) covered under

20 the plan.

21 ‘‘(iii) PLAN ELEMENTS.—

22 ‘‘(I) The nature of the items and

23 services covered under the plan.
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1 ‘‘(II) The name and address to

2 which claims under the plan are to be

3 sent.

4 ‘‘(iv) ELEMENTS CONCERNING THE

5 EMPLOYER.—

6 ‘‘(I) The employer’s name.

7 ‘‘(II) The employer’s address.

8 ‘‘(III) The employer identifica9 tion number of the employer.

10 ‘‘(D) USE OF IDENTIFIERS.—The adminis11 trator of a group health plan shall utilize an

12 identifier for the plan (that the Secretary may

13 furnish) in providing information under sub14 paragraph (A) and in other transactions, as

15 may be specified by the Secretary, related to

16 the provisions of this subsection.

17 ‘‘(E) PENALTY FOR NONCOMPLIANCE.—

18 Any entity that knowingly and willfully fails to

19 comply with a requirement imposed by the pre20 vious subparagraphs shall be subject to a civil

21 money penalty not to exceed $1000 for each in22 cident of such failure. The provisions of section

23 1128A (other than subsections (a) and (b))

24 shall apply to a civil money penalty under the

25 previous sentence in the same manner as those
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1 provisions apply to a penalty or proceeding

2 under section 1128A(a).’’.

3 (b) EFFECTIVE DATE.—The amendment made by

4 subsection (a) is effective 180 days after the date of enact5 ment of this Act.

6 SEC. 11447. TECHNICAL CHANGES CONCERNING MINIMUM

7 SIZES OF GROUP HEALTH PLANS.

8 (a) CONSOLIDATION OF REQUIREMENTS.—

9 (1) Section 1862(b)(1)(A) (42 U.S.C.

10 1395y(b)(1)(A)) (as amended by section 11443 of

11 this Act) is further amended—

12 (A) by striking clauses (ii) and (iii), and

13 (B) by renumbering clause (iv) as (ii).

14 (2) Section 1862(b)(1)(B) (42 U.S.C.

15 1395y(b)(1)(B)) is amended—

16 (A) in clause (i), by striking ‘‘large group

17 health plan (as defined in clause (iv))’’ and in18 serting ‘‘group health plan’’, and

19 (B) by striking clause (iv).

20 (3) Section 1862(b)(1)(E) (42 U.S.C.

21 1395y(b)(1)(E)) (as amended by section 405(c)(3)

22 of this Act) is further amended by adding at the end

23 the following:

24 ‘‘(v) EXCLUSION OF GROUP HEALTH

25 PLANS OF SMALL AND MEDIUM EMPLOYERS.—
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1 ‘‘(I) Subparagraph (A) shall not apply

2 to a group health plan unless the plan cov3 ers employees of at least one employer that

4 has 20 or more employees on at least 50

5 percent of its business days in each of 20

6 or more calendar weeks in the current or

7 preceding calendar year.

8 ‘‘(II) Subparagraph (B) shall not

9 apply to a group health plan unless the

10 plan covers employees of at least one em11 ployer that has 100 or more employees on

12 at least 50 percent of its business days in

13 each of 20 or more calendar weeks in the

14 current or preceding calendar year.’’.

15 (b) CONFORMING AMENDMENTS.—

16 (1) The second sentence of section

17 1862(b)(2)(A) (42 U.S.C. 1395y(b)(2)(A)) is

18 amended by striking ‘‘or large group health plan’’.

19 (2) Section 1862 (b)(3)(C) (42 U.S.C.

20 1395y(b)(3)(C)) is amended—

21 (A) in the heading, by striking ‘‘or a large

22 group health plan’’, and

23 (B) in the first sentence, by striking ‘‘or a

24 large group health plan’’.
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1 (3)(A) Subparagraph (A) of the first sentence

2 of section 1837(i)(1) (42 U.S.C. 1395p(i)(1)) is

3 amended by striking ‘‘(or the individual’s spouse’s)

4 current employment status’’ and inserting ‘‘current

5 employment status (or the current employment sta6 tus of a family member of the individual).’’.

7 (B) Section 1837(i)(1) (42 U.S.C. 1395p(i)(1))

8 is amended by striking the second sentence.

9 (4)(A) Subparagraph (b) of the first sentence of

10 section 1837(i)(2) (42 U.S.C. 1395p(i)(2)) is

11 amended by striking ‘‘(or the individual’s spouse’s)

12 current employment status’’ and inserting ‘‘current

13 employment status (or the current employment sta14 tus of a family member of the individual).’’.

15 (B) Section 1837(i)(2) (42 U.S.C. 1395p(i)(2))

16 is amended by striking the second sentence.

17 (5) Section 1837(i)(3) (42 U.S.C. 1395p(i)(3))

18 is amended—

19 (A) by striking subparagraph (b), and

20 (B) by striking ‘‘(3)(A)’’ and inserting

21 ‘‘(3)’’.

22 (6) Clause (2) of the second sentence of section

23 1839(b) (42 U.S.C. 1395r(b)) is amended by strik24 ing ‘‘by reason of the individual’s (or the individual’s

25 spouse’s) current employment status or months dur-
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1 ing which the individual has not attained the age of

2 65 and for which the individual can demonstrate

3 that the individual was enrolled in a large group

4 health plan’’.

5 Subpart B—Contractor Reform

6 SEC. 11451. INCREASED FLEXIBILITY IN CONTRACTING FOR

7 MEDICARE CLAIMS PROCESSING.

8 (a) CARRIERS TO INCLUDE ENTITIES THAT ARE NOT

9 INSURANCE COMPANIES.—

10 (1) The matter in section 1842(a) (42 U.S.C.

11 1395u(a)) preceding paragraph (1) is amended by

12 striking ‘‘with carriers’’ and inserting ‘‘with agencies

13 and organizations (referred to as carriers)’’.

14 (2) Section 1842(f) (42 U.S.C. 1394u(f)) is re15 pealed.

16 (b) CHOICE OF FISCAL INTERMEDIARIES BY PROVID17 ERS OF SERVICES; SECRETARIAL FLEXIBILITY IN ASSIGN18 ING FUNCTIONS TO INTERMEDIARIES AND CARRIERS.—

19 (1) Section 1816 (42 U.S.C. 1395h) is amended

20 by striking everything after the heading but before

21 subsection (b) and inserting the following:

22 ‘‘SEC. 1816. (a)(1) The Secretary may enter into con23 tracts with agencies or organizations to reform any or all

24 of the following functions, or parts of those functions (or,
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1 to the extent provided in a contract, to secure performance

2 thereof by other organizations):

3 ‘‘(A) determine (subject to the provisions of sec4 tion 1878 and to such review by the Secretary as

5 may be provided for the contracts) the amount of

6 the payments required pursuant to this part to be

7 made to providers of services,

8 ‘‘(B) make payments described in subparagraph

9 (A),

10 ‘‘(C) provide consultative services to institutions

11 or agencies to enable them to establish and maintain

12 fiscal records necessary for purposes of this part and

13 otherwise to qualify as providers of services,

14 ‘‘(D) serve as a center for, and communicate to

15 individuals entitles to benefits under this part and to

16 providers of services, any information or instructions

17 furnished to the agency or organization by the Sec18 retary, and serve as a channel of communication

19 from individuals entitled to benefits under this part

20 and from providers of services to the Secretary,

21 ‘‘(E) make such audits of the records of provid22 ers of services as may be necessary to insure that

23 proper payments are made under this part,

24 ‘‘(F) perform the functions described by sub25 section (d), and
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1 ‘‘(G) perform such other functions as are nec2 essary to carry out the purposes of this part.

3 ‘‘(2) As used in this title and title XI, the term ‘fiscal

4 intermediary’ means an agency or organization with a con5 tract under this section.’’.

6 (2) Subsections (d) and (e) of section 1816 (42

7 U.S.C. 1395h) are amended to read as follows:

8 ‘‘(d) Each provider of services shall have a fiscal

9 intermediary that—

10 ‘‘(1) acts as a single point of contact for the

11 provider of services under this part,

12 ‘‘(2) makes its services sufficiently available to

13 meet the needs of the provider of services, and

14 ‘‘(3) is responsible and accountable for arrang15 ing the resolution of issues raised under this part by

16 the provider of services.

17 ‘‘(e)(1)(A) The Secretary shall, at least every five

18 years, permit each provider of services (other than a home

19 health agency or a hospice program) to choose an agency

20 or organization (from at least three proposed by the Sec21 retary, of which at least one shall have an office in the

22 geographic area of the provider of services, except as pro23 vided by subparagraph (B)(ii)(II)) as the fiscal

24 intermediary under subsection (d) for the provider of serv25 ices. If a contract with that fiscal intermediary is discon-
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1 tinued, the Secretary shall permit the provider of services

2 to choose under the same conditions from three other

3 agencies or organizations

4 ‘‘(B)(i) The Secretary, in carrying out subparagraph

5 (A), shall permit a group of hospitals (or a group of an6 other class of providers other than home health agencies

7 or hospice programs) under common ownership by, or con8 trol of, a particular entity to choose one agency or organi9 zation (from at least three proposed by the Secretary) as

10 the fiscal intermediary under subsection (d) for all the

11 providers in that group if the conditions specified in clause

12 (ii) are met

13 ‘‘(ii) the conditions for clause (i) to apply are that—

14 ‘‘(I) the group includes all the providers or

15 services of that class that are under common owner16 ship by, or control of, that particular entity, and

17 ‘‘(II) all the providers of services in that group

18 agree that none of the agencies or organizations pro19 posed by the Secretary is required to have an office

20 in any particular geographic area.

21 ‘‘(2) The Secretary, in evaluating the performance of

22 a fiscal intermediary, shall solicit comments from provid23 ers of services.’’.

24 (3)(A) Section 1816(b)(1)(A) (42 U.S.C.

25 1395h(b)(1)(A)) is amended by striking ‘‘after ap-
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1 plying the standards, criteria, and procedures’’ and

2 inserting ‘‘after evaluating the ability of the agency

3 or organization to fulfill the contract performance

4 requirements’’.

5 (B) The first sentence of section 1816(f)(1) (42

6 U.S.C. 1395h(f)(1)) is amended—

7 (i) by striking ‘‘develop standards, criteria,

8 and procedures’’ and inserting ‘‘, after public

9 notice and opportunity for comment, develop

10 contract performance requirements’’, and

11 (ii) by striking ‘‘, and the Secretary shall

12 establish standards and criteria with respect to

13 the efficient and effective administration of this

14 part’’.

15 (C) The second sentence of section

16 1842(b)(2)(A) (42 U.S.C. 1395u(b)(2)(A)) is

17 amended to read as follows: ‘‘The Secretary shall,

18 after public notice and opportunity for comment, de19 velop contract performance requirements for the effi20 cient and effective performance of contract obliga21 tions under this section.’’.

22 (D) Section 1842(b)(2)(A) (42 U.S.C.

23 1395u(b)(2)(A)) is amended by striking the third

24 sentence.
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1 (E) The matter in section 1842(b)(2)(B) (42

2 U.S.C. 1395u(b)(2)(B)) preceding clause (i) is

3 amended by striking ‘‘establish standards’’ and in4 serting ‘‘develop contract performance require5 ments’’.

6 (F) Section 1842(b)(2)(D) (42 U.S.C.

7 1395u(b)(2)(D)) is amended by striking ‘‘standards

8 and criteria’’ each place it occurs and inserting

9 ‘‘contract performance requirements’’.

10 (4)(A) The matter in section 1816(b) (42

11 U.S.C. 1395h(b)) preceding paragraph (1) is amend12 ed by striking ‘‘an agreement’’ and inserting ‘‘a con13 tract’’.

14 (B) Paragraphs (1)(B) and (2)(A) of section

15 1816(b) (42 U.S.C. 1395h(b)) are each amended by

16 striking ‘‘agreement’’ and inserting ‘‘contract’’.

17 (C) The first sentence of section 1816(c)(1) (42

18 U.S.C. 1395h(c)(1)) is amended by striking ‘‘An

19 agreement’’ and inserting ‘‘A contract’’.

20 (D) The last sentence of section 1816(c)(1) (42

21 U.S.C. 1395h(c)(1)) is amended by striking ‘‘an

22 agreement’’ and inserting ‘‘a contract’’.

23 (E) The matter in section 1816(c)(2)(A) (42

24 U.S.C. 1395h(c)(2)(A)) preceding clause (i) is
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1 amended by striking ‘‘agreement’’ and inserting

2 ‘‘contract’’.

3 (F) Section 1816(c)(3)(A) (42 U.S.C.

4 1395h(c)(3)(A)) is amended by striking ‘‘agree5 ment’’ and inserting ‘‘contract’’.

6 (G) The first sentence of section 1816(f)(1) (42

7 U.S.C. 1395h(f)(1)) is amended by striking ‘‘an

8 agreement’’ and inserting ‘‘a contract’’.

9 (H) Section 1816(h) (42 U.S.C. 1395h(h)) is

10 amended—

11 (i) by striking ‘‘An agreement’’ and insert12 ing ‘‘A contract’’, and

13 (ii) by striking ‘‘the agreement’’ each place

14 it occurs and inserting ‘‘the contract’’.

15 (I) Section 1816(i)(1) (42 U.S.C. 1395h(i)(1))

16 is amended by striking ‘‘an agreement’’ and insert17 ing ‘‘a contract’’.

18 (J) Section 1816(j) (42 U.S.C. 1395(j)) is

19 amended by striking ‘‘An agreement’’ and inserting

20 ‘‘A contract’’.

21 (K) Section 1816(k) (42 U.S.C. 1395h(k)) is

22 amended by striking ‘‘An agreement’’ and inserting

23 ‘‘A contract’’.
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1 (L) The matter in section 1842(a) (42 U.S.C.

2 1395u(a)) preceding paragraph (1) is amended by

3 striking ‘‘agreements’’ and inserting ‘‘contracts’’.

4 (M) Section 1842(h)(3)(A) (42 U.S.C.

5 1395u(h)(3)(A)) is amended by striking ‘‘an agree6 ment’’ and inserting ‘‘a contract’’.

7 (5) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1))

8 is amended by striking the second sentence.

9 (6)(A) The matter in section 1816(c)(2)(A) (42

10 U.S.C. 1395h(c)(2)(A)) preceding clause (i) is

11 amended by inserting ‘‘that provides for making

12 payments under this part’’ after ‘‘this section’’.

13 (B) Section 1816(c)(3)(A) (42 U.S.C.

14 1395h(c)(3)(A)) is amended by inserting ‘‘that pro15 vides for making payments under this part’’ after

16 ‘‘this section’’.

17 (C) Section 1816(k) (42 U.S.C. 1395h(k)) is

18 amended by inserting ‘‘(as appropriate)’’ after ‘‘sub19 mit’’.

20 (D) The matter in section 1842(a) (42 U.S.C.

21 1395u(a)) preceding paragraph (1) is amended by

22 striking ‘‘some or all of the following functions’’ and

23 inserting ‘‘any or all of the following functions, or

24 parts of those functions’’.
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1 (E) The first sentence of section 1842(b)(2)(C)

2 (42 U.S.C. 1395u(b)(2)(C)) is amended by inserting

3 ‘‘(as appropriate)’’ after ‘‘carriers’’.

4 (F) The matter preceding subparagraph (A) in

5 the first sentence of section 1842(b)(3) (42 U.S.C.

6 1395u(b)(3)) is amended by inserting ‘‘(as appro7 priate)’’ after ‘‘contract’’.

8 (G) The matter in section 1842(b)(7)(A) (42

9 U.S.C. 1395u(b)(7)(A)) preceding clause (i) is

10 amended by striking ‘‘the carrier’’ and inserting ‘‘a

11 carrier’’.

12 (H) The matter in section 1842(b)(11)(A) (42

13 U.S.C. 1395u(b)(11)(A)) preceding clause (i) is

14 amended by inserting ‘‘(as appropriate)’’ after ‘‘each

15 carrier’’.

16 (I) The first sentence of section 1842(h)(2) (42

17 U.S.C. 1395u(b)(2)) is amended by inserting ‘‘(as

18 appropriate)’’ after ‘‘shall’’.

19 (J) Section 1842(h)(5)(A) (42 U.S.C.

20 1395u(h)(5)(A) is amended by inserting ‘‘(as appro21 priate)’’ after ‘‘carrier’’.

22 (7)(A) Section 1816(c)(2)(C) (42 U.S.C.

23 1395h(c)(2)(C) is amended by striking ‘‘hospital,

24 rural primary care hospital, skilled nursing facility,

25 home health agency hospice program, comprehensive
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1 outpatient rehabilitation facility, or rehabilitation

2 agency’’ and inserting ‘‘* * * of services’’.

3 (B) The matter in section 1816(j) (42 U.S.C.

4 1395(j)) preceding paragraph (1) is amended by

5 striking ‘‘for home health services, extended care

6 services, or post-hospital extended care services’’.

7 (8) Section 1842(a)(3) (42 U.S.C. 1395u(a)(3))

8 is amended by inserting ‘‘(to and from individuals

9 enroll under this part and to and from physicians

10 and other entities that furnish items and services)’’

11 after ‘‘communication’’.

12 (c) ELIMINATION OF SPECIAL PROVISIONS FOR TER13 MINATIONS OF CONTRACTS.—

14 (1) The matter in section 1816(b) (42 U.S.C.

15 1395h(b)) preceding paragraph (1) is amended by

16 striking ‘‘or renew’’.

17 (2) The last sentence of section 1816(c)(1) (42

18 U.S.C. 1395h(c)(1)) is amended by striking ‘‘or re19 newing’’.

20 (3) Section 1816(f)(1) (42 U.S.C. 1395h(f)(1))

21 is amended by striking ‘‘, renew, or terminate’’ and

22 ‘‘, whether the Secretary should assign or reassign

23 a provider of services to an agency or organization,’’.

24 (4) Section 1816(g) (42 U.S.C. 1395h(g)) is re25 pealed.
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1 (5) The last sentence of section 1842(b)(2)(A)

2 (42 U.S.C. 1395u(b)(2)(A)) is amended by striking

3 ‘‘or renewing’’.

4 (6) Section 1842(b) (42 U.S.C. 1395u(b)) is

5 amended by striking paragraph (5).

6 (d) REPEAL OF FISCAL INTERMEDIARY REQUIRE7 MENTS THAT ARE NOT COST-EFFECTIVE.—Section

8 1816(f)(2) (42 U.S.C. 1395h(f)(2)) is amended to read

9 as follows:

10 ‘‘(2) The contract performance requirements devel11 oped under paragraph (1) shall include, with respect to

12 claims for services furnished under this part by any pro13 vider of services other than a hospital, whether such agen14 cy or organization is able to process 75 percent of recon15 siderations within 60 days and 90 percent of reconsider16 ations within 90 days.’’.

17 (e) REPEAL OF COST REIMBURSEMENT REQUIRE18 MENTS.—

19 (1) The first sentence of section 1816(c)(1) (42

20 U.S.C. 1395h(c)(1)) is amended—

21 (A) by striking the comma after ‘‘appro22 priate’’ and inserting ‘‘and’’, and

23 (B) by striking everything after ‘‘sub24 section (a)’’ up to the period.
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1 (2) Section 1816(c)(1) (42 U.S.C. 1395h(c)(1))

2 is further amended by striking the second and third

3 sentences.

4 (3) The first sentence of section 1842(c)(1)(A)

5 (42 U.S.C. 1395u(c)(1)(A)) is amended—

6 (A) by striking ‘‘shall provide’’ the first

7 place it occurs and inserting ‘‘may provide’’,

8 and

9 (B) by striking everything after ‘‘this

10 part’’ up to the period.

11 (4) Section 1842(c)(1) (42 U.S.C. 1395u(c)(1))

12 is further amended by striking the remaining sen13 tences.

14 (5) Section 2326(a) of the Deficit Reduction

15 Act of 1984 (42 U.S.C. 1395h nt) is repealed.

16 (f) COMPETITION REQUIRED FOR NEW CONTRACTS

17 AND IN CASES OF POOR PERFORMANCE.—

18 (1) Section 1816(c) (42 U.S.C. 1395h(c)) is

19 amended by adding at the end the following:

20 ‘‘(4)(A) A contract with a fiscal intermediary under

21 this section may be renewed from term to term without

22 regard to any provision of law requiring competition if the

23 fiscal intermediary has met or exceeded the performance

24 requirements established in the current contract.
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1 ‘‘(B) Functions may be transferred among fiscal

2 intermediaries without regard to any provision of law re3 quiring competition.’’.

4 (2) Section 1842(b) (42 U.S.C. 1395u(b)) is

5 amended by striking everything before paragraph (2)

6 and inserting the following:

7 ‘‘(b)(1)(A) A contract with a carrier under subsection

8 (a) may be renewed from term to term without regard to

9 any provision of law requiring competition if the carrier

10 has met or exceeded the performance requirements estab11 lished in the current contract.

12 ‘‘(B) Functions may be transferred among carriers

13 without regard to any provision of law requiring competi14 tion.’’.

15 (g) WAIVER OF COMPETITIVE REQUIREMENTS FOR

16 INITIAL CONTRACTS.—

17 (1) Contracts whose periods begin during the

18 one year period that begins on the first day of the

19 fourth calendar month that begins after the date of

20 enactment of this Act may be entered into under

21 section 1816(a) of the Social Security Act (42

22 U.S.C. 1395h(a)) without regard to any provision of

23 law requiring competition.

24 (2) The amendments made by subsection (f)

25 apply to contracts whose periods begin after the end
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1 of the one year period specified in paragraph (1) of

2 this subsection.

3 (h) EFFECTIVE DATES.—

4 (1) The amendments made by subsection (c)

5 apply to contracts whose periods end at, or after, the

6 end of the third calendar month that begins after

7 the date of enactment of this Act.

8 (2) The amendments made by subsections (a),

9 (b), (d), and (e) apply to contracts whose periods

10 begin after the third calendar month that begins

11 after the date of enactment of this Act.

12 Subpart C—Provisions Relating to Part B of

13 Medicare

14 SEC. 11461. REPLACEMENT OF REASONABLE CHARGE

15 METHODOLOGY BY FEE SCHEDULES.

16 (a) IN GENERAL.—The matter in section 1833(a)(1)

17 (42 U.S.C. 13951(a)(1)) preceding clause (A) is amended

18 by striking ‘‘the reasonable charges for the services’’ and

19 inserting ‘‘the lesser of the actual charges for the services

20 and the amounts determined by the applicable fee sched21 ules developed by the Secretary for the particular serv22 ices’’.

23 (b) CONFORMING AMENDMENTS.—

24 (1) Section 1833(a)(1) (42 U.S.C. 1395l(a)(1))

25 is amended—
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1 (A) in clause (A), by striking ‘‘reasonable

2 charges for’’ and inserting ‘‘payment bases oth3 erwise applicable to’’,

4 (B) in clause (B), by striking ‘‘reasonable

5 charges’’ and inserting ‘‘fee schedule amounts’’,

6 and

7 (C) by inserting after clause (F) the fol8 lowing: ‘‘(G) with respect to services described

9 in clause (i), (ii), or (iv) of section

10 1861(s)(2)(K) (relating to physician assistants

11 and nurse practitioners), the amounts paid shall

12 be 80 percent of the lesser of the actual charge

13 for the services and the applicable amount de14 termined under subclause (I) of (II) of section

15 1842(b)(12)(A)(ii),’’.

16 (2) Section 1833(a)(2) (42 U.S.C. 1395l(a)(2))

17 is amended—

18 (A) in the matter in subparagraph (B) pre19 ceding clause (i), by striking ‘‘(C), (D),’’ and

20 inserting ‘‘(D),’’ and

21 (B) by striking subparagraph (C).

22 (3) Section 1833(l) (42 U.S.C. 1395l(l)) is

23 amended—

24 (A) in paragraph (3)—

25 (i) by striking subparagraph (B), and
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1 (ii) by striking ‘‘(3)(A)’’ and inserting

2 ‘‘(3)’’, and

3 (B) by striking paragraph (6).

4 (4) The heading to section 1834(g)(1)(A)(ii)

5 (42 U.S.C. 1395m(g)(1)(A)(ii)) is amended by strik6 ing ‘‘Reasonable charges for professional’’ and in7 serting ‘‘Professional’’.

8 (5) Section 1842(a) (42 U.S.C. 1395u(a)) is

9 amended—

10 (A) in the matter preceding paragraph (1),

11 by striking ‘‘reasonable charge’’ and inserting

12 ‘‘fee schedule’’, and

13 (B) in paragraph (1)(A), by striking ‘‘rea14 sonable charge’’ and inserting ‘‘other’’.

15 (6)(A) The matter preceding clause (i) in sub16 paragraph (B) of the first sentence of section

17 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended by

18 striking everything after ‘‘assure that,’’ and insert19 ing the following: ‘‘where payment under this part

20 for a service is on a basis other than a cost basis,

21 such payment will (except as otherwise provided in

22 section 1870(f)) be made—’’.

23 (B) Subparagraph (B)(ii)(I) of the first sen24 tence of section 1842(b)(3) (42 U.S.C. 1395u(b)(3))

25 is amended to read as follows: ‘‘(I) the amount de-
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1 termined by the applicable payment basis under this

2 part is the full charge for the service,’’.

3 (C) Section 1842(b)(3) (42 U.S.C.

4 1395u(b)(3)) is amended by striking the second,

5 third, fourth, fifth, sixth, eight, and ninth sentences.

6 (7)(A) Section 1842(b)(4) (42 U.S.C.

7 1395u(b)(4)) is amended to read as follows:

8 ‘‘(4) In the case of an enteral or parenteral

9 pump that is furnished on a rental basis during a

10 period of medical need—

11 ‘‘(A) monthly rental payments shall not be

12 made under this part for more than 15 months

13 during that period, and

14 ‘‘(B) after monthly rental payments have

15 been made for 15 months during that period,

16 payment under this part shall be made for

17 maintenance and servicing of the pump is such

18 amounts as the Secretary determines to be rea19 sonable and necessary to ensure the proper op20 eration of the pump.’’.

21 (B) Section 6112(b) (42 U.S.C. 1395m nt) of

22 the Omnibus Reconciliation Act of 1989 is repealed.

23 (8) Section 1842(b)(7) (42 U.S.C. 1395u(b)(7))

24 is amended—
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1 (A) in the matter in subparagraph (D)(i)

2 preceding subclause (I), by striking ‘‘, to the ex3 tent that such payment is otherwise allowed

4 under this paragraph,’’,

5 (B) in subparagraph (D)(ii), by striking

6 ‘‘subparagraph’’ and inserting ‘‘paragraph’’,

7 (C) by striking ‘‘(7)(A) In the case of’’

8 through the end of subparagraph (C).

9 (D) by striking ‘‘(D)(i)’’ and inserting

10 ‘‘(7)(A)’’,

11 (E) by redesignating clauses (ii) and (iii)

12 as subparagraphs (B) and (C), respectively, and

13 (F) by redesignating subclauses (I), (II),

14 and (III), of subparagraph (A) (as redesignated

15 by subparagraph (D) of this paragraph) as

16 clauses (i), (ii), and (iii), respectively.

17 (9)(A) Section 1842(b) (42 U.S.C. 1395u(b)) is

18 amended by striking paragraphs (8) and (9).

19 (B) The first sentence of section

20 1834(a)(10)(B) (42 U.S.C. 1395m(a)(10(B)) is

21 amended by striking everything after ‘‘is authorized

22 to’’ up to the period and inserting the following:

23 ‘‘describe by regulation the factors to be used in de24 termining the cases (of particular items) in which

25 the application of this subsection results in the de-
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1 termination of an amount that, by reason of its

2 being grossly excessive or grossly deficient, is not in3 herently reasonable, and to provide in those cases

4 for the factors that will be considered in establishing

5 an amount that is realistic and equitable’’.

6 (10) Section 1842(b)(10) (42 U.S.C.

7 1395u(b)(10)) is repealed.

8 (11) Section 1842(b)(11) (42 U.S.C.

9 1395u(b)(11)) is amended—

10 (A) by striking subparagraphs (B) through

11 (D),

12 (B) by striking ‘‘(11)(A)’’ and inserting

13 ‘‘(11)’’, and

14 (C) by redesignating clauses (i) and (ii) as

15 subparagraphs (A) and (B), respectively.

16 (12) Section 1842(b)(12)(A)(ii) (42 U.S.C.

17 1395u(b)(12)(A)(ii) is amended—

18 (A) in the matter preceding subclause (I),

19 by striking ‘‘prevailing charges determined

20 under paragraph (3)’’ and inserting ‘‘the

21 amounts determined under section

22 1833(a)(1)(G)’’, and

23 (B) in subclause (II), by striking ‘‘prevail24 ing charge rate’’ and all that follows up to the

25 period and inserting ‘‘fee schedule amount spec-
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1 ified in section 1848 for such services per2 formed by physicians’’.

3 (13) Paragraphs (14) through (17) of section

4 1842(b) (42 U.S.C. 1395u(b)) are repealed.

5 (14)(A) Section 1842(b)(18)(A) (42 U.S.C.

6 1395u(b)(18)(A)) is amended by striking ‘‘reason7 able charge or’’.

8 (B) Paragraph (18) of section 1842(b) (42

9 U.S.C. 1395u(b)) is renumbered as paragraph (14).

10 (15)(A) The matter in section 1842(j) (42

11 U.S.C. 1395u(j)) preceding paragraph (2) is amend12 ed to read as follows:

13 ‘‘(j)(1) See subsections (k), (l), (m), (n), and (p) as

14 to the cases in which sanctions may be applied under para15 graph (2).’’.

16 (B) Section 1842(j)(4) (42 U.S.C. 1395u(j)(4))

17 is amended by striking ‘‘under paragraph (1)’’.

18 (16) Section 1842(n)(1)(A) (42 U.S.C.

19 1395u(n)(1)(A)) is amended by striking ‘‘reasonable

20 charge (or other applicable limit)’’ and inserting

21 ‘‘other applicable limit’’.

22 (17) Section 1842(q) 42 U.S.C. 1395u(q) is

23 amended—

24 (A) by striking paragraph (1)(B), and
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1 (B) by striking ‘‘(q)(1)(A)’’ and inserting

2 ‘‘(q)(1)’’.

3 (18) Section 1845(b)(1) (42 U.S.C. 1395w4 1(b)(1) is amended by striking ‘‘adjustments to the

5 reasonable charge levels for physicians’ services rec6 ognized under section 1842(b) and’’.

7 (19) Section 1848(i)(3) (42 U.S.C. 1395w8 4(i)(3)) is repealed.

9 (20) Clause (ii) of the first sentence of section

10 1866(a)2)(A) (42 U.S.C. 1395cc(a)(2)(A) is amend11 ed by striking ‘‘reasonable charges’’ through ‘‘pro12 vider)’’ and inserting ‘‘amount customarily charged

13 for such items and services by such provider’’.

14 (21) Section 1881(b)(3)(A) (42 U.S.C.

15 1395rr(b)(3)(A)) is amended by striking ‘‘a reason16 able charge’’ through ‘‘section 1848)’’ and inserting

17 ‘‘the basis described in section 1848’’.

18 (22) Section 9340 of the Omnibus Budget Rec19 onciliation Act of 1986 (42 U.S.C. 1395u nt) is re20 pealed.

21 (c) EFFECTIVE DATES.—The amendments made by

22 the preceding subsections, to the extent they substitute fee

23 schedules for reasonable charges, apply to particular serv24 ices as of the date specified by the Secretary of Health

25 and Human Services.
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1 (d) INITIAL BUDGET NEUTRALITY.—The Secretary,

2 in developing a fee schedule for particular services (under

3 the amendments made by subsections (a) and (b)), shall

4 set amounts for the first year period to which the fee

5 schedule applies at a level such that the total payments

6 under title XVIII of the Social Security Act (42 U.S.C.

7 1395 et seq.) for those services for that year period shall

8 be approximately equal to the estimated total payments

9 if those amendments had not been made.

10 SEC. 11462. APPLICATION OF INHERENT REASONABLENESS

11 TO SURGICAL DRESSINGS.

12 Section 1834(i) (42 U.S.C. 1395m(i)) is amended by

13 adding at the end the following:

14 ‘‘(3) ADJUSTMENT FOR INHERENT REASON15 ABLENESS.—The provisions of subsection (a)(10)(B)

16 shall also apply to surgical dressings.’’.

17 SEC. 11463. APPLICATION OF COMPETITIVE ACQUISITION

18 PROCESS TO CERTAIN PART B ITEMS AND

19 SERVICES.

20 (a) GENERAL RULE.—Part B of title XVIII (42

21 U.S.C. 1395j et seq.) is amended by inserting after section

22 1846 the following:

23 ‘‘COMPETITIVE ACQUISITION OF ITEMS AND SERVICES

24 ‘‘SEC. 1847. (a) ESTABLISHMENT OF BIDDING

25 AREAS.—
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1 ‘‘(1) IN GENERAL.—The Secretary shall estab2 lish competitive acquisition areas for the purposes of

3 awarding contracts for the furnishing under this

4 part of the items and services described in sub5 section (c) after 1995. The Secretary may establish

6 different competitive acquisition areas under this

7 subsection for different classes of items and services

8 under this part.

9 ‘‘(2) CRITERIA FOR ESTABLISHMENT.—The

10 competitive acquisition areas established under para11 graph (1) shall—

12 ‘‘(A) initially be, or be within, metropolitan

13 statistical areas, and

14 ‘‘(B) be chosen based on the availability

15 and accessibility of entities able to furnish

16 items and services, and the probable savings to

17 be realized by the use of competitive bidding in

18 the furnishing of items and services in the area.

19 ‘‘(b) AWARDING OF CONTRACTS IN AREAS.—

20 ‘‘(1) IN GENERAL.—The Secretary shall con21 duct a competition among individuals and entities

22 supplying items and services under this part for

23 each competitive acquisition area established under

24 subsection (a) for each class of items and services.
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1 ‘‘(2) CONDITIONS FOR AWARDING CONTRACT.—

2 The Secretary may not award a contract to any en3 tity under the competition conducted pursuant to

4 paragraph (1) to furnish an item or service under

5 this part unless the Secretary finds that the entity

6 meets quality standards specified by the Secretary

7 for the furnishing of the item or service.

8 ‘‘(3) CONTENTS OF CONTRACT.—A contract en9 tered into with an entity under the competition con10 ducted pursuant to paragraph (1) shall specify (for

11 all of the items and services within a class)—

12 ‘‘(A) the quantity of items and services the

13 entity shall provide; and

14 ‘‘(B) such other terms and conditions as

15 the Secretary may require.

16 ‘‘(c) SERVICES DESCRIBED.—The items and services

17 to which the provisions of this section shall apply are as

18 follows:

19 ‘‘(1) Magnetic resonance imaging tests and

20 computerized axial tomography scans, including phy21 sician’s interpretation of the results of such tests

22 and scans.

23 ‘‘(2) Enteral and parenteral nutrients, supplies,

24 and equipment.
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1 ‘‘(3) Such other items as the Secretary may

2 specify.’’.

3 (b) ITEMS AND SERVICES TO BE FURNISHED ONLY

4 THROUGH COMPETITIVE ACQUISITION.—Section 1862(a)

5 (42 U.S.C. 1395y(a)) is amended—

6 (1) by striking ‘‘or’’ at the end of paragraph

7 (14),

8 (2) by striking the period at the end of para9 graph (15) and inserting ‘‘; or’’, and

10 (3) by inserting after paragraph (15) the fol11 lowing:

12 ‘‘(16) where such expenses are for an item or

13 service furnished in a competitive acquisition area

14 (as established by the Secretary under section

15 1847(a)) by an entity other than an entity with

16 which the Secretary has entered into a contract

17 under section 1847(b) for the furnishing of such an

18 item or service in that area, unless the Secretary

19 finds that such expenses were incurred in a case of

20 urgent need.’’.

21 (c) REDUCTION IN PAYMENT AMOUNTS IF COMPETI22 TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC23 TION IN PAYMENTS.—Notwithstanding any provision of

24 title XVIII of the Social Security Act (42 U.S.C. 1395

25 et seq.), if the establishment of competitive acquisition
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1 areas under section 1847 of that Act (as added by this

2 part) and the furnishing of items and services under that

3 section during 1997 does not result in a reduction of at

4 least 15 percent in the projected payment amounts that

5 would apply to a class of items or services under part B

6 of that title (42 U.S.C. 1395j et seq.) if that class of items

7 or services were not to be furnished under that section

8 1997, the Secretary shall reduce for that year the payment

9 amounts for that class of items and services by the per10 centage the Secretary determines necessary to result in

11 that reduction for that year (and those reduced amounts

12 shall be considered the full payment amounts for that year

13 in calculating payment amounts for future years).

14 (d) EFFECTIVE DATE.—The amendments made by

15 subsections (a) and (b) apply to items and services fur16 nished under part B of title XVIII of the Social Security

17 Act (42 U.S.C. 1395j et seq.) after 1995.

18 SEC. 11464. APPLICATION OF COMPETITIVE ACQUISITION

19 PROCESS TO LABORATORY SERVICES.

20 (a) IN GENERAL.—Section 1847(c), as added by sec21 tion 11463(a) of this Act, is amended by renumbering

22 paragraph (4) as (5) and inserting after paragraph (3)

23 the following:

24 ‘‘(4) Clinical diagnostic laboratory tests.’’.
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1 (b) REDUCTION IN PAYMENT AMOUNTS IF COMPETI2 TIVE ACQUISITION FAILS TO ACHIEVE MINIMUM REDUC3 TION IN PAYMENTS.—See section 11463(c) for provisions

4 that address reductions in payment amounts.

5 (c) EFFECTIVE DATE.—The amendment made by

6 subsection (a) applies to tests furnished under part B of

7 title XVIII of the Social Security Act (42 U.S.C. 1395j

8 et seq.) after 1995.

9 SEC. 11465. CHANGES IN PAYMENTS FOR CLINICAL LAB10 ORATORY TESTS.

11 (a) IN GENERAL.—Section 1833(h)(2)(A)(iii) (42

12 U.S.C. 1395l(h)(2)(A)(iii)) is amended—

13 (1) by striking the clause designation ‘‘(iii)’’

14 and inserting ‘‘(iii)(I)’’, and

15 (2) by adding at the end the following:

16 ‘‘(II) In lieu of the fees established under subclause

17 I, the Secretary may pay for tests classified as automated

18 tests on the basis of a nationally uniform fee for a group

19 of tests (of whatever number) performed together.

20 ‘‘(III) The Secretary shall pay for tests for amylase,

21 apolipoprotein A, apolipoprotein B, creatine kinase,

22 gamma glutamyl transferase, iron, lipase, magnesium,

23 thyroxine, triglyceride, or triiodothyronine uptake on the

24 same basis as the Secretary pays for other tests classified

25 as automated tests.
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1 ‘‘(IV) The Secretary may, from time to time, reclas2 sify specific tests as automated or not automated, based

3 on the volume of a test and the relative frequency by which

4 the test is performed on automated equipment.’’.

5 (b) EFFECTIVE DATE AND INITIAL PAYMENT LEV6 ELS.—

7 (1) The amendments made by subsection (a)

8 apply to tests performed after 1995.

9 (2) If the Secretary sets a nationally uniform

10 fee under subclause (II) of section 1833(h)(2)(A)(iii)

11 of the Social Security Act (42 U.S.C.

12 1395(h)(2)(A)(iii)), such a fee shall be initially es13 tablished so that estimated aggregate payments

14 under such fee shall equal the estimated aggregate

15 amounts that would otherwise have been payable for

16 the tests under subclause (I).

17 Subpart D—Provisions Relating to Parts A

18 and B of Medicare

19 SEC. 11471. DISCLOSURE OF TAXPAYER IDENTIFYING NUM20 BERS AND OTHER INFORMATION.

21 (a) PROVIDERS OF SERVICES AND CERTAIN OTHER

22 ENTITIES.—Section 1124 (42 U.S.C. 1320a–3) is amend23 ed by adding at the end of the following:

24 ‘‘(c) The Secretary may also require a disclosing en25 tity to supply the Secretary with the taxpayer identifying
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1 number (TIN) of the disclosing entity, of any person con2 cerning whom information is to be supplied under sub3 section (a), or of any other disclosing entity listed under

4 subsection (b).’’.

5 (b) ENTITIES THAT FURNISH ITEMS AND SERVICES

6 UNDER PART B.—

7 (1) Section 1124A(c)(1) (42 U.S.C. 1320a–

8 3a(c)(1)) is amended by striking ‘‘on an assignment9 related basis’’.

10 (2) Section 1124A(a) (42 U.S.C. 1320a–3a(a))

11 is amended—

12 (A) by striking ‘‘and’’ at the end of para13 graph (1),

14 (B) by striking the period at the end of

15 paragraph (2) and adding ’’; and’’, and

16 (C) by adding at the end the following:

17 ‘‘(3) on the identity of each individual described

18 in section 1866(a)(1)(D).’’.

19 (3) Section 1124A (42 U.S.C. 1320a–3a) is

20 amended—

21 (A) by redesignating subsection (c) as (d),

22 and

23 (B) by inserting after subsection (b) the

24 following:
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1 ‘‘(d) The Secretary may also require a disclosing part

2 B provider to provide the Secretary with the taxpayer

3 identifying number (TIN) of the disclosing part B pro4 vider, of any person concerning whom information is to

5 be supplied under subsection (a)(1), and of any managing

6 employee or entity listed under subsection (a)(2).’’.

7 (c) VERIFICATION OF TINS WITH THE SECRETARY

8 OF THE TREASURY.—Section 6103(m) of the Internal

9 Revenue Code of 1986 (26 U.S.C. 6103(m)) is amended

10 by adding at the end the following:

11 ‘‘(8) Individuals and other entities involved in

12 furnishing health care items and services under Fed13 eral (or federally supported) programs.—Upon writ14 ten request by the Secretary of Health and Human

15 Services, the Secretary shall disclose to the Sec16 retary of Health and Human Services the name of

17 each person or entity whose TIN has been obtained

18 under section 1124(c) or 1124A(d) of the Social Se19 curity Act.’’.

20 SEC. 11472. USE OF WAGE INDEX FOR AREA IN WHICH

21 HOME HEALTH SERVICES ARE FURNISHED.

22 (a) IN GENERAL.—Section 1861(v)(1)(L)(iii) (42

23 U.S.C. 1395x(v)(1)(L)(iii)) is amended by striking ‘‘the

24 home health agency is located’’ and inserting ‘‘services are

25 furnished’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) applies to services furnished after 1996.

3 CHANGES TO ADMINISTRATION BILL

4 (1) SNF PPS (Section 11113): Advance effective

5 date by one year to October 1, 1997. Interim PPS con6 tained in Section 11112 would apply between October 1,

7 1996 and September 30, 1997.

8 (2) Medical Education (Section 11105): Delete all

9 but subsections (a)(1) and (b)(1). The only thing that re10 mains is the freeze on interns and residents at the hos11 pital-specific level in the aggregate and for non-primary

12 care slots, for both Medicare IME and GME payments.

13 Plus the 2 proposals on the attached sheet.

14 (3) AAPCC Add-Ons (Section 11115): Change sub15 section (c) (new section 1886(d)(11)(F)) to payback of

16 100 percent of IME, GME and DSH (rather than 75 per17 cent), effective 1/1/98. See change in removal of add-ons

18 in managed care section.

19 (4) Oxygen (Section 11126): Delete Section 11126

20 from Administration bill. Substitute Section 8233 from

21 H.R. 2530 (the Coalition bill).

22 (5) Rural Provisions: Keep Section 11116 (Sole Com23 munity Hospitals) and Section 11117 (Rural Primary

24 Care Hospital Program). Add Section 7021 (Rural Refer25 ral Center), Section 7024 (PA/NP), Section 7025

26 (Telemedicine). Section 7026 (Rural Health Outreach
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1 Grants), Section 7028 (DSH threshold) from the Senate

2 Democratic Plan (printed in the Congressional Record on

3 Nov. 1).

4 (6) Managed Care: See attachment.

5 (7) Preventive benefits demonstration program sun6 sets in 2001 unless the Secretary determines these bene7 fits are cost-effective.

8 ADDITIONAL GMF PROPOSALS

9 Medical Education: Add provision from Administra10 tion package to allow hospitals to count residents in non11 hospital settings for purposes of their IME adjustment as

12 long as their resident-to-bed ratio does not increase, effec13 tive 7/1/96.

14 Medical Education: Add provision from Administra15 tion package to allow DGME payments to be made to cer16 tain non-hospital settings when the non-hospital is paying

17 for the resident’s salary in that setting, effective 7/1/96.

18 (c) UPGRADED DURABLE MEDICAL EQUIPMENT.—

19 Section 1834(a) (42 U.S.C. 1395m(a)) is amended by in20 serting after paragraph (15) the following new paragraph:

21 ‘‘(16) CERTAIN UPGRADED ITEMS.—

22 ‘‘(A) INDIVIDUAL’S RIGHT TO CHOOSE UP23 GRADED ITEM.—Notwithstanding any other

24 provision of law, effective on the date on which

25 the Secretary issues regulations under subpara26 graph (C), an individual may purchase or rent
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1 from a supplier an item of upgraded durable

2 medical equipment for which payment would be

3 made under this subsection if the item were a

4 standard item.

5 ‘‘(B) PAYMENTS TO SUPPLIER.—In the

6 case of the purchase or rental of an upgraded

7 item under subparagraph (A)—

8 ‘‘(i) the supplier shall receive payment

9 under this subsection with respect to such

10 item as if such item were a standard item;

11 and

12 ‘‘(ii) the individual purchasing or

13 renting the item shall pay the supplier an

14 amount equal to the difference between the

15 supplier’s charge and the amount under

16 clause (i).

17 In no event may the supplier’s charge for an

18 upgraded item exceed the applicable fee sched19 ule amount (if any) for such item.

20 ‘‘(C) CONSUMER PROTECTION SAFE21 GUARDS.—The Secretary shall issue regulations

22 providing for consumer protection standards

23 with respect to the furnishing of upgraded

24 equipment under subparagraph (A). Such regu25 lations shall provide for—
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1 ‘‘(i) determination of fair market

2 prices with respect to an upgraded item;

3 ‘‘(ii) full disclosure of the availability

4 and price of standard items and proof of

5 receipt of such disclosure information by

6 the beneficiary before the furnishing of the

7 upgraded item;

8 ‘‘(iii) conditions of participation for

9 suppliers in the simplified billing arrange10 ment;

11 ‘‘(iv) sanctions of suppliers who are

12 determined to engage in coercive or abu13 sive practices, including exclusion; and

14 ‘‘(v) such other safeguards as the Sec15 retary determines are necessary.’’.

16 OTHER MEDICARE CHANGES TO ADMINISTRATION’S

17 ORIGINAL PLAN CHOICES

18 Expanded Secretarial discretion over 50/50 and mini19 mum enrollment: The Administration bill would establish

20 minimum enrollment requirements of 5,000 members in

21 urban areas and 1,500 members in rural areas, and main22 tain the 50/50 enrollment composition requirement in

23 urban and rural areas, counting members for whom the

24 entity is ‘‘substantially at risk’’. The 50/50 requirement

25 could be waived in certain situations.
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1 This change would give the Secretary authority to

2 contract with organizations not meeting either the initial

3 enrollment or the 50/50 requirements, subject to: (1) an

4 evaluation that the entity has as the ability to manage

5 risk; (2) capacity limits imposed by the Secretary; (3)

6 meeting appropriate financial solvency requirements; and

7 (4) a higher level of monitoring.

8 Secretarial authority to contract out with entities: El9 igible health plans would include those specified in the Ad10 ministration bill, with the addition of an ‘‘other’’ category

11 for new types of plans that meet specified standards. The

12 Secretary would retain discretion as to which plans could

13 contract with Medicare.

14 Nurses and PSO issue: The Administration bill limits

15 who can establish PSOs to various mixtures of physicians

16 and/or hospitals. This change would treat nurse

17 practioners on a par with physicians for purposes of creat18 ing PSOs.

19 BENEFITS

20 Barium enemas with sigmoidoscopy for high risk

21 beneficiaries: The Administration bill would cover

22 colonoscopy for beneficiaries at high risk of colon cancer.

23 Under this change, Medicare would cover either (1) a

24 colonoscopy or (2) a combination of a flexible

25 sigmoidoscopy and an air contrast barium enema. The

26 original estimate for the complete colon screening benefit
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1 was $1.1 billion; the original proposal was repriced, based

2 on new information, at $1.365 billion. The total cost esti3 mate, including this change, is $1.355 billion, or estimated

4 lower costs of $10 million over 7 years. (The combination

5 of sigmoidoscopy and air contrast barium enema cost

6 slightly less than colonoscopy.) Because HCFA expects a

7 small net savings, we do not anticipate this change would

8 affect CBO’s estimate.

9 REGULATORY REFORM

10 CLIA compromise: The ‘‘Blue Dog’’ proposal would

11 exempt all physician office laboratories (POLs) from

12 CLIA requirements, except when they perform Pap smear

13 tests. An identical provision was deleted under the Byrd

14 rule from the Reconciliation Bill. This provision would

15 leave a majority of the nation’s labs with no quality over16 sight at all. Various compromise proposals for reducing

17 CLIA burdens on POLs have been discussed on Capitol

18 Hill. One such compromise, drafted by Democrats on the

19 House Commerce Committee, would (1) remove the re20 quirement of biennial laboratory inspections, allowing as21 needed inspections based on criteria set by the Secretary;

22 (2) mandate that all routine inspections be announced;

23 and (3) reduce application requirements for CLIA certifi24 cates and remove biennial re-application requirements.

25 This change would reduce burdens related to inspections
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1 and paperwork without compromising the quality of lab2 oratory testing.

3 Self-referral compensation exception: The Adminis4 tration bill includes no provision in this area; the Rec5 onciliation Bill would substantially weaken current protec6 tions.

7 This change, modeled after Mr. Stark’s bill, would:

8 1. Add exceptions for shared facility services and for

9 capitated payments (if designated health services are in10 cluded).

11 2. Entirely exclude intraocular lens, eyeglasses, and

12 contact lenses from designated health services subject to

13 prohibitions.

14 3. Include DME and parenteral and enteral nutri15 ents, equipment and supplies in the exception for in-office

16 ancillary services.

17 4. Delineate the requirements for permissible com18 pensation arrangements, thus making the requirements

19 uniform for all arrangements.

20 5. Repeal the exception for physicians’ services.

21 The ‘‘General Exceptions to both Ownership and

22 Compensation Arrangement Prohibitions’’ would then be:

23 (1) shared facility services (new); (2) in-office ancillary

24 services (including DME, parenteral and enteral nutrients,

25 equipment, and supplies) (altered); (3) pre-paid plans (un-
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1 changed); (4) capitated payments (new); and (5) other

2 permissible exceptions (unchanged).

3 OTHER

4 OPD/PPS: Add a PPS for OPDs. In particular, in

5 FY 2002, establish a PPS that would be budget neutral

6 relative to what Medicare payments would have been in

7 2002 and also budget neutral relative to what total bene8 ficiary coinsurance would have been in 2002.

9 Hospice: Under current law, hospice care is excepted

10 from the package of services provided by risk plans. If

11 beneficiaries elect hospice care, Medicare makes payments

12 directly to the hospice, and the HMOs and CMPs receive

13 the full monthly capitation amount (less an amount paid

14 to the hospice for attending physician services). Thus, hos15 pices are not required to contract directly with HMOs and

16 CMPs. This technical change would retain the current

17 provision under the new authority for Medicare managed

18 care contracting.

19 SNF minimum data set: This change would require

20 the continuation of standardized resident assessments con21 tained in the minimum data set (MDS). The MDS data

22 is necessary for developing a case-mix adjustor for a SNF

23 PPS, proposed elsewhere in the bills. Current Congres24 sional proposals eliminate the requirement that this data

25 be collected by eliminating certain nursing home quality

26 standards.
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1 Home health agency data for case mix system: This

2 change would allow the Secretary to mandate the collec3 tion of data that may be necessary to develop a case mix

4 adjustor for HH PPS. There is currently no requirement

5 that such data be collected.

6 Rural Primary Care Hospital Program (Sec. 11117

7 in President’s bill)

8 (1) Sen. Baucus is seeking an extension of the MAF

9 demonstration project until 2002, such as the one that

10 was included in the Conference Agreement. Since our

11 Rural Primary Care Hospital (RPCH) expansion proposal

12 makes RPCHs much more similar to MAFs in all key as13 pects, we suggest grandfathering all MAFs as RPCHs as

14 of the date of implementation of the national program.

15 This would effectively make all MAFs permanent, so that

16 extensions of the MAF demonstration would no longer be

17 necessary.

18 Centers of excellence: This change would replace the

19 term ‘‘rebates’’ with ‘‘beneficiary incentives.’’

20 TITLE V—WELFARE REFORM

21 SEC. 9000. AMENDMENT OF THE SOCIAL SECURITY ACT.

22 Except as otherwise expressly provided, wherever in

23 this title an amendment or repeal is expressed in terms

24 of an amendment to, or repeal of, a section or other provi-
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1 sion, the reference shall be considered to be made to a

2 section or other provision of the Social Security Act.

3 Subtitle A—Temporary

4 Employment Assistance

5 SEC. 9101. STATE PLAN.

6 (a) IN GENERAL.—Title IV (42 U.S.C. 601 et seq.)

7 is amended by striking part A and inserting the following:

8 ‘‘PART A—TEMPORARY EMPLOYMENT ASSISTANCE

9 ‘‘SEC. 400. APPROPRIATION.

10 ‘‘For the purpose of providing assistance to families

11 with needy children and assisting parents of children in

12 such families to obtain and retain private sector work to

13 the extent possible, and public sector or volunteer work

14 if necessary, through the Work First Employment Block

15 Grant program (hereafter in this title referred to as the

16 ‘Work First program’), there is hereby authorized to be

17 appropriated, and is hereby appropriated, for each fiscal

18 year a sum sufficient to carry out the purposes of this

19 part. The sums made available under this section shall be

20 used for making payments to States which have approved

21 State plans for temporary employment assistance.
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1 ‘‘SUBPART 1—STATE PLANS FOR TEMPORARY

2 EMPLOYMENT ASSISTANCE

3 ‘‘SEC. 401. ELEMENTS OF STATE PLANS.

4 ‘‘A State plan for temporary employment assistance

5 shall provide a description of the State program which car6 ries out the purpose described in section 400 and shall

7 meet the requirements of the following sections of this

8 subpart.

9 ‘‘SEC. 402. FAMILY ELIGIBILITY FOR TEMPORARY EMPLOY10 MENT ASSISTANCE.

11 ‘‘(a) IN GENERAL.—The State plan shall provide that

12 any family—

13 ‘‘(1) with 1 or more children (or any expectant

14 family, at the option of the State), defined as needy

15 by the State; and

16 ‘‘(2) which fulfills the conditions set forth in

17 subsection (b),

18 shall be eligible for cash assistance under the plan, except

19 as otherwise provided under this part.

20 ‘‘(b) INDIVIDUAL RESPONSIBILITY PLAN.—The

21 State plan shall provide that not later than 30 days after

22 the approval of the application for temporary employment

23 assistance, a parent qualifying for assistance shall execute

24 an individual responsibility plan as described in section

25 403. If a child otherwise eligible for assistance under this
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1 part is residing with a relative other than a parent, the

2 State plan may require the relative to execute such a plan

3 as a condition of the family receiving such assistance.

4 ‘‘(c) LIMITATIONS ON ELIGIBILITY.—

5 ‘‘(1) LENGTH OF TIME.—

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

7 subparagraphs (B), (C), (D), and (E), the

8 State plan shall provide that the family of an

9 individual who, after attaining age 18 years (or

10 age 19 years, at the option of the State), has

11 received assistance under the plan for 60

12 months, shall no longer be eligible for cash as13 sistance under the plan.

14 ‘‘(B) HARDSHIP EXCEPTION.—With re15 spect to any family, the State plan shall not in16 clude in the determination of the 60-month pe17 riod under subparagraph (A) any month in

18 which—

19 ‘‘(i) at the option of the State, the

20 family includes an individual working 20

21 hours per week (or more, at the option of

22 the State);

23 ‘‘(ii) the family resides in an area

24 with an unemployment rate exceeding 8

25 percent; or
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1 ‘‘(iii) the family is experiencing other

2 special hardship circumstances which make

3 it appropriate for the State to provide an

4 exemption for such month, except that the

5 total number of exemptions under this

6 clause for any month shall not exceed 15

7 percent of the number of families to which

8 the State is providing assistance under the

9 plan.

10 ‘‘(C) EXCEPTION FOR TEEN PARENTS.—

11 With respect to any family, the State plan shall

12 not include in the determination of the 60-

13 month period under subparagraph (A) any

14 month in which the parent—

15 ‘‘(i) is under age 18 (or age 19, at the

16 option of the State); and

17 ‘‘(ii) is making satisfactory progress

18 while attending high school or an alter19 native technical preparation school.

20 ‘‘(D) EXCEPTION FOR INDIVIDUALS EX21 EMPT FROM WORK REQUIREMENTS.—With re22 spect to any family, the State plan shall not in23 clude in the determination of the 60-month pe24 riod under subparagraph (A) any month in

25 which 1 or each of the parents—
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1 ‘‘(i) is seriously ill, incapacitated, or

2 of advanced age;

3 ‘‘(ii)(I) except for a child described in

4 subclause (II), is responsible for a child

5 under age 1 year (or age 6 months, at the

6 option of the State), or

7 ‘‘(II) in the case of a second or subse8 quent child born during such period, is re9 sponsible for a child under age 3 months;

10 ‘‘(iii) is pregnant in the third tri11 mester; or

12 ‘‘(iv) is caring for a family member

13 who is ill or incapacitated.

14 ‘‘(E) EXCEPTION FOR CHILD-ONLY

15 CASES.—With respect to any child who has not

16 attained age 18 (or age 19, at the option of the

17 State) and who is eligible for assistance under

18 this part, but not as a member of a family oth19 erwise eligible for assistance under this part

20 (determined without regard to this paragraph),

21 the State plan shall not include in the deter22 mination of the 60-month period under sub23 paragraph (A) any month in which such child

24 has not attained such age.
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1 ‘‘(F) OTHER PROGRAM ELIGIBILITY.—The

2 State plan shall provide that if a family is no

3 longer eligible for cash assistance under the

4 plan due to the imposition of the 60-month pe5 riod under subparagraph (A) or due to the im6 position of a penalty under subparagraph

7 (A)(ii) or (B)(ii) of section 403(e)(1)—

8 ‘‘(i) for purposes of determining eligi9 bility for any other Federal or federally as10 sisted program based on need, such family

11 shall continue to be considered eligible for

12 such cash assistance;

13 ‘‘(ii) for purposes of determining the

14 amount of assistance under any other Fed15 eral or federally assisted program based on

16 need, such family shall continue to be con17 sidered receiving such cash assistance; and

18 ‘‘(iii) the State may, at the option of

19 the State, after having assessed the needs

20 of the child or children of the family, pro21 vide for such needs with a voucher for such

22 family—

23 ‘‘(I) determined on the same

24 basis as the State would provide as-
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1 sistance under the State plan to such

2 a family with 1 less individual,

3 ‘‘(II) designed appropriately to

4 pay third parties for shelter, goods,

5 and services received by the child or

6 children, and

7 ‘‘(III) payable directly to such

8 third parties.

9 ‘‘(2) TREATMENT OF INTERSTATE MIGRANTS.—

10 The State plan may apply to a category of families

11 the rules for such category under a plan of another

12 State approved under this part, if a family in such

13 category has moved to the State from the other

14 State and has resided in the State for less than 12

15 months.

16 ‘‘(3) INDIVIDUALS ON OLD-AGE ASSISTANCE OR

17 SSI INELIGIBLE FOR TEMPORARY EMPLOYMENT AS18 SISTANCE.—The State plan shall provide that no as19 sistance shall be furnished any individual under the

20 plan with respect to any period with respect to which

21 such individual is receiving old-age assistance under

22 the State plan approved under section 102 of title

23 I or supplemental security income under title XVI.

24 ‘‘(4) CHILDREN FOR WHOM FEDERAL, STATE,

25 OR LOCAL FOSTER CARE MAINTENANCE OR ADOP-
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1 TION ASSISTANCE PAYMENTS ARE MADE.—A child

2 with respect to whom foster care maintenance pay3 ments or adoption assistance payments are made

4 under part E or under State or local law shall not,

5 for the period for which such payments are made, be

6 regarded as a needy child under this part, and such

7 child’s income and resources shall be disregarded in

8 determining the eligibility of the family of such child

9 for temporary employment assistance.

10 ‘‘(5) DENIAL OF ASSISTANCE FOR 10 YEARS TO

11 A PERSON FOUND TO HAVE FRAUDULENTLY MIS12 REPRESENTED RESIDENCE IN ORDER TO OBTAIN AS13 SISTANCE IN 2 OR MORE STATES.—The State plan

14 shall provide that no assistance will be furnished any

15 individual under the plan during the 10-year period

16 that begins on the date the individual is convicted in

17 Federal or State court of having made, a fraudulent

18 statement or representation with respect to the place

19 of residence of the individual in order to receive ben20 efits or services simultaneously from 2 or more

21 States under programs that are funded under this

22 part, title XIX, or the Food Stamp Act of 1977, or

23 benefits in 2 or more States under the supplemental

24 security income program under title XVI.
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1 ‘‘(6) DENIAL OF ASSISTANCE FOR FUGITIVE

2 FELONS AND PROBATION AND PAROLE VIOLA3 TORS.—

4 ‘‘(A) IN GENERAL.—The State plan shall

5 provide that no assistance will be furnished any

6 individual under the plan for any period if dur7 ing such period the State agency has knowledge

8 that such individual is—

9 ‘‘(i) fleeing to avoid prosecution, or

10 custody or confinement after conviction,

11 under the laws of the place from which the

12 individual flees, for a crime, or an attempt

13 to commit a crime, which is a felony under

14 the laws of the place from which the indi15 vidual flees, or which, in the case of the

16 State of New Jersey, is a high mis17 demeanor under the laws of such State; or

18 ‘‘(ii) violating a condition of probation

19 or parole imposed under Federal or State

20 law.

21 ‘‘(B) EXCHANGE OF INFORMATION WITH

22 LAW ENFORCEMENT AGENCIES.—Notwithstand23 ing any other provision of law, the State plan

24 shall provide that the State shall furnish any

25 Federal, State, or local law enforcement officer,
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1 upon the request of the officer, with the current

2 address of any recipient of assistance under the

3 plan, if the officer furnishes the agency with the

4 name of the recipient and notifies the agency

5 that—

6 ‘‘(i) such recipient—

7 ‘‘(I) is described in clause (i) or

8 (ii) of subparagraph (A); or

9 ‘‘(II) has information that is nec10 essary for the officer to conduct the

11 officer’s official duties; and

12 ‘‘(ii) the location or apprehension of

13 the recipient is within such officer’s official

14 duties.

15 ‘‘(d) DETERMINATION OF ELIGIBILITY.—

16 ‘‘(1) DETERMINATION OF NEED.—The State

17 plan shall provide that the State agency take into

18 consideration any income and resources of any indi19 vidual the State determines should be considered in

20 determining the need of the child or relative claim21 ing temporary employment assistance, subject to sec22 tion 407.

23 ‘‘(2) RESOURCE AND INCOME DETERMINA24 TION.—In determining the total resources and in-
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1 come of the family of any needy child, the State plan

2 shall provide the following:

3 ‘‘(A) RESOURCES.—The State’s resource

4 limit, including a description of the policy deter5 mined by the State regarding any exclusion al6 lowed for vehicles owned by family members, re7 sources set aside for future needs of a child, in8 dividual development accounts, or other policies

9 established by the State to encourage savings.

10 ‘‘(B) FAMILY INCOME.—The extent to

11 which earned or unearned income is disregarded

12 in determining eligibility for, and amount of,

13 assistance.

14 ‘‘(C) CHILD SUPPORT.—The State’s policy,

15 if any, for determining the extent to which child

16 support received in excess of $50 per month on

17 behalf of a member of the family is disregarded

18 in determining eligibility for, and the amount

19 of, assistance.

20 ‘‘(D) CHILD’S EARNINGS.—The treatment

21 of earnings of a child living in the home.

22 ‘‘(E) EARNED INCOME TAX CREDIT.—The

23 State agency shall disregard any refund of Fed24 eral income taxes made to a family receiving

25 temporary employment assistance by reason of
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1 section 32 of the Internal Revenue Code of

2 1986 (relating to earned income tax credit) and

3 any payment made to such a family by an em4 ployer under section 3507 of such Code (relat5 ing to advance payment of earned income cred6 it).

7 ‘‘(3) VERIFICATION SYSTEM.—The State plan

8 shall provide that information is requested and ex9 changed for purposes of income and eligibility ver10 ification in accordance with a State system which

11 meets the requirements of section 1137.

12 ‘‘SEC. 403. INDIVIDUAL RESPONSIBILITY PLAN.

13 ‘‘(a) ASSESSMENT.—The State agency responsible

14 for administering the State plan shall make an initial as15 sessment of the skills, prior work experience, and employ16 ability of each applicant for, or recipient of, assistance

17 under the State plan who—

18 ‘‘(1) has attained 18 years of age; or

19 ‘‘(2) has not completed high school or obtained

20 a certificate of high school equivalency, and is not

21 attending secondary school.

22 ‘‘(b) INDIVIDUAL RESPONSIBILITY PLANS.—

23 ‘‘(1) IN GENERAL.—On the basis of the assess24 ment made under subsection (a) with respect to an

25 individual, the State agency, in consultation with the
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1 individual, shall develop an individual responsibility

2 plan for the individual, which—

3 ‘‘(A) shall provide that participation by the

4 individual in job search activities shall be a con5 dition of eligibility for assistance under the

6 State plan approved under part A, except dur7 ing any period for which the individual is em8 ployed full-time in an unsubsidized job in the

9 private sector;

10 ‘‘(B) sets forth an employment goal for the

11 individual and a plan for moving the individual

12 immediately into private sector employment;

13 ‘‘(C) sets forth the obligations of the indi14 vidual, which may include a requirement that

15 the individual attend school, maintain certain

16 grades and attendance, keep school age children

17 of the individual in school, immunize children,

18 attend parenting and money management class19 es, or do other things that will help the individ20 ual become and remain employed in the private

21 sector;

22 ‘‘(D) may require that the individual enter

23 the State program established under part F, if

24 the caseworker determines that the individual

25 will need education, training, job placement as-
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1 sistance, wage enhancement, or other services

2 to become employed in the private sector;

3 ‘‘(E) shall provide that the individual

4 must—

5 ‘‘(i) assign to the State any rights to

6 support from any other person the individ7 ual may have in such individual’s own be8 half or in behalf of any other family mem9 ber for whom the individual is applying for

10 or receiving assistance; and

11 ‘‘(ii) cooperate with the State—

12 ‘‘(I) in establishing the paternity

13 of a child born out of wedlock with re14 spect to whom assistance is claimed,

15 and

16 ‘‘(II) in obtaining support pay17 ments for the individual and for a

18 child with respect to whom such as19 sistance is claimed, or in obtaining

20 any other payments or property due

21 the individual or the child,

22 unless (in either case) the individual is found to

23 have good cause for refusing to cooperate as de24 termined by the State agency in accordance

25 with standards prescribed by the Secretary,
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1 which standards shall take into consideration

2 the best interests of the child on whose behalf

3 assistance is claimed.

4 ‘‘(F) to the greatest extent possible shall

5 be designed to move the individual into what6 ever private sector employment the individual is

7 capable of handling as quickly as possible, and

8 to increase the responsibility and amount of

9 work the individual is to handle over time;

10 ‘‘(G) shall describe what services the State

11 will provide the individual so that the individual

12 will be able to obtain and keep employment in

13 the private sector, and describe the job counsel14 ing and other services that will be provided by

15 the State; and

16 ‘‘(H) at the option of the State, may re17 quire the individual to undergo appropriate sub18 stance abuse treatment.

19 ‘‘(2) TIMING.—The State agency shall comply

20 with paragraph (1) with respect to an individual—

21 ‘‘(A) within 90 days (or, at the option of

22 the State, 180 days) after the effective date of

23 this part, in the case of an individual who, as

24 of such effective date, is a recipient of assist-
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1 ance under the State plan approved under this

2 part; or

3 ‘‘(B) within 30 days (or, at the option of

4 the State, 90 days) after the individual is deter5 mined to be eligible for such assistance, in the

6 case of any other individual.

7 ‘‘(c) PROVISION OF PROGRAM AND EMPLOYMENT IN8 FORMATION.—The State shall inform all applicants for

9 and recipients of assistance under the State plan approved

10 under this part of all available services under the State

11 plan for which they are eligible.

12 ‘‘(d) REQUIREMENT THAT RECIPIENTS ENTER THE

13 WORK FIRST PROGRAM.—

14 ‘‘(1) IN GENERAL.—Beginning with fiscal year

15 2004, the State shall place recipients of assistance

16 under the State plan approved under this part, who

17 have not become employed in the private sector with18 in 1 year after signing an individual responsibility

19 plan, in the first available slot in the State program

20 established under part F, except as provided in

21 paragraph (2).

22 ‘‘(2) EXCEPTIONS.—A state may not be re23 quired to place a recipient of such assistance in the

24 State program established under part F if the recipi25 ent—
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1 ‘‘(A) is ill, incapacitated, or of advanced

2 age;

3 ‘‘(B) has not attained 18 years of age;

4 ‘‘(C) is caring for a child or parent who is

5 ill or incapacitated; or

6 ‘‘(D) is enrolled in school or in educational

7 or training programs that will lead to private

8 sector employment.

9 ‘‘(e) PENALTIES.—

10 ‘‘(1) STATE NOT OPERATING A WORK FIRST OR

11 WORKFARE PROGRAM.—In the case of a State that

12 is not operating a program under part F or G:

13 ‘‘(A) FAILURE TO COMPLY WITH INDIVID14 UAL RESPONSIBILITY PLAN OR AGREEMENT OF

15 MUTUAL RESPONSIBILITY.—

16 ‘‘(i) PROGRESSIVE REDUCTIONS IN

17 ASSISTANCE FOR 1ST AND 2ND FAIL18 URES.—The amount of assistance other19 wise to be provided under the State plan

20 approved under this part to a family that

21 includes an individual who fails without

22 good cause to comply with an individual

23 responsibility plan (or, if the State has es24 tablished a program under subpart 1 of

25 part F and the individual is required to
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1 participate in the program, an agreement

2 of mutual responsibility) signed by the in3 dividual (other than by reason of conduct

4 described in paragraph (2)) shall be re5 duced by—

6 ‘‘(I) 33 percent for the 1st such

7 act of noncompliance; or

8 ‘‘(II) 66 percent for the 2nd such

9 act of noncompliance.

10 ‘‘(ii) DENIAL OF ASSISTANCE FOR 3RD

11 FAILURE.—In the case of the 3rd such act

12 of noncompliance, the family of which the

13 individual is a member shall not thereafter

14 be eligible for assistance under the State

15 plan approved under this part.

16 ‘‘(iii) ACTS OF NONCOMPLIANCE.—

17 For purposes of this paragraph, a 1st act

18 of noncompliance by an individual that

19 continues for more than 1 calendar month

20 shall be considered a 2nd act of noncompli21 ance, and a 2nd act of noncompliance that

22 continues for more than 3 calendar months

23 shall be considered a 3rd act of noncompli24 ance.
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1 ‘‘(B) DENIAL OF ASSISTANCE TO ADULTS

2 REFUSING TO WORK, LOOK FOR WORK, OR AC3 CEPT A BONA FIDE OFFER OF EMPLOYMENT.—

4 ‘‘(i) REFUSAL TO WORK OR LOOK FOR

5 WORK.—If an unemployed individual who

6 has attained 18 years of age refuses to

7 work or look for work—

8 ‘‘(I) in the case of the 1st such

9 refusal, assistance under the State

10 plan approved under this part shall

11 not be payable with respect to the in12 dividual until the later of—

13 ‘‘(aa) a period of not less

14 than 6 months after the date of

15 the first such refusal; or

16 ‘‘(bb) the first date the indi17 vidual agrees to work or look for

18 work; or

19 ‘‘(II) in the case of the 2nd such

20 refusal, the family of which the indi21 vidual is a member shall not there22 after be eligible for assistance under

23 the State plan approved under this

24 part.
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1 ‘‘(ii) REFUSAL TO ACCEPT A BONA

2 FIDE OFFER OF EMPLOYMENT.—If an un3 employed individual who has attained 18

4 years of age refuses to accept a bona fide

5 offer of employment, the family of which

6 the individual is a member shall not there7 after be eligible for assistance under the

8 State plan approved under this part.

9 ‘‘(2) OTHER STATES.—In the case of any other

10 State, the State shall reduce, by such amount as the

11 State considers appropriate, the amount of assist12 ance otherwise payable under the State plan ap13 proved under this part to a family that includes an

14 individual who fails without good cause to comply

15 with an individual responsibility plan signed by the

16 individual.

17 ‘‘SEC. 404. PAYMENT OF ASSISTANCE.

18 ‘‘(a) STANDARDS OF ASSISTANCE.—The State plan

19 shall specify standards of assistance, including—

20 ‘‘(1) the composition of the unit for which as21 sistance will be provided;

22 ‘‘(2) a standard, expressed in money amounts,

23 to be used in determining the need of applicants and

24 recipients;
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1 ‘‘(3) a standard, expressed in money amounts,

2 to be used in determining the amount of the assist3 ance payment; and

4 ‘‘(4) the methodology to be used in determining

5 the payment amount received by assistance units.

6 ‘‘(b) LEVEL OF ASSISTANCE.—Except as otherwise

7 provided in this title, the State plan shall provide that—

8 ‘‘(1) the determination of need and the amount

9 of assistance for all applicants and recipients shall

10 be made on an objective and equitable basis; and

11 ‘‘(2) families of similar composition with similar

12 needs and circumstances shall be treated similarly.

13 ‘‘(c) CORRECTION OF PAYMENTS.—The State plan

14 shall provide that the State agency will promptly take all

15 necessary steps to correct any overpayment or

16 underpayment of assistance under such plan, including the

17 request for Federal tax refund intercepts as provided

18 under section 416.

19 ‘‘(d) OPTIONAL VOLUNTARY DIVERSION PRO20 GRAM.—The State plan shall, at the option of the State,

21 and in such part or parts of the State as the State may

22 select, provide that—

23 ‘‘(1) upon the recommendation of the case24 worker who is handling the case of a family eligible

25 for assistance under the State plan, the State shall,
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1 in lieu of any other assistance under the State plan

2 to the family during a time period of not more than

3 3 months, make a lump-sum payment to the family

4 for the time period in an amount not to exceed—

5 ‘‘(A) the value of the monthly benefits that

6 would otherwise be provided to the family under

7 the State plan; multiplied by

8 ‘‘(B) the number of months in the time pe9 riod;

10 ‘‘(2) a lump-sum payment pursuant to subpara11 graph (A) shall not be made more than once to any

12 family; and

13 ‘‘(3) if, during a time period for which the

14 State has made a lump-sum payment to a family

15 pursuant to subparagraph (A), the family applies for

16 and (but for the lump-sum payment) would be eligi17 ble under the State plan for a monthly benefit that

18 is greater than the value of the monthly benefit

19 which would have been provided to the family under

20 the State plan at the time of the calculation of the

21 lump sum payment, then, notwithstanding subpara22 graph (A), the State shall, for that part of the time

23 period that remains after the family becomes eligible

24 for the greater monthly benefit, provide monthly

25 benefits to the family in an amount not to exceed—
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1 ‘‘(A) the amount by which the value of the

2 greater monthly benefit exceeds the value of the

3 former monthly benefit, multiplied by the num4 ber of months in the time period; divided by

5 ‘‘(B) the whole number of months remain6 ing in the time period.

7 ‘‘SEC. 405. OTHER PROGRAMS.

8 ‘‘(a) WORK FIRST PROGRAM; WORKFARE OR JOB

9 PLACEMENT VOUCHER PROGRAM.—The State plan shall

10 provide that the State has in effect and operation—

11 ‘‘(1) a work first program that meets the re12 quirements of part F; and

13 ‘‘(2) a workfare program that meets the re14 quirements of part G, or a job placement voucher

15 program that meets the requirements of part H, but

16 not both.

17 ‘‘(b) PROVISION OF POSITIONS AND VOUCHERS.—

18 The State plan shall provide that the State shall provide

19 a position in the workfare program established by the

20 State under part G, or a job placement voucher under the

21 job placement voucher program established by the State

22 under part H to any individual who, by reason of section

23 487(b), is prohibited from participating in the work first

24 program operated by the State, and shall not provide such

25 a position or such a voucher to any other individual.
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1 ‘‘(c) PROVISION OF CASE MANAGEMENT SERV2 ICES.—The State plan shall provide that the State shall

3 provide to participants in such programs such case man4 agement services as are necessary to ensure the integrated

5 provision of benefits and services under such programs.

6 ‘‘(d) STATE CHILD SUPPORT AGENCY.—The State

7 plan shall—

8 ‘‘(1) provide that the State has in effect a plan

9 approved under part D and operates a child support

10 program in substantial compliance with such plan;

11 ‘‘(2) provide that the State agency administer12 ing the plan approved under this part shall be re13 sponsible for assuring that—

14 ‘‘(A) the benefits and services provided

15 under plans approved under this part and part

16 D are furnished in an integrated manner, in17 cluding coordination of intake procedures with

18 the agency administering the plan approved

19 under part D;

20 ‘‘(B) all applicants for, and recipients of,

21 temporary employment assistance are encour22 aged, assisted, and required (as provided under

23 section 403(b)(1)(E)(ii)) to cooperate in the es24 tablishment and enforcement of paternity and

25 child support obligations and are notified about
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1 the services available under the State plan ap2 proved under part D; and

3 ‘‘(C) procedures require referral of pater4 nity and child support enforcement cases to the

5 agency administering the plan approved under

6 part D not later than 10 days after the applica7 tion for temporary employment assistance; and

8 ‘‘(3) provide for prompt notice (including the

9 transmittal of all relevant information) to the State

10 child support collection agency established pursuant

11 to part D of the furnishing of temporary employ12 ment assistance with respect to a child who has been

13 deserted or abandoned by a parent (including a child

14 born out-of-wedlock without regard to whether the

15 paternity of such child has been established).

16 ‘‘(e) CHILD WELFARE SERVICES AND FOSTER CARE

17 AND ADOPTION ASSISTANCE.—The State plan shall pro18 vide that the State has in effect—

19 ‘‘(1) a State plan for child welfare services ap20 proved under part B; and

21 ‘‘(2) a State plan for foster care and adoption

22 assistance approved under part E,

23 and operates such plans in substantial compliance with the

24 requirements of such parts.
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1 ‘‘(f) REPORT OF CHILD ABUSE, ETC.—The State

2 plan shall provide that the State agency will—

3 ‘‘(1) report to an appropriate agency or official,

4 known or suspected instances of physical or mental

5 injury, sexual abuse or exploitation, or negligent

6 treatment or maltreatment of a child receiving as7 sistance under the State plan under circumstances

8 which indicate that the child’s health or welfare is

9 threatened thereby; and

10 ‘‘(2) provide such information with respect to a

11 situation described in paragraph (1) as the State

12 agency may have.

13 ‘‘(g) AVAILABILITY OF ASSISTANCE IN RURAL AREAS

14 OF STATE.—The State plan shall consider and address the

15 needs of rural areas in the State to ensure that families

16 in such areas receive assistance to become self-sufficient.

17 ‘‘(h) FAMILY PRESERVATION.—

18 ‘‘(1) IN GENERAL.—The State plan shall de19 scribe the efforts by the State to promote family

20 preservation and stability, including efforts—

21 ‘‘(A) to encourage fathers to stay home

22 and be a part of the family;

23 ‘‘(B) to keep families together to the ex24 tent possible; and
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1 ‘‘(C) except to the extent provided in para2 graph (2), to treat 2-parent families and 1-par3 ent families equally with respect to eligibility

4 for assistance.

5 ‘‘(2) MAINTENANCE OF TREATMENT.—The

6 State may impose eligibility limitations relating spe7 cifically to 2-parent families to the extent such limi8 tations are no more restrictive than such limitations

9 in effect in the State plan in fiscal year 1995.

10 ‘‘SEC. 406. ADMINISTRATIVE REQUIREMENTS FOR STATE

11 PLAN.

12 ‘‘(a) STATEWIDE PLAN.—The State plan shall be in

13 effect in all political subdivisions of the State, and, if ad14 ministered by the subdivisions, be mandatory upon such

15 subdivisions. If such plan is not administered uniformly

16 throughout the State, the plan shall describe the adminis17 trative variations.

18 ‘‘(b) SINGLE ADMINISTRATING AGENCY.—The State

19 plan shall provide for the establishment or designation of

20 a single State agency to administer the plan or supervise

21 the administration of the plan.

22 ‘‘(c) FINANCIAL PARTICIPATION.—The State plan

23 shall provide for financial participation by the State in the

24 same manner and amount as such State participates

25 under title XIX, except that with respect to the sums ex-
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1 pended for the administration of the State plan, the per2 centage shall be 50 percent.

3 ‘‘(d) REASONABLE PROMPTNESS.—The State plan

4 shall provide that all individuals wishing to make applica5 tion for temporary employment assistance shall have op6 portunity to do so, and that such assistance be furnished

7 with reasonable promptness to all eligible individuals.

8 ‘‘(e) AUTOMATED DATA PROCESSING SYSTEM.—The

9 State plan shall, at the option of the State, provide for

10 the establishment and operation of an automated state11 wide management information system designed effectively

12 and efficiently, to assist management in the administra13 tion of the State plan approved under this part, so as—

14 ‘‘(1) to control and account for—

15 ‘‘(A) all the factors in the total eligibility

16 determination process under such plan for as17 sistance, and

18 ‘‘(B) the costs, quality, and delivery of

19 payments and services furnished to applicants

20 for and recipients of assistance; and

21 ‘‘(2) to notify the appropriate officials for child

22 support, food stamp, and social service programs,

23 and the medical assistance program approved under

24 title XIX, whenever a recipient becomes ineligible for
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1 such assistance or the amount of assistance provided

2 to a recipient under the State plan is changed.

3 ‘‘(f) DISCLOSURE OF INFORMATION.—The State plan

4 shall provide for safeguards which restrict the use or dis5 closure of information concerning applicants or recipients.

6 ‘‘(g) DETECTION OF FRAUD.—The State plan shall

7 provide, in accordance with regulations issued by the Sec8 retary, for appropriate measures to detect fraudulent ap9 plications for temporary employment assistance before the

10 establishment of eligibility for such assistance.

11 ‘‘SUBPART 2—ADMINISTRATIVE PROVISIONS

12 ‘‘SEC. 411. APPROVAL OF PLAN.

13 ‘‘(a) IN GENERAL.—The Secretary shall approve a

14 State plan which fulfills the requirements under subpart

15 1 within 120 days of the submission of the plan by the

16 State to the Secretary.

17 ‘‘(b) DEEMED APPROVAL.—If a State plan has not

18 been rejected by the Secretary during the period specified

19 in subsection (a), the plan shall be deemed to have been

20 approved.

21 ‘‘SEC. 412. COMPLIANCE.

22 In the case of any State plan for temporary employ23 ment assistance which has been approved under section

24 411, if the Secretary, after reasonable notice and oppor25 tunity for hearing to the State agency administering or
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1 supervising the administration of such plan, finds that in

2 the administration of the plan there is a failure to comply

3 substantially with any provision required by subpart 1 to

4 be included in the plan, the Secretary shall notify such

5 State agency that further payments will not be made to

6 the State (or in the Secretary’s discretion, that payments

7 will be limited to categories under or parts of the State

8 plan not affected by such failure) until the Secretary is

9 satisfied that such prohibited requirement is no longer so

10 imposed, and that there is no longer any such failure to

11 comply. Until the Secretary is so satisfied the Secretary

12 shall make no further payments to such State (or shall

13 limit payments to categories under or parts of the State

14 plan not affected by such failure).

15 ‘‘SEC. 413. PAYMENTS TO STATES.

16 ‘‘(a) COMPUTATION OF AMOUNT.—Subject to section

17 412, from the sums appropriated therefor, the Secretary

18 of the Treasury shall pay to each State which has an ap19 proved plan for temporary employment assistance, for

20 each quarter, beginning with the quarter commencing Oc21 tober 1, 1996, an amount equal to the Federal medical

22 assistance percentage (as defined in section 1905(b)) of

23 the expenditures by the State under such plan.
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1 ‘‘(b) METHOD OF COMPUTATION AND PAYMENT.—

2 The method of computing and paying such amounts shall

3 be as follows:

4 ‘‘(1) The Secretary shall, prior to the beginning

5 of each quarter, estimate the amount to be paid to

6 the State for such quarter under the provisions of

7 subsection (a), such estimate to be based on—

8 ‘‘(A) a report filed by the State containing

9 its estimate of the total sum to be expended in

10 such quarter in accordance with the provisions

11 of such subsection and stating the amount ap12 propriated or made available by the State and

13 its political subdivisions for such expenditures

14 in such quarter, and if such amount is less than

15 the State’s proportionate share of the total sum

16 of such estimated expenditures, the source or

17 sources from which the difference is expected to

18 be derived;

19 ‘‘(B) records showing the number of needy

20 children in the State; and

21 ‘‘(C) such other information as the Sec22 retary may find necessary.

23 ‘‘(2) The Secretary of Health and Human Serv24 ices shall then certify to the Secretary of the Treas-
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1 ury the amount so estimated by the Secretary of

2 Health and Human Services—

3 ‘‘(A) reduced or increased, as the case may

4 be, by any sum by which the Secretary of

5 Health and Human Services finds that the esti6 mate for any prior quarter was greater or less

7 than the amount which should have been paid

8 to the State for such quarter;

9 ‘‘(B) reduced by a sum equivalent to the

10 pro rata share to which the Federal Govern11 ment is equitably entitled, as determined by the

12 Secretary of Health and Human Services, of

13 the net amount recovered during any prior

14 quarter by the State or any political subdivision

15 thereof with respect to temporary employment

16 assistance furnished under the State plan; and

17 ‘‘(C) reduced by such amount as is nec18 essary to provide the appropriate reimburse19 ment to the Federal Government that the State

20 is required to make under section 457 out of

21 that portion of child support collections retained

22 by the State pursuant to such section,

23 except that such increases or reductions shall not be

24 made to the extent that such sums have been ap25 plied to make the amount certified for any prior
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1 quarter greater or less than the amount estimated

2 by the Secretary of Health and Human Services for

3 such prior quarter.

4 ‘‘(c) METHOD OF PAYMENT.—The Secretary of the

5 Treasury shall thereupon, through the Fiscal Service of

6 the Department of the Treasury and prior to audit or set7 tlement by the General Accounting Office, pay to the

8 State, at the time or times fixed by the Secretary of

9 Health and Human Services, the amount so certified.

10 ‘‘SEC. 414. QUALITY ASSURANCE, DATA COLLECTION, AND

11 REPORTING SYSTEM.

12 ‘‘(a) QUALITY ASSURANCE.—

13 ‘‘(1) IN GENERAL.—Under the State plan, a

14 quality assurance system shall be developed based

15 upon a collaborative effort involving the Secretary,

16 the State, the political subdivisions of the State, and

17 assistance recipients, and shall include quantifiable

18 program outcomes related to self sufficiency in the

19 categories of welfare-to-work, payment accuracy, and

20 child support.

21 ‘‘(2) MODIFICATIONS TO SYSTEM.—As deemed

22 necessary, but not more often than every 2 years,

23 the Secretary, in consultation with the State, the po24 litical subdivisions of the State, and assistance re25 cipients, shall make appropriate changes in the de-
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1 sign and administration of the quality assurance sys2 tem, including changes in benchmarks, measures,

3 and data collection or sampling procedures.

4 ‘‘(b) DATA COLLECTION AND REPORTING.—

5 ‘‘(1) IN GENERAL.—The State plan shall pro6 vide for a quarterly report to the Secretary regard7 ing the data described in paragraphs (2) and (3)

8 and such additional data needed for the quality as9 surance system. The data collection and reporting

10 system under this subsection shall promote account11 ability, continuous improvement, and integrity in the

12 State plans for temporary employment assistance

13 and Work First.

14 ‘‘(2) DISAGGREGATED DATA.—The State shall

15 collect the following data items on a monthly basis

16 from disaggregated case records of applicants for

17 and recipients of temporary employment assistance

18 from the previous month:

19 ‘‘(A) The age of adults and children (in20 cluding pregnant women).

21 ‘‘(B) Marital or familial status of cases:

22 married (2-parent family), widowed, divorced,

23 separated, or never married; or child living with

24 other adult relative.
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1 ‘‘(C) The gender, race, educational attain2 ment, work experience, disability status (wheth3 er the individual is seriously ill, incapacitated,

4 or caring for a disabled or incapacitated child)

5 of adults.

6 ‘‘(D) The amount of cash assistance and

7 the amount and reason for any reduction in

8 such assistance. Any other data necessary to

9 determine the timeliness and accuracy of bene10 fits and welfare diversions.

11 ‘‘(E) Whether any member of the family

12 receives benefits under any of the following:

13 ‘‘(i) Any housing program.

14 ‘‘(ii) The food stamp program under

15 the Food Stamp Act of 1977.

16 ‘‘(iii) The Head Start programs car17 ried out under the Head Start Act.

18 ‘‘(iv) Any job training program.

19 ‘‘(F) The number of months since the most

20 recent application for assistance under the plan.

21 ‘‘(G) The total number of months for

22 which assistance has been provided to the fami23 lies under the plan.

24 ‘‘(H) The employment status, hours

25 worked, and earnings of individuals while re-
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1 ceiving assistance, whether the case was closed

2 due to employment, and other data needed to

3 meet the work performance rate.

4 ‘‘(I) Status in Work First and workfare,

5 including the number of hours an individual

6 participated and the component in which the in7 dividual participated.

8 ‘‘(J) The number of persons in the assist9 ance unit and their relationship to the youngest

10 child. Nonrecipients in the household and their

11 relationship to the youngest child.

12 ‘‘(K) Citizenship status.

13 ‘‘(L) Shelter arrangement.

14 ‘‘(M) Unearned income (not including tem15 porary employment assistance), such as child

16 support, and assets.

17 ‘‘(N) The number of children who have a

18 parent who is deceased, incapacitated, or unem19 ployed.

20 ‘‘(O) Geographic location.

21 ‘‘(3) AGGREGATED DATA.—The State shall col22 lect the following data items on a monthly basis

23 from aggregated case records of applicants for and

24 recipients of temporary employment assistance from

25 the previous month:
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1 ‘‘(A) The number of adults receiving as2 sistance.

3 ‘‘(B) The number of children receiving as4 sistance.

5 ‘‘(C) The number of families receiving as6 sistance.

7 ‘‘(D) The number of assistance units who

8 had their grants reduced or terminated and the

9 reason for the reduction or termination, includ10 ing sanction, employment, and meeting the time

11 limit for assistance).

12 ‘‘(E) The number of applications for as13 sistance; the number approved and the number

14 denied and the reason for denial.

15 ‘‘(4) LONGITUDINAL STUDIES.—The State shall

16 submit selected data items for a cohort of individ17 uals who are tracked over time. This longitudinal

18 sample shall be used for selected data items de19 scribed in paragraphs (2) and (3), as determined ap20 propriate by the Secretary.

21 ‘‘(c) ADDITIONAL DATA.—The report required by

22 subsection (b) for a fiscal year quarter shall also include

23 the following:
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1 ‘‘(1) REPORT ON USE OF FEDERAL FUNDS TO

2 COVER ADMINISTRATIVE COSTS AND OVERHEAD.—A

3 statement of—

4 ‘‘(A) the percentage of the Federal funds

5 paid to the State under this part for the fiscal

6 year quarter that are used to cover administra7 tive costs or overhead; and

8 ‘‘(B) the total amount of State funds that

9 are used to cover such costs or overhead.

10 ‘‘(2) REPORT ON STATE EXPENDITURES ON

11 PROGRAMS FOR NEEDY FAMILIES.—A statement of

12 the total amount expended by the State during the

13 fiscal year quarter on programs for needy families,

14 with the amount spent on the program under this

15 part, and the purposes for which such amount was

16 spent, separately stated.

17 ‘‘(3) REPORT ON NONCUSTODIAL PARENTS PAR18 TICIPATING IN WORK ACTIVITIES.—The number of

19 noncustodial parents in the State who participated

20 in work activities during the fiscal year quarter.

21 ‘‘(4) REPORT ON CHILD SUPPORT COL22 LECTED.—The total amount of child support col23 lected by the State agency administering the State

24 plan under part D on behalf of a family receiving as25 sistance under this part.
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1 ‘‘(5) REPORT ON CHILD CARE.—The total

2 amount expended by the State for child care under

3 this part, along with a description of the types of

4 child care provided, such as child care provided in

5 the case of a family that has ceased to receive assist6 ance under this part because of increased hours of,

7 or increased income from, employment, or in the

8 case of a family that is not receiving assistance

9 under this part but would be at risk of becoming eli10 gible for such assistance if child care was not pro11 vided.

12 ‘‘(6) REPORT ON TRANSITIONAL SERVICES.—

13 The total amount expended by the State for provid14 ing transitional services to a family that has ceased

15 to receive assistance under this part because of in16 creased hours of, or increased income from, employ17 ment, along with a description of such services.

18 ‘‘(d) COLLECTION PROCEDURES.—The Secretary

19 shall provide case sampling plans and data collection pro20 cedures as deemed necessary to make statistically valid es21 timates of plan performance.

22 ‘‘(e) VERIFICATION.—The Secretary shall develop

23 and implement procedures for verifying the quality of the

24 data submitted by the State, and shall provide technical
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1 assistance, funded by the compliance penalties imposed

2 ***

3 SEC. 9201. EXTENSION OF PROVISION PROVIDING ADDI4 TIONAL ELIGIBILITY FOR MEDICAID.

5 Subsection (f) of section 1925 of the Social Security

6 Act (42 U.S.C. 1396r–6(f)) is amended by striking

7 ‘‘1998’’ and inserting ‘‘2002’’.

8 SEC. 9202. NOTICE OF AVAILABILITY REQUIRED TO BE PRO9 VIDED TO APPLICANTS AND FORMER RECIPI10 ENTS OF TEMPORARY FAMILY ASSISTANCE,

11 FOOD STAMPS, AND MEDICAID.

12 (a) TEMPORARY FAMILY ASSISTANCE.—Section 406,

13 as added by the amendment made by section 9101(a) of

14 this Act, is amended by adding at the end the following:

15 ‘‘(h) NOTICE OF AVAILABILITY OF EITC.—The

16 State plan shall provide that the State agency referred to

17 in subsection (b) must provide written notice of the exist18 ence and availability of the earned income credit under

19 section 32 of the Internal Revenue Code of 1986 to—

20 ‘‘(1) any individual who applies for assistance

21 under the State plan, upon receipt of the applica22 tion; and

23 ‘‘(2) any individual whose assistance under the

24 State plan (or under the State plan approved under

25 part A of this title (as in effect before the effective
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1 date of title IX of the Omnibus Budget Reconcili2 ation Act of 1995) is terminated, in the notice of

3 termination of benefits.’’.

4 (b) FOOD STAMPS.—Section 11(e) of the Food

5 Stamp Act of 1977 (7 U.S.C. 2020(e)) is amended—

6 (1) in paragraph (24) by striking ‘‘and’’ at the

7 end;

8 (2) in paragraph (25) by striking the period at

9 the end and inserting ‘‘; and’’; and

10 (3) by inserting after paragraph (25) the fol11 lowing:

12 ‘‘(26) that whenever a household applies for

13 food stamp benefits, and whenever such benefits are

14 terminated with respect to a household, the State

15 agency shall provide to each member of such house16 hold notice of—

17 ‘‘(A) the existence of the earned income

18 tax credit under section 32 of the Internal Rev19 enue Code of 1986; and

20 ‘‘(B) the fact that such credit may be ap21 plicable to such member.’’.

22 (c) MEDICAID.—Section 1902(a) (42 U.S.C.

23 1396a(a)) is amended—

24 (1) by striking ‘‘and’’ at the end of paragraph

25 (61);
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1 (2) by striking the period at the end of para2 graph (62) and inserting ‘‘; and’’; and

3 (3) by inserting after paragraph (62) the fol4 lowing new paragraph:

5 ‘‘(63) provide that the State shall provide notice

6 of the existence and availability of the earned income

7 tax credit under section 32 of the Internal Revenue

8 Code of 1986 to each individual applying for medical

9 assistance under the State plan and to each individ10 ual whose eligibility for medical assistance under the

11 State plan is terminated.’’.

12 SEC. 9203. NOTICE OF AVAILABILITY OF EARNED INCOME

13 TAX CREDIT AND DEPENDENT CARE TAX

14 CREDIT TO BE INCLUDED ON W–4 FORM.

15 (a) IN GENERAL.—Section 11114 of the Omnibus

16 Budget Reconciliation Act of 1990 (26 U.S.C. 21 note),

17 relating to program to increase public awareness, is

18 amended by adding at the end the following new sentence:

19 ‘‘Such means shall include printing a notice of the avail20 ability of such credits on the forms used by employees to

21 determine the proper number of withholding exemptions

22 under chapter 24 of such Code.’’
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1 SEC. 9204. ADVANCE PAYMENT OF EARNED INCOME TAX

2 CREDIT THROUGH STATE DEMONSTRATION

3 PROGRAMS.

4 (a) IN GENERAL.—Section 3507 of the Internal Rev5 enue Code of 1986 (relating to the advance payment of

6 the earned income tax credit) is amended by adding at

7 the end the following:

8 ‘‘(g) STATE DEMONSTRATIONS.—

9 ‘‘(1) IN GENERAL.—In lieu of receiving earned

10 income advance amounts from an employer under

11 subsection (a), a participating resident shall receive

12 advance earned income payments from a responsible

13 State agency pursuant to a State Advance Payment

14 Program that is designated pursuant to paragraph

15 (2).

16 ‘‘(2) DESIGNATIONS.—

17 ‘‘(A) IN GENERAL.—From among the

18 States submitting proposals satisfying the re19 quirements of paragraph (3), the Secretary (in

20 consultation with the Secretary of Health and

21 Human Services) may designate not more than

22 4 State Advance Payment Demonstrations.

23 States selected for the demonstrations may

24 have, in the aggregate, no more than 5 percent

25 of the total number of households participating

26 in the program under the Food Stamp program
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1 in the immediately preceding fiscal year. Ad2 ministrative costs of a State in conducting a

3 demonstration under this section may be in4 cluded for matching under section 413(a) of the

5 Social Security Act and section 16(a) of the

6 Food Stamp Act of 1977.

7 ‘‘(B) WHEN DESIGNATION MAY BE

8 MADE.—Any designation under this paragraph

9 shall be made no later than December 31,

10 1996.

11 ‘‘(C) PERIOD FOR WHICH DESIGNATION IS

12 IN EFFECT.—

13 ‘‘(i) IN GENERAL.—Designations

14 made under this paragraph shall be effec15 tive for advance earned income payments

16 made after December 31, 1996, and before

17 January 1, 2000.

18 ‘‘(ii) SPECIAL RULES.—

19 ‘‘(I) REVOCATION OF DESIGNA20 TIONS.—The Secretary may revoke

21 any designation made under this

22 paragraph if the Secretary determines

23 that the State is not complying sub24 stantially with the proposal described
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1 in paragraph (3) submitted by the

2 State.

3 ‘‘(II) AUTOMATIC TERMINATION

4 OF DESIGNATIONS.—Any failure by a

5 State to comply with the reporting re6 quirements described in paragraphs

7 (3)(F) and (3)(G) shall have the ef8 fect of immediately terminating the

9 designation under this paragraph and

10 rendering paragraph (5)(A)(ii) inap11 plicable to subsequent payments.

12 ‘‘(3) PROPOSALS.—No State may be designated

13 under paragraph (2) unless the State’s proposal for

14 such designation—

15 ‘‘(A) identifies the responsible State agen16 cy,

17 ‘‘(B) describes how and when the advance

18 earned income payments will be made by that

19 agency, including a description of any other

20 State or Federal benefits with which such pay21 ments will be coordinated,

22 ‘‘(C) describes how the State will obtain

23 the information on which the amount of ad24 vance earned income payments made to each
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1 participating resident will be determined in ac2 cordance with paragraph (4),

3 ‘‘(D) describes how State residents who

4 will be eligible to receive advance earned income

5 payments will be selected, notified of the oppor6 tunity to receive advance earned income pay7 ments from the responsible State agency, and

8 given the opportunity to elect to participate in

9 the program,

10 ‘‘(E) describes how the State will verify, in

11 addition to receiving the certifications and

12 statement described in paragraph (7)(D)(iv),

13 the eligibility of participating residents for the

14 earned income tax credit,

15 ‘‘(F) commits the State to furnishing to

16 each participating resident by January 31 of

17 each year a written statement showing—

18 ‘‘(i) the name and taxpayer identifica19 tion number of the participating resident,

20 and

21 ‘‘(ii) the total amount of advance

22 earned income payments made to the par23 ticipating resident during the prior cal24 endar year,
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1 ‘‘(G) commits the State to furnishing to

2 the Secretary by December 1 of each year a

3 written statement showing the name and tax4 payer identification number of each participat5 ing resident,

6 ‘‘(H) commits the State to treat any ad7 vance earned income payments as described in

8 paragraph (5) and any repayments of excessive

9 advance earned income payments as described

10 in paragraph (6),

11 ‘‘(I) commits the State to assess the devel12 opment and implementation of its State Ad13 vance Payment Program, including an agree14 ment to share its findings and lessons with

15 other interested States in a manner to be de16 scribed by the Secretary, and

17 ‘‘(J) is submitted to the Secretary on or

18 before June 30, 1996.

19 ‘‘(4) AMOUNT AND TIMING OF ADVANCE

20 EARNED INCOME PAYMENTS.—

21 ‘‘(A) AMOUNT.—

22 ‘‘(i) IN GENERAL.—The method for

23 determining the amount of advance earned

24 income payments made to each participat25 ing resident shall conform to the fullest ex-
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1 tent possible with the provisions of sub2 section (c).

3 ‘‘(ii) SPECIAL RULE.—A State may,

4 at its election, apply the rules of subsection

5 (c)(2)(B) by substituting ‘between 60 per6 cent and 75 percent of the credit percent7 age in effect under section 32(b)(1) for an

8 individual with the corresponding number

9 of qualifying children’ for ‘60 percent of

10 the credit percentage in effect under sec11 tion 32(b)(1) for such an eligible individual

12 with 1 qualifying child’ in clause (i) and

13 ‘the same percentage (as applied in clause

14 (i))’ for ‘60 percent’ in clause (ii).

15 ‘‘(B) TIMING.—The frequency of advance

16 earned income payments may be determined on

17 the basis of the payroll periods of participating

18 residents, on a single statewide schedule, or on

19 any other reasonable basis prescribed by the

20 State in its proposal; however, in no event may

21 advance earned income payments be made to

22 any participating resident less frequently than

23 on a calendar-quarter basis.

24 ‘‘(5) PAYMENTS TO BE TREATED AS PAYMENTS

25 OF WITHHOLDING AND FICA TAXES.—
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1 ‘‘(A) IN GENERAL.—For purposes of this

2 title, advance earned income payments during

3 any calendar quarter—

4 ‘‘(i) shall neither be treated as a pay5 ment of compensation nor be included in

6 gross income, and

7 ‘‘(ii) shall be treated as made out of—

8 ‘‘(I) amounts required to be de9 ducted by the State and withheld for

10 the calendar quarter by the State

11 under section 3401 (relating to wage

12 withholding),

13 ‘‘(II) amounts required to be de14 ducted for the calendar quarter under

15 section 3102 (relating to FICA em16 ployee taxes), and

17 ‘‘(III) amounts of the taxes im18 posed on the State for the calendar

19 quarter under section 3111 (relating

20 to FICA employer taxes),

21 as if the State had paid to the Secretary,

22 on the day on which payments are made to

23 participating residents, an amount equal to

24 such payments.
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1 ‘‘(B) IF ADVANCE PAYMENTS EXCEED

2 TAXES DUE.—If for any calendar quarter the

3 aggregate amount of advance earned income

4 payments made by the responsible State agency

5 under a State Advance Payment Program ex6 ceeds the sum of the amounts referred to in

7 subparagraph (A)(ii) (without regard to para8 graph (6)(A)), each such advance earned in9 come payment shall be reduced by an amount

10 which bears the same ratio to such excess as

11 such advance earned income payment bears to

12 the aggregate amount of all such advance

13 earned income payments.

14 ‘‘(6) STATE REPAYMENT OF EXCESSIVE AD15 VANCE EARNED INCOME PAYMENTS.—

16 ‘‘(A) IN GENERAL.—Notwithstanding any

17 other provision of law, in the case of an exces18 sive advance earned income payment a State

19 shall be treated as having deducted and with20 held under section 3401 (relating to wage with21 holding), and as being required to pay to the

22 United States, the repayment amount during

23 the repayment calendar quarter.

24 ‘‘(B) EXCESSIVE ADVANCE EARNED IN25 COME PAYMENT.—For purposes of this section,
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1 the term ‘excessive advance income payment’

2 means that portion of any advance earned in3 come payment that, when combined with other

4 advance earned income payments previously

5 made to the same participating resident during

6 the same calendar year, exceeds the amount of

7 earned income tax credit to which that partici8 pating resident is entitled under section 32 for

9 that year.

10 ‘‘(C) REPAYMENT AMOUNT.—For purposes

11 of this subsection, the term ‘repayment amount’

12 means an amount equal to 50 percent of the ex13 cess of—

14 ‘‘(i) excessive advance earned income

15 payments made by a State during a par16 ticular calendar year, over

17 ‘‘(ii) the sum of—

18 ‘‘(I) 4 percent of all advance

19 earned income payments made by the

20 State during that calendar year, and

21 ‘‘(II) the excessive advance

22 earned income payments made by the

23 State during that calendar year that

24 have been collected from participating

25 residents by the Secretary.
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1 ‘‘(D) REPAYMENT CALENDAR QUARTER.—

2 For purposes of this subsection, the term ‘re3 payment calendar quarter’ means the second

4 calendar quarter of the third calendar year be5 ginning after the calendar year in which an ex6 cessive earned income payment is made.

7 ‘‘(7) DEFINITIONS.—For purposes of this sub8 section—

9 ‘‘(A) STATE ADVANCE PAYMENT PRO10 GRAM.—The term ‘State Advance Payment

11 Program’ means the program described in a

12 proposal submitted for designation under para13 graph (1) and designated by the Secretary

14 under paragraph (2).

15 ‘‘(B) RESPONSIBLE STATE AGENCY.—The

16 term ‘responsible State agency’ means the sin17 gle State agency that will be making the ad18 vance earned income payments to residents of

19 the State who elect to participate in a State Ad20 vance Payment Program.

21 ‘‘(C) ADVANCE EARNED INCOME PAY22 MENTS.—The term ‘advance earned income

23 payments’ means an amount paid by a respon24 sible State agency to residents of the State pur25 suant to a State Advance Payment Program.
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1 ‘‘(D) PARTICIPATING RESIDENT.—The

2 term ‘participating resident’ means an individ3 ual who—

4 ‘‘(i) is a resident of a State that has

5 in effect a designated State Advance Pay6 ment Program,

7 ‘‘(ii) makes the election described in

8 paragraph (3)(D) pursuant to guidelines

9 prescribed by the State,

10 ‘‘(iii) certifies to the State the number

11 of qualifying children the individual has,

12 and

13 ‘‘(iv) provides to the State the certifi14 cations and statement described in sub15 sections (b)(1), (b)(2), (b)(3), and (b)(4)

16 (except that for purposes of this clause,

17 the term ‘any employer’ shall be sub18 stituted for ‘another employer’ in sub19 section (b)(3)), along with any other infor20 mation required by the State.’’.

21 (b) TECHNICAL ASSISTANCE.—The Secretaries of the

22 Treasury and Health and Human Services shall jointly en23 sure that technical assistance is provided to State Advance

24 Payment Programs and that these programs are rigor25 ously evaluated.
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1 (c) ANNUAL REPORTS.—The Secretary shall issue

2 annual reports detailing the extent to which—

3 (1) residents participate in the State Advance

4 Payment Programs,

5 (2) participating residents file Federal and

6 State tax returns,

7 (3) participating residents report accurately the

8 amount of the advance earned income payments

9 made to them by the responsible State agency dur10 ing the year, and

11 (4) recipients of excessive advance earned in12 come payments repay those amounts.

13 The report shall also contain an estimate of the amount

14 of advance earned income payments made by each respon15 sible State agency but not reported on the tax returns of

16 a participating resident and the amount of excessive ad17 vance earned income payments.

18 (d) AUTHORIZATION OF APPROPRIATIONS.—For pur19 poses of providing technical assistance described in sub20 section (b), preparing the reports described in subsection

21 (c), and providing grants to States in support of des22 ignated State Advance Payment Programs, there are au23 thorized to be appropriated in advance to the Secretary

24 of the Treasury and the Secretary of Health and Human
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1 Services a total of $1,400,000 for fiscal years 1997

2 through 2000.

3 SEC. 9205. CONSOLIDATED CHILD CARE DEVELOPMENT

4 BLOCK GRANT.

5 (a) PURPOSE.—It is the purpose of this section to—

6 (1) eliminate program fragmentation and create

7 a seamless system of high quality child care that al8 lows for continuity of care for children as parents

9 move from welfare to work;

10 (2) provide for parental choice among high

11 quality child care programs; and

12 (3) increase the availability of high quality af13 fordable child care in order to promote self suffi14 ciency and support working families.

15 (b) AMENDMENTS TO CHILD CARE AND DEVELOP16 MENT BLOCK GRANT ACT OF 1990.—

17 (1) APPROPRIATIONS.—Section 658B of the

18 Child Care and Development Block Grant Act of

19 1990 (42 U.S.C. 9858) is amended to read as fol20 lows:

21 ‘‘SEC. 658B. APPROPRIATION.

22 ‘‘(a) AUTHORIZATION OF APPROPRIATIONS OF

23 BLOCK GRANT FUNDS.—For the purpose of providing

24 child care services for eligible children through the award25 ing of grants to States under this subchapter (other than
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1 the grants awarded under subsection (b)) by the Sec2 retary, there are authorized to be appropriated,

3 $1,000,000,000 for fiscal year 1996 and such sums as

4 may be necessary for fiscal years 1997 through 2002.

5 ‘‘(b) APPROPRIATIONS OF FEDERAL MATCHING

6 FUNDS.—For the purpose of providing child care services

7 for eligible children through the awarding of matching

8 grants to States under section 658J(d) by the Secretary,

9 there are authorized to be appropriated and are hereby

10 appropriated, baseline plus $500,000,000 for fiscal year

11 1996, baseline plus $500,000,000 for fiscal year 1997,

12 baseline plus $500,000,000 for fiscal year 1998, baseline

13 plus $500,000,000 for fiscal year 1999, baseline plus

14 $500,000,000 for fiscal year 2000, baseline plus

15 $500,000,000 for fiscal year 2001, and baseline plus

16 $500,000,000 for fiscal year 2002.’’.

17 (2) USE OF FUNDS.—Section 658E(c)(3)(B) of

18 the Child Care and Development Block Grant Act of

19 1990 (42 U.S.C. 9858c(c)(3)(B)) is amended—

20 (A) in clause (i), by striking ‘‘with very low

21 family incomes (taking into consideration family

22 size)’’ and inserting ‘‘described in clause (ii) (in

23 the order so described)’’;
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1 (B) by redesignating clauses (i) and (ii) as

2 subclauses (I) and (II), respectively, and re3 aligning the margins accordingly;

4 (C) by striking ‘‘Subject’’ and inserting the

5 following:

6 ‘‘(i) IN GENERAL.—Subject’’; and

7 (D) by adding at the end the following new

8 clause:

9 ‘‘(ii) FAMILIES DESCRIBED.—The

10 families described in this clause are the fol11 lowing:

12 ‘‘(I) Families containing an indi13 vidual receiving assistance under a

14 State plan approved under part A of

15 title IV of the Social Security Act and

16 participating in education, job search,

17 job training, work, or workfare pro18 grams.

19 ‘‘(II) Families containing an indi20 vidual who—

21 ‘‘(aa) no longer qualifies for

22 child care assistance under sec23 tion 405(b) of the Social Security

24 Act because such individual has

25 ceased to receive assistance under
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1 the temporary employment as2 sistance program under part A of

3 title IV of the Social Security Act

4 as a result of increased hours of,

5 or increased income from, em6 ployment; and

7 ‘‘(bb) the State determines

8 requires such child care assist9 ance in order to continue such

10 employment (but only for the 1-

11 year period beginning on the date

12 that the individual no longer

13 qualifies for child care assistance

14 under section 405(b) of such Act,

15 and, at the option of the State,

16 for the additional 1-year period

17 beginning after the conclusion of

18 the first 1-year period).

19 ‘‘(III) Families containing an in20 dividual who—

21 ‘‘(aa) is not described in

22 subclause (I) or (II); and

23 ‘‘(bb) has an annual income

24 for a fiscal year below 75 percent

25 of the State median income.’’.
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1 (3) SET-ASIDES FOR QUALITY AND EXPAN2 SION.—Section 658E(c)(3) of the Child Care and

3 Development Block Grant Act of 1990 (42 U.S.C.

4 9858c(c)(3)) is amended in subparagraph (C), by

5 striking ‘‘25 percent’’ and inserting ‘‘10 percent’’.

6 (4) SLIDING FEE SCALE.—Section 658E(c)(5)

7 of the Child Care and Development Block Grant Act

8 of 1990 (42 U.S.C. 9858c(c)(5)) is amended by in9 serting ‘‘described in subclauses (II) and (III) of

10 paragraph (3)(B)(ii)’’ after ‘‘families’’.

11 (5) MATCHING REQUIREMENT FOR NEW

12 FUNDS.—

13 ‘‘SEC. 418. FUNDING FOR CHILD CARE.

14 ‘‘(a) GENERAL CHILD CARE ENTITLEMENT.—

15 ‘‘(1) GENERAL ENTITLEMENT.—Subject to the

16 amount appropriated under 658(B)(b), each State

17 shall, for the purpose of providing child care assist18 ance, be entitled to payments under a grant under

19 this subsection for a fiscal year in an amount equal

20 to—

21 ‘‘(A) the sum of the total amount required

22 to be paid to the State under former section

23 403 for fiscal year 1994 with respect to

24 amounts expended for child care under sec25 tion—
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1 ‘‘(i) 402(g) of this Act (as such sec2 tion was in effect before October 1, 1995);

3 and

4 ‘‘(ii) 403(i) of this Act (as so in ef5 fect); or

6 ‘‘(B) the average of the total amounts re7 quired to be paid to the State for fiscal years

8 1992 through 1994 under the sections referred

9 to in subparagraph (A);

10 whichever is greater.

11 ‘‘(2) REMAINDER.—

12 ‘‘(A) GRANTS.—The Secretary shall use

13 any amounts appropriated for a fiscal year

14 under 658(B)(b)(3), and remaining after the

15 reservation described in paragraph (3) and

16 after grants are awarded under paragraph (1),

17 to make grants to States under this paragraph.

18 ‘‘(B) AMOUNT.—Subject to subparagraph

19 (C), the amount of a grant awarded to a State

20 for a fiscal year under this paragraph shall be

21 based on the formula used for determining the

22 amount of Federal payments to the State under

23 section 658(o).

24 ‘‘(C) MATCHING REQUIREMENT.—The Sec25 retary shall pay to each eligible State in a fiscal
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1 year an amount, under a grant under subpara2 graph (A), equal to the Federal medical assist3 ance percentage for such State for fiscal year

4 1994 (as defined in section 1905(b)) of so

5 much of the expenditures by the State for child

6 care in such year as exceed the State set-aside

7 for such State under subparagraph (A) for such

8 year and the amount of State expenditures in

9 fiscal year 1994 that equal the non-Federal

10 share for the programs described in subpara11 graphs (A), (B) and (C) of paragraph (1).

12 ‘‘(3) REDISTRIBUTION.—With respect to any

13 fiscal year, if the Secretary determines that amounts

14 under any grant awarded to a State under this sub15 section for such fiscal year will not be used by such

16 State for carrying out the purpose for which the

17 grant is made, the Secretary shall make such

18 amounts available for carrying out such purpose to

19 1 or more other States which apply for such funds

20 to the extent the Secretary determines that such

21 other States will be able to use such additional

22 amounts for carrying out such purpose. Such avail23 able amounts shall be redistributed to a State pursu24 ant to section 402(i) (as such section was in effect

25 before October 1, 1995) by substituting ‘the number
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1 of children residing in all States applying for such

2 funds’ for ‘the number of children residing in the

3 United States in the second preceding fiscal year’.

4 Any amount made available to a State from an ap5 propriation for a fiscal year in accordance with the

6 preceding sentence shall, for purposes of this part,

7 be regarded as part of such State’s payment (as de8 termined under this subsection) for such year.

9 ‘‘(e) AMOUNTS RESERVED FOR INDIAN TRIBES.—

10 The Secretary shall reserve not more than 3 percent of

11 the amount appropriated under section 658B in each fis12 cal year for payments to Indian tribes and tribal organiza13 tions with applications approved under section 6580(c).

14 The amounts reserved under the prior sentence shall be

15 available to make grants to or enter into contracts with

16 Indian tribes or tribal organizations consistent with sec17 tion 6580(c) without a requirement of matching funds by

18 the Indian tribes or tribal organizations.

19 ‘‘(f) SAME TREATMENT AS ALLOTMENTS.—Amounts

20 paid to a State or Indian tribe under subsections (d) and

21 (e) shall be subject to the same requirements under this

22 subchapter as amounts paid from the allotment under sec23 tion 658O.’’.

24 (B) CONFORMING AMENDMENTS.—Section

25 658O of the Child Care and Development Block
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1 Grant Act of 1990 (42 U.S.C. 9858m) is

2 amended—

3 (i) in subsection (a)—

4 (I) in paragraph (1), by striking

5 ‘‘this subchapter’’ and inserting sec6 tion 658B(a); and

7 (II) in paragraph (2), by striking

8 ‘‘section 658B’’ and inserting ‘‘section

9 658B(a); and

10 (ii) in subsection (b)(1), by striking

11 ‘‘section 658B’’ and inserting ‘‘section

12 658B(a)’’.

13 (6) IMPROVING QUALITY.—

14 (A) INCREASE IN REQUIRED FUNDING.—

15 Section 658G of the Child Care and Develop16 ment Block Grant Act of 1990 (42 U.S.C.

17 9858e) is amended by striking ‘‘not less than

18 20 percent’’.

19 (B) QUALITY IMPROVEMENT INCENTIVE

20 INITIATIVE.—Section 658G of the Child Care

21 and Development Block Grant Act of 1990 (42

22 U.S.C. 9858e) is amended—

23 (i) by striking ‘‘A State’’ and insert24 ing ‘‘(a) IN GENERAL.—A State’’;
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1 (ii) by adding at the end the following

2 new subparagraphs:

3 ‘‘(6) BEFORE AND AFTER-SCHOOL ACTIVI4 TIES.—Increasing the availability of before and

5 after-school care.

6 ‘‘(7) INFANT CARE.—Increasing the availability

7 of child care for infants under the age of 18 months.

8 ‘‘(8) NONTRADITIONAL WORK HOURS.—Increas9 ing the availability of child care between the hours

10 of 5:00 p.m. and 8:00 a.m.’’;

11 (iii) by adding at the end the follow12 ing new subsection:

13 ‘‘(b) QUALITY IMPROVEMENT INCENTIVE INITIA14 TIVE.—

15 ‘‘(1) IN GENERAL.—The Secretary shall estab16 lish a child care quality improvement incentive ini17 tiative to make funds available to States that dem18 onstrate progress in the implementation of—

19 ‘‘(A) innovative teacher training programs

20 such as the Department of Defense staff devel21 opment and compensation program for child

22 care personnel; or

23 ‘‘(B) enhanced child care quality standards

24 and licensing and monitoring procedures.
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1 ‘‘(2) FUNDING.—From the amounts made

2 available for each fiscal year under subsection (a),

3 the Secretary shall reserve not to exceed

4 $250,000,000 in each such fiscal year to carry out

5 this subsection.’’.

6 (7) REPEAL—Section 658H of the Child Care

7 and Development Block Grant Act of 1990 (42

8 U.S.C. 9858f) is repealed.

9 (8) PAYMENTS.—Section 658J(a) of the Child

10 Care and Development Block Grant Act of 1990 (42

11 U.S.C. 9858h) is amended by striking ‘‘Subject to

12 the availability of appropriation, a’’ and inserting

13 ‘‘A’’.

14 (9) DEFINITION OF POVERTY LINE.—Section

15 658P of the Child Care and Development Block

16 Grant Act of 1990 (42 U.S.C. 9858n) is amended—

17 (A) by redesignating paragraphs (10)

18 through (14) as paragraphs (11) through (15),

19 respectively; and

20 (B) by inserting after paragraph (9), the

21 following new paragraph:

22 ‘‘(10) POVERTY LINE.—The term ‘poverty line’

23 means the poverty line (as such term is defined in

24 section 673(2) of the Community Services Block
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1 Grant Act (42 U.S.C. 9902(2)), including any revi2 sion required by such section) that—

3 ‘‘(A) in the case of a family of less than

4 4 individuals, is applicable to a family of the

5 size involved; and

6 ‘‘(B) in the case of a family of 4 or more

7 individuals, is applicable to a family of 4 indi8 viduals.’’.

9 (c) PROGRAM REPEALS.—

10 (1) STATE DEPENDENT CARE GRANTS.—Sub11 chapter E of chapter 8 of subtitle A of title VI of

12 the Omnibus Budget Reconciliation Act of 1981 (42

13 U.S.C. 9871 et seq.) is repealed.

14 (2) CHILD DEVELOPMENT ASSOCIATE SCHOLAR15 SHIP ASSISTANCE ACT.—The Child Development As16 sociate Scholarship Assistance Act of 1985 (42

17 U.S.C. 10901 et seq.) is repealed.

18 SEC. 9206. CERTAIN FEDERAL ASSISTANCE INCLUDIBLE IN

19 GROSS INCOME.

20 (a) IN GENERAL.—Part II of subchapter B of chap21 ter 1 of the Internal Revenue Code of 1986 (relating to

22 items specifically included in gross income) is amended by

23 adding at the end the following new section:
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1 ‘‘SEC. 91. CERTAIN FEDERAL ASSISTANCE.

2 ‘‘(a) IN GENERAL.—Gross income shall include an

3 amount equal to the specified Federal assistance received

4 by the taxpayer during the taxable year.

5 ‘‘(b) SPECIFIED FEDERAL ASSISTANCE.—For pur6 poses of this section—

7 ‘‘(1) IN GENERAL.—The term ‘specified Federal

8 assistance’ means—

9 ‘‘(A) supplemental security income benefits

10 under title XVI of the Social Security Act (in11 cluding supplemental security income benefits

12 of the type described in section 1616 of such

13 Act or section 212 of Public Law 93-66).’’.

14 (b) REPORTING.—

15 (1) IN GENERAL.—Subpart B of part III of

16 subchapter A of chapter 61 of such Code is amended

17 by adding at the end the following new section:

18 ‘‘SEC. 6050Q. PAYMENTS OF CERTAIN FEDERAL ASSIST19 ANCE.

20 ‘‘(a) REQUIREMENT OF REPORTING.—The appro21 priate official shall make a return, according to the forms

22 and regulations prescribed by the Secretary, setting

23 forth—

24 ‘‘(1) the aggregate amount of specified Federal

25 assistance paid to any individual during any cal26 endar year, and
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1 ‘‘(2) the name, address, and TIN of such indi2 vidual.

3 ‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS

4 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—

5 Every person required to make a return under subsection

6 (a) shall furnish to each individual whose name is required

7 to be set forth in such return a written statement show8 ing—

9 ‘‘(1) the aggregate amount of payments made

10 to the individual which are required to be shown on

11 such return, and

12 ‘‘(2) the name of the agency making the pay13 ments.

14 The written statement required under the preceding sen15 tence shall be furnished to the individual on or before Jan16 uary 31 of the year following the calendar year for which

17 the return under subsection (a) was required to be made.

18 ‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur19 poses of this section—

20 ‘‘(1) APPROPRIATE OFFICIAL.—The term ‘ap21 propriate official’ means—

22 ‘‘(A) in the case of specified Federal as23 sistance described in section 91(b)(1)(A), the

24 head of the State agency administering the plan

25 under which such assistance is provided,
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1 ‘‘(B) in the case of specified Federal as2 sistance described in section 91(b)(1)(B), the

3 head of the State agency administering the pro4 gram under which such assistance is provided,

5 and

6 ‘‘(C) in the case of specified Federal assist7 ance described in section 91(b)(1)(C), the Sec8 retary of Health and Human Services.

9 ‘‘(2) SPECIFIED FEDERAL ASSISTANCE.—The

10 term ‘specified Federal assistance’ has the meaning

11 given such term by section 91(b).

12 ‘‘(3) AMOUNTS TREATED AS PAID.—The rules

13 of section 91(c) shall apply for purposes of deter14 mining to whom specified Federal assistance is

15 paid.’’

16 (2) PENALTIES.—

17 (A) Subparagraph (B) of section

18 6724(d)(1) of such Code is amended by redesig19 nating clauses (ix) through (xiv) as clauses (x)

20 through (xv), respectively, and by inserting

21 after clause (viii) the following new clause:

22 ‘‘(ix) section 6050Q (relating to pay23 ments of certain Federal assistance),’’.

24 (B) Paragraph (2) of section 6724(d) of

25 such Code is amended by redesignating sub-
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1 paragraphs (Q) through (T) as subparagraphs

2 (R) through (U), respectively, and by inserting

3 after subparagraph (P) the following new sub4 paragraph:

5 ‘‘(Q) section 6050Q(b) (relating to pay6 ments of certain Federal assistance),’’.

7 (c) SUPPLEMENTAL SECURITY INCOME BENEFITS

8 NOT TAKEN INTO ACCOUNT FOR PURPOSES OF THE

9 EARNED INCOME TAX CREDIT.—Section 32 of the Inter10 nal Revenue Code of 1986 (relating to the earned income

11 tax credit), is amended by adding at the end the following

12 new subsection:

13 ‘‘(k) ADJUSTED GROSS INCOME DETERMINED WITH14 OUT REGARD TO CERTAIN FEDERAL ASSISTANCE.—For

15 purposes of this section, adjusted gross income shall be

16 determined without regard to any amount which is includ17 ible in gross income solely by reason of section 91.’’

18 (d) CLERICAL AMENDMENTS.—

19 (1) The table of sections for part II of sub20 chapter B of chapter 1 of such Code is amended by

21 adding at the end the following new item:

‘‘Sec. 91. Certain Federal assistance.’’.

22 (2) The table of sections for subpart B of part

23 III of subchapter A of chapter 61 of such Code is
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1 amended by adding at the end the following new

2 item:

‘‘Sec. 6050Q. Payments of certain Federal assistance.’’.

3 (e) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to benefits received after December

5 31, 1995, except that the amendment made by subsection

6 (c) shall apply to taxable years beginning after such date.

7 SEC. 9207. DEPENDENT CARE CREDIT TO BE REFUNDABLE;

8 HIGH-INCOME TAXPAYERS INELIGIBLE FOR

9 CREDIT.

10 (a) CREDIT TO BE REFUNDABLE.—

11 (1) IN GENERAL.—Section 21 of the Internal

12 Revenue Code of 1986 (relating to expenses for

13 household and dependent care services necessary for

14 gainful employment) is hereby moved to subpart C

15 of part IV of subchapter A of chapter 1 of such

16 Code (relating to refundable credits) and inserted

17 after section 34.

18 (2) TECHNICAL AMENDMENTS.—

19 (A) Section 35 of such Code is redesig20 nated as section 36.

21 (B) Section 21 of such Code is redesig22 nated as section 35.

23 (C) Paragraph (1) of section 35(a) of such

24 Code (as redesignated by subparagraph (B)) is
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1 amended by striking ‘‘this chapter’’ and insert2 ing ‘‘this subtitle’’.

3 (D) Subparagraph (C) of section 129(a)(2)

4 of such Code is amended by striking ‘‘section

5 21(e)’’ and inserting ‘‘section 35(e)’’.

6 (E) Paragraph (2) of section 129(b) of

7 such Code is amended by striking ‘‘section

8 21(d)(2)’’ and inserting ‘‘section 35(d)(2)’’.

9 (F) Paragraph (1) of section 129(e) of

10 such Code is amended by striking ‘‘section

11 21(b)(2)’’ and inserting ‘‘section 35(b)(2)’’.

12 (G) Subsection (e) of section 213 of such

13 Code is amended by striking ‘‘section 21’’ and

14 inserting ‘‘section 35’’.

15 (H) Paragraph (2) of section 1324(b) of

16 title 31, United States Code, is amended by in17 serting before the period ‘‘, or from section 35

18 of such Code’’.

19 (I) The table of sections for subpart C of

20 part IV of subchapter A of chapter 1 of such

21 Code is amended by striking the item relating

22 to section 35 and inserting the following:

‘‘Sec. 35. Expenses for household and dependent care services

necessary for gainful employment.

‘‘Sec. 36. Overpayments of tax.’’.
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1 (J) The table of sections for subpart A of

2 such part IV is amended by striking the item

3 relating to section 21.

4 (b) HIGHER-INCOME TAXPAYERS INELIGIBLE FOR

5 CREDIT.—Subsection (a) of section 35 of such Code, as

6 redesignated by subsection (a), is amended by adding at

7 the end the following new paragraph:

8 ‘‘(3) PHASEOUT OF CREDIT FOR HIGHER-IN9 COME TAXPAYERS.—The amount of the credit which

10 would (but for this paragraph) be allowed by this

11 section shall be reduced (but not below zero) by an

12 amount which bears the same ratio to such amount

13 of credit as the excess of the taxpayer’s adjusted

14 gross income for the taxable year over $60,000 bears

15 to $20,000. Any reduction determined under the

16 preceding sentence which is not a multiple of $10

17 shall be rounded to the nearest multiple of $10.’’.

18 (c) EFFECTIVE DATE.—The amendments made by

19 this section shall apply to taxable years beginning after

20 December 31, 1996.

21 Subtitle C—Work First

22 SEC. 9301. WORK FIRST PROGRAM.

23 (a) ESTABLISHMENT AND OPERATION OF PRO24 GRAM.—Title IV (42 U.S.C. 601 et seq.) is amended by

25 striking part F and inserting the following:
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1 ‘‘Part F—Work First Program

2 ‘‘SEC. 481. STATE ROLE.

3 ‘‘(a) PROGRAM REQUIREMENTS.—Any State may es4 tablish and operate a work first program that meets the

5 following requirements:

6 ‘‘(1) OBJECTIVE.—The objective of the pro7 gram is for each program participant to find and

8 hold a full-time unsubsidized paid job, and for this

9 goal to be achieved in a cost-effective fashion.

10 ‘‘(2) METHOD.—The method of the program is

11 to connect recipients of assistance under the State

12 plan approved under part A with the private sector

13 labor market as soon as possible and offer them the

14 support and skills necessary to remain in the labor

15 market. Each component of the program should be

16 permeated with an emphasis on employment and

17 with an understanding that minimum wage jobs are

18 a stepping stone to more highly paid employment.

19 The program shall provide recipients with education,

20 training, job search and placement, wage

21 supplementation, temporary subsidized jobs, or such

22 other services that the State deems necessary to help

23 a recipient obtain private sector employment.

24 ‘‘(3) JOB CREATION.—The creation of jobs,

25 with an emphasis on private sector jobs, shall be a

26 component of the program and shall be a priority for
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1 each State office with responsibilities under the pro2 gram.

3 ‘‘(4) FORMS OF ASSISTANCE.—The State shall

4 provide assistance to participants in the program in

5 the form of education, training, job placement serv6 ices (including vouchers for job placement services),

7 work supplementation programs, temporary sub8 sidized job creation, job counseling, assistance in es9 tablishing microenterprises, or other services to pro10 vide individuals with the support and skills necessary

11 to obtain and keep employment in the private sector.

12 ‘‘(5) 2-YEAR LIMITATION ON PARTICIPATION.—

13 The program shall comply with section 487(b).

14 ‘‘(6) AGREEMENTS OF MUTUAL RESPONSIBIL15 ITY.—

16 ‘‘(A) IN GENERAL.—The State agency

17 shall develop an agreement of mutual respon18 sibility for each program participant, which will

19 be an individualized comprehensive plan, devel20 oped by the team and the participant, to move

21 the participant into a full-time unsubsidized

22 job. The agreement should detail the education,

23 training, or skills that the individual will be re24 ceiving to obtain a full-time unsubsidized job,

25 and the obligations of the individual.
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1 ‘‘(B) HOURS OF PARTICIPATION REQUIRE2 MENT.—The agreement shall provide that the

3 individual shall participate in activities in ac4 cordance with the agreement for—

5 ‘‘(i) not fewer than 20 hours per week

6 during fiscal years 1997 and 1998;

7 ‘‘(ii) not fewer than 25 hours per

8 week during fiscal year 1999; and

9 ‘‘(iii) not fewer than 30 hours per

10 week thereafter.

11 ‘‘(7) CASELOAD PARTICIPATION RATES.—The

12 program shall comply with section 488.

13 ‘‘(8) NONDISPLACEMENT.—The program may

14 not be operated in a manner that results in—

15 ‘‘(A) the displacement of a currently em16 ployed worker or position by a program partici17 pant;

18 ‘‘(B) the replacement of an employee who

19 has been terminated with a program partici20 pant; or

21 ‘‘(C) the replacement of an individual who

22 is on layoff from the same position given to a

23 program participant or any equivalent position.

24 ‘‘(b) ANNUAL REPORTS.—
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1 ‘‘(1) COMPLIANCE WITH PERFORMANCE MEAS2 URES.—Each State that operates a program under

3 this part shall submit to the Secretary annual re4 ports that compare the achievements of the program

5 with the performance-based measures established

6 under section 488(c).

7 ‘‘(2) COMPLIANCE WITH PARTICIPATION

8 RATES.—Each State that operates a program under

9 this part for a fiscal year shall submit to the Sec10 retary a report on the participation rate of the State

11 for the fiscal year.

12 ‘‘SEC. 482. REVAMPED JOBS PROGRAM.

13 ‘‘A State that establishes a program under this part

14 may operate a program similar to the program known as

15 the ‘GAIN Program’ that has been operated by Riverside

16 County, California, under Federal law in effect imme17 diately before the date this part first applies to the State

18 of California.

19 ‘‘SEC. 483. USE OF PLACEMENT COMPANIES.

20 ‘‘(a) IN GENERAL.—A State that establishes a pro21 gram under this part may enter into contracts with private

22 companies (whether operated for profit or not for profit)

23 for the placement of participants in the program in posi24 tions of full-time employment, preferably in the private
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1 sector, for wages sufficient to eliminate the need of such

2 participants for cash assistance.

3 ‘‘(b) REQUIRED CONTRACT TERMS.—Each contract

4 entered into under this section with a company shall meet

5 the following requirements:

6 ‘‘(1) PROVISION OF JOB READINESS AND SUP7 PORT SERVICES.—The contract shall require the

8 company to provide, to any program participant who

9 presents to the company a voucher issued under sub10 section (d) intensive personalized support and job

11 readiness services designed to prepare the individual

12 for employment and ensure the continued success of

13 the individual in employment.

14 ‘‘(2) PAYMENTS.—

15 ‘‘(A) IN GENERAL.—The contract shall

16 provide for payments to be made to the com17 pany with respect to each program participant

18 who presents to the company a voucher issued

19 under subsection (d).

20 ‘‘(B) STRUCTURE.—The contract shall

21 provide for the majority of the amounts to be

22 paid under the contract with respect to a pro23 gram participant, to be paid after the company

24 has placed the participant in a position of full25 time employment and the participant has been
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1 employed in the position for such period of not

2 less than 5 months as the State deems appro3 priate.

4 ‘‘(c) COMPETITIVE BIDDING REQUIRED.—Contracts

5 under this section shall be awarded only after competitive

6 bidding.

7 ‘‘(d) VOUCHERS.—The State shall issue a voucher to

8 each program participant whose agreement of mutual re9 sponsibility provides for the use of placement companies

10 under this section, indicating that the participant is eligi11 ble for the services of such a company.

12 ‘‘SEC. 484. TEMPORARY SUBSIDIZED JOB CREATION.

13 ‘‘A State that establishes a program under this part

14 may establish a program similar to the program known

15 as ‘JOBS Plus’ that has been operated by the State of

16 Oregon under Federal law in effect immediately before the

17 date this part first applies to the State of Oregon.

18 ‘‘SEC. 485. MICROENTERPRISE.

19 ‘‘(a) GRANTS AND LOANS TO NONPROFIT ORGANIZA20 TIONS FOR THE PROVISION OF TECHNICAL ASSISTANCE,

21 TRAINING, AND CREDIT TO LOW INCOME ENTRE22 PRENEURS.—A State that establishes a program under

23 this part may make grants and loans to nonprofit organi24 zations to provide technical assistance, training, and credit
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1 to low income entrepreneurs for the purpose of establish2 ing microenterprises.

3 ‘‘(b) MICROENTERPRISE DEFINED.—For purposes of

4 this subsection, the term ‘microenterprise’ means a com5 mercial enterprise which has 5 or fewer employees, 1 or

6 more of whom owns the enterprise.

7 ‘‘SEC. 486. WORK SUPPLEMENTATION PROGRAM.

8 ‘‘(a) IN GENERAL.—A State that establishes a pro9 gram under this part may institute a work

10 supplementation program under which the State, to the

11 extent it considers appropriate, may reserve the sums that

12 would otherwise be payable under the State plan approved

13 under part A to participants in the program and use the

14 sums instead for the purpose of providing and subsidizing

15 jobs for the participants (as described in subsection (c)(3)

16 (A) and (B)), as an alternative to providing such assist17 ance to the participants.

18 ‘‘(b) STATE FLEXIBILITY.—

19 ‘‘(1) Nothing in this part, or in any State plan

20 approved under part A, shall be construed to prevent

21 a State from operating (on such terms and condi22 tions and in such cases as the State may find to be

23 necessary or appropriate) a work supplementation

24 program in accordance with this section and section
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1 484 (as in effect immediately before the date this

2 part first applies to the State).

3 ‘‘(2) Notwithstanding any other provision of

4 law, a State may adjust the levels of the standards

5 of need under the State plan as the State determines

6 to be necessary and appropriate for carrying out a

7 work supplementation program under this section.

8 ‘‘(3) Notwithstanding any other provision of

9 law, a State operating a work supplementation pro10 gram under this section may provide that the need

11 standards in effect in those areas of the State in

12 which the program is in operation may be different

13 from the need standards in effect in the areas in

14 which the program is not in operation, and the State

15 may provide that the need standards for categories

16 of recipients may vary among such categories to the

17 extent the State determines to be appropriate on the

18 basis of ability to participate in the work

19 supplementation program.

20 ‘‘(4) Notwithstanding any other provision of

21 law, a State may make such further adjustments in

22 the amounts of assistance provided under the plan

23 to different categories of recipients (as determined

24 under paragraph (3)) in order to offset increases in

25 benefits from needs-related programs (other than
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1 the State plan approved under part A) as the State

2 determines to be necessary and appropriate to fur3 ther the purposes of the work supplementation pro4 gram.

5 ‘‘(5) In determining the amounts to be reserved

6 and used for providing and subsidizing jobs under

7 this section as described in subsection (a), the State

8 may use a sampling methodology.

9 ‘‘(6) Notwithstanding any other provision of

10 law, a State operating a work supplementation pro11 gram under this section, may reduce or eliminate the

12 amount of earned income to be disregarded under

13 the State plan as the State determines to be nec14 essary and appropriate to further the purposes of

15 the work supplementation program.

16 ‘‘(c) RULES RELATING TO SUPPLEMENTED JOBS.—

17 ‘‘(1) A work supplementation program operated

18 by a State under this section may provide that any

19 individual who is an eligible individual (as deter20 mined under paragraph (2)) shall take a supple21 mented job (as defined in paragraph (3)) to the ex22 tent that supplemented jobs are available under the

23 program. Payments by the State to individuals or to

24 employers under the work supplementation program

25 shall be treated as expenditures incurred by the
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1 State for temporary employment assistance under

2 part A except as limited by subsection (d).

3 ‘‘(2) For purposes of this section, an eligible in4 dividual is an individual who is in a category which

5 the State determines should be eligible to participate

6 in the work supplementation program, and who

7 would, at the time of placement in the job involved,

8 be eligible for assistance under an approved State

9 plan if the State did not have a work

10 supplementation program in effect.

11 ‘‘(3) For purposes of this subsection, a supple12 mented job is—

13 ‘‘(A) a job provided to an eligible individ14 ual by the State or local agency administering

15 the State plan under part A; or

16 ‘‘(B) a job provided to an eligible individ17 ual by any other employer for which all or part

18 of the wages are paid by the State or local

19 agency.

20 A State may provide or subsidize under the program

21 any job which the State determines to be appro22 priate.

23 ‘‘(d) COST LIMITATION.—The amount of the Federal

24 payment to a State under section 413 for expenditures in25 curred in making payments to individuals and employers
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1 under a work supplementation program under this sub2 section shall not exceed an amount equal to the amount

3 which would otherwise be payable under such section if

4 the family of each individual employed in the program es5 tablished in the State under this section had received the

6 maximum amount of assistance providable under the State

7 plan to such a family with no income (without regard to

8 adjustments under subsection (b) of this section) for the

9 lesser of—

10 ‘‘(1) 9 months; or

11 ‘‘(2) the number of months in which the indi12 vidual was employed in the program.

13 ‘‘(e) RULES OF INTERPRETATION.—

14 ‘‘(1) This section shall not be construed as re15 quiring the State or local agency administering the

16 State plan to provide employee status to an eligible

17 individual to whom the State or local agency pro18 vides a job under the work supplementation program

19 (or with respect to whom the State or local agency

20 provides all or part of the wages paid to the individ21 ual by another entity under the program), or as re22 quiring any State or local agency to provide that an

23 eligible individual filling a job position provided by

24 another entity under the program be provided em-
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1 ployee status by the entity during the first 13 weeks

2 the individual fills the position.

3 ‘‘(2) Wages paid under a work supplementation

4 program shall be considered to be earned income for

5 purposes of any provision of law.

6 ‘‘(f) PRESERVATION OF MEDICAID ELIGIBILITY.—

7 Any State that chooses to operate a work supplementation

8 program under this section shall provide that any individ9 ual who participates in the program, and any child or rel10 ative of the individual (or other individual living in the

11 same household as the individual) who would be eligible

12 for assistance under the State plan approved under part

13 A if the State did not have a work supplementation pro14 gram, shall be considered individuals receiving assistance

15 under the State plan approved under part A for purposes

16 of eligibility for medical assistance under the State plan

17 approved under title XIX.

18 ‘‘SEC. 487. PARTICIPATION RULES.

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

20 (b), a State that establishes a program under this part

21 may require any individual receiving assistance under the

22 State plan approved under part A to participate in the

23 program.

24 ‘‘(b) 2-YEAR LIMITATION ON PARTICIPATION.—
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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), an individual may not participate in a

3 State program established under this part if the in4 dividual has participated in the State program es5 tablished under this part for 24 months after the

6 date the individual first signed an agreement of mu7 tual responsibility under this part, excluding any

8 month during which the individual worked for an av9 erage of at least 25 hours per week in a private sec10 tor job.

11 ‘‘(2) AUTHORITY TO ALLOW REPEAT PARTICI12 PATION.—

13 ‘‘(A) IN GENERAL.—Subject to subpara14 graph (B) of this paragraph, a State may allow

15 an individual who, by reason of paragraph (1),

16 would be prohibited from participating in the

17 State program established under this part to

18 participate in the program for such additional

19 period or periods as the State determines ap20 propriate.

21 ‘‘(B) LIMITATION ON PERCENTAGE OF RE22 PEAT PARTICIPANTS.—

23 ‘‘(i) IN GENERAL.—Except as pro24 vided in clause (ii) of this subparagraph,

25 the number of individuals allowed under
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1 subparagraph (A) to participate during a

2 program year in a State program estab3 lished under this part shall not exceed—

4 ‘‘(I) 10 percent of the total num5 ber of individuals who participated in

6 the State program established under

7 this part or the State program estab8 lished under part H during the imme9 diately preceding program year; or

10 ‘‘(II) in the case of fiscal year

11 2004 or any succeeding fiscal year, 15

12 percent of such total number of indi13 viduals.

14 ‘‘(ii) AUTHORITY TO INCREASE LIMI15 TATION.—

16 ‘‘(I) PETITION.—A State may re17 quest the Secretary to increase to not

18 more than 15 percent the percentage

19 limitation imposed by clause (i)(I) for

20 a fiscal year before fiscal year 2004.

21 ‘‘(II) AUTHORITY TO GRANT RE22 QUEST.—The Secretary may approve

23 a request made pursuant to subclause

24 (I) if the Secretary deems it appro25 priate. The Secretary shall develop
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1 recommendations on the criteria that

2 should be applied in evaluating re3 quests under subclause (I).

4 ‘‘SEC. 488. CASELOAD PARTICIPATION RATES; PERFORM5 ANCE MEASURES.

6 ‘‘(a) PARTICIPATION RATES.—

7 ‘‘(1) REQUIREMENT.—A State that operates a

8 program under this part shall achieve a participation

9 rate for the following fiscal years of not less than

10 the following percentage:

‘‘Fiscal year: Percentage:

1997 ......................................................................................... 20

1998 ......................................................................................... 24

1999 ......................................................................................... 28

2000 ......................................................................................... 32

2001 ......................................................................................... 36

2002 ......................................................................................... 40

2003 or later ............................................................................ 52.

11 ‘‘(2) PARTICIPATION RATE DEFINED.—

12 ‘‘(A) IN GENERAL.—As used in this sub13 section, the term ‘participation rate’ means,

14 with respect to a State and a fiscal year, an

15 amount equal to—

16 ‘‘(i) the average monthly number of

17 individuals who, during the fiscal year,

18 participate in the State program estab19 lished under this part or (if applicable)

20 part G or H; divided by
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1 ‘‘(ii) the average monthly number of

2 individuals who are not described in sec3 tion 402(c)(1)(D) and for whom an indi4 vidual responsibility plan is in effect under

5 section 403 during the fiscal year.

6 ‘‘(B) SPECIAL RULE.—For each of the 1st

7 12 months after an individual ceases to receive

8 assistance under a State plan approved under

9 part A by reason of having become employed

10 for more than 25 hours per week in an

11 unsubsidized job in the private sector, the indi12 vidual shall be considered to be participating in

13 the State program established under this part,

14 and to be an adult recipient of such assistance,

15 for purposes of subparagraph (A).

16 ‘‘(3) STATE COMPLIANCE REPORTS.—Each

17 State that operates a program under this part for a

18 fiscal year shall submit to the Secretary a report on

19 the participation rate of the State for the fiscal year.

20 ‘‘(4) EFFECT OF FAILURE TO MEET PARTICIPA21 TION RATES.—

22 ‘‘(A) IN GENERAL.—If a State reports that

23 the State has failed to achieve the participation

24 rate required by paragraph (1) for the fiscal

25 year, the Secretary may make recommendations
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1 for changes in the State program established

2 under this part and (if the State has estab3 lished a program under part G) the State pro4 gram established under part G. The State may

5 elect to follow such recommendations, and shall

6 demonstrate to the Secretary how the State will

7 achieve the required participation rates.

8 ‘‘(B) SECOND CONSECUTIVE FAILURE.—

9 Notwithstanding subparagraph (A), if a State

10 fails to achieve the participation rate required

11 by paragraph (1) for 2 consecutive fiscal years,

12 the Secretary may—

13 ‘‘(i) require the State to make

14 changes in the State program established

15 under this part and (if the State has estab16 lished a program under part G) the State

17 program established under part G; and

18 ‘‘(ii) reduce by 5 percent the amount

19 otherwise payable to the State under sec20 tion 413.

21 ‘‘(b) PERFORMANCE STANDARDS.—The Secretary

22 shall develop standards to be used to measure the effec23 tiveness of the programs established under this part and

24 part G in moving recipients of assistance under the State
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1 plan approved under part A into full-time unsubsidized

2 employment.

3 ‘‘(c) PERFORMANCE-BASED MEASURES.—

4 ‘‘(1) ESTABLISHMENT.—The Secretary shall, by

5 regulation, establish measures of the effectiveness of

6 the State programs established under this part and

7 under part G in moving recipients of assistance

8 under the State plan approved under part A into

9 full-time unsubsidized employment, based on the

10 performance of such programs.

11 ‘‘(2) ANNUAL COMPLIANCE REPORTS.—Each

12 State that operates a program under this part shall

13 submit to the Secretary annual reports that compare

14 the achievements of the program with the perform15 ance-based measures established under paragraph

16 (1).

17 ‘‘SEC. 489. FEDERAL ROLE.

18 ‘‘(a) APPROVAL OF STATE PLANS.—

19 ‘‘(1) IN GENERAL.—Within 60 days after the

20 date a State submits to the Secretary a plan that

21 provides for the establishment and operation of a

22 work first program that meets the requirements of

23 section 481, the Secretary shall approve the plan.

24 ‘‘(2) AUTHORITY TO EXTEND APPROVAL DEAD25 LINE.—The 60-day deadline established in para-
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1 graph (1) with respect to a State may be extended

2 in accordance with an agreement between the Sec3 retary and the State.

4 ‘‘(b) PERFORMANCE-BASED MEASURES.—The Sec5 retary shall, by regulation, establish measures of the effec6 tiveness of the State program established under this part

7 and (if the State has established a program under part

8 G) the State program established under part G in moving

9 recipients of assistance under the State plan approved

10 under part A into full-time unsubsidized employment,

11 based on the performance of such programs.

12 ‘‘(c) EFFECT OF FAILURE TO MEET PARTICIPATION

13 RATES.—

14 ‘‘(1) IN GENERAL.—If a State reports that the

15 State has failed to achieve the participation rate re16 quired by section 488 for the fiscal year, the Sec17 retary may make recommendations for changes in

18 the State program established under this part and

19 (if the State has established a program under part

20 G) the State program established under part G. The

21 State may elect to follow such recommendations, and

22 shall demonstrate to the Secretary how the State

23 will achieve the required participation rates.

24 ‘‘(2) SECOND CONSECUTIVE FAILURE.—Not25 withstanding paragraph (1), if the State has failed
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1 to achieve the participation rates required by section

2 488 for 2 consecutive fiscal years, the Secretary may

3 require the State to make changes in the State pro4 gram established under this part and (if the State

5 has established a program under part G) the State

6 program established under part G.

7 ‘‘PART G—WORKFARE PROGRAM

8 ‘‘SEC. 490. ESTABLISHMENT AND OPERATION OF PROGRAM.

9 ‘‘(a) IN GENERAL.—A State that establishes a work

10 first program under part F may establish and carry out

11 a workfare program that meets the requirements of this

12 part, unless the State has established a job placement

13 voucher program under part H.

14 ‘‘(b) OBJECTIVE.—The objective of the workfare pro15 gram is for each program participant to find and hold a

16 full-time unsubsidized paid job, and for this goal to be

17 achieved in a cost-effective fashion.

18 ‘‘(c) CASE MANAGEMENT TEAMS.—The State shall

19 assign to each program participant a case management

20 team that shall meet with the participant and assist the

21 participant to choose the most suitable workfare job under

22 subsection (e), (f), or (g) and to eventually obtain a full23 time unsubsidized paid job.

24 ‘‘(d) PROVISION OF JOBS.—The State shall provide

25 each participant in the program with a community service
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1 job that meets the requirements of subsection (e) or a sub2 sidized job that meets the requirements of subsection (f)

3 or (g).

4 ‘‘(e) COMMUNITY SERVICE JOBS.—

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graphs (2) and (3), each participant shall work for

7 not fewer than 30 hours per week (or, at the option

8 of the State, 20 hours per week during fiscal years

9 1997 and 1998, not fewer than 25 hours per week

10 during fiscal year 1999, not fewer than 30 hours per

11 week during fiscal years 2000 and 2001, and not

12 fewer than 35 hours per week thereafter) in a com13 munity service job, and be paid at a rate which is

14 not greater than 75 percent (or, at the option of the

15 State, 100 percent) of the maximum amount of as16 sistance that may be provided under the State plan

17 approved under part A to a family of the same size

18 and composition with no income.

19 ‘‘(2) EXCEPTION.—(A) If the participant has

20 obtained unsubsidized part-time employment in the

21 private sector, the State shall provide the participant

22 with a part-time community service job.

23 ‘‘(B) If the State provides a participant a part24 time community service job under subparagraph (A),
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1 the State shall ensure that the participant works for

2 not fewer than 30 hours per week.

3 ‘‘(3) WAGES NOT CONSIDERED EARNED IN4 COME.—Wages paid under a workfare program shall

5 not be considered to be earned income for purposes

6 of any provision of law.

7 ‘‘(4) COMMUNITY SERVICE JOB DEFINED.—For

8 purposes of this section, the term ‘community serv9 ice job’ means—

10 ‘‘(A) a job provided to a participant by the

11 State administering the State plan under part

12 A; or

13 ‘‘(B) a job provided to a participant by any

14 other employer for which all or part of the

15 wages are paid by the State.

16 A State may provide or subsidize under the program

17 any job which the State determines to be appro18 priate.

19 ‘‘(f) TEMPORARY SUBSIDIZED JOB CREATION.—A

20 State that establishes a workfare program under this part

21 may establish a program similar to the program operated

22 by the State of Oregon, which is known as ‘JOBS Plus’.

23 ‘‘(g) WORK SUPPLEMENTATION PROGRAM.—

24 ‘‘(1) IN GENERAL.—A State that establishes a

25 workfare program under this part may institute a
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1 work supplementation program under which the

2 State, to the extent it considers appropriate, may re3 serve the sums that would otherwise be payable to

4 participants in the program as a community service

5 minimum wage and use the sums instead for the

6 purpose of providing and subsidizing private sector

7 jobs for the participants.

8 ‘‘(2) EMPLOYER AGREEMENT.—An employer

9 who provides a private sector job to a participant

10 under paragraph (1) shall agree to provide to the

11 participant an amount in wages equal to the poverty

12 threshold for a family of three.

13 ‘‘(h) JOB SEARCH REQUIREMENT.—The State shall

14 require each participant to spend a minimum of 5 hours

15 per week on activities related to securing unsubsidized

16 full-time employment in the private sector.

17 ‘‘(i) DURATION OF PARTICIPATION.—

18 ‘‘(1) IN GENERAL.—Except as provided in para19 graph (2), an individual may not participate for

20 more than 2 years in a workfare program under this

21 part.

22 ‘‘(2) AUTHORITY TO ALLOW REPEATED PAR23 TICIPATION.—

24 ‘‘(A) IN GENERAL.—Subject to subpara25 graph (B), a State may allow an individual
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1 who, by reason of paragraph (1), would be pro2 hibited from participating in the State program

3 established under this part to participate in the

4 program for such additional period or periods

5 as the State determines appropriate.

6 ‘‘(B) LIMITATION ON PERCENTAGE OF RE7 PEAT PARTICIPANTS.—

8 ‘‘(i) IN GENERAL.—Except as pro9 vided in clause (ii), the number of individ10 uals allowed under subparagraph (A) to

11 participate during a program year in a

12 State program established under this part

13 shall not exceed 10 percent of the total

14 number of individuals who participated in

15 the program during the immediately pre16 ceding program year.

17 ‘‘(ii) AUTHORITY TO INCREASE LIMI18 TATION.—

19 ‘‘(I) PETITION.—A State may re20 quest the Secretary to increase the

21 percentage limitation imposed by

22 clause (i) to not more than 15 per23 cent.

24 ‘‘(II) AUTHORITY TO GRANT RE25 QUEST.—The Secretary may approve
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1 a request made pursuant to subclause

2 (I) if the Secretary deems it appro3 priate. The Secretary shall develop

4 recommendations on the criteria that

5 should be applied in evaluating re6 quests under subclause (I).

7 ‘‘(j) USE OF PLACEMENT COMPANIES.—A State that

8 establishes a workfare program under this part may enter

9 into contracts with private companies (whether operated

10 for profit or not for profit) for the placement of partici11 pants in the program in positions of full-time employment,

12 preferably in the private sector, for wages sufficient to

13 eliminate the need of such participants for cash assistance

14 in accordance with section 483.

15 ‘‘(k) MAXIMUM OF 3 COMMUNITY SERVICE JOBS.—

16 A program participant may not receive more than 3 com17 munity service jobs under the program.

18 ‘‘PART H—JOB PLACEMENT VOUCHER PROGRAM

19 ‘‘SEC. 490A. JOB PLACEMENT VOUCHER PROGRAM.

20 ‘‘A State that is not operating a workfare program

21 under part G may establish a job placement voucher pro22 gram that meets the following requirements:

23 ‘‘(1) The program shall offer each program par24 ticipant a voucher which the participant may use to

25 obtain employment in the private sector.
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1 ‘‘(2) An employer who receives a voucher issued

2 under the program from an individual may redeem

3 the voucher at any time after the individual has been

4 employed by the employer for 6 months, unless an5 other employee of the employer was displaced by the

6 employment of the individual.

7 ‘‘(3) Upon presentation of a voucher by an em8 ployer to the State agency responsible for the admin9 istration of the program, the State agency shall pay

10 to the employer an amount equal to 50 percent of

11 the total amount of assistance provided under the

12 State plan approved under part A to the family of

13 which the individual is a member for the most recent

14 12 months for which the family was eligible for such

15 assistance.’’.

16 (c) FUNDING.—Section 413(a), as added by section

17 9101(a) of this Act, is amended—

18 (1) by striking ‘‘Subject to’’ and inserting the

19 following:

20 ‘‘(1) IN GENERAL.—Subject to’’; and

21 (2) by inserting after and below the end the fol22 lowing:

23 ‘‘(2) WORK FIRST AND OTHER PROGRAMS.—(A)

24 Each State that is operating a program in accord25 ance with a plan approved under part F and a pro-
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1 gram in accordance with part G or H shall be enti2 tled to payments under paragraph (3) for any fiscal

3 year in an amount equal to the sum of the applicable

4 percentages (specified in such paragraph) of its ex5 penditures to carry out such programs (subject to

6 limitations prescribed by or pursuant to such parts

7 or this part on expenditures that may be included

8 for purposes of determining payment under para9 graph (3)), but such payments for any fiscal year in

10 the case of any State may not exceed the limitation

11 determined under subparagraph (B) with respect to

12 the State.

13 ‘‘(B) The limitation determined under this sub14 paragraph with respect to a State for any fiscal year

15 is the amount that bears the same ratio to the

16 amount specified in subparagraph (C) for such fiscal

17 year as the average monthly number of adult recipi18 ents (as defined in subparagraph (D)) in the State

19 in the preceding fiscal year bears to the average

20 monthly number of such recipients in all the States

21 for such preceding year.

22 ‘‘(C)(i) The amount specified in this subpara23 graph is—

24 ‘‘(I) $1,600,000,000 for fiscal year 1997;

25 ‘‘(II) $1,600,000,000 for fiscal year 1998;
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1 ‘‘(III) $1,900,000,000 for fiscal year 1999;

2 ‘‘(IV) $2,500,000,000 for fiscal year 2000;

3 and

4 ‘‘(V) $3,200,000,000 for fiscal year 2001;

5 and

6 ‘‘(VI) $4,700,000,000 for fiscal year 2002;

7 and

8 ‘‘(VII) the amount determined under

9 clause (ii) for fiscal year 2003 and each suc10 ceeding fiscal year.

11 ‘‘(ii) The amount determined under this clause

12 for a fiscal year is the product of the following:

13 ‘‘(I) The amount specified in this subpara14 graph for the immediately preceding fiscal year.

15 ‘‘(II) 1.00 plus the percentage (if any) by

16 which—

17 ‘‘(aa) the average of the Consumer

18 Price Index (as defined in section 1(f)(5)

19 of the Internal Revenue Code of 1986) for

20 the most recent 12-month period for which

21 such information is available; exceeds

22 ‘‘(bb) the average of the Consumer

23 Price Index (as so defined) for the 12-

24 month period ending on June 30 of the

25 2nd preceding fiscal year.
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1 ‘‘(III) The amount that bears the same

2 ratio to the amount specified in this subpara3 graph for the immediately preceding fiscal year

4 as the number of individuals whom the Sec5 retary estimates will participate in programs

6 operated under part F, G, or H during the fis7 cal year bears to the total number of individuals

8 who participated in such programs during such

9 preceding fiscal year.

10 ‘‘(D) For purposes of this paragraph, the term

11 ‘adult recipient’ in the case of any State means an

12 individual other than a dependent child (unless such

13 child is the custodial parent of another dependent

14 child) whose needs are met (in whole or in part)

15 with assistance provided under the State plan ap16 proved under this part.

17 ‘‘(E) For purposes of subparagraph (D), the

18 term ‘dependent child’ means a needy child (i) who

19 has been deprived of parental support or care by

20 reason of the death, continued absence from the

21 home (other than absence occasioned solely by rea22 son of the performance of active duty in the uni23 formed services of the United States), or physical or

24 mental incapacity of a parent, and who is living with

25 his father, mother, grandfather, grandmother, broth-
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1 er, sister, stepfather, stepmother, stepbrother, step2 sister, uncle, aunt, first cousin, nephew, or niece, in

3 a place of residence maintained by one or more of

4 such relatives as his or their own home, and (ii) who

5 is (I) under the age of eighteen, or (II) at the option

6 of the State, under the age of nineteen and a full7 time student in a secondary school (or in the equiva8 lent level of vocational or technical training), if, be9 fore he attains age nineteen, he may reasonably be

10 expected to complete the program of such secondary

11 school (or such training).

12 ‘‘(F) For purposes of subparagraph (E), the

13 term ‘relative with whom any dependent child is liv14 ing’ means the individual who is one of the relatives

15 specified in subparagraph (E) and with whom such

16 child is living (within the meaning of such sub17 section) in a place of residence maintained by such

18 individual (himself or together with any one or more

19 of the other relatives so specified) as his (or their)

20 own home.

21 ‘‘(3)(A) In lieu of any payment under para22 graph (1) therefor, the Secretary shall pay to each

23 State that is operating a program in accordance

24 with a plan approved under part F and a program

25 in accordance with part G or H, with respect to ex-
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1 penditures by the State to carry out such programs,

2 an amount equal to—

3 ‘‘(i) with respect to so much of such ex4 penditures in a fiscal year as do not exceed the

5 State’s expenditures in the fiscal year 1987

6 with respect to which payments were made to

7 such State from its allotment for such fiscal

8 year pursuant to part C of this title as then in

9 effect, 90 percent; and

10 ‘‘(ii) with respect to so much of such ex11 penditures in a fiscal year as exceed the amount

12 described in clause (i)—

13 ‘‘(I) 50 percent, in the case of expend14 itures for administrative costs made by a

15 State in operating such programs for such

16 fiscal year (other than the personnel costs

17 for staff employed full-time in the oper18 ation of such program) and the costs of

19 transportation and other work-related sup20 portive services; and

21 ‘‘(II) 60 percent or the Federal medi22 cal assistance percentage (as defined in the

23 last sentence of section 1118), whichever is

24 the greater, in the case of expenditures

25 made by a State in operating such pro-
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1 grams for such fiscal year (other than for

2 costs described in subclause (I)).

3 ‘‘(B) With respect to the amount for which pay4 ment is made to a State under subparagraph (A)(i),

5 the State’s expenditures for the costs of operating

6 such programs may be in cash or in kind, fairly eval7 uated.

8 ‘‘(C) Not more than 10 percent of the amount

9 payable to a State under this paragraph for a quar10 ter may be for expenditures made during the quarter

11 with respect to program participants who are not eli12 gible for assistance under the State plan approved

13 under this part.’’.

14 (d) SECRETARY’S SPECIAL ADJUSTMENT FUND.—

15 Section 413(a), as added by section 9101(a) of this Act,

16 is amended by adding at the end the following:

17 ‘‘(4) SECRETARY’S SPECIAL ADJUSTMENT

18 FUND.—(A) There shall be available to the Sec19 retary from the amount appropriated for payments

20 under paragraph (2) for States’ programs under

21 parts F and G for fiscal year 1996, $300,000,000

22 for special adjustments to States’ limitations on

23 Federal payments for such programs.

24 ‘‘(B) A State may, not later than March 1 and

25 September 1 of each fiscal year, submit to the Sec-
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1 retary a request to adjust the limitation on pay2 ments under this section with respect to its program

3 under part F (and, in fiscal years after 1997) its

4 program under part G for the following fiscal year.

5 The Secretary shall only consider such a request

6 from a State which has, or which demonstrates con7 vincingly on the basis of estimates that it will, sub8 mit allowable claims for Federal payment in the full

9 amount available to it under paragraph (2) in the

10 current fiscal year and obligated 95 percent of its

11 full amount in the prior fiscal year. The Secretary

12 shall by regulation prescribe criteria for the equi13 table allocation among the States of Federal pay14 ments pursuant to adjustments of the limitations re15 ferred to in the preceding sentence in the case where

16 the requests of all States that the Secretary finds

17 reasonable exceed the amount available, and, within

18 30 days following the dates specified in this para19 graph, will notify each State whether one or more of

20 its limitations will be adjusted in accordance with

21 the State’s request and the amount of the adjust22 ment (which may be some or all of the amount re23 quested).

24 ‘‘(C) The Secretary may adjust the limitation

25 on Federal payments to a State for a fiscal year
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1 under paragraph (2), and upon a determination by

2 the Secretary that (and the amount by which) a

3 State’s limitation should be raised, the amount spec4 ified in such paragraph shall be considered to be so

5 increased for the following fiscal year.

6 ‘‘(D) The amount made available under sub7 paragraph (A) for special adjustments shall remain

8 available to the Secretary until expended. That

9 amount shall be reduced by the sum of the adjust10 ments approved by the Secretary in any fiscal year,

11 and the amount shall be increased in a fiscal year

12 by the amount by which all States’ limitations under

13 paragraph (2) of this subsection and section 2008

14 for a fiscal year exceeded the sum of the Federal

15 payments under such provisons of law for such fiscal

16 year, but for fiscal years after 1997, such amount

17 at the end of such fiscal year shall not exceed

18 $400,000,000.’’.

19 (e) CONFORMING AMENDMENTS.—

20 (1) Section 1115(b)(2)(A) (42 U.S.C.

21 1315(b)(2)(A)) is amended by striking ‘‘, and

22 402(a)(19) (relating to the work incentive pro23 gram)’’.

24 (2) Section 1108 (42 U.S.C. 1308) is amend25 ed—
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1 (A) in subsection (a), by striking ‘‘or, in

2 the case of part A of title IV, section 403(k)’’;

3 and

4 (B) in subsection (d), by striking ‘‘(exclu5 sive of any amounts on account of services and

6 items to which, in the case of part A of such

7 title, section 403(k) applies)’’.

8 (3) Section 1902(a)(10)(A)(i)(I) (42 U.S.C.

9 1396a(a)(19)(A)(i)(I)) is amended—

10 (A) by striking ‘‘402(a)(37), 406(h), or’’;

11 and

12 (B) by striking ‘‘482(e)(6)’’ and inserting

13 ‘‘486(f)’’.

14 (4) Section 1928(a)(1) (42 U.S.C. 1396s(a)(1))

15 is amended by striking ‘‘482(e)(6)’’ and inserting

16 ‘‘486(f)’’.

17 (f) INTENT OF THE CONGRESS.—The Congress in18 tends for State activities under section 484 of the Social

19 Security Act (as added by the amendment made by section

20 9301(a) of this Act) to emphasize the use of the funds

21 that would otherwise be used to provide individuals with

22 assistance under part A of title IV of the Social Security

23 Act and with food stamp benefits under the Food Stamp

24 Act of 1977, to subsidize the wages of such individuals

25 in temporary jobs.
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1 (g) SENSE OF THE CONGRESS.—It is the sense of

2 the Congress that States should target individuals who

3 have not attained 25 years of age for participation in the

4 program established by the State under part F of title IV

5 of the Social Security Act (as added by the amendment

6 made by section 9301(a) of this section) in order to break

7 the cycle of welfare dependency.

8 SEC. 9302. REGULATIONS.

9 The Secretary of Health and Human Services shall

10 prescribe such regulations as may be necessary to imple11 ment the amendments made by this subtitle.

12 SEC. 9303. APPLICABILITY TO STATES.

13 (a) STATE OPTION TO ACCELERATE APPLICABIL14 ITY.—If a State formally notifies the Secretary of Health

15 and Human Services that the State desires to accelerate

16 the applicability to the State of the amendments made by

17 this subtitle, the amendments shall apply to the State on

18 and after such earlier date as the State may select.

19 (b) STATE OPTION TO DELAY APPLICABILITY UNTIL

20 WAIVERS EXPIRE.—The amendments made by this sub21 title shall not apply to a State with respect to which there

22 is in effect a waiver issued under section 1115 of the So23 cial Security Act for the State program established under

24 part F of title IV of such Act, until the waiver expires,

25 if the State formally notifies the Secretary of Health and
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1 Human Services that the State desires to so delay such

2 effective date.

3 (c) AUTHORITY OF THE SECRETARY OF HEALTH

4 AND HUMAN SERVICES TO DELAY APPLICABILITY TO A

5 STATE.—If a State formally notifies the Secretary of

6 Health and Human Services that the State desires to

7 delay the applicability to the State of the amendments

8 made by this title, the amendments shall apply to the

9 State on and after any later date agreed upon by the Sec10 retary and the State.

11 Subtitle D—Family Responsibility

12 And Improved Child Support

13 Enforcement

14 CHAPTER 1—ELIGIBILITY AND OTHER

15 MATTERS CONCERNING TITLE IV–D

16 PROGRAM CLIENTS

17 SEC. 9401. STATE OBLIGATION TO PROVIDE PATERNITY ES18 TABLISHMENT AND CHILD SUPPORT EN19 FORCEMENT SERVICES.

20 (a) STATE LAW REQUIREMENTS.—Section 466(a)

21 (42 U.S.C. 666(a)) is amended by inserting after para22 graph (11) the following:

23 ‘‘(12) USE OF CENTRAL CASE REGISTRY AND

24 CENTRALIZED COLLECTIONS UNIT.—Procedures

25 under which—
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1 ‘‘(A) every child support order established

2 or modified in the State on or after October 1,

3 1998, is recorded in the central case registry

4 established in accordance with section 454A(e);

5 and

6 ‘‘(B) child support payments are collected

7 through the centralized collections unit estab8 lished in accordance with section 454B—

9 ‘‘(i) on and after October 1, 1998,

10 under each order subject to wage withhold11 ing under section 466(b); and

12 ‘‘(ii) on and after October 1, 1999,

13 under each other order required to be re14 corded in such central case registry under

15 this paragraph or section 454A(e), except

16 as provided in subparagraph (C); and

17 ‘‘(C)(i) parties subject to a child support

18 order described in subparagraph (B)(ii) may

19 opt out of the procedure for payment of support

20 through the centralized collections unit (but not

21 the procedure for inclusion in the central case

22 registry) by filing with the State agency a writ23 ten agreement, signed by both parties, to an al24 ternative payment procedure; and
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1 ‘‘(ii) an agreement described in clause (i)

2 becomes void whenever either party advises the

3 State agency of an intent to vacate the agree4 ment.’’.

5 (b) STATE PLAN REQUIREMENTS.—Section 454 (42

6 U.S.C. 654) is amended—

7 (1) by striking paragraph (4) and inserting the

8 following:

9 ‘‘(4) provide that such State will undertake—

10 ‘‘(A) to provide appropriate services under

11 this part to—

12 ‘‘(i) each child with respect to whom

13 an assignment is effective under section

14 403(b)(1)(E)(i), 471(a)(17), or 1912 (ex15 cept in cases where the State agency deter16 mines, in accordance with paragraph (25),

17 that it is against the best interests of the

18 child to do so); and

19 ‘‘(ii) each child not described in clause

20 (i)—

21 ‘‘(I) with respect to whom an in22 dividual applies for such services; and

23 ‘‘(II) (on and after October 1,

24 1998) each child with respect to

25 whom a support order is recorded in
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1 the central State case registry estab2 lished under section 454A, regardless

3 of whether application is made for

4 services under this part; and

5 ‘‘(B) to enforce the support obligation es6 tablished with respect to the custodial parent of

7 a child described in subparagraph (A) unless

8 the parties to the order which establishes the

9 support obligation have opted, in accordance

10 with section 466(a)(12)(C), for an alternative

11 payment procedure.’’; and

12 (2) in paragraph (6)—

13 (A) by striking subparagraph (A) and in14 serting the following:

15 ‘‘(A) services under the State plan shall be

16 made available to nonresidents on the same

17 terms as to residents;’’;

18 (B) in subparagraph (B)—

19 (i) by inserting ‘‘on individuals not re20 ceiving assistance under part A’’ after

21 ‘‘such services shall be imposed’’; and

22 (ii) by inserting ‘‘but no fees or costs

23 shall be imposed on any absent or custo24 dial parent or other individual for inclusion
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1 in the central State registry maintained

2 pursuant to section 454A(e)’’; and

3 (C) in each of subparagraphs (B), (C), and

4 (D)—

5 (i) by indenting such subparagraph

6 and aligning its left margin with the left

7 margin of subparagraph (A); and

8 (ii) by striking the final comma and

9 inserting a semicolon.

10 (c) CONFORMING AMENDMENTS.—

11 (1) Section 452(g)(2)(A) (42 U.S.C.

12 652(g)(2)(A)) is amended by striking ‘‘454(6)’’ each

13 place it appears and inserting ‘‘454(4)(A)(ii)’’.

14 (2) Section 454(23) (42 U.S.C. 654(23)) is

15 amended, effective October 1, 1998, by striking ‘‘in16 formation as to any application fees for such services

17 and’’.

18 (3) Section 466(a)(3)(B) (42 U.S.C.

19 666(a)(3)(B)) is amended by striking ‘‘in the case of

20 overdue support which a State has agreed to collect

21 under section 454(6)’’ and inserting ‘‘in any other

22 case’’.

23 (4) Section 466(e) (42 U.S.C. 666(e)) is

24 amended by striking ‘‘or (6)’’.
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1 SEC. 9402. DISTRIBUTION OF PAYMENTS.

2 (a) DISTRIBUTIONS THROUGH STATE CHILD SUP3 PORT ENFORCEMENT AGENCY TO FORMER ASSISTANCE

4 RECIPIENTS.—Section 454(5) (42 U.S.C. 654(5)) is

5 amended—

6 (1) in subparagraph (A)—

7 (A) by striking ‘‘section 402(a)(26) is ef8 fective,’’ and inserting ‘‘section 403(b)(1)(E)(i)

9 is effective, except as otherwise specifically pro10 vided in section 464 or 466(a)(3),’’; and

11 (B) by striking ‘‘except that’’ and all that

12 follows through the semicolon; and

13 (2) in subparagraph (B), by striking ‘‘, except’’

14 and all that follows through ‘‘medical assistance’’.

15 (b) DISTRIBUTION TO A FAMILY CURRENTLY RE16 CEIVING TEMPORARY EMPLOYMENT ASSISTANCE.—Sec17 tion 457 (42 U.S.C. 657) is amended—

18 (1) by striking subsection (a) and redesignating

19 subsection (b) as subsection (a);

20 (2) in subsection (a) (as so redesignated)—

21 (A) in the matter preceding paragraph (2),

22 to read as follows:

23 ‘‘(a) IN THE CASE OF A FAMILY RECEIVING TEA.—

24 Amounts collected under this part during any month as

25 support of a child who is receiving assistance under part

26 A (or a parent or caretaker relative of such a child) shall
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1 (except in the case of a State exercising the option under

2 subsection (b)) be distributed as follows:

3 ‘‘(1) an amount equal to the amount that will

4 be disregarded pursuant to section 402(d)(2)(C)

5 shall be taken from each of—

6 ‘‘(A) the amounts received in a month

7 which represent payments for that month; and

8 ‘‘(B) the amounts received in a month

9 which represent payments for a prior month

10 which were made by the absent parent in that

11 prior month;

12 and shall be paid to the family without affecting its

13 eligibility for assistance or decreasing any amount

14 otherwise payable as assistance to such family dur15 ing such month;’’;

16 (B) in paragraph (4), by striking ‘‘or (B)’’

17 and all that follows through the period and in18 serting ‘‘; then (B) from any remainder,

19 amounts equal to arrearages of such support

20 obligations assigned, pursuant to part A, to any

21 other State or States shall be paid to such

22 other State or States and used to pay any such

23 arrearages (with appropriate reimbursement of

24 the Federal Government to the extent of its
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1 participation in the financing); and then (C)

2 any remainder shall be paid to the family.’’; and

3 (3) by inserting after subsection (a) (as so re4 designated) the following new subsection:

5 ‘‘(b) ALTERNATIVE DISTRIBUTION IN CASE OF FAM6 ILY RECEIVING TEA.—In the case of a State electing the

7 option under this subsection, amounts collected as de8 scribed in subsection (a) shall be distributed as follows:

9 ‘‘(1) an amount equal to the amount that will

10 be disregarded pursuant to section 402(d)(2)(C)

11 shall be taken from each of—

12 ‘‘(A) the amounts received in a month

13 which represent payments for that month; and

14 ‘‘(B) the amounts received in a month

15 which represent payments for a prior month

16 which were made by the absent parent in that

17 prior month;

18 and shall be paid to the family without affecting its

19 eligibility for assistance or decreasing any amount

20 otherwise payable as assistance to such family dur21 ing such month;

22 ‘‘(2) second, from any remainder, amounts

23 equal to the balance of support owed for the current

24 month shall be paid to the family;
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1 ‘‘(3) third, from any remainder, amounts equal

2 to arrearages of such support obligations assigned,

3 pursuant to part A, to the State making the collec4 tion shall be retained and used by such State to pay

5 any such arrearages (with appropriate reimburse6 ment of the Federal Government to the extent of its

7 participation in the financing);

8 ‘‘(4) fourth, from any remainder, amounts

9 equal to arrearages of such support obligations as10 signed, pursuant to part A, to any other State or

11 States shall be paid to such other State or States

12 and used to pay any such arrearages (with appro13 priate reimbursement of the Federal Government to

14 the extent of its participation in the financing); and

15 ‘‘(5) fifth, any remainder shall be paid to the

16 family.’’.

17 (c) DISTRIBUTION TO A FAMILY NOT RECEIVING

18 TEA.—Section 457(c) (42 U.S.C. 657(c)) is amended to

19 read as follows:

20 ‘‘(c) DISTRIBUTIONS IN CASE OF FAMILY NOT RE21 CEIVING TEA.—Amounts collected by a State agency

22 under this part during any month as support of a child

23 who is not receiving assistance under part A (or of a par24 ent or caretaker relative of such a child) shall (subject to
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1 the remaining provisions of this section) be distributed as

2 follows:

3 ‘‘(1) first, amounts equal to the total of such

4 support owed for such month shall be paid to the

5 family;

6 ‘‘(2) second, from any remainder, amounts

7 equal to arrearages of such support obligations for

8 months during which such child did not receive as9 sistance under part A shall be paid to the family;

10 ‘‘(3) third, from any remainder, amounts equal

11 to arrearages of such support obligations assigned to

12 the State making the collection pursuant to part A

13 shall be retained and used by such State to pay any

14 such arrearages (with appropriate reimbursement of

15 the Federal Government to the extent of its partici16 pation in the financing); and

17 ‘‘(4) fourth, from any remainder, amounts

18 equal to arrearages of such support obligations as19 signed to any other State pursuant to part A shall

20 be paid to such other State or States, and used to

21 pay such arrearages, in the order in which such ar22 rearages accrued (with appropriate reimbursement

23 of the Federal Government to the extent of its par24 ticipation in the financing).’’.
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1 (d) DISTRIBUTION TO A CHILD RECEIVING ASSIST2 ANCE UNDER TITLE IV–E.—Section 457(d) (42 U.S.C.

3 657(d)) is amended, in the matter preceding paragraph

4 (1), by striking ‘‘Notwithstanding the preceding provisions

5 of this section, amounts’’ and inserting the following:

6 ‘‘(d) DISTRIBUTIONS IN CASE OF A CHILD RECEIV7 ING ASSISTANCE UNDER TITLE IV–E.—Amounts’’.

8 (e) REGULATIONS.—The Secretary of Health and

9 Human Services shall promulgate regulations under part

10 A of title IV of the Social Security Act, establishing stand11 ards applicable to States electing the alternative formula

12 under section 457(b) of such Act for distribution of collec13 tions on behalf of families receiving temporary employ14 ment assistance, designed to minimize irregular monthly

15 payments to such families.

16 (f) CLERICAL AMENDMENTS.—Section 454 (42

17 U.S.C. 654) is amended—

18 (1) in paragraph (11)—

19 (A) by striking ‘‘(11)’’ and inserting

20 ‘‘(11)(A)’’; and

21 (B) by inserting after the semicolon ‘‘and’’;

22 and

23 (2) by redesignating paragraph (12) as sub24 paragraph (B) of paragraph (11).

25 (g) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—Except as otherwise pro2 vided in this subsection, the amendments made by

3 this section shall become effective on October 1,

4 1996.

5 (2) FAMILY NOT RECEIVING TEA.—The amend6 ment made by subsection (c) shall become effective

7 on October 1, 1999.

8 (3) SPECIAL RULES.—

9 (A) APPLICABILITY.—A State may elect to

10 have the amendments made by any subsection

11 of this section become effective only with re12 spect to child support cases beginning on or

13 after the effective date of such subsection.

14 (B) DELAYED IMPLEMENTATION.—A State

15 may elect to have the amendments made by this

16 section (other than subsection (c)) become ef17 fective on a date later than October 1, 1996,

18 which date shall coincide with the operation of

19 the single statewide automated data processing

20 and information retrieval system required by

21 section 454A of the Social Security Act (as

22 added by section 9415(a)(2) of this Act) and

23 the State centralized collection unit required by

24 section 454B of the Social Security Act (as

25 added by section 9422(b) of this Act).
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1 SEC. 9403. DUE PROCESS RIGHTS.

2 (a) IN GENERAL.—Section 454 (42 U.S.C. 654), as

3 amended by section 9402(f) of this Act, is amended by

4 inserting after paragraph (11) the following new para5 graph:

6 ‘‘(12) provide for procedures to ensure that—

7 ‘‘(A) individuals who are applying for or

8 receiving services under this part, or are parties

9 to cases in which services are being provided

10 under this part—

11 ‘‘(i) receive notice of all proceedings in

12 which support obligations might be estab13 lished or modified; and

14 ‘‘(ii) receive a copy of any order estab15 lishing or modifying a child support obliga16 tion, or (in the case of a petition for modi17 fication) a notice of determination that

18 there should be no change in the amount

19 of the child support award, within 14 days

20 after issuance of such order or determina21 tion;

22 ‘‘(B) individuals applying for or receiving

23 services under this part have access to a fair

24 hearing that meets standards established by the

25 Secretary and ensures prompt consideration

26 and resolution of complaints (but the resort to
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1 such procedure shall not stay the enforcement

2 of any support order); and

3 ‘‘(C) individuals adversely affected by the

4 establishment or modification of (or, in the case

5 of a petition for modification, the determination

6 that there should be no change in) a child sup7 port order shall be afforded not less than 30

8 days after the receipt of the order or determina9 tion to initiate proceedings to challenge such

10 order or determination;’’.

11 (b) EFFECTIVE DATE.—The amendment made by

12 subsection (a) shall become effective on October 1, 1997.

13 SEC. 9404. PRIVACY SAFEGUARDS.

14 (a) STATE PLAN REQUIREMENT.—Section 454 (42

15 U.S.C. 454) is amended—

16 (1) by striking ‘‘and’’ at the end of paragraph

17 (23);

18 (2) by striking the period at the end of para19 graph (24) and inserting ‘‘; and’’; and

20 (3) by adding after paragraph (24) the follow21 ing:

22 ‘‘(25) will have in effect safeguards applicable

23 to all sensitive and confidential information handled

24 by the State agency designed to protect the privacy

25 rights of the parties, including—
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1 ‘‘(A) safeguards against unauthorized use

2 or disclosure of information relating to proceed3 ings or actions to establish paternity, or to es4 tablish or enforce support;

5 ‘‘(B) prohibitions on the release of infor6 mation on the whereabouts of one party to an7 other party against whom a protective order

8 with respect to the former party has been en9 tered; and

10 ‘‘(C) prohibitions on the release of infor11 mation on the whereabouts of one party to an12 other party if the State has reason to believe

13 that the release of the information may result

14 in physical or emotional harm to the former

15 party.’’.

16 (b) EFFECTIVE DATE.—The amendment made by

17 subsection (a) shall become effective on October 1, 1997.

18 CHAPTER 2—PROGRAM ADMINISTRATION

19 AND FUNDING

20 SEC. 9411. FEDERAL MATCHING PAYMENTS.

21 (a) INCREASED BASE MATCHING RATE.—Section

22 455(a)(2) (42 U.S.C. 655(a)(2)) is amended to read as

23 follows:

24 ‘‘(2) The applicable percent for a quarter for

25 purposes of paragraph (1)(A) is—
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1 ‘‘(A) for fiscal year 1997, 69 percent,

2 ‘‘(B) for fiscal year 1998, 72 percent, and

3 ‘‘(C) for fiscal year 1999 and succeeding

4 fiscal years, 75 percent.’’.

5 (b) MAINTENANCE OF EFFORT.—Section 455 (42

6 U.S.C. 655) is amended—

7 (1) in subsection (a)(1), in the matter preced8 ing subparagraph (A), by striking ‘‘From’’ and in9 serting ‘‘Subject to subsection (c), from’’; and

10 (2) by inserting after subsection (b) the follow11 ing new subsection:

12 ‘‘(c) MAINTENANCE OF EFFORT.—Notwithstanding

13 the provisions of subsection (a), total expenditures for the

14 State program under this part for fiscal year 1997 and

15 each succeeding fiscal year, reduced by the percentage

16 specified for such fiscal year under subsection (a)(2)(A),

17 (B), or (C)(i), shall not be less than such total expendi18 tures for fiscal year 1996, reduced by 66 percent.’’.

19 SEC. 9412. PERFORMANCE-BASED INCENTIVES AND PEN20 ALTIES.

21 (a) INCENTIVE ADJUSTMENTS TO FEDERAL MATCH22 ING RATE.—Section 458 (42 U.S.C. 658) is amended to

23 read as follows:

24 ‘‘INCENTIVE ADJUSTMENTS TO MATCHING RATE

25 ‘‘SEC. 458. (a) INCENTIVE ADJUSTMENT.—(1) IN

26 GENERAL.—In order to encourage and reward State child
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1 support enforcement programs which perform in an effec2 tive manner, the Federal matching rate for payments to

3 a State under section 455(a)(1)(A), for each fiscal year

4 beginning on or after October 1, 1998, shall be increased

5 by a factor reflecting the sum of the applicable incentive

6 adjustments (if any) determined in accordance with regu7 lations under this section with respect to Statewide pater8 nity establishment and to overall performance in child sup9 port enforcement.

10 ‘‘(2) STANDARDS.—(A) IN GENERAL.—The Sec11 retary shall specify in regulations—

12 ‘‘(i) the levels of accomplishment, and rates of

13 improvement as alternatives to such levels, which

14 States must attain to qualify for incentive adjust15 ments under this section; and

16 ‘‘(ii) the amounts of incentive adjustment that

17 shall be awarded to States achieving specified ac18 complishment or improvement levels, which amounts

19 shall be graduated, ranging up to—

20 ‘‘(I) 5 percentage points, in connection

21 with Statewide paternity establishment; and

22 ‘‘(II) 10 percentage points, in connection

23 with overall performance in child support en24 forcement.
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1 ‘‘(B) LIMITATION.—In setting performance stand2 ards pursuant to subparagraph (A)(i) and adjustment

3 amounts pursuant to subparagraph (A)(ii), the Secretary

4 shall ensure that the aggregate number of percentage

5 point increases as incentive adjustments to all States do

6 not exceed such aggregate increases as assumed by the

7 Secretary in estimates of the cost of this section as of

8 June 1995, unless the aggregate performance of all States

9 exceeds the projected aggregate performance of all States

10 in such cost estimates.

11 ‘‘(3) DETERMINATION OF INCENTIVE ADJUST12 MENT.—The Secretary shall determine the amount (if

13 any) of incentive adjustment due each State on the basis

14 of the data submitted by the State pursuant to section

15 454(15)(B) concerning the levels of accomplishment (and

16 rates of improvement) with respect to performance indica17 tors specified by the Secretary pursuant to this section.

18 ‘‘(4) FISCAL YEAR SUBJECT TO INCENTIVE ADJUST19 MENT.—The total percentage point increase determined

20 pursuant to this section with respect to a State program

21 in a fiscal year shall apply as an adjustment to the appli22 cable percent under section 455(a)(2) for payments to

23 such State for the succeeding fiscal year.

24 ‘‘(5) RECYCLING OF INCENTIVE ADJUSTMENT.—A

25 State shall expend in the State program under this part
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1 all funds paid to the State by the Federal Government

2 as a result of an incentive adjustment under this section.

3 ‘‘(b) MEANING OF TERMS.—For purposes of this sec4 tion—

5 ‘‘(1) the term ‘Statewide paternity establish6 ment percentage’ means, with respect to a fiscal

7 year, the ratio (expressed as a percentage) of—

8 ‘‘(A) the total number of out-of-wedlock

9 children in the State under one year of age for

10 whom paternity is established or acknowledged

11 during the fiscal year, to

12 ‘‘(B) the total number of children born out

13 of wedlock in the State during such fiscal year;

14 and

15 ‘‘(2) the term ‘overall performance in child sup16 port enforcement’ means a measure or measures of

17 the effectiveness of the State agency in a fiscal year

18 which takes into account factors including—

19 ‘‘(A) the percentage of cases requiring a

20 child support order in which such an order was

21 established;

22 ‘‘(B) the percentage of cases in which child

23 support is being paid;

24 ‘‘(C) the ratio of child support collected to

25 child support due; and
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1 ‘‘(D) the cost-effectiveness of the State

2 program, as determined in accordance with

3 standards established by the Secretary in regu4 lations.’’.

5 (b) ADJUSTMENT OF PAYMENTS UNDER PART D OF

6 TITLE IV.—Section 455(a)(2) (42 U.S.C. 655(a)(2)), as

7 amended by section 9411(a) of this Act, is amended—

8 (1) by striking the period at the end of sub9 paragraph (C)(ii) and inserting a comma; and

10 (2) by adding after and below subparagraph

11 (C), flush with the left margin of the subsection, the

12 following:

13 ‘‘increased by the incentive adjustment factor (if any) de14 termined by the Secretary pursuant to section 458.’’.

15 (c) CONFORMING AMENDMENTS.—Section 454(22)

16 (42 U.S.C. 654(22)) is amended—

17 (1) by striking ‘‘incentive payments’’ the first

18 place it appears and inserting ‘‘incentive adjust19 ments’’; and

20 (2) by striking ‘‘any such incentive payments

21 made to the State for such period’’ and inserting

22 ‘‘any increases in Federal payments to the State re23 sulting from such incentive adjustments’’.

24 (d) CALCULATION OF IV–D PATERNITY ESTABLISH25 MENT PERCENTAGE.—(1) Section 452(g)(1) (42 U.S.C.
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1 652(g)(1)) is amended in the matter preceding subpara2 graph (A) by inserting ‘‘its overall performance in child

3 support enforcement is satisfactory (as defined in section

4 458(b) and regulations of the Secretary), and’’ after

5 ‘‘1994,’’.

6 (2) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is

7 amended—

8 (A) in subparagraph (A), in the matter preced9 ing clause (i)—

10 (i) by striking ‘‘paternity establishment

11 percentage’’ and inserting ‘‘IV–D paternity es12 tablishment percentage’’; and

13 (ii) by striking ‘‘(or all States, as the case

14 may be)’’;

15 (B) in subparagraph (A)(i), by striking ‘‘during

16 the fiscal year’’;

17 (C) in subparagraph (A)(ii)(I), by striking ‘‘as

18 of the end of the fiscal year’’ and inserting ‘‘in the

19 fiscal year or, at the option of the State, as of the

20 end of such year’’;

21 (D) in subparagraph (A)(ii)(II), by striking ‘‘or

22 (E) as of the end of the fiscal year’’ and inserting

23 ‘‘in the fiscal year or, at the option of the State, as

24 of the end of such year’’;

25 (E) in subparagraph (A)(iii)—
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1 (i) by striking ‘‘during the fiscal year’’;

2 and

3 (ii) by striking ‘‘and’’ at the end; and

4 (F) in the matter following subparagraph (A)—

5 (i) by striking ‘‘who were born out of wed6 lock during the immediately preceding fiscal

7 year’’ and inserting ‘‘born out of wedlock’’;

8 (ii) by striking ‘‘such preceding fiscal

9 year’’ both places it appears and inserting ‘‘the

10 preceding fiscal year’’; and

11 (iii) by striking ‘‘or (E)’’ the second place

12 it appears.

13 (3) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is

14 amended—

15 (A) by striking subparagraph (A) and redesig16 nating subparagraphs (B) and (C) as subparagraphs

17 (A) and (B), respectively;

18 (B) in subparagraph (A), as redesignated, by

19 striking ‘‘the percentage of children born out-of-wed20 lock in the State’’ and inserting ‘‘the percentage of

21 children in the State who are born out of wedlock

22 or for whom support has not been established’’; and

23 (C) in subparagraph (B), as redesignated—
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1 (i) by inserting ‘‘and overall performance

2 in child support enforcement’’ after ‘‘paternity

3 establishment percentages’’; and

4 (ii) by inserting ‘‘and securing support’’

5 before the period.

6 (e) REDUCTION OF PAYMENTS UNDER PART D OF

7 TITLE IV.—

8 (1) NEW REQUIREMENTS.—Section 455 (42

9 U.S.C. 655) is amended by inserting after sub10 section (b) the following:

11 ‘‘(c)(1) If the Secretary finds, with respect to a State

12 program under this part in a fiscal year beginning on or

13 after October 1, 1997—

14 ‘‘(A)(i) on the basis of data submitted by a

15 State pursuant to section 454(15)(B), that the State

16 program in such fiscal year failed to achieve the IV–

17 D paternity establishment percentage (as defined in

18 section 452(g)(2)(A)) or the appropriate level of

19 overall performance in child support enforcement (as

20 defined in section 458(b)(2)), or to meet other per21 formance measures that may be established by the

22 Secretary, or

23 ‘‘(ii) on the basis of an audit or audits of such

24 State data conducted pursuant to section

25 452(a)(4)(C), that the State data submitted pursu-
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1 ant to section 454(15)(B) is incomplete or unreli2 able; and

3 ‘‘(B) that, with respect to the succeeding fiscal

4 year—

5 ‘‘(i) the State failed to take sufficient cor6 rective action to achieve the appropriate per7 formance levels as described in subparagraph

8 (A)(i) of this paragraph, or

9 ‘‘(ii) the data submitted by the State pur10 suant to section 454(15)(B) is incomplete or

11 unreliable,

12 the amounts otherwise payable to the State under this

13 part for quarters following the end of such succeeding fis14 cal year, prior to quarters following the end of the first

15 quarter throughout which the State program is in compli16 ance with such performance requirement, shall be reduced

17 by the percentage specified in paragraph (2).

18 ‘‘(2) The reductions required under paragraph (1)

19 shall be—

20 ‘‘(A) not less than 6 nor more than 8 percent,

21 or

22 ‘‘(B) not less than 8 nor more than 12 percent,

23 if the finding is the second consecutive finding made

24 pursuant to paragraph (1), or
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1 ‘‘(C) not less than 12 nor more than 15 per2 cent, if the finding is the third or a subsequent con3 secutive such finding.

4 ‘‘(3) For purposes of this subsection, section 405(d),

5 and section 452(a)(4), a State which is determined as a

6 result of an audit to have submitted incomplete or unreli7 able data pursuant to section 454(15)(B), shall be deter8 mined to have submitted adequate data if the Secretary

9 determines that the extent of the incompleteness or

10 unreliability of the data is of a technical nature which does

11 not adversely affect the determination of the level of the

12 State’s performance.’’.

13 (2) CONFORMING AMENDMENTS.—

14 (A) Section 452(a)(4) (42 U.S.C.

15 652(a)(4)) is amended by striking ‘‘403(h)’’

16 each place such term appears and inserting

17 ‘‘455(c)’’.

18 (B) Subsections (d)(3)(A), (g)(1), and

19 (g)(3)(A) of section 452 (42 U.S.C. 652) are

20 each amended by striking ‘‘403(h)’’ and insert21 ing ‘‘455(c)’’.

22 (f) EFFECTIVE DATES.—

23 (1) INCENTIVE ADJUSTMENTS.—(A) The

24 amendments made by subsections (a), (b), and (c)
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1 shall become effective October 1, 1997, except to the

2 extent provided in subparagraph (B).

3 (B) Section 458 of the Social Security Act, as

4 in effect prior to the enactment of this section, shall

5 be effective for purposes of incentive payments to

6 States for fiscal years prior to fiscal year 1999.

7 (2) PENALTY REDUCTIONS.—(A) The amend8 ments made by subsection (d) shall become effective

9 with respect to calendar quarters beginning on and

10 after the date of enactment of this Act.

11 (B) The amendments made by subsection (e)

12 shall become effective with respect to calendar quar13 ters beginning on and after the date one year after

14 the date of enactment of this Act.

15 SEC. 9413. FEDERAL AND STATE REVIEWS AND AUDITS.

16 (a) STATE AGENCY ACTIVITIES.—Section 454 (42

17 U.S.C. 654) is amended—

18 (1) in paragraph (14), by striking ‘‘(14)’’ and

19 inserting ‘‘(14)(A)’’;

20 (2) by redesignating paragraph (15) as sub21 paragraph (B) of paragraph (14); and

22 (3) by inserting after paragraph (14) the fol23 lowing new paragraph:

24 ‘‘(15) provide for—
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1 ‘‘(A) a process for annual reviews of and

2 reports to the Secretary on the State program

3 under this part, which shall include such infor4 mation as may be necessary to measure State

5 compliance with Federal requirements for expe6 dited procedures and timely case processing,

7 using such standards and procedures as are re8 quired by the Secretary, under which the State

9 agency will determine the extent to which such

10 program is in conformity with applicable re11 quirements with respect to the operation of

12 State programs under this part (including the

13 status of complaints filed under the procedure

14 required under paragraph (12)(B)); and

15 ‘‘(B) a process of extracting from the

16 State automated data processing system and

17 transmitting to the Secretary data and calcula18 tions concerning the levels of accomplishment

19 (and rates of improvement) with respect to ap20 plicable performance indicators (including IV–D

21 paternity establishment percentages and overall

22 performance in child support enforcement) to

23 the extent necessary for purposes of sections

24 452(g) and 458.’’.
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1 (b) FEDERAL ACTIVITIES.—Section 452(a)(4) (42

2 U.S.C. 652(a)(4)) is amended to read as follows:

3 ‘‘(4)(A) review data and calculations transmit4 ted by State agencies pursuant to section

5 454(15)(B) on State program accomplishments with

6 respect to performance indicators for purposes of

7 section 452(g) and 458, and determine the amount

8 (if any) of penalty reductions pursuant to section

9 455(c) to be applied to the State;

10 ‘‘(B) review annual reports by State agencies

11 pursuant to section 454(15)(A) on State program

12 conformity with Federal requirements; evaluate any

13 elements of a State program in which significant de14 ficiencies are indicated by such report on the status

15 of complaints under the State procedure under sec16 tion 454(12)(B); and, as appropriate, provide to the

17 State agency comments, recommendations for addi18 tional or alternative corrective actions, and technical

19 assistance; and

20 ‘‘(C) conduct audits, in accordance with the

21 government auditing standards of the United States

22 Comptroller General—

23 ‘‘(i) at least once every 3 years (or more

24 frequently, in the case of a State which fails to

25 meet requirements of this part, or of regula-
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1 tions implementing such requirements, concern2 ing performance standards and reliability of

3 program data) to assess the completeness, reli4 ability, and security of the data, and the accu5 racy of the reporting systems, used for the cal6 culations of performance indicators specified in

7 subsection (g) and section 458;

8 ‘‘(ii) of the adequacy of financial manage9 ment of the State program, including assess10 ments of—

11 ‘‘(I) whether Federal and other funds

12 made available to carry out the State pro13 gram under this part are being appro14 priately expended, and are properly and

15 fully accounted for; and

16 ‘‘(II) whether collections and disburse17 ments of support payments and program

18 income are carried out correctly and are

19 properly and fully accounted for; and

20 ‘‘(iii) for such other purposes as the Sec21 retary may find necessary;’’.

22 (c) EFFECTIVE DATE.—The amendments made by

23 this section shall be effective with respect to calendar

24 quarters beginning on or after the date one year after en25 actment of this section.
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1 SEC. 9414. REQUIRED REPORTING PROCEDURES.

2 (a) ESTABLISHMENT.—Section 452(a)(5) (42 U.S.C.

3 652(a)(5)) is amended by inserting ‘‘, and establish proce4 dures to be followed by States for collecting and reporting

5 information required to be provided under this part, and

6 establish uniform definitions (including those necessary to

7 enable the measurement of State compliance with the re8 quirements of this part relating to expedited processes and

9 timely case processing) to be applied in following such pro10 cedures’’ before the semicolon.

11 (b) STATE PLAN REQUIREMENT.—Section 454 (42

12 U.S.C. 654), as amended by section 9404(a) of this Act,

13 is amended—

14 (1) by striking ‘‘and’’ at the end of paragraph

15 (24);

16 (2) by striking the period at the end of para17 graph (25) and inserting ‘‘; and’’; and

18 (3) by adding after paragraph (25) the follow19 ing:

20 ‘‘(26) provide that the State shall use the defi21 nitions established under section 452(a)(5) in col22 lecting and reporting information as required under

23 this part.’’.
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1 SEC. 9415. AUTOMATED DATA PROCESSING REQUIRE2 MENTS.

3 (a) REVISED REQUIREMENTS.—(1) Section 454(16)

4 (42 U.S.C. 654(16)) is amended—

5 (A) by striking ‘‘, at the option of the State,’’;

6 (B) by inserting ‘‘and operation by the State

7 agency’’ after ‘‘for the establishment’’;

8 (C) by inserting ‘‘meeting the requirements of

9 section 454A’’ after ‘‘information retrieval system’’;

10 (D) by striking ‘‘in the State and localities

11 thereof, so as (A)’’ and inserting ‘‘so as’’;

12 (E) by striking ‘‘(i)’’; and

13 (F) by striking ‘‘(including’’ and all that follows

14 and inserting a semicolon.

15 (2) Part D of title IV (42 U.S.C. 651–669) is amend16 ed by inserting after section 454 the following new section:

17 ‘‘AUTOMATED DATA PROCESSING

18 ‘‘SEC. 454A. (a) IN GENERAL.—In order to meet the

19 requirements of this section, for purposes of the require20 ment of section 454(16), a State agency shall have in op21 eration a single statewide automated data processing and

22 information retrieval system which has the capability to

23 perform the tasks specified in this section, and performs

24 such tasks with the frequency and in the manner specified

25 in this part or in regulations or guidelines of the Sec26 retary.
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1 ‘‘(b) PROGRAM MANAGEMENT.—The automated sys2 tem required under this section shall perform such func3 tions as the Secretary may specify relating to management

4 of the program under this part, including—

5 ‘‘(1) controlling and accounting for use of Fed6 eral, State, and local funds to carry out such pro7 gram; and

8 ‘‘(2) maintaining the data necessary to meet

9 Federal reporting requirements on a timely basis.

10 ‘‘(c) CALCULATION OF PERFORMANCE INDICA11 TORS.—In order to enable the Secretary to determine the

12 incentive and penalty adjustments required by sections

13 452(g) and 458, the State agency shall—

14 ‘‘(1) use the automated system—

15 ‘‘(A) to maintain the requisite data on

16 State performance with respect to paternity es17 tablishment and child support enforcement in

18 the State; and

19 ‘‘(B) to calculate the IV–D paternity es20 tablishment percentage and overall performance

21 in child support enforcement for the State for

22 each fiscal year; and

23 ‘‘(2) have in place systems controls to ensure

24 the completeness, and reliability of, and ready access

25 to, the data described in paragraph (1)(A), and the
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1 accuracy of the calculations described in paragraph

2 (1)(B).

3 ‘‘(d) INFORMATION INTEGRITY AND SECURITY.—The

4 State agency shall have in effect safeguards on the integ5 rity, accuracy, and completeness of, access to, and use of

6 data in the automated system required under this section,

7 which shall include the following (in addition to such other

8 safeguards as the Secretary specifies in regulations):

9 ‘‘(1) POLICIES RESTRICTING ACCESS.—Written

10 policies concerning access to data by State agency

11 personnel, and sharing of data with other persons,

12 which—

13 ‘‘(A) permit access to and use of data only

14 to the extent necessary to carry out program re15 sponsibilities;

16 ‘‘(B) specify the data which may be used

17 for particular program purposes, and the per18 sonnel permitted access to such data; and

19 ‘‘(C) ensure that data obtained or disclosed

20 for a limited program purpose is not used or

21 redisclosed for another, impermissible purpose.

22 ‘‘(2) SYSTEMS CONTROLS.—Systems controls

23 (such as passwords or blocking of fields) to ensure

24 strict adherence to the policies specified under para25 graph (1).
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1 ‘‘(3) MONITORING OF ACCESS.—Routine mon2 itoring of access to and use of the automated sys3 tem, through methods such as audit trails and feed4 back mechanisms, to guard against and promptly

5 identify unauthorized access or use.

6 ‘‘(4) TRAINING AND INFORMATION.—The State

7 agency shall have in effect procedures to ensure that

8 all personnel (including State and local agency staff

9 and contractors) who may have access to or be re10 quired to use sensitive or confidential program data

11 are fully informed of applicable requirements and

12 penalties, and are adequately trained in security pro13 cedures.

14 ‘‘(5) PENALTIES.—The State agency shall have

15 in effect administrative penalties (up to and includ16 ing dismissal from employment) for unauthorized ac17 cess to, or disclosure or use of, confidential data.’’.

18 (3) REGULATIONS.—Section 452 (42 U.S.C. 652) is

19 amended by adding at the end the following:

20 ‘‘(j) The Secretary shall prescribe final regulations

21 for implementation of the requirements of section 454A

22 not later than 2 years after the date of the enactment of

23 this subsection.’’.

24 (4) IMPLEMENTATION TIMETABLE.—Section

25 454(24) (42 U.S.C. 654(24)), as amended by sections
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1 9404(a)(2) and 9414(b)(1) of this Act, is amended to read

2 as follows:

3 ‘‘(24) provide that the State will have in effect

4 an automated data processing and information re5 trieval system—

6 ‘‘(A) by October 1, 1995, meeting all re7 quirements of this part which were enacted on

8 or before the date of enactment of the Family

9 Support Act of 1988; and

10 ‘‘(B) by October 1, 1999, meeting all re11 quirements of this part enacted on or before the

12 date of enactment of the Omnibus Budget Rec13 onciliation Act of 1995 (but this provision shall

14 not be construed to alter earlier deadlines speci15 fied for elements of such system), except that

16 such deadline shall be extended by 1 day for

17 each day (if any) by which the Secretary fails

18 to meet the deadline imposed by section 452(j)

19 of this Act;’’.

20 (b) SPECIAL FEDERAL MATCHING RATE FOR DE21 VELOPMENT COSTS OF AUTOMATED SYSTEMS.—Section

22 455(a) (42 U.S.C. 655(a)) is amended—

23 (1) in paragraph (1)(B)—

24 (A) by striking ‘‘90 percent’’ and inserting

25 ‘‘the percent specified in paragraph (3)’’;
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1 (B) by striking ‘‘so much of’’; and

2 (C) by striking ‘‘which the Secretary’’ and

3 all that follows and inserting ‘‘, and’’; and

4 (2) by adding at the end the following new

5 paragraph:

6 ‘‘(3)(A) The Secretary shall pay to each State, for

7 each quarter in fiscal year 1996, 90 percent of so much

8 of State expenditures described in subparagraph (1)(B) as

9 the Secretary finds are for a system meeting the require10 ments specified in section 454(16), or meeting such re11 quirements without regard to clause (D) thereof.

12 ‘‘(B)(i) The Secretary shall pay to each State, for

13 each quarter in fiscal years 1997 through 2001, the per14 centage specified in clause (ii) of so much of State expend15 itures described in subparagraph (1)(B) as the Secretary

16 finds are for a system meeting the requirements specified

17 in sections 454(16) and 454A, subject to clause (iii).

18 ‘‘(ii) The percentage specified in this clause, for pur19 poses of clause (i), is the higher of—

20 ‘‘(I) 80 percent, or

21 ‘‘(II) the percentage otherwise applicable to

22 Federal payments to the State under subparagraph

23 (A) (as adjusted pursuant to section 458).’’.
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1 (c) CONFORMING AMENDMENT.—Section 123(c) of

2 the Family Support Act of 1988 (102 Stat. 2352; Public

3 Law 100–485) is repealed.

4 (d) ADDITIONAL PROVISIONS.—For additional provi5 sions of section 454A, as added by subsection (a) of this

6 section, see the amendments made by sections 9421,

7 9422(c), and 9433(d) of this Act.

8 SEC. 9416. DIRECTOR OF CSE PROGRAM; STAFFING STUDY.

9 (a) REPORTING TO SECRETARY.—Section 452(a) (42

10 U.S.C. 652(a)) is amended in the matter preceding para11 graph (1) by striking ‘‘directly’’.

12 (b) STAFFING STUDIES.—

13 (1) SCOPE.—The Secretary of Health and

14 Human Services shall, directly or by contract, con15 duct studies of the staffing of each State child sup16 port enforcement program under part D of title IV

17 of the Social Security Act. Such studies shall include

18 a review of the staffing needs created by require19 ments for automated data processing, maintenance

20 of a central case registry and centralized collections

21 of child support, and of changes in these needs re22 sulting from changes in such requirements. Such

23 studies shall examine and report on effective staffing

24 practices used by the States and on recommended

25 staffing procedures.
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1 (2) FREQUENCY OF STUDIES.—The Secretary

2 shall complete the first staffing study required under

3 paragraph (1) by October 1, 1997, and may conduct

4 additional studies subsequently at appropriate inter5 vals.

6 (3) REPORT TO THE CONGRESS.—The Sec7 retary shall submit a report to the Congress stating

8 the findings and conclusions of each study conducted

9 under this subsection.

10 SEC. 9417. FUNDING FOR SECRETARIAL ASSISTANCE TO

11 STATE PROGRAMS.

12 Section 452 (42 U.S.C. 652), as amended by section

13 9415(a)(3) of this Act, is amended by adding at the end

14 the following new subsection:

15 ‘‘(k) FUNDING FOR FEDERAL ACTIVITIES ASSISTING

16 STATE PROGRAMS.—(1) There shall be available to the

17 Secretary, from amounts appropriated for fiscal year 1996

18 and each succeeding fiscal year for payments to States

19 under this part, the amount specified in paragraph (2) for

20 the costs to the Secretary for—

21 ‘‘(A) information dissemination and technical

22 assistance to States, training of State and Federal

23 staff, staffing studies, and related activities needed

24 to improve programs (including technical assistance

25 concerning State automated systems);
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1 ‘‘(B) research, demonstration, and special

2 projects of regional or national significance relating

3 to the operation of State programs under this part;

4 and

5 ‘‘(C) operation of the Federal Parent Locator

6 Service under section 453, to the extent such costs

7 are not recovered through user fees.

8 ‘‘(2) The amount specified in this paragraph for a

9 fiscal year is the amount equal to a percentage of the re10 duction in Federal payments to States under part A on

11 account of child support (including arrearages) collected

12 in the preceding fiscal year on behalf of children receiving

13 assistance under State plans approved under part A in

14 such preceding fiscal year (as determined on the basis of

15 the most recent reliable data available to the Secretary

16 as of the end of the third calendar quarter following the

17 end of such preceding fiscal year), equal to—

18 ‘‘(A) 1 percent, for the activities specified in

19 subparagraphs (A) and (B) of paragraph (1); and

20 ‘‘(B) 2 percent, for the activities specified in

21 subparagraph (C) of paragraph (1).’’.

22 SEC. 9418. REPORTS AND DATA COLLECTION BY THE SEC23 RETARY.

24 (a) ANNUAL REPORT TO CONGRESS.—(1) Section

25 452(a)(10)(A) (42 U.S.C. 652(a)(10)(A)) is amended—
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1 (A) by striking ‘‘this part;’’ and inserting ‘‘this

2 part, including—’’; and

3 (B) by adding at the end the following indented

4 clauses:

5 ‘‘(i) the total amount of child support

6 payments collected as a result of services

7 furnished during such fiscal year to indi8 viduals receiving services under this part;

9 ‘‘(ii) the cost to the States and to the

10 Federal Government of furnishing such

11 services to those individuals; and

12 ‘‘(iii) the number of cases involving

13 families—

14 ‘‘(I) who became ineligible for as15 sistance under a State plan approved

16 under part A during a month in such

17 fiscal year; and

18 ‘‘(II) with respect to whom a

19 child support payment was received in

20 the same month;’’.

21 (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C))

22 is amended—

23 (A) in the matter preceding clause (i)—

24 (i) by striking ‘‘with the data required

25 under each clause being separately stated for
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1 cases’’ and inserting ‘‘separately stated for (1)

2 cases’’;

3 (ii) by striking ‘‘cases where the child was

4 formerly receiving’’ and inserting ‘‘or formerly

5 received’’;

6 (iii) by inserting ‘‘or 1912’’ after

7 ‘‘471(a)(17)’’; and

8 (iv) by inserting ‘‘(2)’’ before ‘‘all other’’;

9 (B) in each of clauses (i) and (ii), by striking

10 ‘‘, and the total amount of such obligations’’;

11 (C) in clause (iii), by striking ‘‘described in’’

12 and all that follows and inserting ‘‘in which support

13 was collected during the fiscal year;’’;

14 (D) by striking clause (iv); and

15 (E) by redesignating clause (v) as clause (vii),

16 and inserting after clause (iii) the following new

17 clauses:

18 ‘‘(iv) the total amount of support col19 lected during such fiscal year and distrib20 uted as current support;

21 ‘‘(v) the total amount of support col22 lected during such fiscal year and distrib23 uted as arrearages;

24 ‘‘(vi) the total amount of support due

25 and unpaid for all fiscal years; and’’.
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1 (3) Section 452(a)(10)(G) (42 U.S.C. 652(a)(10)(G))

2 is amended by striking ‘‘on the use of Federal courts

3 and’’.

4 (4) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is

5 amended by striking all that follows subparagraph (I).

6 (b) DATA COLLECTION AND REPORTING.—Section

7 469 (42 U.S.C. 669) is amended—

8 (1) by striking subsections (a) and (b) and in9 serting the following:

10 ‘‘(a) The Secretary shall collect and maintain, on a

11 fiscal year basis, up-to-date statistics, by State, with re12 spect to services to establish paternity and services to es13 tablish child support obligations, the data specified in sub14 section (b), separately stated, in the case of each such

15 service, with respect to—

16 ‘‘(1) families (or dependent children) receiving

17 assistance under State plans approved under part A

18 (or E); and

19 ‘‘(2) families not receiving such assistance.

20 ‘‘(b) The data referred to in subsection (a) are—

21 ‘‘(1) the number of cases in the caseload of the

22 State agency administering the plan under this part

23 in which such service is needed; and

24 ‘‘(2) the number of such cases in which the

25 service has been provided.’’; and
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1 (2) in subsection (c), by striking ‘‘(a)(2)’’ and

2 inserting ‘‘(b)(2)’’.

3 (c) EFFECTIVE DATE.—The amendments made by

4 this section shall be effective with respect to fiscal year

5 1996 and succeeding fiscal years.

6 CHAPTER 3—LOCATE AND CASE

7 TRACKING

8 SEC. 9421. CENTRAL STATE AND CASE REGISTRY.

9 Section 454A, as added by section 9415(a)(2) of this

10 Act, is amended by adding at the end the following:

11 ‘‘(e) CENTRAL CASE REGISTRY.—(1) IN GEN12 ERAL.—The automated system required under this section

13 shall perform the functions, in accordance with the provi14 sions of this subsection, of a single central registry con15 taining records with respect to each case in which services

16 are being provided by the State agency (including, on and

17 after October 1, 1998, each order specified in section

18 466(a)(12)), using such standardized data elements (such

19 as names, social security numbers or other uniform identi20 fication numbers, dates of birth, and case identification

21 numbers), and containing such other information (such as

22 information on case status) as the Secretary may require.

23 ‘‘(2) PAYMENT RECORDS.—Each case record in the

24 central registry shall include a record of—
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1 ‘‘(A) the amount of monthly (or other periodic)

2 support owed under the support order, and other

3 amounts due or overdue (including arrears, interest

4 or late payment penalties, and fees);

5 ‘‘(B) the date on which or circumstances under

6 which the support obligation will terminate under

7 such order;

8 ‘‘(C) all child support and related amounts col9 lected (including such amounts as fees, late payment

10 penalties, and interest on arrearages);

11 ‘‘(D) the distribution of such amounts collected;

12 and

13 ‘‘(E) the birth date of the child for whom the

14 child support order is entered.

15 ‘‘(3) UPDATING AND MONITORING.—The State agen16 cy shall promptly establish and maintain, and regularly

17 monitor, case records in the registry required by this sub18 section, on the basis of—

19 ‘‘(A) information on administrative actions and

20 administrative and judicial proceedings and orders

21 relating to paternity and support;

22 ‘‘(B) information obtained from matches with

23 Federal, State, or local data sources;

24 ‘‘(C) information on support collections and dis25 tributions; and
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1 ‘‘(D) any other relevant information.

2 ‘‘(f) DATA MATCHES AND OTHER DISCLOSURES OF

3 INFORMATION.—The automated system required under

4 this section shall have the capacity, and be used by the

5 State agency, to extract data at such times, and in such

6 standardized format or formats, as may be required by

7 the Secretary, and to share and match data with, and re8 ceive data from, other data bases and data matching serv9 ices, in order to obtain (or provide) information necessary

10 to enable the State agency (or Secretary or other State

11 or Federal agencies) to carry out responsibilities under

12 this part. Data matching activities of the State agency

13 shall include at least the following:

14 ‘‘(1) DATA BANK OF CHILD SUPPORT OR15 DERS.—Furnish to the Data Bank of Child Support

16 Orders established under section 453(h) (and update

17 as necessary, with information including notice of

18 expiration of orders) minimal information (to be

19 specified by the Secretary) on each child support

20 case in the central case registry.

21 ‘‘(2) FEDERAL PARENT LOCATOR SERVICE.—

22 Exchange data with the Federal Parent Locator

23 Service for the purposes specified in section 453.

24 ‘‘(3) TEMPORARY EMPLOYMENT ASSISTANCE

25 PROGRAM AND MEDICAID AGENCIES.—Exchange
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1 data with State agencies (of the State and of other

2 States) administering the programs under part A

3 and title XIX, as necessary for the performance of

4 State agency responsibilities under this part and

5 under such programs.

6 ‘‘(4) INTRA- AND INTERSTATE DATA

7 MATCHES.—Exchange data with other agencies of

8 the State, agencies of other States, and interstate

9 information networks, as necessary and appropriate

10 to carry out (or assist other States to carry out) the

11 purposes of this part.’’.

12 SEC. 9422. CENTRALIZED COLLECTION AND DISBURSE13 MENT OF SUPPORT PAYMENTS.

14 (a) STATE PLAN REQUIREMENT.—Section 454 (42

15 U.S.C. 654), as amended by sections 9404(a) and 9414(b)

16 of this Act, is amended—

17 (1) by striking ‘‘and’’ at the end of paragraph

18 (25);

19 (2) by striking the period at the end of para20 graph (26) and inserting ‘‘; and’’; and

21 (3) by adding after paragraph (26) the follow22 ing new paragraph:

23 ‘‘(27) provide that the State agency, on and

24 after October 1, 1998—
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1 ‘‘(A) will operate a centralized, automated unit

2 for the collection and disbursement of child support

3 under orders being enforced under this part, in ac4 cordance with section 454B; and

5 ‘‘(B) will have sufficient State staff (consisting

6 of State employees), and (at State option) contrac7 tors reporting directly to the State agency to mon8 itor and enforce support collections through such

9 centralized unit, including carrying out the auto10 mated data processing responsibilities specified in

11 section 454A(g) and to impose, as appropriate in

12 particular cases, the administrative enforcement

13 remedies specified in section 466(c)(1).’’.

14 (b) ESTABLISHMENT OF CENTRALIZED COLLECTION

15 UNIT.—Part D of title IV (42 U.S.C. 651–669) is amend16 ed by adding after section 454A the following new section:

17 ‘‘CENTRALIZED COLLECTION AND DISBURSEMENT OF

18 SUPPORT PAYMENTS

19 ‘‘SEC. 454B. (a) IN GENERAL.—In order to meet the

20 requirement of section 454(27), the State agency must op21 erate a single centralized, automated unit for the collection

22 and disbursement of support payments, coordinated with

23 the automated data system required under section 454A,

24 in accordance with the provisions of this section, which

25 shall be—
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1 ‘‘(1) operated directly by the State agency (or

2 by two or more State agencies under a regional co3 operative agreement), or by a single contractor re4 sponsible directly to the State agency; and

5 ‘‘(2) used for the collection and disbursement

6 (including interstate collection and disbursement) of

7 payments under support orders in all cases being en8 forced by the State pursuant to section 454(4).

9 ‘‘(b) REQUIRED PROCEDURES.—The centralized col10 lections unit shall use automated procedures, electronic

11 processes, and computer-driven technology to the maxi12 mum extent feasible, efficient, and economical, for the col13 lection and disbursement of support payments, including

14 procedures—

15 ‘‘(1) for receipt of payments from parents, em16 ployers, and other States, and for disbursements to

17 custodial parents and other obligees, the State agen18 cy, and the State agencies of other States;

19 ‘‘(2) for accurate identification of payments;

20 ‘‘(3) to ensure prompt disbursement of the cus21 todial parent’s share of any payment; and

22 ‘‘(4) to furnish to either parent, upon request,

23 timely information on the current status of support

24 payments.’’.
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1 (c) USE OF AUTOMATED SYSTEM.—Section 454A, as

2 added by section 9415(a)(2) of this Act and as amended

3 by section 9421 of this Act, is amended by adding at the

4 end the following new subsection:

5 ‘‘(g) CENTRALIZED COLLECTION AND DISTRIBUTION

6 OF SUPPORT PAYMENTS.—The automated system re7 quired under this section shall be used, to the maximum

8 extent feasible, to assist and facilitate collections and dis9 bursement of support payments through the centralized

10 collections unit operated pursuant to section 454B,

11 through the performance of functions including at a mini12 mum—

13 ‘‘(1) generation of orders and notices to em14 ployers (and other debtors) for the withholding of

15 wages (and other income)—

16 ‘‘(A) within two working days after receipt

17 (from the directory of New Hires established

18 under section 453(i) or any other source) of no19 tice of and the income source subject to such

20 withholding; and

21 ‘‘(B) using uniform formats directed by

22 the Secretary;

23 ‘‘(2) ongoing monitoring to promptly identify

24 failures to make timely payment; and
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1 ‘‘(3) automatic use of enforcement mechanisms

2 (including mechanisms authorized pursuant to sec3 tion 466(c)) where payments are not timely made.’’.

4 (d) EFFECTIVE DATE.—The amendments made by

5 this section shall become effective on October 1, 1998.

6 SEC. 9423. AMENDMENTS CONCERNING INCOME WITH7 HOLDING.

8 (a) MANDATORY INCOME WITHHOLDING.—(1) Sec9 tion 466(a)(1) (42 U.S.C. 666(a)(1)) is amended to read

10 as follows:

11 ‘‘(1) INCOME WITHHOLDING.—(A) UNDER OR12 DERS ENFORCED UNDER THE STATE PLAN.—Proce13 dures described in subsection (b) for the withholding

14 from income of amounts payable as support in cases

15 subject to enforcement under the State plan.

16 ‘‘(B) UNDER CERTAIN ORDERS PREDATING

17 CHANGE IN REQUIREMENT.—Procedures under

18 which all child support orders issued (or modified)

19 before October 1, 1996, and which are not otherwise

20 subject to withholding under subsection (b), shall be21 come subject to withholding from wages as provided

22 in subsection (b) if arrearages occur, without the

23 need for a judicial or administrative hearing.’’.

24 (2) Section 466(a)(8) (42 U.S.C. 666(a)(8)) is re25 pealed.
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1 (3) Section 466(b) (42 U.S.C. 666(b)) is amended—

2 (A) in the matter preceding paragraph (1), by

3 striking ‘‘subsection (a)(1)’’ and inserting ‘‘sub4 section (a)(1)(A)’’;

5 (B) in paragraph (5), by striking all that fol6 lows ‘‘administered by’’ and inserting ‘‘the State

7 through the centralized collections unit established

8 pursuant to section 454B, in accordance with the re9 quirements of such section 454B.’’;

10 (C) in paragraph (6)(A)(i)—

11 (i) by inserting ‘‘, in accordance with time12 tables established by the Secretary,’’ after

13 ‘‘must be required’’; and

14 (ii) by striking ‘‘to the appropriate agency’’

15 and all that follows and inserting ‘‘to the State

16 centralized collections unit within 5 working

17 days after the date such amount would (but for

18 this subsection) have been paid or credited to

19 the employee, for distribution in accordance

20 with this part.’’;

21 (D) in paragraph (6)(A)(ii), by inserting ‘‘be in

22 a standard format prescribed by the Secretary, and’’

23 after ‘‘shall’’; and

24 (E) in paragraph (6)(D)—
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1 (i) by striking ‘‘employer who discharges’’

2 and inserting ‘‘employer who—(A) discharges’’;

3 (ii) by relocating subparagraph (A), as des4 ignated, as an indented subparagraph after and

5 below the introductory matter;

6 (iii) by striking the period at the end; and

7 (iv) by adding after and below subpara8 graph (A) the following new subparagraph:

9 ‘‘(B) fails to withhold support from wages,

10 or to pay such amounts to the State centralized

11 collections unit in accordance with this sub12 section.’’.

13 (b) CONFORMING AMENDMENT.—Section 466(c) (42

14 U.S.C. 666(c)) is repealed.

15 (c) DEFINITION OF TERMS.—The Secretary shall

16 promulgate regulations providing definitions, for purposes

17 of part D of title IV of the Social Security Act, for the

18 term ‘‘income’’ and for such other terms relating to in19 come withholding under section 466(b) of such Act as the

20 Secretary may find it necessary or advisable to define.

21 SEC. 9424. LOCATOR INFORMATION FROM INTERSTATE

22 NETWORKS.

23 Section 466(a) (42 U.S.C. 666(a)), as amended by

24 section 9423(a)(2) of this Act, is amended by inserting

25 after paragraph (7) the following:
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1 ‘‘(8) LOCATOR INFORMATION FROM INTER2 STATE NETWORKS.—Procedures ensuring that the

3 State will neither provide funding for, nor use for

4 any purpose (including any purpose unrelated to the

5 purposes of this part), any automated interstate net6 work or system used to locate individuals—

7 ‘‘(A) for purposes relating to the use of

8 motor vehicles; or

9 ‘‘(B) providing information for law en10 forcement purposes (where child support en11 forcement agencies are otherwise allowed access

12 by State and Federal law),

13 unless all Federal and State agencies administering

14 programs under this part (including the entities es15 tablished under section 453) have access to informa16 tion in such system or network to the same extent

17 as any other user of such system or network.’’.

18 SEC. 9425. EXPANDED FEDERAL PARENT LOCATOR SERV19 ICE.

20 (a) EXPANDED AUTHORITY TO LOCATE INDIVIDUALS

21 AND ASSETS.—Section 453 (42 U.S.C. 653) is amended—

22 (1) in subsection (a), by striking all that follows

23 ‘‘subsection (c))’’ and inserting the following:
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1 ‘‘, for the purpose of establishing parentage, establishing,

2 setting the amount of, modifying, or enforcing child sup3 port obligations—

4 ‘‘(1) information on, or facilitating the discov5 ery of, the location of any individual—

6 ‘‘(A) who is under an obligation to pay

7 child support;

8 ‘‘(B) against whom such an obligation is

9 sought; or

10 ‘‘(C) to whom such an obligation is owed,

11 including such individual’s social security num12 ber (or numbers), most recent residential ad13 dress, and the name, address, and employer

14 identification number of such individual’s em15 ployer; and

16 ‘‘(2) information on the individual’s wages (or

17 other income) from, and benefits of, employment (in18 cluding rights to or enrollment in group health care

19 coverage); and

20 ‘‘(3) information on the type, status, location,

21 and amount of any assets of, or debts owed by or

22 to, any such individual.’’; and

23 (2) in subsection (b)—

24 (A) in the matter preceding paragraph (1),

25 by striking ‘‘social security’’ and all that follows
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1 through ‘‘absent parent’’ and inserting ‘‘infor2 mation specified in subsection (a)’’; and

3 (B) in paragraph (2), by inserting before

4 the period ‘‘, or from any consumer reporting

5 agency (as defined in section 603(f) of the Fair

6 Credit Reporting Act (15 U.S.C. 1681a(f))’’;

7 (3) in subsection (e)(1), by inserting before the

8 period ‘‘, or by consumer reporting agencies’’.

9 (b) REIMBURSEMENT FOR DATA FROM FEDERAL

10 AGENCIES.—Section 453(e)(2) (42 U.S.C. 653(e)(2)) is

11 amended in the fourth sentence by inserting before the

12 period ‘‘in an amount which the Secretary determines to

13 be reasonable payment for the data exchange (which

14 amount shall not include payment for the costs of obtain15 ing, compiling, or maintaining the data)’’.

16 (c) ACCESS TO CONSUMER REPORTS UNDER FAIR

17 CREDIT REPORTING ACT.—(1) Section 608 of the Fair

18 Credit Reporting Act (15 U.S.C. 1681f) is amended—

19 (A) by striking ‘‘, limited to’’ and inserting ‘‘to

20 a governmental agency (including the entire

21 consumer report, in the case of a Federal, State, or

22 local agency administering a program under part D

23 of title IV of the Social Security Act, and limited

24 to’’; and
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1 (B) by striking ‘‘employment, to a govern2 mental agency’’ and inserting ‘‘employment, in the

3 case of any other governmental agency)’’.

4 (2) REIMBURSEMENT FOR REPORTS BY STATE

5 AGENCIES AND CREDIT BUREAUS.—Section 453 (42

6 U.S.C. 653) is amended by adding at the end the following

7 new subsection:

8 ‘‘(g) The Secretary is authorized to reimburse costs

9 to State agencies and consumer credit reporting agencies

10 the costs incurred by such entities in furnishing informa11 tion requested by the Secretary pursuant to this section

12 in an amount which the Secretary determines to be rea13 sonable payment for the data exchange (which amount

14 shall not include payment for the costs of obtaining, com15 piling, or maintaining the data).’’.

16 (d) DISCLOSURE OF TAX RETURN INFORMATION.—

17 (1) Section 6103(1)(6)(A)(ii) of the Internal Revenue

18 Code of 1986 is amended by striking ‘‘, but only if’’ and

19 all that follows and inserting a period.

20 (2) Section 6103(1)(8)(A) of the Internal Revenue

21 Code of 1986 is amended by inserting ‘‘Federal,’’ before

22 ‘‘State or local’’.

23 (e) TECHNICAL AMENDMENTS.—

24 (1) Sections 452(a)(9), 453(a), 453(b), 463(a),

25 and 463(e) (42 U.S.C. 652(a)(9), 653(a), 653(b),
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1 663(a), and 663(e)) are each amended by inserting

2 ‘‘Federal’’ before ‘‘Parent’’ each place it appears.

3 (2) Section 453 (42 U.S.C. 653) is amended in

4 the heading by adding ‘‘FEDERAL’’ before ‘‘PAR5 ENT’’.

6 (f) NEW COMPONENTS.—Section 453 (42 U.S.C.

7 653), as amended by subsection (c)(2) of this section, is

8 amended by adding at the end the following:

9 ‘‘(h) DATA BANK OF CHILD SUPPORT ORDERS.—

10 ‘‘(1) IN GENERAL.—Not later than October 1,

11 1998, In order to assist States in administering

12 their State plans under this part and parts A, F,

13 and G, and for the other purposes specified in this

14 section, the Secretary shall establish and maintain in

15 the Federal Parent Locator Service an automated

16 registry to be known as the Data Bank of Child

17 Support Orders, which shall contain abstracts of

18 child support orders and other information described

19 in paragraph (2) on each case in each State central

20 case registry maintained pursuant to section

21 454A(e), as furnished (and regularly updated), pur22 suant to section 454A(f), by State agencies admin23 istering programs under this part.

24 ‘‘(2) CASE INFORMATION.—The information re25 ferred to in paragraph (1), as specified by the Sec-
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1 retary, shall include sufficient information (including

2 names, social security numbers or other uniform

3 identification numbers, and State case identification

4 numbers) to identify the individuals who owe or are

5 owed support (or with respect to or on behalf of

6 whom support obligations are sought to be estab7 lished), and the State or States which have estab8 lished or modified, or are enforcing or seeking to es9 tablish, such an order.

10 ‘‘(i) DIRECTORY OF NEW HIRES.—

11 ‘‘(1) IN GENERAL.—Not later than October 1,

12 1998, In order to assist States in administering

13 their State plans under this part and parts A, F,

14 and G, and for the other purposes specified in this

15 section, the Secretary shall establish and maintain in

16 the Federal Parent Locator Service an automated

17 directory to be known as the directory of New Hires,

18 containing—

19 ‘‘(A) information supplied by employers on

20 each newly hired individual, in accordance with

21 paragraph (2); and

22 ‘‘(B) information supplied by State agen23 cies administering State unemployment com24 pensation laws, in accordance with paragraph

25 (3).
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1 ‘‘(2) EMPLOYER INFORMATION.—

2 ‘‘(A) INFORMATION REQUIRED.—Subject

3 to subparagraph (D), each employer shall fur4 nish to the Secretary, for inclusion in the direc5 tory established under this subsection, not later

6 than 10 days after the date (on or after Octo7 ber 1, 1998) on which the employer hires a new

8 employee (as defined in subparagraph (C)), a

9 report containing the name, date of birth, and

10 social security number of such employee, and

11 the employer identification number of the em12 ployer.

13 ‘‘(B) REPORTING METHOD AND FOR14 MAT.—The Secretary shall provide for trans15 mission of the reports required under subpara16 graph (A) using formats and methods which

17 minimize the burden on employers, which shall

18 include—

19 ‘‘(i) automated or electronic trans20 mission of such reports;

21 ‘‘(ii) transmission by regular mail;

22 and

23 ‘‘(iii) transmission of a copy of the

24 form required for purposes of compliance
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1 with section 3402 of the Internal Revenue

2 Code of 1986.

3 ‘‘(C) EMPLOYEE DEFINED.—For purposes

4 of this paragraph, the term ‘employee’ means

5 any individual subject to the requirement of

6 section 3402(f)(2) of the Internal Revenue Code

7 of 1986.

8 ‘‘(D) PAPERWORK REDUCTION REQUIRE9 MENT.—As required by the information re10 sources management policies published by the

11 Director of the Office of Management and

12 Budget pursuant to section 3504(b)(1) of title

13 44, United States Code, the Secretary, in order

14 to minimize the cost and reporting burden on

15 employers, shall not require reporting pursuant

16 to this paragraph if an alternative reporting

17 mechanism can be developed that either relies

18 on existing Federal or State reporting or en19 ables the Secretary to collect the needed infor20 mation in a more cost-effective and equally ex21 peditious manner, taking into account the re22 porting costs on employers.

23 ‘‘(E) CIVIL MONEY PENALTY ON NON24 COMPLYING EMPLOYERS.—(i) Any employer

25 that fails to make a timely report in accordance
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1 with this paragraph with respect to an individ2 ual shall be subject to a civil money penalty, for

3 each calendar year in which the failure occurs,

4 of the lesser of $500 or 1 percent of the wages

5 or other compensation paid by such employer to

6 such individual during such calendar year.

7 ‘‘(ii) Subject to clause (iii), the provisions

8 of section 1128A (other than subsections (a)

9 and (b) thereof) shall apply to a civil money

10 penalty under clause (i) in the same manner as

11 they apply to a civil money penalty or proceed12 ing under section 1128A(a).

13 ‘‘(iii) Any employer with respect to whom

14 a penalty under this subparagraph is upheld

15 after an administrative hearing shall be liable to

16 pay all costs of the Secretary with respect to

17 such hearing.

18 ‘‘(3) EMPLOYMENT SECURITY INFORMATION.—

19 ‘‘(A) REPORTING REQUIREMENT.—Each

20 State agency administering a State unemploy21 ment compensation law approved by the Sec22 retary of Labor under the Federal Unemploy23 ment Tax Act shall furnish to the Secretary of

24 Health and Human Services extracts of the re25 ports to the Secretary of Labor concerning the
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1 wages and unemployment compensation paid to

2 individuals required under section 303(a)(6), in

3 accordance with subparagraph (B).

4 ‘‘(B) MANNER OF COMPLIANCE.—The ex5 tracts required under subparagraph (A) shall be

6 furnished to the Secretary of Health and

7 Human Services on a quarterly basis, with re8 spect to calendar quarters beginning on and

9 after October 1, 1996, by such dates, in such

10 format, and containing such information as re11 quired by that Secretary in regulations.

12 ‘‘(j) DATA MATCHES AND OTHER DISCLOSURES.—

13 ‘‘(1) VERIFICATION BY SOCIAL SECURITY AD14 MINISTRATION.—(A) The Secretary shall transmit

15 data on individuals and employers maintained under

16 this section to the Social Security Administration to

17 the extent necessary for verification in accordance

18 with subparagraph (B).

19 ‘‘(B) The Social Security Administration shall

20 verify the accuracy of, correct or supply to the ex21 tent necessary and feasible, and report to the Sec22 retary, the following information in data supplied by

23 the Secretary pursuant to subparagraph (A):

24 ‘‘(i) the name, social security number, and

25 birth date of each individual; and
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1 ‘‘(ii) the employer identification number of

2 each employer.

3 ‘‘(2) CHILD SUPPORT LOCATOR MATCHES.—For

4 the purpose of locating individuals for purposes of

5 paternity establishment and establishment and en6 forcement of child support, the Secretary shall—

7 ‘‘(A) match data in the directory of New

8 Hires against the child support order abstracts

9 in the Data Bank of Child Support Orders not

10 less often than every 2 working days; and

11 ‘‘(B) report information obtained from

12 such a match to concerned State agencies oper13 ating programs under this part not later than

14 2 working days after such match.

15 ‘‘(3) DATA MATCHES AND DISCLOSURES OF

16 DATA IN ALL REGISTRIES FOR TITLE IV PROGRAM

17 PURPOSES.—The Secretary shall—

18 ‘‘(A) perform matches of data in each com19 ponent of the Federal Parent Locator Service

20 maintained under this section against data in

21 each other such component (other than the

22 matches required pursuant to paragraph (1)),

23 and report information resulting from such

24 matches to State agencies operating programs

25 under this part and parts A, F, and G; and
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1 ‘‘(B) disclose data in such registries to

2 such State agencies,

3 to the extent, and with the frequency, that the Sec4 retary determines to be effective in assisting such

5 States to carry out their responsibilities under such

6 programs.

7 ‘‘(k) FEES.—

8 ‘‘(1) FOR SSA VERIFICATION.—The Secretary

9 shall reimburse the Commissioner of Social Security,

10 at a rate negotiated between the Secretary and the

11 Commissioner, the costs incurred by the Commis12 sioner in performing the verification services speci13 fied in subsection (j).

14 ‘‘(2) FOR INFORMATION FROM SESAS.—The

15 Secretary shall reimburse costs incurred by State

16 employment security agencies in furnishing data as

17 required by subsection (j)(3), at rates which the Sec18 retary determines to be reasonable (which rates shall

19 not include payment for the costs of obtaining, com20 piling, or maintaining such data).

21 ‘‘(3) FOR INFORMATION FURNISHED TO STATE

22 AND FEDERAL AGENCIES.—State and Federal agen23 cies receiving data or information from the Secretary

24 pursuant to this section shall reimburse the costs in25 curred by the Secretary in furnishing such data or
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1 information, at rates which the Secretary determines

2 to be reasonable (which rates shall include payment

3 for the costs of obtaining, verifying, maintaining,

4 and matching such data or information).

5 ‘‘(l) RESTRICTION ON DISCLOSURE AND USE.—Data

6 in the Federal Parent Locator Service, and information

7 resulting from matches using such data, shall not be used

8 or disclosed except as specifically provided in this section.

9 ‘‘(m) RETENTION OF DATA.—Data in the Federal

10 Parent Locator Service, and data resulting from matches

11 performed pursuant to this section, shall be retained for

12 such period (determined by the Secretary) as appropriate

13 for the data uses specified in this section.

14 ‘‘(n) INFORMATION INTEGRITY AND SECURITY.—The

15 Secretary shall establish and implement safeguards with

16 respect to the entities established under this section de17 signed to—

18 ‘‘(1) ensure the accuracy and completeness of

19 information in the Federal Parent Locator Service;

20 and

21 ‘‘(2) restrict access to confidential information

22 in the Federal Parent Locator Service to authorized

23 persons, and restrict use of such information to au24 thorized purposes.
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1 ‘‘(o) LIMIT ON LIABILITY.—The Secretary shall not

2 be liable to either a State or an individual for inaccurate

3 information provided to a component of the Federal Par4 ent Locator Service section and disclosed by the Secretary

5 in accordance with this section.’’.

6 (g) CONFORMING AMENDMENTS.—

7 (1) TO PART D OF TITLE IV OF THE SOCIAL SE8 CURITY ACT.—Section 454(8)(B) (42 U.S.C.

9 654(8)(B)) is amended to read as follows:

10 ‘‘(B) the Federal Parent Locator Service

11 established under section 453;’’.

12 (2) TO FEDERAL UNEMPLOYMENT TAX ACT.—

13 Section 3304(16) of the Internal Revenue Code of

14 1986 is amended—

15 (A) by striking ‘‘Secretary of Health, Edu16 cation, and Welfare’’ each place such term ap17 pears and inserting ‘‘Secretary of Health and

18 Human Services’’;

19 (B) in subparagraph (B), by striking

20 ‘‘such information’’ and all that follows and in21 serting ‘‘information furnished under subpara22 graph (A) or (B) is used only for the purposes

23 authorized under such subparagraph;’’;

24 (C) by striking ‘‘and’’ at the end of sub25 paragraph (A);
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1 (D) by redesignating subparagraph (B) as

2 subparagraph (C); and

3 (E) by inserting after subparagraph (A)

4 the following new subparagraph:

5 ‘‘(B) wage and unemployment compensa6 tion information contained in the records of

7 such agency shall be furnished to the Secretary

8 of Health and Human Services (in accordance

9 with regulations promulgated by such Sec10 retary) as necessary for the purposes of the di11 rectory of New Hires established under section

12 453(i) of the Social Security Act, and’’.

13 (3) TO STATE GRANT PROGRAM UNDER TITLE

14 III OF THE SOCIAL SECURITY ACT.—Section 303(a)

15 (42 U.S.C. 503(a)) is amended—

16 (A) by striking ‘‘and’’ at the end of para17 graph (8);

18 (B) by striking the period at the end of

19 paragraph (9) and inserting ‘‘; and’’; and

20 (C) by adding after paragraph (9) the fol21 lowing new paragraph:

22 ‘‘(10) The making of quarterly electronic re23 ports, at such dates, in such format, and containing

24 such information, as required by the Secretary of

25 Health and Human Services under section 453(i)(3),
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1 and compliance with such provisions as such Sec2 retary may find necessary to ensure the correctness

3 and verification of such reports.’’.

4 SEC. 9426. USE OF SOCIAL SECURITY NUMBERS.

5 (a) STATE LAW REQUIREMENT.—Section 466(a) (42

6 U.S.C. 666(a)), as amended by section 9401(a) of this

7 Act, is amended by inserting after paragraph (12) the fol8 lowing:

9 ‘‘(13) SOCIAL SECURITY NUMBERS RE10 QUIRED.—Procedures requiring the recording of so11 cial security numbers—

12 ‘‘(A) of both parties on marriage licenses

13 and divorce decrees; and

14 ‘‘(B) of both parents, on birth records and

15 child support and paternity orders.’’.

16 (b) CLARIFICATION OF FEDERAL POLICY.—Section

17 205(c)(2)(C)(ii) (42 U.S.C. 405(c)(2)(C)(ii)) is amended

18 by striking the third sentence and inserting ‘‘This clause

19 shall not be considered to authorize disclosure of such

20 numbers except as provided in the preceding sentence.’’.
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1 CHAPTER 4—STREAMLINING AND

2 UNIFORMITY OF PROCEDURES

3 SEC. 9431. ADOPTION OF UNIFORM STATE LAWS.

4 Section 466(a) (42 U.S.C. 666(a)), as amended by

5 sections 9401(a) and 9426(a) of this Act, is amended in6 serting after paragraph (13) the following:

7 ‘‘(14) INTERSTATE ENFORCEMENT.—(A) ADOP8 TION OF UIFSA.—Procedures under which the State

9 adopts in its entirety (with the modifications and ad10 ditions specified in this paragraph) not later than

11 January 1, 1997, and uses on and after such date,

12 the Uniform Interstate Family Support Act, as ap13 proved by the National Conference of Commissioners

14 on Uniform State Laws in August, 1992.

15 ‘‘(B) EXPANDED APPLICATION OF UIFSA.—The

16 State law adopted pursuant to subparagraph (A)

17 shall be applied to any case—

18 ‘‘(i) involving an order established or modi19 fied in one State and for which a subsequent

20 modification is sought in another State; or

21 ‘‘(ii) in which interstate activity is required

22 to enforce an order.

23 ‘‘(C) JURISDICTION TO MODIFY ORDERS.—The

24 State law adopted pursuant to subparagraph (A) of

25 this paragraph shall contain the following provision
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1 in lieu of section 611(a)(1) of the Uniform Inter2 state Family Support Act described in such subpara3 graph (A):

4 ‘‘ ‘(1) the following requirements are met:

5 ‘‘ ‘(i) the child, the individual obligee, and

6 the obligor—

7 ‘‘ ‘(I) do not reside in the issuing

8 State; and

9 ‘‘ ‘(II) either reside in this State or

10 are subject to the jurisdiction of this State

11 pursuant to section 201; and

12 ‘‘ ‘(ii) (in any case where another State is

13 exercising or seeks to exercise jurisdiction to

14 modify the order) the conditions of section 204

15 are met to the same extent as required for pro16 ceedings to establish orders; or’.

17 ‘‘(D) SERVICE OF PROCESS.—The State law

18 adopted pursuant to subparagraph (A) shall recog19 nize as valid, for purposes of any proceeding subject

20 to such State law, service of process upon persons

21 in the State (and proof of such service) by any

22 means acceptable in another State which is the initi23 ating or responding State in such proceeding.

24 ‘‘(E) COOPERATION BY EMPLOYERS.—The

25 State law adopted pursuant to subparagraph (A)
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1 shall provide for the use of procedures (including

2 sanctions for noncompliance) under which all entities

3 in the State (including for-profit, nonprofit, and gov4 ernmental employers) are required to provide

5 promptly, in response to a request by the State

6 agency of that or any other State administering a

7 program under this part, information on the employ8 ment, compensation, and benefits of any individual

9 employed by such entity as an employee or contrac10 tor.’’.

11 SEC. 9432. IMPROVEMENTS TO FULL FAITH AND CREDIT

12 FOR CHILD SUPPORT ORDERS.

13 Section 1738B of title 28, United States Code, is

14 amended—

15 (1) in subsection (a)(2), by striking ‘‘subsection

16 (e)’’ and inserting ‘‘subsections (e), (f), and (i)’’;

17 (2) in subsection (b), by inserting after the 2nd

18 undesignated paragraph the following:

19 ‘‘ ‘child’s home State’ means the State in which

20 a child lived with a parent or a person acting as par21 ent for at least six consecutive months immediately

22 preceding the time of filing of a petition or com23 parable pleading for support and, if a child is less

24 than six months old, the State in which the child

25 lived from birth with any of them. A period of tem-
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1 porary absence of any of them is counted as part of

2 the six-month period.’’;

3 (3) in subsection (c), by inserting ‘‘by a court

4 of a State’’ before ‘‘is made’’;

5 (4) in subsection (c)(1), by inserting ‘‘and sub6 sections (e), (f), and (g)’’ after ‘‘located’’;

7 (5) in subsection (d)—

8 (A) by inserting ‘‘individual’’ before ‘‘con9 testant’’; and

10 (B) by striking ‘‘subsection (e)’’ and in11 serting ‘‘subsections (e) and (f)’’;

12 (6) in subsection (e), by striking ‘‘make a modi13 fication of a child support order with respect to a

14 child that is made’’ and inserting ‘‘modify a child

15 support order issued’’;

16 (7) in subsection (e)(1), by inserting ‘‘pursuant

17 to subsection (i)’’ before the semicolon;

18 (8) in subsection (e)(2)—

19 (A) by inserting ‘‘individual’’ before ‘‘con20 testant’’ each place such term appears; and

21 (B) by striking ‘‘to that court’s making the

22 modification and assuming’’ and inserting ‘‘with

23 the State of continuing, exclusive jurisdiction

24 for a court of another State to modify the order

25 and assume’’;
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1 (9) by redesignating subsections (f) and (g) as

2 subsections (g) and (h), respectively;

3 (10) by inserting after subsection (e) the follow4 ing:

5 ‘‘(f) RECOGNITION OF CHILD SUPPORT ORDERS.—

6 If one or more child support orders have been issued in

7 this or another State with regard to an obligor and a child,

8 a court shall apply the following rules in determining

9 which order to recognize for purposes of continuing, exclu10 sive jurisdiction and enforcement:

11 ‘‘(1) If only one court has issued a child sup12 port order, the order of that court must be recog13 nized.

14 ‘‘(2) If two or more courts have issued child

15 support orders for the same obligor and child, and

16 only one of the courts would have continuing, exclu17 sive jurisdiction under this section, the order of that

18 court must be recognized.

19 ‘‘(3) If two or more courts have issued child

20 support orders for the same obligor and child, and

21 only one of the courts would have continuing, exclu22 sive jurisdiction under this section, an order issued

23 by a court in the current home State of the child

24 must be recognized, but if an order has not been is-
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1 sued in the current home State of the child, the

2 order most recently issued must be recognized.

3 ‘‘(4) If two or more courts have issued child

4 support orders for the same obligor and child, and

5 none of the courts would have continuing, exclusive

6 jurisdiction under this section, a court may issue a

7 child support order, which must be recognized.

8 ‘‘(5) The court that has issued an order recog9 nized under this subsection is the court having con10 tinuing, exclusive jurisdiction.’’;

11 (11) in subsection (g) (as so redesignated)—

12 (A) by striking ‘‘PRIOR’’ and inserting

13 ‘‘MODIFIED’’; and

14 (B) by striking ‘‘subsection (e)’’ and in15 serting ‘‘subsections (e) and (f)’’;

16 (12) in subsection (h) (as so redesignated)—

17 (A) in paragraph (2), by inserting ‘‘includ18 ing the duration of current payments and other

19 obligations of support’’ before the comma; and

20 (B) in paragraph (3), by inserting ‘‘arrears

21 under’’ after ‘‘enforce’’; and

22 (13) by adding at the end the following:

23 ‘‘(i) REGISTRATION FOR MODIFICATION.—If there is

24 no individual contestant or child residing in the issuing

25 State, the party or support enforcement agency seeking
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1 to modify, or to modify and enforce, a child support order

2 issued in another State shall register that order in a State

3 with jurisdiction over the nonmovant for the purpose of

4 modification.’’.

5 SEC. 9433. STATE LAWS PROVIDING EXPEDITED PROCE6 DURES.

7 (a) STATE LAW REQUIREMENTS.—Section 466 (42

8 U.S.C. 666) is amended—

9 (1) in subsection (a)(2), in the first sentence, to

10 read as follows: ‘‘Expedited administrative and judi11 cial procedures (including the procedures specified in

12 subsection (c)) for establishing paternity and for es13 tablishing, modifying, and enforcing support obliga14 tions.’’; and

15 (2) by adding after subsection (b) the following

16 new subsection:

17 ‘‘(c) EXPEDITED PROCEDURES.—The procedures

18 specified in this subsection are the following:

19 ‘‘(1) ADMINISTRATIVE ACTION BY STATE AGEN20 CY.—Procedures which give the State agency the au21 thority (and recognize and enforce the authority of

22 State agencies of other States), without the necessity

23 of obtaining an order from any other judicial or ad24 ministrative tribunal (but subject to due process

25 safeguards, including (as appropriate) requirements
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1 for notice, opportunity to contest the action, and op2 portunity for an appeal on the record to an inde3 pendent administrative or judicial tribunal), to take

4 the following actions relating to establishment or en5 forcement of orders:

6 ‘‘(A) GENETIC TESTING.—To order genetic

7 testing for the purpose of paternity establish8 ment as provided in section 466(a)(5).

9 ‘‘(B) DEFAULT ORDERS.—To enter a de10 fault order, upon a showing of service of proc11 ess and any additional showing required by

12 State law—

13 ‘‘(i) establishing paternity, in the case

14 of any putative father who refuses to sub15 mit to genetic testing; and

16 ‘‘(ii) establishing or modifying a sup17 port obligation, in the case of a parent (or

18 other obligor or obligee) who fails to re19 spond to notice to appear at a proceeding

20 for such purpose.

21 ‘‘(C) SUBPOENAS.—To subpoena any fi22 nancial or other information needed to estab23 lish, modify, or enforce an order, and to sanc24 tion failure to respond to any such subpoena.
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1 ‘‘(D) ACCESS TO PERSONAL AND FINAN2 CIAL INFORMATION.—To obtain access, subject

3 to safeguards on privacy and information secu4 rity, to the following records (including auto5 mated access, in the case of records maintained

6 in automated data bases):

7 ‘‘(i) records of other State and local

8 government agencies, including—

9 ‘‘(I) vital statistics (including

10 records of marriage, birth, and di11 vorce);

12 ‘‘(II) State and local tax and rev13 enue records (including information

14 on residence address, employer, in15 come and assets);

16 ‘‘(III) records concerning real

17 and titled personal property;

18 ‘‘(IV) records of occupational and

19 professional licenses, and records con20 cerning the ownership and control of

21 corporations, partnerships, and other

22 business entities;

23 ‘‘(V) employment security

24 records;
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1 ‘‘(VI) records of agencies admin2 istering public assistance programs;

3 ‘‘(VII) records of the motor vehi4 cle department; and

5 ‘‘(VIII) corrections records; and

6 ‘‘(ii) certain records held by private

7 entities, including—

8 ‘‘(I) customer records of public

9 utilities and cable television compa10 nies; and

11 ‘‘(II) information (including in12 formation on assets and liabilities) on

13 individuals who owe or are owed sup14 port (or against or with respect to

15 whom a support obligation is sought)

16 held by financial institutions (subject

17 to limitations on liability of such enti18 ties arising from affording such ac19 cess).

20 ‘‘(E) INCOME WITHHOLDING.—To order

21 income withholding in accordance with sub22 section (a)(1) and (b) of section 466.

23 ‘‘(F) CHANGE IN PAYEE.—(In cases where

24 support is subject to an assignment under sec25 tion 403(b)(1)(E)(i), 471(a)(17), or 1912, or to
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1 a requirement to pay through the centralized

2 collections unit under section 454B) upon pro3 viding notice to obligor and obligee, to direct

4 the obligor or other payor to change the payee

5 to the appropriate government entity.

6 ‘‘(G) SECURE ASSETS TO SATISFY ARREAR7 AGES.—For the purpose of securing overdue

8 support—

9 ‘‘(i) to intercept and seize any peri10 odic or lump-sum payment to the obligor

11 by or through a State or local government

12 agency, including—

13 ‘‘(I) unemployment compensa14 tion, workers’ compensation, and

15 other benefits;

16 ‘‘(II) judgments and settlements

17 in cases under the jurisdiction of the

18 State or local government; and

19 ‘‘(III) lottery winnings;

20 ‘‘(ii) to attach and seize assets of the

21 obligor held by financial institutions;

22 ‘‘(iii) to attach public and private re23 tirement funds in appropriate cases, as de24 termined by the Secretary; and
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1 ‘‘(iv) to impose liens in accordance

2 with paragraph (a)(4) and, in appropriate

3 cases, to force sale of property and dis4 tribution of proceeds.

5 ‘‘(H) INCREASE MONTHLY PAYMENTS.—

6 For the purpose of securing overdue support, to

7 increase the amount of monthly support pay8 ments to include amounts for arrearages (sub9 ject to such conditions or restrictions as the

10 State may provide).

11 ‘‘(I) SUSPENSION OF DRIVERS’ LI12 CENSES.—To suspend drivers’ licenses of indi13 viduals owing past-due support, in accordance

14 with subsection (a)(16).

15 ‘‘(2) SUBSTANTIVE AND PROCEDURAL RULES.—

16 The expedited procedures required under subsection

17 (a)(2) shall include the following rules and author18 ity, applicable with respect to all proceedings to es19 tablish paternity or to establish, modify, or enforce

20 support orders:

21 ‘‘(A) LOCATOR INFORMATION; PRESUMP22 TIONS CONCERNING NOTICE.—Procedures

23 under which—

24 ‘‘(i) the parties to any paternity or

25 child support proceedings are required
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1 (subject to privacy safeguards) to file with

2 the tribunal before entry of an order, and

3 to update as appropriate, information on

4 location and identity (including Social Se5 curity number, residential and mailing ad6 dresses, telephone number, driver’s license

7 number, and name, address, and telephone

8 number of employer); and

9 ‘‘(ii) in any subsequent child support

10 enforcement action between the same par11 ties, the tribunal shall be authorized, upon

12 sufficient showing that diligent effort has

13 been made to ascertain such party’s cur14 rent location, to deem due process require15 ments for notice and service of process to

16 be met, with respect to such party, by de17 livery to the most recent residential or em18 ployer address so filed pursuant to clause

19 (i).

20 ‘‘(B) STATEWIDE JURISDICTION.—Proce21 dures under which—

22 ‘‘(i) the State agency and any admin23 istrative or judicial tribunal with authority

24 to hear child support and paternity cases

25 exerts statewide jurisdiction over the par-
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1 ties, and orders issued in such cases have

2 statewide effect; and

3 ‘‘(ii) (in the case of a State in which

4 orders in such cases are issued by local ju5 risdictions) a case may be transferred be6 tween jurisdictions in the State without

7 need for any additional filing by the peti8 tioner, or service of process upon the re9 spondent, to retain jurisdiction over the

10 parties.’’.

11 (c) EXCEPTIONS FROM STATE LAW REQUIRE12 MENTS.—Section 466(d) (42 U.S.C. 666(d)) is amend13 ed—

14 (1) by striking ‘‘(d) If’’ and inserting the fol15 lowing:

16 ‘‘(d) EXEMPTIONS FROM REQUIREMENTS.—

17 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

18 if’’; and

19 (2) by adding at the end the following new

20 paragraph:

21 ‘‘(2) NONEXEMPT REQUIREMENTS.—The Sec22 retary shall not grant an exemption from the re23 quirements of—

24 ‘‘(A) subsection (a)(5) (concerning proce25 dures for paternity establishment);
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1 ‘‘(B) subsection (a)(10) (concerning modi2 fication of orders);

3 ‘‘(C) subsection (a)(12) (concerning re4 cording of orders in the central State case reg5 istry);

6 ‘‘(D) subsection (a)(13) (concerning re7 cording of Social Security numbers);

8 ‘‘(E) subsection (a)(14) (concerning inter9 state enforcement); or

10 ‘‘(F) subsection (c) (concerning expedited

11 procedures), other than paragraph (1)(A) there12 of (concerning establishment or modification of

13 support amount).’’.

14 (d) AUTOMATION OF STATE AGENCY FUNCTIONS.—

15 Section 454A, as added by section 9415(a)(2) of this Act

16 and as amended by sections 9421 and 9422(c) of this Act,

17 is amended by adding at the end the following new sub18 section:

19 ‘‘(h) EXPEDITED ADMINISTRATIVE PROCEDURES.—

20 The automated system required under this section shall

21 be used, to the maximum extent feasible, to implement any

22 expedited administrative procedures required under sec23 tion 466(c).’’.
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1 CHAPTER 5—PATERNITY ESTABLISHMENT

2 SEC. 9441. SENSE OF THE CONGRESS.

3 It is the sense of the Congress that social services

4 should be provided in hospitals to women who have become

5 pregnant as a result of rape or incest.

6 SEC. 9442. AVAILABILITY OF PARENTING SOCIAL SERVICES

7 FOR NEW FATHERS.

8 Section 466(a) (42 U.S.C. 666(a)), as amended by

9 sections 9401(a), 9426(a), and 9431 of this Act, is amend10 ed by inserting after paragraph (14) the following:

11 ‘‘(15) Procedures for providing new fathers

12 with positive parenting counseling that stresses the

13 importance of paying child support in a timely man14 ner, in accordance with regulations prescribed by the

15 Secretary.’’.

16 SEC. 9443. COOPERATION REQUIREMENT AND GOOD CAUSE

17 EXCEPTION.

18 (a) IN GENERAL.—Section 454 (42 U.S.C. 654) is

19 amended—

20 (1) by striking ‘‘and’’ at the end of paragraph

21 (23);

22 (2) by striking the period at the end of para23 graph (24) and inserting ‘‘; and’’; and

24 (3) by inserting after paragraph (24) the fol25 lowing:
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1 ‘‘(25) provide that the State agency administer2 ing the plan under this part—

3 ‘‘(A) will make the determination specified

4 under paragraph (4), as to whether an individ5 ual is cooperating with efforts to establish pa6 ternity and secure support (or has good cause

7 not to cooperate with such efforts) for purposes

8 of the requirements of sections 403(b)(1)(E)(i)

9 and 1912;

10 ‘‘(B) will advise individuals, both orally

11 and in writing, of the grounds for good cause

12 exceptions to the requirement to cooperate with

13 such efforts;

14 ‘‘(C) will take the best interests of the

15 child into consideration in making the deter16 mination whether such individual has good

17 cause not to cooperate with such efforts;

18 ‘‘(D)(i) will make the initial determination

19 as to whether an individual is cooperating (or

20 has good cause not to cooperate) with efforts to

21 establish paternity within 10 days after such in22 dividual is referred to such State agency by the

23 State agency administering the program under

24 part A of title XIX;
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1 ‘‘(ii) will make redeterminations as to co2 operation or good cause at appropriate inter3 vals; and

4 ‘‘(iii) will promptly notify the individual,

5 and the State agencies administering such pro6 grams, of each such determination and redeter7 mination;

8 ‘‘(E) with respect to any child born on or

9 after the date 10 months after enactment of

10 this provision, will not determine (or redeter11 mine) the mother (or other custodial relative) of

12 such child to be cooperating with efforts to es13 tablish paternity unless such individual fur14 nishes—

15 ‘‘(i) the name of the putative father

16 (or fathers); and

17 ‘‘(ii) sufficient additional information

18 to enable the State agency, if reasonable

19 efforts were made, to verify the identity of

20 the person named as the putative father

21 (including such information as the putative

22 father’s present address, telephone num23 ber, date of birth, past or present place of

24 employment, school previously or currently

25 attended, and names and addresses of par-
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1 ents, friends, or relatives able to provide

2 location information, or other information

3 that could enable service of process on

4 such person), and

5 ‘‘(F)(i) (where a custodial parent who was

6 initially determined not to be cooperating (or to

7 have good cause not to cooperate) is later deter8 mined to be cooperating or to have good cause

9 not to cooperate) will immediately notify the

10 State agencies administering the programs

11 under part A of title XIX that this eligibility

12 condition has been met; and

13 ‘‘(ii) (where a custodial parent was initially

14 determined to be cooperating (or to have good

15 cause not to cooperate)) will not later determine

16 such individual not to be cooperating (or not to

17 have good cause not to cooperate) until such in18 dividual has been afforded an opportunity for a

19 hearing.’’.

20 (b) MEDICAID AMENDMENTS.—Section 1912(a) (42

21 U.S.C. 1396k(a)) is amended—

22 (1) in paragraph (1)(B), by inserting ‘‘(except

23 as provided in paragraph (2))’’ after ‘‘to cooperate

24 with the State’’;
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1 (2) in subparagraphs (B) and (C) of paragraph

2 (1) by striking ‘‘, unless’’ and all that follows and

3 inserting a semicolon; and

4 (3) by redesignating paragraph (2) as para5 graph (5), and inserting after paragraph (1) the fol6 lowing new paragraphs:

7 ‘‘(2) provide that the State agency will imme8 diately refer each applicant or recipient requiring

9 paternity establishment services to the State agency

10 administering the program under part D of title IV;

11 ‘‘(3) provide that an individual will not be re12 quired to cooperate with the State, as provided

13 under paragraph (1), if the individual is found to

14 have good cause for refusing to cooperate, as deter15 mined in accordance with standards prescribed by

16 the Secretary, which standards shall take into con17 sideration the best interests of the individuals in18 volved—

19 ‘‘(A) to the satisfaction of the State agency

20 administering the program under part D, as de21 termined in accordance with section 454(25),

22 with respect to the requirements to cooperate

23 with efforts to establish paternity and to obtain

24 support (including medical support) from a par25 ent; and
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1 ‘‘(B) to the satisfaction of the State agen2 cy administering the program under this title,

3 with respect to other requirements to cooperate

4 under paragraph (1);

5 ‘‘(4) provide that (except as provided in para6 graph (5)) an applicant requiring paternity estab7 lishment services (other than an individual presump8 tively eligible pursuant to section 1920) shall not be

9 eligible for medical assistance under this title until

10 such applicant—

11 ‘‘(i) has furnished to the agency admin12 istering the State plan under part D of title IV

13 the information specified in section 454(25)(E);

14 or

15 ‘‘(ii) has been determined by such agency

16 to have good cause not to cooperate; and

17 ‘‘(5) provide that the provisions of paragraph

18 (4) shall not apply with respect to an applicant—

19 ‘‘(i) if such agency has not, within 10 days

20 after such individual was referred to such agen21 cy, provided the notification required by section

22 454(25)(D)(iii), until such notification is re23 ceived; and

24 ‘‘(ii) if such individual appeals a deter25 mination that the individual lacks good cause
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1 for noncooperation, until after such determina2 tion is affirmed after notice and opportunity for

3 a hearing.’’.

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section shall be effective with respect to applications

6 filed in or after the first calendar quarter beginning 10

7 months or more after the date of the enactment of this

8 Act (or such earlier quarter as the State may select) for

9 assistance under a State plan approved under part A of

10 title IV of the Social Security Act or for medical assistance

11 under a State plan approved under title XIX of such Act.

12 SEC. 9444. FEDERAL MATCHING PAYMENTS.

13 (a) INCREASED BASE MATCHING RATE.—Section

14 455(a)(2) (42 U.S.C. 655(a)(2)) is amended to read as

15 follows:

16 ‘‘(2) The applicable percent for a quarter for

17 purposes of paragraph (1)(A) is—

18 ‘‘(A) for fiscal year 1996, 69 percent;

19 ‘‘(B) for fiscal year 1997, 72 percent; and

20 ‘‘(C) for fiscal year 1998 and succeeding

21 fiscal years, 75 percent.’’.

22 (b) MAINTENANCE OF EFFORT.—Section 455 (42

23 U.S.C. 655) is amended—
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1 (1) in subsection (a)(1), in the matter preced2 ing subparagraph (A), by striking ‘‘From’’ and in3 serting ‘‘Subject to subsection (c), from’’; and

4 (2) by inserting after subsection (b) the follow5 ing:

6 ‘‘(c) MAINTENANCE OF EFFORT.—Notwithstanding

7 subsection (a), total expenditures for the State program

8 under this part for fiscal year 1996 and each succeeding

9 fiscal year, reduced by the percentage specified for such

10 fiscal year under subparagraph (A), (B), or (C)(i) of para11 graph (2), shall not be less than such total expenditures

12 for fiscal year 1995, reduced by 66 percent.’’.

13 SEC. 9445. STATE LAWS CONCERNING PATERNITY ESTAB14 LISHMENT.

15 (a) STATE LAWS REQUIRED.—Section 466(a)(5) (42

16 U.S.C. 666(a)(5)) is amended—

17 (1) by striking ‘‘(5)’’ and inserting the follow18 ing:

19 ‘‘(5) PROCEDURES CONCERNING PATERNITY ES20 TABLISHMENT.—’’;

21 (2) in subparagraph (A)—

22 (A) by striking ‘‘(A)(i)’’ and inserting the

23 following:
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1 ‘‘(A) ESTABLISHMENT PROCESS AVAIL2 ABLE FROM BIRTH UNTIL AGE EIGHTEEN.—

3 (i)’’; and

4 (B) by indenting clauses (i) and (ii) so

5 that the left margin of such clauses is 2 ems to

6 the right of the left margin of paragraph (4);

7 (3) in subparagraph (B)—

8 (A) by striking ‘‘(B)’’ and inserting the

9 following:

10 ‘‘(B) PROCEDURES CONCERNING GENETIC

11 TESTING.—(i)’’;

12 (B) in clause (i), as redesignated, by in13 serting before the period ‘‘, where such request

14 is supported by a sworn statement (I) by such

15 party alleging paternity setting forth facts es16 tablishing a reasonable possibility of the req17 uisite sexual contact of the parties, or (II) by

18 such party denying paternity setting forth facts

19 establishing a reasonable possibility of the

20 nonexistence of sexual contact of the parties;’’;

21 (C) by inserting after and below clause (i)

22 (as redesignated) the following new clause:

23 ‘‘(ii) Procedures which require the State

24 agency, in any case in which such agency orders

25 genetic testing—
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1 ‘‘(I) to pay costs of such tests, subject

2 to recoupment (where the State so elects)

3 from the putative father if paternity is es4 tablished; and

5 ‘‘(II) to obtain additional testing in

6 any case where an original test result is

7 disputed, upon request and advance pay8 ment by the disputing party.’’;

9 (4) by striking subparagraphs (C) and (D) and

10 inserting the following:

11 ‘‘(C) PATERNITY ACKNOWLEDGMENT.—(i)

12 Procedures for a simple civil process for volun13 tarily acknowledging paternity under which the

14 State must provide that, before a mother and a

15 putative father can sign an acknowledgment of

16 paternity, the putative father and the mother

17 must be given notice, orally, in writing, and in

18 a language that each can understand, of the al19 ternatives to, the legal consequences of, and the

20 rights (including, if 1 parent is a minor, any

21 rights afforded due to minority status) and re22 sponsibilities that arise from, signing the ac23 knowledgment.

24 ‘‘(ii) Such procedures must include a hos25 pital-based program for the voluntary acknowl-
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1 edgment of paternity focusing on the period im2 mediately before or after the birth of a child.

3 ‘‘(iii) Such procedures must require the

4 State agency responsible for maintaining birth

5 records to offer voluntary paternity establish6 ment services.

7 ‘‘(iv) The Secretary shall prescribe regula8 tions governing voluntary paternity establish9 ment services offered by hospitals and birth

10 record agencies. The Secretary shall prescribe

11 regulations specifying the types of other entities

12 that may offer voluntary paternity establish13 ment services, and governing the provision of

14 such services, which shall include a requirement

15 that such an entity must use the same notice

16 provisions used by, the same materials used by,

17 provide the personnel providing such services

18 with the same training provided by, and evalu19 ate the provision of such services in the same

20 manner as, voluntary paternity establishment

21 programs of hospitals and birth record agen22 cies.

23 ‘‘(v) Such procedures must require the

24 State and those required to establish paternity

25 to use only the affidavit developed under section
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1 452(a)(7) for the voluntary acknowledgment of

2 paternity, and to give full faith and credit to

3 such an affidavit signed in any other State.

4 ‘‘(D) STATUS OF SIGNED PATERNITY AC5 KNOWLEDGMENT.—(i) Procedures under which

6 a signed acknowledgment of paternity is consid7 ered a legal finding of paternity, subject to the

8 right of any signatory to rescind the acknowl9 edgment within 60 days.

10 ‘‘(ii)(I) Procedures under which, after the

11 60-day period referred to in clause (i), a signed

12 acknowledgment of paternity may be challenged

13 in court only on the basis of fraud, duress, or

14 material mistake of fact, with the burden of

15 proof upon the challenger, and under which the

16 legal responsibilities (including child support

17 obligations) of any signatory arising from the

18 acknowledgment may not be suspended during

19 the challenge, except for good cause shown.

20 ‘‘(II) Procedures under which, after the

21 60-day period referred to in clause (i), a minor

22 who signs an acknowledgment of paternity

23 other than in the presence of a parent or court24 appointed guardian ad litem may rescind the
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1 acknowledgment in a judicial or administrative

2 proceeding, until the earlier of—

3 ‘‘(aa) attaining the age of majority; or

4 ‘‘(bb) the date of the first judicial or

5 administrative proceeding brought (after

6 the signing) to establish a child support

7 obligation, visitation rights, or custody

8 rights with respect to the child whose pa9 ternity is the subject of the acknowledg10 ment, and at which the minor is rep11 resented by a parent, guardian ad litem, or

12 attorney.’’;

13 (5) by striking subparagraph (E) and inserting

14 the following:

15 ‘‘(E) BAR ON ACKNOWLEDGMENT RATIFI16 CATION PROCEEDINGS.—Procedures under

17 which no judicial or administrative proceedings

18 are required or permitted to ratify an unchal19 lenged acknowledgment of paternity.’’;

20 (6) by striking subparagraph (F) and inserting

21 the following:

22 ‘‘(F) ADMISSIBILITY OF GENETIC TESTING

23 RESULTS.—Procedures—

24 ‘‘(i) requiring that the State admit

25 into evidence, for purposes of establishing
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1 paternity, results of any genetic test that

2 is—

3 ‘‘(I) of a type generally acknowl4 edged, by accreditation bodies des5 ignated by the Secretary, as reliable

6 evidence of paternity; and

7 ‘‘(II) performed by a laboratory

8 approved by such an accreditation

9 body;

10 ‘‘(ii) that any objection to genetic

11 testing results must be made in writing not

12 later than a specified number of days be13 fore any hearing at which such results may

14 be introduced into evidence (or, at State

15 option, not later than a specified number

16 of days after receipt of such results); and

17 ‘‘(iii) that, if no objection is made, the

18 test results are admissible as evidence of

19 paternity without the need for foundation

20 testimony or other proof of authenticity or

21 accuracy.’’; and

22 (7) by adding after subparagraph (H) the fol23 lowing new subparagraphs:
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1 ‘‘(I) NO RIGHT TO JURY TRIAL.—Proce2 dures providing that the parties to an action to

3 establish paternity are not entitled to jury trial.

4 ‘‘(J) TEMPORARY SUPPORT ORDER BASED

5 ON PROBABLE PATERNITY IN CONTESTED

6 CASES.—Procedures which require that a tem7 porary order be issued, upon motion by a party,

8 requiring the provision of child support pending

9 an administrative or judicial determination of

10 parentage, where there is clear and convincing

11 evidence of paternity (on the basis of genetic

12 tests or other evidence).

13 ‘‘(K) PROOF OF CERTAIN SUPPORT AND

14 PATERNITY ESTABLISHMENT COSTS.—Proce15 dures under which bills for pregnancy, child16 birth, and genetic testing are admissible as evi17 dence without requiring third-party foundation

18 testimony, and shall constitute prima facie evi19 dence of amounts incurred for such services and

20 testing on behalf of the child.

21 ‘‘(L) WAIVER OF STATE DEBTS FOR CO22 OPERATION.—At the option of the State, proce23 dures under which the tribunal establishing pa24 ternity and support has discretion to waive

25 rights to all or part of amounts owed to the
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1 State (but not to the mother) for costs related

2 to pregnancy, childbirth, and genetic testing

3 and for public assistance paid to the family

4 where the father cooperates or acknowledges

5 paternity before or after genetic testing.

6 ‘‘(M) STANDING OF PUTATIVE FATHERS.—

7 Procedures ensuring that the putative father

8 has a reasonable opportunity to initiate a pater9 nity action.’’.

10 (b) NATIONAL PATERNITY ACKNOWLEDGMENT AFFI11 DAVIT.—Section 452(a)(7) (42 U.S.C. 652(a)(7)) is

12 amended by inserting ‘‘, and develop an affidavit to be

13 used for the voluntary acknowledgment of paternity which

14 shall include the social security account number of each

15 parent’’ before the semicolon.

16 (c) TECHNICAL AMENDMENT.—Section 468 (42

17 U.S.C. 668) is amended by striking ‘‘a simple civil process

18 for voluntarily acknowledging paternity and’’.

19 SEC. 9446. OUTREACH FOR VOLUNTARY PATERNITY ESTAB20 LISHMENT.

21 (a) STATE PLAN REQUIREMENT.—Section 454(23)

22 (42 U.S.C. 654(23)) is amended by adding at the end the

23 following new subparagraph:

24 ‘‘(C) publicize the availability and encour25 age the use of procedures for voluntary estab-
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1 lishment of paternity and child support through

2 a variety of means, which—

3 ‘‘(i) include distribution of written

4 materials at health care facilities (includ5 ing hospitals and clinics), and other loca6 tions such as schools;

7 ‘‘(ii) may include pre-natal programs

8 to educate expectant couples on individual

9 and joint rights and responsibilities with

10 respect to paternity (and may require all

11 expectant recipients of assistance under

12 part A to participate in such pre-natal pro13 grams, as an element of cooperation with

14 efforts to establish paternity and child sup15 port);

16 ‘‘(iii) include, with respect to each

17 child discharged from a hospital after birth

18 for whom paternity or child support has

19 not been established, reasonable follow-up

20 efforts (including at least one contact of

21 each parent whose whereabouts are known,

22 except where there is reason to believe

23 such follow-up efforts would put mother or

24 child at risk), providing—
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1 ‘‘(I) in the case of a child for

2 whom paternity has not been estab3 lished, information on the benefits of

4 and procedures for establishing pater5 nity; and

6 ‘‘(II) in the case of a child for

7 whom paternity has been established

8 but child support has not been estab9 lished, information on the benefits of

10 and procedures for establishing a

11 child support order, and an applica12 tion for child support services;’’.

13 (b) ENHANCED FEDERAL MATCHING.—Section

14 455(a)(1)(C) (42 U.S.C. 655(a)(1)(C)) is amended—

15 (1) by inserting ‘‘(i)’’ before ‘‘laboratory costs’’,

16 and

17 (2) by inserting before the semicolon ‘‘, and (ii)

18 costs of outreach programs designed to encourage

19 voluntary acknowledgment of paternity’’.

20 (c) EFFECTIVE DATES.—(1) The amendments made

21 by subsection (a) shall become effective October 1, 1997.

22 (2) The amendments made by subsection (b) shall be

23 effective with respect to calendar quarters beginning on

24 and after October 1, 1996.
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1 CHAPTER 6—ESTABLISHMENT AND

2 MODIFICATION OF SUPPORT ORDERS

3 SEC. 9451. NATIONAL CHILD SUPPORT GUIDELINES COM4 MISSION.

5 (a) ESTABLISHMENT.—There is hereby established a

6 commission to be known as the ‘‘National Child Support

7 Guidelines Commission’’ (in this section referred to as the

8 ‘‘Commission’’).

9 (b) GENERAL DUTIES.—The Commission shall de10 velop a national child support guideline for consideration

11 by the Congress that is based on a study of various guide12 line models, the benefits and deficiencies of such models,

13 and any needed improvements.

14 (c) MEMBERSHIP.—

15 (1) NUMBER; APPOINTMENT.—

16 (A) IN GENERAL.—The Commission shall

17 be composed of 12 individuals appointed jointly

18 by the Secretary of Health and Human Services

19 and the Congress, not later than January 15,

20 1997, of which—

21 (i) 2 shall be appointed by the Chair22 man of the Committee on Finance of the

23 Senate, and 1 shall be appointed by the

24 ranking minority member of the Commit25 tee;
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1 (ii) 2 shall be appointed by the Chair2 man of the Committee on Ways and Means

3 of the House of Representatives, and 1

4 shall be appointed by the ranking minority

5 member of the Committee; and

6 (iii) 6 shall be appointed by the Sec7 retary of Health and Human Services.

8 (B) QUALIFICATIONS OF MEMBERS.—

9 Members of the Commission shall have exper10 tise and experience in the evaluation and devel11 opment of child support guidelines. At least 1

12 member shall represent advocacy groups for

13 custodial parents, at least 1 member shall rep14 resent advocacy groups for noncustodial par15 ents, and at least 1 member shall be the direc16 tor of a State program under part D of title IV

17 of the Social Security Act.

18 (2) TERMS OF OFFICE.—Each member shall be

19 appointed for a term of 2 years. A vacancy in the

20 Commission shall be filled in the manner in which

21 the original appointment was made.

22 (d) COMMISSION POWERS, COMPENSATION, ACCESS

23 TO INFORMATION, AND SUPERVISION.—The first sentence

24 of subparagraph (C), the first and third sentences of sub25 paragraph (D), subparagraph (F) (except with respect to
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1 the conduct of medical studies), clauses (ii) and (iii) of

2 subparagraph (G), and subparagraph (H) of section

3 1886(e)(6) of the Social Security Act shall apply to the

4 Commission in the same manner in which such provisions

5 apply to the Prospective Payment Assessment Commis6 sion.

7 (e) REPORT.—Not later than 2 years after the ap8 pointment of members, the Commission shall submit to

9 the President, the Committee on Ways and Means of the

10 House of Representatives, and the Committee on Finance

11 of the Senate, a recommended national child support

12 guideline and a final assessment of issues relating to such

13 a proposed national child support guideline.

14 (f) TERMINATION.—The Commission shall terminate

15 6 months after the submission of the report described in

16 subsection (e).

17 SEC. 9452. SIMPLIFIED PROCESS FOR REVIEW AND ADJUST18 MENT OF CHILD SUPPORT ORDERS.

19 (a) IN GENERAL.—Section 466(a)(10) (42 U.S.C.

20 666(a)(10)) is amended to read as follows:

21 ‘‘(10) PROCEDURES FOR MODIFICATION OF

22 SUPPORT ORDERS.—

23 ‘‘(A)(i) Procedures under which—

24 ‘‘(I) every 3 years, at the request of

25 either parent subject to a child support
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1 order, the State shall review and, as appro2 priate, adjust the order in accordance with

3 the guidelines established under section

4 467(a) if the amount of the child support

5 award under the order differs from the

6 amount that would be awarded in accord7 ance with such guidelines, without a re8 quirement for any other change in cir9 cumstances; and

10 ‘‘(II) upon request at any time of ei11 ther parent subject to a child support

12 order, the State shall review and, as appro13 priate, adjust the order in accordance with

14 the guidelines established under section

15 467(a) based on a substantial change in

16 the circumstances of either such parent.

17 ‘‘(ii) Such procedures shall require both

18 parents subject to a child support order to be

19 notified of their rights and responsibilities pro20 vided for under clause (i) at the time the order

21 is issued and in the annual information ex22 change form provided under subparagraph (B).

23 ‘‘(B) Procedures under which each child

24 support order issued or modified in the State

25 after the effective date of this subparagraph
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1 shall require the parents subject to the order to

2 provide each other with a complete statement of

3 their respective financial condition annually on

4 a form which shall be established by the Sec5 retary and provided by the State. The Secretary

6 shall establish regulations for the enforcement

7 of such exchange of information.’’.

8 CHAPTER 7—ENFORCEMENT OF SUPPORT

9 ORDERS

10 SEC. 9461. FEDERAL INCOME TAX REFUND OFFSET.

11 (a) CHANGED ORDER OF REFUND DISTRIBUTION

12 UNDER INTERNAL REVENUE CODE.—Section 6402(c) of

13 the Internal Revenue Code of 1986 is amended by striking

14 the 3rd sentence.

15 (b) ELIMINATION OF DISPARITIES IN TREATMENT

16 OF ASSIGNED AND NON-ASSIGNED ARREARAGES.—(1)

17 Section 464(a) (42 U.S.C. 664(a)) is amended—

18 (A) by striking ‘‘(a)’’ and inserting ‘‘(a) OFF19 SET AUTHORIZED.—’’;

20 (B) in paragraph (1)—

21 (i) in the first sentence, by striking ‘‘which

22 has been assigned to such State pursuant to

23 section 402(a)(26) or section 471(a)(17)’’; and
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1 (ii) in the second sentence, by striking ‘‘in

2 accordance with section 457 (b)(4) or (d)(3)’’

3 and inserting ‘‘as provided in paragraph (2)’’;

4 (C) in paragraph (2), to read as follows:

5 ‘‘(2) The State agency shall distribute amounts

6 paid by the Secretary of the Treasury pursuant to

7 paragraph (1)—

8 ‘‘(A) in accordance with section 457(a)(4)

9 or (d)(3), in the case of past-due support as10 signed to a State pursuant to section

11 403(b)(1)(E)(i) or 471(a)(17); and

12 ‘‘(B) to or on behalf of the child to whom

13 the support was owed, in the case of past-due

14 support not so assigned.’’;

15 (D) in paragraph (3)—

16 (i) by striking ‘‘or (2)’’ each place it ap17 pears; and

18 (ii) in subparagraph (B), by striking

19 ‘‘under paragraph (2)’’ and inserting ‘‘on ac20 count of past-due support described in para21 graph (2)(B)’’.

22 (2) Section 464(b) (42 U.S.C. 664(b)) is

23 amended—

24 (A) by striking ‘‘(b)(1)’’ and inserting ‘‘(b)

25 REGULATIONS.—’’; and
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1 (B) by striking paragraph (2).

2 (3) Section 464(c) (42 U.S.C. 664(c)) is

3 amended—

4 (A) by striking ‘‘(c)(1) Except as provided

5 in paragraph (2), as’’ and inserting ‘‘(c) DEFI6 NITION.—As’’; and

7 (B) by striking paragraphs (2) and (3).

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall become effective October 1, 1999.

10 SEC. 9462. INTERNAL REVENUE SERVICE COLLECTION OF

11 ARREARS.

12 (a) AMENDMENT TO INTERNAL REVENUE CODE.—

13 Section 6305(a) of the Internal Revenue Code of 1986 is

14 amended—

15 (1) in paragraph (1), by inserting ‘‘except as

16 provided in paragraph (5)’’ after ‘‘collected’’;

17 (2) by striking ‘‘and’’ at the end of paragraph

18 (3);

19 (3) by striking the period at the end of para20 graph (4) and inserting a comma;

21 (4) by adding after paragraph (4) the following

22 new paragraph:

23 ‘‘(5) no additional fee may be assessed for ad24 justments to an amount previously certified pursu-
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1 ant to such section 452(b) with respect to the same

2 obligor.’’; and

3 (5) by striking ‘‘Secretary of Health, Edu4 cation, and Welfare’’ each place it appears and in5 serting ‘‘Secretary of Health and Human Services’’.

6 (b) EFFECTIVE DATE.—The amendments made by

7 this section shall become effective October 1, 1997.

8 SEC. 9463. AUTHORITY TO COLLECT SUPPORT FROM FED9 ERAL EMPLOYEES.

10 (a) CONSOLIDATION AND STREAMLINING OF AU11 THORITIES.—

12 (1) Section 459 (42 U.S.C. 659) is amended in

13 the caption by inserting ‘‘INCOME WITHHOLDING,’’

14 before ‘‘GARNISHMENT’’.

15 (2) Section 459(a) (42 U.S.C. 659(a)) is

16 amended—

17 (A) by striking ‘‘(a)’’ and inserting ‘‘(a)

18 CONSENT TO SUPPORT ENFORCEMENT.—’’;

19 (B) by striking ‘‘section 207’’ and insert20 ing ‘‘section 207 of this Act and 38 U.S.C.

21 5301’’; and

22 (C) by striking all that follows ‘‘a private

23 person,’’ and inserting ‘‘to withholding in ac24 cordance with State law pursuant to subsections

25 (a)(1) and (b) of section 466 and regulations of
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1 the Secretary thereunder, and to any other legal

2 process brought, by a State agency administer3 ing a program under this part or by an individ4 ual obligee, to enforce the legal obligation of

5 such individual to provide child support or ali6 mony.’’.

7 (3) Section 459(b) (42 U.S.C. 659(b)) is

8 amended to read as follows:

9 ‘‘(b) CONSENT TO REQUIREMENTS APPLICABLE TO

10 PRIVATE PERSON.— Except as otherwise provided herein,

11 each entity specified in subsection (a) shall be subject,

12 with respect to notice to withhold income pursuant to sub13 section (a)(1) or (b) of section 466, or to any other order

14 or process to enforce support obligations against an indi15 vidual (if such order or process contains or is accompanied

16 by sufficient data to permit prompt identification of the

17 individual and the moneys involved), to the same require18 ments as would apply if such entity were a private per19 son.’’.

20 (4) Section 459(c) (42 U.S.C. 659(c)) is redes21 ignated and relocated as paragraph (2) of subsection

22 (f), and is amended—

23 (A) by striking ‘‘responding to interrog24 atories pursuant to requirements imposed by

25 section 461(b)(3)’’ and inserting ‘‘taking ac-
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1 tions necessary to comply with the requirements

2 of subsection (A) with regard to any individ3 ual’’; and

4 (B) by striking ‘‘any of his duties’’ and all

5 that follows and inserting ‘‘such duties.’’.

6 (5) Section 461 (42 U.S.C. 661) is amended by

7 striking subsection (b), and section 459 (42 U.S.C.

8 659) is amended by inserting after subsection (b)

9 (as added by paragraph (3) of this subsection) the

10 following:

11 ‘‘(c) DESIGNATION OF AGENT; RESPONSE TO NOTICE

12 OR PROCESS.—(1) The head of each agency subject to the

13 requirements of this section shall—

14 ‘‘(A) designate an agent or agents to receive or15 ders and accept service of process; and

16 ‘‘(B) publish (i) in the appendix of such regula17 tions, (ii) in each subsequent republication of such

18 regulations, and (iii) annually in the Federal Reg19 ister, the designation of such agent or agents, identi20 fied by title of position, mailing address, and tele21 phone number.’’.

22 (6) Section 459 (42 U.S.C. 659) is amended by

23 striking subsection (d) and by inserting after sub24 section (c)(1) (as added by paragraph (5) of this

25 subsection) the following:
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1 ‘‘(2) Whenever an agent designated pursuant to para2 graph (1) receives notice pursuant to subsection (a)(1) or

3 (b) of section 466, or is effectively served with any order,

4 process, or interrogatories, with respect to an individual’s

5 child support or alimony payment obligations, such agent

6 shall—

7 ‘‘(A) as soon as possible (but not later than fif8 teen days) thereafter, send written notice of such no9 tice or service (together with a copy thereof) to such

10 individual at his duty station or last-known home

11 address;

12 ‘‘(B) within 30 days (or such longer period as

13 may be prescribed by applicable State law) after re14 ceipt of a notice pursuant to subsection (a)(1) or (b)

15 of section 466, comply with all applicable provisions

16 of such section 466; and

17 ‘‘(C) within 30 days (or such longer period as

18 may be prescribed by applicable State law) after ef19 fective service of any other such order, process, or

20 interrogatories, respond thereto.’’.

21 (7) Section 461 (42 U.S.C. 661) is amended by

22 striking subsection (c), and section 459 (42 U.S.C.

23 659) is amended by inserting after subsection (c) (as

24 added by paragraph (5) and amended by paragraph

25 (6) of this subsection) the following:
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1 ‘‘(d) PRIORITY OF CLAIMS.—In the event that a gov2 ernmental entity receives notice or is served with process,

3 as provided in this section, concerning amounts owed by

4 an individual to more than one person—

5 ‘‘(1) support collection under section 466(b)

6 must be given priority over any other process, as

7 provided in section 466(b)(7);

8 ‘‘(2) allocation of moneys due or payable to an

9 individual among claimants under section 466(b)

10 shall be governed by the provisions of such section

11 466(b) and regulations thereunder; and

12 ‘‘(3) such moneys as remain after compliance

13 with subparagraphs (A) and (B) shall be available to

14 satisfy any other such processes on a first-come,

15 first-served basis, with any such process being satis16 fied out of such moneys as remain after the satisfac17 tion of all such processes which have been previously

18 served.’’.

19 (8) Section 459(e) (42 U.S.C. 659(e)) is

20 amended by striking ‘‘(e)’’ and inserting the follow21 ing:

22 ‘‘(e) NO REQUIREMENT TO VARY PAY CYCLES.—’’.

23 (9) Section 459(f) (42 U.S.C. 659(f)) is amend24 ed by striking ‘‘(f)’’ and inserting the following:

25 ‘‘(f) RELIEF FROM LIABILITY.—(1)’’.
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1 (10) Section 461(a) (42 U.S.C. 661(a)) is re2 designated and relocated as section 459(g), and is

3 amended—

4 (A) by striking ‘‘(g)’’ and inserting the fol5 lowing:

6 ‘‘(g) REGULATIONS.—’’; and

7 (B) by striking ‘‘section 459’’ and insert8 ing ‘‘this section’’.

9 (11) Section 462 (42 U.S.C. 662) is amended

10 by striking subsection (f), and section 459 (42

11 U.S.C. 659) is amended by inserting the following

12 after subsection (g) (as added by paragraph (10) of

13 this subsection):

14 ‘‘(h) MONEYS SUBJECT TO PROCESS.—(1) Subject to

15 subsection (i), moneys paid or payable to an individual

16 which are considered to be based upon remuneration for

17 employment, for purposes of this section—

18 ‘‘(A) consist of—

19 ‘‘(i) compensation paid or payable for per20 sonal services of such individual, whether such

21 compensation is denominated as wages, salary,

22 commission, bonus, pay, allowances, or other23 wise (including severance pay, sick pay, and in24 centive pay);
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1 ‘‘(ii) periodic benefits (including a periodic

2 benefit as defined in section 228(h)(3)) or other

3 payments—

4 ‘‘(I) under the insurance system es5 tablished by title II;

6 ‘‘(II) under any other system or fund

7 established by the United States which

8 provides for the payment of pensions, re9 tirement or retired pay, annuities, depend10 ents’ or survivors’ benefits, or similar

11 amounts payable on account of personal

12 services performed by the individual or any

13 other individual;

14 ‘‘(III) as compensation for death

15 under any Federal program;

16 ‘‘(IV) under any Federal program es17 tablished to provide ‘black lung’ benefits;

18 or

19 ‘‘(V) by the Secretary of Veterans Af20 fairs as pension, or as compensation for a

21 service-connected disability or death (ex22 cept any compensation paid by such Sec23 retary to a former member of the Armed

24 Forces who is in receipt of retired or re25 tainer pay if such former member has
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1 waived a portion of his retired pay in order

2 to receive such compensation); and

3 ‘‘(iii) worker’s compensation benefits paid

4 under Federal or State law; but

5 ‘‘(B) do not include any payment—

6 ‘‘(i) by way of reimbursement or otherwise,

7 to defray expenses incurred by such individual

8 in carrying out duties associated with his em9 ployment; or

10 ‘‘(ii) as allowances for members of the uni11 formed services payable pursuant to chapter 7

12 of title 37, United States Code, as prescribed

13 by the Secretaries concerned (defined by section

14 101(5) of such title) as necessary for the effi15 cient performance of duty.’’.

16 (12) Section 462(g) (42 U.S.C. 662(g)) is re17 designated and relocated as section 459(i) (42

18 U.S.C. 659(i)).

19 (13)(A) Section 462 (42 U.S.C. 662) is amend20 ed—

21 (i) in subsection (e)(1), by redesignating

22 subparagraphs (A), (B), and (C) as clauses (i),

23 (ii), and (iii); and
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1 (ii) in subsection (e), by redesignating

2 paragraphs (1) and (2) as subparagraphs (A)

3 and (B).

4 (B) Section 459 (42 U.S.C. 659) is amended by

5 adding at the end the following:

6 ‘‘(j) DEFINITIONS.—For purposes of this section:’’.

7 (C) Subsections (a) through (e) of section 462

8 (42 U.S.C. 662), as amended by subparagraph (A)

9 of this paragraph, are relocated and redesignated as

10 paragraphs (1) through (4), respectively of section

11 459(j) (as added by subparagraph (B) of this para12 graph, (42 U.S.C. 659(j)), and the left margin of

13 each of such paragraphs (1) through (4) is indented

14 2 ems to the right of the left margin of subsection

15 (i) (as added by paragraph (12) of this subsection).

16 (b) CONFORMING AMENDMENTS.—

17 (1) TO PART D OF TITLE IV.—Sections 461 and

18 462 (42 U.S.C. 661), as amended by subsection (a)

19 of this section, are repealed.

20 (2) TO TITLE 5, UNITED STATES CODE.—Sec21 tion 5520a of title 5, United States Code, is amend22 ed, in subsections (h)(2) and (i), by striking ‘‘sec23 tions 459, 461, and 462 of the Social Security Act

24 (42 U.S.C. 659, 661, and 662)’’ and inserting ‘‘sec-
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1 tion 459 of the Social Security Act (42 U.S.C.

2 659)’’.

3 (c) MILITARY RETIRED AND RETAINER PAY.—(1)

4 DEFINITION OF COURT.—Section 1408(a)(1) of title 10,

5 United States Code, is amended—

6 (A) by striking ‘‘and’’ at the end of subpara7 graph (B);

8 (B) by striking the period at the end of sub9 paragraph (C) and inserting ‘‘; and’’; and

10 (C) by adding after subparagraph (C) the fol11 lowing new paragraph:

12 ‘‘(D) any administrative or judicial tribu13 nal of a State competent to enter orders for

14 support or maintenance (including a State

15 agency administering a State program under

16 part D of title IV of the Social Security Act).’’;

17 (2) DEFINITION OF COURT ORDER.—Section

18 1408(a)(2) of such title is amended by inserting ‘‘or a

19 court order for the payment of child support not included

20 in or accompanied by such a decree or settlement,’’ before

21 ‘‘which—’’.

22 (3) PUBLIC PAYEE.—Section 1408(d) of such title is

23 amended—

24 (A) in the heading, by striking ‘‘to spouse’’ and

25 inserting ‘‘to (or for benefit of)’’; and
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1 (B) in paragraph (1), in the first sentence, by

2 inserting ‘‘(or for the benefit of such spouse or

3 former spouse to a State central collections unit or

4 other public payee designated by a State, in accord5 ance with part D of title IV of the Social Security

6 Act, as directed by court order, or as otherwise di7 rected in accordance with such part D)’’ before ‘‘in

8 an amount sufficient’’.

9 (4) RELATIONSHIP TO PART D OF TITLE IV.—Sec10 tion 1408 of such title is amended by adding at the end

11 the following new subsection:

12 ‘‘(j) RELATIONSHIP TO OTHER LAWS.—In any case

13 involving a child support order against a member who has

14 never been married to the other parent of the child, the

15 provisions of this section shall not apply, and the case

16 shall be subject to the provisions of section 459 of the

17 Social Security Act.’’.

18 (d) EFFECTIVE DATE.—The amendments made by

19 this section shall become effective 6 months after the date

20 of the enactment of this Act.

21 SEC. 9464. ENFORCEMENT OF CHILD SUPPORT OBLIGA22 TIONS OF MEMBERS OF THE ARMED FORCES.

23 (a) AVAILABILITY OF LOCATOR INFORMATION.—

24 (1) MAINTENANCE OF ADDRESS INFORMA25 TION.—The Secretary of Defense shall establish a
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1 centralized personnel locator service that includes

2 the address of each member of the Armed Forces

3 under the jurisdiction of the Secretary. Upon re4 quest of the Secretary of Transportation, addresses

5 for members of the Coast Guard shall be included in

6 the centralized personnel locator service.

7 (2) TYPE OF ADDRESS.—

8 (A) RESIDENTIAL ADDRESS.—Except as

9 provided in subparagraph (B), the address for

10 a member of the Armed Forces shown in the lo11 cator service shall be the residential address of

12 that member.

13 (B) DUTY ADDRESS.—The address for a

14 member of the Armed Forces shown in the loca15 tor service shall be the duty address of that

16 member in the case of a member—

17 (i) who is permanently assigned over18 seas, to a vessel, or to a routinely

19 deployable unit; or

20 (ii) with respect to whom the Sec21 retary concerned makes a determination

22 that the member’s residential address

23 should not be disclosed due to national se24 curity or safety concerns.
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1 (3) UPDATING OF LOCATOR INFORMATION.—

2 Within 30 days after a member listed in the locator

3 service establishes a new residential address (or a

4 new duty address, in the case of a member covered

5 by paragraph (2)(B)), the Secretary concerned shall

6 update the locator service to indicate the new ad7 dress of the member.

8 (4) AVAILABILITY OF INFORMATION.—The Sec9 retary of Defense shall make information regarding

10 the address of a member of the Armed Forces listed

11 in the locator service available, on request, to the

12 Federal Parent Locator Service.

13 (b) FACILITATING GRANTING OF LEAVE FOR AT14 TENDANCE AT HEARINGS.—

15 (1) REGULATIONS.—The Secretary of each

16 military department, and the Secretary of Transpor17 tation with respect to the Coast Guard when it is

18 not operating as a service in the Navy, shall pre19 scribe regulations to facilitate the granting of leave

20 to a member of the Armed Forces under the juris21 diction of that Secretary in a case in which—

22 (A) the leave is needed for the member to

23 attend a hearing described in paragraph (2);

24 (B) the member is not serving in or with

25 a unit deployed in a contingency operation (as
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1 defined in section 101 of title 10, United States

2 Code); and

3 (C) the exigencies of military service (as

4 determined by the Secretary concerned) do not

5 otherwise require that such leave not be grant6 ed.

7 (2) COVERED HEARINGS.—Paragraph (1) ap8 plies to a hearing that is conducted by a court or

9 pursuant to an administrative process established

10 under State law, in connection with a civil action—

11 (A) to determine whether a member of the

12 Armed Forces is a natural parent of a child; or

13 (B) to determine an obligation of a mem14 ber of the Armed Forces to provide child sup15 port.

16 (3) DEFINITIONS.—For purposes of this sub17 section:

18 (A) The term ‘‘court’’ has the meaning

19 given that term in section 1408(a) of title 10,

20 United States Code.

21 (B) The term ‘‘child support’’ has the

22 meaning given such term in section 462 of the

23 Social Security Act (42 U.S.C. 662).

24 (c) PAYMENT OF MILITARY RETIRED PAY IN COM25 PLIANCE WITH CHILD SUPPORT ORDERS.—
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1 (1) DATE OF CERTIFICATION OF COURT

2 ORDER.—Section 1408 of title 10, United States

3 Code, is amended—

4 (A) by redesignating subsection (i) as sub5 section (j); and

6 (B) by inserting after subsection (h) the

7 following new subsection (i):

8 ‘‘(i) CERTIFICATION DATE.—It is not necessary that

9 the date of a certification of the authenticity or complete10 ness of a copy of a court order or an order of an adminis11 trative process established under State law for child sup12 port received by the Secretary concerned for the purposes

13 of this section be recent in relation to the date of receipt

14 by the Secretary.’’.

15 (2) PAYMENTS CONSISTENT WITH ASSIGN16 MENTS OF RIGHTS TO STATES.—Section 1408(d)(1)

17 of such title is amended by inserting after the first

18 sentence the following: ‘‘In the case of a spouse or

19 former spouse who, pursuant to section

20 403(b)(1)(E)(i) of the Social Security Act, assigns

21 to a State the rights of the spouse or former spouse

22 to receive support, the Secretary concerned may

23 make the child support payments referred to in the

24 preceding sentence to that State in amounts consist25 ent with that assignment of rights.’’.
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1 (3) ARREARAGES OWED BY MEMBERS OF THE

2 UNIFORMED SERVICES.—Section 1408(d) of such

3 title is amended by adding at the end the following

4 new paragraph:

5 ‘‘(6) In the case of a court order or an order of an

6 administrative process established under State law for

7 which effective service is made on the Secretary concerned

8 on or after the date of the enactment of this paragraph

9 and which provides for payments from the disposable re10 tired pay of a member to satisfy the amount of child sup11 port set forth in the order, the authority provided in para12 graph (1) to make payments from the disposable retired

13 pay of a member to satisfy the amount of child support

14 set forth in a court order or an order of an administrative

15 process established under State law shall apply to payment

16 of any amount of child support arrearages set forth in that

17 order as well as to amounts of child support that currently

18 become due.’’.

19 SEC. 9465. MOTOR VEHICLE LIENS.

20 Section 466(a)(4) (42 U.S.C. 666(a)(4)) is amend21 ed—

22 (1) by striking ‘‘(4) Procedures’’ and inserting

23 the following:

24 ‘‘(4) LIENS.—

25 ‘‘(A) IN GENERAL.—Procedures’’; and
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1 (2) by adding at the end the following new sub2 paragraph:

3 ‘‘(B) MOTOR VEHICLE LIENS.—Procedures

4 for placing liens for arrears of child support on

5 motor vehicle titles of individuals owing such

6 arrears equal to or exceeding two months of

7 support, under which—

8 ‘‘(i) any person owed such arrears

9 may place such a lien;

10 ‘‘(ii) the State agency administering

11 the program under this part shall system12 atically place such liens;

13 ‘‘(iii) expedited methods are provided

14 for—

15 ‘‘(I) ascertaining the amount of

16 arrears;

17 ‘‘(II) affording the person owing

18 the arrears or other titleholder to con19 test the amount of arrears or to ob20 tain a release upon fulfilling the sup21 port obligation;

22 ‘‘(iv) such a lien has precedence over

23 all other encumbrances on a vehicle title

24 other than a purchase money security in25 terest; and
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1 ‘‘(v) the individual or State agency

2 owed the arrears may execute on, seize,

3 and sell the property in accordance with

4 State law.’’.

5 SEC. 9466. VOIDING OF FRAUDULENT TRANSFERS.

6 Section 466(a) (42 U.S.C. 666(a)), as amended by

7 sections 9401(a), 9426(a), 9431, and 9442 of this Act,

8 is amended by inserting after paragraph (15) the follow9 ing:

10 ‘‘(16) FRAUDULENT TRANSFERS.—Procedures

11 under which—

12 ‘‘(A) the State has in effect—

13 ‘‘(i) the Uniform Fraudulent Convey14 ance Act of 1981,

15 ‘‘(ii) the Uniform Fraudulent Trans16 fer Act of 1984, or

17 ‘‘(iii) another law, specifying indicia of

18 fraud which create a prima facie case that

19 a debtor transferred income or property to

20 avoid payment to a child support creditor,

21 which the Secretary finds affords com22 parable rights to child support creditors;

23 and

24 ‘‘(B) in any case in which the State knows

25 of a transfer by a child support debtor with re-
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1 spect to which such a prima facie case is estab2 lished, the State must—

3 ‘‘(i) seek to void such transfer; or

4 ‘‘(ii) obtain a settlement in the best

5 interests of the child support creditor.’’.

6 SEC. 9467. STATE LAW AUTHORIZING SUSPENSION OF LI7 CENSES.

8 Section 466(a) (42 U.S.C. 666(a)), as amended by

9 sections 9401(a), 9426(a), 9431, 9442, and 9466 of this

10 Act, is amended by inserting after paragraph (16) the fol11 lowing:

12 ‘‘(17) AUTHORITY TO WITHHOLD OR SUSPEND

13 LICENSES.—Procedures under which the State has

14 (and uses in appropriate cases) authority (subject to

15 appropriate due process safeguards) to withhold or

16 suspend, or to restrict the use of driver’s licenses,

17 and professional and occupational licenses of individ18 uals owing overdue child support or failing, after re19 ceiving appropriate notice, to comply with subpoenas

20 or warrants relating to paternity or child support

21 proceedings.’’.

22 SEC. 9468. REPORTING ARREARAGES TO CREDIT BUREAUS.

23 Section 466(a)(7) (42 U.S.C. 666(a)(7)) is amended

24 to read as follows:
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1 ‘‘(7) REPORTING ARREARAGES TO CREDIT BU2 REAUS.—(A) Procedures (subject to safeguards pur3 suant to subparagraph (B)) requiring the State to

4 report periodically to consumer reporting agencies

5 (as defined in section 603(f) of the Fair Credit Re6 porting Act (15 U.S.C. 1681a(f)) the name of any

7 absent parent who is delinquent by 90 days or more

8 in the payment of support, and the amount of over9 due support owed by such parent.

10 ‘‘(B) Procedures ensuring that, in carrying out

11 subparagraph (A), information with respect to an

12 absent parent is reported—

13 ‘‘(i) only after such parent has been af14 forded all due process required under State law,

15 including notice and a reasonable opportunity

16 to contest the accuracy of such information;

17 and

18 ‘‘(ii) only to an entity that has furnished

19 evidence satisfactory to the State that the en20 tity is a consumer reporting agency.’’.

21 SEC. 9469. EXTENDED STATUTE OF LIMITATION FOR COL22 LECTION OF ARREARAGES.

23 (a) AMENDMENTS.—Section 466(a)(9) (42 U.S.C.

24 666(a)(9)) is amended—
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1 (1) by striking ‘‘(9) Procedures’’ and inserting

2 the following:

3 ‘‘(9) LEGAL TREATMENT OF ARREARS.—

4 ‘‘(A) FINALITY.—Procedures’’;

5 (2) by redesignating subparagraphs (A), (B),

6 and (C) as clauses (i), (ii), and (iii), respectively,

7 and by indenting each of such clauses 2 additional

8 ems to the right; and

9 (3) by adding after and below subparagraph

10 (A), as redesignated, the following new subpara11 graph:

12 ‘‘(B) STATUTE OF LIMITATIONS.—Proce13 dures under which the statute of limitations on

14 any arrearages of child support extends at least

15 until the child owed such support is 30 years of

16 age.’’.

17 (b) APPLICATION OF REQUIREMENT.—The amend18 ment made by this section shall not be read to require

19 any State law to revive any payment obligation which had

20 lapsed prior to the effective date of such State law.

21 SEC. 9470. CHARGES FOR ARREARAGES.

22 (a) STATE LAW REQUIREMENT.—Section 466(a) (42

23 U.S.C. 666(a)), as amended by sections 9401(a), 9426(a),

24 9431, 9442, 9466, and 9467 of this Act, is amended by

25 inserting after paragraph (17) the following:
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1 ‘‘(18) CHARGES FOR ARREARAGES.—Proce2 dures providing for the calculation and collection of

3 interest or penalties for arrearages of child support,

4 and for distribution of such interest or penalties col5 lected for the benefit of the child (except where the

6 right to support has been assigned to the State).’’.

7 (b) REGULATIONS.—The Secretary of Health and

8 Human Services shall establish by regulation a rule to re9 solve choice of law conflicts arising in the implementation

10 of the amendment made by subsection (a).

11 (c) CONFORMING AMENDMENT.—Section 454(21)

12 (42 U.S.C. 654(21)) is repealed.

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall be effective with respect to arrearages

15 accruing on or after October 1, 1998.

16 SEC. 9471. DENIAL OF PASSPORTS FOR NONPAYMENT OF

17 CHILD SUPPORT.

18 (a) HHS CERTIFICATION PROCEDURE.—

19 (1) SECRETARIAL RESPONSIBILITY.—Section

20 452 (42 U.S.C. 652), as amended by sections

21 9415(a)(3) and 9417 of this Act, is amended by

22 adding at the end the following new subsection:

23 ‘‘(l) CERTIFICATIONS FOR PURPOSES OF PASSPORT

24 RESTRICTIONS.—
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1 ‘‘(1) IN GENERAL.—Where the Secretary re2 ceives a certification by a State agency in accord3 ance with the requirements of section 454(28) that

4 an individual owes arrearages of child support in an

5 amount exceeding $5,000 or in an amount exceeding

6 24 months’ worth of child support, the Secretary

7 shall transmit such certification to the Secretary of

8 State for action (with respect to denial, revocation,

9 or limitation of passports) pursuant to section

10 9471(b) of the Omnibus Budget Reconciliation Act

11 of 1995.

12 ‘‘(2) LIMIT ON LIABILITY.—The Secretary shall

13 not be liable to an individual for any action with re14 spect to a certification by a State agency under this

15 section.’’.

16 (2) STATE CSE AGENCY RESPONSIBILITY.—Sec17 tion 454 (42 U.S.C. 654), as amended by sections

18 9404(a), 9414(b), and 9422(a) of this Act, is

19 amended—

20 (A) by striking ‘‘and’’ at the end of para21 graph (26);

22 (B) by striking the period at the end of

23 paragraph (27) and inserting ‘‘; and’’; and

24 (C) by adding after paragraph (27) the fol25 lowing new paragraph:
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1 ‘‘(28) provide that the State agency will have in

2 effect a procedure (which may be combined with the

3 procedure for tax refund offset under section 464)

4 for certifying to the Secretary, for purposes of the

5 procedure under section 452(l) (concerning denial of

6 passports) determinations that individuals owe ar7 rearages of child support in an amount exceeding

8 $5,000 or in an amount exceeding 24 months’ worth

9 of child support, under which procedure—

10 ‘‘(A) each individual concerned is afforded

11 notice of such determination and the con12 sequences thereof, and an opportunity to con13 test the determination; and

14 ‘‘(B) the certification by the State agency

15 is furnished to the Secretary in such format,

16 and accompanied by such supporting docu17 mentation, as the Secretary may require.’’.

18 (b) STATE DEPARTMENT PROCEDURE FOR DENIAL

19 OF PASSPORTS.—

20 (1) IN GENERAL.—The Secretary of State,

21 upon certification by the Secretary of Health and

22 Human Services, in accordance with section 452(l)

23 of the Social Security Act, that an individual owes

24 arrearages of child support in excess of $5,000, shall

25 refuse to issue a passport to such individual, and
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1 may revoke, restrict, or limit a passport issued pre2 viously to such individual.

3 (2) LIMIT ON LIABILITY.—The Secretary of

4 State shall not be liable to an individual for any ac5 tion with respect to a certification by a State agency

6 under this section.

7 (c) EFFECTIVE DATE.—This section and the amend8 ments made by this section shall become effective October

9 1, 1996.

10 SEC. 9472. INTERNATIONAL CHILD SUPPORT ENFORCE11 MENT.

12 (a) SENSE OF THE CONGRESS THAT THE UNITED

13 STATES SHOULD RATIFY THE UNITED NATIONS CON14 VENTION OF 1956.—It is the sense of the Congress that

15 the United States should ratify the United Nations Con16 vention of 1956.

17 (b) TREATMENT OF INTERNATIONAL CHILD SUP18 PORT CASES AS INTERSTATE CASES.—Section 454 (42

19 U.S.C. 654), as amended by sections 9404(a), 9414(b),

20 9422(a), and 9471(a)(2) of this Act, is amended—

21 (1) by striking ‘‘and’’ at the end of paragraph

22 (27);

23 (2) by striking the period at the end of para24 graph (28) and inserting ‘‘; and’’; and
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1 (3) by inserting after paragraph (28) the fol2 lowing:

3 ‘‘(29) provide that the State must treat inter4 national child support cases in the same manner as

5 the State treats interstate child support cases.’’.

6 SEC. 9473. SEIZURE OF LOTTERY WINNINGS, SETTLEMENTS,

7 PAYOUTS, AWARDS, AND BEQUESTS, AND

8 SALE OF FORFEITED PROPERTY, TO PAY

9 CHILD SUPPORT ARREARAGES.

10 Section 466(a) (42 U.S.C. 666(a)), as amended by

11 sections 9401(a), 9426(a), 9431, 9442, 9466, 9467, and

12 9470(a) of this Act, is amended by inserting after para13 graph (18) the following:

14 ‘‘(19) Procedures, in addition to other income

15 withholding procedures, under which a lien is im16 posed against property with the following effect:

17 ‘‘(A) The person required to make a pay18 ment under a policy of insurance or a settle19 ment of a claim made with respect to the policy

20 shall—

21 ‘‘(i) suspend the payment until an in22 quiry is made to and a response received

23 from the agency as to whether the person

24 otherwise entitled to the payment owes a

25 child support arrearage; and
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1 ‘‘(ii) if there is such an arrearage,

2 withhold from the payment the lesser of

3 the amount of the payment or the amount

4 of the arrearage, and pay the amount with5 held to the agency for distribution.

6 ‘‘(B) The payor of any amount pursuant to

7 an award, judgment, or settlement in any ac8 tion brought in Federal or State court shall—

9 ‘‘(i) suspend the payment of the

10 amount until an inquiry is made to and a

11 response is received from the agency as to

12 whether the person otherwise entitled to

13 the payment owes a child support arrear14 age; and

15 ‘‘(ii) if there is such an arrearage,

16 withhold from the payment the lesser of

17 the amount of the payment or the amount

18 of the arrearage, and pay the amount with19 held to the agency for distribution.

20 ‘‘(C) If the State seizes property forfeited

21 to the State by an individual by reason of a

22 criminal conviction, the State shall—

23 ‘‘(i) hold the property until an inquiry

24 is made to and a response is received from
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1 the agency as to whether the individual

2 owes a child support arrearage; and

3 ‘‘(ii) if there is such an arrearage, sell

4 the property and, after satisfying the

5 claims of all other private or public claim6 ants to the property and deducting from

7 the proceeds of the sale the attendant costs

8 (such as for towing, storage, and the sale),

9 pay the lesser of the remaining proceeds or

10 the amount of the arrearage directly to the

11 agency for distribution.

12 ‘‘(D) Any person required to make a pay13 ment in respect of a decedent shall—

14 ‘‘(i) suspend the payment until an in15 quiry is made to and a response received

16 from the agency as to whether the person

17 otherwise entitled to the payment owes a

18 child support arrearage; and

19 ‘‘(ii) if there is such an arrearage,

20 withhold from the payment the lesser of

21 the amount of the payment or the amount

22 of the arrearage, and pay the amount with23 held to the agency for distribution.’’.
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1 SEC. 9474. LIABILITY OF GRANDPARENTS FOR FINANCIAL

2 SUPPORT OF CHILDREN OF THEIR MINOR

3 CHILDREN.

4 Section 466(a) (42 U.S.C. 666(a)), as amended by

5 sections 9401(a), 9426(a), 9431, 9442, 9466, 9467,

6 9470(a), and 9473 of this Act, is amended by inserting

7 after paragraph (19) the following:

8 ‘‘(20) Procedures under which each parent of

9 an individual who has not attained 18 years of age

10 is liable for the financial support of any child of the

11 individual to the extent that the individual is unable

12 to provide such support. The preceding sentence

13 shall not apply to the State if the State plan explic14 itly provides for such inapplicability.’’.

15 SEC. 9475. SENSE OF THE CONGRESS REGARDING PRO16 GRAMS FOR NONCUSTODIAL PARENTS UN17 ABLE TO MEET CHILD SUPPORT OBLIGA18 TIONS.

19 It is the sense of the Congress that the States should

20 develop programs, such as the program of the State of

21 Wisconsin known as the ‘‘Children’s First Program’’, that

22 are designed to work with noncustodial parents who are

23 unable to meet their child support obligations.
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1 CHAPTER 8—MEDICAL SUPPORT

2 SEC. 9481. TECHNICAL CORRECTION TO ERISA DEFINITION

3 OF MEDICAL CHILD SUPPORT ORDER.

4 (a) IN GENERAL.—Section 609(a)(2)(B) of the Em5 ployee Retirement Income Security Act of 1974 (29

6 U.S.C. 1169(a)(2)(B)) is amended—

7 (1) by striking ‘‘issued by a court of competent

8 jurisdiction’’;

9 (2) by striking the period at the end of clause

10 (ii) and inserting a comma; and

11 (3) by adding, after and below clause (ii), the

12 following:

13 ‘‘if such judgment, decree, or order (I) is issued

14 by a court of competent jurisdiction or (II) is

15 issued by an administrative adjudicator and has

16 the force and effect of law under applicable

17 State law.’’.

18 (b) EFFECTIVE DATE.—

19 (1) IN GENERAL.—The amendments made by

20 this section shall take effect on the date of the en21 actment of this Act.

22 (2) PLAN AMENDMENTS NOT REQUIRED UNTIL

23 JANUARY 1, 1996.—Any amendment to a plan re24 quired to be made by an amendment made by this

25 section shall not be required to be made before the
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1 first plan year beginning on or after January 1,

2 1996, if—

3 (A) during the period after the date before

4 the date of the enactment of this Act and be5 fore such first plan year, the plan is operated

6 in accordance with the requirements of the

7 amendments made by this section, and

8 (B) such plan amendment applies retro9 actively to the period after the date before the

10 date of the enactment of this Act and before

11 such first plan year.

12 A plan shall not be treated as failing to be operated

13 in accordance with the provisions of the plan merely

14 because it operates in accordance with this para15 graph.

16 CHAPTER 9—FOOD STAMP PROGRAM

17 REQUIREMENTS

18 SEC. 9491. COOPERATION WITH CHILD SUPPORT AGENCIES.

19 Section 6 of the Food Stamp Act of 1977 (7 U.S.C.

20 2015) is amended adding at the end the following:

21 ‘‘(i) CUSTODIAL PARENT’S COOPERATION WITH

22 CHILD SUPPORT AGENCIES.—

23 ‘‘(1) IN GENERAL.—At the option of a State

24 agency, subject to paragraphs (2) and (3), no natu25 ral or adoptive parent or other individual (collec-
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1 tively referred to in this subsection as ‘the individ2 ual’) who is living with and exercising parental con3 trol over a child under the age of 18 who has an ab4 sent parent shall be eligible to participate in the food

5 stamp program unless the individual cooperates with

6 the State agency administering the program estab7 lished under part D of title IV of the Social Security

8 Act (42 U.S.C. 651 et seq.)—

9 ‘‘(A) in establishing the paternity of the

10 child (if the child is born out of wedlock); and

11 ‘‘(B) in obtaining support for—

12 ‘‘(i) the child; or

13 ‘‘(ii) the individual and the child.

14 ‘‘(2) GOOD CAUSE FOR NONCOOPERATION.—

15 Paragraph (1) shall not apply to the individual if

16 good cause is found for refusing to cooperate, as de17 termined by the State agency in accordance with

18 standards prescribed by the Secretary in consulta19 tion with the Secretary of Health and Human Serv20 ices. The standards shall take into consideration cir21 cumstances under which cooperation may be against

22 the best interests of the child.

23 ‘‘(3) FEES.—Paragraph (1) shall not require

24 the payment of a fee or other cost for services pro-
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1 vided under part D of title IV of the Social Security

2 Act (42 U.S.C. 651 et seq.).

3 ‘‘(j) NON-CUSTODIAL PARENT’S COOPERATION WITH

4 CHILD SUPPORT AGENCIES.—

5 ‘‘(1) IN GENERAL.—At the option of a State

6 agency, subject to paragraphs (2) and (3), a puta7 tive or identified non-custodial parent of a child

8 under the age of 18 (referred to in this subsection

9 as ‘the individual’) shall not be eligible to participate

10 in the food stamp program if the individual refuses

11 to cooperate with the State agency administering the

12 program established under part D of title IV of the

13 Social Security Act (42 U.S.C. 651 et seq.)—

14 ‘‘(A) in establishing the paternity of the

15 child (if the child is born out of wedlock); and

16 ‘‘(B) in providing support for the child.

17 ‘‘(2) REFUSAL TO COOPERATE.—

18 ‘‘(A) GUIDELINES.—The Secretary, in con19 sultation with the Secretary of Health and

20 Human Services, shall develop guidelines on

21 what constitutes a refusal to cooperate under

22 paragraph (1).

23 ‘‘(B) PROCEDURES.—The State agency

24 shall develop procedures, using guidelines devel25 oped under subparagraph (A), for determining
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1 whether an individual is refusing to cooperate

2 under paragraph (1).

3 ‘‘(3) FEES.—Paragraph (1) shall not require

4 the payment of a fee or other cost for services pro5 vided under part D of title IV of the Social Security

6 Act (42 U.S.C. 651 et seq.).

7 ‘‘(4) PRIVACY.—The State agency shall provide

8 safeguards to restrict the use of information col9 lected by a State agency administering the program

10 established under part D of title IV of the Social Se11 curity Act (42 U.S.C. 651 et seq.) to purposes for

12 which the information is collected.’’.

13 SEC. 9492. DISQUALIFICATION FOR CHILD SUPPORT AR14 REARS.

15 Section 6 of the Food Stamp Act of 1977 (7 U.S.C.

16 2015), as amended by section 9491 of this Act, is amend17 ed by adding at the end the following:

18 ‘‘(k) DISQUALIFICATION FOR CHILD SUPPORT AR19 REARS.—

20 ‘‘(1) IN GENERAL.—At the option of a State

21 agency, except as provided in paragraph (2), no indi22 vidual shall be eligible to participate in the food

23 stamp program as a member of any household dur24 ing any month that the individual is delinquent in
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1 any payment due under a court order for the sup2 port of a child of the individual.

3 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not

4 apply if—

5 ‘‘(A) a court is allowing the individual to

6 delay payment; or

7 ‘‘(B) the individual is complying with a

8 payment plan approved by a court or the State

9 agency designated under part D of title IV of

10 the Social Security Act (42 U.S.C. 651 et seq.)

11 to provide support for the child of the individ12 ual.’’.

13 CHAPTER 10—EFFECT OF ENACTMENT

14 SEC. 9498. EFFECTIVE DATES.

15 (a) IN GENERAL.—Except as otherwise specifically

16 provided (but subject to subsections (b) and (c))—

17 (1) provisions of this title requiring enactment

18 or amendment of State laws under section 466 of

19 the Social Security Act, or revision of State plans

20 under section 454 of such Act, shall be effective with

21 respect to periods beginning on and after October 1,

22 1996; and

23 (2) all other provisions of this title shall become

24 effective upon enactment.
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1 (b) GRACE PERIOD FOR STATE LAW CHANGES.—The

2 provisions of this title shall become effective with respect

3 to a State on the later of—

4 (1) the date specified in this title, or

5 (2) the effective date of laws enacted by the leg6 islature of such State implementing such provisions,

7 but in no event later than the first day of the first cal8 endar quarter beginning after the close of the first regular

9 session of the State legislature that begins after the date

10 of enactment of this Act. For purposes of the previous

11 sentence, in the case of a State that has a 2-year legisla12 tive session, each year of such session shall be deemed to

13 be a separate regular session of the State legislature.

14 (c) GRACE PERIOD FOR STATE CONSTITUTIONAL

15 AMENDMENT.—A State shall not be found out of compli16 ance with any requirement enacted by this title if it is

17 unable to comply without amending the State constitution

18 until the earlier of—

19 (1) the date one year after the effective date of

20 the necessary State constitutional amendment, or

21 (2) the date five years after enactment of this

22 title.

23 SEC. 9499. SEVERABILITY.

24 If any provision of this title or the application thereof

25 to any person or circumstance is held invalid, the invalid-
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1 ity shall not affect other provisions or applications of this

2 title which can be given effect without regard to the invalid

3 provision or application, and to this end the provisions of

4 this title shall be severable.

5 Subtitle E—Teen Pregnancy and

6 Family Stability

7 SEC. 9501. STATE OPTION TO DENY TEMPORARY EMPLOY8 MENT ASSISTANCE FOR ADDITIONAL CHIL9 DREN.

10 (a) IN GENERAL.—Section 402(d)(1), as added by

11 section 9101(a) of this Act, is amended—

12 (1) by striking ‘‘(1) DETERMINATION OF

13 NEED.—’’ and inserting the following:

14 ‘‘(1) DETERMINATION OF NEED.—

15 ‘‘(A) IN GENERAL.—’’; and

16 (2) by adding at the end the following:

17 ‘‘(B) OPTIONAL DENIAL OF ASSISTANCE

18 TO FAMILIES HAVING ADDITIONAL CHILDREN

19 WHILE RECEIVING ASSISTANCE.—At the option

20 of the State, the State plan may provide that—

21 ‘‘(i)(I) a child shall not be considered

22 a needy child if the child is born (other

23 than as a result of rape or incest) to a

24 member of a family—
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1 ‘‘(aa) while the family was a re2 cipient of assistance under the State

3 plan; or

4 ‘‘(bb) during the 6-month period

5 ending with the date the family ap6 plied for such assistance; and

7 ‘‘(II) if the value of assistance to a

8 family under the State plan approved

9 under this part is reduced by reason of

10 subclause (I), each member of the family

11 shall be considered to be receiving such as12 sistance for purposes of eligibility for medi13 cal assistance under the State plan ap14 proved under title XIX for so long as as15 sistance to the family under the State plan

16 approved under this part would otherwise

17 not be so reduced; and

18 ‘‘(ii) if the State exercises the option,

19 the State may provide the family with

20 vouchers, in amounts not exceeding the

21 amount of any such reduction in assist22 ance, that may be used only to pay for

23 particular goods and services specified by

24 the State as suitable for the care of the
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1 child of the parent (such as diapers, cloth2 ing, or school supplies).’’.

3 (b) EFFECTIVE DATE.—The amendment made by

4 subsection (a) of this section shall take effect in the same

5 manner as the amendment made by section 9101(a) takes

6 effect.

7 SEC. 9502. SUPERVISED LIVING ARRANGEMENTS FOR MI8 NORS.

9 (a) IN GENERAL.—Section 402(c), as added by sec10 tion 9101(a) of this Act, is amended by adding at the end

11 the following:

12 ‘‘(8) SUPERVISED LIVING ARRANGEMENTS FOR

13 MINORS.—The State plan shall provide that—

14 ‘‘(A) except as provided in subparagraph

15 (B), in the case of any individual who is under

16 age 18 and has never married, and who has a

17 needy child in his or her care (or is pregnant

18 and is eligible for temporary employment assist19 ance under the State plan)—

20 ‘‘(i) such individual may receive such

21 assistance for the individual and such child

22 (or for herself in the case of a pregnant

23 woman) only if such individual and child

24 (or such pregnant woman) reside in a

25 place of residence maintained by a parent,
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1 legal guardian, or other adult relative of

2 such individual as such parent’s, guard3 ian’s, or adult relative’s own home; and

4 ‘‘(ii) such assistance (where possible)

5 shall be provided to the parent, legal

6 guardian, or other adult relative on behalf

7 of such individual and child; and

8 ‘‘(B)(i) in the case of an individual de9 scribed in clause (ii)—

10 ‘‘(I) the State agency shall assist such

11 individual in locating an appropriate adult12 supervised supportive living arrangement

13 taking into consideration the needs and

14 concerns of the individual, unless the State

15 agency determines that the individual’s

16 current living arrangement is appropriate,

17 and thereafter shall require that the indi18 vidual (and child, if any) reside in such liv19 ing arrangement as a condition of the con20 tinued receipt of assistance under the plan

21 (or in an alternative appropriate arrange22 ment, should circumstances change and the

23 current arrangement cease to be appro24 priate), or
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1 ‘‘(II) if the State agency is unable,

2 after making diligent efforts, to locate any

3 such appropriate living arrangement, the

4 State agency shall provide for comprehen5 sive case management, monitoring, and

6 other social services consistent with the

7 best interests of the individual (and child)

8 while living independently (as determined

9 by the State agency); and

10 ‘‘(ii) for purposes of clause (i), an individ11 ual is described in this clause if—

12 ‘‘(I) such individual has no parent or

13 legal guardian of his or her own who is liv14 ing and whose whereabouts are known;

15 ‘‘(II) no living parent or legal guard16 ian of such individual allows the individual

17 to live in the home of such parent or

18 guardian;

19 ‘‘(III) the State agency determines

20 that the physical or emotional health of

21 such individual or any needy child of the

22 individual would be jeopardized if such in23 dividual and such needy child lived in the

24 same residence with such individual’s own

25 parent or legal guardian; or
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1 ‘‘(IV) the State agency otherwise de2 termines (in accordance with regulations

3 issued by the Secretary) that it is in the

4 best interest of the needy child to waive

5 the requirement of subparagraph (A) with

6 respect to such individual.’’.

7 (b) EFFECTIVE DATE.—The amendment made by

8 subsection (a) of this section shall take effect in the same

9 manner as the amendment made by section 9101(a) takes

10 effect.

11 SEC. 9503. NATIONAL CLEARINGHOUSE ON ADOLESCENT

12 PREGNANCY.

13 (a) IN GENERAL.—Title XX (42 U.S.C. 1397–

14 1397f), as amended by section 9205(b) of this Act, is

15 amended by adding at the end the following:

16 ‘‘SEC. 2010. NATIONAL CLEARINGHOUSE ON ADOLESCENT

17 PREGNANCY.

18 ‘‘(a) NATIONAL CLEARINGHOUSE ON ADOLESCENT

19 PREGNANCY.—

20 ‘‘(1) ESTABLISHMENT.—The responsible Fed21 eral officials shall establish, through grant or con22 tract, a national center for the collection and provi23 sion of programmatic information and technical as24 sistance that relates to adolescent pregnancy preven25 tion programs, to be known as the ‘National Clear-
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1 inghouse on Adolescent Pregnancy Prevention Pro2 grams’.

3 ‘‘(2) FUNCTIONS.—The national center estab4 lished under paragraph (1) shall serve as a national

5 information and data clearinghouse, and as a train6 ing, technical assistance, and material development

7 source for adolescent pregnancy prevention pro8 grams. Such center shall—

9 ‘‘(A) develop and maintain a system for

10 disseminating information on all types of ado11 lescent pregnancy prevention programs and on

12 the state of adolescent pregnancy prevention

13 program development, including information

14 concerning the most effective model programs;

15 ‘‘(B) develop and sponsor a variety of

16 training institutes and curricula for adolescent

17 pregnancy prevention program staff;

18 ‘‘(C) identify model programs representing

19 the various types of adolescent pregnancy pre20 vention programs;

21 ‘‘(D) develop technical assistance materials

22 and activities to assist other entities in estab23 lishing and improving adolescent pregnancy

24 prevention programs;
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1 ‘‘(E) develop networks of adolescent preg2 nancy prevention programs for the purpose of

3 sharing and disseminating information; and

4 ‘‘(F) conduct such other activities as the

5 responsible Federal officials find will assist in

6 developing and carrying out programs or activi7 ties to reduce adolescent pregnancy.

8 ‘‘(b) FUNDING.—The responsible Federal officials

9 shall make grants to eligible entities for the establishment

10 and operation of a National Clearinghouse on Adolescent

11 Pregnancy Prevention Programs under subsection (a) so

12 that in the aggregate the expenditures for such grants do

13 not exceed $2,000,000 for fiscal year 1996, $4,000,000

14 for fiscal year 1997, $8,000,000 for fiscal year 1998, and

15 $10,000,000 for fiscal year 1999 and each subsequent fis16 cal year.

17 ‘‘(c) DEFINITIONS.—As used in this section:

18 ‘‘(1) ADOLESCENTS.—The term ‘adolescents’

19 means youth who are ages 10 through 19.

20 ‘‘(2) ELIGIBLE ENTITY.—The term ‘eligible en21 tity’ means a partnership that includes—

22 ‘‘(A) a local education agency, acting on

23 behalf of one or more schools, together with
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1 ‘‘(B) one or more community-based organi2 zations, institutions of higher education, or

3 public or private agencies or organizations.

4 ‘‘(3) ELIGIBLE AREA.—The term ‘eligible area’

5 means a school attendance area in which—

6 ‘‘(A) at least 75 percent of the children are

7 from low-income families as that term is used

8 in part A of title I of the Elementary and Sec9 ondary Education Act of 1965; or

10 ‘‘(B) the number of children receiving as11 sistance under a State plan approved under

12 part A of title IV of this Act is substantial as

13 determined by the responsible Federal officials;

14 or

15 ‘‘(C) the unmarried adolescent birth rate is

16 high, as determined by the responsible Federal

17 officials.

18 ‘‘(4) SCHOOL.—The term ‘school’ means a pub19 lic elementary, middle, or secondary school.

20 ‘‘(5) RESPONSIBLE FEDERAL OFFICIALS.—The

21 term ‘responsible Federal officials’ means the Sec22 retary of Education, the Secretary of Health and

23 Human Services, and the Chief Executive Officer of

24 the Corporation for National and Community Serv25 ice.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall become effective January 1, 1996.

3 SEC. 9504. REQUIRED COMPLETION OF HIGH SCHOOL OR

4 OTHER TRAINING FOR TEENAGE PARENTS.

5 (a) IN GENERAL.—Section 403(b)(1)(D), as added

6 by section 9101(a) of this Act, is amended—

7 (1) by inserting ‘‘(i)’’ after ‘‘(D)’’; and

8 (2) by adding at the end the following:

9 ‘‘(ii) in the case of a client who is a custo10 dial parent who is under age 18 (or age 19, at

11 the option of the State), has not successfully

12 completed a high-school education (or its equiv13 alent), and is required to participate in the

14 Work First program (including an individual

15 who would otherwise be exempt from participa16 tion in the program), shall provide that—

17 ‘‘(I) such parent participate in—

18 ‘‘(aa) educational activities di19 rected toward the attainment of a

20 high school diploma or its equivalent

21 on a full-time (as defined by the edu22 cational provider) basis; or

23 ‘‘(bb) an alternative educational

24 or training program on a full-time (as

25 defined by the provider) basis; and
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1 ‘‘(II) child care be provided in accord2 ance with section 2009 with respect to the

3 family.’’.

4 (b) STATE OPTION TO PROVIDE ADDITIONAL INCEN5 TIVES AND PENALTIES TO ENCOURAGE TEEN PARENTS

6 TO COMPLETE HIGH SCHOOL AND PARTICIPATE IN

7 PARENTING ACTIVITIES.—

8 (1) STATE PLAN.—Section 403(b)(1)(D), as

9 amended by subsection (a) of this section, is amend10 ed by adding at the end the following:

11 ‘‘(iii) at the option of the State, may pro12 vide that the client who is a custodial parent or

13 pregnant woman who is under age 19 (or age

14 21, at the option of the State) participate in a

15 program of monetary incentives and penalties

16 which—

17 ‘‘(I) may, at the option of the State,

18 require full-time participation by such cus19 todial parent or pregnant woman in sec20 ondary school or equivalent educational ac21 tivities, or participation in a course or pro22 gram leading to a skills certificate found

23 appropriate by the State agency or

24 parenting education activities (or any com-
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1 bination of such activities and secondary

2 education);

3 ‘‘(II) shall require that the needs of

4 such custodial parent or pregnant woman

5 be reviewed and the program assure that,

6 either in the initial development or revision

7 of such individual’s individual responsibil8 ity plan, there will be included a descrip9 tion of the services that will be provided to

10 the client and the way in which the pro11 gram and service providers will coordinate

12 with the educational or skills training ac13 tivities in which the client is participating;

14 ‘‘(III) shall provide monetary incen15 tives (to be treated as assistance under the

16 State plan) for more than minimally ac17 ceptable performance of required edu18 cational activities;

19 ‘‘(IV) shall provide penalties (which

20 may be those required by subsection (e) or,

21 with the approval of the Secretary, other

22 monetary penalties that the State finds will

23 better achieve the objectives of the pro24 gram) for less than minimally acceptable

25 performance of required activities;
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1 ‘‘(V) shall provide that when a mone2 tary incentive is payable because of the

3 more than minimally acceptable perform4 ance of required educational activities by a

5 custodial parent, the incentive be paid di6 rectly to such parent, regardless of wheth7 er the State agency makes payment of as8 sistance under the State plan directly to

9 such parent; and

10 ‘‘(VI) for purposes of any other Fed11 eral or federally-assisted program based on

12 need, shall not consider any monetary in13 centive paid under the State plan as in14 come in determining a family’s eligibility

15 for or amount of benefits under such pro16 gram, and if assistance is reduced by rea17 son of a penalty under this clause, such

18 other program shall treat the family in19 volved as if no such penalty has been ap20 plied.’’.

21 (c) EFFECTIVE DATE.—The amendments made by

22 this section shall take effect in the same manner as the

23 amendment made by section 9101(a) takes effect.
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1 SEC. 9505. DENIAL OF FEDERAL HOUSING BENEFITS TO MI2 NORS WHO BEAR CHILDREN OUT-OF-WED3 LOCK.

4 (a) PROHIBITION OF ASSISTANCE.—Notwithstanding

5 any other provision of law, a household whose head of

6 household is an individual who has borne a child out-of7 wedlock before attaining 18 years of age may not be pro8 vided Federal housing assistance for a dwelling unit until

9 attaining such age, unless—

10 (1) after the birth of the child—

11 (A) the individual marries an individual

12 who has been determined by the relevant State

13 to be the biological father of the child; or

14 (B) the biological parent of the child has

15 legal custody of the child and marries an indi16 vidual who legally adopts the child;

17 (2) the individual is a biological and custodial

18 parent of another child who was not born out-of19 wedlock; or

20 (3) eligibility for such Federal housing assist21 ance is based in whole or in part on any disability

22 or handicap of a member of the household.

23 (4) the state deems it necessary.

24 (b) DEFINITIONS.—For purposes of this section, the

25 following definitions shall apply:
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1 (1) COVERED PROGRAM.—The term ‘‘covered

2 program’’ means—

3 (A) the program of rental assistance on be4 half of low-income families provided under sec5 tion 8 of the United States Housing Act of

6 1937 (42 U.S.C. 1437f);

7 (B) the public housing program under title

8 I of the United States Housing Act of 1937 (42

9 U.S.C. 1437 et seq.);

10 (C) the program of rent supplement pay11 ments on behalf of qualified tenants pursuant

12 to contracts entered into under section 101 of

13 the Housing and Urban Development Act of

14 1965 (12 U.S.C. 1701s);

15 (D) the program of interest reduction pay16 ments pursuant to contracts entered into by the

17 Secretary of Housing and Urban Development

18 under section 236 of the National Housing Act

19 (12 U.S.C. 1715z–1);

20 (E) the program for mortgage insurance

21 provided pursuant to sections 221(d) (3) or (4)

22 of the National Housing Act (12 U.S.C.

23 1715l(d)) for multifamily housing for low- and

24 moderate-income families;
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1 (F) the rural housing loan program under

2 section 502 of the Housing Act of 1949 (42

3 U.S.C. 1472);

4 (G) the rural housing loan guarantee pro5 gram under section 502(h) of the Housing Act

6 of 1949 (42 U.S.C. 1472(h));

7 (H) the loan and grant programs under

8 section 504 of the Housing Act of 1949 (42

9 U.S.C. 1474) for repairs and improvements to

10 rural dwellings;

11 (I) the program of loans for rental and co12 operative rural housing under section 515 of

13 the Housing Act of 1949 (42 U.S.C. 1485);

14 (J) the program of rental assistance pay15 ments pursuant to contracts entered into under

16 section 521(a)(2)(A) of the Housing Act of

17 1949 (42 U.S.C. 1490a(a)(2)(A));

18 (K) the loan and assistance programs

19 under sections 514 and 516 of the Housing Act

20 of 1949 (42 U.S.C. 1484, 1486) for housing for

21 farm labor;

22 (L) the program of grants and loans for

23 mutual and self-help housing and technical as24 sistance under section 523 of the Housing Act

25 of 1949 (42 U.S.C. 1490c);
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1 (M) the program of grants for preservation

2 and rehabilitation of housing under section 533

3 of the Housing Act of 1949 (42 U.S.C.

4 1490m); and

5 (N) the program of site loans under sec6 tion 524 of the Housing Act of 1949 (42

7 U.S.C. 1490d).

8 (2) COVERED PROJECT.—The term ‘‘covered

9 project’’ means any housing for which Federal hous10 ing assistance is provided that is attached to the

11 project or specific dwelling units in the project.

12 (3) FEDERAL HOUSING ASSISTANCE.—The term

13 ‘‘Federal housing assistance’’ means—

14 (A) assistance provided under a covered

15 program in the form of any contract, grant,

16 loan, subsidy, cooperative agreement, loan or

17 mortgage guarantee or insurance, or other fi18 nancial assistance; or

19 (B) occupancy in a dwelling unit that is—

20 (i) provided assistance under a cov21 ered program; or

22 (ii) located in a covered project and

23 subject to occupancy limitations under a

24 covered program that are based on income.
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1 (4) STATE.—The term ‘‘State’’ means the

2 States of the United States, the District of Colum3 bia, the Commonwealth of Puerto Rico, the Com4 monwealth of the Northern Mariana Islands, Guam,

5 the Virgin Islands, American Samoa, and any other

6 territory or possession of the United States.

7 (c) LIMITATIONS ON APPLICABILITY.—Subsection

8 (a) shall not apply to Federal housing assistance provided

9 for a household pursuant to an application or request for

10 such assistance made by such household before the effec11 tive date of this Act if the household was receiving such

12 assistance on the effective date of this Act.

13 SEC. 9506. STATE OPTION TO DENY TEMPORARY EMPLOY14 MENT ASSISTANCE TO MINOR PARENTS.

15 (a) IN GENERAL.—Section 402(d)(1), as added by

16 section 9101(a) of this Act and as amended by section

17 9501(a) of this Act, is amended by adding at the end the

18 following:

19 ‘‘(C) OPTIONAL DENIAL OF ASSISTANCE

20 TO MINOR PARENTS.—At the option of the

21 State, the State plan may provide that—

22 ‘‘(i)(I) in determining the need of a

23 family, the State may disregard the needs

24 of any family member who is a parent and
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1 has not attained 18 years of age or such

2 lesser age as the State may prescribe; and

3 ‘‘(II) if the value of the assistance

4 provided to a family under the State plan

5 approved under this part is reduced by

6 reason of subclause (I), each member of

7 the family shall be considered to be receiv8 ing such assistance for purposes of eligi9 bility for medical assistance under the

10 State plan approved under title XIX for so

11 long as such assistance under the State

12 plan approved under this part would other13 wise not be so reduced; and

14 ‘‘(ii) if the State exercises the option, the

15 State may provide the family with vouchers, in

16 amounts not exceeding the value of any such re17 duction in assistance, that may be used only to

18 pay for—

19 ‘‘(I) particular goods and services

20 specified by the State as suitable for the

21 care of the child of the parent (such as

22 diapers, clothing, or cribs); and

23 ‘‘(II) the costs associated with a ma24 ternity home, foster home, or other adult-
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1 supervised supportive living arrangement

2 in which the parent and the child live.’’.

3 (b) EFFECTIVE DATE.—The amendment made by

4 subsection (a) shall take effect in the same manner in

5 which the amendment made by section 9101(a) takes ef6 fect.

7 Subtitle F—SSI Reform

8 SEC. 9601. DEFINITION AND ELIGIBILITY RULES.

9 (a) DEFINITION OF CHILDHOOD DISABILITY.—Sec10 tion 1614(a)(3) (42 U.S.C. 1382c(a)(3)) is amended—

11 (1) in subparagraph (A), by striking ‘‘An indi12 vidual’’ and inserting ‘‘Except as provided in sub13 paragraph (C), an individual’’;

14 (2) in subparagraph (A), by striking ‘‘(or, in

15 the case of an individual under the age of 18, if he

16 suffers from any medically determinable physical or

17 mental impairment of comparable severity)’’;

18 (3) by redesignating subparagraphs (C) through

19 (H) as subparagraphs (D) through (I), respectively;

20 (4) by inserting after subparagraph (B) the fol21 lowing new subparagraph:

22 ‘‘(C) An individual under the age of 18 shall be con23 sidered disabled for the purposes of this title if that indi24 vidual has a medically determinable physical or mental im25 pairment, which results in marked and severe functional
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1 limitations, and which can be expected to result in death

2 or which has lasted or can be expected to last for a contin3 uous period of not less than 12 months.’’; and

4 (5) in subparagraph (F), as so redesignated by

5 paragraph (3) of this subsection, by striking ‘‘(D)’’

6 and inserting ‘‘(E)’’.

7 (b) CHANGES TO CHILDHOOD SSI REGULATIONS.—

8 (1) MODIFICATION TO MEDICAL CRITERIA FOR

9 EVALUATION OF MENTAL AND EMOTIONAL DIS10 ORDERS.—The Commissioner of Social Security

11 shall modify sections 112.00C.2. and

12 112.02B.2.c.(2) of appendix 1 to subpart P of part

13 404 of title 20, Code of Federal Regulations, to

14 eliminate references to maladaptive behavior in the

15 domain of personal/behavorial function.

16 (2) DISCONTINUANCE OF INDIVIDUALIZED

17 FUNCTIONAL ASSESSMENT.—The Commissioner of

18 Social Security shall discontinue the individualized

19 functional assessment for children set forth in sec20 tions 416.924d and 416.924e of title 20, Code of

21 Federal Regulations.

22 (c) EFFECTIVE DATE; REGULATIONS; APPLICATION

23 TO CURRENT RECIPIENTS.—

24 (1) IN GENERAL.—The amendments made by

25 subsections (a) and (b) shall apply to applicants for
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1 benefits for months beginning on or after January

2 1, 1997.

3 (2) REGULATIONS.—The Commissioner of So4 cial Security shall issue such regulations as the

5 Commissioner determines to be necessary to imple6 ment the amendments made by subsections (a) and

7 (b), not later than January 1, 1997.

8 (3) APPLICATION TO CURRENT RECIPIENTS.—

9 (A) ELIGIBILITY DETERMINATIONS.—Be10 ginning on January 1, 1997, and ending not

11 later than January 1, 1998, the Commissioner

12 of Social Security shall redetermine the eligi13 bility of any individual under age 18 who is re14 ceiving supplemental security income benefits

15 based on a disability under title XVI of the So16 cial Security Act as of the date of the enact17 ment of this Act and whose eligibility for such

18 benefits may terminate by reason of the amend19 ments made by subsection (a) or (b). With re20 spect to any redetermination under this sub21 paragraph—

22 (i) section 1614(a)(4) of the Social

23 Security Act (42 U.S.C. 1382c(a)(4)) shall

24 not apply;
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1 (ii) the Commissioner of Social Secu2 rity shall apply the eligibility criteria for

3 new applicants for benefits under title XVI

4 of such Act;

5 (iii) the Commissioner shall give such

6 redetermination priority over all continuing

7 eligibility reviews and other reviews under

8 such title; and

9 (iv) such redetermination shall be

10 counted as a review or redetermination

11 otherwise required to be made under sec12 tion 208 of the Social Security Independ13 ence and Program Improvements Act of

14 1994 or any other provision of title XVI of

15 the Social Security Act.

16 (B) NOTICE.—Not later than 90 days

17 after the date of the enactment of this Act, the

18 Commissioner of Social Security shall notify an

19 individual described in subparagraph (A) of the

20 provisions of this paragraph.

21 SEC. 9602. ELIGIBILITY REDETERMINATIONS AND CON22 TINUING DISABILITY REVIEWS.

23 (a) CONTINUING DISABILITY REVIEWS RELATING TO

24 CERTAIN CHILDREN.—Section 1614(a)(3)(H) (42 U.S.C.
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1 1382c(a)(3)(H)), as so redesignated by section 9601(a)(3)

2 of this Act, is amended—

3 (1) by inserting ‘‘(i)’’ after ‘‘(H)’’; and

4 (2) by adding at the end the following new

5 clause:

6 ‘‘(ii)(I) Not less frequently than once every 3 years,

7 the Commissioner shall review in accordance with para8 graph (4) the continued eligibility for benefits under this

9 title of each individual who has not attained 18 years of

10 age and is eligible for such benefits by reason of an im11 pairment (or combination of impairments) which may im12 prove (or, which is unlikely to improve, at the option of

13 the Commissioner).

14 ‘‘(II) A parent or guardian of a recipient whose case

15 is reviewed under this clause shall present, at the time

16 of review, evidence demonstrating that the recipient is,

17 and has been, receiving treatment, to the extent consid18 ered medically necessary and available, of the condition

19 which was the basis for providing benefits under this

20 title.’’.

21 (b) DISABILITY ELIGIBILITY REDETERMINATIONS

22 REQUIRED FOR SSI RECIPIENTS WHO ATTAIN 18 YEARS

23 OF AGE.—

24 (1) IN GENERAL.—Section 1614(a)(3)(H) (42

25 U.S.C. 1382c(a)(3)(H)), as so redesignated by sec-
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1 tion 9601(a)(3) of this Act and as amended by sub2 section (a) of this section, is amended by adding at

3 the end the following new clause:

4 ‘‘(iii) If an individual is eligible for benefits under this

5 title by reason of disability for the month preceding the

6 month in which the individual attains the age of 18 years,

7 the Commissioner shall redetermine such eligibility—

8 ‘‘(I) during the 1-year period beginning on the

9 individual’s 18th birthday; and

10 ‘‘(II) by applying the criteria used in determin11 ing the initial eligibility for applicants who have at12 tained the age of 18 years.

13 With respect to a redetermination under this clause, para14 graph (4) shall not apply and such redetermination shall

15 be considered a substitute for a review or redetermination

16 otherwise required under any other provision of this sub17 paragraph during that 1-year period.’’.

18 (2) CONFORMING REPEAL.—Section 207 of the

19 Social Security Independence and Program Improve20 ments Act of 1994 (42 U.S.C. 1382 note; 108 Stat.

21 1516) is hereby repealed.

22 (c) CONTINUING DISABILITY REVIEW REQUIRED FOR

23 LOW BIRTH WEIGHT BABIES.—Section 1614(a)(3)(H)

24 (42 U.S.C. 1382c(a)(3)(H)), as so redesignated by section

25 9601(a)(3) of this Act and as amended by subsections (a)
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1 and (b) of this section, is amended by adding at the end

2 the following new clause:

3 ‘‘(iv)(I) Not later than 12 months after the birth of

4 an individual, the Commissioner shall review in accordance

5 with paragraph (4) the continuing eligibility for benefits

6 under this title by reason of disability of such individual

7 whose low birth weight is a contributing factor material

8 to the Commissioner’s determination that the individual

9 is disabled.

10 ‘‘(II) A review under subclause (I) shall be considered

11 a substitute for a review otherwise required under any

12 other provision of this subparagraph during that 12-

13 month period.

14 ‘‘(III) A parent or guardian of a recipient whose case

15 is reviewed under this clause shall present, at the time

16 of review, evidence demonstrating that the recipient is,

17 and has been, receiving treatment, to the extent consid18 ered medically necessary and available, of the condition

19 which was the basis for providing benefits under this

20 title.’’.

21 (d) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to benefits for months beginning

23 on or after the date of the enactment of this Act, without

24 regard to whether regulations have been issued to imple25 ment such amendments.
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1 SEC. 9603. ADDITIONAL ACCOUNTABILITY REQUIREMENTS.

2 (a) TIGHTENING OF REPRESENTATIVE PAYEE RE3 QUIREMENTS.—

4 (1) CLARIFICATION OF ROLE.—Section

5 1631(a)(2)(B)(ii) (42 U.S.C. 1383(a)(2)(B)(ii)) is

6 amended by striking ‘‘and’’ at the end of subclause

7 (II), by striking the period at the end of subclause

8 (IV) and inserting ‘‘; and’’, and by adding after

9 subclause (IV) the following new subclause:

10 ‘‘(V) advise such person through the notice of

11 award of benefits, and at such other times as the

12 Commissioner of Social Security deems appropriate,

13 of specific examples of appropriate expenditures of

14 benefits under this title and the proper role of a rep15 resentative payee.’’.

16 (2) DOCUMENTATION OF EXPENDITURES RE17 QUIRED.—

18 (A) IN GENERAL.—Subparagraph (C)(i) of

19 section 1631(a)(2) (42 U.S.C. 1383(a)(2)) is

20 amended to read as follows:

21 ‘‘(C)(i) In any case where payment is made to a rep22 resentative payee of an individual or spouse, the Commis23 sioner of Social Security shall—

24 ‘‘(I) require such representative payee to docu25 ment expenditures and keep contemporaneous
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1 records of transactions made using such payment;

2 and

3 ‘‘(II) implement statistically valid procedures

4 for reviewing a sample of such contemporaneous

5 records in order to identify instances in which such

6 representative payee is not properly using such pay7 ment.’’.

8 (B) CONFORMING AMENDMENT WITH RE9 SPECT TO PARENT PAYEES.—Clause (ii) of sec10 tion 1631(a)(2)(C) (42 U.S.C. 1383(a)(2)(C))

11 is amended by striking ‘‘Clause (i)’’ and insert12 ing ‘‘Subclauses (II) and (III) of clause (i)’’.

13 (3) EFFECTIVE DATE.—The amendments made

14 by this subsection shall apply to benefits paid after

15 the date of the enactment of this Act.

16 (b) DEDICATED SAVINGS ACCOUNTS.—

17 (1) IN GENERAL.—Section 1631(a)(2)(B) (42

18 U.S.C. 1383(a)(2)(B)) is amended by adding at the

19 end the following:

20 ‘‘(xiv) Notwithstanding clause (x), the Commissioner

21 of Social Security may, at the request of the representative

22 payee, pay any lump sum payment for the benefit of a

23 child into a dedicated savings account that could only be

24 used to purchase for such child—

25 ‘‘(I) education and job skills training;
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1 ‘‘(II) special equipment or housing modifica2 tions or both specifically related to, and required by

3 the nature of, the child’s disability; and

4 ‘‘(III) appropriate therapy and rehabilitation.’’.

5 (2) DISREGARD OF TRUST FUNDS.—Section

6 1613(a) (42 U.S.C. 1382b(a)) is amended—

7 (A) by striking ‘‘and’’ at the end of para8 graph (10),

9 (B) by striking the period at the end of

10 paragraph (11) and inserting ‘‘; and’’, and

11 (C) by inserting after paragraph (11) the

12 following:

13 ‘‘(12) all amounts deposited in, or interest cred14 ited to, a dedicated savings account described in sec15 tion 1631(a)(2)(B)(xiv).’’.

16 (3) EFFECTIVE DATE.—The amendments made

17 by this subsection shall apply to payments made

18 after the date of the enactment of this Act.

19 SEC. 9604. DENIAL OF SSI BENEFITS BY REASON OF DIS20 ABILITY TO DRUG ADDICTS AND ALCOHOL21 ICS.

22 (a) IN GENERAL.—Section 1614(a)(3) (42 U.S.C.

23 1382c(a)(3)), as amended by section 9601(a)(3) of this

24 Act, is amended by adding at the end the following:
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1 ‘‘(J) Notwithstanding subparagraph (A), an individ2 ual shall not be considered to be disabled for purposes of

3 this title if alcoholism or drug addiction would (but for

4 this subparagraph) be a contributing factor material to

5 the Commissioner’s determination that the individual is

6 disabled.’’.

7 (b) CONFORMING AMENDMENTS.—

8 (1) Section 1611(e) (42 U.S.C. 1382(e)) is

9 amended by striking paragraph (3).

10 (2) Section 1613(a)(12) (42 U.S.C.

11 1382b(a)(12)) is amended by striking

12 ‘‘1631(a)(2)(B)(xiv)’’ and inserting

13 ‘‘1631(a)(2)(B)(xiii)’’.

14 (3) Section 1631(a)(2)(A)(ii) (42 U.S.C.

15 1383(a)(2)(A)(ii)) is amended—

16 (A) by striking ‘‘(I)’’; and

17 (B) by striking subclause (II).

18 (4) Section 1631(a)(2)(B) (42 U.S.C.

19 1383(a)(2)(B)) is amended—

20 (A) by striking clause (vii);

21 (B) in clause (viii), by striking ‘‘(ix)’’ and

22 inserting ‘‘(viii)’’;

23 (C) in clause (ix)—

24 (i) by striking ‘‘(viii)’’ and inserting

25 ‘‘(vii)’’; and
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1 (ii) in subclause (II), by striking all

2 that follows ‘‘15 years’’ and inserting a pe3 riod;

4 (D) in clause (xiii)—

5 (i) by striking ‘‘(xii)’’ and inserting

6 ‘‘(xi)’’; and

7 (ii) by striking ‘‘(xi)’’ and inserting

8 ‘‘(x)’’;

9 (E) in clause (xiv) (as added by section

10 9603(b)(1) of this Act), by striking ‘‘(x)’’ and

11 inserting ‘‘(ix)’’; and

12 (F) by redesignating clauses (viii) through

13 (xiv) as clauses (vii) through (xiii), respectively.

14 (5) Section 1631(a)(2)(D)(i)(II) (42 U.S.C.

15 1383(a)(2)(D)(i)(II)) is amended by striking all that

16 follows ‘‘$25.00 per month’’ and inserting a period.

17 (6) Section 1634 (42 U.S.C. 1383c) is amended

18 by striking subsection (e).

19 (7) Section 201(c)(1) of the Social Security

20 Independence and Program Improvements Act of

21 1994 (42 U.S.C. 425 note) is amended—

22 (A) by striking ‘‘—’’ and all that follows

23 through ‘‘(A)’’ the 1st place such term appears;

24 (B) by striking ‘‘and’’ the 3rd place such

25 term appears;
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1 (C) by striking subparagraph (B);

2 (D) by striking ‘‘either subparagraph (A)

3 or subparagraph (B)’’ and inserting ‘‘the pre4 ceding sentence’’; and

5 (E) by striking ‘‘subparagraph (A) or (B)’’

6 and inserting ‘‘the preceding sentence’’.

7 (c) EFFECTIVE DATE.—The amendments made by

8 this section shall take effect on October 1, 1995, and shall

9 apply with respect to months beginning on or after such

10 date.

11 (d) FUNDING OF CERTAIN PROGRAMS FOR DRUG

12 ADDICTS AND ALCOHOLICS.—Out of any money in the

13 Treasury of the United States not otherwise appropriated,

14 the Secretary of the Treasury shall pay to the Director

15 of the National Institute on Drug Abuse—

16 (1) $95,000,000, for each of fiscal years 1997,

17 1998, 1999, and 2000, for expenditure through the

18 Federal Capacity Expansion Program to expand the

19 availability of drug treatment; and

20 (2) $5,000,000 for each of fiscal years 1997,

21 1998, 1999, and 2000 to be expended solely on the

22 medication development project to improve drug

23 abuse and drug treatment research.
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1 SEC. 9605. DENIAL OF SSI BENEFITS FOR 10 YEARS TO INDI2 VIDUALS FOUND TO HAVE FRAUDULENTLY

3 MISREPRESENTED RESIDENCE IN ORDER TO

4 OBTAIN BENEFITS SIMULTANEOUSLY IN 2 OR

5 MORE STATES.

6 Section 1614(a) (42 U.S.C. 1382c(a)) is amended by

7 adding at the end the following:

8 ‘‘(5) An individual shall not be considered an eligible

9 individual for purposes of this title during the 10-year pe10 riod beginning on the date the individual is found by a

11 State to have made, or is convicted in Federal or State

12 court of having made, a fraudulent statement or represen13 tation with respect to the place of residence of the individ14 ual in order to receive benefits simultaneously from 2 or

15 more States under programs that are funded under part

16 A of title IV, or title XIX of this Act, the consolidated

17 program of food assistance under chapter 2 of subtitle E

18 of title XIV of the Omnibus Budget Reconciliation Act of

19 1995, or the Food Stamp Act of 1977 (as in effect before

20 the effective date of such chapter), or benefits in 2 or more

21 States under the supplemental security income program

22 under title XVI of this Act.’’.
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1 SEC. 9606. DENIAL OF SSI BENEFITS FOR FUGITIVE FELONS

2 AND PROBATION AND PAROLE VIOLATORS.

3 (a) IN GENERAL.—Section 1611(e) (42 U.S.C.

4 1382(e)), as amended by section 9604(b)(1) of this Act,

5 is amended by inserting after paragraph (2) the following:

6 ‘‘(3) A person shall not be an eligible individual

7 or eligible spouse for purposes of this title with re8 spect to any month if, throughout the month, the

9 person is—

10 ‘‘(A) fleeing to avoid prosecution, or cus11 tody or confinement after conviction, under the

12 laws of the place from which the person flees,

13 for a crime, or an attempt to commit a crime,

14 which is a felony under the laws of the place

15 from which the person flees, or which, in the

16 case of the State of New Jersey, is a high mis17 demeanor under the laws of such State; or

18 ‘‘(B) violating a condition of probation or

19 parole imposed under Federal or State law.’’.

20 (b) EXCHANGE OF INFORMATION WITH LAW EN21 FORCEMENT AGENCIES.—Section 1631(e) of such Act (42

22 U.S.C. 1383(e)) is amended by inserting after paragraph

23 (3) the following:

24 ‘‘(4) Notwithstanding any other provision of law, the

25 Commissioner shall furnish any Federal, State, or local

26 law enforcement officer, upon the request of the officer,
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1 with the current address of any recipient of benefits under

2 this title, if the officer furnishes the agency with the name

3 of the recipient and notifies the agency that—

4 ‘‘(A) the recipient—

5 ‘‘(i) is fleeing to avoid prosecution, or cus6 tody or confinement after conviction, under the

7 laws of the place from which the person flees,

8 for a crime, or an attempt to commit a crime,

9 which is a felony under the laws of the place

10 from which the person flees, or which, in the

11 case of the State of New Jersey, is a high mis12 demeanor under the laws of such State;

13 ‘‘(ii) is violating a condition of probation or

14 parole imposed under Federal or State law; or

15 ‘‘(iii) has information that is necessary for

16 the officer to conduct the officer’s official du17 ties;

18 ‘‘(B) the location or apprehension of the recipi19 ent is within the official duties of the officer; and

20 ‘‘(C) the request is made in the proper exercise

21 of such duties.’’.
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1 Subtitle D—Supplemental Security Income

2 SEC. 9607 VERIFICATION OF ELIGIBILITY FOR CERTAIN SSI

3 DISABILITY BENEFITS.

4 Section 1631 (42 U.S.C. 1383) is amended by adding

5 at the end the following new subsection:

6 ‘‘(o)(1) Notwithstanding any other provision of law,

7 if the Commissioner of Social Security determines that an

8 individual, who is 18 years of age or older, is eligible to

9 receive benefits pursuant to section 1614(a)(3), the Com10 missioner shall, at the time of the determination, either

11 exempt the individual from an eligibility review or estab12 lish a schedule for reviewing the individual’s continuing

13 eligibility in accordance with paragraph (2).

14 ‘‘(2)(A) The Commissioner shall establish a periodic

15 review with respect to the continuing eligibility of an indi16 vidual to receive benefits, unless the individual is exempt

17 from review under subparagraph (C) or is subject to a

18 scheduled review under subparagraph (B). A periodic re19 view under this subparagraph shall be initiated by the

20 Commissioner not later than 30 months after the date a

21 determination is made that the individual is eligible for

22 benefits and every 30 months thereafter, unless a waiver

23 is granted under section 221(i)(2). However, the Commis24 sioner shall not postpone the initiation of a periodic review

25 for more than 12 months in any case in which such waiver
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1 has been granted unless exigent circumstances require

2 such postponement.

3 ‘‘(B)(i) In the case of an individual, other than an

4 individual who is exempt from review under subparagraph

5 (C) or with respect to whom subparagraph (A) applies,

6 the Commissioner shall schedule a review regarding the

7 individual’s continuing eligibility to receive benefits at any

8 time the Commissioner determines, based on the evidence

9 available, that there is a significant possibility that the

10 individual may cease to be entitled to such benefits.

11 ‘‘(ii) The Commissioner may establish classifications

12 of individuals for whom a review of continuing eligibility

13 is scheduled based on the impairments that are the basis

14 for such individuals’ eligibility for benefits. A review of

15 an individual covered by a classification shall be scheduled

16 in accordance with the applicable classification, unless the

17 Commissioner determines that applying such schedule is

18 inconsistent with the purpose of this Act or the integrity

19 of the supplemental security income program.

20 ‘‘(C)(i) The Commissioner may exempt an individual

21 from review under this subsection, if the individual’s eligi22 bility for benefits is based on a condition that, as a prac23 tical matter, has no substantial likelihood of improving to

24 a point where the individual will be able to perform sub25 stantial gainful activity.
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1 ‘‘(ii) The Commissioner may establish classifications

2 of individuals who are exempt from review under this sub3 section based on the impairments that are the basis for

4 such individuals’ eligibility for benefits. Notwithstanding

5 any such classification, the Commissioner may, at the time

6 of determining an individual’s eligibility, schedule a review

7 of such individual’s continuing eligibility if the Commis8 sioner determines that a review is necessary to preserve

9 the integrity of the supplemental security income program.

10 ‘‘(3) The Commissioner may revise a determination

11 made under paragraph (1) and schedule a review under

12 paragraph (2)(B), if the Commissioner obtains credible

13 evidence that an individual may no longer be eligible for

14 benefits or the Commissioner determines that a review is

15 necessary to maintain the integrity of the supplemental

16 security income program. Information obtained under sec17 tion 1137 may be used as the basis to schedule a review.

18 ‘‘(4)(i) The requirements of sections 1614(a)(4) and

19 1633 shall apply to reviews conducted under this sub20 section.

21 ‘‘(ii) Such reviews may be conducted by the applicable

22 State agency or the Commissioner, whichever is appro23 priate.’’.
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1 MODIFICATION TO ACCELERATE IMPLEMENTATION OF

2 CONRAD CONTINUING DISABILITY REVIEW PROVISION

3 At the end of section 841 of S. 840, insert after ‘‘is

4 appropriate.’’ the following:

5 ‘‘(5) TRANSITION RULE.—Not later than three

6 months after the date of enactment of this sub7 section, the Commissioner shall establish a schedule

8 for reviewing the continuing eligibility of each indi9 vidual receiving benefits pursuant to section

10 1614(a)(3) on the date of enactment and who is 18

11 years of age or older unless such individual is ex12 empt under subparagraph (2)(C). Such reviews shall

13 be scheduled under the procedures set out in para14 graph (2), except that the reviews shall be scheduled

15 so that the eligibility of one-third of all such non-ex16 empt individuals is reviewed within one year after

17 the date of enactment, the eligibility of two-thirds of

18 such non-exempt individuals is reviewed within two

19 years of the date of enactment, and all remaining

20 non-exempt individuals receiving benefits on the date

21 of enactment of this subsection who continue receiv22 ing benefits shall have their eligibility reviewed with23 in three years of the date of enactment. Each indi24 vidual determined eligible to continue receiving bene25 fits in a review scheduled under this paragraph
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1 shall, at the time of such determination, be subject

2 to paragraph (1).’’.

3 Subtitle H—Treatment of Aliens

4 SEC. 9801. EXTENSION OF DEEMING OF INCOME AND RE5 SOURCES UNDER TEA, SSI, AND FOOD STAMP

6 PROGRAMS.

7 (a) IN GENERAL.—Except as provided in subsections

8 (b) and (c), in applying sections 407 and 1621 of the So9 cial Security Act and section 5(i) of the Food Stamp Act

10 of 1977, the period in which each respective section other11 wise applies with respect to an alien shall be extended

12 through the date (if any) on which the alien becomes a

13 citizen of the United States (under chapter 2 of title III

14 of the Immigration and Nationality Act).

15 (b) EXCEPTION.—Subsection (a) shall not apply to

16 an alien if—

17 (1) the alien has been lawfully admitted to the

18 United States for permanent residence, has attained

19 75 years of age, and has resided in the United

20 States for at least 5 years;

21 (2) the alien—

22 (A) is a veteran (as defined in section 101

23 of title 38, United States Code) with a dis24 charge characterized as an honorable discharge,
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1 (B) is on active duty (other than active

2 duty for training) in the Armed Forces of the

3 United States, or

4 (C) is the spouse or unmarried dependent

5 child of an individual described in subparagraph

6 (A) or (B);

7 (3) the alien is the subject of domestic violence

8 by the alien’s spouse and a divorce between the alien

9 and the alien’s spouse has been initiated through the

10 filing of an appropriate action in an appropriate

11 court; or

12 (4) there has been paid with respect to the self13 employment income or employment of the alien, or

14 of a parent or spouse of the alien, taxes under chap15 ter 2 or chapter 21 of the Internal Revenue Code of

16 1986 in each of 20 different calendar quarters.

17 (c) HOLD HARMLESS FOR MEDICAID ELIGIBILITY.—

18 Subsection (a) shall not apply with respect to determina19 tions of eligibility for benefits under a State plan approved

20 under part A of title IV of the Social Security Act or under

21 the supplemental income security program under title XVI

22 of such Act but only insofar as such determinations pro23 vide for eligibility for medical assistance under title XIX

24 of such Act.
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1 (d) EXECPTION FOR ALIENS RECEIVING BENEFIT.—

2 Subsection (a) shall not apply with respect to determina3 tions of eligibility for a benefit for an alien receiving such

4 a benefit on the date of the enactment of the Common

5 Sense Budget Act of 1996 who otherwise continues to be

6 eligible for and continues to receive such benefit after such

7 date.

8 (e) RULES REGARDING INCOME AND RESOURCE

9 DEEMING UNDER TEA PROGRAM.—Subpart 1 of part A

10 of title IV of the Social Security Act, as added by section

11 9101(a) of this Act, is amended by adding at the end the

12 following:

13 ‘‘SEC. 407. ATTRIBUTION OF SPONSOR’S INCOME AND RE14 SOURCES TO ALIEN.

15 ‘‘(a) For purposes of determining eligibility for and

16 the amount of assistance under a State plan approved

17 under this part for an individual who is an alien lawfully

18 admitted for permanent residence or otherwise perma19 nently residing in the United States under color of law

20 (including any alien who is lawfully present in the United

21 States as a result of the application of the provisions of

22 section 207(c) of the Immigration and Nationality Act (or

23 of section 203(a)(7) of such Act prior to April 1, 1980),

24 or as a result of the application of the provisions of section

25 208 or 212(d)(5) of such Act), the income and resources
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1 of any person who (as a sponsor of such individual’s entry

2 into the United States) executed an affidavit of support

3 or similar agreement with respect to such individual, and

4 the income and resources of the sponsor’s spouse, shall

5 be deemed to be the unearned income and resources of

6 such individual (in accordance with subsections (b) and

7 (c)) for a period of three years after the individual’s entry

8 into the United States, except that this section is not ap9 plicable if such individual is a dependent child and such

10 sponsor (or such sponsor’s spouse) is the parent of such

11 child.

12 ‘‘(b)(1) The amount of income of a sponsor (and his

13 spouse) which shall be deemed to be the unearned income

14 of an alien for any month shall be determined as follows:

15 ‘‘(A) the total amount of earned and unearned

16 income of such sponsor and such sponsor’s spouse

17 (if such spouse is living with the sponsor) shall be

18 determined for such month;

19 ‘‘(B) the amount determined under subpara20 graph (A) shall be reduced by an amount equal to

21 the sum of—

22 ‘‘(i) the lesser of (I) 20 percent of the total

23 of any amounts received by the sponsor and his

24 spouse in such month as wages or salary or as

25 net earnings from self-employment, plus the full
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1 amount of any costs incurred by them in pro2 ducing self-employment income in such month,

3 or (II) $175;

4 ‘‘(ii) the cash needs standard established

5 by the State under its plan for a family of the

6 same size and composition as the sponsor and

7 those other individuals living in the same house8 hold as the sponsor who are claimed by him as

9 dependents for purposes of determining his

10 Federal personal income tax liability but whose

11 needs are not taken into account in making a

12 determination under section 402(d);

13 ‘‘(iii) any amounts paid by the sponsor (or

14 his spouse) to individuals not living in such

15 household who are claimed by him as depend16 ents for purposes of determining his Federal

17 personal income tax liability; and

18 ‘‘(iv) any payments of alimony or child

19 support with respect to individuals not living in

20 such household.

21 ‘‘(2) The amount of resources of a sponsor (and his

22 spouse) which shall be deemed to be the resources of an

23 alien for any month shall be determined as follows:

24 ‘‘(A) the total amount of the resources (deter25 mined as if the sponsor were applying for assistance
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1 under the State plan approved under this part) of

2 such sponsor and such sponsor’s spouse (if such

3 spouse is living with the sponsor) shall be deter4 mined; and

5 ‘‘(B) the amount determined under subpara6 graph (A) shall be reduced by $1,500.

7 ‘‘(c)(1) Any individual who is an alien and whose

8 sponsor was a public or private agency shall be ineligible

9 for assistance under a State plan approved under this part

10 during the period of three years after his or her entry into

11 the United States, unless the State agency administering

12 such plan determines that such sponsor either no longer

13 exists or has become unable to meet such individual’s

14 needs; and such determination shall be made by the State

15 agency based upon such criteria as it may specify in the

16 State plan, and upon such documentary evidence as it may

17 therein require. Any such individual, and any other indi18 vidual who is an alien (as a condition of his or her eligi19 bility for assistance under a State plan approved under

20 this part during the period of three years after his or her

21 entry into the United States), shall be required to provide

22 to the State agency administering such plan such informa23 tion and documentation with respect to his sponsor as may

24 be necessary in order for the State agency to make any

25 determination required under this section, and to obtain
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1 any cooperation from such sponsor necessary for any such

2 determination. Such alien shall also be required to provide

3 to the State agency such information and documentation

4 as it may request and which such alien or his sponsor pro5 vided in support of such alien’s immigration application.

6 ‘‘(2) The Secretary shall enter into agreements with

7 the Secretary of State and the Attorney General whereby

8 any information available to them and required in order

9 to make any determination under this section will be pro10 vided by them to the Secretary (who may, in turn, make

11 such information available, upon request, to a concerned

12 State agency), and whereby the Secretary of State and

13 Attorney General will inform any sponsor of an alien, at

14 the time such sponsor executes an affidavit of support or

15 similar agreement, of the requirements imposed by this

16 section.

17 ‘‘(d) Any sponsor of an alien, and such alien, shall

18 be jointly and severally liable for an amount equal to any

19 overpayment of assistance under the State plan made to

20 such alien during the period of three years after such

21 alien’s entry into the United States, on account of such

22 sponsor’s failure to provide correct information under the

23 provisions of this section, except where such sponsor was

24 without fault, or where good cause of such failure existed.

25 Any such overpayment which is not repaid to the State
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1 or recovered in accordance with the procedures generally

2 applicable under the State plan to the recoupment of over3 payments shall be withheld from any subsequent payment

4 to which such alien or such sponsor is entitled under any

5 provision of this Act.

6 ‘‘(e)(1) In any case where a person is the sponsor

7 of two or more alien individuals who are living in the same

8 home, the income and resources of such sponsor (and his

9 spouse), to the extent they would be deemed the income

10 and resources of any one of such individuals under the

11 preceding provisions of this section, shall be divided into

12 two or more equal shares (the number of shares being the

13 same as the number of such alien individuals) and the in14 come and resources of each such individual shall be

15 deemed to include one such share.

16 ‘‘(2) Income and resources of a sponsor (and his

17 spouse) which are deemed under this section to be the in18 come and resources of any alien individual in a family

19 shall not be considered in determining the need of other

20 family members except to the extent such income or re21 sources are actually available to such other members.

22 ‘‘(f) The provisions of this section shall not apply

23 with respect to any alien who is—

24 ‘‘(1) admitted to the United States as a result

25 of the application, prior to April 1, 1980, of the pro-
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1 visions of section 203(a)(7) of the Immigration and

2 Nationality Act;

3 ‘‘(2) admitted to the United States as a result

4 of the application, after March 31, 1980, of the pro5 visions of section 207(c) of such Act;

6 ‘‘(3) paroled into the United States as a refugee

7 under section 212(d)(5) of such Act;

8 ‘‘(4) granted political asylum by the Attorney

9 General under section 208 of such Act; or

10 ‘‘(5) a Cuban and Haitian entrant, as defined

11 in section 501(e) of the Refugee Education Assist12 ance Act of 1980 (Public Law 96–422).’.

13 SEC. 9802. REQUIREMENTS FOR SPONSOR’S AFFIDAVITS OF

14 SUPPORT.

15 (a) IN GENERAL.—Title II of the Immigration and

16 Nationality Act is amended by inserting after section 213

17 the following new section:

18 ‘‘REQUIREMENTS FOR SPONSOR’S AFFIDAVIT OF SUPPORT

19 ‘‘SEC. 213A. (a) ENFORCEABILITY.—

20 ‘‘(1) IN GENERAL.—No affidavit of support

21 may be accepted by the Attorney General or by any

22 consular officer to establish that an alien is not ex23 cludable under section 212(a)(4) unless such affida24 vit is executed as a contract—

25 ‘‘(A) which is legally enforceable against

26 the sponsor by the Federal Government, by a
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1 State, or by any political subdivision of a State,

2 providing cash benefits under a public cash as3 sistance program (as defined in subsection

4 (f)(2)), but not later than 5 years after the date

5 the alien last receives any such cash benefit;

6 and

7 ‘‘(B) in which the sponsor agrees to submit

8 to the jurisdiction of any Federal or State court

9 for the purpose of actions brought under sub10 section (e)(2).

11 ‘‘(2) EXPIRATION OF LIABILITY.—Such con12 tract shall only apply with respect to cash benefits

13 described in paragraph (1)(A) provided to an alien

14 before the earliest of the following:

15 ‘‘(A) CITIZENSHIP.—The date the alien be16 comes a citizen of the United States under

17 chapter 2 of title III.

18 ‘‘(B) VETERAN.—The first date the alien

19 is described in section 9801(b)(2)(A) of the

20 Omnibus Budget Reconciliation Act of 1995.

21 ‘‘(C) PAYMENT OF SOCIAL SECURITY

22 TAXES.—The first date as of which the condi23 tion described in section 9801(b)(4) of the Om24 nibus Budget Reconciliation Act of 1995 is met

25 with respect to the alien.
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1 ‘‘(3) NONAPPLICATION DURING CERTAIN PERI2 ODS.—Such contract also shall not apply with re3 spect to cash benefits described in paragraph (1)(A)

4 provided during any period in which the alien is de5 scribed in section 9801(b)(2)(B) or 9801(b)(2)(C) of

6 the Omnibus Budget Reconciliation Act of 1995.

7 ‘‘(b) FORMS.—Not later than 90 days after the date

8 of enactment of this section, the Attorney General, in con9 sultation with the Secretary of State and the Secretary

10 of Health and Human Services, shall formulate an affida11 vit of support consistent with the provisions of this sec12 tion.

13 ‘‘(c) NOTIFICATION OF CHANGE OF ADDRESS.—

14 ‘‘(1) REQUIREMENT.—The sponsor shall notify

15 the Federal Government and the State in which the

16 sponsored alien is currently resident within 30 days

17 of any change of address of the sponsor during the

18 period specified in subsection (a)(1)(A).

19 ‘‘(2) ENFORCEMENT.—Any person subject to

20 the requirement of paragraph (1) who fails to satisfy

21 such requirement shall be subject to a civil penalty

22 of—

23 ‘‘(A) not less than $250 or more than

24 $2,000, or
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1 ‘‘(B) if such failure occurs with knowledge

2 that the sponsored alien has received any bene3 fit under any means-tested public benefits pro4 gram, not less than $2,000 or more than

5 $5,000.

6 ‘‘(d) REIMBURSEMENT OF GOVERNMENT EX7 PENSES.—

8 ‘‘(1) REQUEST FOR REIMBURSEMENT.—

9 ‘‘(A) IN GENERAL.—Upon notification that

10 a sponsored alien has received any cash benefits

11 described in subsection (a)(1)(A), the appro12 priate Federal, State, or local official shall re13 quest reimbursement by the sponsor in the

14 amount of such cash benefits.

15 ‘‘(B) REGULATIONS.—The Attorney Gen16 eral, in consultation with the Secretary of

17 Health and Human Services, shall prescribe

18 such regulations as may be necessary to carry

19 out subparagraph (A).

20 ‘‘(2) INITIATION OF ACTION.—If within 45 days

21 after requesting reimbursement, the appropriate

22 Federal, State, or local agency has not received a re23 sponse from the sponsor indicating a willingness to

24 commence payments, an action may be brought
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1 against the sponsor pursuant to the affidavit of sup2 port.

3 ‘‘(3) FAILURE TO ABIDE BY REPAYMENT

4 TERMS.—If the sponsor fails to abide by the repay5 ment terms established by such agency, the agency

6 may, within 60 days of such failure, bring an action

7 against the sponsor pursuant to the affidavit of sup8 port.

9 ‘‘(4) LIMITATION ON ACTIONS.—No cause of

10 action may be brought under this subsection later

11 than 5 years after the date the alien last received

12 any cash benefit described in subsection (a)(1)(A).

13 ‘‘(f) DEFINITIONS.—For the purposes of this section:

14 ‘‘(1) SPONSOR.—The term ‘sponsor’ means an

15 individual who—

16 ‘‘(A) is a citizen or national of the United

17 States or an alien who is lawfully admitted to

18 the United States for permanent residence;

19 ‘‘(B) is 18 years of age or over; and

20 ‘‘(C) is domiciled in any State.

21 ‘‘(2) PUBLIC CASH ASSISTANCE PROGRAM.—

22 The term ‘public cash assistance program’ means a

23 program of the Federal Government or of a State or

24 political subdivision of a State that provides direct

25 cash assistance for the purpose of income mainte-
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1 nance and in which the eligibility of an individual,

2 household, or family eligibility unit for cash benefits

3 under the program, or the amount of such cash ben4 efits, or both are determined on the basis of income,

5 resources, or financial need of the individual, house6 hold, or unit. Such term does not include any pro7 gram insofar as it provides medical, housing, edu8 cation, job training, food, or in-kind assistance or

9 social services.’’.

10 (b) CLERICAL AMENDMENT.—The table of contents

11 of such Act is amended by inserting after the item relating

12 to section 213 the following:

‘‘Sec. 213A. Requirements for sponsor’s affidavit of support.’’.

13 (c) EFFECTIVE DATE.—Subsection (a) of section

14 213A of the Immigration and Nationality Act, as inserted

15 by subsection (a) of this section, shall apply to affidavits

16 of support executed on or after a date specified by the

17 Attorney General, which date shall be not earlier than 60

18 days (and not later than 90 days) after the date the Attor19 ney General formulates the form for such affidavits under

20 subsection (b) of such section 213A.
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1 SEC. 9803. EXTENDING REQUIREMENT FOR AFFIDAVITS OF

2 SUPPORT TO FAMILY-RELATED AND DIVER3 SITY IMMIGRANTS.

4 (a) IN GENERAL.—Section 212(a)(4) of the Immi5 gration and Nationality Act (8 U.S.C. 1182(a)(4)) is

6 amended to read as follows:

7 ‘‘(4) PUBLIC CHARGE AND AFFIDAVITS OF SUP8 PORT.—

9 ‘‘(A) PUBLIC CHARGE.—Any alien who, in

10 the opinion of the consular officer at the time

11 of application for a visa, or in the opinion of

12 the Attorney General at the time of application

13 for admission or adjustment of status, is likely

14 at any time to become a public charge is exclud15 able.

16 ‘‘(B) AFFIDAVITS OF SUPPORT.—Any im17 migrant who seeks admission or adjustment of

18 status as any of the following is excludable un19 less there has been executed with respect to the

20 immigrant an affidavit of support pursuant to

21 section 213A:

22 ‘‘(i) As an immediate relative (under

23 section 201(b)(2)).

24 ‘‘(ii) As a family-sponsored immigrant

25 under section 203(a) (or as the spouse or
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1 child under section 203(d) of such an im2 migrant).

3 ‘‘(iii) As the spouse or child (under

4 section 203(d)) of an employment-based

5 immigrant under section 203(b).

6 ‘‘(iv) As a diversity immigrant under

7 section 203(c) (or as the spouse or child

8 under section 203(d) of such an immi9 grant).’’.

10 (b) EFFECTIVE DATE.—The amendment made by

11 subsection (a) shall apply to aliens with respect to whom

12 an immigrant visa is issued (or adjustment of status is

13 granted) after the date specified by the Attorney General

14 under section 9802(c)

15 SEC. 6102. REDUCTION IN TITLE XX BLOCK GRANTS TO

16 STATES FOR SOCIAL SERVICES.

17 Section 2003(c) of the Social Security Act (42 U.S.C.

18 1397b(c)) is amended—

19 (1) by striking ‘‘and’’ at the end of paragraph

20 (4);

21 (2) in paragraph (5), by striking ‘‘fiscal year

22 after fiscal year 1989.’’ and inserting ‘‘of fiscal

23 years 1990 through 1995; and’’; and

24 (3) by adding at the end the following:
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1 ‘‘(6) $2,520,000,000 for fiscal year 1996 and

2 each succeeding fiscal year.’’.

3 PART 1—FOOD STAMPS

4 SHORT TITLE

5 SEC. 12001. This part may be cited as ‘‘The Food

6 Stamp Act Amendments of 1995’’.

7 INCLUDE MINOR CHILDREN UNDER 18 YEARS OLD IN

8 THEIR PARENTS’ HOUSEHOLDS

9 SEC. 12011. Section 3(i) of the Food Stamp Act of

10 1997 (7 U.S.C. 2012(i)) is amended by striking the first

11 parenthetical phrase in the second sentence and inserting

12 in lieu thereof—‘‘(except children who have reached the

13 age of 18 and are themselves parents living with their chil14 dren or married and living with their spouses)’’.

15 USE THE COST OF THE THRIFTY FOOD PLAN FOR

16 ALLOTMENT ADJUSTMENTS

17 SEC. 12012. Section 3(o) of the Food Stamp Act of

18 1977 (7 U.S.C. 2012(o)) is amended by—

19 (1) inserting in paragraph (11) of the second

20 sentence immediately following ‘‘and each October 1

21 thereafter,’’ the words ‘‘through the last day of the

22 first month after the month of enactment of the Bal23 anced Budget Act of 1995 for Economic Growth and

24 Fairness’’; and

25 (2) inserting a new third sentence as follows—
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1 ‘‘On the first day of the second month

2 after the month of enactment of the Balanced

3 Budget Act of 1995 for Economic Growth and

4 Fairness and each October 1 thereafter, adjust

5 the cost of the diet to reflect the cost of the

6 diet, in the preceding June, and round the re7 sult to the nearest lower dollar increment for

8 each household size, except that on the first day

9 of the second month after the month of enact10 ment of the Balanced Budget Act of 1995 for

11 Economic Growth and Fairness, the Secretary

12 may not reduce the cost of the diet in effect on

13 September 30, 1995.’’.

14 LOWER AGE FOR EXCLUDING STUDENTS’ EARNINGS

15 SEC. 12013. Section 5(d)(7) of the Food Stamp Act

16 of 1977 (7 U.S.C. 2014(d)(7)) is amended by striking ‘‘is

17 21 years of age or younger’’ and inserting ‘‘has not

18 reached the age of 18’’.

19 COUNT GOVERNMENTAL ENERGY ASSISTANCE AS INCOME

20 SEC. 12014. (a) Section 5(d) of the Food Stamp Act

21 of 1977 (7 U.S.C. 2014(d)) is amended by striking para22 graph (11) and renumbering paragraphs (12) through

23 (16) as paragraphs (11) through (15), respectively.

24 (b) Section 5(e) of the Food Stamp Act of 1977 (7

25 U.S.C. 2014(e)) is amended by striking ‘‘If a State agency
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1 elects’’ and all that follows through ‘‘season for which it

2 was provided.’’.

3 (c) Section 5(k) of the Food Stamp Act of 1977 (7

4 U.S.C. 2014(k)) is amended—

5 (1) in paragraph (1)(B), by striking ‘‘, not in6 cluding energy or utility-cost assistance,’’;

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

8 (C); and

9 (3) by adding at the end the following—

10 ‘‘(4)(A) For purposes of subsection (d)(1),

11 a payment made under a Federal or State law

12 to provide energy assistance to a household

13 shall be considered money payable directly to

14 the household.

15 ‘‘(B) For purposes of subsection (e), an ex16 pense paid on behalf of a household under a

17 Federal or State law to provide energy assist18 ance shall be considered an out-of-pocket ex19 pense incurred and paid by the household.’’.

20 (d) Section 2605(f) of the Low-Income Home Energy

21 Assistance Act of 1981 (42 U.S.C. 8624(f)) is amended—

22 (1) by striking ‘‘(1) Notwithstanding any other

23 provision of law unless’’ and inserting ‘‘Notwith24 standing any other provision of law except the Food
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1 Stamp Act of 1977 (7 U.S.C. 2011 et seq.), and

2 any’’;

3 (2) in paragraph (1), by striking ‘‘food

4 stamps,’’; and (3) by striking paragraph (2).

5 REDUCE THE STANDARD DEDUCTION

6 SEC. 12015. Section 5(e) of the Food Stamp Act of

7 1977 (7 U.S.C. 2014(e)) is amended by striking the first

8 two sentences and inserting in lieu thereof the following—

9 ‘‘The Secretary shall allow a standard deduction for each

10 household in the 48 contiguous States and the District

11 of Columbia, Alaska, Hawaii, Guam, and the Virgin Is12 lands of the United States of—

13 ‘‘for fiscal year 1995, $134, $ , $ , $

14 , and $ , respectively;

15 ‘‘(i) for fiscal year 1996, $130, $ , $

16 , $ , and $ , respectively;

17 ‘‘(ii) for fiscal year 1997, $115, $ , $

18 , $ , and $ , respectively; and

19 ‘‘(iii) on October 1, 1997, and each October 1

20 thereafter, the Secretary shall adjust the standard

21 deduction to the nearest lower dollar increment to

22 reflect changes in the Consumer Price Index for all

23 urban consumers published by the Bureau of Labor

24 Statistics, for items other than food, for the 12-

25 month period ending the preceding June 30.’’.
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1 MAKE MANDATORY USE OF STANDARD UTILITY

2 ALLOWANCES A STATE OPTION

3 SEC. 12016. Section 5(e) of the Food Stamp Act of

4 1977 (7 U.S.C. 2014(e)) is amended by inserting imme5 diately before ‘‘No such allowance may be used’’ the fol6 lowing new sentence—‘‘A State agency may make the use

7 of a standard utility allowance mandatory for all house8 holds with qualifying utility costs if (1) the State agency

9 has developed one or more standards that include the cost

10 of heating and cooling and one or more standards that

11 do not include the cost of heating and cooling; and (2)

12 the Secretary finds that the standards will not result in

13 increased program costs.’’.

14 FREEZE AMOUNT OF VEHICLE ASSET LIMITATION

15 SEC. 12017. The first sentence of section 5(g)(2) of

16 the Food Stamp Act of 1977 (7 U.S.C. 2014(g)(2)) is

17 amended by striking ‘‘through September 30, 1995’’ and

18 all that follows through ‘‘such date and on’’ and inserting

19 ‘‘and shall be adjusted on October 1, 1996, and’’.

20 REQUIRE COOPERATION WITH CHILD SUPPORT

21 ENFORCEMENT AGENCIES AT STATE OPTION

22 SEC. 12018. (a) Section 6 of the Food Stamp Act

23 of 1977 (7 U.S.C. 2015) is amended by adding new sub24 sections (i) and (j) at the end thereof as follows—‘‘(i) At

25 the option of the State, no natural or adoptive parent or

26 other individual who is living with and exercising parental
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1 control over a child under the age of eighteen who has

2 an absent parent shall be eligible to participate in the food

3 stamp program unless such parent or individual cooper4 ates with the State agency administering the program

5 under part D of title IV of the Social Security Act (or

6 is determined by such State agency to have good cause

7 not to cooperate) in (1) establishing the paternity of such

8 child (if born out of wedlock), and (2) obtaining support

9 for such child or for herself/himself and for such child.

10 Notwithstanding any provision of part D of title IV of the

11 Social Security Act, no person required under this sub12 section to cooperate with the State agency administering

13 the program under part D of title IV of the Social Security

14 Act may be required to pay a fee or other costs for services

15 provided under such program.’’.

16 ‘‘(j) At the option of the State agency, no person who

17 fails to make legally obligated child support payments

18 shall be eligible to participate in the food stamp program

19 unless such person is unemployed or establishes that the

20 child support award is inconsistent with applicable guide21 lines.’’.

22 FACILITATE IMPLEMENTATION OF A NATIONAL

23 ELECTRONIC BENEFIT TRANSFER DELIVERY SYSTEM

24 SEC. 12019. Section 7 of the Food Stamp Act of

25 1977 (7 U.S.C. 2016) is amended by—

26 (1) striking in subsection (g) ‘‘(1)’’;
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1 (2) striking paragraph (g)(2); and

2 (3) striking in subsection (g) ‘‘(A)’’ and ‘‘(B)’’

3 and inserting in lieu thereof ‘‘(1)’’ and ‘‘(2)’’, re4 spectively.

5 REPEAL MINIMUM BENEFIT ADJUSTMENTS

6 SEC. 12020. Section 8(a) of the Food Stamp Act of

7 1977 (7 U.S.C. 2017(a)) is amended by striking in the

8 proviso ‘‘, and shall be adjusted’’ and all that follows

9 through ‘‘$5’’.

10 PRORATE BENEFITS ON RECERTIFICATION

11 SEC. 12021. Section 8(c)(2)(B) of the Food Stamp

12 Act of 1977 (7 U.S.C. 2017(c)(2)(B)) is amended by

13 striking ‘‘of more than one month’’.

14 PROHIBIT ALLOTMENT INCREASES FOR PENALTIES

15 UNDER OTHER WELFARE AND PUBLIC ASSISTANCE

16 PROGRAMS

17 SEC. 12022. Section 8 of the Food Stamp Act of

18 1977 (7 U.S.C. 2017) is amended by striking subsection

19 (d) and inserting in lieu thereof the following—‘‘(d) If the

20 benefits of a household are reduced under a Federal,

21 State, or local law relating to a welfare or public assist22 ance program because of a penalty or for the failure to

23 perform an action required under the law or program, for

24 the duration of the reduction the household may not re25 ceive an increased allotment as the result of a decrease
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1 in the income of the household to the extent that the de2 crease is the result of the reduction.’’.

3 PERMIT STATES TO DETERMINE MOST USEFUL AND

4 RELIABLE MEANS OF VERIFICATION

5 SEC. 12023. Section 11 of the Food Stamp Act of

6 1977 (7 U.S.C. 2020) is amended by—

7 (1) striking in subsection (e)(3) all that follows

8 ‘‘, and that the State agency shall’’ through ‘‘(E)’’;

9 (2) inserting after the paragraph designation

10 (19) of subsection (e) ‘‘at the option of the State

11 agency,’’; and

12 (3) by adding at the end thereof the following

13 new subsection—

14 ‘‘(p) Notwithstanding any other provision

15 of law, State agencies (described in section

16 3(n)(1) of this Act) shall not be required to use

17 an income and eligibility verification system es18 tablished under section 1137 of the Social Secu19 rity Act (42 U.S.C. 1320b–7) or the immigra20 tion status verification system established under

21 section 1137(d) of the Social Security Act (42

22 U.S.C. 1320b–71d)).’’.

23 EXPAND CLAIMS COLLECTION METHODS

24 SEC. 12024. (a) Section 11(e)(8) of the Food Stamp

25 Act of 1977 (7 U.S.C. 2020(e)(8)) is amended by insert26 ing before the semicolon at the end thereof the following—
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1 ‘‘or refunds of Federal taxes as authorized pursuant to

2 31 U.S.C. 3720A’’.

3 (b) Section 13 of the Food Stamp Act of 1977 (7

4 U.S.C. 2022) is amended by—

5 (1) striking paragraph (1) of subsection (b);

6 (2) redesignating subparagraph (A) of para7 graph (b)(2) as paragraph (b)(1);

8 (3) striking in paragraph (b)(1), as redesig9 nated by this subsection, ‘‘, other than claims the

10 collection of which is provided for in paragraph (1)

11 of this subsection and claims arising from an error

12 of the State agency,’’;

13 (4) inserting at the end of paragraph (b)(1), as

14 redesignated by this subsection, the following new

15 sentence—‘‘A State agency may waive the use of al16 lotment reduction as a means of collecting a claim

17 arising from an error of the State agency if su8ch

18 collection would cause a hardship (as defined by the

19 State agency) on the household but shall continue to

20 pursue all other lawful methods of collection of such

21 claims as prescribed in subsection (b)(2).’’;

22 (5) striking in paragraph (b)(1), as redesig23 nated by this subsection, ‘‘, except that the house24 hold shall’’ and inserting in lieu thereof ‘‘. At the

25 option of the State, the household may’’;
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1 (6) redesignating subparagraph (b)(2)(B) as

2 paragraph (b)(2);

3 (7) striking in paragraph (b)(2), as redesig4 nated by this subsection, ‘‘or subparagraph (A)’’;

5 (8) striking in subsection (d) ‘‘and except for

6 claims arising from an error of the State agency,’’;

7 (9) striking in subsection (d) ‘‘may’’ and insert8 ing in lieu thereof ‘‘shall’’; and

9 (10) inserting before the period at the end of

10 subsection (d) the following—‘‘or refunds of Federal

11 taxes as authorized pursuant to 31 U.S.C. 3720A’’.

12 (c) Section 16(a) of the Food Stamp Act of 1977 (7

13 U.S.C. 2025(a)) is amended by striking ‘‘25 percent dur14 ing the period beginning October 1, 1990’’ and all that

15 follows through ‘‘error of a State agency.’’ and inserting

16 in lieu thereof the following—‘‘25 percent of

17 overissuances, except those arising from an error of the

18 State agency, which are recovered or collected pursuant

19 to subsections (b), (c), and (d) of section 13.’’.

20 (d) Section 6402(d) of the Internal Revenue Code (26

21 U.S.C. 6402(d)) is amended by—

22 (1) inserting in paragraph (1) immediately fol23 lowing ‘‘any Federal agency’’ the following—

24 ‘‘(or any State agency that has the respon25 sibility for the administration of the food stamp
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1 program operated pursuant to the Food Stamp

2 Act of 1977)’’; and

3 (inserting in the second sentence of paragraph

4 (2) immediately following ‘‘a Federal agency’’ the

5 following—

6 ‘‘(or a State agency that has the respon7 sibility for the administration of the food stamp

8 program operated pursuant to the Food Stamp

9 Act of 1977)’’.

10 EFFECTIVE DATES

11 SEC. 12025. Except as otherwise provided in this

12 part, the provisions of this part shall become effective the

13 first day of the second month after the month of enact14 ment.

15 PART 2—CHILD NUTRITION

16 IMPROVED TARGETING OF DAY CARE HOME

17 REIMBURSEMENTS

18 SEC. 12031. (a) RESTRUCTURED DAY CARE HOME

19 REIMBURSEMENTS.—Section 17(f)(3) of the National

20 School Lunch Act (42 U.S.C. 1766(f)(3)) is amended by

21 striking ‘‘(3)(A) Institutions’’ and all that follows through

22 the end of subparagraph (A) and inserting the following—

23 ‘‘(3) REIMBURSEMENT OF FAMILY OR GROUP

24 DAY CARE HOME SPONSORING ORGANIZATIONS.—

25 ‘‘(A) REIMBURSEMENT FACTOR.—
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1 ‘‘(i) IN GENERAL.—An institution

2 that participates in the program under this

3 section as a family or group day care home

4 sponsoring organization shall be provided,

5 for payment to a home sponsored by the

6 organization, reimbursement factors in ac7 cordance with this subparagraph for the

8 cost of obtaining and preparing food and

9 prescribed labor costs involved in providing

10 meals under this section.

11 ‘‘(ii) TIER I FAMILY OR GROUP DAY

12 CARE HOMES.—

13 ‘‘(I) DEFINITION.—In this para14 graph, the term ‘tier I family or group

15 day care home’ means—

16 ‘‘(aa) a family or group day

17 care home that is located in a ge18 ographic area, as defined by the

19 Secretary based on census data,

20 in which at least 50 percent of

21 the children residing in the area

22 are members of households whose

23 incomes meet the income eligi24 bility guidelines for free or re-
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1 duced price meals under section

2 9;

3 ‘‘(bb) a family or group day

4 care home that is located in an

5 area served by a school enrolling

6 elementary students in which at

7 least 50 percent of the total num8 ber of children enrolled are cer9 tified eligible to receive free or

10 reduced price school meals under

11 this Act or the Child Nutrition

12 Act of 1966 (42 U.S.C. 1771 et

13 seq.); or

14 ‘‘(cc) a family or group day

15 care home that is operated by a

16 provider whose household meets

17 the eligibility requirements for

18 free or reduced price meals under

19 section 9 and whose eligibility is

20 verified by the sponsoring organi21 zation of the home under regula22 tions established by the Sec23 retary.

24 ‘‘(II) REIMBURSEMENT.—Except

25 as provided in subclause (III), a tier
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1 I family or group day care home shall

2 be provided reimbursement factors

3 under this clause without a require4 ment for documentation of the costs

5 described in clause (i), except that re6 imbursement shall not be provided

7 under this subclause for meals or sup8 plements served to the children of a

9 person acting as a family or group

10 day care home provider unless the

11 children meet the eligibility require12 ments for free or reduced price meals

13 under section 9.

14 ‘‘(III) FACTORS.—Except as pro15 vided in subclause (IV), the reim16 bursement factors applied to a home

17 referred to in subclause (II) shall be

18 the factors in effect on the date of en19 actment of this subclause.

20 ‘‘(IV) ADJUSTMENTS.—The re21 imbursement factors under this sub22 paragraph shall be adjusted on Octo23 ber 1, 1996, July 1, 1997, and each

24 July 1 thereafter, to reflect changes in

25 the Consumer Price Index for food at
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1 home for the most recent 12-month

2 period for which the data are avail3 able. The reimbursement factors

4 under this subparagraph shall be

5 rounded to the nearest lower cent in6 crement and based on the unrounded

7 adjustment in effect on June 30 of

8 the preceding school year.

9 ‘‘(iii) TIER II FAMILY OR GROUP DAY

10 CARE HOMES.—

11 ‘‘(I) IN GENERAL.—

12 ‘‘(aa) FACTORS.—Except as

13 provided in subclause (II), with

14 respect to meals or supplements

15 served under this clause by a

16 family or group day care home

17 that does not meet the criteria

18 set forth in clause (ii)(I), the re19 imbursement factors shall be $1

20 for lunches and suppers, 30 cents

21 for breakfasts, and 15 cents for

22 supplements.

23 ‘‘(bb) ADJUSTMENTS.—The

24 factors shall be adjusted on July

25 1, 1997, and each July 1 there-
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1 after, to reflect changes in the

2 Consumer Price Index for food at

3 home for the most recent 12-

4 month period for which the data

5 are available. The reimbursement

6 factors under this item shall be

7 rounded down to the nearest

8 lower cent increment and based

9 on the unrounded adjustment for

10 the preceding 12-month period.

11 ‘‘(cc) REIMBURSEMENT.—A

12 family or group day care home

13 shall be provided reimbursement

14 factors under this subclause with15 out a requirement for docu16 mentation of the costs described

17 in clause (i), except that reim18 bursement shall not be provided

19 under this subclause for meals or

20 supplements served to the chil21 dren of a person acting as a fam22 ily or group day care home pro23 vider unless the children meet the

24 eligibility requirements for free
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1 or reduced price meals under sec2 tion 9.

3 ‘‘(II) OTHER FACTORS.—A fam4 ily or group day care home that does

5 not meet the criteria set forth in

6 clause (ii)(I) may elect to be provided

7 reimbursement factors determined in

8 accordance with the following require9 ments:

10 ‘‘(aa) CHILDREN ELIGIBLE

11 FOR FREE OR REDUCED PRICE

12 MEALS.—In the case of meals or

13 supplements served under this

14 subsection to children who meet

15 the eligibility requirements for

16 free or reduced price meals under

17 section 9, the family or group

18 day care home shall be provided

19 reimbursement factors set by the

20 Secretary in accordance with

21 clause (ii)(III).

22 ‘‘(bb) INELIGIBLE CHIL23 DREN.—In the case of meals or

24 supplements served under this

25 subsection to children who do not
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1 meet the eligibility requirements

2 for free or reduced priced meals

3 under section 9, the family or

4 group day care home shall be

5 provided reimbursement factors

6 in accordance with subclause (I).

7 ‘‘(III) INFORMATION AND DE8 TERMINATIONS.—

9 ‘‘(aa) IN GENERAL.—If a

10 family or group day care home

11 elects to claim the factors de12 scribed in subclause (II), the

13 family or group day care home

14 sponsoring organization serving

15 the home shall collect the nec16 essary eligibility information, as

17 determined by the Secretary,

18 from any parent or other care19 taker to make the determinations

20 specified in subclause (II) and

21 shall make the determinations in

22 accordance with rules prescribed

23 by the Secretary.

24 ‘‘(bb) CATEGORICAL ELIGI25 BILITY—In making a determina-
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1 tion under item (aa), a family or

2 group day care home sponsoring

3 organization may consider a child

4 participating in or subsidized

5 under, or a child with a parent

6 participating in or subsidized

7 under, a federally or State sup8 ported child care or other benefit

9 program with an income eligi10 bility limit that does not exceed

11 the income eligibility guidelines

12 for free or reduced price meals

13 under section 9 to be a child who

14 is eligible for free or reduced

15 price meals under section 9.

16 ‘‘(cc) FACTORS FOR CHIL17 DREN ONLY.—A family or group

18 day care home may elect to re19 ceive the reimbursement factors

20 prescribed under clause (ii) (III)

21 solely for the children participat22 ing in a program referred to in

23 item (bb) if the home elects not

24 to have eligibility information col-
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1 lected from parents or other care2 takers.’’.

3 (b) GRANTS TO STATES TO PROVIDE ASSISTANCE TO

4 FAMILY OR GROUP DAY CARE HOMES.—Section 17(f)(3)

5 of the National School Lunch Act (42 U.S.C. 1766(f)(3))

6 is amended by adding at the end the following—

7 ‘‘(D) GRANTS TO STATES TO

8 PROVIDE ASSISTANCE TO FAMILY

9 OR GROUP DAY CARE HOMES.—

10 ‘‘(i) IN GENERAL.—

11 ‘‘(I) RESERVATION.—The Secretary

12 shall reserve $5,000,000 of the amount

13 made available to carry out this section for

14 fiscal year 1996.

15 ‘‘(II) PURPOSE.—The Secretary shall

16 use the funds made available under

17 subclause (I) to provide grants to States

18 for the purpose of providing—

19 ‘‘(aa) assistance, including

20 grants, to family or group day care

21 home sponsoring organizations and

22 other appropriate organization, in se23 curing and providing training, mate24 rials, automated data processing as25 sistance, and other assistance for the
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1 staff of the sponsoring organizations;

2 and

3 ‘‘(bb) training and other assist4 ance to family or group day care

5 homes in the implementation of the

6 amendments to subparagraph (A)

7 made by section 12031(a) of the Bal8 anced Budget Act of 1995 for Eco9 nomic Growth and Fairness.

10 ‘‘(ii) ALLOCATION.—The Secretary shall

11 allocate from the funds reserved under clause

12 (i)(I)—

13 ‘‘(I) $30,000 in base funding to each

14 State; and

15 ‘‘(II) any remaining amount among

16 the States, based on the number of family

17 or group day case homes participating in

18 the program in a State during fiscal year

19 1994 as a percentage of the number of all

20 family or group day care homes participat21 ing in the program during fiscal year

22 1994.

23 ‘‘(iii) RETENTION OF FUNDS.—of the

24 amount of funds made available to a State for

25 fiscal year 1996 under clause (i), the State may
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1 retain not to exceed 30 percent of the amount

2 to carry out this subparagraph.

3 ‘‘(iv) ADDITIONAL PAYMENTS.—Any pay4 ments received under this subparagraph shall

5 be in addition to payments that a State receives

6 under subparagraph (A) (as amended by section

7 12031(a) of the Balanced Budget Act of 1995

8 for Economic Growth and Fairness).’’.

9 (c) PROVISION OF DATA.—Section 17(f)(3) of the

10 National School Lunch Act (42 U.S.C. 1766(f)(3)), as

11 amended by subsection (b), is further amended by adding

12 at the end the following—

13 ‘‘(E) PROVISION OF DATA TO FAMILY OR

14 GROUP DAY CARE HOME SPONSORING ORGANIZA15 TIONS.—

16 ‘‘(i) CENSUS DATA.—The Secretary shall

17 provide to each State agency administering a

18 child and adult care food program under this

19 section data from the most recent decennial

20 census survey or other appropriate census sur21 vey for which the data are available showing

22 which areas in the State meet the requirements

23 of subparagraph (A)(ii)(I)(aa). The State agen24 cy shall provide the data to family or group day
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1 care home sponsoring organizations located in

2 the State.

3 ‘‘(ii) SCHOOL DATA.—

4 ‘‘(I) IN GENERAL.—A State agency

5 administering the school lunch program

6 under this Act or the school breakfast pro7 gram under the Child Nutrition Act of

8 1966 (42 U.S.C. 1771 et seq.) shall pro9 vide data for each elementary school in the

10 State, or shall direct each school within the

11 State to provide data for the school, to ap12 proved family or group day care home

13 sponsoring organizations that request the

14 data, on the percentage of enrolled children

15 who are certified eligible for free or re16 duced price meals.

17 ‘‘(II) USE OF DATA FROM PRECEDING

18 SCHOOL YEAR.—In determining for a fiscal

19 year or other annual period whether a

20 home qualifies as a tier I family or group

21 day care home under subparagraph

22 (A)(ii)(I), the State agency administering

23 the program under this section, and a fam24 ily or group day care home sponsoring or25 ganization, shall use the most current
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1 available data at the time of the deter2 mination.

3 ‘‘(iii) DURATION OF DETERMINATION.—

4 For purposes of this section, a determination

5 that a family or group day care home is located

6 in an area that qualifies the home as a tier I

7 family or group day care home (as the term is

8 defined in subparagraph (A)(ii)(I)), shall be in

9 effect for 3 years (unless the determination is

10 made on the basis of census data, in which case

11 the determination shall remain in effect until

12 more recent census data are available) unless

13 the State agency determines that the area in

14 which the home is located no longer qualifies

15 the home as a tier I family or group day care

16 home.’’.

17 (d) CONFORMING AMENDMENTS.—Section 17(c) of

18 the National School Lunch Act (42 U.S.C. 1766(c)) is

19 amended by inserting ‘‘except as provided in subsection

20 (f)(3),’’ after ‘‘For purposes of this section,’’ each place

21 it appears in paragraphs (1), (2), and (3).

22 (e) EFFECTIVE DATE.—

23 (1) IN GENERAL.—Except as provided in para24 graph (2), the amendments made by this section
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1 shall become effective on the date of enactment of

2 this part.

3 (2) IMPROVED TARGETING OF DAY CARE HOME

4 REIMBURSEMENTS.—The amendments made by sub5 sections (a), (c), and (d) shall become effective on

6 October 7, 1996.

7 SEC. . REIMBURSEMENT RATE ADJUSTMENTS.

8 (a) IN GENERAL.—

9 (1) COMMODITY RATE.—Section 6(a)(1)(B) of

10 the National School Lunch Act (42 U.S.C.

1755(g)(1)(M) is amended by striking ‘‘1 11 ⁄4 cent’’

12 and inserting ‘‘lower cent increment’’.

13 (2) LUNCH, BREAKFAST AND SUPPLEMENT

14 RATES.—Section 11(a)(3)(b) of the National School

15 Lunch Act (42 U.S.C. 1759a(a)(3)(B)) is amended

16 by striking ‘‘one fourth cent’’ and inserting ‘‘lower

17 cent increment’’.

18 (3) SUMMER PROGRAM RATES.—Section

19 13(b)(1) of the National School Lunch Act (42

20 U.S.C. 1761(b)(1)) is amended by striking ‘‘one21 fourth cent’’ and inserting ‘‘lower cent increment’’.

22 (4) FAMILY DAY CARE RATES.—Section

23 17(f)(3(A) of the National School Lunch Act (42

24 U.S.C. 1766(f)(3)(A)) is amended in the last sen-
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1 tence by striking ‘‘one-fourth cent’’ and inserting

2 ‘‘lower cent increment’’.

3 (5) SPECIAL MILK PROGRAM RATES.—Section

4 3(a)(8) of the Child Nutrition Act (42 U.S.C.

5 1772(a)(8)) is amended by striking ‘‘one-fourth

6 cent’’ and inserting ‘‘lower cent increment’’.

7 (6) SEVERE NEED RATES.—Section

8 4(b)(2)(B)(ii) of the Child Nutrition Act (42 U.S.C.

9 1773(b)(B)(ii)) is amended by striking ‘‘one-fourth

10 cent’’ and inserting ‘‘lower cent increment’’.

11 (b) EFFECTIVE DATES.—The amendments made by

12 subsection (a) shall become effective on July 1, 1996.

13 SEC. . ELIMINATION OF START-UP AND EXPANSION

14 GRANTS.

15 (a) Section 4 of the Child Nutrition Act (42 U.S.C.

16 1773) is amended by striking subsection (g).

17 (b) The amendment made by this subsection (a) shall

18 become effective on October 1, 1996.

19 SEC. . AUTHORIZATION OF APPROPRIATIONS.

20 Section 19(i) of the Child Nutrition Act (42 U.S.C.

21 1788(i)) is amended—

22 (a) in the first sentence of paragraph (2)(A), by

23 striking ‘‘and each succeeding fiscal year’’;

24 (b) by redesignating paragraphs (3) and (4) as

25 paragraphs (4) and (5), respectively; and
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1 (c) by inserting after paragraph (2) the follow2 ing: ‘‘(3) FISCAL YEARS 1997 THROUGH 2002—

3 ‘‘(A) IN GENERAL.—There are authorized

4 to be appropriated to carry out this section

5 $10,000,00 for each of the fiscal years 1997

6 through 2002.

7 ‘‘(B) GRANTS.—

8 ‘‘(i)’’ IN GENERAL.—Grants to each

9 State from the amounts made available

10 under subparagraph (A) shall be based on

11 a rate of 50 cents for each child enrolled

12 in schools or institutions within the State,

13 except that no State shall * * * an

14 amount less than $75,000 per fiscal year.

15 ‘‘(ii) INSUFFICIENT FUNDS.—If an

16 amount made available for any fiscal year

17 is insufficient to pay the amount to which

18 each State is entitled under clause (i), the

19 amount of each grant shall be ratably re20 duced.’’

21 SEC. 12035. DIRECT FEDERAL EXPENDITURES.

22 (a) COMMODITY ASSISTANCE.—

23 (1) Section 6(g) of the National School Lunch

24 Act (42 U.S.C. 1755(g)) is amended by striking ‘‘12

25 percent’’ and inserting ‘‘8 percent’’.
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1 TITLE X—FOOD STAMPS AND COMMODITY

2 DISTRIBUTION

3 SEC. 1001. SHORT TITLE.

4 This title may be cited as the ‘‘Food Stamp Reform

5 and Commodity Distribution Act of 1995’’.

6 Subtitle A—Food Stamp Program

7 SEC. 1011. DEFINITION OF CERTIFICATION PERIOD.

8 Section 3(c) of the Food Stamp Act of 1977 (7

9 U.S.C. 2012(c)) is amended by striking ‘‘Except as pro10 vided’’ and all that follows and inserting the following:

11 ‘‘The certification period shall not exceed 12 months, ex12 cept that the certification period may be up to 24 months

13 if all adult household members are elderly or disabled. A

14 State agency shall have at least 1 contact with each cer15 tified household every 12 months’’.

16 SEC. 1012. DEFINITION OF COUPON.

17 Section 3(d) of the Food Stamp Act of 1977 (7

18 U.S.C. 2012(d)) is amended by striking ‘‘or type of certifi19 cate’’ and inserting ‘‘type of certificate, authorization

20 card, cash or check issued in lieu of a coupon, or an access

21 device, including an electronic benefit transfer card or per22 sonal identification number,’’.
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1 SEC. 1016. DEFINITION OF HOMELESS INDIVIDUAL.

2 Section 3(s)(2)(C) of the Food Stamp Act of 1977

3 (7 U.S.C. 2012(s)(2)(C)) is amended by inserting ‘‘for not

4 more than 90 days’’ after ‘‘temporary accommodation’’.

5 SEC. 1017. STATE OPTION FOR ELIGIBILITY STANDARDS.

6 Section 5(b) of the Food Stamp Act of 1977 (7

7 U.S.C. 2014(d)) is amended by striking ‘‘(b) The Sec8 retary’’ and inserting the following:

9 ‘‘(b) ELIGIBILITY STANDARDS.—Except as otherwise

10 provided in this Act, the Secretary’’.

11 SEC. 1023. DOUBLE PENALTIES FOR VIOLATING FOOD

12 STAMP PROGRAM REQUIREMENTS.

13 Section 6(b)(1) of the Food Stamp Act of 1977 (7

14 U.S.C. 2015(b)(1)) is amended—

15 (1) in clause (i), by striking ‘‘six months’’ and

16 inserting ‘‘1 year’’; and

17 (2) in clause (ii), by striking ‘‘1 year’’ and in18 serting ‘‘2 years’’.

19 SEC. 1024. DISQUALIFICATION OF CONVICTED INDIVID20 UALS.

21 Section 6(b)(1)(iii) of the Food Stamp Act of 1977

22 (7 U.S.C. 2015(b)(1)(iii) is amended—

23 (1) in subclause (II), by striking ‘‘or’’ at the

24 end;

25 (2) in subclause (III), by striking the period at

26 the end and inserting ‘‘; or’’; and
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1 (3) by inserting after subclause (III) the follow2 ing:

3 ‘‘(IV) a conviction of an offense under sub4 section (b) or (c) of section 15 involving an

5 item covered by subsection (b) or (c) of section

6 15 having a value of $500 or more.’’.

7 SEC. 1027. EMPLOYMENT AND TRAINING.

8 (a) IN GENERAL.—Section 6(d)(4) of the Food

9 Stamp Act of 1977 (7 U.S.C. 2015(d)(4)) is amended—

10 (1) in subparagraph (A)—

11 (A) by striking ‘‘Not later than April 1,

12 1987, each’’ and inserting ‘‘Each’’;

13 (B) by inserting ‘‘work,’’ after ‘‘skills,

14 training,’’; and

15 (C) by adding at the end the following:

16 ‘‘Each component of an employment and train17 ing program carried out under this paragraph

18 shall be delivered through a statewide workforce

19 development system, unless the component is

20 not available locally through the statewide

21 workforce development system.’’;

22 (2) in subparagraph (B)—

23 (A) in the matter preceding clause (i), by

24 striking the colon at the end and inserting the

25 following: ‘‘, except that the State agency shall
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1 retain the option to apply employment require2 ments prescribed under this subparagraph to a

3 program applicant at the time of application:’’;

4 (B) in clause (i), by striking ‘‘with terms

5 and conditions’’ and all that follows through

6 ‘‘time of application’’; and

7 (C) in clause (iv)—

8 (i) by striking subclauses (I) and (II);

9 and

10 (ii) by redesignating subclauses (III)

11 and (IV) as subclauses (I) and (II), respec12 tively;

13 (3) in subparagraph (D)—

14 (A) in clause (i), by striking ‘‘to which the

15 application’’ and all that follows through ‘‘30

16 days or less’’;

17 (B) in clause (ii), by striking ‘‘but with re18 spect’’ and all that follows through ‘‘child

19 care’’; and

20 (C) in clause (iii), by striking ‘‘, on the

21 basis of’’ and all that follows through ‘‘clause

22 (ii)’’ and inserting ‘‘the exemption continues to

23 be valid’’;

24 (4) in subparagraph (E), by striking the third

25 sentence;
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1 (5) in subparagraph (G)—

2 (A) by striking ‘‘(G)(i) The State’’ and in3 serting ‘‘(G) The State’’; and

4 (B) by striking clause (ii);

5 (6) in subparagraph (H), by striking ‘‘(H)(i)

6 The Secretary’’ and all that follows through ‘‘(ii)

7 Federal funds’’ and inserting ‘‘(H) Federal funds’’;

8 (7) in subparagraph (I)(i)(II), by striking ‘‘, or

9 was in operation,’’ and all that follows through ‘‘So10 cial Security Act’’ and inserting the following: ‘‘),

11 except that no such payment or reimbursement shall

12 exceed the applicable local market rate’’;

13 (8)(A) by striking subparagraphs (K) and (L)

14 and inserting the following:

15 ‘‘(K) LIMITATION ON FUNDING.—Notwith16 standing any other provision of this paragraph,

17 the amount of funds a State agency uses to

18 carry out this paragraph (including under sub19 paragraph (I)) for participants who are receiv20 ing benefits under a State program funded

21 under part A of title IV of the Social Security

22 Act (42 U.S.C. 601 et seq.) shall not exceed the

23 amount of funds the State agency used in fiscal

24 year 1995 to carry out this paragraph for par25 ticipants who were receiving benefits in fiscal
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1 year 1995 under a State program funded under

2 part A of title IV of the Act (42 U.S.C. 601 et

3 seq.).’’; and

4 (B) by redesignating subparagraphs (M)

5 and (N) as subparagraphs (L) and (M), respec6 tively; and

7 (9) in subparagraph (L), as redesignated by

8 paragraph (8)(B)—

9 (A) by striking ‘‘(L)(i) The Secretary’’ and

10 inserting ‘‘(L) The Secretary’’; and

11 (B) by striking clause (ii).

12 (b) FUNDING.—Section 16(h) of the Act (7 U.S.C.

13 2025(h)) is amended by striking ‘‘(h)(1)(A) The Sec14 retary’’ and all that follows through the end of paragraph

15 (1) and inserting the following:

16 ‘‘(h) FUNDING OF EMPLOYMENT AND TRAINING

17 PROGRAMS.—

18 ‘‘(1) IN GENERAL.—

19 ‘‘(A) AMOUNTS.—To carry out employ20 ment and training programs, the Secretary

21 shall reserve for allocation to State agencies

22 from funds made available for each fiscal year

23 under section 18(a)(1) the amount of—

24 ‘‘(i) for fiscal year 1996, $77,000,000;
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1 ‘‘(ii) for fiscal year 1997,

2 $79,000,000;

3 ‘‘(iii) for fiscal year 1998,

4 $81,000,000;

5 ‘‘(iv) for fiscal year 1999,

6 $84,000,000;

7 ‘‘(v) for fiscal year 2000,

8 $86,000,000;

9 ‘‘(vi) for fiscal year 2001,

10 $88,000,000; and

11 ‘‘(vii) for fiscal year 2002,

12 $90,000,000.

13 ‘‘(B) ALLOCATION.—The Secretary shall

14 allocate the amounts reserved under subpara15 graph (A) among the State agencies using a

16 reasonable formula (as determined by the Sec17 retary) that gives consideration to the popu18 lation in each State affected by section 6(o).

19 ‘‘(C) REALLOCATION.—

20 ‘‘(i) NOTIFICATION.—A State agency

21 shall promptly notify the Secretary if the

22 State agency determines that the State

23 agency will not expend all of the funds al24 located to the State agency under subpara25 graph (B).
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1 ‘‘(ii) REALLOCATION.—On notification

2 under clause (i), the Secretary shall reallo3 cate the funds that the State agency will

4 not expend as the Secretary considers ap5 propriate and equitable.

6 ‘‘(D) MINIMUM ALLOCATION.—Notwith7 standing subparagraphs (A) through (C), the

8 Secretary shall ensure that each State agency

9 operating an employment and training program

10 shall receive not less than $50,000 in each fis11 cal year.’’.

12 (c) ADDITIONAL MATCHING FUNDS.—Section

13 16(h)(2) of the Act (7 U.S.C. 2025(h)(2)) is amended by

14 inserting before the period at the end the following: ‘‘, in15 cluding the costs for case management and casework to

16 facilitate the transition from economic dependency to self17 sufficiency through work’’.

18 (d) REPORTS.—Section 16(h) of the Act (7 U.S.C.

19 2025(h)) is amended—

20 (1) in paragraph (5)—

21 (A) by striking ‘‘(5)(A) The Secretary’’

22 and inserting ‘‘(5) The Secretary’’; and

23 (B) by striking subparagraph (B); and

24 (2) by striking paragraph (6).
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1 SEC. 1030. DISQUALIFICATION OF FLEEING FELONS.

2 Section 6 of the Food Stamp Act of 1977 (7 U.S.C.

3 2015), as amended by section 1029, is further amended

4 by inserting after subsection (j) the following:

5 ‘‘(k) DISQUALIFICATION OF FLEEING FELONS.—No

6 member of a household who is otherwise eligible to partici7 pate in the food stamp program shall be eligible to partici8 pate in the program as a member of that or any other

9 household during any period during which the individual

10 is—

11 (1) fleeing to avoid prosecution, or custody or

12 confinement after conviction, under the law of the

13 place from which the individual is fleeing, for a

14 crime, or attempt to commit a crime, that is a felony

15 under the law of the place from which the individual

16 is fleeing or that, in the case of New Jersey, is a

17 high misdemeanor under the law of New Jersey; or

18 ‘‘(2) violating a condition of probation or parole

19 imposed under a Federal or State law.’’.

20 SEC. 1034. ENCOURAGE ELECTRONIC BENEFIT TRANSFER

21 SYSTEMS.

22 (a) IN GENERAL.—Section 7(i) of the Food Stamp

23 Act of 1977 (7 U.S.C. 2016(i)) is amended—

24 (1) by striking paragraph (1) and inserting the

25 following:

26 ‘‘(1) ELECTRONIC BENEFIT TRANSFERS.—
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1 ‘‘(A) IMPLEMENTATION.—Each State

2 agency shall implement an electronic benefit

3 transfer system in which household benefits de4 termined under section 8(a) or 24 are issued

5 from and stored in a central databank before

6 October 1, 2002, unless the Secretary provides

7 a waiver for a State agency that faces unusual

8 barriers to implementing an electronic benefit

9 transfer system.

10 ‘‘(C) STATE FLEXIBILITY.—Subject to

11 paragraph (2), a State agency may procure and

12 implement an electronic benefit transfer system

13 under the terms, conditions, and design that

14 the State agency considers appropriate.

15 ‘‘(D) OPERATION.—An electronic benefit

16 transfer system should take into account gen17 erally accepted standard operating rules based

18 on—

19 ‘‘(i) commercial electronic funds

20 transfer technology;

21 ‘‘(ii) the need to permit interstate op22 eration and law enforcement monitoring;

23 and
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1 ‘‘(iii) the need to permit monitoring

2 and investigations by authorized law en3 forcement agencies.’’;

4 ‘‘(8) REPLACEMENT CARD FEE.—A State agen5 cy may collect a charge for replacement of an elec6 tronic benefit transfer card by reducing the monthly

7 allotment of the household receiving the replacement

8 card.

9 ‘‘(9) OPTIONAL PHOTOGRAPHIC IDENTIFICA10 TION.—

11 ‘‘(A) IN GENERAL.—A State agency may

12 require that an electronic benefit card contain

13 a photograph of 1 or more members of a house14 hold.

15 ‘‘(B) OTHER AUTHORIZED USERS.—If a

16 State agency requires a photograph on an elec17 tronic benefit card under subparagraph (A), the

18 State agency shall establish procedures to en19 sure that any other appropriate member of the

20 household or any authorized representative of

21 the household may utilize the card.’’.

22 SEC. 1035. VALUE OF MINIMUM ALLOTMENT.

23 The proviso in section 8(a) of the Food Stamp Act

24 of 1977 (7 U.S.C. 2017(a)) is amended by striking ‘‘, and

25 shall be adjusted’’ and all that follows through ‘‘$5.’’.
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1 SEC. 1036. BENEFITS ON RECERTIFICATION.

2 Section 8(c)(2)(B) of the Food Stamp Act of 1977

3 (7 U.S.C. 2017(c)(2)(B)) is amended by striking ‘‘of more

4 than one month’’.

5 SEC. 1037. OPTIONAL COMBINED ALLOTMENT AND EXPE6 DITED HOUSEHOLDS.

7 Section 8(c) of the Food Stamp Act of 1977 (7

8 U.S.C. 2017(c)) is amended by striking paragraph (3) and

9 inserting the following:

10 ‘‘(3) OPTIONAL COMBINED ALLOTMENT FOR

11 EXPEDITED HOUSEHOLDS.—A State agency may

12 provide to an eligible household applying after the

13 15th day of a month, in lieu of the initial allotment

14 of the household and the regular allotment of the

15 household for the following month, an allotment that

16 is equal to the total amount of the initial allotment

17 and the first regular allotment. The allotment shall

18 be provided in accordance with section 11(e)(3) in

19 the case of a household that is not entitled to expe20 dited service and in accordance with paragraphs (3)

21 and (9) of section 11(e) in the case of a household

22 that is entitled to expedited service.’’.
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1 SEC. 1038. FAILURE TO COMPLY WITH OTHER MEANS-TEST2 ED PUBLIC ASSISTANCE PROGRAMS.

3 Section 8 of the Food Stamp Act of 1977 (7 U.S.C.

4 2017) is amended by striking subsection (d) and inserting

5 the following:

6 ‘‘(d) REDUCTION OF PUBLIC ASSISTANCE BENE7 FITS.—

8 ‘‘(1) IN GENERAL.—If the benefits of a house9 hold are reduced under a Federal, State, or local law

10 relating to a means-tested public assistance program

11 for the failure of a member of the household to per12 form an action required under the law or program,

13 for the duration of the reduction—

14 ‘‘(A) the household may not receive an in15 creased allotment as the result of a decrease in

16 the income of the household to the extent that

17 the decrease is the result of the reduction; and

18 ‘‘(B) the State agency may reduce the al19 lotment of the household by not more than 25

20 percent.

21 SEC. 1037. OPTIONAL COMBINED ALLOTMENT FOR EXPE22 DITED HOUSEHOLDS.

23 Section 8(c) of the Food Stamp Act of 1977 (7

24 U.S.C. 2017(c)) is amended by striking paragraph (3) and

25 inserting the following:
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1 ‘‘(3) OPTIONAL COMBINED ALLOTMENT FOR

2 EXPEDITED HOUSEHOLDS.—A State agency may

3 provide to an eligible household applying after the

4 15th day of a month, in lieu of the initial allotment

5 of the household and the regular allotment of the

6 household for the following month, an allotment that

7 is equal to the total amount of the initial allotment

8 and the first regular allotment. The allotment shall

9 be provided in accordance with section 11(e)(3) in

10 the case of a household that is not entitled to expe11 dited service and in accordance with paragraphs (3)

12 and (9) of section 11(e) in the case of a household

13 that is entitled to expedited service.’’.

14 SEC. 1039. ALLOTMENTS FOR HOUSEHOLDS RESIDING IN

15 CENTERS.

16 Section 8 of the Food Stamp Act of 1977 (7 U.S.C.

17 2017) is amended by adding at the end the following:

18 ‘‘(f) ALLOTMENTS FOR HOUSEHOLDS RESIDING

19 IN CENTERS.—

20 ‘‘(1) IN GENERAL.—In the case of an individual

21 who resides in a center for the purpose of a drug or

22 alcoholic treatment program described in the last

23 sentence of section 3(i), a State agency may provide

24 an allotment for the individual to—
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1 ‘‘(A) the center as an authorized represent2 ative of the individual for a period that is less

3 than 1 month; and

4 ‘‘(B) the individual, if the individual leaves

5 the center.

6 ‘‘(2) DIRECT PAYMENT.—A State agency may

7 require an individual referred to in paragraph (1) to

8 designate the center in which the individual resides

9 as the authorized representative of the individual for

10 the purpose of receiving an allotment.’’.

11 SEC. 1046. EXCHANGE OF LAW ENFORCEMENT INFORMA12 TION.

13 Section 11(e)(8) of the Food Stamp Act of 1977 (7

14 U.S.C. 2020(e)(8)) is amended—

15 (1) by striking ‘‘that (A) such’’ and inserting

16 the following: ‘‘that—

17 ‘‘(A) the’’;

18 (2) by striking ‘‘law, (B) notwithstanding’’ and

19 inserting the following: ‘‘law;

20 ‘‘(B) notwithstanding’’;

21 (3) by striking ‘‘Act, and (C) such’’ and insert22 ing the following: ‘‘Act;

23 ‘‘(C) the’’; and

24 (4) by adding at the end the following:
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1 ‘‘(D) notwithstanding any other provision

2 of law, the address, social security number, and,

3 if available, photograph of any member of a

4 household shall be made available, on request,

5 to any Federal, State, or local law enforcement

6 officer if the officer furnishes the State agency

7 with the name of the member and notifies the

8 agency that—

9 ‘‘(i) the member—

10 ‘‘(I) is fleeing to avoid prosecu11 tion, or custody or confinement after

12 conviction, for a crime (or attempt to

13 commit a crime) that, under the law

14 of the place the member is fleeing, is

15 a felony (or, in the case of New Jer16 sey, a high misdemeanor), or is violat17 ing a condition of probation or parole

18 imposed under Federal or State law;

19 or

20 ‘‘(II) has information that is nec21 essary for the officer to conduct an of22 ficial duty related to subclause (I);

23 ‘‘(ii) locating or apprehending the

24 member is an official duty; and
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1 ‘‘(iii) the request is being made in the

2 proper exercise of an official duty; and

3 ‘‘(E) the safeguards shall not prevent com4 pliance with paragraph (16);’’.

5 SEC. 1047. EXPEDITED COUPON SERVICE.

6 Section 11(e)(9) of the Food Stamp Act of 1977 (7

7 U.S.C. 2020(e)(9)) is amended—

8 (1) in subparagraph (A)—

9 (A) by striking ‘‘five days’’ and inserting

10 ‘‘7 days’’; and

11 (B) by inserting ‘‘and’’ at the end;

12 (2) by striking subparagraphs (B) and (C);

13 (3) by redesignating subparagraph (D) as sub14 paragraph (B); and

15 (4) in subparagraph (B), as redesignated by

16 paragraph (3), by striking ‘‘, (B), or (C)’’.

17 SEC. 1048. WITHDRAWING FAIR HEARING REQUESTS.

18 Section 11(e)(10) of the Food Stamp Act of 1977 (7

19 U.S.C. 2020(e)(10)) is amended by inserting before the

20 semicolon at the end a period and the following: ‘‘At the

21 option of a State, at any time prior to a fair hearing deter22 mination under this paragraph, a household may with23 draw, orally or in writing, a request by the household for

24 the fair hearing. If the withdrawal request is an oral re25 quest, the State agency shall provide a written notice to
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1 the household confirming the withdrawal request and pro2 viding the household with an opportunity to request a

3 hearing’’.

4 SEC. 1049. INCOME, ELIGIBILITY, AND IMMIGRATION STA5 TUS VERIFICATION SYSTEMS.

6 Section 11 of the Food Stamp Act of 1977 (7 U.S.C.

7 2020) is amended—

8 (1) in subsection (e)(18), as redesignated by

9 section 1044(1)(D)—

10 (A) by striking ‘‘that information is’’ and

11 inserting ‘‘at the option of the State agency,

12 that information may be’’; and

13 (B) by striking ‘‘shall be requested’’ and

14 inserting ‘‘may be requested’’; and

15 (2) by adding at the end the following:

16 ‘‘(p) STATE VERIFICATION OPTION—Notwithstand17 ing any other provision of law, in carrying out the food

18 stamp program, a State agency shall not be required to

19 use an income and eligibility or an immigration status ver20 ification system established under section 1137 of the So21 cial Security Act (42 U.S.C. 1320b–7).’’.

22 SEC. 1059. AUTHORIZATION OF PILOT PROJECTS.

23 Section 17(b)(1)(B) of the Food Stamp Act of 1977

24 (7 U.S.C. 2026(b)(1)(B)), as amended by section 1058,

25 is further amended—
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1 (1) in clause (iv), by striking ‘‘coupons. Any

2 pilot’’ and inserting the following: ‘‘coupons.

3 ‘‘(v) CASH PAYMENT PILOT

4 PROJECTS.—Any pilot’’; and

5 (2) in clause (v), as so amended, by striking

6 ‘‘1995’’ and inserting ‘‘2002’’.

7 SEC. 1060. RESPONSE TO WAIVERS.

8 Section 17(b)(1) of the Food Stamp Act of 1977 (7

9 U.S.C. 2026(b)(1)), as amended by section 1058, is fur10 ther amended by adding at the end the following:

11 ‘‘(D) RESPONSE TO WAIVERS.—

12 ‘‘(i) RESPONSE.—Not later than 60

13 days after the date of receiving a request

14 for a waiver under subparagraph (A), the

15 Secretary shall provide a response that—

16 ‘‘(I) approves the waiver request;

17 ‘‘(II) denies the waiver request

18 and explains any modification needed

19 for approval of the waiver request;

20 ‘‘(III) denies the waiver request

21 and explains the grounds for the de22 nial; or

23 ‘‘(IV) requests clarification of the

24 waiver request.
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1 ‘‘(ii) FAILURE TO RESPOND.—If the

2 Secretary does not provide a response in

3 accordance with clause (i), the waiver shall

4 be considered approved, unless the ap5 proval is specifically prohibited by this Act.

6 ‘‘(iii) NOTICE OF DENIAL.—On denial

7 of a waiver request under clause (i)(III),

8 the Secretary shall provide a copy of the

9 waiver request and a description of the

10 reasons for the denial to the Committee on

11 Agriculture of the House of Representa12 tives and the Committee on Agriculture,

13 Nutrition, and Forestry of the Senate.’’.

14 Subtitle B—Commodity Distribution Programs

15 SEC. 1071. COMMODITY DISTRIBUTION PROGRAM; COM16 MODITY SUPPLEMENTAL FOOD PROGRAM.

17 (a) REAUTHORIZATION.—The first sentence of sec18 tion 4(a) of the Agriculture and Consumer Protection Act

19 of 1973 (Public Law 93–86; 7 U.S.C. 612c note) is

20 amended by striking ‘‘1995’’ and inserting ‘‘2002’’.

21 (b) FUNDING.—Section 5 of the Act (Public Law 93–

22 86; 7 U.S.C. 612c note) is amended—

23 (1) in subsection (a)(2), by striking ‘‘1995’’ and

24 inserting ‘‘2002’’; and
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1 (2) in subsection (d)(2), by striking ‘‘1995’’

2 and inserting ‘‘2002’’.

3 SEC. 1073. FOOD BANK DEMONSTRATION PROJECT.

4 Section 3 of the Charitable Assistance and Food

5 Bank Act of 1987 (Public Law 100–232; 7 U.S.C. 612c

6 note) is repealed.

7 SEC. 1074. HUNGER PREVENTION PROGRAMS.

8 The Hunger Prevention Act of 1988 (Public Law

9 100–435; 7 U.S.C 612c note) is amended—

10 (1) by striking section 110;

11 (2) by striking subtitle C of title II; and

12 (3) by striking section 502.

13 SEC. 1075. REPORT ON ENTITLEMENT COMMODITY PROC14 ESSING.

15 Section 1773 of the Food, Agriculture, Conservation,

16 and Trade Act of 1990 (Public Law 101–624; 7 U.S.C.

17 612c note) is amended by striking subsection (f).

18 TITLE XI—MISCELLANEOUS

19 SEC. 1101. EXPENDITURE OF FEDERAL FUNDS IN ACCORD20 ANCE WITH LAWS AND PROCEDURES APPLI21 CABLE TO EXPENDITURE OF STATE FUNDS.

22 (a) IN GENERAL.—Notwithstanding any other provi23 sion of law, any funds received by a State under the provi24 sions of law specified in subsection (b) shall be expended

25 only in accordance with the laws and procedures applicable
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1 to expenditures of the State’s own revenues, including ap2 propriation by the State legislature, consistent with the

3 terms and conditions required under such provisions of

4 law.

5 TITLE VI—FEDERAL RETIREMENT AND RELATED

6 PROVISIONS

7 Subtitle A—Civil Service and Postal Service

8 Provisions

9 SEC. 6001. EXTENSION OF DELAY IN COST-OF-LIVING AD10 JUSTMENTS IN FEDERAL EMPLOYEE RETIRE11 MENT BENEFITS THROUGH FISCAL YEAR

12 2002.

13 Section 11001(a) of the Omnibus Budget Reconcili14 ation Act of 1993 (Public Law 103–66; 107 Stat. 408)

15 is amended in the matter preceding paragraph (1) by

16 striking out ‘‘or 1996,’’ and inserting in lieu thereof

17 ‘‘1996, 1997, 1998, 1999, 2000, 2001, or 2002,’’.

18 SEC. 6002. INCREASED CONTRIBUTIONS TO FEDERAL CI19 VILIAN RETIREMENT SYSTEMS.

20 (a) CIVIL SERVICE RETIREMENT SYSTEM.—

21 (1) DEDUCTIONS.—The first sentence of section

22 8334(a)(1) of title 5, United States Code, is amend23 ed to read as follows: ‘‘The employing agency shall

24 deduct and withhold from the basic pay of an em25 ployee, Member, Congressional employee, law en-
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1 forcement officer, firefighter, bankruptcy judge,

2 judge of the United States Court of Appeals for the

3 Armed Forces, United States magistrate, or Claims

4 Court judge, as the case may be, the percentage of

5 basic pay applicable under subsection (c).’’.

6 (2) AGENCY CONTRIBUTIONS.—

7 (A) INCREASE IN AGENCY CONTRIBUTION

8 DURING CALENDAR YEARS 1996 THROUGH

9 2002.—Section 8334(a)(1) of title 5, United

10 States Code (as amended by this section) is fur11 ther amended—

12 (i) by inserting ‘‘(A)’’ after ‘‘(1)’’; and

13 (ii) by adding at the end thereof the

14 following new subparagraph;

15 ‘‘(B)(i) Notwithstanding subparagraph

16 (A), the agency contribution under the second

17 sentence of such subparagraph, during the pe18 riod beginning on January 1, 1996, through

19 December 31, 2002—

20 ‘‘(I) for each employing agency (other

21 than the United States Postal Service or

22 the Washington Metropolitan Airport Au23 thority) shall be 8.51 percent of the basic

24 pay of an employee, Congressional em25 ployee, and a Member of Congress, 9.01
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1 percent of the basic pay of a law enforce2 ment officer, a member of the Capitol Po3 lice, and a firefighter, and 8.51 percent of

4 the basic pay of a Claims Court judge, a

5 United States magistrate, a judge of the

6 United States Court of Appeals for the

7 Armed Services, and a bankruptcy judge,

8 as the case may be; and

9 ‘‘(II) for the United States Postal

10 Service and the Washington Metropolitan

11 Airport Authority shall be 7 percent of the

12 basic pay of an employee and 7.5 percent

13 of the basic pay of a law enforcement offi14 cer or firefighter.’’.

15 (B) NO REDUCTION IN AGENCY CONTRIBU16 TIONS BY THE POSTAL SERVICE.—Agency con17 tributions by the United States Postal Service

18 under section 8348(h) of title 5, United States

19 Code—

20 (i) shall not be reduced as a result of

21 the amendments made under paragraph

22 (3) of this subsection; and

23 (ii) shall be computed as through such

24 amendments had not been enacted.
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1 (3) INDIVIDUAL DEDUCTIONS, WITHHOLDINGS,

2 AND DEPOSITS.—The table under section 8334(c) of

3 title 5, United States Code, is amended—

4 (A) in the matter relating to an employee

5 by striking out

‘‘7 ........ After December 31, 1969.’’

6 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.’’;

7 (B) in the matter relating to a Member or

8 employee for Congressional employee service by

9 striking out

‘‘71⁄2 ..... After December 31, 1969.’’

10 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.’’;

11 (C) in the matter relating to a Member for

12 Member service by striking out

‘‘8 ........ After December 31, 1969.’’

13 and inserting in lieu thereof the following:

‘‘8 ........ January 1, 1970, to December 31, 1995.

7.25 ..... January 1, 1996, to December 31, 1996.

7.4 ....... January 1, 1997, to December 31, 1997.

7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31, 2002.’’;
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1 (D) in the matter relating to a law enforce2 ment officer for law enforcement service and

3 firefighter for firefighter service by striking out

‘‘71⁄2 ..... After December 31, 1974.’’

4 and inserting in lieu thereof the following:

‘‘7.5 ..... January 1, 1975, to December 31, 1995.

7.75 ..... January 1, 1996, to December 31, 1996.

7.9 ....... January 1, 1997, to December 31, 1997.

8 .......... January 1, 1998, to December 31, 2002.

7.5 ....... After December 31, 2002.’’;

5 (E) in the matter relating to a bankruptcy

6 judge by striking out

‘‘8 ........ After December 31, 1983.’’

7 and inserting in lieu thereof the following:

‘‘8 ........ January 1, 1984, to December 31, 1995.

7.5 ....... January 1, 1996, to December 31, 1996.

7.4 ....... January 1, 1997, to December 31, 1997.

7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31, 2002.’’;

8 (F) in the matter relating to a judge of the

9 United States Court of Appeals for the Armed

10 Forces for service as a judge of that court by

11 striking out

‘‘8 ........ On and after the date of the enactment of

the Department of Defense Authorization Act, 1984.’’

12 and inserting in lieu thereof the following:

‘‘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.
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7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31, 2002.’’;

1 (G) in the matter relating to a United

2 States magistrate by striking out

‘‘8 ........ After September 30, 1987.’’

3 and inserting in lieu thereof the following:

‘‘8 ........ October 1, 1987, to December 31, 1995.

7.25 ..... January 1, 1996, to December 31, 1996.

7.4 ....... January 1, 1997, to December 31, 1997.

7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31, 2002.’’;

4 (H) in the matter relating to a Claims

5 Court judge by striking out

‘‘8 ........ After September 30, 1988.’’

6 and inserting in lieu thereof the following:

‘‘8 ........ October 1, 1988, to December 31, 1995.

7.25 ..... January 1, 1996, to December 31, 1996.

7.4 ....... January 1, 1997, to December 31, 1997.

7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31, 2002.’’;

7 and

8 (I) by inserting after the matter relating to

9 a Claims Court judge the following:

‘‘Member of the Capitol Police .................... 2.5 ....... August 1, 1920, to June 30, 1926.

3.5 ....... July 1, 1926, to June 30, 1942.

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.’’.

10 (4) OTHER SERVICE.—
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1 (A) MILITARY SERVICE.—Section 8334(j)

2 of title 5, United States Code, is amended—

3 (i) in paragraph (1)(A) by inserting

4 ‘‘and subject to paragraph (5),’’ after ‘‘Ex5 cept as provided in subparagraph (B),’’;

6 and

7 (ii) by adding at the end thereof the

8 following new paragraph:

9 ‘‘(5) Effective with respect to any period of

10 military service after December 31, 1995, the per11 centage of basic pay under section 204 of title 37

12 payable under paragraph (1) shall be equal to the

13 same percentage as would be applicable under sec14 tion 8334(c) for that same period for service as an

15 employee, subject to paragraph (1)(B).’’.

16 (B) VOLUNTEER SERVICE.—Section

17 8334(l) of title 5, United States Code, is

18 amended—

19 (i) in paragraph (1) by adding at the

20 end thereof the following: ‘‘This paragraph

21 shall be subject to paragraph (4).’’; and

22 (ii) by adding at the end thereof the

23 following new paragraph:

24 ‘‘(4) Effective with respect to any period of

25 service after December 31, 1995, the percentage of
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1 the readjustment allowance or stipend (as the case

2 may be) payable under paragraph (1) shall be equal

3 to the same percentage as would be applicable under

4 section 8334(c) for that same period for service as

5 an employee.’’.

6 (b) FEDERAL EMPLOYEES RETIREMENT SYSTEM.—

7 (1) INDIVIDUAL DEDUCTIONS AND

8 WITHHOLDINGS.—

9 (A) IN GENERAL.—Section 8422(a) of title

10 5, United States Code, is amended by striking

11 out paragraph (2) and inserting in lieu thereof

12 the following:

13 ‘‘(2) The percentage to be deducted and with14 held from basic pay for any pay period shall be

15 equal to—

16 ‘‘(A) the applicable percentage under para17 graph (3), minus

18 ‘‘(B) the percentage then in effect under

19 section 3101(a) of the Internal Revenue Code

20 of 1986 (relating to rate of tax for old-age, sur21 vivors, and disability insurance).

22 ‘‘(3) The applicable percentage under this para23 graph, 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.
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7.4 ....... January 1, 1997, to December 31, 1997.

7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31, 2002.

Member ........................................................ 7.5 ....... Before January 1, 1996.

7.25 ..... January 1, 1996, to December 31, 1996.

7.4 ....... January 1, 1997, to December 31, 1997.

7.5 ....... January 1, 1998, to December 31, 2002.

7 .......... After December 31, 2002.

Law enforcement officer, firefighter, member of the Capitol Police, or air traffic

controller.

7.5 ....... Before January 1, 1996.

7.75 ..... January 1, 1996, to December 31, 1996.

7.9 ....... January 1, 1997, to December 31, 1997.

8 .......... January 1, 1998, to December 31, 2002.

7.5 ....... After December 31, 2002.

1 (B) MILITARY SERVICE.—Section 8422(e)

2 of title 5, United States Code, is amended—

3 (i) in paragraph (1)(A) by inserting

4 ‘‘and subject to paragraph (6),’’ after ‘‘Ex5 cept as provided in subparagraph (B),’’;

6 and

7 (ii) by adding at the end thereof the

8 following:

9 ‘‘(6) The percentage of basic pay under section

10 204 of title 37 payable under paragraph (1), with

11 respect to any period of military service performed

12 during—

13 ‘‘(A) January 1, 1996, through December

14 31, 1996, shall be 3.25 percent;

15 ‘‘(B) January 1, 1997, through December

16 31, 1997, shall be 3.4 percent; and

17 ‘‘(C) January 1, 1998, through December

18 31, 2002, shall be 3.5 percent.’’.
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1 (C) VOLUNTEER SERVICE.—Section

2 8422(f) of title 5, United States Code, is

3 amended—

4 (i) in paragraph (1) by adding at the

5 end thereof the following: ‘‘This paragraph

6 shall be subject to paragraph (4).’’; and

7 (ii) by adding at the end the follow8 ing:

9 ‘‘(4) The percentage of the readjustment allow10 ance or stipend (as the case may be) payable under

11 paragraph (1), with respect to any period of volun12 teer service performed during—

13 ‘‘(A) January 1, 1996, through December

14 31, 1996, shall be 3.25 percent;

15 ‘‘(B) January 1, 1997, through December

16 31, 1997, shall 3.4 percent; and

17 ‘‘(C) January 1, 1998, through December

18 31, 2002, shall be 3.5 percent.’’.

19 (2) NO REDUCTION IN AGENCY CONTRIBU20 TIONS.—Agency contributions under section 8423

21 (a) and (b) of title 5, United States Code, shall not

22 be reduced as a result of the amendments made

23 under paragraph (1) of this subsection.

24 (c) EFFECTIVE DATE.—The amendments made by

25 this section shall take effect on the first day of the first
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1 applicable pay period beginning on or after January 1,

2 1996.

3 SEC. 6003. FEDERAL RETIREMENT PROVISIONS RELATING

4 TO MEMBERS OF CONGRESS AND CONGRES5 SIONAL EMPLOYEES.

6 (a) RELATING TO THE YEARS OF SERVICE AS A

7 MEMBER OF CONGRESS AND CONGRESSIONAL EMPLOY8 EES FOR PURPOSES OF COMPUTING AN ANNUITY.—

9 (1) CSRS.—Section 8339 of title 5, United

10 States Code, is amended—

11 (A) in subsection (a) inserting ‘‘or Mem12 ber’’ after ‘‘employee’’; and

13 (B) by striking out subsections (b) and (c).

14 (2) FERS.—Section 8415 of title 5, United

15 States Code, is amended—

16 (A) by striking out subsections (b) and (c);

17 (B) in subsections (a) and (g) by inserting

18 ‘‘or Member’’ after ‘‘employee’’ each place it

19 appears; and

20 (C) in subsection (g)(2) by striking out

21 ‘‘Congressional employee’’.

22 (b) ACCRUAL RATE FOR MEMBER AND CONGRES23 SIONAL EMPLOYEE SERVICE PERFORMED BUT NOT

24 VESTED BEFORE EFFECTIVE DATE.—
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1 (1) APPLICATION.—This subsection shall apply

2 to an individual who—

3 (A) is a Member of Congress or Congres4 sional employee on December 31, 1995;

5 (B) has performed less than 5 years of

6 service as a Member of Congress or Congres7 sional employee on December 31, 1995; and

8 (C) after December 31, 1995, completes 5

9 years of service as a Member of Congress or

10 Congressional employee, that includes a period

11 of service performed as a Member of Congress

12 or Congressional employee before January 1,

13 1996.

14 (2) COMPUTATION OF ANNUITY.—In computing

15 the annuity of an individual described under para16 graph (1)—

17 (A) any period of service as a Member of

18 Congress or Congressional employee performed

19 before January 1, 1996, shall be computed

20 under section 8339 or 8415 of title 5, United

21 States Code (as though the amendments under

22 subsection (a) of this section were not enacted);

23 and

24 (B) the 5 year service requirement under

25 subsections (b) and (c) of section 8339 or 8415
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1 of such title (as in effect before the date of en2 actment of this Act) shall be deemed fulfilled.

3 (c) CAPITOL POLICE.—Section 8339(q) of title 5,

4 United States Code, is amended by striking out ‘‘with sub5 section (b), except that, in the case of a member who re6 tires under section 8335(d) or 8336(m), and who meets

7 the requirements of subsection (b)(2),’’ and inserting in

8 lieu thereof ‘‘with subsection (a), except that in the case

9 of a member who retires under section 8335(d) or

10 8336(m), and who has deductions withheld from his pay

11 or has made deposit covering his last 5 years of civilian

12 service,’’.

13 (d) ADMINISTRATIVE REGULATIONS.—The Office of

14 Personnel Management, in consultation with the Secretary

15 of the Senate and the Clerk of the House of Representa16 tives, may prescribe regulations to carry out the provisions

17 of this section and the amendments made by this section

18 for applicable employees and Members of Congress.

19 (e) EFFECTIVE DATES.—

20 (1) YEARS OF SERVICE; ANNUITY COMPUTA21 TION.—

22 (A) SERVICE AFTER EFFECTIVE DATE.—

23 The amendments made by subsection (a) shall

24 take effect on January 1, 1996, and shall apply
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1 only with respect to the computation of an an2 nuity relating to—

3 (i) the service of a Member of Con4 gress as a Member or as a Congressional

5 employee performed on or after January 1,

6 1996; and

7 (ii) the service of a Congressional em8 ployee as a Congressional employee per9 formed on or after January 1, 1996.

10 (B) SERVICE BEFORE EFFECTIVE DATE.—

11 An annuity shall be computed as though the

12 amendments made under subsection (a) had not

13 been enacted with respect to—

14 (i) the service of a Member of Con15 gress as a Member or a Congressional em16 ployee or military service performed before

17 January 1, 1996; and

18 (ii) the service of a Congressional em19 ployee as a Congressional employee or mili20 tary service performed before January 1,

21 1996.

22 (C) ALTERNATIVE EFFECTIVE DATE RE23 LATING TO MEMBERS OF CONGRESS.—If a

24 court of competent jurisdiction makes a final

25 determination that a provision of this para-
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1 graph violates the 27th amendment of the Unit2 ed States Constitution, the effective date and

3 application dates relating to Members of Con4 gress shall be January 1, 1997.

5 (2) ADMINISTRATIVE PROVISIONS.—The provi6 sions of subsections (b), (c), and (d) shall take effect

7 on the date of the enactment of this Act.

8 SEC. 6004. ACCRUAL RATES RELATING TO CERTAIN

9 JUDGES WITH SIMILAR TREATMENT AS CON10 GRESSIONAL SERVICE.

11 (a) JUDGE OF THE UNITED STATES COURT OF MILI12 TARY APPEALS.—Section 8339(d)(7) of title 5, United

13 States Code, is amended by striking out ‘‘service.’’ and

14 inserting in lieu thereof ‘‘service performed before Janu15 ary 1, 1996.’’

16 (b) CLAIMS COURT JUDGE, BANKRUPTCY JUDGE,

17 UNITED STATES MAGISTRATE.—Section 8339(n) of title

18 5, United States Code, is amended by striking out ‘‘serv19 ice.’’ and inserting in lieu thereof ‘‘service performed be20 fore January 1, 1996. The annuity of any such employee

21 is, and with respect to any service referred to in the pre22 ceding sentence that is performed on or after January 1,

23 1996, computed under subsection (a).’’.
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1 SEC. 6005. REPEAL OF AUTHORIZATION OF TRANSITIONAL

2 APPROPRIATIONS FOR THE UNITED STATES

3 POSTAL SERVICE.

4 (a) REPEAL.—

5 (1) IN GENERAL.—Section 2004 of title 39,

6 United States Code, is repealed.

7 (2) TECHNICAL AND CONFORMING AMEND8 MENT.—

9 (A) The table of sections for chapter 20 of

10 such title is amended by repealing the item re11 lating to section 2004.

12 (B) Section 2003(e)(2) of such title is

13 amended by striking ‘‘sections 2401 and 2004’’

14 each place it appears and inserting ‘‘section

15 2401’’.

16 (b) CLARIFICATION THAT LIABILITIES FORMERLY

17 PAID PURSUANT TO SECTION 2004 REMAIN LIABILITIES

18 PAYABLE BY THE POSTAL SERVICE.—Section 2003 of

19 title 39, United States Code, is amended by adding at the

20 end the following:

21 ‘‘(h) Liabilities of the former Post Office Department

22 to the Employees’ Compensation Fund (appropriations for

23 which were authorized by former section 2004, as in effect

24 before the effective date of this subsection) shall be liabil25 ities of the Postal Service payable out of the Fund.’’.

26 (c) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—This section and the amend2 ments made by this section shall be effective as of

3 October 1, 1995.

4 (2) PROVISIONS RELATING TO PAYMENTS FOR

5 FISCAL YEAR 1996.—

6 (A) AMOUNTS NOT YET PAID.—No pay7 ment may be made to the Postal Service Fund,

8 on or after the date of the enactment of this

9 Act, pursuant to any appropriation for fiscal

10 year 1996 authorized by section 2004 of title

11 39, United States Code (as in effect before the

12 effective date of this section).

13 (B) AMOUNTS PAID.—If any payment to

14 the Postal Service Fund is or has been made

15 pursuant to an appropriation for fiscal year

16 1996 authorized by such section 2004, then an

17 amount equal to the amount of such payment

18 shall be paid from such Fund into the Treasury

19 as miscellaneous receipts.

20 SEC. 13103. REQUIREMENT THAT CERTAIN AGENCIES

21 PREFUND GOVERNMENT HEALTH BENEFITS

22 CONTRIBUTIONS FOR THEIR ANNUITANTS.

23 (a) DEFINITIONS.—For the purpose of this section—

24 (1) the term ‘‘agency’’ means any agency or

25 other instrumentality within the executive branch of
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1 the Government, the receipts and disbursements of

2 which are not generally included in the totals of the

3 budget of the United States Government submitted

4 by the President;

5 (2) the term ‘‘health benefits plan’’ means, with

6 respect to an agency, a health benefits plan, estab7 lished by or under Federal law, in which employees

8 or annuitants of such agency may participate;

9 (3) the term ‘‘health-benefits coverage’’ means

10 coverage under a health benefits plan;

11 (4) an individual shall be considered to be an

12 ‘‘annuitant of an agency’’ if such individual is enti13 tled to an annuity, under a retirement system estab14 lished by or under Federal law, by virtue of—

15 (A) such individual’s service with, and sep16 aration from, such agency; or

17 (B) being the survivor of an annuitant

18 under subparagraph (A) or of an individual who

19 died while employed by such agency; and

20 (5) the term ‘‘Office’’ means the Office of Per21 sonnel Management.

22 (b) PREFUNDING REQUIREMENT.—

23 (1) IN GENERAL.—Effective as of October 1,

24 1996, each agency shall be required to prepay the

25 Government contributions which are or will be re-
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1 quired in connection with providing health-benefits

2 coverage for annuitants of such agency.

3 (2) REGULATIONS.—The Office shall prescribe

4 such regulations as may be necessary to carry out

5 this section. The regulations shall be designed to en6 sure at least the following:

7 (A) Amounts paid by each agency shall be

8 sufficient to cover the amounts which would

9 otherwise be payable by such agency (on a

10 ‘‘pay-as-you-go’’ basis), on or after the applica11 ble effective date under paragraph (1), on be12 half of—

13 (i) individuals who are annuitants of

14 the agency as of such effective date; and

15 (ii) individuals who are employed by

16 the agency as of such effective date, or

17 who become employed by the agency after

18 such effective date, after such individuals

19 have become annuitants of the agency (in20 cluding their survivors).

21 (B)(i) For purposes of determining any

22 amounts payable by an agency—

23 (I) this section shall be treated as if

24 it had taken effect at the beginning of the

25 20-year period which ends on the effective
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1 date applicable under paragraph (1) with

2 respect to such agency; and

3 (II) in addition to any amounts pay4 able under subparagraph (A), each agency

5 shall also be responsible for paying any

6 amounts for which it would have been re7 sponsible, with respect to the 20-year pe8 riod described in subclause (I), in connec9 tion with any individuals who are annu10 itants or employees of the agency as of the

11 applicable effective date under paragraph

12 (1).

13 (ii) Any amounts payable under this sub14 paragraph for periods preceding the applicable

15 effective date under paragraph (1) shall be pay16 able in equal installments over the 20-year pe17 riod beginning on such effective date.

18 (c) FASB STANDARDS.—Regulations under sub19 section (b) shall be in conformance with the provisions of

20 standard 106 of the Financial Accounting Standards

21 Board, issued in December 1990.

22 (d) CLARIFICATION.—Nothing in this section shall be

23 considered to permit or require duplicative payments on

24 behalf of any individuals.
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1 (e) DRAFT LEGISLATION.—The Office shall prepare

2 and submit to Congress any draft legislation which may

3 be necessary in order to carry out this section.

4 TITLE VII—VETERANS AND RELATED

5 PROVISIONS

6 SEC. 10001. SHORT TITLE; TABLE OF CONTENTS.

7 (a) SHORT TITLE.—This title may be cited as the

8 ‘‘Veterans Reconciliation Act of 1995’’.

9 (b) TABLE OF CONTENTS.—The table of contents for

10 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.
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1 Subtitle A—Extension of Temporary Authorities

2 SEC. 10011. AUTHORITY TO REQUIRE THAT CERTAIN VET3 ERANS MAKE COPAYMENTS IN EXCHANGE

4 FOR RECEIVING HEALTH-CARE BENEFITS.

5 (a) HOSPITAL AND MEDICAL CARE.—Section

6 8013(e) of the Omnibus Budget Reconciliation Act of

7 1990 (38 U.S.C. 1710 note) is amended by striking out

8 ‘‘September 30, 1998’’ and inserting in lieu thereof ‘‘Sep9 tember 30, 2002’’.

10 (b) OUTPATIENT MEDICATIONS.—Section 1722A(c)

11 of title 38, United States Code, is amended by striking

12 out ‘‘September 30, 1998’’ and inserting in lieu thereof

13 ‘‘September 30, 2002’’.

14 SEC. 10012. MEDICAL CARE COST RECOVERY AUTHORITY.

15 Section 1729(a)(2)(E) of title 38, United States

16 Code, is amended by striking out ‘‘before October 1,

17 1998,’’ and inserting ‘‘before October 1, 2002,’’.

18 SEC. 10013. INCOME VERIFICATION AUTHORITY.

19 Section 5317(g) of title 38, United States Code, is

20 amended by striking out ‘‘September 30, 1998’’ and in21 serting in lieu thereof ‘‘September 30, 2002’’.
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1 SEC. 10014. LIMITATION ON PENSION FOR CERTAIN RECIPI2 ENTS OF MEDICAID-COVERED NURSING

3 HOME CARE.

4 Section 5503(f)(7) of title 38, United States Code,

5 is amended by striking out ‘‘September 30, 1998’’ and in6 serting in lieu thereof ‘‘September 30, 2002’’.

7 SEC. 10015. HOME LOAN FEES.

8 Section 3729(a) of title 38, United States Code, is

9 amended—

10 (1) in paragraph (4), by striking out ‘‘October

11 1, 1998’’ and inserting in lieu thereof ‘‘October 1,

12 2002’’; and

13 (2) in paragraph (5)(C), by striking out ‘‘Octo14 ber 1, 1998’’ and inserting in lieu thereof ‘‘October

15 1, 2002’’.

16 SEC. 10016. PROCEDURES APPLICABLE TO LIQUIDATION

17 SALES ON DEFAULTED HOME LOANS GUAR18 ANTEED BY THE DEPARTMENT OF VETERANS

19 AFFAIRS.

20 Section 3732(c)(11) of title 38, United States Code,

21 is amended by striking out ‘‘October 1, 1998’’ and insert22 ing ‘‘October 1, 2002’’.

23 SEC. 10017. ENHANCED LOAN ASSET SALE AUTHORITY.

24 Section 3720(h)(2) of title 38, United States Code,

25 is amended by striking out ‘‘December 31, 1995’’ and in26 serting in lieu thereof ‘‘September 30, 2002’’.
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1 Subtitle B—Other Matters

2 SEC. 1002. ROUNDING DOWN OF COST-OF-LIVING AD3 JUSTMENTS IN COMPENSATION AND DIC

4 RATES.

5 (a) FISCAL YEAR 1996 COLA.—Effective as of De6 cember 1, 1995, the Secretary of Veterans Affairs shall

7 recompute any increase in an adjustment that is otherwise

8 provided by law to be effective during fiscal year 1996 in

9 the rates of disability compensation and dependency and

10 indemnity compensation paid by the Secretary as such

11 rates were in effect on November 30, 1995. The recom12 putation shall provide for the same percentage increase

13 as provided under such law, but with amounts so recom14 puted (if not a whole dollar amount).

15 ‘‘§ 1103. Cost-of-living adjustments

16 ‘‘(a) In the computation of cost-of-living adjustments

17 for fiscal years 1997 through 2002 in the rates of, and

18 dollar limitations applicable to, compensation payable

19 under this chapter, such adjustments shall be made by a

20 uniform percentage that is no more than the percentage

21 equal to the social security increase for that fiscal year,

22 with all increased monthly rates and limitations (other

23 than increased rates or limitations equal to a whole dollar

24 amount) rounded down to the next lower whole dollar

25 amount.
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1 ‘‘(b) For purposes of this section, the term ‘social se2 curity increase’ means the percentage by which benefit

3 amounts payable under title II of the Social Security Act

4 (42 U.S.C. 401 et seq.) are increased for any fiscal year

5 as a result of a determination under section 215(i) of such

6 Act (42 U.S.C. 415(i)).’’.

7 (b) The table of sections at the beginning of such

8 chapter is amended by inserting after the item relating

9 to section 1102 the following new item:

‘‘1103. Cost-of-living adjustments.’’.

10 (c) OUT-YEAR DIC COLAS.—(1) Chapter 13 of title

11 38, United States Code, is amended by inserting after sec12 tion 1302 the following new section:

13 ‘‘§ 1303. Cost-of-living adjustments

14 ‘‘(a) In the computation of cost-of-living adjustments

15 for fiscal years 1997 through 2002 in the rates of depend16 ency and indemnity compensation payable under this

17 chapter, such adjustments shall be made by a uniform per18 centage that is no more than the percentage equal to the

19 social security increase for that fiscal year, with all in20 creased monthly rates (other than increased rates equal

21 to a whole dollar amount) rounded down to the next lower

22 whole dollar amount.

23 ‘‘(b) For purposes of this section, the term ‘social se24 curity increase’ means the percentage by which benefit
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1 amounts payable under title II of the Social Security Act

2 (42 U.S.C. 401 et seq.) are increased for any fiscal year

3 as a result of a determination under section 215(i) of such

4 Act (42 U.S.C. 415(i)).’’.

5 (2) The table of sections at the beginning of such

6 chapter is amended by inserting after the item relating

7 to section 1302 the following new item:

‘‘1303. Cost-of-living adjustments.’’.

8 SEC. 10023. REVISED STANDARD FOR LIABILITY FOR IN9 JURIES RESULTING FROM DEPARTMENT OF

10 VETERANS AFFAIRS TREATMENT.

11 (a) REVISED STANDARD.—Section 1151 of title 38,

12 United States Code, is amended—

13 (1) by designating the second sentence as sub14 section (c);

15 (2) by striking out the first sentence and insert16 ing in lieu thereof the following:

17 ‘‘(a) Compensation under this chapter and depend18 ency and indemnity compensation under chapter 13 of this

19 title shall be awarded for a qualifying additional disability

20 of a veteran or the qualifying death of a veteran in the

21 same manner as if such disability or death were service22 connected.

23 ‘‘(b)(1) For purposes of this section, a disability or

24 death is a qualifying additional disability or a qualifying

25 death only if the disability or death—
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1 ‘‘(A) was caused by Department health care

2 and was a proximate result of—

3 ‘‘(i) negligence on the part of the Depart4 ment in furnishing the Department health care;

5 or

6 ‘‘(ii) an event not reasonably foreseeable;

7 or

8 ‘‘(B) was incurred as a proximate result of the

9 provision of training and rehabilitation services by

10 the Secretary (including by a service-provider used

11 by the Secretary for such purpose under section

12 3115 of this title) as part of an approved rehabilita13 tion program under chapter 31 of this title.

14 ‘‘(2) For purposes of this section, the term ‘Depart15 ment health care’ means hospital care, medical or surgical

16 treatment, or an examination that is furnished under any

17 law administered by the Secretary to a veteran by a De18 partment employee or in a facility over which the Sec19 retary has direct jurisdiction.

20 ‘‘(3) A disability or death of a veteran which is the

21 result of the veteran’s willful misconduct is not a qualify22 ing disability or death for purposes of this section.’’; and

23 (3) by adding at the end the following:

24 ‘‘(d) Effective with respect to injuries, aggravations

25 of injuries, and deaths occurring after September 30,
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1 2002, a disability or death is a qualifying additional dis2 ability or a qualifying death for purposes of this section

3 (notwithstanding the provisions of subsection (b)(1)) if the

4 disability or death—

5 ‘‘(1) was the result of Department health care;

6 or

7 ‘‘(2) was the result of the pursuit of a course

8 of vocational rehabilitation under chapter 31 of this

9 title.’’.

10 (b) CONFORMING AMENDMENTS.—Subsection (c) of

11 such section, as designated by subsection (a)(1), is amend12 ed—

13 (1) by striking out ‘‘, aggravation,’’ both places

14 it appears; and

15 (2) by striking out ‘‘sentence’’ and inserting in

16 lieu thereof ‘‘subsection’’.

17 (c) EFFECTIVE DATE.—The amendments made by

18 this section shall apply to any administrative or judicial

19 determination of eligibility for benefits under section 1151

20 of title 38, United States Code, based on a claim that is

21 received by the Secretary on or after October 1, 1995, in22 cluding any such determination based on an original appli23 cation or an application seeking to reopen, revise, recon24 sider, or otherwise readjudicate any claim for benefits
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1 under section 1151 of that title or any predecessor provi2 sion of law.

3 SEC. 10024. WITHHOLDING OF PAYMENTS AND BENE4 FITS.

5 (a) NOTICE REQUIRED IN LIEU OF CONSENT OR

6 COURT ORDER.—Section 3726 of title 38, United States

7 Code, is amended by striking out ‘‘unless’’ and all that

8 follows and inserting in lieu thereof the following: ‘‘unless

9 the Secretary provides such veteran or surviving spouse

10 with notice by certified mail with return receipt requested

11 of the authority of the Secretary to waive the payment

12 of indebtedness under section 5302(b) of this title. If the

13 Secretary does not waive the entire amount of the liability,

14 the Secretary shall then determine whether the veteran or

15 surviving spouse should be released from liability under

16 section 3713(b) of this title. If the Secretary determines

17 that the veteran or surviving spouse should not be released

18 from liability, the Secretary shall notify the veteran or sur19 viving spouse of that determination and provide a notice

20 of the procedure for appealing that determination, unless

21 the Secretary has previously made such determination and

22 notified the veteran or surviving spouse of the procedure

23 for appealing the determination.‘‘.
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1 (b) CONFORMING AMENDMENT.—Section 5302(b) of

2 such title is amended by inserting ‘‘with return receipt re3 quested’’ after ‘‘certified mail’’.

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section shall apply with respect to any indebtedness

6 to the United States arising pursuant to chapter 37 of

7 title 38, United States Code, before, on, or after the date

8 of the enactment of this Act.

9 Subtitle C—Educational Benefits

10 SEC. 11031. LIMITATION REGARDING COST-OF-LIVING AD11 JUSTMENTS FOR MONTGOMERY GI BILL BEN12 EFITS.

13 With respect to each of fiscal years 1966 through

14 2002, the cost-of-living adjustments in the rates of edu15 cational assistance payable under chapter 30 of title 38,

16 United States Code, shall be the percentage equal to 50

17 percent of the percentage by which such assistance would

18 be increased under section 3015(g) of such title with re19 spect to such fiscal year but for this section.

20 TITLE VIII—ASSET SALES; USER FEES AND

21 OTHER MANDATORY PROGRAMS

22 Subtitle A—United States Enrichment Corporation

23 SEC. 3001. SHORT TITLE.

24 This subtitle may be cited as the ‘‘USEC Privatiza25 tion Act’’.
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1 SEC. 3002. PURPOSE.

2 The purpose of this subtitle is to transfer the interest

3 of the United States in the United States Enrichment Cor4 poration to the private sector in a manner that provides

5 for the long-term viability of the Corporation, provides for

6 the continuation by the Corporation of the operation of

7 the Department of Energy’s gaseous diffusion plants, pro8 vides for the protection of the public interest in maintain9 ing a reliable and economical domestic source of uranium

10 mining and enrichment services, and, to the extent not in11 consistent with such purposes, secures the maximum pro12 ceeds to the United States.

13 SEC. 3003. DEFINITIONS.

14 For purposes of this subtitle:

15 (1) The term ‘‘AVLIS’’ means atomic vapor

16 laser isotope separation technology.

17 (2) The term ‘‘Corporation’’ means the United

18 States Enrichment Corporation and, unless the con19 text otherwise requires, includes the private corpora20 tion and any successor thereto following privatiza21 tion.

22 (3) The term ‘‘gaseous diffusion plants’’ means

23 the Paducah Gaseous Diffusion Plant at Paducah,

24 Kentucky and the Portsmouth Gaseous Diffusion

25 Plant at Piketon, Ohio.
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1 (4) The term ‘‘highly enriched uranium’’ means

2 uranium enriched to 20 percent or more of the ura3 nium-235 isotope.

4 (5) The term ‘‘low-enriched uranium’’ means

5 uranium enriched to less than 20 percent of the ura6 nium-235 isotope, including that which is derived

7 from highly enriched uranium.

8 (6) The term ‘‘low-level radioactive waste’’ has

9 the meaning given such term in section 2(9) of the

10 Low-Level Radioactive Waste Policy Act (42 U.S.C.

11 2021b(9)).

12 (7) The term ‘‘private corporation’’ means the

13 corporation established under section 3005.

14 (8) The term ‘‘privatization’’ means the trans15 fer of ownership of the Corporation to private inves16 tors.

17 (9) The term ‘‘privatization date’’ means the

18 date on which 100 percent of the ownership of the

19 Corporation has been transferred to private inves20 tors.

21 (10) The term ‘‘public offering’’ means an un22 derwritten offering to the public of the common

23 stock of the private corporation pursuant to section

24 3004.
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1 (11) The ‘‘Russian HEU Agreement’’ means

2 the Agreement Between the Government of the

3 United States of America and the Government of

4 the Russian Federation Concerning the Disposition

5 of Highly Enriched Uranium Extracted from Nu6 clear Weapons, dated February 18, 1993.

7 (12) The term ‘‘Secretary’’ means the Secretary

8 of Energy.

9 (13) The ‘‘Suspension Agreement’’ means the

10 Agreement to Suspend the Antidumping Investiga11 tion on Uranium from the Russian Federation, as

12 amended.

13 (14) The term ‘‘uranium enrichment’’ means

14 the separation of uranium of a given isotopic content

15 into 2 components, 1 having a higher percentage of

16 a fissile isotope and 1 having a lower percentage.

17 SEC. 3004. SALE OF THE CORPORATION.

18 (a) AUTHORIZATION.—The Board of Directors of the

19 Corporation, with the approval of the Secretary of the

20 Treasury, shall transfer ownership of the assets and obli21 gations of the Corporation to the private corporation es22 tablished under section 3005 (which may be consummated

23 through a merger or consolidation effected in accordance

24 with, and having the effects provided under, the laws of
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1 the State of incorporation of the private corporation, as

2 if the Corporation were incorporated thereunder.).

3 (b) BOARD DETERMINATION.—The Board, with the

4 approval of the Secretary of the Treasury, shall select the

5 method of transfer and establish terms and conditions for

6 the transfer to provide the maximum proceeds to the

7 Treasury of the United States and to provide for the long8 term viability of the private corporation, the continued op9 eration of the gaseous diffusion plants, and the public in10 terest in maintaining reliable and economical domestic

11 uranium mining and enrichment industries.

12 (c) APPLICATION OF SECURITIES LAWS.—Any offer13 ing or sale of securities by the private corporation shall

14 be subject to the Securities Act of 1993 (15 U.S.C. 77a

15 et seq.), the Securities Exchange Act of 1934 (15 U.S.C.

16 78a et seq.), and the provisions of the Constitution and

17 laws of any State, territory, or possession of the United

18 States relating to transactions in securities.

19 (d) PROCEEDS.—Proceeds from the sale of the Unit20 ed States’ interest in the Corporation shall be—

21 (1) deposited in the general fund of the Treas22 ury;

23 (2) included in the budget baseline required by

24 the Balanced Budget and Emergency Deficit Control

25 Act of 1985; and
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1 (3) counted as an offset to direct spending for

2 purposes of section 252 of such Act, notwithstanding

3 section 257(e) of such Act.

4 (e) EXPENSES.—Expenses of privatization shall be

5 paid from Corporation revenue accounts in the United

6 States Treasury.

7 SEC. 3005 ESTABLISHMENT OF PRIVATE CORPORATION.

8 (a) INCORPORATION.—(1) The directors of the Cor9 poration shall establish a private for-profit corporation

10 under the laws of a State for the purpose of receiving the

11 assets and obligations of the Corporation at privatization

12 and continuing the business operations of the Corporation

13 following privatization.

14 (2) The directors of the Corporation may serve as

15 incorporators of the private corporation and shall take all

16 steps necessary to establish the private corporation, in17 cluding the filing of articles of incorporation consistent

18 with the privisions of this subtitle.

19 (3) Employees and officers of the Corporation (in20 cluding members of the Board of Directors) acting in ac21 cordance with this section on behalf of the private corpora22 tion shall be deemed to be acting in their official capacities

23 as employees or officers of the Corporation for purposes

24 of section 205 of title 18, United States Code.
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1 (b) STATUS OF THE PRIVATE CORPORATION.—(1)

2 The private corporation shall not be an agency, instrumen3 tality, or establishment of the United States, a Govern4 ment corporation, or a Government-controlled corporation.

5 (2) Except as otherwise provided by this subtitle, fi6 nancial obligations of the private corporation shall not be

7 obligations of, or guaranteed as to principal or interest

8 by, the Corporation or the United States, and the obliga9 tions shall so plainly state.

10 (3) No action under section 1491 of title 28, United

11 States Code, shall be allowable against the United States

12 based on actions of the private corporation.

13 (c) APPLICATION OF POST-GOVERNMENT EMPLOY14 MENT RESTRICTIONS.—Beginning on the privatization

15 date, the restrictions of sections 207(a), (b), (c), and (d)

16 of title 18, United States Code, shall not apply to the acts

17 of an individual done in carrying out official duties as a

18 director, officer, or employee of the private corporation,

19 if the individual was an officer or employee of the Corpora20 tion (including a director) continuously during the 45 days

21 prior to the privatization date.

22 (d) DISSOLUTION.—In the event that the privatiza23 tion does not occur, the Corporation will provide for the

24 dissolution of the private corporation within 1 year of the

25 private corporation’s incorporation unless the Secretary of
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1 the Treasury or his delegate, upon the Corporation’s re2 quest, agrees to delay any such dissolution for an addi3 tional year.

4 SEC. 3006. TRANSFERS TO THE PRIVATE CORPORATION.

5 Concurrent with privatization, the Corporation shall

6 transfer to the private corporation—

7 (1) the lease of the gaseous diffusion plants in

8 accordance with section 3007,

9 (2) all personal property and inventories of the

10 Corporation,

11 (3) all contracts, agreements, and leases under

12 section 3108(a),

13 (4) the Corporation’s right to purchase power

14 from the Secretary under section 3008(b),

15 (5) such funds in accounts of the Corporation

16 held by the Treasury or on deposit with any bank

17 or other financial institution as approved by the Sec18 retary of the Treasury, and

19 (6) all of the Corporation’s records, including

20 all of the papers and other documentary materials,

21 regardless of physical form or characteristics, made

22 or received by the Corporation.

23 SEC. 3007. LEASING OF GASEOUS DIFFUSION FACILITIES.

24 (a) TRANSFER OF LEASE.—Concurrent with privat25 ization, the Corporation shall transfer to the private cor-
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1 poration the lease of the gaseous diffusion plants and re2 lated property for the remainder of the term of such lease

3 in accordance with the terms of such lease.

4 (b) RENEWAL.—The private corporation shall have

5 the exclusive option to lease the gaseous diffusion plants

6 and related property for additional periods following the

7 expiration of the initial term of the lease.

8 (c) EXCLUSION OF FACILITIES FOR PRODUCTION OF

9 HIGHLY ENRICHED URANIUM.—The Secretary shall not

10 lease to the private corporation any facilities necessary for

11 the production of highly enriched uranium but may, sub12 ject to the requirements of the Atomic Energy Act of 1954

13 (42 U.S.C. 2011 et seq.), grant the Corporation access

14 to such facilities for purposes other than the production

15 of highly enriched uranium.

16 (d) DOE RESPONSIBILITY FOR PREEXISTING CONDI17 TIONS.—The payment of any costs of decontamination

18 and decommissioning, response actions, or corrective ac19 tions with respect to conditions existing before July 1,

20 1993, at the gaseous diffusion plants shall remain the sole

21 responsibility of the Secretary.

22 (e) ENVIRONMENTAL AUDIT.—For purposes of sub23 section (d), the conditions existing before July 1, 1993,

24 at the gaseous diffusion plants shall be determined from

25 the environmental audit conducted pursuant to section
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1 1403(e) of the Atomic Energy Act of 1954 (42 U.S.C.

2 2297c–2(e)).

3 (f) TREATMENT UNDER PRICE-ANDERSON PROVI4 SIONS.—Any lease executed between the Secretary and the

5 Corporation or the private corporation, and any extension

6 or renewal thereof, under this section shall be deemed to

7 be a contract for purposes of section 170d. of the Atomic

8 Energy Act of 1954 (42 U.S.C. 2210(d)).

9 (g) WAIVER OF EIS REQUIREMENT.—The execution

10 or transfer of the lease between the Secretary and the Cor11 poration or the private corporation, and any extension or

12 renewal thereof, shall not be considered a major Federal

13 action significantly affecting the quality of the human en14 vironment for purposes of section 102 of the National En15 vironmental Policy Act of 1969 (42 U.S.C. 4332).

16 SEC. 3008. TRANSFER OF CONTRACTS.

17 (a) TRANSFER OF CONTRACTS.—Concurrent with

18 privatization, the Corporation shall transfer to the private

19 corporation all contracts, agreements, and leases, includ20 ing all uranium enrichment contracts that were—

21 (1) transferred by the Secretary to the Corpora22 tion pursuant to section 1401(b) of the Atomic En23 ergy Act of 1954 (42 U.S.C. 2297c(b)), or

24 (2) entered into by the Corporation before the

25 privatization date.
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1 (b) NONTRANSFERABLE POWER CONTRACTS.—The

2 Corporation shall transfer to the private corporation the

3 right to purchase power from the Secretary under the

4 power purchase contracts for the gaseous diffusion plants

5 executed by the Secretary before July 1, 1993. The Sec6 retary shall continue to receive power for the gaseous dif7 fusion plants under such contracts and shall continue to

8 resell such power to the private corporation at cost during

9 the term of such contracts.

10 (c) EFFECTS OF TRANSFER.—(1) Notwithstanding

11 subsection (a), the United States shall remain obligated

12 to the parties to the contracts, agreements, and leases

13 transferred under subsection (a) for the performance of

14 its obligations under such contracts, agreements, or leases

15 during their terms. Performance of such obligations by the

16 private corporation shall be considered performance by the

17 United States.

18 (2) If a contract, agreement, or lease transferred

19 under subsection (a) is terminated, extended, or materially

20 amended after the privatization date—

21 (A) the private corporation shall be responsible

22 for any obligation arising under such contract,

23 agreement, or lease after any extension or material

24 amendment, and
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1 (B) the United States shall be responsible for

2 any obligation arising under the contract, agree3 ment, or lease before the termination, extension, or

4 material amendment.

5 (3) The private corporation shall reimburse the Unit6 ed States for any amount paid by the United States under

7 a settlement agreement entered into with the consent of

8 the private corporation or under a judgment, if the settle9 ment or judgment—

10 (A) arises out of an obligation under a contract,

11 agreement, or lease transferred under subsection (a),

12 and

13 (B) arises out of actions of the private corpora14 tion between the privatization date and the date of

15 a termination, extension, or material amendment of

16 such contract agreement, or lease.

17 (d) PRICING.—The Corporation may establish prices

18 for its products, materials, and services provided to cus19 tomers on a basis that will allow it to attain the normal

20 business objectives of a profitmaking corporation.

21 SEC. 3009. LIABILITIES.

22 (a) LIABILITY OF THE UNITED STATES.—(1) Except

23 as otherwise provided in this subtitle, all liabilities arising

24 out of the operation of the uranium enrichment enterprise
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1 before July 1, 1993, shall remain the direct liabilities of

2 the Secretary.

3 (2) Except as provided in subsection (a)(3) or other4 wise provided in a memorandum of agreement entered into

5 by the Corporation and the Office of Management and

6 Budget prior to the privatization date, all liabilities arising

7 out of the operation of the Corporation between July 1,

8 1993, and the privatization date shall remain the direct

9 liabilities of the United States.

10 (3) All liabilities arising out of the disposal of de11 pleted uranium generated by the Corporation between

12 July 1, 1993 and privatization date shall become the di13 rect liabilities of the Secretary.

14 (4) Any stated or implied consent for the United

15 States, or any agent or officer of the United States, to

16 be sued by any person for any legal, equitable, or other

17 relief with respect to any claim arising out of, or resulting

18 from, the privatization of the Corporation is hereby with19 drawn.

20 (5) To the extent that any claim against the United

21 States under this section is of the type otherwise required

22 by Federal statute or regulation to be presented to a Fed23 eral agency or official for adjudication or review, such

24 claim shall be presented to the Department of Energy in

25 accordance with the procedures to be established by the
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1 Secretary. Nothing in this paragraph shall be construed

2 to impose on the Department of Energy liability to pay

3 any claim presented pursuant to this paragraph.

4 (6) The Attorney General shall represent the United

5 States in any action seeking to impose liability under this

6 subsection.

7 (b) LIABILITY OF THE CORPORATION.—Notwith8 standing any provision of any agreement to which the Cor9 poration is a party, the Corporation shall not be consid10 ered in breach, default, or violation of any agreement be11 cause of the transfer of such agreement to the private cor12 poration under section 3008 or any other action the Cor13 poration is required to take under this subtitle.

14 (c) LIABILITY OF THE PRIVATE CORPORATION.—Ex15 cept as provided in this subtitle, the private corporation

16 shall be liable for any liabilities arising out of its oper17 ations after the privatization date.

18 (d) LIABILITY OF OFFICERS AND DIRECTORS.—(1)

19 No officer, director, employee, or agent of the Corporation

20 shall be liable in any civil proceeding to any party in con21 nection with any action taken in connection with the pri22 vatization if, with respect to the subject matter of the ac23 tion, suit, or proceeding, such person was acting within

24 the scope of his employment.
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1 (2) This subsection shall not apply to claims arising

2 under the Securities Exchange Act of 1933 (15 U.S.C.

3 77a et seq.), the Securities Exchange Act of 1934 (15

4 U.S.C. 78a et seq.), or under the Constitution or laws of

5 any State, territory, or possession of the United States

6 relating to transactions in securities.

7 SEC. 3010. EMPLOYEE PROTECTIONS.

8 (a) CONTRACTOR EMPLOYEES.—(1) Privatization

9 shall not diminish the accrued, vested pension benefits of

10 employees of the Corporation’s operating contractor at the

11 two gaseous diffusion plants.

12 (2) In the event that the private corporation termi13 nates or changes the contractor at either or both of the

14 gaseous diffusion plants, the plan sponsor or other appro15 priate fiduciary of the pension plan covering employees of

16 the prior operating contractor shall arrange for the trans17 fer of all plan assets and liabilities relating to accrued pen18 sion benefits of such plan’s participants and beneficiaries

19 from such plant to a pension plan sponsored by the new

20 contractor or the private corporation or a joint labor-man21 agement plan, as the case may be.

22 (3) In addition to any obligations arising under the

23 National Labor Relations Act, any employer (including the

24 private corporation if it operates a gaseous diffusion plant
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1 without a contractor or any contractor of the private cor2 poration) at a gaseous diffusion plant shall—

3 (A) abide by the terms of any unexpired collec4 tive bargaining agreement covering employees in

5 bargaining units at the plant and in effect on the

6 privatization date until the stated expiration or ter7 mination date of the agreement; or

8 (B) in the event a collective bargaining agree9 ment is not in effect upon the privatization date,

10 have the same bargaining obligations under section

11 8(d) of the National Labor Relations Act (29 U.S.C.

12 158(d)) as it had immediately before the privatiza13 tion date.

14 (4) If the private corporation replaces its operating

15 contractor at a gaseous diffusion plant, the new employer

16 (including the new contractor or the private corporation

17 if it operates a gaseous diffusion plant without a contrac18 tor) shall—

19 (A) offer employment to non-management em20 ployees of the predecessor contractor to the extent

21 that their jobs still exist or they are qualified for

22 new jobs, and

23 (B) abide by the terms of the predecessor con24 tractor’s collective bargaining agreement until the

25 agreement expires or a new agreement is signed.
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1 The provisions of subparagraphs (A) and (B) apply

2 only to replacements of operating contractors at the gase3 ous diffusion plants during the first two years following

4 the privatization date (if any) and to the first bona fide

5 replacement of an operating contractor at a gaseous diffu6 sion plant following the expiration of that two year period.

7 For purposes of this paragraph, a replacement of an oper8 ating contractor is considered to be ‘‘bona fide’’ unless it

9 is made solely to evade or avoid the provisions of subpara10 graphs (A) and (B).

11 (5) In the event of a plant closing or mass layoff (as

12 such terms are defined in section 2(a) (2) and (3) of the

13 Worker Adjustment and Retraining Notification Act (29

14 U.S.C. 2102(2)(2) and (3))) at either of the gaseous diffu15 sion plants, the Secretary of Energy shall treat any ad16 versely affected employee of an operating contractor at ei17 ther plant who was an employee at such plant on July

18 1, 1993, as a Department of Energy employee for pur19 poses of sections 3161 and 3162 of the National Defense

20 Authorization Act for Fiscal Year 1993 (42 U.S.C.

21 7274h–7274i).

22 (6)(A) The Secretary and the private corporation

23 shall cause the post-retirement health benefits plan pro24 vider (or its successor) to continue to provide benefits for

25 persons employed by an operating contractor at either of
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1 the gaseous diffusion plants in an economically efficient

2 manner and at substantially the same level of coverage

3 as eligible retirees are entitled to receive on the privatiza4 tion date.

5 (B) Persons eligible for coverage under subparagraph

6 (A) shall be limited to:

7 (i) Persons who retired from active employment

8 at one of the gaseous diffusion plants on or before

9 the privatization date as vested participants in a

10 pension plan maintained either by the Corporation’s

11 operating contractor or by a contractor employed

12 prior to July 1, 1993, by the Department of Energy

13 to operate a gaseous diffusion plant.

14 (ii) Persons who are employed by the Corpora15 tion’s operating contractor on or before the privat16 ization date and are vested participants in a pension

17 plan maintained either by the Corporation’s operat18 ing contractor or by a contractor employed prior to

19 July 1, 1993, by the Department of Energy to oper20 ate a gaseous diffusion plant.

21 (C) The Secretary shall fund the entire cost of post22 retirement health benefits for persons who retired from

23 employment with an operating contractor prior to July 1,

24 1993.
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1 (D) The Secretary and the Corporation shall fund the

2 cost of post-retirement health benefits for persons who re3 tire from employment with an operating contractor after

4 July 1, 1993 in proportion to the retired person’s years

5 and months of service at a gaseous diffusion plant under

6 their respective management.

7 (7)(A) Any suit under this subsection alleging a viola8 tion of an agreement between an employer and a labor

9 organization shall be brought in accordance with section

10 301 of the Labor Management Relations Act (29 U.S.C.

11 185).

12 (B) Any charge under this subsection al13 leging an unfair labor practice violation of sec14 tion 8 of the National Labor Relations Act (29

15 U.S.C. 158) shall be pursued in accordance

16 with section 10 of the National Labor Relations

17 Act (29 U.S.C. 160).

18 (C) Any suit alleging a violation of any

19 provision of this subsection, to the extent it

20 does not allege a violation of the National

21 Labor Relations Act, may be brought in any

22 district court of the United States having juris23 diction of the parties, without regard to the

24 amount in controversy or the citizenships of the

25 parties.
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1 (b) FORMER FEDERAL EMPLOYEES.—(1)(A) Em2 ployees of the Corporation who were subject to either the

3 Civil Service Retirement System (CSRS) or the Federal

4 Employees’ Retirement System (FERS) on the day imme5 diately preceding the privatization date shall elect—

6 (i) to retain their coverage under either CSRS

7 or FERS, as applicable, in lieu of coverage by the

8 Corporation’s retirement system, or

9 (ii) to receive a deferred annuity or lump sum

10 benefit payable to a terminated employee under

11 CSRS or FERS, as applicable.

12 (B) Those employees electing subparagraph (A)(ii)

13 shall have the option to transfer the balance in their Thrift

14 Savings Plan account to a defined contribution plan under

15 the Corporation’s retirement system, consistent with appli16 cable law and the terms of the Corporation’s defined con17 tribution plan.

18 (2) The Corporation shall pay to the Civil Service Re19 tirement and Disability Fund—

20 (A) such employee deductions and agency con21 tributions as are required by sections 8334, 8422,

22 and 8423 of title 5, United States Code, for those

23 employees who elect to retain their coverage under

24 either CSRS or FERS pursuant to paragraph (1);
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1 (B) such additional agency contributions as are

2 determined necessary by the Office of Personnel

3 Management to pay, in combination with the sums

4 under subparagraph (A), the ‘‘normal cost’’ (deter5 mined using dynamic assumptions) of retirement

6 benefits for those employees who elect to retain their

7 coverage under CSRS pursuant to paragraph (1),

8 with the concept of ‘‘normal cost’’ being used con9 sistent with generally accepted actuarial standards

10 and principles; and

11 (C) such additional amounts, not to exceed two

12 percent of the amounts under subparagraphs (A)

13 and (B), as are determined necessary by the Office

14 of Personnel Management to pay the cost of admin15 istering retirement benefits for employees who retire

16 from the Corporation after the privatization date

17 under either CSRS or FERS, for their survivors,

18 and for survivors of employees of the Corporation

19 who die after the privatization date (which amounts

20 shall be available to the Office of Personnel Manage21 ment as provided in section 8348(a)(1)(B) of title 5,

22 United States Code).

23 (3) The Corporation shall pay to the Thrift Savings

24 Fund such employee and agency contributions as are re25 quired by section 8432 of title 5, United States Code, for
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1 those employees who elect to retain their coverage under

2 FERS pursuant to paragraph (1).

3 (4) Any employee of the Corporation who was subject

4 to the Federal Employee Health Benefits Program

5 (FEHBP) on the day immediately preceding the privatiza6 tion date and who elects to retain coverage under either

7 CSRS or FERS pursuant to paragraph (1) shall have the

8 option to receive health benefits from a health benefit plan

9 established by the Corporation or to continue without

10 interruption coverage under the FEHBP, in lieu of cov11 erage by the Corporation’s health benefit system.

12 (5) The Corporation shall pay to the Employees

13 Health Benefits Fund—

14 (A) such employee deductions and agency con15 tributions as are required by section 8906 (a)–(f) of

16 title 5, United States Code, for those employees who

17 elect to retain their coverage under FEHBP pursu18 ant to paragraph (4); and

19 (B) such amounts as are determined necessary

20 by the Office of Personnel Management under para21 graph (6) to reimburse the Office of Personnel Man22 agement for contributions under section 8906(g)(1)

23 of title 5, United States Code, for those employees

24 who elect to retain their coverage under FEHBP

25 pursuant to paragraph (4).
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1 (6) The amounts required under paragraph (5)(B)

2 shall pay the Government contributions for retired employ3 ees who retire from the Corporation after the privatization

4 date under either CSRS or FERS, for survivors of such

5 retired employees, and for survivors of employees of the

6 Corporation who die after the privatization date, with said

7 amounts prorated to reflect only that portion of the total

8 service of such employees and retired persons that was

9 performed for the Corporation after the privatization date.

10 SEC. 3011. OWNERSHIP LIMITATIONS.

11 No director, officer, or employee of the Corporation

12 may acquire directly or indirectly any securities, or any

13 rights to acquire any securities of the private corporation

14 on terms more favorable than those offered to the general

15 public—

16 (1) in a public offering designed to transfer

17 ownership of the Corporation to private investors,

18 (2) pursuant to any agreement, arrangement,

19 or understanding entered into before the privatiza20 tion date, or

21 (3) before the election of the directors of the

22 private corporation.

23 SEC. 3012. URANIUM TRANSFERS AND SALES.

24 (a) TRANSFERS AND SALES BY THE SECRETARY.—

25 The Secretary shall not provide enrichment services or
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1 transfer or sell any uranium (including natural uranium

2 concentrates, natural uranium hexafluoride, or enriched

3 uranium in any form) to any person except as consistent

4 with this section.

5 (b) RUSSIAN HEU.—(1) On or before December 31,

6 1996, the United States Executive Agent under the Rus7 sian HEU Agreement shall transfer to the Secretary with8 out charge title to an amount of uranium hexafluoride

9 equivalent to the natural uranium component of low-en10 riched uranium derived from at least 18 metric tons of

11 highly enriched uranium purchased from the Russian Ex12 ecutive Agent under the Russian HEU Agreement. The

13 quantity of such uranium hexafluoride delivered to the

Secretary shall be based on a tails assay of 0.30 U235 14 .

15 Uranium hexafluoride transferred to the Secretary pursu16 ant to this paragraph shall be deemed under U.S. law,

17 for all purposes to be of Russian origin.

18 (2) Within 7 years of the date of enactment of this

19 subtitle, the Secretary shall sell, and receive payment for,

20 the uranium hexafluoride transferred to the Secretary pur21 suant to paragraph (1). Such uranium hexafluoride shall

22 be sold—

23 (A) at any time for use in the United States for

24 the purpose of overfeeding;
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1 (B) at any time for end use outside the United

2 States; or

3 (C) in calendar year 2001 for consumption by

4 end users in the United States not prior to January

5 1, 2002, in volumes not to exceed 3 million pounds

6 U3O8 equivalent per year.

7 (3) With respect to all enriched uranium delivered to

8 the United States Executive Agent under the Russian

9 HEU Agreement on or after January 1, 1997, the United

10 States Executive Agent shall, upon request of the Russian

11 Executive Agent, enter into an agreement to deliver con12 currently to the Russian Executive Agent an amount of

13 uranium hexafluoride equivalent to the natural uranium

14 component of such uranium. An agreement executed pur15 suant to a request of the Russian Executive Agent, as con16 templated in this paragraph, may pertain to any deliveries

17 due during any period remaining under the Russian HEU

18 Agreement. The quantity of such uranium hexafluoride de19 livered to the Russian Executive Agent shall be based on

a tails assay of 0.30 U235 20 . Title to uranium hexafluoride

21 delivered to the Russian Executive Agent pursuant to this

22 paragraph shall transfer to the Russian Executive Agent

23 upon delivery of such material to the Russian Executive

24 Agent, with such delivery to take place at a North Amer25 ican facility designated by the Russian Executive Agent.
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1 Uranium hexafluoride delivered to the Russian Executive

2 Agent pursuant to this paragraph shall be deemed under

3 U.S. law for all purposes to be of Russian origin. Such

4 uranium hexafluoride may be sold to any person or entity

5 for delivery and use in the United States only as permitted

6 in subsections (b)(5), (b)(6) and (b)(7) of this section.

7 (4) In the event that the Russian Executive Agent

8 does not exercise its right to enter into an agreement to

9 take delivery of the natural uranium component of any

10 low-enriched uranium, as contemplated in paragraph (3),

11 within 90 days of the date such low-enriched uranium is

12 delivered to the United States Executive Agent, then the

13 United States Executive Agent shall engage an independ14 ent entity through a competitive selection process to auc15 tion an amount of uranium hexafluoride or U3O8 (in the

16 event that the conversion component of such hexafluoride

17 has previously been sold) equivalent to the natural ura18 nium component of such low-enriched uranium. Such inde19 pendent entity shall sell such uranium hexafluoride in one

20 or more lots to any person or entity to maximize the pro21 ceeds from such sales, for disposition consistent with the

22 limitations set forth in this subsection. The independent

23 entity shall pay to the Russian Executive Agent the pro24 ceeds of any such auction less all reasonable transaction

25 and other administrative costs. The quantity of such ura-
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1 nium hexafluoride auctioned shall be based on a tails assay

of 0.30 U235 2 . Title to uranium hexafluoride auctioned pur3 suant to this paragraph shall transfer to the buyer of such

4 material upon delivery of such material to the buyer. Ura5 nium hexafluoride auctioned pursuant to this paragraph

6 shall be deemed under U.S. law for all purposes to be of

7 Russian origin.

8 (5) Except as provided in paragraphs (6) and (7),

9 uranium hexafluoride delivered to the Russian Executive

10 Agent under paragraph (3) or auctioned pursuant to para11 graph (4), may not be delivered for consumption by end

12 users in the United States either directly or indirectly

13 prior to January 1, 1998 and thereafter only in accord14 ance with the following schedule:

Annual Maximum Deliveries to End Users

Year: (millions lbs. U3O8

equivalent)

1998 ........................................................................................................... 3

1999 ........................................................................................................... 5

2000 ........................................................................................................... 7

2001 ........................................................................................................... 9

2002 ........................................................................................................... 11

2003 ........................................................................................................... 13

2004 ........................................................................................................... 15

2005 ........................................................................................................... 16

2006 ........................................................................................................... 17

2007 ........................................................................................................... 18

2008 ........................................................................................................... 19

2009 and each succeeding year ................................................................. 20

15 (6) Uranium hexafluoride delivered to the Rus16 sian Executive Agent under paragraph (3) or auc17 tioned pursuant to paragraph (4) may be sold at any

18 time as Russian-origin natural uranium in a
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1 matched sale pursuant to the Suspension Agree2 ment, and in such case shall not be counted against

3 the annual maximum deliveries set forth in para4 graph (5).

5 (7) Uranium hexafluoride delivered to the Rus6 sian Executive Agent under paragraph (3) or auc7 tioned pursuant to paragraph (4) may be sold at any

8 time for use in the United States for the purpose of

9 overfeeding in the operations of enrichment facilities.

10 (8) Nothing in this subsection (b) shall restrict

11 the sale of the conversion component of such ura12 nium hexafluoride.

13 (9) The Secretary of Commerce shall have re14 sponsibility for the administration and enforcement

15 of the limitations set forth in this subsection. The

16 Secretary of Commerce may require any person to

17 provide any certifications, information, or take any

18 action that may be necessary to enforce these limita19 tions. The U.S. Customs Service shall maintain and

20 provide any information required by the Secretary of

21 Commerce and shall take any action requested by

22 the Secretary of Commerce which is necessary for

23 the administration and enforcement of the uranium

24 delivery limitations set forth in this section.
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1 (10) The President shall monitor the actions of

2 the United States Executive Agent under the Rus3 sian HEU Agreement and shall report to the Con4 gress not later than December 31 of each year on

5 the effect the low-enriched uranium delivered under

6 the Russian HEU Agreement is having on the do7 mestic uranium mining, conversion, and enrichment

8 industries, and the operation of the gaseous diffu9 sion plants. Such report shall include a description

10 of actions taken or proposed to be taken by the

11 President to prevent or mitigate any material ad12 verse impact on such industries or any loss of em13 ployment at the gaseous diffusion plants as a result

14 of the Russian HEU Agreement.

15 (11)(A) In the event that the President makes

16 a determination that a waiver under this subsection

17 with respect to the importation of highly enriched

18 uranium or low-enriched uranium derived from high19 ly enriched uranium extracted from nuclear weapons

20 dismantled in the Russian Federation and purchased

21 from the Russian Federation under a government22 to-government agreement is in the national security

23 interest of the United States, then such highly en24 riched uranium and low-enriched uranium derived

25 from highly enriched uranium, including, within the
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1 limits established by this section, the natural ura2 nium component thereof and any uranium products

3 delivered pursuant to enrichment contracts affected

4 by such imports, shall not be subject to title VII of

5 the Tariff Act of 1930, to such extent, for such pe6 riod, and under such terms and conditions as may

7 be provided in the order making such determination.

8 (B) No person shall have any cause of action or

9 defense based on this section, and no court shall

10 have jurisdiction to entertain challenges based on

11 any action taken by the President or the Secretary

12 of Commerce pursuant to this section or on an al13 leged failure to take any such action.

14 (c) TRANSFERS TO THE CORPORATION.—

15 (1) The Secretary shall transfer to the Corpora16 tion without charge up to 50 metric tons of enriched

17 uranium and up to 7,000 metric tons of natural ura18 nium from the Department of Energy’s stockpile,

19 subject to the restrictions in subsection (c)(2).

20 (2) The Corporation shall not deliver for com21 mercial end use in the United States—

22 (A) any of the uranium transferred under

23 this subsection before January 1, 1998;

24 (B) more than 10 percent of the uranium

25 (by uranium hexafluoride equivalent content)
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1 transferred under this subsection or more than

2 4 million pounds, whichever is less, in any cal3 endar year after 1997; or

4 (C) more than 800,000 separative work

5 units contained in low-enriched uranium trans6 ferred under this subsection in any calendar

7 year.

8 (d) INVENTORY SALES.—(1) In addition to the trans9 fers authorized under subsections (c) and (e), the Sec10 retary may, from time to time, sell natural and low-en11 riched uranium (including low-enriched uranium derived

12 from highly enriched uranium) from the Department of

13 Energy’s stockpile.

14 (2) Except as provided in subsections (b), (c), and

15 (e), no sale or transfer of natural or low-enriched uranium

16 shall be made unless—

17 (A) the President determines that the material

18 is not necessary to national security needs,

19 (B) the Secretary determines that the sale of

20 the material will not have an adverse material im21 pact on the domestic uranium mining, conversion, or

22 enrichment industry, taking into account the sales of

23 uranium under the Russian HEU Agreement and

24 the Suspension Agreement, and
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1 (C) the price paid to the Secretary will not be

2 less than the fair market value of the material.

3 (e) GOVERNMENT TRANSFERS.—Nothwithstanding

4 subsection (d)(2), the Secretary may transfer or sell en5 riched uranium—

6 (1) to a Federal agency if the material is trans7 ferred for the use of the receiving agency without

8 any resale or transfer to another entity and the ma9 terial does not meet commercial specifications;

10 (2) to any person for national security pur11 poses, as determined by the Secretary; or

12 (3) to any State or local agency or nonprofit,

13 charitable, or educational institution for use other

14 than the generation of electricity for commercial use.

15 (f) SAVINGS PROVISION.—Nothing in this subtitle

16 shall be read to modify the terms of the Russian HEU

17 Agreement.

18 SEC. 3013. LOW-LEVEL WASTE.

19 (a) RESPONSIBILITY OF DOE.—(1) The Secretary,

20 at the request of the generator, shall accept for disposal

21 low-level radioactive waste, including depleted uranium if

22 it were ultimately determined to be low-level radioactive

23 waste, generated by—

24 (A) the Corporation as a result of the oper25 ations of the gaseous diffusion plants or as a result
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1 of the treatment of such wastes at a location other

2 than the gaseous diffusion plants, or

3 (B) any person licensed by the Nuclear Regu4 latory Commission to operate a uranium enrichment

5 facility under sections 53, 63, and 193 of the Atomic

6 Energy Act of 1954 (42 U.S.C. 2073, 2093, and

7 2243).

8 (2) Except as provided in paragraph (3), the genera9 tor shall reimburse the Secretary for the disposal of low10 level radioactive waste pursuant to paragraph (1) in an

11 amount equal to the Secretary’s costs, including a pro rata

12 share of any capital costs, but in no event more than an

13 amount equal to that which would be charged by commer14 cial, State, regional, or interstate compact entities for dis15 posal of such waste.

16 (3) In the event depleted uranium were ultimately de17 termined to be low-level radioactive waste, the generator

18 shall reimburse the Secretary for the disposal of depleted

19 uranium pursuant to paragraph (1) in an amount equal

20 to the Secretary’s costs, including a pro rata share of any

21 capital costs.

22 (b) AGREEMENTS WITH OTHER PERSONS.—The

23 generator may also enter into agreements for the disposal

24 of low-level radioactive waste subject to subsection (a)

25 with any person other than the Secretary that is author-
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1 ized by applicable laws and regulations to dispose of such

2 wastes.

3 (c) STATE OR INTERSTATE COMPACTS.—Notwith4 standing any other provision of law, no State or interstate

5 compact shall be liable for the treatment, storage, or dis6 posal of any low-level radioactive waste (including mixed

7 waste) attributable to the operation, decontamination, and

8 decommissioning of any uranium enrichment facility.

9 SEC. 3014. AVLIS.

10 (a) EXCLUSIVE RIGHT TO COMMERCIALIZE.—The

11 Corporation shall have the exclusive commercial right to

12 deploy the use any AVLIS patents, processes, and tech13 nical information owned or controlled by the Government,

14 upon completion of a royalty agreement with the Sec15 retary.

16 (b) TRANSFER OF RELATED PROPERTY TO COR17 PORATION.—

18 (1) IN GENERAL.—To the extent requested by

19 Corporation and subject to the requirements of the

20 Atomic Energy Act of 1954, the President shall

21 transfer without charge to the Corporation all of the

22 right, title, or interest in and to property owned by

23 the United States under control or custody of the

24 Secretary that is directly related to and materially

25 useful in the performance of the Corporation’s pur-
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1 poses regarding AVLIS and alternative technologies

2 for uranium enrichment, including—

3 (A) facilities, equipment, and materials

4 and research, development, and demonstration

5 activities; and

6 (B) all other facilities, equipment, mate7 rials, processes, patents, technical information

8 of any kind, contracts, agreements, and leases.

9 (2) EXCEPTION.—Facilities, real estate, im10 provements, and equipment related to the gaseous

11 diffusion, and gas centrifuge, uranium enrichment

12 programs of the Secretary shall not transfer under

13 paragraph (1)(B).

14 (3) EXPIRATION OF TRANSFER AUTHORITY.—

15 The President’s authority to transfer property under

16 this subsection shall expire upon the privatization

17 date.

18 (c) LIABILITY FOR PATENT AND RELATED

19 CLAIMS.—With respect to any right, title, or interest pro20 vided to the Corporation under subsection (a) or (b), the

21 Corporation shall have sole liability for any payments

22 made or awards under section 157b.(3) of the Atomic En23 ergy Act of 1954 (42 U.S.C. 2187(b)(3)), or any settle24 ments or judgments involving claims for alleged patent in25 fringement. Any royalty agreement under subsection (a)
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1 of this section shall provide for a reduction of royalty pay2 ments to the Secretary to offset any payments, awards,

3 settlements, or judgments under this subsection.

4 SEC. 3015. APPLICATION OF CERTAIN LAWS.

5 (a) OSHA.—(1) As of the privatization date, the pri6 vate corporation shall be subject to and comply with the

7 Occupational Safety and Health Act of 1970 (29 U.S.C.

8 651 et seq.).

9 (2) The Nuclear Regulatory Commission and the Oc10 cupational Safety and Health Administration shall, within

11 90 days after the enactment of this subtitle, enter into

12 a memorandum of agreement to govern the exercise of

13 their authority over occupational safety and health haz14 ards at the gaseous diffusion plants, including inspection,

15 investigation, enforcement, and rulemaking relating to

16 such hazards.

17 (b) ANTITRUST LAWS.—For purposes of the anti18 trust laws, the performance by the private corporation of

19 a ‘‘matched import’’ contract under the Suspension Agree20 ment shall be considered to have occurred prior to the pri21 vatization date, if at the time of privatization, such con22 tract had been agreed to by the parties in all material

23 terms and confirmed by the Secretary of Commerce under

24 the Suspension Agreement.
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1 (c) ENERGY REORGANIZATION ACT REQUIRE2 MENTS.—(1) The private corporation and its contractors

3 shall be subject to the provisions of section 211 of the

4 Energy Reorganization Act of 1974 (42 U.S.C. 5851) to

5 the same extent as an employer subject to such section.

6 (2) With respect to the operation of the facilities

7 leased by the private corporation, section 206 of the En8 ergy Reorganization Act of 1974 (42 U.S.C. 5846) shall

9 apply of the directors and officers of the private corpora10 tion.

11 SEC. 3016. AMENDMENTS OF THE ATOMIC ENERGY ACT.

12 (a) REPEAL.—(1) Chapters 22 through 26 of the

13 Atomic Energy Act of 1954 (42 U.S.C. 1201–1608) are

14 repealed as of the privatization date.

15 (2) The table of contents of such Act is amended as

16 of the privatization date by striking the items referring

17 to sections repealed by paragraph (1).

18 (b) NRC LICENSING.—(1) Section 11v. of the Atomic

19 Energy Act of 1954 (42 U.S.C. 2014v.) is amended by

20 striking ‘‘or the construction and operation of a uranium

21 enrichment facility using Atomic Vapor Laser Isotope

22 Separation technology’’.

23 (2) Section 193 of the Atomic Energy Act of 1954

24 (42 U.S.C. 2243) is amended by adding at the end the

25 following:
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1 ‘‘(f) LIMITATION.—No license or certificate of com2 pliance may be issued to the United States Enrichment

3 Corporation or its successor under sections 53, 63, 193,

4 or 1701, if in the opinion of the Commission, the issuance

5 of such a license or certificate of compliance—

6 ‘‘(i) would be inimical to the common defense

7 and security of the United States; or

8 ‘‘(ii) would be inimical to the maintenance of a

9 reliable and economical domestic source of enrich10 ment services because of the nature and extent of

11 the ownership, control, or domination of the Cor12 poration by a foreign corporation or a foreign gov13 ernment or any other relevant factors or cir14 cumstances.’’.

15 (3) Section 1701(c)(2) of the Atomic Energy Act of

16 1954 (42 U.S.C. 2297f(c)(2) is amended to read as fol17 lows:

18 ‘‘(2) PERIODIC APPLICATION FOR CERTIFICATE

19 OF COMPLIANCE.—The Corporation shall apply to

20 the Nuclear Regulatory Commission for a certificate

21 of compliance under paragraph (1) periodically, as

22 determined by the Commission, by not less than

23 every 5 years. The Commission shall review any such

24 application and any determination made under sub-
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1 section (b)(2) shall be based on the results of any

2 such review.’’.

3 (4) Section 1702(a) of the Atomic Energy Act of

4 1954 (42 U.S.C. 2297f–1(a)) is amended—

5 (1) by striking ‘‘other than’’ and inserting ‘‘in6 cluding’’, and

7 (2) by striking ‘‘sections 53 and 63’’ and insert8 ing ‘‘sections 53, 63, and 193’’.

9 (c) JUDICIAL REVIEW OF NRC ACTIONS.—Section

10 189b. of the Atomic Energy Act of 1954 (42 U.S.C.

11 2239(b)) is amended to read as follows:

12 ‘‘b. The following Commission actions shall be subject

13 to judicial review in the manner prescribed in chapter 158

14 of title 28, United States Code and chapter 7 of title 5,

15 United States Code:

16 ‘‘(1) Any final order entered in any proceeding

17 of the kind specified in subsection (a).

18 ‘‘(2) Any final order allowing or prohibiting a

19 facility to begin operating under a combined con20 struction and operation license.

21 ‘‘(3) Any final order establishing by regulation

22 standards to govern the Department of Energy’s

23 gaseous diffusion uranium enrichment plants, in24 cluding any such facilities leased to a corporation es25 tablished under the USEC Privatization Act.
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1 ‘‘(4) Any final determination relating to wheth2 er the gaseous diffusion plants, including any such

3 facilities leased to a corporation established under

4 the USEC Privatization Act, are in compliance with

5 the Commission’s standards governing the gaseous

6 diffusion plants and all applicable laws.’’.

7 (d) CIVIL PENALTIES.—Section 234a. of the Atomic

8 Energy Act of 1954 (42 U.S.C. 2282(a)) is amended by—

9 (1) striking ‘‘any licensing provision of sections

10 53, 57, 62, 63, 81, 82, 101, 103, 104, 107, or 109’’

11 and inserting: ‘‘any licensing or certification provi12 sion of section 53, 57, 62, 63, 81, 82, 101, 103,

13 104, 107, 109, or 1701’’; and

14 (2) by striking ‘‘any license issued thereunder’’

15 and inserting: ‘‘and license or certification issued

16 thereunder’’.

17 (e) REFERENCES TO THE CORPORATION.—Following

18 the privatization date, all references in the Atomic Energy

19 Act of 1954 to the United States Enrichment Corporation

20 shall be deemed to be references to the private corpora21 tion.

22 SEC. 3017. AMENDMENTS TO OTHER LAWS.

23 (a) DEFINITION OF GOVERNMENT CORPORATION.—

24 As of the privatization date, section 9101(3) of title 31,
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1 United States Code, is amended by striking subparagraph

2 (N).

3 (b) DEFINITION OF THE CORPORATION.—Section

4 1018(1) of the Energy Policy Act of 1992 (42 U.S.C.

5 2296b–7(1)) is amended by adding immediately before the

6 period ‘‘, or its successor’’.

7 (b) REPEAL OF PRIOR CONDITIONAL ENACTMENT.—

8 Section 8114A(b) of Public Law 103–335 (108 Stat.

9 2648) is repealed.

10 Subtitle B—Naval Petroleum Reserves Privatization

11 SEC. 4101. SHORT TITLE.

12 This subtitle may be cited as the ‘‘Naval Petroleum

13 Reserves Privatization Act’’.

14 PART I—DEFINITIONS, APPLICABILITY OF

15 TITLES

16 SEC. 4111. DEFINITIONS.

17 For the purposes of this subtitle:

18 (a) ‘‘Department’’ means the United States De19 partment of Energy.

20 (b) ‘‘Naval petroleum reserves’’ (referred to in

21 this subtitle as ‘‘the Reserves’’) means Naval Petro22 leum Reserve Numbered 1 (Elk Hills), located in

23 Kern County, California, established by Executive

24 order of the President, dated September 2, 1912;

25 Naval Petroleum Reserve Numbered 2 (Buena
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1 Vista), located in Kern County, California, estab2 lished by Executive order of the President, dated

3 December 13, 1912; Navel Petroleum Reserve Num4 bered 3 (Teapot Dome), located in Wyoming, estab5 lished by Executive order of the President, dated

6 April 30, 1915; Oil Shale Reserve Numbered 1, lo7 cated in Colorado, established by Executive order of

8 the President, dated December 6, 1916, as amended

9 by Executive order dated June 12, 1919; and Oil

10 Shale Reserve Numbered 3, located in Colorado, es11 tablished by Executive order of the President, dated

12 September 27, 1924.

13 (c) ‘‘Petroleum’’ includes crude oil, gases (in14 cluding natural gas), natural gasoline, and other re15 lated hydrocarbons, oil shale, and the products of

16 any of such resources.

17 (d) ‘‘Secretary’’ means the Secretary of Energy.

18 (e) ‘‘Unit Plan Contract’’ means the agreement

19 of June 19, 1944 between the Department and

20 Chevron U.S.A., Inc.

21 SEC. 4112. APPLICABILITY OF TITLES.

22 (a) Parts 1, 2, and 4, of this subtitle take effect upon

23 enactment of this subtitle.
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1 PART II—PRIVATIZATION

2 SEC. 4121. PRIVATIZATION PLAN AND IMPLEMENTATION.

3 (a) PREPARATION OF PLAN.—

4 (1) The Secretary shall prepare not later than

5 March 31, 1997, in consultation with the Secretary

6 of the Treasury, a plan for selling Naval Petroleum

7 Reserve Numbered 1 and for selling or leasing the

8 remaining Reserves out of Federal ownership, in fis9 cal year 2002.

10 (2) The plan shall include consideration of al11 ternative means for selling Naval Petroleum Reserve

12 Numbered 1 and for selling or leasing the remaining

13 Reserves. The plan shall include the estimated re14 turn on the Government’s investment in the Re15 serves achievable through each sale or lease alter16 native and shall include the Secretary’s rec17 ommendation on the preferred means of selling or

18 leasing the Reserves. The plan shall specify a mini19 mum acceptable price for the Reserves, which is not

20 less than the net present value of the sum of the:

21 (A) anticipated revenue stream that the

22 Secretary, in consultation with the Secretary of

23 the Treasury, determines the Treasury would

24 receive from the Reserves if they were not sold

25 or leased, and
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1 (B) the payments due under subsection

2 (g). The minimum acceptable price may be ad3 justed by the Secretary for relevant economic

4 factors after consideration of the results of the

5 studies conducted under subsection (c) of this

6 section.

7 (b) PRESIDENTIAL APPROVAL.—The Secretary shall

8 submit the plan to the President not later than March 31,

9 1997. The President may modify the minimum acceptable

10 price in the plan, or otherwise modify the plan. The Presi11 dent shall approve the plan with or without modifications

12 by June 30, 1997. When the plan is approved with or

13 without modification by the President, the Secretary shall

14 implement the plan. Not later than the end of fiscal year

15 2002 the Secretary of Energy shall enter into one or more

16 contracts for the sale of all rights, title, and interest of

17 the United States in and to all lands owned or controlled

18 by the United States inside Naval Petroleum Reserve

19 Numbered 1.

20 (c) ACQUISITION OF SERVICE.—The Secretary may

21 enter into contracts on a non-competitive basis for studies

22 relating to the preparation or implementation of the plan.

23 (d) EQUITY SHARES IN NAVAL PETROLEUM RE24 SERVE NUMBERED 1.—
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1 (1) Not later than five months after the effec2 tive date, the Secretary shall finalize equity interests

3 of the known oil and gas zones in Naval Petroleum

4 Reserve Numbered 1 in the manner provided by this

5 subsection.

6 (2) The Secretary shall retain the services of an

7 independent petroleum engineer, mutually acceptable

8 to the equity owners, who shall prepare a rec9 ommendation on final equity figures. The Secretary

10 may accept the recommendation of the independent

11 petroleum engineer for final equity in each known oil

12 and gas zone and establish final equity interest in

13 Naval Petroleum Reserve Numbered 1 in accordance

14 with the recommendation, or the Secretary may use

15 such other method to establish final equity interest

16 in the reserve as the Secretary considers appro17 priate.

18 (3) If, on the effective date, there is an ongoing

19 equity redetermination dispute between the equity

20 owners under section 9(b) of the unit plan contract,

21 the dispute shall be resolved in the manner provided

22 in the unit plan contract within five months after

23 the effective date. The resolution shall be considered

24 final for all purposes under this section.
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1 (e) FUTURE LIABILITIES.—To effectuate the sale of

2 the interest of the United States in Naval Petroleum Re3 serve Numbered 1, the Secretary may extend such indem4 nities and warranties as the Secretary considers reason5 able and necessary to protect the purchaser from claims

6 arising from the ownership in the reserve by the United

7 States.

8 (f) DEPOSIT OF PROCEEDS.—Proceeds from the sale

9 or lease of the Reserves under this subtitle shall be depos10 ited into miscellaneous receipts in the Treasury.

11 (g) REVENUE SHARING WITH THE STATE OF CALI12 FORNIA.—Notwithstanding any other law, the Secretary

13 of the Treasury shall pay to the State of California (to

14 be credited by the State to the Supplemental Benefits

15 Maintenance Account within the Teachers’ Retirement

16 Fund) seven percent of proceeds from the sale of Naval

17 Petroleum Reserve Numbered 1. The State of California

18 share (seven percent of proceeds) shall be paid in annual

19 installments of 2.25 percent of the share in each fiscal

20 year from the date of sale for 9 fiscal years, and 25.75

21 of the share in the tenth fiscal year. Payments under this

22 subsection may begin upon a release of all claims against

23 the United States by the State of California and the

24 Teachers’ Retirement Fund with respect to production
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1 and proceeds of sale from Naval Petroleum Reserve Num2 bered 1.

3 (h) EXPENDITURES FOR SALE OR LEASE.—(1) Sec4 tion 501 of Public Law 101–45 is hereby repealed.

5 (2) Unobligated balances in the Naval Petroleum and

6 Oil Shale Reserves account shall be used for necessary ex7 penses related to sale of lease of the reserves.

8 (a) EFFECT ON EXISTING CONTRACTS.—(1) In the

9 case of any contract, in effect on the effective date, for

10 the purchase of production from any part of the United

11 States’ share of Naval Petroleum Reserve Numbered 1,

12 the sale of the interest of the United States in the reserve

13 shall be subject to the contract for a period of three

14 months after the closing date of the sale or until termi15 nation of the contract, whichever occurs first. The term

16 of any contract entered into after the effective date for

17 the purchase of the production shall not exceed the antici18 pated closing date for the sale of the reserve.

19 (2) The Secretary shall exercise the termination pro20 cedures provided in the contract between the United

21 States and Bechtel Petroleum Operations, Inc., Contract

22 Number DE–ACO1–85FE60520 or in any subsequent

23 management and operating contract so that the contract

24 terminates not later than the date of closing of the sale
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1 of Naval Petroleum Reserve Numbered 1 under section

2 3412.

3 (3) The Secretary shall exercise the termination pro4 cedures provided in the unit plan contract so that the unit

5 plan contract terminates not later than the date of closing

6 of the sale reserve.

7 (b) EFFECT ON ANTITRUST LAWS.—Nothing in this

8 subtitle shall be construed to alter the application of the

9 antitrust laws of the United States to the purchaser or

10 purchasers (as the case may be) of Naval Petroleum Re11 serve Numbered 1 or to the lands in the reserve subject

12 to sale or lease under Section 4121 upon the completion

13 of the sale or lease.

14 (c) PRESERVATION OF PRIVATE RIGHT, TITLE, AND

15 INTEREST.—Nothing in this subtitle shall be construed to

16 adversely affect the ownership interest of any other entity

17 having any right, title, and interest in and to lands within

18 the boundaries of Naval Petroleum Reserve Numbered 1

19 and which are subject to the unit plan contract.

20 The Secretary may transfer to the purchaser or pur21 chasers (as the case may be) of Naval Petroleum Reserve

22 Numbered 1 the incidental take permit regarding the re23 serve issued to the Secretary by the United States Fish

24 and Wildlife Serve and in effect on the effective date if

25 the Secretary determines that transfer of the permit is
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1 necessary to expedite the sale of the reserve in a manner

2 that maximized the value of the sale to the United States.

3 The transferred permit shall cover the identical activities,

4 and shall be subject to the same terms and conditions,

5 as apply to the permit at the time of the transfer.

6 SEC. 4122. RELATIONSHIP TO BALANCED BUDGET AND

7 EMERGENCY DEFICIT CONTROL ACT OF 1985.

8 If the President so designates, the net proceeds from

9 privatizing the Reserves under this subtitle shall be in10 cluded in the budget baseline required by the Balanced

11 Budget and Emergency Deficit Control Act of 1985 and

12 shall be counted for the purposes of section 252 of that

13 Act as an offset to direct spending notwithstanding section

14 257(a) of the Act.

15 SEC. 4123. DISCRETIONARY SPENDING LIMITS.

16 (a) Upon sale of the NPR Numbered 1 the discre17 tionary spending limits set forth in section 601(a)(2) of

18 the Congressional Budget Act of 1974 (2 U.S.C.

19 665(a)(2)) (as adjusted in conformance with section 251

20 of the Balanced Budget and Emergency Deficit Control

21 Act of 1985) for fiscal year 2003 are reduced as follows:

22 for fiscal year 2002 for the discretionary category:

23 $158 million in new budget authority and $166 mil24 lion in outlays.
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1 (b) For fiscal year 2004, the comparable amount for

2 budgetary purposes is considered to be $158 million in

3 new budget authority and $166 million in outlays. For fis4 cal year 2005 the comparable amount for budgetary pur5 poses is considered to be $158 million in new budget au6 thority and $166 million in outlays.

7 PART III—OIL SHALE RESERVE

8 NUMBERED 2

9 SEC. 4131. TRANSFER.

10 Subject to sections 4132 and 4133 of this subtitle,

11 the functions vested in the Secretary with regard to Oil

12 Shale Reserve Numbered 2 (located in Utah, established

13 by Executive order of the President dated December 6,

14 1916) by chapter 641 of title 10, United States Code, as

15 amended by section 501 of this Act, are transferred to

16 and vested in the Secretary of the Interior.

17 SEC. 4132. GREEN RIVER AREA.

18 (a) REPORT AND MANAGEMENT OF AREA.—The Sec19 retary of the Interior shall study and submit to the Presi20 dent a report on the appropriateness of including the

21 Green River area within the national wild and scenic rivers

22 system. During the study period, the Secretary of the Inte23 rior shall manage the Green River area in a manner con24 sistent with the memorandum of understanding between
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1 the Department of Energy and the Department of the In2 terior under which the reserve is being currently managed.

3 (b) For purposes of this section, ‘‘Green River area’’

4 means the following area within Oil Shale Reserve Num5 bered 2: The segments of the Green River that are within

6 the boundaries of Oil Shale Reserve Numbered 2, which

7 include the approximately 11.6 mile segment of the Green

8 River extending from the northern boundary of Oil Shale

9 Reserve Numbered 2 near Duchess Hole to the western

10 boundary of Oil Shale Reserve Numbered 2 near Rock

11 House Bottom and the approximately .6 mile segment of

12 the Green River in Oil Shale Reserve Numbered 2 near

13 the base of Peters Point, and the area extending one-half

14 mile from the river on each side of these segments.

15 SEC. 4133. UINTAH AND OURAY INDIAN RESERVATION.

16 Nothing in this subtitle affects any interest in, or

17 right or obligation respecting, the Uintah and Ouray In18 dian Reservation.

19 PART IV—MISCELLANEOUS

20 SEC. 4151. AMENDMENTS TO CHAPTER 641 OF TITLE 10,

21 UNITED STATES CODE.

22 Chapter 641 of title 10, United States Code, is

23 amended:

24 (a) in the table of contents, by renaming section

25 7438 ‘‘Mining and removal of oil shale.’’;
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1 (b) in section 7420, by striking paragraph (6);

2 (c) in section 7421(a), by striking ‘‘for national

3 defense purposes, except as otherwise provided in

4 this chapter’’;

5 (d) by amending section 7422 to read as fol6 lows:

7 ‘‘(a) Prior to privatization, the Secretary,

8 directly or by contract, lease, or otherwise, shall

9 explore, prospect, conserve, develop, use,

10 produce, and operate the naval petroleum re11 serves to maximize the economic value of these

12 properties to the Nation, except that no petro13 leum leases shall be granted at Naval Petro14 leum Reserves Numbered 1 and 3.

15 ‘‘(b) The Secretary shall dispose of the

16 United States’ share of petroleum produced

17 from the naval petroleum reserves in accord18 ance with section 7430 of this chapter.

19 ‘‘(c) The Secretary may construct, acquire,

20 or contract for the use of storage and shipping

21 facilities, and pipelines and associated facilities,

22 on and off the naval petroleum reserves, for

23 transporting petroleum to locations where it will

24 be refined or shipped.
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1 ‘‘(d) The Secretary may store petroleum

2 owned or managed by other Federal agencies

3 and instrumentalities, for appropriate reim4 bursement reasonably reflecting fair market

5 value.

6 ‘‘(e) The Secretary may acquire a pipeline

7 in the vicinity of a naval petroleum reserve not

8 otherwise operated as a common carrier, by

9 condemnation, if necessary, if the pipeline

10 owner refuses to accept, convey, and transport

11 petroleum produced at that reserve without dis12 crimination and at reasonable rates. The Sec13 retary may acquire rights-of-way for new pipe14 lines and associated facilities by eminent do15 main under the Act of February 26, 1931 (40

16 U.S.C. 258a–258e), and the prospective holder

17 of the right-of-way is ‘‘the authority empowered

18 by law to acquire the lands’’ within the meaning

19 of that Act. New pipelines shall accept, convey,

20 and transport any petroleum produced at the

21 naval petroleum reserves at reasonable rates as

22 a common carrier,’’;

23 (e) in section 7423, by striking ‘‘when that pro24 duction is authorized under section 7422 of this

25 title’’;
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1 (f) in section 7425(a), by striking ‘‘, with the

2 approval of the President,’’;

3 (g) in section 7426, as follows:

4 (1) by striking ‘‘Subject to the provisions

5 of section 7422(c) of this title, the’’ and insert6 ing ‘‘The’’ in subsection (a),

7 (2) by inserting ‘‘as is fixed, or’’ after

8 ‘‘contract,’’ in subsection (b), and

9 (3) by striking ‘‘than having petroleum

10 produced for national defense’’ and inserting

11 ‘‘producing petroleum’’ in subsection (c);

12 (h) in section 7427, by striking ‘‘, with the con13 sent of the President,’’;

14 (i) in section 7428, by striking ‘‘approval by the

15 President and to’’;

16 (j) in section 7429, by striking ‘‘If any such

17 land is to be re-leased, the’’ and inserting ‘‘The’’;

18 (k) in section 7430, as follows:

19 (l) by amending subsection (b)(2) to read as follows:

20 ‘‘(2) The Secretary may not sell any part of the

21 United States share of petroleum produced from

22 Naval Petroleum Reserves Numbered 1, 2, and 3 for

23 less than the Secretary’s estimate of the current

24 sales price of comparable petroleum in the same

25 area.’’,
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1 (2) by striking ‘‘Naval Petroleum Reserves

2 Numbered 1 or Numbered 3’’ and inserting

3 ‘‘the naval petroleum reserves’’ in subsection

4 (j),

5 (3)(A) by amending subsection (l)(1) to

6 read as follows: ‘‘Notwithstanding any other

7 provision of this chapter (but subject to para8 graph (2)), the Secretary may provide any por9 tion of the United States share of petroleum to

10 any other Federal agency or instrumentality for

11 its use in order to meet petroleum product re12 quirements of the Federal Government.’’;

13 (B) by striking ‘‘the Department of De14 fense’’ and inserting ‘‘any other Federal agency

15 or instrumentality’’ and striking ‘‘Secretary of

16 Defense’’ and inserting ‘‘other Federal agencies

17 and instrumentalities’’ in subsection (l)(2); and

18 (C) by striking ‘‘exchange’’ and inserting

19 ‘‘transaction’’ in subsection (l)(3), and

20 (4) by striking subsections (c), (d), (e), (f),

21 (g), (h), and (i);

22 (l) in section 7431, as follows:

23 (1) by striking ‘‘and approval’’ in the catch

24 line,
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1 (2) by striking ‘‘and the President’s ap2 proval must be obtained’’ in subsection (a),

3 (3) by striking 11 and Presidential ap4 proval are’’ and inserting ‘‘is’’ in subsection

5 (a)(2), and

6 (4) by striking subsections (a)(3), and (c);

7 (m) by amending section 7432 to read as follows:

8 ‘‘§ 7432. Production Enhancement

9 ‘‘Not more than $60 million of the United States

10 share of amounts collected in fiscal year 1996 under the

11 Emergency Petroleum Allocation Act of 1973 (15 U.S.C.

12 § 751 et seq.) may be used to enhance production from

13 the Reserves in that fiscal year, to the extent provided in

14 an appropriations Act.’’;

15 (n) by amending section 7434 to read as follows:

16 ‘‘Prior to privatization, the Secretary shall submit a report

17 to the Committee on Armed Services of the Senate and

18 the Committee on National Security of the House of Rep19 resentatives, within 270 days of the end of each fiscal

20 year, on production from the naval petroleum reserves for

21 the preceding fiscal year and on other naval petroleum re22 serves matters the Secretary considers appropriate.’’; and

23 (o) by amending section 7438 to read as follows:
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1 ‘‘§ 7438. Mining and removal of oil shale

2 ‘‘(a) Except as provided in title III of the Naval Pe3 troleum Reserves Privatization Act, prior to privatization

4 the Secretary may mine and remove, or authorize the min5 ing and removal of, oil shale or oil shale products from

6 Oil Shale Reserves Numbered 1, 2, and 3 needed for the

7 national defense or for research, development, test, evalua8 tion, and demonstration work, at prices and under other

9 terms that the Secretary directs.

10 ‘‘(b) This section is not intended to authorize the

11 commercial development and operation of the naval oil

12 shale reserves by the Government in competition with pri13 vate industry.’’.

14 SEC. 4132. CONFORMING AMENDMENTS AND REPEALERS.

15 (a) Section 2 of Pub. L. No. 96–137, 93 Stat. 1061

16 (1979) (42 U.S.C. 7156a) is repealed.

17 (b) Section 501 of the Dire Emergency Supplemental

18 Appropriations and Transfers, Urgent Supplementals, and

19 correcting Enrollment Errors Act of 1989 (10 U.S.C.

20 7431 note) is repealed.

21 (c) Chapter 641 of title 10 United States Code ceases

22 to apply to any Reserve that is privatized.

23 CHAPTER 2—DEPARTMENT OF ENERGY

24 SEC. 5221. SALE OF DOE ASSETS.

25 (a) ASSET MANAGEMENT AND DISPOSITION PRO26 GRAM.—
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1 (1) IN GENERAL.—In order to maximize the use

2 of Department of Energy assets and to reduce over3 head and other costs related to asset management at

4 the Department’s facilities and laboratories, the Sec5 retary of Energy shall conduct an asset management

6 and disposition program that will result in not less

7 than $225,000,000 in receipts and savings by Octo8 ber 1, 2000.

9 (2) ITEMS TO BE INCLUDED.—The program

10 shall include an inventory of assets in the care of the

11 Department and its contractors; the recovery, reuse,

12 and stewardship of assets; and disposition of a mini13 mum of 1,139,000,000 pounds of fuel, 136,000 tons

14 of chemicals and industrial gases, 557,000 tons of

15 scrap metal, 14,000 radiation sources, 17,000 pieces

16 of major equipment, 11,000 pounds of precious met17 als, and 91,000,000 pounds of base metals.

18 (b) FEDERAL PROPERTY AND ADMINSTRATIVE

19 SERVICES ACT.—The disposition of assets under this sec20 tion is not subject to section 202 or 203 of the Federal

21 Property and Administrative Services Act of 1949 (40

22 U.S.C. 483, 484) or section 13 of the Surplus Property

23 Act of 1944 (50 U.S.C. App. 1622). In order to avoid mar24 ket disruptions, the Secretary shall consult with appro-
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1 priate executive agencies with respect to dispositions

2 under this section.

3 (c) DISPOSITION OF PROCEEDS.—After deduction of

4 administrative costs of disposition under this section not

5 to exceed $7,000,000 per year, the remainder of the pro6 ceeds from dispositions under this subpart shall be re7 turned to the Treasury as miscellaneous receipts. There

8 shall be established a new receipt account in the Treasury

9 for proceeds of asset sales under this section.

10 SEC. 5222. SALE OF WEEKS ISLAND OIL.

11 Notwithstanding section 161 of the Energy Policy

12 and Conservation Act (42 U.S.C. 6241), the Secretary of

13 Energy shall draw down and sell 32,000,000 barrels of

14 oil contained in the Weeks Island Strategic Petroleum Re15 serve Facility. The Secretary shall, to the greatest extent

16 practicable, sell oil from the reserve in a manner that

17 minimizes the impact of such sale upon supply levels and

18 market forces.

19 SEC. 5223. LEASE OF EXCESS STRATEGIC PETROLEUM RE20 SERVE CAPACITY.

21 (a) AMENDMENT.—Part B of title I of the Energy

22 Policy and Conservation Act (42 U.S.C. 6231 et seq.) is

23 amended by adding at the end the following:

24 ‘‘USE OF UNDERUTILIZED FACILITIES

25 ‘‘SEC. 168. (a) AUTHORITY.—Notwithstanding any

26 other provision of this title, the Secretary, by lease or oth-
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1 erwise, for any term and under such other conditions as

2 the Secretary considers necessary or appropriate, may

3 store in underutilized Strategic Petroleum Reserve facili4 ties petroleum product owned by a foreign government or

5 its representative. Petroleum products stored under this

6 section are not part of the Strategic Petroleum Reserve

7 and may be exported without license from the United

8 States.

9 ‘‘(b) PROTECTION OF FACILITIES.—All agreements

10 entered into pursuant to subsection (a) shall contain provi11 sions providing for fees to fully compensate the United

12 States for all costs of storage and removals of petroleum

13 products, including the cost of replacement facilities neces14 sitated as a result of any withdrawals.

15 ‘‘(c) ACCESS TO STORED OIL.—The Secretary shall

16 ensure that agreements to store petroleum products for

17 foreign governments or their representatives do not affect

18 the ability of the United States to withdraw, distribute,

19 or sell petroleum from the Strategic Petroleum reserve in

20 response to an energy emergency or to the obligations of

21 the United States under the Agreement on an Inter22 national Energy Program’’.

23 (b) TABLE OF CONTENTS AMENDMENT.—The table

24 of contents of part B of title I of the Energy Policy and
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1 Conservation Act is amended by adding at the end the

2 following:

‘‘Sec. 168. Use of underutilized facilities.’’.

3 Subtitle C—Natural Resources

4 Subchapter B—Helium Reserves

5 SEC. 5311. SHORT TITLE.

6 This subchapter may be cited as the ‘‘Helium Act of

7 1995’’.

8 SEC. 5312. AMENDMENT OF HELIUM ACT.

9 Except as otherwise expressly provided, whenever in

10 this chapter an amendment or repeal is expressed in terms

11 of an amendment to, or repeal of, a section or other provi12 sion, the reference shall be considered to be made to a

13 section or other provision of the Helium Act (50 U.S.C.

14 167 to 167n).

15 SEC. 5313. AUTHORITY OF SECRETARY.

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

17 ‘‘SEC. 3. AUTHORITY OF SECRETARY.

18 ‘‘(a) EXTRACTION AND DISPOSAL OF HELIUM ON

19 FEDERAL LANDS.—

20 ‘‘(1) IN GENERAL.—The Secretary may enter

21 into agreements with private parties for the recovery

22 and disposal of helium on Federal lands upon such

23 terms and conditions as the Secretary deems fair,

24 reasonable, and necessary.
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1 ‘‘(2) LEASEHOLD RIGHTS.—The Secretary may

2 grant leasehold rights to any such helium.

3 ‘‘(3) LIMITATION.—The Secretary may not

4 enter into any agreement by which the Secretary

5 sells such helium other than to a private party with

6 whom the Secretary has an agreement for recovery

7 and disposal of helium.

8 ‘‘(4) REGULATIONS.—Agreements under para9 graph (1) may be subject to such regulations as may

10 be prescribed by the Secretary.

11 ‘‘(5) EXISTING RIGHTS.—An agreement under

12 paragraph (1) shall be subject to any rights of any

13 affected Federal oil and gas lessee that may be in

14 existence prior to the date of the agreement.

15 ‘‘(6) TERMS AND CONDITIONS.—An agreement

16 under paragraph (1) (and any extension or renewal

17 of an agreement) shall contain such terms and con18 ditions as the Secretary may consider appropriate.

19 ‘‘(7) PRIOR AGREEMENTS.—This subsection

20 shall not in any manner affect or diminish the rights

21 and obligations of the Secretary and private parties

22 under agreements to dispose of helium produced

23 from Federal lands in existence on the date of enact24 ment of the Helium Act of 1995 except to the extent
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1 that such agreements are renewed or extended after

2 that date.

3 ‘‘(b) STORAGE, TRANSPORTATION AND SALE.—The

4 Secretary may store, transport, and sell helium only in ac5 cordance with this Act.

6 ‘‘SEC. 4. STORAGE, TRANSPORTATION, AND WITHDRAWAL

7 OF CRUDE HELIUM.

8 ‘‘(a) STORAGE, TRANSPORTATION AND WITH9 DRAWAL.—The Secretary may store, transport and with10 draw crude helium and maintain and operate crude helium

11 storage facilities, in existence on the date of enactment

12 of the Helium Act of 1995 at the Bureau of Mines Cliff13 side Field, and related helium transportation and with14 drawal facilities.

15 ‘‘(b) CESSATION OF PRODUCTION, REFINING, AND

16 MARKETING.—Not later than 18 months after the date

17 of enactment of the Helium Act of 1995, the Secretary

18 shall cease producing, refining, and marketing refined he19 lium and shall cease carrying out all other activities relat20 ing to helium which the Secretary was authorized to carry

21 out under this Act before the date of enactment of the

22 Helium Act of 1995, except activities described in sub23 section (a).

24 ‘‘(c) DISPOSAL OF FACILITIES.—
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1 ‘‘(1) IN GENERAL.—Subject to paragraph (5),

2 not later than 24 months after the cessation of ac3 tivities referred to in section (b) of this section, the

4 Secretary shall designate as excess property and dis5 pose of all facilities, equipment, and other real and

6 personal property, and all interests therein, held by

7 the United States for the purpose of producing, re8 fining and marketing refined helium.

9 ‘‘(2) APPLICABLE LAW.—The disposal of such

10 property shall be in accordance with the Federal

11 Property and Administrative Services Act of 1949.

12 ‘‘(3) PROCEEDS.—All proceeds accruing to the

13 United States by reason of the sale or other disposal

14 of such property shall be treated as moneys received

15 under this chapter for purposes of section 6(f).

16 ‘‘(4) COSTS.—All costs associated with such

17 sale and disposal (including costs associated with

18 termination of personnel) and with the cessation of

19 activities under subsection (b) shall be paid from

20 amounts available in the helium production fund es21 tablished under section 6(f).

22 ‘‘(5) EXCEPTION.—Paragraph (1) shall not

23 apply to any facilities, equipment, or other real or

24 personal property, or any interest therein, necessary

25 for the storage, transportation and withdrawal of
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1 crude helium or any equipment, facilities, or other

2 real or personal property, required to maintain the

3 purity, quality control, and quality assurance of

4 crude helium in the Bureau of Mines Cliffside Field.

5 ‘‘(d) EXISTING CONTRACTS.—

6 ‘‘(1) IN GENERAL.—All contracts that were en7 tered into by any person with the Secretary for the

8 purchase by the person from the Secretary of refined

9 helium and that are in effect on the date of the en10 actment of the Helium Act of 1995 shall remain in

11 force and effect until the date on which the refining

12 operations cease, as described in subsection (b).

13 ‘‘(2) COSTS.—Any costs associated with the ter14 mination of contracts described in paragraph (1)

15 shall be paid from the helium production fund estab16 lished under section 6(f).

17 ‘‘SEC. 5. FEES FOR STORAGE, TRANSPORTATION AND WITH18 DRAWAL.

19 ‘‘(a) IN GENERAL.—Whenever the Secretary provides

20 helium storage withdrawal or transportation services to

21 any person, the Secretary shall impose a fee on the person

22 to reimburse the Secretary for the full costs of providing

23 such storage, transportation, and withdrawal.
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1 ‘‘(b) TREATMENT.—All fees received by the Secretary

2 under subsection (a) shall be treated as moneys received

3 under this Act for purposes of section 6(f).’’.

4 SEC. 5314. SALE OF CRUDE HELIUM.

5 (a) Subsection 6(a) is amended by striking ‘‘from the

6 Secretary’’ and inserting ‘‘from persons who have entered

7 into enforceable contracts to purchase an equivalent

8 amount of crude helium from the Secretary’’.

9 (b) Subsection 6(b) is amended—

10 (1) by inserting ‘‘crude’’ before ‘‘helium’’; and

11 (2) by adding the following at the end: ‘‘Except

12 as may be required by reason of subsection (a), sales

13 of crude helium under this section shall be in

14 amounts as the Secretary determines, in consulta15 tion with the helium industry, necessary to carry out

16 this subsection with minimum market disruption.’’.

17 (c) Subsection 6(c) is amended—

18 (1) by inserting ‘‘crude’’ after ‘‘Sales of’’; and

19 (2) by striking ‘‘together with interest as pro20 vided in this subsection’’ and all that follows

21 through the end of the subsection and inserting ‘‘all

22 funds required to be repaid to the United States as

23 of October 1, 1995 under this section (referred to in

24 this subsection as ‘repayable amounts’). The price at

25 which crude helium is sold by the Secretary shall not
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1 be less than the amount determined by the Secretary

2 by—

3 ‘‘(1) dividing the outstanding amount of such

4 repayable amounts by the volume (in million cubic

5 feet) of crude helium owned by the United States

6 and stored in the Bureau of Mines Cliffside Field at

7 the time of the sale concerned, and

8 ‘‘(2) adjusting the amount determined under

9 paragraph (1) by the Consumer Price Index for

10 years beginning after December 31, 1995.’’.

11 (d) Subsection 6(d) is amended to read as follows:

12 ‘‘(d) EXTRACTION OF HELIUM FROM DEPOSITS ON

13 FEDERAL LANDS.—All moneys received by the Secretary

14 from the sale or disposition of helium on Federal lands

15 shall be paid to the Treasury and credited against the

16 amounts required to be repaid to the Treasury under sub17 section (c).’’.

18 (e) Subsection 6(e) is repealed.

19 (f) Subsection 6(f) is amended—

20 (1) by striking ‘‘(f)’’ and inserting ‘‘(e)(1)’’;

21 and

22 (2) by adding the following at the end:

23 ‘‘(2)(A) Within 7 days after the commencement of

24 each fiscal year after the disposal of the facilities referred

25 to in section 4(c), all amounts in such fund in excess of
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1 $2,000,000 (or such lesser sum as the Secretary deems

2 necessary to carry out this Act during such fiscal year)

3 shall be paid to the Treasury and credited as provided in

4 paragraph (1).

5 ‘‘(B) On repayment of all amounts referred to in sub6 section (c), the fund established under this section shall

7 be terminated and all moneys received under this Act shall

8 be deposited in the general fund of the Treasury.’’.

9 SEC. 5315. ELIMINATION OF STOCKPILE.

10 Section 8 is amended to read as follows:

11 ‘‘SEC. 8. ELIMINATION OF STOCKPILE.

12 ‘‘(a) STOCKPILE SALES.—

13 ‘‘(1) COMMENCEMENT.—Not later than Janu14 ary 1, 2005, the Secretary shall commence offering

15 for sale crude helium from helium reserves owned by

16 the United States in such amounts as would be nec17 essary to dispose of all such helium reserves in ex18 cess of 600,000,000 cubic feet on a straight-line

19 basis between such date and January 1, 2015.

20 ‘‘(2) TIMES OF SALE.—The sales shall be at

21 such times during each year and in such lots as the

22 Secretary determines, in consultation with the he23 lium industry, to be necessary to carry out this sub24 section with minimum market disruption.
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1 ‘‘(3) PRICE.—The price for all sales under

2 paragraph (1), as determined by the Secretary in

3 consultation with the helium industry, shall be such

4 price as will ensure repayment of the amounts re5 quired to be repaid to the Treasury under section

6 6(c).

7 ‘‘(b) DISCOVERY OF ADDITIONAL RESERVES.—The

8 discovery of additional helium reserves shall not affect the

9 duty of the Secretary to make sales of helium under sub10 section (a).’’.

11 SEC. 5316. REPEAL OF AUTHORITY TO BORROW.

12 Sections 12 and 15 are repealed.

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

14 (a) IN GENERAL.—The Secretary of the Interior shall

15 transfer all right, title, and interest of the United States

16 in and to the parcel of land described in subsection (b)

17 to the Texas Plains Girl Scout Council for consideration

18 of $1, reserving to the United States such easements as

19 may be necessary for pipeline rights-of-way.

20 (b) LAND DESCRIPTION.—The parcel of land re21 ferred to in subsection (a) is all those certain lots, tracts

22 or parcels of land lying and being situated in the County

23 of Potter and State of Texas, and being the East Three

24 Hundred Thirty-One (E331) acres out of Section Seventy25 eight (78) in Block Nine (9), B.S. & F. Survey, (some
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1 times known as the G.D. Landis pasture) Potter County,

2 Texas, located by certificate No. 1/39 and evidenced by

3 letters patents Nos. 411 and 412 issued by the State of

4 Texas under date of November 23, 1937, and of record

5 in Vol. 66A of the Patent Records of the State of Texas.

6 The metes and bounds description of such lands is as fol7 lows:

8 (1) FIRST TRACT.—One Hundred Seventy-one

9 (171) acres of land known as the North part of the

10 East part of said survey Seventy-eight (78) afore11 said, described by metes and bounds as follows:

12 Beginning at a stone 20 x 12 x 3 inches

13 marked X, set by W.D. Twichell in 1905, for the

14 Northeast corner of this survey and the Northwest

15 corner of Section 59;

16 Thence, South 0 degrees 12 minutes East with

17 the West line of said Section 59, 999.4 varas to the

18 Northeast corner of the South 160 acres of East

19 half of Section 78;

20 Thence, North 89 degrees 47 minutes West

21 with the North line of the South 150 acres of the

22 East half, 956.8 varas to a point in the East line

23 of the West half Section 78;

24 Thence, North 0 degrees 10 minutes West with

25 the East line of the West half 999.4 varas to a stone
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1 18 x 14 x 3 inches in the middle of the South line

2 of Section 79;

3 Thence, South 89 degrees 47 minutes East 965

4 varas to the place of beginning.

5 (2) SECOND TRACT.—One Hundred Sixty (160)

6 acres of land known as the South part of the East

7 part of said survey No. Seventy-eight (78) described

8 by metes and bounds as follows:

9 Beginning at the Southwest corner of Section

10 59, a stone marked X and a pile of stones; Thence,

11 North 89 degrees 47 minutes West with the North

12 line of Section 77, 966.5 varas to the Southeast cor13 ner of the West half of Section 78; Thence, North

14 0 degrees 10 minutes West with the East line of the

15 West half of Section 78;

16 Thence, South 89 degrees 47 minutes East

17 965.8 varas to a point in the East line of Section

18 78;

19 Thence, South 0 degrees 12 minutes East

20 934.6 varas to the place of beginning.

21 Containing an area of 331 acres, more or less.
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1 CHAPTER 8—OUTER CONTINENTAL SHELF

2 DEEP WATER ROYALTY RELIEF

3 SEC. 5421. SHORT TITLE.

4 This chapter may be referred to as the ‘‘Outer Con5 tinental Shelf Deep Water Royalty Relief Act’’.

6 SEC. 5422. AMENDMENTS TO THE OUTER CONTINENTAL

7 SHELF LANDS ACT.

8 Section 8(a)(3) of the Outer Continental Shelf Lands

9 Act (43 U.S.C. 1337(a)(3)), is amended—

10 (1) by designating the provisions of paragraph

11 (3) as subparagraph (A) of such paragraph (3); and

12 (2) by inserting after subparagraph (A), as so

13 designated, the following:

14 ‘‘(B) In the Western and Central Planning

15 Areas of the Gulf of Mexico and the portion of

16 the Eastern Planning Area of the Gulf of Mex17 ico encompassing whole lease blocks lying west

18 of 87 degrees, 30 minutes West longitude, the

19 Secretary may, in order to—

20 ‘‘(i) promote development or increased

21 production on producing or non-producing

22 leases; or

23 ‘‘(ii) encourage production of mar24 ginal resources on producing or non-pro25 ducing leases;
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1 through primary, secondary, or tertiary recov2 ery means, reduce or eliminate any royalty or

3 net profit share set forth in the lease(s). With

4 the lessee’s consent, the Secretary may make

5 other modifications to the royalty or net profit

6 share terms of the lease in order to achieve

7 these purposes.

8 ‘‘(C)(i) Notwithstanding the provisions of

9 this Act other than this subparagraph, with re10 spect to any lease or unit in existence on the

11 date of enactment of the Outer Continental

12 Shelf Deep Water Royalty Relief Act meeting

13 the requirements of this subparagraph, no roy14 alty payments shall be due on new production,

15 as defined in clause (iv) of this subparagraph,

16 from any lease or unit located in water depths

17 of 200 meters or greater in the Western and

18 Central Planning Areas of the Gulf of Mexico,

19 including that portion of the Eastern Planning

20 Area of the Gulf of Mexico encompassing whole

21 lease blocks lying west of 87 degrees, 30 min22 utes West longitude, until such volume of pro23 duction as determined pursuant to clause (ii)

24 has been produced by the lessee.
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1 ‘‘(ii) Upon submission of a complete appli2 cation by the lessee, the Secretary shall deter3 mine within 180 days of such application

4 whether new production from such lease or unit

5 would be economic in the absence of the relief

6 from the requirement to pay royalties provided

7 for by clause (i) of this subparagraph. In mak8 ing such determination, the Secretary shall con9 sider the increased technological and financial

10 risk of deep water development and all costs as11 sociated with exploring, developing, and produc12 ing from the lease. The lessee shall provide in13 formation required for a complete application to

14 the Secretary prior to such determination. The

15 Secretary shall clearly define the information

16 required for a complete application under this

17 section. Such application may be made on the

18 basis of an individual lease or unit. If the Sec19 retary determines that such new production

20 would be economic in the absence of the relief

21 from the requirement to pay royalties provided

22 for by clause (i) of this subparagraph, the pro23 visions of clause (i) shall not apply to such pro24 duction. If the Secretary determines that such

25 new production would not be economic in the
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1 absence of the relief from the requirement to

2 pay royalties provided for by clause (i), the Sec3 retary must determine the volume of production

4 from the lease or unit on which no royalties

5 would be due in order to make such new pro6 duction economically viable; except that for new

7 production as defined in clause (iv)(I), in no

8 case will that volume be less than 17.5 million

9 barrels of oil equivalent in water depths of 200

10 to 400 meters, 52.5 million barrels of oil equiv11 alent in 400 to 800 meters of water, and 87.5

12 million barrels of oil equivalent in water depths

13 greater than 800 meters. Redetermination of

14 the applicability of clause (i) shall be under15 taken by the Secretary when requested by the

16 lessee prior to the commencement of the new

17 production and upon significant change in the

18 factors upon which the original determination

19 was made. The Secretary shall make such rede20 termination within 120 days of submission of a

21 complete application. The Secretary may extend

22 the time period for making any determination

23 or redetermination under this clause for 30

24 days, or longer if agreed to by the applicant, if

25 circumstances so warrant. The lessee shall be
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1 notified in writing of any determination or rede2 termination and the reasons for and assump3 tions used for such determination. Any deter4 mination or redetermination under this clause

5 shall be a final agency action. The Secretary’s

6 determination or redetermination shall be judi7 cially reviewable under section 10(a) of the Ad8 ministrative Procedure Act (5 U.S.C. 702), only

9 for actions filed within 30 days of the Sec10 retary’s determination or redetermination.

11 ‘‘(iii) In the event that the Secretary fails

12 to make the determination or redetermination

13 called for in clause (ii) upon application by the

14 lessee within the time period, together with any

15 extension thereof, provided for by clause (ii), no

16 royalty payments shall be due on new produc17 tion as follows:

18 ‘‘(I) For new production, as defined in

19 clause (iv)(I) of this subparagraph, no roy20 alty shall be due on such production ac21 cording to the schedule of minimum vol22 umes specified in clause (ii) of this sub23 paragraph.

24 ‘‘(II) For new production, as defined

25 in clause (iv)(II) of this subparagraph, no
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1 royalty shall be due on such production for

2 one year following the start of such pro3 duction.

4 ‘‘(iv) For purposes of this subparagraph,

5 the term ‘new production’ is—

6 ‘‘(I) any production from a lease from

7 which no royalties are due on production,

8 other than test production, prior to the

9 date of enactment of the Outer Continental

10 Shelf Deep Water Royalty Relief Act; or

11 ‘‘(II) any production resulting from

12 lease development activities pursuant to a

13 Development Operations Coordination Doc14 ument, or supplement thereto that would

15 expand production significantly beyond the

16 level anticipated in the Development Oper17 ations Coordination Document, approved

18 by the Secretary after the date of enact19 ment of the Outer Continental Shelf Deep

20 Water Royalty Relief Act.

21 ‘‘(v) During the production of volumes de22 termined pursuant to clauses (ii) or (iii) of this

23 subparagraph, in any year during which the

24 arithmetic average of the closing prices on the

25 New York Mercantile Exchange for light sweet
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1 crude oil exceeds $28.00 per barrel, any produc2 tion of oil will be subject to royalties at the

3 lease stipulated royalty rate. Any production

4 subject to this clause shall be counted toward

5 the production volume determined pursuant to

6 clauses (ii) or (iii). Estimated royalty payments

7 will be made if such average of the closing

8 prices for the previous year exceeds $28.00.

9 After the end of the calendar year, when the

10 new average price can be calculated, lessees will

11 pay any royalties due, with interest but without

12 penalty, or can apply for a refund, with inter13 est, of any overpayment.

14 ‘‘(vi) During the production of volumes de15 termined pursuant to clause (ii) or (iii) of this

16 subparagraph, in any year during which the

17 arithmetic average of the closing prices on the

18 New York Mercantile Exchange for natural gas

19 exceeds $3.50 per million British thermal units,

20 any production of natural gas will be subject to

21 royalties at the lease stipulated royalty rate.

22 Any production subject to this clause shall be

23 counted toward the production volume deter24 mined pursuant to clauses (ii) or (iii). Esti25 mated royalty payments will be made if such
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1 average of the closing prices for the previous

2 year exceeds $3.50. After the end of the cal3 endar year, when the new average price can be

4 calculated, lessees will pay any royalties due,

5 with interest but without penalty, or can apply

6 for a refund, with interest, of any overpayment.

7 ‘‘(vii) The prices referred to in clauses (v)

8 and (vi) of this subparagraph shall be changed

9 during any calendar year after 1994 by the per10 centage, if any, by which the implicit price

11 deflator for the gross domestic product changed

12 during the preceding calendar year.’’.

13 SEC. 5423. NEW LEASES.

14 Section 8(a)(1) of the Outer Continental Shelf Lands

15 Act, as amended (43 U.S.C. 1337(a)(1)), is amended—

16 (1) by redesignating subparagraph (H) as sub17 paragraph (I);

18 (2) by striking ‘‘or’’ at the end of subparagraph

19 (G); and

20 (3) by inserting after subparagraph (G) the fol21 lowing new subparagraph:

22 ‘‘(H) cash bonus bid with royalty at no less

23 than 12 and 1/2 per centum fixed by the Sec24 retary in amount or value of production saved,

25 removed, or sold, and with suspension of royal-
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1 ties for a period, volume, or value of production

2 determined by the Secretary, which suspensions

3 may vary based on the price of production from

4 the lease; or’’.

5 SEC. 5424. LEASE SALES.

6 For all tracts located in water depths of 200 meters

7 or greater in the Western and Central Planning Area of

8 the Gulf of Mexico, including that portion of the Eastern

9 Planning Area of the Gulf of Mexico encompassing whole

10 lease blocks lying west of 87 degrees, 30 minutes West

11 longitude, any lease sale within seven years of the date

12 of enactment of this chapter, shall use the bidding system

13 authorized in section 8(a)(1)(H) of the Outer Continental

14 Shelf Lands Act, as amended by this chapter, except that

15 the suspension of royalties shall be set at a volume of not

16 less than the following:

17 (1) 17.5 million barrels of oil equivalent for

18 leases in water depths of 200 to 400 meters;

19 (2) 52.5 million barrels of oil equivalent for

20 leases in 400 to 800 meters of water; and

21 (3) 87.5 million barrels of oil equivalent for

22 leases in water depths greater than 800 meters.
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1 SEC. 5425. REGULATIONS.

2 The Secretary shall promulgate such rules and regu3 lations as are necessary to implement the provisions of this

4 chapter within 180 days after the enactment of this Act.

5 SEC. 5426. SAVINGS CLAUSE.

6 Nothing in this chapter shall be construed to affect

7 any offshore pre-leasing, leasing, or development morato8 rium, including any moratorium applicable to the Eastern

9 Planning Area of the Gulf of Mexico located off the Gulf

10 Coast of Florida.

11 Subtitle C—GSA Property Sales

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

13 (a) IN GENERAL.—Notwithstanding any other provi14 sion of law, the Administrator of General Services shall

15 dispose of by sale at fair market value all rights, title, and

16 interests of the United States in and to the land of, and

17 improvements to, Governors Island, New York.

18 (b) RIGHT OF FIRST REFUSAL.—Before a sale is

19 made under subsection (a) to any other parties, the State

20 of New York and the city of New York shall be given the

21 right of first refusal to purchase all or part of Governors

22 Island. Such right may be exercised by either the State

23 of New York or the city of New York or by both parties

24 acting jointly.

25 (c) PROCEEDS.—Proceeds from the disposal of Gov26 ernors Island under subsection (a) shall be deposited in
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1 the general fund of the Treasury and credited as mis2 cellaneous receipts.

3 SEC. 6022. SALE OF AIR RIGHTS.

4 (a) IN GENERAL.—Notwithstanding any other provi5 sion of law, the Administrator of General Services shall

6 sell, at fair market value and in a manner to be deter7 mined by the Administrator, the air rights adjacent to

8 Washington Union Station described in subsection (b), in9 cluding air rights conveyed to the Administrator under

10 subsection (d). The Administrator shall complete the sale

11 by such date as is necessary to ensure that the proceeds

12 from the sale will be deposited in accordance with sub13 section (c).

14 (b) DESCRIPTION.—The air rights referred to in sub15 section (a) total approximately 16.5 acres and are depicted

16 on the plat map of the District of Columbia as follows:

17 (1) Part of lot 172, square 720.

18 (2) Part of lots 172 and 823, square 720.

19 (3) Part of lot 811, square 717.

20 (c) PROCEEDS.—Before September 30, 1996, pro21 ceeds from the sale of air rights under subsection (a) shall

22 be deposited in the general fund of the Treasury and cred23 ited as miscellaneous receipts.

24 (d) CONVEYANCE OF AMTRAK AIR RIGHTS.—
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1 (1) GENERAL RULE.—As a condition of future

2 Federal financial assistance, Amtrak shall convey to

3 the Administrator of General Services on or before

4 December 31, 1995, at no charge, all of the air

5 rights of Amtrak described in subsection (b).

6 (2) FAILURE TO COMPLY.—If Amtrak does not

7 meet the condition established by paragraph (1),

8 Amtrak shall be prohibited from obligating Federal

9 funds after March 1, 1996.

10 TITLE V—ENERGY AND NATURAL RESOURCES

11 PROVISIONS

12 Subtitle A—Nuclear Regulatory Commission Annual

13 Charges

14 SEC. 5001. NUCLEAR REGULATORY COMMISSION ANNUAL

15 CHARGES.

16 Section 6101(a)(3) of the Omnibus Budget Reconcili17 ation Act of 1990 (42 U.S.C. 2214(a)(3)) is amended by

18 striking ‘‘September 30, 1998’’ and inserting ‘‘September

19 30, 2002’’.

20 Subtitle B—Department of Energy Assets

21 CHAPTER 1—UNITED STATES

22 ENRICHMENT CORPORATION

23 SEC. 5410. HETCH HETCHY DAM.

24 Section 7 of the Act of December 13, 1913 (38 Stat.

25 242), is amended—
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1 (1) By striking ‘‘pay the sum of $30,000’’ and

2 all that follows in the first sentence and inserting

3 ‘‘pay an amount determined annually by the Sec4 retary in accordance with the formula used by the

5 Federal Energy Regulatory Commission for applica6 tion to licenses of hydroelectric projects under the

7 Federal Power Act (16 U.S.C. 791 et seq.), provided

8 that, in no event shall such amount be less than

9 $597,000.00. Said amount to be paid on the first

10 day of July of each year.’’.

11 (2) By amending the second and third sen12 tences to read as follows: ‘‘These funds shall be

13 placed in a separate fund by the United States and,

14 notwithstanding any other provision of law, shall not

15 be available for obligation or expenditure until ap16 propriated by Congress. The highest priority use of

17 the funds shall be for annual operation of Yosemite

18 National Park, with the remainder of any funds to

19 be used to fund operations of other national parks

20 in the State of California.’’.
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1 CHAPTER 7—POWER MARKETING

2 ADMINISTRATIONS

3 Subchapter A—Bonneville Power

4 Administration Refinancing

5 SEC. 5401. DEFINITIONS.

6 For the purposes of this subchapter—

7 (1) ‘‘Administrator’’ means the Administrator

8 of the Bonneville Power Administration;

9 (2) ‘‘capital investment’’ means a capitalized

10 cost funded by Federal appropriations that—

11 (A) is for a project, facility, or separable

12 unit or feature of a project or facility;

13 (B) is a cost for which the Administrator

14 is required by law to establish rates to repay to

15 the United States Treasury through the sale of

16 electric power, transmission, or other services;

17 (C) excludes a Federal irrigation invest18 ment; and

19 (D) excludes an investment financed by the

20 current revenues of the Administrator or by

21 bonds issued and sold, or authorized to be is22 sued and sold, by the Administrator under sec23 tion 13 of the Federal Columbia River Trans24 mission System Act (16 U.S.C. 838k);
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1 (3) ‘‘new capital investment’’ means a capital

2 investment for a project, facility, or separable unit

3 or feature of a project, facility, or separable unit or

4 feature of a project or facility, placed in service after

5 September 30, 1995;

6 (4) ‘‘old capital investment’’ means a capital in7 vestment the capitalized cost of which—

8 (A) was incurred, but not repaid, before

9 October 1, 1995, and

10 (B) was for a project, facility, or separable

11 unit or feature of a project or facility, placed in

12 service before October 1, 1995;

13 (5) ‘‘repayment date’’ means the end of the pe14 riod within which the Administrator’s rates are to

15 assure the repayment of the principal amount of a

16 capital investment; and

17 (6) ‘‘Treasury rate’’ means—

18 (A) for an old capital investment, a rate

19 determined by the Secretary of the Treasury,

20 taking into consideration prevailing market

21 yields, during the month preceding October 1,

22 1995, on outstanding interest-bearing obliga23 tions of the United States with periods to matu24 rity comparable to the period between October
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1 1, 1995, and the repayment date for the old

2 capital investment; and

3 (B) for a new capital investment, a rate

4 determined by the Secretary of the Treasury,

5 taking into consideration prevailing market

6 yields, during the month preceding the begin7 ning of the fiscal year in which the related

8 project, facility, or separable unit or feature is

9 placed in service, on outstanding interest-bear10 ing obligations of the United States with peri11 ods to maturity comparable to the period be12 tween the beginning of the fiscal year and the

13 repayment date for the new capital investment.

14 SEC. 5402. NEW PRINCIPAL AMOUNTS.

15 (a) PRINCIPAL AMOUNT.—Effective October 1, 1995,

16 an old capital investment has a new principal amount that

17 is the sum of—

18 (1) the present value of the old payment

19 amounts for the old capital investment, calculated

20 using a discount rate equal to the Treasury rate for

21 the old capital investment; and

22 (2) an amount equal to $100,000,000 multi23 plied by a fraction the numerator of which is the

24 principal amount of the old payment amounts for

25 the old capital investment and the denominator of
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1 which is the sum of the principal amounts of the old

2 payment amounts for all old capital investments.

3 (b) DETERMINATION.—With the approval of the Sec4 retary of the Treasury, based solely on consistency with

5 this subchapter, the Administrator shall determine the

6 new principal amounts under this section and the assign7 ment of interest rates to the new principal amounts under

8 section 5403.

9 (c) OLD PAYMENT AMOUNT.—For the purposes of

10 this section, ‘‘old payment amounts’’ means, for an old

11 capital investment, the annual interest and principal that

12 the Administrator would have paid to the United States

13 Treasury from October 1, 1995, if this subchapter had

14 not been enacted, assuming that—

15 (1) the principal were repaid—

16 (A) on the repayment date the Adminis17 trator assigned before October 1, 1993, to the

18 old capital investment, or

19 (B) with respect to an old capital invest20 ment for which the Administrator has not as21 signed a repayment date before October 1,

22 1993, on a repayment date the Administrator

23 shall assign to the old capital investment in ac24 cordance with paragraph 10(d)(1) of the ver-
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1 sion of Department of Energy Order RA

2 6120.2 in effect on October 1, 1993; and

3 (2) interest were paid—

4 (A) at the interest rate the Administrator

5 assigned before October 1, 1993, to the old cap6 ital investment, or

7 (B) with respect to an old capital invest8 ment for which the Administrator has not as9 signed an interest rate before October 1, 1993,

10 at a rate determined by the Secretary of the

11 Treasury, taking into consideration prevailing

12 market yields, during the month preceding the

13 beginning of the fiscal year in which the related

14 project, facility, or separable unit or feature is

15 placed in service, on outstanding interest-bear16 ing obligations of the United States with peri17 ods to maturity comparable to the period be18 tween the beginning of the fiscal year and the

19 repayment date for the old capital investment.

20 SEC. 5403. INTEREST RATE FOR NEW PRINCIPAL AMOUNTS.

21 As of October 1, 1995, the unpaid balance on the

22 new principal amount established for an old capital invest23 ment under section 5402 bears interest annually at the

24 Treasury rate for the old capital investment until the ear-
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1 lier of the date that the new principal amount is repaid

2 or the repayment date for the new principal amount.

3 SEC. 5404. REPAYMENT DATES.

4 As of October 1, 1995, the repayment date for the

5 new principal amount established for an old capital invest6 ment under section 5402 is no earlier than the repayment

7 date for the old capital investment assumed in section

8 5402(c)(1).

9 SEC. 5405. PREPAYMENT LIMITATIONS.

10 During the period October 1, 1995, through Septem11 ber 30, 2000, the total new principal amounts of old cap12 ital investments, as established under section 5402, that

13 the Administrator may pay before their respective repay14 ment dates shall not exceed $100,000,000.

15 SEC. 5406. INTEREST RATES FOR NEW CAPITAL INVEST16 MENTS DURING CONSTRUCTION.

17 (a) NEW CAPITAL INVESTMENT.—The principal

18 amount of a new capital investment includes interest in

19 each fiscal year of construction of the related project, facil20 ity, or separable unit or feature at a rate equal to the

21 one-year rate for the fiscal year on the sum of—

22 (1) construction expenditures that were made

23 from the date construction commenced through the

24 end of the fiscal year, and

25 (2) accrued interest during construction.
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1 (b) PAYMENT.—The Administrator is not required to

2 pay, during construction of the project, facility, or sepa3 rable unit or feature, the interest calculated, accrued, and

4 capitalized under subsection (a).

5 (c) ONE-YEAR RATE.—For the purposes of this sec6 tion, ‘‘one-year rate’’ for a fiscal year means a rate deter7 mined by the Secretary of the Treasury, taking into con8 sideration prevailing market yields, during the month pre9 ceding the beginning of the fiscal year, on outstanding in10 terest-bearing obligations of the United States with peri11 ods to maturity of approximately one year.

12 SEC. 5407. INTEREST RATES FOR NEW CAPITAL INVEST13 MENTS.

14 The unpaid balance on the principal amount of a new

15 capital investment bears interest at the Treasury rate for

16 the new capital investment from the date the related

17 project, facility, or separable unit or feature is placed in

18 service until the earlier of the date the new capital invest19 ment is repaid or the repayment date for the new capital

20 investment.

21 SEC. 5408. CREDITS TO ADMINISTRATOR’S PAYMENTS TO

22 THE UNITED STATES TREASURY.

23 The Confederated Tribe of the Colville Reservation

24 Grand Coulee Dam Settlement Act (Public Law 103–436;
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1 108 Stat. 4577) is amended by striking section 6 and in2 serting the following:

3 ‘‘SEC. 6. CREDITS TO ADMINISTRATOR’S PAYMENTS TO THE

4 UNITED STATES TREASURY.

5 ‘‘So long as the Administrator makes annual pay6 ments to the tribes under the settlement agreement, the

7 Administrator shall apply against amounts otherwise pay8 able by the Administrator to the United States Treasury

9 a credit that reduces the Administrator’s payment in the

10 amount and for each fiscal year as follows: $15,250,000

11 in fiscal year 1996; $15,860,000 in fiscal year 1997;

12 $16,490,000 in fiscal year 1998; $17,150,000 in fiscal

13 year 1999; $17,840,000 in fiscal year 2000; and

14 $4,100,000 in each succeeding fiscal year.’’.

15 SEC. 5409. CONTRACT PROVISIONS.

16 In each contract of the Administrator that provides

17 for the Administrator to sell electric power, transmission,

18 or related services, and that is in effect after September

19 30, 1995, the Administrator shall offer to include, or as

20 the case may be, shall offer to amend to include, provisions

21 specifying that after September 30, 1995—

22 (1) the Administrator shall establish rates and

23 charges on the basis that—

24 (A) the principal amount of an old capital

25 investment shall be no greater than the new
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1 principal amount established under section

2 5402;

3 (B) the interest rate applicable to the un4 paid balance of the new principal amount of an

5 old capital investment shall be no greater than

6 the interest rate established under section

7 5403;

8 (C) any payment of principal of an old

9 capital investment shall reduce the outstanding

10 principal balance of the old capital investment

11 in the amount of the payment at the time the

12 payment is tendered; and

13 (D) any payment of interest on the unpaid

14 balance of the new principal amount of an old

15 capital investment shall be a credit against the

16 appropriate interest account in the amount of

17 the payment at the time the payment is ten18 dered;

19 (2) apart from charges necessary to repay the

20 new principal amount of an old capital investment as

21 established under section 5402 and to pay the inter22 est on the principal amount under section 5403, no

23 amount may be charged for return to the United

24 States Treasury as repayment for or return on an

25 old capital investment, whether by way of rate, rent,
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1 lease payment, assessment, user charge, or any other

2 fee;

3 (3) amounts provided under section 1304 of

4 title 31, United States Code, shall be available to

5 pay, and shall be the sole source for payment of, a

6 judgment against or settlement by the Administrator

7 or the United States on a claim for a breach of the

8 contract provisions required by this subchapter; and

9 (4) the contract provisions specified in this sub10 chapter do not—

11 (A) preclude the Administrator from recov12 ering, through rates or other means, any tax

13 that is generally imposed on electric utilities in

14 the United States, or

15 (B) affect the Administrator’s authority

16 under applicable law, including section 7(g) of

17 the Pacific Northwest Electric Power Planning

18 and Conservation Act (16 U.S.C. 839e(g)), to—

19 (i) allocate costs and benefits, includ20 ing but not limited to fish and wildlife

21 costs, to rates or resources, or

22 (ii) design rates.

23 SEC. 5410. SAVINGS PROVISIONS.

24 (a) REPAYMENT.—This subchapter does not affect

25 the obligation of the Administrator to repay the principal
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1 associated with each capital investment, and to pay inter2 est on the principal, only from the ‘‘Administrator’s net

3 proceeds,’’ as defined in section 13(b) of the Federal Co4 lumbia River Transmission System Act (16 U.S.C.

5 838k(b)).

6 (b) PAYMENT OF CAPITAL INVESTMENT.—Except as

7 provided in section 5405, this subchapter does not affect

8 the authority of the Administrator to pay all or a portion

9 of the principal amount associated with a capital invest10 ment before the repayment date for the principal amount.

11 Subchapter B—Alaska Power Marketing

12 Administration Sale

13 SEC. 5411. SHORT TITLE.

14 This subchapter may be cited as the ‘‘Alaska Power

15 Administration Asset Sale and Termination Act’’.

16 SEC. 5412. DEFINITIONS.

17 For purposes of this subchapter:

18 (1) The term ‘‘Eklutna’’ means Eklutna Hydro19 electric Project and related assets as described in

20 section 4 and Exhibit A of the Eklutna Purchase

21 Agreement.

22 (2) The term ‘‘Eklutna Purchase Agreement’’

23 means the August 2, 1989, Eklutna Purchase

24 Agreement between the Alaska Power Administra25 tion of the Department of Energy and the Eklutna
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1 Purchasers, together with any amendments thereto

2 adopted before the date of enactment of this Act.

3 (3) The term ‘‘Eklutna Purchasers’’ means the

4 Municipality of Anchorage doing business as Munici5 pal Light and Power, the Chugach Electric Associa6 tion, Inc. and the Matanuska Electric Association,

7 Inc.

8 (4) The term ‘‘Snettisham’’ means the

9 Snettisham Hydroelectric Project and related assets

10 as described in section 4 and Exhibit A of the

11 Snettisham Purchase Agreement.

12 (5) The term ‘‘Snettisham Purchase Agree13 ment’’ means the February 10, 1989, Snettisham

14 Purchase Agreement between the Alaska Power Ad15 ministration of the Department of Energy and the

16 Alaska Power Authority and its successors in inter17 est, together with any amendments thereto adopted

18 before the date of enactment of this Act.

19 (6) The term ‘‘Snettisham Purchaser’’ means

20 the Alaska Industrial Development and Export Au21 thority or a successor State agency or authority.
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1 SEC. 5413. SALE OF EKLUTNA AND SNETTISHAM HYDRO2 ELECTRIC PROJECTS.

3 CHAPTER 11—PARK ENTRANCE FEES

4 SEC. 5451. FEES.

5 (a) ADMISSION FEES.—Section 4(a) of the Land and

6 Water Conservation Fund Act of 1965 (16 U.S.C. 460l–

7 6a(a)) is amended—

8 (1) in the first sentence of the subsection by

9 striking ‘‘no more than 21’’;

10 (2) in the first sentence of paragraph (1)(A)(i)

11 by striking ‘‘$25’’ and inserting ‘‘$50’’;

12 (3) in the second sentence of paragraph (1)(B)

13 by striking ‘‘$15’’ and inserting ‘‘$25’’;

14 (4) in paragraph (2) by striking the fourth,

15 fifth, and sixth sentences and inserting ‘‘The fee for

16 a single-visit permit at any designated area shall be

17 collected on a per person basis, not to exceed $6 per

18 person, including for persons entering by private,

19 noncommercial vehicle.’’;

20 (5) in paragraph (3)—

21 (A) in the third sentence by inserting

22 ‘‘Great’’ before ‘‘Smoky’’; and

23 (B) by striking the last sentence;

24 (6) in paragraph (4)—

25 (A) by striking the second sentence and in26 serting ‘‘Such permit shall be nontransferable,
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1 shall be issued for a one-time charge, which

2 shall be set at the same rate as the fee for a

3 Golden Eagle Passport, and shall entitle the

4 permittee to free admission into any area des5 ignated pursuant to this subsection.’’; and

6 (B) by striking the third sentence and in7 serting ‘‘No fees of any kind shall be collected

8 from any persons who have a right of access for

9 hunting or fishing privileges under a specific

10 provision of law or treaty or who are engaged

11 in the conduct of official Federal, State, or local

12 government business.’’;

13 (7) by striking paragraph (5) and inserting the

14 following:

15 ‘‘(5) The Secretary of the Interior and the Sec16 retary of Agriculture shall establish procedures pro17 viding for the issuance of a lifetime admission per18 mit to any citizen of, or person legally domiciled in,

19 the United States, if such citizen or person applies

20 for such permit and is permanently disabled. Such

21 procedures shall ensure that a lifetime admission

22 permit shall be issued only to persons who have been

23 medically determined to be permanently disabled. A

24 lifetime admission permit shall be nontransferable,

25 shall be issued without charge, and shall entitle the
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1 permittee and one accompanying individual to gen2 eral admission into any area designated pursuant to

3 this subsection, notwithstanding the method of trav4 el.’’;

5 (8) by striking paragraph (9) and by redesig6 nating paragraph (10) as paragraph (9)’’;

7 (9) by striking all but the last sentence of para8 graph (11) and redesignating paragraph (11) as

9 paragraph (10); and

10 (10) by redesignating paragraph (12) as para11 graph (11).

12 (b) RECREATION FEES.—Section 4 of the Land and

13 Water Conservation Fund Act of 1965 (16 U.S.C. 460l–

14 6a) is amended by striking subsection (b) and inserting

15 the following:

16 ‘‘(b) RECREATION USE FEES.—Each agency develop17 ing, administering, providing, or furnishing at Federal ex18 pense services for such activities as camping, including,

19 but not limited to, back country camping under permit,

20 guarded swimming sites, boat launch facilities, managed

21 parking lots, motorized recreation use and other recreation

22 uses, is authorized, in accordance with this section to pro23 vide for the collection of recreation use fees at the place

24 of use or any reasonably convenient location. The admin-
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1 istering Secretary may establish both daily and annual

2 recreation use fees.’’.

3 (c) CRITERIA, POSTING AND UNIFORMITY OF

4 FEES.—Section 4(d) of the Land and Water Conservation

5 Fund Act of 1965 (16 U.S.C. 460l–6a(d)) is amended in

6 the first sentence by striking ‘‘recreation fees charged by

7 non-Federal public agencies,’’ and inserting ‘‘fees charged

8 by other public and private entities,’’.

9 (d) PENALTY.—Section 4(e) of the Land and Water

10 Conservation Fund Act of 1965 (16 U.S.C. 460l–6a(e))

11 is amended by striking ‘‘of not more than $100.’’ and in12 serting ‘‘as provided by law.’’.

13 (e) TECHNICAL AMENDMENTS.—Section 4(h) of the

14 Land and Water Conservation Fund Act of 1965 (16

15 U.S.C. 460l–6a(h)) is amended—

16 (1) by striking ‘‘Bureau of Outdoor Recreation’’

17 and inserting ‘‘National Park Service’’;

18 (2) by striking ‘‘Natural Resources’’ and insert19 ing ‘‘Resources’’; and

20 (3) by striking ‘‘Bureau’’ and inserting ‘‘Na21 tional Park Service’’.

22 (f) USE OF FEES.—Section 4(i) of the Land and

23 Water Conservation Fund Act of 1965 (16 U.S.C. 460l–

24 6a(i)) is amended—
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1 (1) in the first sentence of paragraph (1)(B) by

2 striking ‘‘fee collection costs for that fiscal year’’

3 and inserting ‘‘fee collection costs for the imme4 diately preceding fiscal year’’ and by striking ‘‘sec5 tion in that fiscal year’’ and inserting ‘‘section in

6 such immediately preceding fiscal year’’;

7 (2) in the second sentence of subparagraph (B)

8 by striking ‘‘in that fiscal year’’; and

9 (3) by striking paragraph (4) and inserting the

10 following:

11 ‘‘(4) Amounts covered into the special account

12 for the National Park Service shall be allocated

13 among park system units in accordance with sub14 section (j) for obligation or expenditure by the Di15 rector of the National Park Service for park oper16 ations.’’.

17 (g) TIME OF REIMBURSEMENT.—Section 4(k) of the

18 Land and Water Conservation Fund Act of 1965 (16

19 U.S.C. 460l–6a(k)) is amended by striking the last sen20 tence.

21 (h) COMMERCIAL TOUR USE FEES.—Section 4(n) of

22 the Land and Water Conservation Fund Act of 1965 (16

23 U.S.C. 460l–6a(n)) is amended—

24 (1) by striking the first sentence of paragraph

25 (1) and inserting ‘‘In the case of each unit of the
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1 National Park System for which an admission fee is

2 charged under this section, the Secretary of the In3 terior shall establish, by October 1, 1996, a commer4 cial tour use fee in lieu of a per person admission

5 fee to be imposed on each vehicle entering the unit

6 for the purpose of providing commercial tour serv7 ices within the unit.’’; and

8 (2) by striking the period at the end of para9 graph (3) and inserting ‘‘, with written notification

10 of such adjustments provided to commercial tour op11 erators 12 months in advance of implementation.’’.

12 (i) CONFORMING AMENDMENTS.—

13 (1) Title I of the Department of the Interior

14 and Related Agencies Appropriations Act, 1994, is

15 amended by striking the second proviso under the

16 heading ‘‘ADMINISTRATIVE PROVISIONS’’ under the

17 heading ‘‘NATIONAL PARK SERVICE’’ (related to re18 covery of costs associated with special use permits).

19 (2) Section 3 of the Act entitled ‘‘An Act creat20 ing the Mount Rushmore National Memorial Com21 mission and defining its purposes and powers’’, ap22 proved February 25, 1929 (45 Stat. 1300, chapter

23 315), is amended by striking the last sentence.

24 (3) Section 5 of Public Law 87–657 (16 U.S.C.

25 459c–5), is amended by striking subsection (e).
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1 (4) Section 3 of Public Law 87–750 (16 U.S.C.

2 398e) is amended by striking subsection (b).

3 (5) Section 4(e) of Public Law 92–589 (16

4 U.S.C. 460bb–3) is amended by striking the first

5 sentence.

6 (6) Section 6 of Public Law 95–348 (16 U.S.C.

7 410dd) is amended by striking subsection (j).

8 (7) Section 207 of Public Law 96–199 (16

9 U.S.C. 410ff–6) is repealed.

10 (8) Section 106 of Public Law 96–287 (16

11 U.S.C. 410gg–5) is amended by striking the last

12 sentence.

13 (9) Section 204 of Public Law 96–287 (94

14 Stat. 601) is amended by striking the last sentence.

15 (10) Section 5 of Public Law 96–428 (94 Stat.

16 1842; 16 U.S.C. 461 note) is repealed.

17 (11) Public Law 100–55 (101 Stat. 371; U.S.C.

18 460l–6a note) is repealed.

19 SEC. 5452. COVERING OF INCREASED FEE REVENUES INTO

20 SPECIAL ACCOUNTS.

21 Of the funds deposited in special accounts in the

22 Treasury for the National Park Service, Bureau of Land

23 Management, and Forest Service as set forth in section

24 4(i) of the Land and Water Conservation Fund Act of

25 1965 (16 U.S.C. 460l–6a(i)), beginning in fiscal year
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1 1997, 80 percent of all receipts earned in the previous year

2 in excess of the following amounts for each covered agency

3 shall be made available to that agency without further ap4 propriation:

5 (1) National Park System:

6 (A) $82,000,000 for fiscal year 1997.

7 (B) $85,000,000 for fiscal year 1998.

8 (C) $88,000,000 for fiscal year 1999.

9 (D) $91,000,000 for fiscal year 2000.

10 (E) $94,000,000 for fiscal year 2001.

11 (F) $97,000,000 for fiscal year 2002.

12 (G) $100,000,000 for fiscal year 2003.

13 (2) Bureau of Land Management:

14 (A) $4,500,000 for fiscal year 1997.

15 (B) $5,000,000 for fiscal year 1998.

16 (C) $5,000,000 for fiscal year 1999.

17 (D) $5,000,000 for fiscal year 2000.

18 (E) $5,000,000 for fiscal year 2001.

19 (F) $5,000,000 for fiscal year 2002.

20 (G) $5,000,000 for fiscal year 2003.

21 (3) Forest Service:

22 (A) $20,000,000 for fiscal year 1997.

23 (B) $20,600,000 for fiscal year 1998.

24 (C) $21,200,000 for fiscal year 1999.

25 (D) $21,900,000 for fiscal year 2000.
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1 (E) $22,500,000 for fiscal year 2001.

2 (F) $23,600,000 for fiscal year 2002.

3 (G) $24,300,000 for fiscal year 2003.

4 SEC. 5453. ALLOCATION AND USE OF FEES.

5 (a) ALLOCATION.—Beginning in fiscal year 1997, re6 ceipts above the amounts stated in section 5454 in each

7 covered agency’s special account from the previous fiscal

8 year shall be allocated as follows:

9 (1) Seventy-five percent shall be allocated

10 among the units or areas of each affected agency in

11 the same proportion as fees collected pursuant to

12 section 4 of the Land and Water Conservation Fund

13 Act of 1965 (16 U.S.C. 460l–6a) from a specific

14 unit or area bear to the total amount of such fees

15 collected from all units or areas of the same covered

16 agency for each fiscal year.

17 (2) Twenty-five percent shall be allocated

18 among each covered agency’s units or areas on the

19 basis of need, as determined by the Secretary.

20 (b) USE.—Expenditures from the special accounts

21 shall be used solely for infrastructure related to visitor use

22 and annual operating expenses related to visitor services

23 at units or areas of the covered agencies.
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1 Subtitle F—National Defense Stockpile

2 SEC. 12601. DISPOSAL OF CERTAIN MATERIALS IN NA3 TIONAL DE- FENSE STOCKPILE FOR DEFI4 CIT REDUCTION.

5 (a) DISPOSALS REQUIRED.—(1) During fiscal year

6 1996, the President shall dispose of all cobalt contained

7 in the National Defense Stockpile that, as of the date of

8 the enactment of this Act, is authorized for disposal under

9 any law (other than this Act).

10 (2) In addition to the disposal of cobalt under para11 graph (1), the President shall dispose of additional quan12 tities of cobalt and quantities of other materials contained

13 in the National Defense Stockpile and specified in the

14 table in subsection (b) so as to result in receipts to the

15 United States in amounts equal to—

16 (A) $21,000,000 during the fiscal year ending

17 September 30, 1996;

18 (B) $338,000,000 during the five-fiscal year pe19 riod ending on September 30, 2000; and

20 (C) $649,000,000 during the seven-fiscal year

21 period ending on September 30, 2002.

22 (b) LIMITATION ON DISPOSAL QUANTITY.—The total

23 quantities of materials authorized for disposal by the

24 President under subsection (a)(2) may not exceed the

25 amounts set forth in the following table:
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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.

1 (c) DEPOSIT OF RECEIPTS.—Notwithstanding sec2 tion 9 of the Strategic and Critical Materials Stock Piling

3 Act (50 U.S.C. 98h), funds received as a result of the dis4 posal of materials under subsection (a)(2) shall be depos5 ited into the general fund of the Treasury for the purpose

6 of deficit reduction.

7 (d) RELATIONSHIP TO OTHER DISPOSAL AUTHOR8 ITY.—The disposal authority provided in subsection (a)(2)

9 is new disposal authority and is in addition to, and shall

10 not affect, any other disposal authority provided by law

11 regarding the materials specified in such subsection.

12 (e) TERMINATION OF DISPOSAL AUTHORITY.—The

13 President may not use the disposal authority provided in

14 subsection (a)(2) after the date on which the total amount

15 of receipts specified in subparagraph (C) of such sub16 section is achieved.

17 (f) DEFINITION.—The term ‘‘National Defense

18 Stockpile’’ means the National Defense Stockpile provided
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1 for in section 4 of the Strategic and Critical Materials

2 Stock Piling Act (50 U.S.C. 98c).

3 SEC. 9002. EXTENSION OF HIGHER VESSEL TONNAGE DU4 TIES.

5 (a) EXTENSION OF DUTIES.—Section 36 of the Act

6 of August 5, 1909 (36 Stat. 111; 46 U.S.C. App. 121),

7 is amended by striking ‘‘for fiscal years 1991, 1992, 1993,

8 1994, 1995, 1996, 1997, 1998,’’ each place it appears and

9 inserting ‘‘for fiscal years through fiscal year 2002,’’.

10 (b) CONFORMING AMENDMENT.—The Act entitled

11 ‘‘An Act concerning tonnage duties on vessels entering

12 otherwise than the sea’’, approved March 8, 1910 (36

13 Stat. 234; 46 U.S.C. App. 132), is amended by striking

14 ‘‘for fiscal years 1991, 1992, 1993, 1994, 1995, 1996,

15 1997, and 1998,’’ and inserting ‘‘fiscal years through fis16 cal year 2002,’’.

17 SEC. 9003. FEMA RADIOLOGICAL EMERGENCY PREPARED18 NESS FEES.

19 (a) IN GENERAL.—The Director of the Federal

20 Emergency Management Agency may assess and collect

21 fees applicable to persons subject to radiological emer22 gency preparedness regulations issued by the Director.

23 (b) REQUIREMENTS.—The assessment and collection

24 of fees by the Director under subsection (a) shall be fair

25 and equitable and shall reflect the full amount of costs
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1 to the Agency of providing radiological emergency plan2 ning, preparedness, response, and associated services.

3 Such fees shall be assessed by the Director in a manner

4 that reflects the use of resources of the Agency for classes

5 of regulated persons and the and the administrative costs

6 of collecting such fees.

7 (c) AMOUNT OF FEES.—The aggregate amount of

8 fees assessed under subsection (a) in a fiscal year shall

9 approximate but not be less than, 100 percent of the

10 amounts anticipated by the Director to be obligated for

11 the radiological emergency preparedness program of the

12 Agency for such fiscal year.

13 (d) DEPOSIT OF FEES IN TREASURY.—Fees received

14 pursuant to subsection (a) shall be deposited in the gen15 eral fund of the Treasury as offsetting receipts.

16 (e) EXPIRATION OF AUTHORITY.—The authority of

17 the Director to assess and collect fees under subsection

18 (a) shall expire on September 30, 2002.

19 SEC. 6011. PATENT AND TRADEMARK FEES.

20 Section 10101 of the Omnibus Budget Reconciliation

21 Act of 1990 (35 U.S.C. 41 note) is amended—

22 (1) in subsection (a) by striking ‘‘1998’’ and in23 serting ‘‘2002’’;

24 (2) in subsection (b)(2) by striking ‘‘1998’’ and

25 inserting ‘‘2002’’; and
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1 (3) in subsection (c)—

2 (A) by striking ‘‘through 1998’’ and insert3 ing ‘‘through 2002’’; and

4 (B) by adding at the end the following:

5 ‘‘(9) $119,000,000 in fiscal year 1999.

6 ‘‘(10) $119,000,000 in fiscal year 2000.

7 ‘‘(11) $119,000,000 in fiscal year 2001.

8 ‘‘(12) $119,000,000 in fiscal year 2002.’’.

9 CHAPTER 6—DISCLOSURE OF RETURN IN10 FORMATION FOR ADMINISTRATION OF

11 CERTAIN VETERANS PROGRAMS

12 SEC. 11161. DISCLOSURE OF RETURN INFORMATION FOR

13 ADMINISTRATION OF CERTAIN VETERANS

14 PROGRAMS.

15 (a) GENERAL RULE.—Subparagraph (D) of section

16 6103(l)(7) (relating to disclosure of return information to

17 Federal, State, and local agencies administering certain

18 programs) is amended by striking ‘‘Clause (viii) shall not

19 apply after September 30, 1998.’’ and inserting ‘‘Clause

20 (viii) shall not apply after September 30, 2002.’’

21 (b) EFFECTIVE DATE.—The amendment made by

22 section (a) shall take effect on the date of the enactment

23 of this Act.
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1 Subtitle F—Taxpayer Bill of Rights 2 Provisions

2 SEC. 11201. EXPANSION OF AUTHORITY TO ABATE INTER3 EST.

4 (a) GENERAL RULE.—Paragraph (1) of section

5 6404(e) (relating to abatement of interest in certain cases)

6 is amended—

7 (1) by inserting ‘‘unreasonable’’ before ‘‘error’’

8 each place it appears in subparagraphs (A) and (B),

9 and

10 (2) by striking ‘‘in performing a ministerial

11 act’’ each place it appears and inserting ‘‘in per12 forming a ministerial or managerial act’’.

13 (b) CLERICAL AMENDMENT.—The subsection head14 ing for subsection (e) of section 6404 is amended—

15 (1) by striking ‘‘ASSESSMENT’’ and inserting

16 ‘‘ABATEMENT’’, and

17 (2) by inserting ‘‘UNREASONABLE’’ before ‘‘ER18 RORS’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to interest accruing with respect

21 to deficiencies or payments for taxable years beginning

22 after the date of the enactment of this Act.
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1 SEC. 11202. EXTENSION OF INTEREST-FREE PERIOD FOR

2 PAYMENT OF TAX AFTER NOTICE AND DE3 MAND.

4 (a) GENERAL RULE.—Paragraph (3) of section

5 6601(e) (relating to payments made within 10 days after

6 notice and demand) is amended to read as follows:

7 SEC 6105. DENIAL OF UNEMPLOYMENT INSURANCE TO IN8 DIVIDUALS WHO VOLUNTARILY LEAVE MILI9 TARY SERVICE.

10 (a) GENERAL RULE.—Paragraph (1) of section

11 8521(a) of title 5, United State Code, is amended to read

12 as follows:

13 ‘‘(1) ‘Federal service’ means active service (not

14 including active duty in a reserve status unless for

15 a continuous period of 45 days or more) in the

16 armed forces or the commissioned corps of the Na17 tional Oceanic and Atmospheric Administration if

18 with respect to that service the individual—

19 ‘‘(A) was discharged or released under

20 honorable conditions,

21 ‘‘(B) did not resign or voluntarily leave the

22 service, and

23 ‘‘(C) was not discharged or released for

24 cause as defined by the Secretary of Defense;’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply in the case of a discharge or

3 release after the date of the enactment of this Act.

4 TITLE IX—LIMITATIONS ON COR5 PORATE WELFARE AND

6 OTHER REVENUE PROVI7 SIONS

8 SEC. ll001. AMENDMENT OF 1986 CODE.

9 Except as otherwise expressly provided, whenever in

10 this title an amendment or repeal is expressed in terms

11 of an amendment to, or repeal of, a section or other provi12 sion, the reference shall be considered to be made to such

13 section or other provision of the Internal Revenue Code

14 of 1986.

15 SEC. ll002. TABLE OF CONTENTS.

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

TITLE ll—LIMITATIONS ON CORPORATE WELFARE AND OTHER

REVENUE PROVISIONS

Sec. ll001. Amendment of 1986 Code.

Sec. ll002. Table of contents.

Subtitle A—Expatriation

Sec. ll101. Revision of tax rules on expatriation.

Sec. ll102. Information on individuals expatriating.

Subtitle B—Corporate Reforms

Sec. ll201. Tax treatment of certain extraordinary dividends.

Sec. ll202. Registration of confidential corporate tax shelters.

Sec. ll203. Denial of deduction for interest on loans with respect to company-owned insurance.

Sec. ll204. Termination of suspense accounts for family corporations required to use accrual method of accounting.

Sec. ll205. Modifications of Puerto Rico and possessions tax credit.
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Sec. ll206. Personal property used predominantly in the United States

treated as not property of a like kind with respect to property

used predominantly outside the United States.

Sec. ll207. Repeal of financial institution transition rule to interest allocation rules.

Sec. ll208. Conversion of large corporations into S corporations treated as

complete liquidation.

Sec. ll209. Modification of taxable years to which net operating losses may

be carried.

Sec. ll210. Constructive sales treatment for appreciated financial positions.

Sec. ll211. Modification of rules for allocating interest expense to tax-exempt interest.

Sec. ll212. Reduction of 70 percent dividends received deduction to 50 percent.

Sec. ll213. Modification of holding period applicable to dividends received

deduction.

Sec. ll214. Certain preferred stock treated as boot.

Sec. ll215. Denial of interest deductions on certain debt instruments.

Sec. ll216. Deferral of deduction for interest on convertible debt until payment.

Subtitle C—Foreign Provisions

PART I—FOREIGN TRUSTS

Sec. ll301. Improved information reporting on foreign trusts.

Sec. ll302. Modifications of rules relating to foreign trusts having one or

more United States beneficiaries.

Sec. ll303. Foreign persons not to be treated as owners under grantor trust

rules.

Sec. ll304. Information reporting regarding foreign gifts.

Sec. ll305. Modification of rules relating to foreign trusts which are not

grantor trusts.

Sec. ll306. Residence of estates and trusts, etc.

PART II—OTHER FOREIGN PROVISIONS

Sec. ll311. Definition of foreign personal holding company income.

Sec. ll312. Treatment of foreign oil and gas extraction income.

Sec. ll313. Limitation on exclusion of earned income of citizens or residents

of the United States living abroad.

Subtitle D—Accounting Provisions

Sec. ll401. Repeal of bad debt reserve method for thrift savings associations.

Sec. ll402. Depreciation under income forecast method.

Sec. ll403. Repeal of lower-of-cost-or-market method of accounting for inventories.

Subtitle E—Administrative Provisions

Sec. ll501. Repeal of diesel fuel tax rebate to purchasers of diesel-powered

automobiles and light trucks.

Sec. ll502. Increased information reporting penalties.

Subtitle F—Casualty and Involuntary Conversion Provisions
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Sec. ll601. Basis adjustment to property held by corporation where stock in

corporation is replacement property under involuntary conversion rules.

Subtitle G—Excise Tax on Amounts of Private Excess Benefits

Sec. ll701. Excise taxes for failure by certain charitable organizations to

meet certain qualification requirements.

Sec. ll702. Reporting of certain excise taxes and other information.

Sec. ll703. Increase in penalties on exempt organizations for failure to file

complete and timely annual returns.

Subtitle H—Extension of Certain Taxes

Sec. ll801. Extension of hazardous substance Superfund taxes.

Sec. ll802. Extension of oil spill liability tax.

Sec. ll803. Extension of Federal unemployment tax.

Subtitle I—Provisions Relating To Individuals

Sec. ll851. No rollover or exclusion of gain on sale of principal residence

which is attributable to depreciation deductions.

Sec. ll852. Extension of withholding to certain gambling winnings.

Sec. ll853. Repeal of special rule for rental use of vacation homes, etc., for

less than 15 days.

Subtitle J—Reform of Earned Income Credit

Sec. ll901. Earned income credit denied to individuals not authorized to be

employed in the United States.

Sec. ll902. Rules relating to denial of earned income credit on basis of disqualified income.

1 Subtitle A—Expatriation

2 SEC. ll101. REVISION OF TAX RULES ON EXPATRIATION.

3 (a) IN GENERAL.—Subpart A of part II of sub4 chapter N of chapter 1 is amended by inserting after sec5 tion 877 the following new section:

6 ‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.

7 ‘‘(a) GENERAL RULES.—For purposes of this sub8 title—

9 ‘‘(1) MARK TO MARKET.—Except as provided in

10 subsection (f), all property of a covered expatriate to
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1 which this section applies shall be treated as sold on

2 the expatriation date for its fair market value.

3 ‘‘(2) RECOGNITION OF GAIN OR LOSS.—In the

4 case of any sale under paragraph (1)—

5 ‘‘(A) notwithstanding any other provision

6 of this title, any gain arising from such sale

7 shall be taken into account for the taxable year

8 of the sale unless such gain is excluded from

9 gross income under part III of subchapter B,

10 and

11 ‘‘(B) any loss arising from such sale shall

12 be taken into account for the taxable year of

13 the sale to the extent otherwise provided by this

14 title, except that section 1091 shall not apply

15 (and section 1092 shall apply) to any such loss.

16 ‘‘(3) EXCLUSION FOR CERTAIN GAIN.—The

17 amount which would (but for this paragraph) be in18 cludible in the gross income of any individual by rea19 son of this section shall be reduced (but not below

20 zero) by $600,000. For purposes of this paragraph,

21 allocable expatriation gain taken into account under

22 subsection (f)(2) shall be treated in the same man23 ner as an amount required to be includible in gross

24 income.
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1 ‘‘(4) ELECTION TO CONTINUE TO BE TAXED AS

2 UNITED STATES CITIZEN.—

3 ‘‘(A) IN GENERAL.—If an expatriate elects

4 the application of this paragraph—

5 ‘‘(i) this section (other than this para6 graph) shall not apply to the expatriate,

7 but

8 ‘‘(ii) the expatriate shall be subject to

9 tax under this title, with respect to prop10 erty to which this section would apply but

11 for such election, in the same manner as if

12 the individual were a United States citizen.

13 ‘‘(B) LIMITATION ON AMOUNT OF ESTATE,

14 GIFT, AND GENERATION-SKIPPING TRANSFER

15 TAXES.—The aggregate amount of taxes im16 posed under subtitle B with respect to any

17 transfer of property by reason of an election

18 under subparagraph (A) shall not exceed the

19 amount of income tax which would be due if the

20 property were sold for its fair market value im21 mediately before the time of the transfer or

22 death (taking into account the rules of para23 graph (2)).
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1 ‘‘(C) REQUIREMENTS.—Subparagraph (A)

2 shall not apply to an individual unless the indi3 vidual—

4 ‘‘(i) provides security for payment of

5 tax in such form and manner, and in such

6 amount, as the Secretary may require,

7 ‘‘(ii) consents to the waiver of any

8 right of the individual under any treaty of

9 the United States which would preclude as10 sessment or collection of any tax which

11 may be imposed by reason of this para12 graph, and

13 ‘‘(iii) complies with such other re14 quirements as the Secretary may prescribe.

15 ‘‘(D) ELECTION.—An election under sub16 paragraph (A) shall apply to all property to

17 which this section would apply but for the elec18 tion and, once made, shall be irrevocable. Such

19 election shall also apply to property the basis of

20 which is determined in whole or in part by ref21 erence to the property with respect to which the

22 election was made.

23 ‘‘(b) ELECTION TO DEFER TAX.—
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1 ‘‘(1) IN GENERAL.—If the taxpayer elects the

2 application of this subsection with respect to any

3 property—

4 ‘‘(A) no amount shall be required to be in5 cluded in gross income under subsection (a)(1)

6 with respect to the gain from such property for

7 the taxable year of the sale, but

8 ‘‘(B) the taxpayer’s tax for the taxable

9 year in which such property is disposed of shall

10 be increased by the deferred tax amount with

11 respect to the property.

12 Except to the extent provided in regulations, sub13 paragraph (B) shall apply to a disposition whether

14 or not gain or loss is recognized in whole or in part

15 on the disposition.

16 ‘‘(2) DEFERRED TAX AMOUNT.—

17 ‘‘(A) IN GENERAL.—For purposes of para18 graph (1), the term ‘deferred tax amount’

19 means, with respect to any property, an amount

20 equal to the sum of—

21 ‘‘(i) the difference between the

22 amount of tax paid for the taxable year de23 scribed in paragraph (1)(A) and the

24 amount which would have been paid for

25 such taxable year if the election under
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1 paragraph (1) had not applied to such

2 property, plus

3 ‘‘(ii) an amount of interest on the

4 amount described in clause (i) determined

5 for the period—

6 ‘‘(I) beginning on the 91st day

7 after the expatriation date, and

8 ‘‘(II) ending on the due date for

9 the taxable year described in para10 graph (1)(B),

11 by using the rates and method applicable

12 under section 6621 for underpayments of

13 tax for such period.

14 For purposes of clause (ii), the due date is the

15 date prescribed by law (determined without re16 gard to extension) for filing the return of the

17 tax imposed by this chapter for the taxable

18 year.

19 ‘‘(B) ALLOCATION OF LOSSES.—For pur20 poses of subparagraph (A), any losses described

21 in subsection (a)(2)(B) shall be allocated rat22 ably among the gains described in subsection

23 (a)(2)(A).

24 ‘‘(3) SECURITY.—
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1 ‘‘(A) IN GENERAL.—No election may be

2 made under paragraph (1) with respect to any

3 property unless adequate security is provided

4 with respect to such property.

5 ‘‘(B) ADEQUATE SECURITY.—For purposes

6 of subparagraph (A), security with respect to

7 any property shall be treated as adequate secu8 rity if—

9 ‘‘(i) it is a bond in an amount equal

10 to the deferred tax amount under para11 graph (2)(A) for the property, or

12 ‘‘(ii) the taxpayer otherwise estab13 lishes to the satisfaction of the Secretary

14 that the security is adequate.

15 ‘‘(4) WAIVER OF CERTAIN RIGHTS.—No elec16 tion may be made under paragraph (1) unless the

17 taxpayer consents to the waiver of any right under

18 any treaty of the United States which would pre19 clude assessment or collection of any tax imposed by

20 reason of this section.

21 ‘‘(5) DISPOSITIONS.—For purposes of this sub22 section, a taxpayer making an election under this

23 subsection with respect to any property shall be

24 treated as having disposed of such property—
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1 ‘‘(A) immediately before death if such

2 property is held at such time, and

3 ‘‘(B) at any time the security provided

4 with respect to the property fails to meet the

5 requirements of paragraph (3) and the taxpayer

6 does not correct such failure within the time

7 specified by the Secretary.

8 ‘‘(6) ELECTIONS.—An election under paragraph

9 (1) shall only apply to property described in the elec10 tion and, once made, is irrevocable. An election may

11 be under paragraph (1) with respect to an interest

12 in a trust with respect to which gain is required to

13 be recognized under subsection (f)(1).

14 ‘‘(c) COVERED EXPATRIATE.—For purposes of this

15 section—

16 ‘‘(1) IN GENERAL.—The term ‘covered expatri17 ate’ means an expatriate—

18 ‘‘(A) whose average annual net income tax

19 (as defined in section 38(c)(1)) for the period

20 of 5 taxable years ending before the expatria21 tion date is greater than $100,000, or

22 ‘‘(B) whose net worth as of such date is

23 $500,000 or more.

24 If the expatriation date is after 1996, such

25 $100,000 and $500,000 amounts shall be increased
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1 by an amount equal to such dollar amount multi2 plied by the cost-of-living adjustment determined

3 under section 1(f)(3) for such calendar year by sub4 stituting ‘1995’ for ‘1992’ in subparagraph (B)

5 thereof. Any increase under the preceding sentence

6 shall be rounded to the nearest multiple of $1,000.

7 ‘‘(2) EXCEPTIONS.—An individual shall not be

8 treated as a covered expatriate if—

9 ‘‘(A) the individual—

10 ‘‘(i) became at birth a citizen of the

11 United States and a citizen of another

12 country and, as of the expatriation date,

13 continues to be a citizen of, and is taxed

14 as a resident of, such other country, and

15 ‘‘(ii) has been a resident of the United

16 States (as defined in section

17 7701(b)(1)(A)(ii)) for not more than 8 tax18 able years during the 15-taxable year pe19 riod ending with the taxable year during

20 which the expatriation date occurs, or

21 ‘‘(B)(i) the individual’s relinquishment of

22 United States citizenship occurs before such individual attains age 181 23 ⁄2, and

24 ‘‘(ii) the individual has been a resident of

25 the United States (as so defined) for not more
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1 than 5 taxable years before the date of relin2 quishment.

3 ‘‘(d) PROPERTY TO WHICH SECTION APPLIES.—For

4 purposes of this section—

5 ‘‘(1) IN GENERAL.—Except as otherwise pro6 vided by the Secretary, this section shall apply to—

7 ‘‘(A) any interest in property held by a

8 covered expatriate on the expatriation date the

9 gain from which would be includible in the

10 gross income of the expatriate if such interest

11 had been sold for its fair market value on such

12 date in a transaction in which gain is recog13 nized in whole or in part, and

14 ‘‘(B) any other interest in a trust to which

15 subsection (f) applies.

16 ‘‘(2) EXCEPTIONS.—This section shall not

17 apply to the following property:

18 ‘‘(A) UNITED STATES REAL PROPERTY IN19 TERESTS.—Any United States real property in20 terest (as defined in section 897(c)(1)), other

21 than stock of a United States real property

22 holding corporation which does not, on the ex23 patriation date, meet the requirements of sec24 tion 897(c)(2).
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1 ‘‘(B) INTEREST IN CERTAIN RETIREMENT

2 PLANS.—

3 ‘‘(i) IN GENERAL.—Any interest in a

4 qualified retirement plan (as defined in

5 section 4974(c)), other than any interest

6 attributable to contributions which are in

7 excess of any limitation or which violate

8 any condition for tax-favored treatment.

9 ‘‘(ii) FOREIGN PENSION PLANS.—

10 ‘‘(I) IN GENERAL.—Under regu11 lations prescribed by the Secretary,

12 interests in foreign pension plans or

13 similar retirement arrangements or

14 programs.

15 ‘‘(II) LIMITATION.—The value of

16 property which is treated as not sold

17 by reason of this subparagraph shall

18 not exceed $500,000.

19 ‘‘(e) DEFINITIONS.—For purposes of this section—

20 ‘‘(1) EXPATRIATE.—The term ‘expatriate’

21 means—

22 ‘‘(A) any United States citizen who relin23 quishes his citizenship, or

24 ‘‘(B) any long-term resident of the United

25 States who—
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1 ‘‘(i) ceases to be a lawful permanent

2 resident of the United States (within the

3 meaning of section 7701(b)(6)), or

4 ‘‘(ii) commences to be treated as a

5 resident of a foreign country under the

6 provisions of a tax treaty between the

7 United States and the foreign country and

8 who does not waive the benefits of such

9 treaty applicable to residents of the foreign

10 country.

11 ‘‘(2) EXPATRIATION DATE.—The term ‘expa12 triation date’ means—

13 ‘‘(A) the date an individual relinquishes

14 United States citizenship, or

15 ‘‘(B) in the case of a long-term resident of

16 the United States, the date of the event de17 scribed in clause (i) or (ii) of paragraph (1)(B).

18 ‘‘(3) RELINQUISHMENT OF CITIZENSHIP.—A

19 citizen shall be treated as relinquishing his United

20 States citizenship on the earliest of—

21 ‘‘(A) the date the individual renounces his

22 United States nationality before a diplomatic or

23 consular officer of the United States pursuant

24 to paragraph (5) of section 349(a) of the Immi-
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1 gration and Nationality Act (8 U.S.C.

2 1481(a)(5)),

3 ‘‘(B) the date the individual furnishes to

4 the United States Department of State a signed

5 statement of voluntary relinquishment of Unit6 ed States nationality confirming the perform7 ance of an act of expatriation specified in para8 graph (1), (2), (3), or (4) of section 349(a) of

9 the Immigration and Nationality Act (8 U.S.C.

10 1481(a)(1)–(4)),

11 ‘‘(C) the date the United States Depart12 ment of State issues to the individual a certifi13 cate of loss of nationality, or

14 ‘‘(D) the date a court of the United States

15 cancels a naturalized citizen’s certificate of nat16 uralization.

17 Subparagraph (A) or (B) shall not apply to any indi18 vidual unless the renunciation or voluntary relin19 quishment is subsequently approved by the issuance

20 to the individual of a certificate of loss of nationality

21 by the United States Department of State.

22 ‘‘(4) LONG-TERM RESIDENT.—

23 ‘‘(A) IN GENERAL.—The term ‘long-term

24 resident’ means any individual (other than a

25 citizen of the United States) who is a lawful
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1 permanent resident of the United States in at

2 least 8 taxable years during the period of 15

3 taxable years ending with the taxable year dur4 ing which the expatriation date occurs. For pur5 poses of the preceding sentence, an individual

6 shall not be treated as a lawful permanent resi7 dent for any taxable year if such individual is

8 treated as a resident of a foreign country for

9 the taxable year under the provisions of a tax

10 treaty between the United States and the for11 eign country and does not waive the benefits of

12 such treaty applicable to residents of the for13 eign country.

14 ‘‘(B) SPECIAL RULE.—For purposes of

15 subparagraph (A), there shall not be taken into

16 account—

17 ‘‘(i) any taxable year during which

18 any prior sale is treated under subsection

19 (a)(1) as occurring, or

20 ‘‘(ii) any taxable year prior to the tax21 able year referred to in clause (i).

22 ‘‘(f) SPECIAL RULES APPLICABLE TO BENE23 FICIARIES’ INTERESTS IN TRUST.—
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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), if an individual is determined under para3 graph (3) to hold an interest in a trust—

4 ‘‘(A) the individual shall not be treated as

5 having sold such interest,

6 ‘‘(B) such interest shall be treated as a

7 separate share in the trust, and

8 ‘‘(C)(i) such separate share shall be treat9 ed as a separate trust consisting of the assets

10 allocable to such share,

11 ‘‘(ii) the separate trust shall be treated as

12 having sold its assets immediately before the ex13 patriation date for their fair market value and

14 as having distributed all of its assets to the in15 dividual as of such time, and

16 ‘‘(iii) the individual shall be treated as hav17 ing recontributed the assets to the separate

18 trust.

19 Subsection (a)(2) shall apply to any income, gain, or

20 loss of the individual arising from a distribution de21 scribed in subparagraph (C)(ii).

22 ‘‘(2) SPECIAL RULES FOR INTERESTS IN QUALI23 FIED TRUSTS.—
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1 ‘‘(A) IN GENERAL.—If the trust interest

2 described in paragraph (1) is an interest in a

3 qualified trust—

4 ‘‘(i) paragraph (1) and subsection (a)

5 shall not apply, and

6 ‘‘(ii) in addition to any other tax im7 posed by this title, there is hereby imposed

8 on each distribution with respect to such

9 interest a tax in the amount determined

10 under subparagraph (B).

11 ‘‘(B) AMOUNT OF TAX.—The amount of

12 tax under subparagraph (A)(ii) shall be equal to

13 the lesser of—

14 ‘‘(i) the highest rate of tax imposed by

15 section 1(e) for the taxable year in which

16 the expatriation date occurs, multiplied by

17 the amount of the distribution, or

18 ‘‘(ii) the balance in the deferred tax

19 account immediately before the distribution

20 determined without regard to any increases

21 under subparagraph (C)(ii) after the 30th

22 day preceding the distribution.

23 ‘‘(C) DEFERRED TAX ACCOUNT.—For pur24 poses of subparagraph (B)(ii)—
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1 ‘‘(i) OPENING BALANCE.—The open2 ing balance in a deferred tax account with

3 respect to any trust interest is an amount

4 equal to the tax which would have been im5 posed on the allocable expatriation gain

6 with respect to the trust interest if such

7 gain had been included in gross income

8 under subsection (a).

9 ‘‘(ii) INCREASE FOR INTEREST.—The

10 balance in the deferred tax account shall

11 be increased by the amount of interest de12 termined (on the balance in the account at

13 the time the interest accrues), for periods

14 after the 90th day after the expatriation

15 date, by using the rates and method appli16 cable under section 6621 for underpay17 ments of tax for such periods.

18 ‘‘(iii) DECREASE FOR TAXES PRE19 VIOUSLY PAID.—The balance in the tax de20 ferred account shall be reduced—

21 ‘‘(I) by the amount of taxes im22 posed by subparagraph (A) on any

23 distribution to the person holding the

24 trust interest, and
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1 ‘‘(II) in the case of a person

2 holding a nonvested interest, to the

3 extent provided in regulations, by the

4 amount of taxes imposed by subpara5 graph (A) on distributions from the

6 trust with respect to nonvested inter7 ests not held by such person.

8 ‘‘(D) ALLOCABLE EXPATRIATION GAIN.—

9 For purposes of this paragraph, the allocable

10 expatriation gain with respect to any bene11 ficiary’s interest in a trust is the amount of

12 gain which would be allocable to such bene13 ficiary’s vested and nonvested interests in the

14 trust if the beneficiary held directly all assets

15 allocable to such interests.

16 ‘‘(E) TAX DEDUCTED AND WITHHELD.—

17 ‘‘(i) IN GENERAL.—The tax imposed

18 by subparagraph (A)(ii) shall be deducted

19 and withheld by the trustees from the dis20 tribution to which it relates.

21 ‘‘(ii) EXCEPTION WHERE FAILURE TO

22 WAIVE TREATY RIGHTS.—If an amount

23 may not be deducted and withheld under

24 clause (i) by reason of the distributee fail-
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1 ing to waive any treaty right with respect

2 to such distribution—

3 ‘‘(I) the tax imposed by subpara4 graph (A)(ii) shall be imposed on the

5 trust and each trustee shall be person6 ally liable for the amount of such tax,

7 and

8 ‘‘(II) any other beneficiary of the

9 trust shall be entitled to recover from

10 the distributee the amount of such tax

11 imposed on the other beneficiary.

12 ‘‘(F) DISPOSITION.—If a trust ceases to be

13 a qualified trust at any time, a covered expatri14 ate disposes of an interest in a qualified trust,

15 or a covered expatriate holding an interest in a

16 qualified trust dies, then, in lieu of the tax im17 posed by subparagraph (A)(ii), there is hereby

18 imposed a tax equal to the lesser of—

19 ‘‘(i) the tax determined under para20 graph (1) as if the expatriation date were

21 the date of such cessation, disposition, or

22 death, whichever is applicable, or

23 ‘‘(ii) the balance in the tax deferred

24 account immediately before such date.
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1 Such tax shall be imposed on the trust and

2 each trustee shall be personally liable for the

3 amount of such tax and any other beneficiary

4 of the trust shall be entitled to recover from the

5 covered expatriate or the estate the amount of

6 such tax imposed on the other beneficiary.

7 ‘‘(G) DEFINITIONS AND SPECIAL RULE.—

8 For purposes of this paragraph—

9 ‘‘(i) QUALIFIED TRUST.—The term

10 ‘qualified trust’ means a trust—

11 ‘‘(I) which is organized under,

12 and governed by, the laws of the Unit13 ed States or a State, and

14 ‘‘(II) with respect to which the

15 trust instrument requires that at least

16 1 trustee of the trust be an individual

17 citizen of the United States or a do18 mestic corporation.

19 ‘‘(ii) VESTED INTEREST.—The term

20 ‘vested interest’ means any interest which,

21 as of the expatriation date, is vested in the

22 beneficiary.

23 ‘‘(iii) NONVESTED INTEREST.—The

24 term ‘nonvested interest’ means, with re25 spect to any beneficiary, any interest in a
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1 trust which is not a vested interest. Such

2 interest shall be determined by assuming

3 the maximum exercise of discretion in

4 favor of the beneficiary and the occurrence

5 of all contingencies in favor of the bene6 ficiary.

7 ‘‘(iv) ADJUSTMENTS.—The Secretary

8 may provide for such adjustments to the

9 bases of assets in a trust or a deferred tax

10 account, and the timing of such adjust11 ments, in order to ensure that gain is

12 taxed only once.

13 ‘‘(3) DETERMINATION OF BENEFICIARIES’ IN14 TEREST IN TRUST.—

15 ‘‘(A) DETERMINATIONS UNDER PARA16 GRAPH (1).—For purposes of paragraph (1), a

17 beneficiary’s interest in a trust shall be based

18 upon all relevant facts and circumstances, in19 cluding the terms of the trust instrument and

20 any letter of wishes or similar document, histor21 ical patterns of trust distributions, and the ex22 istence of and functions performed by a trust

23 protector or any similar advisor.

24 ‘‘(B) OTHER DETERMINATIONS.—For pur25 poses of this section—
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1 ‘‘(i) CONSTRUCTIVE OWNERSHIP.—If

2 a beneficiary of a trust is a corporation,

3 partnership, trust, or estate, the sharehold4 ers, partners, or beneficiaries shall be

5 deemed to be the trust beneficiaries for

6 purposes of this section.

7 ‘‘(ii) TAXPAYER RETURN POSITION.—

8 A taxpayer shall clearly indicate on its in9 come tax return—

10 ‘‘(I) the methodology used to de11 termine that taxpayer’s trust interest

12 under this section, and

13 ‘‘(II) if the taxpayer knows (or

14 has reason to know) that any other

15 beneficiary of such trust is using a

16 different methodology to determine

17 such beneficiary’s trust interest under

18 this section.

19 ‘‘(g) TERMINATION OF DEFERRALS, ETC.—On the

20 date any property held by an individual is treated as sold

21 under subsection (a), notwithstanding any other provision

22 of this title—

23 ‘‘(1) any period during which recognition of in24 come or gain is deferred shall terminate, and
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1 ‘‘(2) any extension of time for payment of tax

2 shall cease to apply and the unpaid portion of such

3 tax shall be due and payable at the time and in the

4 manner prescribed by the Secretary.

5 ‘‘(h) IMPOSITION OF TENTATIVE TAX.—

6 ‘‘(1) IN GENERAL.—If an individual is required

7 to include any amount in gross income under sub8 section (a) for any taxable year, there is hereby im9 posed, immediately before the expatriation date, a

10 tax in an amount equal to the amount of tax which

11 would be imposed if the taxable year were a short

12 taxable year ending on the expatriation date.

13 ‘‘(2) DUE DATE.—The due date for any tax im14 posed by paragraph (1) shall be the 90th day after

15 the expatriation date.

16 ‘‘(3) TREATMENT OF TAX.—Any tax paid under

17 paragraph (1) shall be treated as a payment of the

18 tax imposed by this chapter for the taxable year to

19 which subsection (a) applies.

20 ‘‘(4) DEFERRAL OF TAX.—The provisions of

21 subsection (b) shall apply to the tax imposed by this

22 subsection to the extent attributable to gain includ23 ible in gross income by reason of this section.
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1 ‘‘(i) COORDINATION WITH ESTATE AND GIFT

2 TAXES.—If subsection (a) applies to property held by an

3 individual for any taxable year and—

4 ‘‘(1) such property is includible in the gross es5 tate of such individual solely by reason of section

6 2107, or

7 ‘‘(2) section 2501 applies to a transfer of such

8 property by such individual solely by reason of sec9 tion 2501(a)(3),

10 then there shall be allowed as a credit against the addi11 tional tax imposed by section 2101 or 2501, whichever is

12 applicable, solely by reason of section 2107 or 2501(a)(3)

13 an amount equal to the increase in the tax imposed by

14 this chapter for such taxable year by reason of this sec15 tion.

16 ‘‘(j) REGULATIONS.—The Secretary shall prescribe

17 such regulations as may be necessary or appropriate to

18 carry out the purposes of this section, including regula19 tions—

20 ‘‘(1) to prevent double taxation by ensuring

21 that—

22 ‘‘(A) appropriate adjustments are made to

23 basis to reflect gain recognized by reason of

24 subsection (a) and the exclusion provided by

25 subsection (a)(3), and
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1 ‘‘(B) any gain by reason of a deemed sale

2 under subsection (a) of an interest in a corpora3 tion, partnership, trust, or estate is reduced to

4 reflect that portion of such gain which is attrib5 utable to an interest in a trust which a share6 holder, partner, or beneficiary is treated as

7 holding directly under subsection (f)(3)(B)(i),

8 and

9 ‘‘(2) which provide for the proper allocation of

10 the exclusion under subsection (a)(3) to property to

11 which this section applies.

12 ‘‘(k) CROSS REFERENCE.—

‘‘For income tax treatment of individuals who

terminate United States citizenship, see section

7701(a)(47).’’.

13 (b) INCLUSION IN INCOME OF GIFTS AND INHERIT14 ANCES FROM COVERED EXPATRIATES.—Section 102 (re15 lating to gifts, etc. not included in gross income) is amend16 ed by adding at the end the following new subsection:

17 ‘‘(d) GIFTS AND INHERITANCES FROM COVERED EX18 PATRIATES.—Subsection (a) shall not exclude from gross

19 income the value of any property acquired by gift, bequest,

20 devise, or inheritance from a covered expatriate after the

21 expatriation date. For purposes of this subsection, any

22 term used in this subsection which is also used in section

23 877A shall have the same meaning as when used in section

24 877A.’’.
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1 (c) DEFINITION OF TERMINATION OF UNITED

2 STATES CITIZENSHIP.—Section 7701(a) is amended by

3 adding at the end the following new paragraph:

4 ‘‘(47) TERMINATION OF UNITED STATES CITI5 ZENSHIP.—An individual shall not cease to be treat6 ed as a United States citizen before the date on

7 which the individual’s citizenship is treated as relin8 quished under section 877A(e)(3).’’.

9 (d) CONFORMING AMENDMENTS.—

10 (1) Section 877 is amended by adding at the

11 end the following new subsection:

12 ‘‘(f) APPLICATION.—This section shall not apply to

13 any individual who relinquishes (within the meaning of

14 section 877A(e)(3)) United States citizenship on or after

15 February 6, 1995.’’.

16 (2) Section 2107(c) is amended by adding at

17 the end the following new paragraph:

18 ‘‘(3) CROSS REFERENCE.—For credit against

19 the tax imposed by subsection (a) for expatriation

20 tax, see section 877A(i).’’.

21 (3) Section 2501(a)(3) is amended by adding at

22 the end the following new flush sentence:

23 ‘‘For credit against the tax imposed under this sec24 tion by reason of this paragraph, see section

25 877A(i).’’.
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1 (4) Paragraph (10) of section 7701(b) is

2 amended by adding at the end the following new

3 sentence: ‘‘This paragraph shall not apply to any

4 long-term resident of the United States who is an

5 expatriate (as defined in section 877A(e)(1)).’’.

6 (e) CLERICAL AMENDMENT.—The table of sections

7 for subpart A of part II of subchapter N of chapter 1

8 is amended by inserting after the item relating to section

9 877 the following new item:

‘‘Sec. 877A. Tax responsibilities of expatriation.’’.

10 (f) EFFECTIVE DATE.—

11 (1) IN GENERAL.—Except as provided in this

12 subsection, the amendments made by this section

13 shall apply to expatriates (within the meaning of

14 section 877A(e) of the Internal Revenue Code of

15 1986, as added by this section) whose expatriation

16 date (as so defined) occurs on or after February 6,

17 1995.

18 (2) GIFTS AND BEQUESTS.—Section 102(d) of

19 the Internal Revenue Code of 1986 (as added by

20 subsection (b)) shall apply to amounts received from

21 expatriates (as so defined) whose expatriation date

22 (as so defined) occurs on and after February 6,

23 1995.

24 (3) SPECIAL RULES RELATING TO CERTAIN

25 ACTS OCCURRING BEFORE FEBRUARY 6, 1995.—In
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1 the case of an individual who took an act of expa2 triation specified in paragraph (1), (2), (3), or (4)

3 of section 349(a) of the Immigration and Nationality

4 Act (8 U.S.C. 1481(a) (1)–(4)) before February 6,

5 1995, but whose expatriation date (as so defined)

6 occurs after February 6, 1995—

7 (A) the amendment made by subsection (c)

8 shall not apply,

9 (B) the amendment made by subsection

10 (d)(1) shall not apply for any period prior to

11 the expatriation date, and

12 (C) the other amendments made by this

13 section shall apply as of the expatriation date.

14 (4) DUE DATE FOR TENTATIVE TAX.—The due

15 date under section 877A(h)(2) of such Code shall in

16 no event occur before the 90th day after the date of

17 the enactment of this Act.

18 SEC. ll102. INFORMATION ON INDIVIDUALS EXPATRIAT19 ING.

20 (a) IN GENERAL.—Subpart A of part III of sub21 chapter A of chapter 61 is amended by inserting after sec22 tion 6039E the following new section:

23 ‘‘SEC. 6039F. INFORMATION ON INDIVIDUALS EXPATRIAT24 ING.

25 ‘‘(a) REQUIREMENT.—
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1 ‘‘(1) IN GENERAL.—Notwithstanding any other

2 provision of law, any expatriate (within the meaning

3 of section 877A(e)(1)) shall provide a statement

4 which includes the information described in sub5 section (b).

6 ‘‘(2) TIMING.—

7 ‘‘(A) CITIZENS.—In the case of an expatri8 ate described in section 877(e)(1)(A), such

9 statement shall be—

10 ‘‘(i) provided not later than the expa11 triation date (within the meaning of sec12 tion 877A(e)(2)), and

13 ‘‘(ii) provided to the person or court

14 referred to in section 877A(e)(3).

15 ‘‘(B) NONCITIZENS.—In the case of an ex16 patriate described in section 877A(e)(1)(B),

17 such statement shall be provided to the Sec18 retary with the return of tax imposed by chap19 ter 1 for the taxable year during which the

20 event described in such section occurs.

21 ‘‘(b) INFORMATION TO BE PROVIDED.—Information

22 required under subsection (a) shall include—

23 ‘‘(1) the taxpayer’s TIN,

24 ‘‘(2) the mailing address of such individual’s

25 principal foreign residence,
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1 ‘‘(3) the foreign country in which such individ2 ual is residing,

3 ‘‘(4) the foreign country of which such individ4 ual is a citizen,

5 ‘‘(5) in the case of an individual having a net

6 worth of at least the dollar amount applicable under

7 section 877A(c)(1)(B), information detailing the as8 sets and liabilities of such individual, and

9 ‘‘(6) such other information as the Secretary

10 may prescribe.

11 ‘‘(c) PENALTY.—Any individual failing to provide a

12 statement required under subsection (a) shall be subject

13 to a penalty for each year during any portion of which

14 such failure continues in an amount equal to the greater

15 of—

16 ‘‘(1) 5 percent of the additional tax required to

17 be paid under section 877A for such year, or

18 ‘‘(2) $1,000,

19 unless it is shown that such failure is due to reasonable

20 cause and not to willful neglect.

21 ‘‘(d) INFORMATION TO BE PROVIDED TO SEC22 RETARY.—Notwithstanding any other provision of law—

23 ‘‘(1) any Federal agency or court which collects

24 (or is required to collect) the statement under sub25 section (a) shall provide to the Secretary—
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1 ‘‘(A) a copy of any such statement, and

2 ‘‘(B) the name (and any other identifying

3 information) of any individual refusing to com4 ply with the provisions of subsection (a),

5 ‘‘(2) the Secretary of State shall provide to the

6 Secretary a copy of each certificate as to the loss of

7 American nationality under section 358 of the Immi8 gration and Nationality Act which is approved by

9 the Secretary of State, and

10 ‘‘(3) the Federal agency primarily responsible

11 for administering the immigration laws shall provide

12 to the Secretary the name of each lawful permanent

13 resident of the United States (within the meaning of

14 section 7701(b)(6)) whose status as such has been

15 revoked or has been administratively or judicially de16 termined to have been abandoned.

17 Notwithstanding any other provision of law, not later than

18 30 days after the close of each calendar quarter, the Sec19 retary shall publish in the Federal Register the name of

20 each individual relinquishing United States citizenship

21 (within the meaning of section 877A(e)(3)) with respect

22 to whom the Secretary receives information under the pre23 ceding sentence during such quarter.

24 ‘‘(e) EXEMPTION.—The Secretary may by regulations

25 exempt any class of individuals from the requirements of
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1 this section if the Secretary determines that applying this

2 section to such individuals is not necessary to carry out

3 the purposes of this section.’’.

4 (b) CLERICAL AMENDMENT.—The table of sections

5 for such subpart A is amended by inserting after the item

6 relating to section 6039E the following new item:

‘‘Sec. 6039F. Information on individuals expatriating.’’.

7 (c) EFFECTIVE DATE.—The amendments made by

8 this section shall apply to individuals to whom section

9 877A of the Internal Revenue Code of 1986 applies and

10 whose expatriation date (as defined in section 877A(e)(2))

11 occurs on or after February 6, 1995, except that no state12 ment shall be required by such amendments before the

13 90th day after the date of the enactment of this Act.

14 Subtitle B—Corporate Reforms

15 SEC. ll201. TAX TREATMENT OF CERTAIN EXTRAOR16 DINARY DIVIDENDS.

17 (a) TREATMENT OF EXTRAORDINARY DIVIDENDS IN

18 EXCESS OF BASIS.—Paragraph (2) of section 1059(a) (re19 lating to corporate shareholder’s basis in stock reduced by

20 nontaxed portion of extraordinary dividends) is amended

21 to read as follows:

22 ‘‘(2) AMOUNTS IN EXCESS OF BASIS.—If the

23 nontaxed portion of such dividends exceeds such

24 basis, such excess shall be treated as gain from the
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1 sale or exchange of such stock for the taxable year

2 in which the extraordinary dividend is received.’’.

3 (b) TREATMENT OF REDEMPTIONS WHERE OPTIONS

4 INVOLVED.—Paragraph (1) of section 1059(e) (relating to

5 treatment of partial liquidations and non-pro rata redemp6 tions) is amended to read as follows:

7 ‘‘(1) TREATMENT OF PARTIAL LIQUIDATIONS

8 AND CERTAIN REDEMPTIONS.—Except as otherwise

9 provided in regulations—

10 ‘‘(A) REDEMPTIONS.—In the case of any

11 redemption of stock—

12 ‘‘(i) which is part of a partial liquida13 tion (within the meaning of section 302(e))

14 of the redeeming corporation,

15 ‘‘(ii) which is not pro rata as to all

16 shareholders, or

17 ‘‘(iii) which would not have been

18 treated (in whole or in part) as a dividend

19 if any options had not been taken into ac20 count under section 318(a)(4),

21 any amount treated as a dividend with respect

22 to such redemption shall be treated as an ex23 traordinary dividend to which paragraphs (1)

24 and (2) of subsection (a) apply without regard

25 to the period the taxpayer held such stock. In
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1 the case of a redemption described in clause

2 (iii), only the basis in the stock redeemed shall

3 be taken into account under subsection (a).

4 ‘‘(B) REORGANIZATIONS, ETC.—An ex5 change described in section 356(a)(1) which is

6 treated as a dividend under section 356(a)(2)

7 shall be treated as a redemption of stock for

8 purposes of applying subparagraph (A).’’.

9 (c) EFFECTIVE DATES.—

10 (1) IN GENERAL.—The amendments made by

11 this section shall apply to distributions after May 3,

12 1995.

13 (2) TRANSITION RULE.—The amendments

14 made by this section shall not apply to any distribu15 tion made pursuant to the terms of—

16 (A) a written binding contract in effect on

17 May 3, 1995, and at all times thereafter before

18 such distribution, or

19 (B) a tender offer outstanding on May 3,

20 1995.

21 (3) CERTAIN DIVIDENDS NOT PURSUANT TO

22 CERTAIN REDEMPTIONS.—In determining whether

23 the amendment made by subsection (a) applies to

24 any extraordinary dividend other than a dividend

25 treated as an extraordinary dividend under section
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1 1059(e)(1) of the Internal Revenue Code of 1986

2 (as amended by this Act), paragraphs (1) and (2)

3 shall be applied by substituting ‘‘September 13,

4 1995’’ for ‘‘May 3, 1995’’.

5 SEC. ll202. REGISTRATION OF CONFIDENTIAL COR6 PORATE TAX SHELTERS.

7 (a) IN GENERAL.—Section 6111 (relating to registra8 tion of tax shelters) is amended by redesignating sub9 sections (d) and (e) as subsections (e) and (f), respectively,

10 and by inserting after subsection (c) the following new

11 subsection:

12 ‘‘(d) CERTAIN CONFIDENTIAL ARRANGEMENTS

13 TREATED AS TAX SHELTERS.—

14 ‘‘(1) IN GENERAL.—For purposes of this sec15 tion, the term ‘tax shelter’ includes any entity, plan,

16 arrangement, or transaction—

17 ‘‘(A) a significant purpose of the structure

18 of which is the avoidance or evasion of Federal

19 income tax for a direct or indirect participant

20 which is a corporation,

21 ‘‘(B) which is offered to any potential par22 ticipant under conditions of confidentiality, and

23 ‘‘(C) for which the tax shelter promoters

24 may receive fees in excess of $100,000 in the

25 aggregate.
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1 ‘‘(2) CONDITIONS OF CONFIDENTIALITY.—For

2 purposes of paragraph (1)(B), an offer is under con3 ditions of confidentiality if—

4 ‘‘(A) the potential participant to whom the

5 offer is made (or any other person acting on be6 half of such participant) has an understanding

7 or agreement with or for the benefit of any pro8 moter of the tax shelter that such participant

9 (or such other person) will limit disclosure of

10 the tax shelter or any significant tax features of

11 the tax shelter, or

12 ‘‘(B) any promoter of the tax shelter—

13 ‘‘(i) claims, knows, or has reason to

14 know,

15 ‘‘(ii) knows or has reason to know

16 that any other person (other than the po17 tential participant) claims, or

18 ‘‘(iii) causes another person to claim,

19 that the tax shelter (or any aspect thereof) is

20 proprietary to any person other than the poten21 tial participant or is otherwise protected from

22 disclosure to or use by others.

23 For purposes of this subsection, the term ‘promoter’

24 means any person or any related person (within the

25 meaning of section 267 or 707) who participates in
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1 the organization, management, or sale of the tax

2 shelter.

3 ‘‘(3) PERSONS OTHER THAN PROMOTER RE4 QUIRED TO REGISTER IN CERTAIN CASES.—

5 ‘‘(A) IN GENERAL.—If—

6 ‘‘(i) the requirements of subsection (a)

7 are not met with respect to any tax shelter

8 (as defined in paragraph (1)) by any tax

9 shelter promoter, and

10 ‘‘(ii) no tax shelter promoter is a

11 United States person,

12 then each United States person who discussed

13 participation in such shelter shall register such

14 shelter under subsection (a).

15 ‘‘(B) EXCEPTION.—Subparagraph (A)

16 shall not apply to a United States person who

17 discussed participation in a tax shelter if—

18 ‘‘(i) such person notified the promoter

19 in writing (not later than the close of the

20 90th day after the day on which such dis21 cussions began) that such person would

22 not participate in such shelter, and

23 ‘‘(ii) such person does not participate

24 in such shelter.
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1 ‘‘(4) OFFER TO PARTICIPATE TREATED AS

2 OFFER FOR SALE.—For purposes of subsections (a)

3 and (b), an offer to participate in a tax shelter (as

4 defined in paragraph (1)) shall be treated as an

5 offer for sale.’’.

6 (b) PENALTY.—Subsection (a) of section 6707 (relat7 ing to failure to furnish information regarding tax shel8 ters) is amended by adding at the end the following new

9 paragraph:

10 ‘‘(3) CONFIDENTIAL ARRANGEMENTS.—

11 ‘‘(A) IN GENERAL.—In the case of a tax

12 shelter (as defined in section 6111(d)), the pen13 alty imposed under paragraph (1) shall be an

14 amount equal to the greater of—

15 ‘‘(i) 50 percent of the fees paid to any

16 promoter of the tax shelter with respect to

17 offerings made before the date such shelter

18 is registered under section 6111, or

19 ‘‘(ii) $10,000.

20 Clause (i) shall be applied by substituting ‘75

21 percent’ for ‘50 percent’ in the case of an inten22 tional failure or act described in paragraph (1).

23 ‘‘(B) SPECIAL RULE FOR PARTICIPANTS

24 REQUIRED TO REGISTER SHELTER.—In the
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1 case of a person required to register such a tax

2 shelter by reason of section 6111(d)(3)—

3 ‘‘(i) such person shall be required to

4 pay the penalty under paragraph (1) only

5 if such person actually participated in such

6 shelter,

7 ‘‘(ii) the amount of such penalty shall

8 be determined by taking into account

9 under subparagraph (A)(i) only the fees

10 paid by such person, and

11 ‘‘(iii) such penalty shall be in addition

12 to the penalty imposed on any other person

13 for failing to register such shelter.’’.

14 (c) CONFORMING AMENDMENTS.—

15 (1) Paragraph (2) of section 6707(a) is amend16 ed by striking ‘‘The penalty’’ and inserting ‘‘Except

17 as provided in paragraph (3), the penalty’’.

18 (2) Subparagraph (A) of section 6707(a)(1) is

19 amended by striking ‘‘paragraph (2)’’ and inserting

20 ‘‘paragraph (2) or (3), as the case may be’’.

21 (d) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to any tax shelter (as defined in

23 section 6111(d) of the Internal Revenue Code of 1986,

24 as amended by this section) interests in which are offered

25 to potential participants after the Secretary of the Treas-
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1 ury prescribes guidance with respect to meeting require2 ments added by such amendments.

3 SEC. ll203. DENIAL OF DEDUCTION FOR INTEREST ON

4 LOANS WITH RESPECT TO COMPANY-OWNED

5 INSURANCE.

6 (a) IN GENERAL.—Paragraph (4) of section 264(a)

7 is amended—

8 (1) by inserting ‘‘, or any endowment or annu9 ity contracts owned by the taxpayer covering any in10 dividual,’’ after ‘‘the life of any individual’’, and

11 (2) by striking all that follows ‘‘carried on by

12 the taxpayer’’ and inserting a period.

13 (b) EXCEPTION FOR CONTRACTS RELATING TO KEY

14 PERSONS; PERMISSIBLE INTEREST RATES.—Section 264

15 is amended—

16 (1) by striking ‘‘Any’’ in subsection (a)(4) and

17 inserting ‘‘Except as provided in subsection (d),

18 any’’, and

19 (2) by adding at the end the following new sub20 section:

21 ‘‘(d) SPECIAL RULES FOR APPLICATION OF SUB22 SECTION (a)(4).—

23 ‘‘(1) EXCEPTION FOR KEY PERSONS.—Sub24 section (a)(4) shall not apply to any interest paid or

25 accrued on any indebtedness with respect to policies
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1 or contracts covering an individual who is a key per2 son to the extent that the aggregate amount of such

3 indebtedness with respect to policies and contracts

4 covering such individual does not exceed $50,000.

5 ‘‘(2) INTEREST RATE CAP ON KEY PERSONS

6 AND PRE-1986 CONTRACTS.—

7 ‘‘(A) IN GENERAL.—No deduction shall be

8 allowed by reason of paragraph (1) or the last

9 sentence of subsection (a) with respect to inter10 est paid or accrued for any month to the extent

11 the amount of such interest exceeds the amount

12 which would have been determined if the appli13 cable rate of interest were used for such month.

14 ‘‘(B) APPLICABLE RATE OF INTEREST.—

15 For purposes of subparagraph (A)—

16 ‘‘(i) IN GENERAL.—The applicable

17 rate of interest for any month is the rate

18 of interest described as Moody’s Corporate

19 Bond Yield Average-Monthly Average

20 Corporates as published by Moody’s Inves21 tors Service, Inc., or any successor thereto,

22 for such month.

23 ‘‘(ii) PRE-1986 CONTRACT.—In the

24 case of indebtedness on a contract to which
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1 the last sentence of subsection (a) ap2 plies—

3 ‘‘(I) which is a contract providing

4 a fixed rate of interest, the applicable

5 rate of interest for any month shall be

6 the Moody’s rate described in clause

7 (i) for the month in which the con8 tract was purchased, or

9 ‘‘(II) which is a contract provid10 ing a variable rate of interest, the ap11 plicable rate of interest for any month

12 in an applicable period shall be such

13 Moody’s rate for the second month

14 preceding the first month in such pe15 riod.

16 For purposes of subclause (II), the tax17 payer shall elect an applicable period for

18 such contract on its return of tax imposed

19 by this chapter for its first taxable year

20 ending on or after October 13, 1995. Such

21 applicable period shall be for any number

22 of months (not greater than 12) specified

23 in the election and may not be changed by

24 the taxpayer without the consent of the

25 Secretary.
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1 ‘‘(3) KEY PERSON.—For purposes of paragraph

2 (1), the term ‘key person’ means an officer or 20-

3 percent owner, except that the number of individuals

4 who may be treated as key persons with respect to

5 any taxpayer shall not exceed the greater of—

6 ‘‘(A) 5 individuals, or

7 ‘‘(B) the lesser of 5 percent of the total of8 ficers and employees of the taxpayer or 10 indi9 viduals.

10 ‘‘(4) 20-PERCENT OWNER.—For purposes of

11 this subsection, the term ‘20-percent owner’

12 means—

13 ‘‘(A) if the taxpayer is a corporation, any

14 person who owns directly 20 percent or more of

15 the outstanding stock of the corporation or

16 stock possessing 20 percent or more of the total

17 combined voting power of all stock of the cor18 poration, or

19 ‘‘(B) if the taxpayer is not a corporation,

20 any person who owns 20 percent or more of the

21 capital or profits interest in the employer.

22 ‘‘(5) AGGREGATION RULES.—

23 ‘‘(A) IN GENERAL.—For purposes of para24 graph (4)(A) and applying the $50,000 limita25 tion in paragraph (1)—
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1 ‘‘(i) all members of a controlled group

2 shall be treated as 1 taxpayer, and

3 ‘‘(ii) such limitation shall be allocated

4 among the members of such group in such

5 manner as the Secretary may prescribe.

6 ‘‘(B) CONTROLLED GROUP.—For purposes

7 of this paragraph, all persons treated as a sin8 gle employer under subsection (a) or (b) of sec9 tion 52 or subsection (m) or (o) of section 414

10 shall be treated as members of a controlled

11 group.’’.

12 (c) EFFECTIVE DATES.—

13 (1) IN GENERAL.—The amendments made by

14 this section shall apply to interest paid or accrued

15 after October 13, 1995.

16 (2) TRANSITION RULE FOR EXISTING INDEBT17 EDNESS.—

18 (A) IN GENERAL.—In the case of—

19 (i) indebtedness incurred before Janu20 ary 1, 1996, or

21 (ii) indebtedness incurred before Jan22 uary 1, 1997, with respect to any contract

23 or policy entered into in 1994 or 1995,

24 the amendments made by this section shall not

25 apply to qualified interest paid or accrued on
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1 such indebtedness after October 13, 1995, and

2 before January 1, 1999.

3 (B) QUALIFIED INTEREST.—For purposes

4 of subparagraph (A), the qualified interest with

5 respect to any indebtedness for any month is

6 the applicable percentage of the amount of in7 terest (otherwise deductible) which would be

8 paid or accrued for such month on such indebt9 edness if—

10 (i) in the case of any interest paid or

11 accrued after December 31, 1995, indebt12 edness with respect to no more than

13 20,000 insured individuals were taken into

14 account, and

15 (ii) the lesser of the following rates of

16 interest were used for such month:

17 (I) The rate of interest specified

18 under the terms of the indebtedness

19 as in effect on October 13, 1995 (and

20 without regard to modification of such

21 terms after such date).

22 (II) The rate of interest de23 scribed as Moody’s Corporate Bond

24 Yield Average-Monthly Average

25 Corporates as published by Moody’s
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1 Investors Service, Inc., or any succes2 sor thereto, for such month.

3 For purposes of clause (i), all persons treated

4 as a single employer under subsection (a) or (b)

5 of section 52 of the Internal Revenue Code of

6 1986 or subsection (m) or (o) of section 414 of

7 such Code shall be treated as one person.

8 (C) APPLICABLE PERCENTAGE.—For pur9 poses of subparagraph (B), the applicable per10 centage is as follows:

For calendar year: The percentage is:

1995 .......................................................................... 100 percent

1996 .......................................................................... 90 percent

1997 .......................................................................... 80 percent

1998 .......................................................................... 70 percent.

11 (3) SPECIAL RULE FOR GRANDFATHERED CON12 TRACTS.—This section shall not apply to any con13 tract purchased on or before June 20, 1986, except

14 that section 264(d)(2) of the Internal Revenue Code

15 of 1986 shall apply to interest paid or accrued after

16 October 13, 1995.

17 (d) SPREAD OF INCOME INCLUSION ON SURRENDER,

18 ETC. OF CONTRACTS.—

19 (1) IN GENERAL.—If any amount is received

20 under any life insurance policy or endowment or an21 nuity contract described in paragraph (4) of section

22 264(a) of the Internal Revenue Code of 1986—
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1 (A) on the complete surrender, redemption,

2 or maturity of such policy or contract during

3 calendar year 1996, 1997, or 1998, or

4 (B) in full discharge during any such cal5 endar year of the obligation under the policy or

6 contract which is in the nature of a refund of

7 the consideration paid for the policy or con8 tract,

9 then (in lieu of any other inclusion in gross income)

10 such amount shall be includible in gross income rat11 ably over the 4-taxable year period beginning with

12 the taxable year such amount would (but for this

13 paragraph) be includible. The preceding sentence

14 shall only apply to the extent the amount is includ15 ible in gross income for the taxable year in which

16 the event described in subparagraph (A) or (B) oc17 curs.

18 (2) SPECIAL RULES FOR APPLYING SECTION

19 264.—A contract shall not be treated as—

20 (A) failing to meet the requirement of sec21 tion 264(c)(1) of the Internal Revenue Code of

22 1986, or

23 (B) a single premium contract under sec24 tion 264(b)(1) of such Code,
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1 solely by reason of an occurrence described in sub2 paragraph (A) or (B) of paragraph (1) of this sub3 section or solely by reason of no additional pre4 miums being received under the contract by reason

5 of a lapse occurring after October 13, 1995.

6 (3) SPECIAL RULE FOR DEFERRED ACQUISI7 TION COSTS.—In the case of the occurrence of any

8 event described in subparagraph (A) or (B) of para9 graph (1) of this subsection with respect to any pol10 icy or contract—

11 (A) section 848 of the Internal Revenue

12 Code of 1986 shall not apply to the

13 unamortized balance (if any) of the specified

14 policy acquisition expenses attributable to such

15 policy or contract immediately before the insur16 ance company’s taxable year in which such

17 event occurs, and

18 (B) there shall be allowed as a deduction

19 to such company for such taxable year under

20 chapter 1 of such Code an amount equal to

21 such unamortized balance.
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1 SEC. ll204. TERMINATION OF SUSPENSE ACCOUNTS FOR

2 FAMILY CORPORATIONS REQUIRED TO USE

3 ACCRUAL METHOD OF ACCOUNTING.

4 (a) IN GENERAL.—Subsection (i) of section 447 (re5 lating to method of accounting for corporations engaged

6 in farming) is amended by adding at the end the following

7 new paragraph:

8 ‘‘(7) TERMINATION.—

9 ‘‘(A) IN GENERAL.—No suspense account

10 may be established under this subsection by any

11 corporation required by this section to change

12 its method of accounting for any taxable year

13 ending after September 13, 1995.

14 ‘‘(B) 20-YEAR PHASEOUT OF EXISTING

15 SUSPENSE ACCOUNTS.—Each suspense account

16 under this subsection shall be reduced (but not

17 below zero) for each of the first 20 taxable

18 years beginning after September 13, 1995, by

19 an amount equal to the applicable portion of

20 such account. Any reduction in a suspense ac21 count under this paragraph shall be included in

22 gross income for the taxable year of the reduc23 tion. The amount of the reduction required

24 under this paragraph for any taxable year shall

25 be reduced (but not below zero) by the amount
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1 of any reduction required for such taxable year

2 under any other provision of this subsection.

3 ‘‘(C) APPLICABLE PORTION.—For pur4 poses of subparagraph (B), the term ‘applicable

5 portion’ means, for any taxable year, the

6 amount which would ratably reduce the amount

7 in the account (after taking into account prior

8 reductions) to zero over the period consisting of

9 such taxable year and the remaining taxable

10 years in such first 20 taxable years.’’.

11 (b) EFFECTIVE DATE.—The amendment made by

12 this section shall apply to taxable years ending after Sep13 tember 13, 1995.

14 SEC. ll205. MODIFICATIONS OF PUERTO RICO AND POS15 SESSIONS TAX CREDIT.

16 (a) PHASEOUT OF REDUCED CREDIT.—The table

17 contained in clause (ii) of section 936(a)(4)(B) (relating

18 to election to take reduced credit) is amended to read as

19 follows:

‘‘In the case of taxable

years beginning in: The percentage is:

1996 ......................................................................................... 50

1997 ......................................................................................... 36

1998 ......................................................................................... 24

1999 ......................................................................................... 16

2000 ......................................................................................... 8

2001 and thereafter ................................................................. 0.’’

20 (b) CARRYOVER OF EXCESS ECONOMIC ACTIVITY

21 CREDIT.—
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1 (1) IN GENERAL.—Section 936(a)(4) is amend2 ed by redesignating subparagraph (C) as subpara3 graph (D) and by inserting after subparagraph (B)

4 the following new subparagraph:

5 ‘‘(C) CARRYOVER OF EXCESS ECONOMIC

6 ACTIVITY CREDIT.—

7 ‘‘(i) IN GENERAL.—If the amount de8 termined under subparagraph (A) for any

9 taxable year exceeds the amount of the

10 credit determined under paragraph (1) for

11 such taxable year with respect to income

12 referred to in paragraph (1)(A), the

13 amount determined under subparagraph

14 (A) for the following taxable year shall be

15 increased by the amount of such excess.

16 ‘‘(ii) LIMITATION.—Any excess de17 scribed in clause (i) may not be carried to

18 any taxable year after the 5th taxable year

19 following the taxable year in which it

20 arises.

21 ‘‘(iii) ORDERING RULE.—For pur22 poses of applying subparagraph (A), the

23 limitation under subparagraph (A) shall be

24 treated as used on a first-in, first-out

25 basis.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 SEC. ll206. PERSONAL PROPERTY USED PREDOMINANTLY

5 IN THE UNITED STATES TREATED AS NOT

6 PROPERTY OF A LIKE KIND WITH RESPECT

7 TO PROPERTY USED PREDOMINANTLY OUT8 SIDE THE UNITED STATES.

9 (a) IN GENERAL.—Subsection (h) of section 1031

10 (relating to exchange of property held for productive use

11 or investment) is amended to read as follows:

12 ‘‘(h) SPECIAL RULES FOR FOREIGN REAL AND PER13 SONAL PROPERTY.—For purposes of this section—

14 ‘‘(1) REAL PROPERTY.—Real property located

15 in the United States and real property located out16 side the United States are not property of a like

17 kind.

18 ‘‘(2) PERSONAL PROPERTY.—

19 ‘‘(A) IN GENERAL.—Personal property

20 used predominantly within the United States

21 and personal property used predominantly out22 side the United States are not property of a like

23 kind.
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1 ‘‘(B) PREDOMINANT USE.—Except as pro2 vided in subparagraph (C), the predominant use

3 of any property shall be determined based on—

4 ‘‘(i) in the case of the property relin5 quished in the exchange, the 2-year period

6 ending on the date of such relinquishment,

7 and

8 ‘‘(ii) in the case of the property ac9 quired in the exchange, the 2-year period

10 beginning on the date of such acquisition.

11 ‘‘(C) SPECIAL RULE FOR CERTAIN PROP12 ERTY.—Property described in any subpara13 graph of section 168(g)(4) shall be treated as

14 used predominantly in the United States.’’

15 (b) EFFECTIVE DATE.—

16 (1) IN GENERAL.—The amendment made by

17 this section shall apply to transfers after December

18 6, 1995, in taxable years ending after such date.

19 (2) BINDING CONTRACTS.—The amendment

20 made by this section shall not apply to any transfer

21 pursuant to a written binding contract in effect on

22 December 6, 1995, and at all times thereafter before

23 the disposition or acquisition of property. A contract

24 shall not fail to meet the requirements of the preced25 ing sentence solely because—
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1 (A) it provides for a sale in lieu of an ex2 change, or

3 (B) the property to be disposed of as relin4 quished property, or the property to be acquired

5 as replacement property, whichever is applica6 ble, was not identified under such contract be7 fore December 7, 1995.

8 SEC. ll207. REPEAL OF FINANCIAL INSTITUTION TRANSI9 TION RULE TO INTEREST ALLOCATION

10 RULES.

11 (a) IN GENERAL.—Paragraph (5) of section 1215(c)

12 of the Tax Reform Act of 1986 (Public Law 99–514, 100

13 Stat. 2548) is hereby repealed.

14 (b) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to taxable years beginning after

16 December 31, 1995.

17 SEC. ll208. CONVERSION OF LARGE CORPORATIONS INTO

18 S CORPORATIONS TREATED AS COMPLETE

19 LIQUIDATION.

20 (a) IN GENERAL.—Section 1374 (relating to tax im21 posed on certain built-in gains) is amended by redesignat22 ing subsection (e) as subsection (f) and by inserting after

23 subsection (d) the following new subsection:

24 ‘‘(e) SECTION NOT TO APPLY TO CONVERSIONS OF

25 LARGE C CORPORATIONS.—
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1 ‘‘(1) IN GENERAL.—If an S corporation was a

2 large C corporation for the last taxable year before

3 the first taxable year for which the election under

4 section 1362(a) was effective—

5 ‘‘(A) the preceding provisions of this sec6 tion shall not apply to the S corporation, but

7 ‘‘(B) for purposes of this title—

8 ‘‘(i) the C corporation shall be treated

9 as having distributed, as of the last day of

10 such last taxable year, all its property to

11 its shareholders in complete liquidation,

12 and

13 ‘‘(ii) the shareholders shall be treated

14 as having immediately contributed such

15 property to the S corporation in exchange

16 for its stock.

17 ‘‘(2) SPECIAL RULE FOR ASSET ACQUISI18 TIONS.—Rules similar to the rules of paragraph (1)

19 shall apply to any transaction described in sub20 section (d)(8) in which an S corporation acquires as21 sets from a large C corporation.

22 ‘‘(3) LARGE C CORPORATION.—For purposes of

23 this subsection, the term ‘large C corporation’ means

24 a C corporation the fair market value of all of the

25 stock of which, as of the close of the last taxable
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1 year described in paragraph (1), is greater than

2 $5,000,000.

3 (b) REGULATORY AUTHORITY TO PREVENT AVOID4 ANCE.—Section 1374(f), as redesignated by subsection

5 (a), is amended by inserting ‘‘and regulations preventing

6 avoidance of the application of subsection (e)’’ before the

7 period at the end.

8 (c) EFFECTIVE DATES.—

9 (1) IN GENERAL.—The amendments made by

10 this section shall apply to elections under section

11 1361(a) of the Internal Revenue Code of 1986 which

12 are made after December 6, 1995.

13 (2) ACQUISITIONS.—The provisions of section

14 1374(e)(2) of such Code (as added by the amend15 ments made by this section) shall apply to acquisi16 tions after December 6, 1995, except that such pro17 visions shall not apply to any acquisition after such

18 date pursuant to a binding contract in effect on such

19 date and at all times thereafter before such acquisi20 tion.

21 SEC. ll209. MODIFICATION OF TAXABLE YEARS TO WHICH

22 NET OPERATING LOSSES MAY BE CARRIED.

23 (a) IN GENERAL.—Subparagraph (A) of section

24 172(b)(1) (relating to years to which loss may be carried)

25 is amended—
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1 (1) by striking ‘‘3’’ in clause (i) and inserting

2 ‘‘1’’, and

3 (2) by striking ‘‘15’’ in clause (ii) and inserting

4 ‘‘20’’.

5 (b) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to net operating losses for taxable

7 years beginning after December 31, 1995.

8 SEC. ll210. CONSTRUCTIVE SALES TREATMENT FOR AP9 PRECIATED FINANCIAL POSITIONS.

10 (a) IN GENERAL.—Part IV of subchapter P of chap11 ter 1 is amended by adding at the end the following new

12 section:

13 ‘‘SEC. 1259. CONSTRUCTIVE SALES TREATMENT FOR AP14 PRECIATED FINANCIAL POSITIONS.

15 ‘‘(a) IN GENERAL.—If there is a constructive sale of

16 an appreciated financial position—

17 ‘‘(1) such position shall be treated as sold for

18 its fair market value on the date of such construc19 tive sale (and any gain shall be taken into account

20 for the taxable year which includes such date), and

21 ‘‘(2) for purposes of applying this title for peri22 ods after the constructive sale—

23 ‘‘(A) proper adjustment shall be made in

24 the amount of any gain or loss subsequently re25 alized with respect to such position for any gain
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1 taken into account by reason of paragraph (1),

2 and

3 ‘‘(B) the holding period of such position

4 shall be determined as if such position were

5 originally acquired on the date of such con6 structive sale.

7 ‘‘(b) APPRECIATED FINANCIAL POSITION.—For pur8 poses of this section—

9 ‘‘(1) IN GENERAL.—The term ‘appreciated fi10 nancial position’ means any position with respect to

11 any stock, debt instrument, or partnership interest

12 if there would be gain were such position sold.

13 ‘‘(2) POSITION.—The term ‘position’ means an

14 interest, including a futures or forward contract,

15 short sale, or option.

16 ‘‘(c) CONSTRUCTIVE SALE.—For purposes of this

17 section—

18 ‘‘(1) IN GENERAL.—A taxpayer shall be treated

19 as having made a constructive sale of an appreciated

20 financial position if the taxpayer or a related per21 son—

22 ‘‘(A) enters into 1 or more positions with

23 respect to the same or substantially identical

24 property which, for some period, substantially
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1 eliminate both risk of loss and opportunity for

2 gain on the appreciated financial position, or

3 ‘‘(B) enters into any other transaction

4 which is marketed or sold as being economically

5 equivalent to any transaction described in sub6 paragraph (A).

7 The transactions described in subparagraph (A)

8 shall include making a short sale with respect to

9 substantially identical property, and the granting of

10 a call option, or the acquisition of a put option, with

11 respect to the same or substantially identical prop12 erty but only if there is a substantial certainty that

13 such call or put option will be exercised.

14 ‘‘(2) EXCEPTION FOR TRANSACTIONS MARKED

15 TO MARKET.—The term ‘constructive sale’ shall not

16 include any transaction if the appreciated financial

17 position which is part of such transaction is marked

18 to market under section 475 or 1256.

19 ‘‘(3) EXCEPTION FOR SALES OF NONPUBLICLY

20 TRADED PROPERTY.—The term ‘constructive sale’

21 shall not include any contract for sale of any stock,

22 debt instrument, or partnership interest which is not

23 a marketable security (as defined in section 453(f))

24 if the sale occurs within 1 year after the date such

25 contract is entered into.
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1 ‘‘(4) RELATED PERSON.—A person is related to

2 another person with respect to a transaction if—

3 ‘‘(A) the relationship between such persons

4 would result in a disallowance of losses under

5 section 267 or 707(b), and

6 ‘‘(B) such transaction is entered into with

7 a view toward avoiding the purposes of this sec8 tion.

9 ‘‘(d) SPECIAL RULES.—

10 ‘‘(1) TRANSACTIONS COVERING LESS THAN ALL

11 OF APPRECIATED FINANCIAL POSITIONS.—If there is

12 a constructive sale of less than all of the appreciated

13 financial positions held by the taxpayer, subsection

14 (a) shall apply to such positions in the order in

15 which acquired or entered into.

16 ‘‘(2) TREATMENT OF SUBSEQUENT SALE OF

17 POSITION WHICH WAS DEEMED SOLD.—If—

18 ‘‘(A) there is a constructive sale of any ap19 preciated financial position,

20 ‘‘(B) such position is subsequently sold or

21 otherwise disposed of, and

22 ‘‘(C) at the time of such sale or disposi23 tion, the transaction resulting in the construc24 tive sale of such position is open,
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1 solely for purposes of determining whether the tax2 payer has entered into a constructive sale of any

3 other appreciated financial position held by the tax4 payer, the taxpayer shall be treated as entering into

5 such transaction immediately after such sale or

6 other disposition.

7 ‘‘(3) CERTAIN TRUST INSTRUMENTS TREATED

8 AS STOCK.—For purposes of this section, an interest

9 in a trust which is actively traded (within the mean10 ing of section 1092(d)(1)) shall be treated as stock.

11 ‘‘(e) REGULATIONS.—The Secretary shall prescribe

12 such regulations as may be necessary or appropriate to

13 carry out the purposes of this section.’’

14 (b) CLERICAL AMENDMENT.—The table of sections

15 for such part IV is amended by adding at the end the

16 following new item:

‘‘Sec. 1259. Constructive sales treatment for appreciated financial positions.’’

17 (c) EFFECTIVE DATE.—

18 (1) IN GENERAL.—The amendments made by

19 this section shall apply to—

20 (A) constructive sales after the date of the

21 enactment of this Act, and

22 (B) constructive sales after January 4,

23 1996, and before the date of the enactment of

24 this Act but only if the transaction is not closed
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1 before the date which is 30 days after the date

2 of the enactment of this Act.

3 In a case to which subparagraph (B) applies, section

4 1259 of the Internal Revenue Code of 1986 (as

5 added by this section) shall be applied as if the con6 structive sale occurred on the date which is 30 days

7 after the date of the enactment of this Act.

8 (2) SPECIAL RULE.—In the case of a decedent

9 dying after the date of the enactment of this Act,

10 if—

11 (A) there was a constructive sale on or be12 fore such date of enactment of any appreciated

13 financial position, and

14 (B) on the day before the date of the dece15 dent’s death, the transaction resulting in the

16 constructive sale of such position is open,

17 for purposes of the Internal Revenue Code of 1986,

18 such position (and any property related thereto, as

19 determined under the principles of section

20 1259(d)(1) of such Code (as so added)) shall be

21 treated as property constituting rights to receive an

22 item of income in respect of a decedent under sec23 tion 691 of such Code.
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1 SEC. ll211. MODIFICATION OF RULES FOR ALLOCATING

2 INTEREST EXPENSE TO TAX-EXEMPT INTER3 EST.

4 (a) PRO RATA ALLOCATION RULES APPLICABLE TO

5 CORPORATIONS.—

6 (1) IN GENERAL.—Paragraph (1) of section

7 265(b) is amended by striking ‘‘In the case of a fi8 nancial institution’’ and inserting ‘‘In the case of a

9 corporation’’.

10 (2) ONLY OBLIGATIONS ACQUIRED AFTER DE11 CEMBER 6, 1995 TAKEN INTO ACCOUNT.—Subpara12 graph (A) of section 265(b)(2) is amended by strik13 ing ‘‘August 7, 1986’’ and inserting ‘‘December 6,

14 1995 (August 7, 1986, in the case of a financial in15 stitution)’’.

16 (3) SMALL ISSUER EXCEPTION NOT TO

17 APPLY.—Subparagraph (A) of section 265(b)(3) is

18 amended by striking ‘‘Any qualified’’ and inserting

19 ‘‘In the case of a financial institution, any quali20 fied’’.

21 (4) EXCEPTION FOR CERTAIN BONDS ACQUIRED

22 ON SALE OF GOODS OR SERVICES.—Subparagraph

23 (B) of section 265(b)(4) is amended by adding at

24 the end the following new sentence: ‘‘In the case of

25 a taxpayer other than a financial institution, such

26 term shall not include a nonsaleable obligation ac-
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1 quired by such taxpayer in the ordinary course of

2 business as payment for goods or services provided

3 by such taxpayer to any State or local government.’’

4 (5) LOOK-THRU RULES FOR PARTNERSHIPS.—

5 Paragraph (6) of section 265(b) is amended by add6 ing at the end the following new subparagraph:

7 ‘‘(C) LOOK-THRU RULES FOR PARTNER8 SHIPS.—In the case of a corporation which is a

9 partner in a partnership, such corporation shall

10 be treated for purposes of this subsection as

11 holding directly its allocable share of the assets

12 of the partnership.’’

13 (6) APPLICATION OF PRO RATA DISALLOWANCE

14 ON AFFILIATED GROUP BASIS.—Subsection (b) of

15 section 265 is amended by adding at the end the fol16 lowing new paragraph:

17 ‘‘(7) APPLICATION OF DISALLOWANCE ON AF18 FILIATED GROUP BASIS.—

19 ‘‘(A) IN GENERAL.—For purposes of this

20 subsection, all members of an affiliated group

21 filing a consolidated return under section 1501

22 shall be treated as 1 taxpayer.

23 ‘‘(B) TREATMENT OF INSURANCE COMPA24 NIES.—This subsection shall not apply to an in25 surance company, and subparagraph (A) shall
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1 be applied without regard to any member of an

2 affiliated group which is an insurance com3 pany.’’

4 (7) CLERICAL AMENDMENT.—The subsection

5 heading for section 265(b) is amended by striking

6 ‘‘FINANCIAL INSTITUTIONS’’ and inserting ‘‘COR7 PORATIONS’’.

8 (b) APPLICATION OF SECTION 265(a)(2) WITH RE9 SPECT TO CONTROLLED GROUPS.—Paragraph (2) of sec10 tion 265(a) is amended after ‘‘obligations’’ by inserting

11 ‘‘held by the taxpayer (or any corporation which is a mem12 ber of a controlled group (as defined in section 267(f)(1))

13 which includes the taxpayer)’’.

14 (c) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to taxable years beginning after

16 December 31, 1995.

17 SEC. ll212. REDUCTION OF 70 PERCENT DIVIDENDS RE18 CEIVED DEDUCTION TO 50 PERCENT.

19 (a) IN GENERAL.—Paragraph (1) of section 243(a)

20 (relating to dividends received by corporations) is amended

21 by striking ‘‘70 percent’’ and inserting ‘‘50 percent’’.

22 (b) CONFORMING CHANGES.—Each of the following

23 provisions is amended by striking ‘‘70 percent’’ and insert24 ing ‘‘50 percent’’:

25 (1) Section 243(c)(1).
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1 (2) Subsections (a)(3) and (b)(2) of section

2 244.

3 (3) Section 245(c)(1)(B).

4 (4) Section 246(b)(3)(B).

5 (5) Section 246A(a)(1).

6 (c) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to dividends received or accrued

8 after January 31, 1996.

9 SEC. ll213. MODIFICATION OF HOLDING PERIOD APPLI10 CABLE TO DIVIDENDS RECEIVED DEDUC11 TION.

12 (a) IN GENERAL.—Subparagraph (A) of section

13 246(c)(1) is amended to read as follows:

14 ‘‘(A) which is held by the taxpayer for 45

15 days or less during the 90-day period beginning

16 on the date which is 45 days before the date on

17 which such share becomes ex-dividend with re18 spect to such dividend, or’’.

19 (b) CONFORMING AMENDMENTS.—

20 (1) Paragraph (2) of section 246(c) is amended

21 to read as follows:

22 ‘‘(2) 90-DAY RULE IN THE CASE OF CERTAIN

23 PREFERENCE DIVIDENDS.—In the case of stock hav24 ing preference in dividends, if the taxpayer receives

25 dividends with respect to such stock which are at-
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1 tributable to a period or periods aggregating in ex2 cess of 366 days, paragraph (1)(A) shall be ap3 plied—

4 ‘‘(A) by substituting ‘90 days’ for ‘45

5 days’ each place it appears, and

6 ‘‘(B) by substituting ‘180-day period’ for

7 ‘90-day period’.’’

8 (2) Paragraph (3) of section 246(c) is amended

9 by adding ‘‘and’’ at the end of subparagraph (A), by

10 striking subparagraph (B), and by redesignating

11 subparagraph (C) as subparagraph (B).

12 (c) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to dividends received or accrued

14 after January 31, 1996.

15 SEC. ll214. CERTAIN PREFERRED STOCK TREATED AS

16 BOOT.

17 (a) SECTION 351.—Section 351 (relating to transfer

18 to corporation controlled by transferor) is amended by re19 designating subsection (g) as subsection (h) and by insert20 ing after subsection (f) the following new subsection:

21 ‘‘(g) NONQUALIFIED PREFERRED STOCK NOT

22 TREATED AS STOCK.—

23 ‘‘(1) IN GENERAL.—For purposes of sub24 sections (a) and (b), the term ‘stock’ shall not in25 clude nonqualified preferred stock.
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1 ‘‘(2) NONQUALIFIED PREFERRED STOCK.—For

2 purposes of paragraph (1), the term ‘nonqualified

3 preferred stock’ means preferred stock if—

4 ‘‘(A) the holder of such stock has the right

5 to require the issuer or a related person to re6 deem or purchase the stock,

7 ‘‘(B) the issuer or a related person is re8 quired to redeem or purchase such stock,

9 ‘‘(C) the issuer or a related person has the

10 right to redeem or purchase the stock and, as

11 of the issue date, it is more likely than not that

12 such right will be exercised, or

13 ‘‘(D) the dividend rate on such stock varies

14 in whole or in part (directly or indirectly) with

15 reference to interest rates, commodity prices, or

16 other similar indices.

17 Subparagraphs (A), (B), and (C) shall apply only if

18 the right or obligation referred to therein may be ex19 ercised within the 20-year period beginning on the

20 issue date of such stock and if such right or obliga21 tion is not pursuant to a contingency the likelihood

22 of which is remote.

23 ‘‘(3) DEFINITIONS.—For purposes of this sub24 section—
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1 ‘‘(A) PREFERRED STOCK.—The term ‘pre2 ferred stock’ means stock which is limited and

3 preferred as to dividends and does not partici4 pate (including through a conversion privilege)

5 in corporate growth to any significant extent.

6 ‘‘(B) RELATED PERSON.—A person shall

7 be treated as related to another person if they

8 bear a relationship to such other person de9 scribed in section 267(b) or 707(b).

10 ‘‘(4) REGULATIONS.—The Secretary may pre11 scribe such regulations as may be necessary or ap12 propriate to carry out the purposes of this sub13 section and sections 354(a)(2)(C), 355(a)(3)(D),

14 and 356(e). The Secretary may also prescribe regu15 lations, consistent with the treatment under this

16 subsection and such sections, for the treatment of

17 nonqualified preferred stock under other provisions

18 of this title.’’

19 (b) SECTION 354.—Paragraph (2) of section 354(a)

20 (relating exchanges of stock and securities in certain reor21 ganizations) is amended by adding at the end the following

22 new subparagraph:

23 ‘‘(C) NONQUALIFIED PREFERRED

24 STOCK.—
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1 ‘‘(i) IN GENERAL.—Nonqualified pre2 ferred stock (as defined in section

3 351(g)(2)) received in exchange for stock

4 other than nonqualified preferred stock (as

5 so defined) shall not be treated as stock or

6 securities.

7 ‘‘(ii) RECAPITALIZATIONS OF FAMILY8 OWNED CORPORATIONS.—

9 ‘‘(I) IN GENERAL.—Clause (i)

10 shall not apply in the case of a recapi11 talization under section 368(a)(1)(E)

12 of a family-owned corporation.

13 ‘‘(II) FAMILY-OWNED CORPORA14 TION.—For purposes of this clause,

15 the term ‘family-owned corporation’

16 means any corporation which is de17 scribed in clause (i) of section

18 447(d)(2)(C) throughout the 8-year

19 period beginning on the date which is

20 5 years before the date of the recapi21 talization. For purposes of the preced22 ing sentence, stock shall not be treat23 ed as owned by a family member dur24 ing any period that such family mem-
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1 ber’s holding period would be reduced

2 under the rules of section 246(c)(4).

3 (c) SECTION 355.—Paragraph (3) of section 355(a)

4 is amended by adding at the end the following new sub5 paragraph:

6 ‘‘(D) NONQUALIFIED PREFERRED

7 STOCK.—Nonqualified preferred stock (as de8 fined in section 351(g)(2)) received in a dis9 tribution with respect to stock other than non10 qualified preferred stock (as so defined) shall

11 not be treated as stock or securities.’’

12 (d) SECTION 356.—Section 356 is amended by redes13 ignating subsections (e) and (f) as subsections (f) and (g),

14 respectively, and by inserting after subsection (d) the fol15 lowing new subsection:

16 ‘‘(e) NONQUALIFIED PREFERRED STOCK TREATED

17 AS OTHER PROPERTY.—For purposes of this section—

18 ‘‘(1) IN GENERAL.—Except as provided in para19 graph (2), the term ‘other property’ includes non20 qualified preferred stock (as defined in section

21 351(g)(2)).

22 ‘‘(2) EXCEPTION.—The term ‘other property’

23 does not include nonqualified preferred stock (as so

24 defined) to the extent that, under section 354 or
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1 355, such preferred stock would be permitted to be

2 received without the recognition of gain.’’

3 (e) CONFORMING AMENDMENTS.—

4 (1) Subparagraph (B) of section 354(a)(2) is

5 amended by inserting ‘‘(including nonqualified pre6 ferred stock, as defined in section 351(g)(2))’’ after

7 ‘‘stock’’.

8 (2) Subparagraph (A) of section 354(a)(3) is

9 amended by inserting ‘‘nonqualified preferred stock

10 and’’ after ‘‘including’’.

11 (3) Section 1036 is amended by redesignating

12 subsection (b) as subsection (c) and by inserting

13 after subsection (a) the following new subsection:

14 ‘‘(b) NONQUALIFIED PREFERRED STOCK TREATED

15 AS NOT STOCK.—For purposes of this section, non16 qualified preferred stock (as defined in section 351(g)(2))

17 shall be treated as not stock.’’

18 (f) EFFECTIVE DATE.—

19 (1) IN GENERAL.—The amendments made by

20 this section shall apply to transactions after Decem21 ber 7, 1995.

22 (2) TRANSITIONAL RULE.—The amendments

23 made by this section shall not apply to—

24 (A) any stock issued pursuant to a written

25 agreement which was (subject to customary
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1 conditions) binding on December 7, 1995, and

2 at all times thereafter before the stock was is3 sued,

4 (B) any stock issued pursuant to an ex5 change offer which was outstanding on such

6 date, and

7 (C) any stock which was priced for pur8 poses of issuance on or before such date.

9 SEC. ll215. DENIAL OF INTEREST DEDUCTIONS ON CER10 TAIN DEBT INSTRUMENTS.

11 (a) IN GENERAL.—Section 163 (relating to deduction

12 for interest) is amended by redesignating subsection (k)

13 as subsection (l) and by inserting after subsection (j) the

14 following new subsection:

15 ‘‘(k) DISALLOWANCE OF DEDUCTION ON CERTAIN

16 DEBT INSTRUMENTS OF CORPORATIONS.—

17 ‘‘(1) IN GENERAL.—No deduction shall be al18 lowed under this chapter for any interest paid or ac19 crued on a disqualified debt instrument.

20 ‘‘(2) DISQUALIFIED DEBT INSTRUMENT.—For

21 purposes of this subsection—

22 ‘‘(A) IN GENERAL.—The term ‘disqualified

23 debt instrument’ means any indebtedness of a

24 corporation—
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1 ‘‘(i) which has a weighted average ma2 turity of more than 40 years, or

3 ‘‘(ii) any principal or interest on

4 which is payable in equity of the issuer or

5 a related party.

6 ‘‘(B) EXCEPTIONS.—Such term shall not

7 include—

8 ‘‘(i) a demand loan,

9 ‘‘(ii) indebtedness in connection with a

10 lease described in section 1055(c)(1) (re11 lating to redeemable ground rents), or

12 ‘‘(iii) any other indebtedness specified

13 by the Secretary.

14 ‘‘(3) WEIGHTED AVERAGE MATURITY.—For

15 purposes of paragraph (2)(A)(i), the weighted aver16 age maturity of any indebtedness shall be deter17 mined in the same manner as under section 1273,

18 and in making such determination—

19 ‘‘(A) any option or other right to extend,

20 renew, or relend the amount of any indebted21 ness shall be treated as if exercised,

22 ‘‘(B) the holding of a put, call, or other

23 right to accelerate payment shall be dis24 regarded, and
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1 ‘‘(C) 2 or more loans which are part of the

2 same transaction or series of transactions shall

3 be treated as 1 loan.

4 ‘‘(4) SPECIAL RULES FOR AMOUNTS PAYABLE

5 IN EQUITY.—For purposes of paragraph (2)(A)(ii),

6 principal or interest on indebtedness shall be treated

7 as payable in equity of the issuer or a related party

8 only if—

9 ‘‘(A) the principal or interest is required to

10 be paid or converted, or at the option of the is11 suer or a related party is payable or convertible,

12 into such equity,

13 ‘‘(B) the amount of principal or interest is

14 required to be determined, or at the option of

15 the issuer or a related party is determined, by

16 reference to the value of such equity at the time

17 of payment of such principal or interest, or

18 ‘‘(C) the indebtedness is part of an ar19 rangement which is reasonably expected to re20 sult in a transaction described in subparagraph

21 (A) or (B).

22 The requirements of the preceding sentence shall be

23 treated as met with respect to any principal or inter24 est on indebtedness only if such requirement is met
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1 with respect to a substantial amount of such prin2 cipal or interest.

3 ‘‘(5) RELATED PARTY.—For purposes of this

4 subsection, a person is a related party with respect

5 to another person if such person bears a relationship

6 to such other person described in section 267(b) or

7 707(b).

8 ‘‘(6) REGULATIONS.—The Secretary shall pre9 scribe such regulations as may be necessary or ap10 propriate to carry out the purposes of this sub11 section, including regulations preventing avoidance

12 of this subsection through the use of an issuer other

13 than a corporation.’’

14 (b) CLASSIFICATION OF CERTAIN INSTRUMENTS AS

15 DEBT OR EQUITY.—Section 385(c) (relating to effect of

16 classification by issuer) is amended by redesignating para17 graph (3) as paragraph (4) and by inserting after para18 graph (2) the following new paragraph:

19 ‘‘(3) DEEMED CLASSIFICATION OF INTEREST AS

20 STOCK.—

21 ‘‘(A) IN GENERAL.—Except as otherwise

22 provided in regulations, for purposes of this

23 subsection, an applicable corporation shall be

24 treated as having characterized an interest in

25 the corporation as stock if—
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1 ‘‘(i) it has a term of more than 20

2 years (determined under the principles of

3 subparagraphs (A), (B), and (C) of section

4 163(k)(3)), and

5 ‘‘(ii) it is not shown as indebtedness

6 on an applicable balance sheet of the is7 suer.

8 This paragraph shall not apply to an interest

9 described in section 163(k)(2)(B).

10 ‘‘(B) EFFECT OF CHARACTERIZATION.—

11 Any characterization of an interest as stock

12 under subparagraph (A)—

13 ‘‘(i) may not be changed, and

14 ‘‘(ii) except to the extent provided in

15 regulations, shall be treated as having been

16 made as of the time of issuance.

17 ‘‘(C) APPLICABLE CORPORATION, ETC.—

18 For purposes of this paragraph—

19 ‘‘(i) APPLICABLE CORPORATION.—The

20 term ‘applicable corporation’ means, with

21 respect to any interest, a corporation

22 which, at any time during the 1-year pe23 riod beginning on the date of issuance of

24 the interest, is—
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1 ‘‘(I) required to file annual finan2 cial statements with the Securities

3 and Exchange Commission, or

4 ‘‘(II) required to be included in

5 such financial statements.

6 ‘‘(ii) APPLICABLE BALANCE SHEET.—

7 The term ‘applicable balance sheet’ means

8 any balance sheet which is required to be

9 filed with the Securities and Exchange

10 Commission by the issuer of an interest or

11 which is required to include data with re12 spect to such issuer.

13 ‘‘(D) INTERESTS ISSUED TO RELATED

14 PARTIES.—For purposes of subparagraph

15 (A)(ii), if—

16 ‘‘(i) an interest in a corporation to

17 which subparagraph (A) applies is issued

18 to a person (other than a corporation)

19 which is related to the issuer, and

20 ‘‘(ii) such interest is not shown on an

21 applicable balance sheet of the issuer solely

22 because the related person is consolidated

23 with such person on such balance sheet,

24 such interest shall be treated as having been

25 characterized as stock if such related person is-
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1 sues a related instrument not shown as indebt2 edness on such balance sheet. For purposes of

3 the preceding sentence, a person is a related

4 person with respect to an issuer if such person

5 bears a relationship to the issuer described in

6 section 267(b) or 707(b).

7 ‘‘(E) EXCEPTION FOR CERTAIN LEASE RE8 CEIVABLES.—This subsection shall not apply to

9 a nonrecourse interest if the issuer’s investment

10 in a related lease receivable as shown on the ap11 plicable balance sheet is reduced by the amount

12 of such interest.’’

13 (c) REGULATIONS.—Paragraph (4) of section 385(c),

14 as redesignated by subsection (b), is amended to read as

15 follows:

16 ‘‘(4) REGULATIONS.—The Secretary shall pre17 scribe such regulations as may be necessary or ap18 propriate to carry out the purposes of this sub19 section, including such requirements for the provid20 ing of information to the Secretary or such other

21 persons as the Secretary determines appropriate.’’

22 (d) EFFECTIVE DATE.—

23 (1) IN GENERAL.—The amendments made by

24 this section shall apply to interests in a corporation

25 issued on or after December 7, 1995.
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1 (2) TRANSITIONAL RULE.—The amendments

2 made by this section shall not apply to—

3 (A) any interest issued pursuant to a com4 mitment which was binding on December 6,

5 1995, and at all times thereafter before the in6 terest was issued,

7 (B) any interest issued pursuant to an ex8 change offer which was outstanding on such

9 date,

10 (C) any interest which was priced for pur11 poses of issuance on or before such date,

12 (D) interests issued pursuant to a registra13 tion statement filed with the Securities and Ex14 change Commission on or before December 7,

15 1995 (other than a registration statement

16 which, under 17 CFR 230.415, contemplated a

17 delayed or continuous offering of such inter18 ests), but only to the extent that such interests

19 are described in, and the amount of such inter20 ests does not exceed in the aggregate the

21 amount stated in, such registration statement

22 as of such date,

23 (E) interests issued pursuant to a registra24 tion statement which is filed with the Securities

25 and Exchange Commission on or before Decem-
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1 ber 7, 1995, and which, under 17 CFR

2 230.415, contemplated a delayed or continuous

3 offering of such interests if a prospectus supple4 ment (including a preliminary prospectus sup5 plement) to such registration statement was

6 filed under 17 CFR 230.424 on or before De7 cember 7, 1995, but only to the extent that

8 such interests are described in, and the amount

9 of such interests does not exceed in the aggre10 gate the amount stated in, such prospectus sup11 plement as of such date (or, to the extent a pre12 liminary prospectus supplement as of such date

13 does not state a maximum amount to be issued,

14 the amount expected to be offered may be es15 tablished by other contemporaneous, written

16 evidence), and

17 (F) interests issued pursuant to a private

18 placement that contemplates resales of the in19 terests pursuant to 17 CFR 230.144A, but only

20 if, on or before December 7, 1995—

21 (i) the issuer had made a public an22 nouncement of its intention to issue the in23 terests, and

24 (ii) an offering circular or memoran25 dum (including a preliminary offering cir-
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1 cular or memorandum) with respect to the

2 interests had been distributed to prospec3 tive investors, but only to the extent that

4 such interests are described in, and the

5 amount of such interests does not exceed

6 in the aggregate the amount stated in,

7 such offering circular or memorandum as

8 of such date.

9 An interest shall be treated as meeting the require10 ments of subparagraph (A) if such interest is issued,

11 before the 30th day after the date of the enactment

12 of this Act, as part of an issue substantially identical

13 (other than yield) to an issue which was publicly an14 nounced as having been sold on December 7, 1995,

15 but which was terminated on such date.

16 SEC. ll216. DEFERRAL OF DEDUCTION FOR INTEREST ON

17 CONVERTIBLE DEBT UNTIL PAYMENT.

18 (a) IN GENERAL.—Section 163, as amended by sec19 tion ll, is amended by redesignating subsection (l) as

20 subsection (m) and by inserting after subsection (k) the

21 following new subsection:

22 ‘‘(l) DEFERRAL OF INTEREST DEDUCTION ON CON23 VERTIBLE INDEBTEDNESS.—

24 ‘‘(1) IN GENERAL.—Interest on convertible in25 debtedness of a corporation shall be deductible under
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1 this chapter only in the taxable year in which paid.

2 For purposes of the preceding sentence, the prin3 ciples of section 163(i)(3)(B) shall apply.

4 ‘‘(2) EQUITY PAYMENTS DISREGARDED.—Ex5 cept to the extent provided in regulations, payments

6 (including through an arrangement described in

7 paragraph (3)(C)) shall be disregarded for purposes

8 of paragraph (1) if such payments are in the form

9 of—

10 ‘‘(A) equity of the issuer or a related

11 party, or

12 ‘‘(B) cash or other property the amount of

13 which is determined by reference to the value of

14 such equity.

15 ‘‘(3) CONVERTIBLE INDEBTEDNESS.—For pur16 poses of this subsection—

17 ‘‘(A) IN GENERAL.—The term ‘convertible

18 indebtedness’ means any indebtedness if—

19 ‘‘(i) the indebtedness is convertible

20 into equity of the issuer or a related party,

21 ‘‘(ii) the amount principal or interest

22 on such indebtedness is determined by ref23 erence to the value of such equity, or

24 ‘‘(iii) the indebtedness is issued with

25 warrants or similar instruments as part of
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1 an investment unit in which the indebted2 ness may be used to satisfy the exercise

3 price of such warrants or similar instru4 ments.

5 ‘‘(B) EXCEPTIONS.—Such term shall not

6 include—

7 ‘‘(i) any indebtedness which would

8 (but for this subparagraph) be convertible

9 indebtedness solely because a fixed pay10 ment of principal or interest is, at the elec11 tion of the holder, payable in equity of the

12 issuer or a related party having a value

13 equal to the amount of such principal or

14 interest, or

15 ‘‘(ii) any other indebtedness specified

16 by the Secretary.

17 ‘‘(4) RELATED PARTY.—For purposes of this

18 subsection, persons are related if they bear a rela19 tionship specified in section 267(b) or section

20 707(b).

21 ‘‘(5) REGULATIONS.—The Secretary shall pre22 scribe such regulations as may be necessary or ap23 propriate to carry out the purposes of this sub24 section, including regulations preventing avoidance
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1 of this subsection through the use of an issuer other

2 than a corporation.’’

3 (b) EFFECTIVE DATES.—

4 (1) IN GENERAL.—Except as provided in para5 graph (2), the amendments made by this section

6 shall apply to indebtedness issued on or after De7 cember 7, 1995.

8 (2) TRANSITIONAL RULE.—The amendments

9 made by this section shall not apply to—

10 (A) any indebtedness issued pursuant to a

11 commitment which was binding on December 6,

12 1995, and at all times thereafter before the in13 debtedness was issued,

14 (B) any indebtedness issued pursuant to

15 an exchange offer which was outstanding on

16 such date,

17 (C) any indebtedness which was priced for

18 purposes of issuance on or before such date,

19 (D) indebtedness issued pursuant to a reg20 istration statement filed with the Securities and

21 Exchange Commission on or before December

22 7, 1995 (other than a registration statement

23 which, under 17 CFR 230.415, contemplated a

24 delayed or continuous offering of such indebted25 ness), but only to the extent that such indebted-
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1 ness is described in, and the amount of such in2 debtedness does not exceed in the aggregate the

3 amount stated in, such registration statement

4 as of such date,

5 (E) indebtedness issued pursuant to a reg6 istration statement which is filed with the Secu7 rities and Exchange Commission on or before

8 December 7, 1995, and which, under 17 CFR

9 230.415, contemplated a delayed or continuous

10 offering of such indebtedness if a prospectus

11 supplement (including a preliminary prospectus

12 supplement) to such registration statement was

13 filed under 17 CFR 230.424 on or before De14 cember 7, 1995, but only to the extent that

15 such indebtedness is described in, and the

16 amount of such indebtedness does not exceed in

17 the aggregate the amount stated in, such pro18 spectus supplement as of such date (or, to the

19 extent a preliminary prospectus supplement as

20 of such date does not state a maximum amount

21 to be issued, the amount expected to be offered

22 may be established by other contemporaneous,

23 written evidence), and

24 (F) indebtedness issued pursuant to a pri25 vate placement that contemplates resales of the
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1 instruments pursuant to 17 CFR 230.144A,

2 but only if, on or before December 7, 1995—

3 (i) the issuer had made a public an4 nouncement of its intention to issue the in5 debtedness, and

6 (ii) an offering circular or memoran7 dum (including a preliminary offering cir8 cular or memorandum) with respect to the

9 indebtedness had been distributed to pro10 spective investors, but only to the extent

11 that such indebtedness is described in, and

12 the amount of such indebtedness does not

13 exceed in the aggregate the amount stated

14 in, such offering circular or memorandum

15 as of such date.

16 Indebtedness shall be treated as meeting the require17 ments of subparagraph (A) if such indebtedness is

18 issued, before the 30th day after the date of the en19 actment of this Act, as part of an issue substantially

20 identical (other than yield) to an issue which was

21 publicly announced as having been sold on December

22 7, 1995, but which was terminated on such date.
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1 Subtitle C—Foreign Provisions

2 PART I—FOREIGN TRUSTS

3 SEC. ll301. IMPROVED INFORMATION REPORTING ON

4 FOREIGN TRUSTS.

5 (a) IN GENERAL.—Section 6048 of the Internal Rev6 enue Code of 1986 (relating to returns as to certain for7 eign trusts) is amended to read as follows:

8 ‘‘SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN

9 FOREIGN TRUSTS.

10 ‘‘(a) NOTICE OF CERTAIN EVENTS.—

11 ‘‘(1) GENERAL RULE.—On or before the 90th

12 day (or such later day as the Secretary may pre13 scribe) after any reportable event, the responsible

14 party shall provide written notice of such event to

15 the Secretary in accordance with paragraph (2).

16 ‘‘(2) CONTENTS OF NOTICE.—The notice re17 quired by paragraph (1) shall contain such informa18 tion as the Secretary may prescribe, including—

19 ‘‘(A) the amount of money or other prop20 erty (if any) transferred to the trust in connec21 tion with the reportable event, and

22 ‘‘(B) the identity of the trust and of each

23 trustee and beneficiary (or class of bene24 ficiaries) of the trust.
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1 ‘‘(3) REPORTABLE EVENT.—For purposes of

2 this subsection—

3 ‘‘(A) IN GENERAL.—The term ‘reportable

4 event’ means—

5 ‘‘(i) the creation of any foreign trust

6 by a United States person,

7 ‘‘(ii) the transfer of any money or

8 property (directly or indirectly) to a for9 eign trust by a United States person, in10 cluding a transfer by reason of death, and

11 ‘‘(iii) the death of a citizen or resident

12 of the United States if—

13 ‘‘(I) the decedent was treated as

14 the owner of any portion of a foreign

15 trust under the rules of subpart E of

16 part I of subchapter J of chapter 1,

17 or

18 ‘‘(II) any portion of a foreign

19 trust was included in the gross estate

20 of the decedent.

21 ‘‘(B) EXCEPTIONS.—

22 ‘‘(i) FAIR MARKET VALUE SALES.—

23 Subparagraph (A)(ii) shall not apply to

24 any transfer of property to a trust in ex25 change for consideration of at least the fair
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1 market value of the transferred property.

2 For purposes of the preceding sentence,

3 consideration other than cash shall be

4 taken into account at its fair market value

5 and the rules of section 679(a)(3) shall

6 apply.

7 ‘‘(ii) PENSION AND CHARITABLE

8 TRUSTS.—Subparagraph (A) shall not

9 apply with respect to a trust which is—

10 ‘‘(I) described in section

11 404(a)(4) or 404A, or

12 ‘‘(II) determined by the Sec13 retary to be described in section

14 501(c)(3).

15 ‘‘(4) RESPONSIBLE PARTY.—For purposes of

16 this subsection, the term ‘responsible party’

17 means—

18 ‘‘(A) the grantor in the case of the cre19 ation of an inter vivos trust,

20 ‘‘(B) the transferor in the case of a report21 able event described in paragraph (3)(A)(ii)

22 other than a transfer by reason of death, and

23 ‘‘(C) the executor of the decedent’s estate

24 in any other case.
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1 ‘‘(b) UNITED STATES GRANTOR OF FOREIGN

2 TRUST.—

3 ‘‘(1) IN GENERAL.—If, at any time during any

4 taxable year of a United States person, such person

5 is treated as the owner of any portion of a foreign

6 trust under the rules of subpart E of part I of sub7 chapter J of chapter 1, such person shall be respon8 sible to ensure that—

9 ‘‘(A) such trust makes a return for such

10 year which sets forth a full and complete ac11 counting of all trust activities and operations

12 for the year, the name of the United States

13 agent for such trust, and such other informa14 tion as the Secretary may prescribe, and

15 ‘‘(B) such trust furnishes such information

16 as the Secretary may prescribe to each United

17 States person (i) who is treated as the owner of

18 any portion of such trust or (ii) who receives

19 (directly or indirectly) any distribution from the

20 trust.

21 ‘‘(2) TRUSTS NOT HAVING UNITED STATES

22 AGENT.—

23 ‘‘(A) IN GENERAL.—If the rules of this

24 subsection apply to any foreign trust, the deter25 mination of amounts required to be taken into
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1 account with respect to such trust by a United

2 States person under the rules of subpart E of

3 part I of subchapter J of chapter 1 shall be de4 termined by the Secretary in the Secretary’s

5 sole discretion from the Secretary’s own knowl6 edge or from such information as the Secretary

7 may obtain through testimony or otherwise.

8 ‘‘(B) UNITED STATES AGENT REQUIRED.—

9 The rules of this subsection shall apply to any

10 foreign trust to which paragraph (1) applies un11 less such trust agrees (in such manner, subject

12 to such conditions, and at such time as the Sec13 retary shall prescribe) to authorize a United

14 States person to act as such trust’s limited

15 agent solely for purposes of applying sections

16 7602, 7603, and 7604 with respect to—

17 ‘‘(i) any request by the Secretary to

18 examine records or produce testimony re19 lated to the proper treatment of amounts

20 required to be taken into account under

21 the rules referred to in subparagraph (A),

22 or

23 ‘‘(ii) any summons by the Secretary

24 for such records or testimony.
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1 The appearance of persons or production of

2 records by reason of a United States person

3 being such an agent shall not subject such per4 sons or records to legal process for any purpose

5 other than determining the correct treatment

6 under this title of the amounts required to be

7 taken into account under the rules referred to

8 in subparagraph (A). A foreign trust which ap9 points an agent described in this subparagraph

10 shall not be considered to have an office or a

11 permanent establishment in the United States,

12 or to be engaged in a trade or business in the

13 United States, solely because of the activities of

14 such agent pursuant to this subsection.

15 ‘‘(C) OTHER RULES TO APPLY.—Rules

16 similar to the rules of paragraphs (2) and (4)

17 of section 6038A(e) shall apply for purposes of

18 this paragraph.

19 ‘‘(c) REPORTING BY UNITED STATES BENEFICIARIES

20 OF FOREIGN TRUSTS.—

21 ‘‘(1) IN GENERAL.—If any United States per22 son receives (directly or indirectly) during any tax23 able year of such person any distribution from a for24 eign trust, such person shall make a return with re25 spect to such trust for such year which includes—
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1 ‘‘(A) the name of such trust,

2 ‘‘(B) the aggregate amount of the distribu3 tions so received from such trust during such

4 taxable year, and

5 ‘‘(C) such other information as the Sec6 retary may prescribe.

7 ‘‘(2) INCLUSION IN INCOME IF RECORDS NOT

8 PROVIDED.—If adequate records are not provided to

9 the Secretary to determine the proper treatment of

10 any distribution from a foreign trust, such distribu11 tion shall be treated as an accumulation distribution

12 includible in the gross income of the distributee

13 under chapter 1. To the extent provided in regula14 tions, the preceding sentence shall not apply if the

15 foreign trust elects to be subject to rules similar to

16 the rules of subsection (b)(2)(B).

17 ‘‘(d) SPECIAL RULES.—

18 ‘‘(1) DETERMINATION OF WHETHER UNITED

19 STATES PERSON RECEIVES DISTRIBUTION.—For

20 purposes of this section, in determining whether a

21 United States person receives a distribution from a

22 foreign trust, the fact that a portion of such trust

23 is treated as owned by another person under the

24 rules of subpart E of part I of subchapter J of chap25 ter 1 shall be disregarded.
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1 ‘‘(2) DOMESTIC TRUSTS WITH FOREIGN ACTIVI2 TIES.—To the extent provided in regulations, a trust

3 which is a United States person shall be treated as

4 a foreign trust for purposes of this section and sec5 tion 6677 if such trust has substantial activities, or

6 holds substantial property, outside the United

7 States.

8 ‘‘(3) TIME AND MANNER OF FILING INFORMA9 TION.—Any notice or return required under this sec10 tion shall be made at such time and in such manner

11 as the Secretary shall prescribe.

12 ‘‘(4) MODIFICATION OF RETURN REQUIRE13 MENTS.—The Secretary is authorized to suspend or

14 modify any requirement of this section if the Sec15 retary determines that the United States has no sig16 nificant tax interest in obtaining the required infor17 mation.’’

18 (b) INCREASED PENALTIES.—Section 6677 of such

19 Code (relating to failure to file information returns with

20 respect to certain foreign trusts) is amended to read as

21 follows:
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1 ‘‘SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT

2 TO CERTAIN FOREIGN TRUSTS.

3 ‘‘(a) CIVIL PENALTY.—In addition to any criminal

4 penalty provided by law, if any notice or return required

5 to be filed by section 6048—

6 ‘‘(1) is not filed on or before the time provided

7 in such section, or

8 ‘‘(2) does not include all the information re9 quired pursuant to such section or includes incorrect

10 information,

11 the person required to file such notice or return shall pay

12 a penalty equal to 35 percent of the gross reportable

13 amount. If any failure described in the preceding sentence

14 continues for more than 90 days after the day on which

15 the Secretary mails notice of such failure to the person

16 required to pay such penalty, such person shall pay a pen17 alty (in addition to the amount determined under the pre18 ceding sentence) of $10,000 for each 30-day period (or

19 fraction thereof) during which such failure continues after

20 the expiration of such 90-day period.

21 ‘‘(b) SPECIAL RULES FOR RETURNS UNDER SEC22 TION 6048(b).—In the case of a return required under

23 section 6048(b)—

24 ‘‘(1) the United States person referred to in

25 such section shall be liable for the penalty imposed

26 by subsection (a), and
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1 ‘‘(2) subsection (a) shall be applied by sub2 stituting ‘5 percent’ for ‘35 percent’.

3 ‘‘(c) GROSS REPORTABLE AMOUNT.—For purposes

4 of subsection (a), the term ‘gross reportable amount’

5 means—

6 ‘‘(1) the gross value of the property involved in

7 the event (determined as of the date of the event)

8 in the case of a failure relating to section 6048(a),

9 ‘‘(2) the gross value of the portion of the trust’s

10 assets at the close of the year treated as owned by

11 the United States person in the case of a failure re12 lating to section 6048(b)(1), and

13 ‘‘(3) the gross amount of the distributions in

14 the case of a failure relating to section 6048(c).

15 ‘‘(d) REASONABLE CAUSE EXCEPTION.—No penalty

16 shall be imposed by this section on any failure which is

17 shown to be due to reasonable cause and not due to willful

18 neglect. The fact that a foreign jurisdiction would impose

19 a civil or criminal penalty on the taxpayer (or any other

20 person) for disclosing the required information is not rea21 sonable cause.

22 ‘‘(e) DEFICIENCY PROCEDURES NOT TO APPLY.—

23 Subchapter B of chapter 63 (relating to deficiency proce24 dures for income, estate, gift, and certain excise taxes)
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1 shall not apply in respect of the assessment or collection

2 of any penalty imposed by subsection (a).’’

3 (c) CONFORMING AMENDMENTS.—

4 (1) Paragraph (2) of section 6724(d) of such

5 Code is amended by striking ‘‘or’’ at the end of sub6 paragraph (S), by striking the period at the end of

7 subparagraph (T) and inserting ‘‘, or’’, and by in8 serting after subparagraph (T) the following new

9 subparagraph:

10 ‘‘(U) section 6048(b)(1)(B) (relating to

11 foreign trust reporting requirements).’’

12 (2) The table of sections for subpart B of part

13 III of subchapter A of chapter 61 is of such Code

14 amended by striking the item relating to section

15 6048 and inserting the following new item:

‘‘Sec. 6048. Information with respect to certain foreign trusts.’’

16 (3) The table of sections for part I of sub17 chapter B of chapter 68 of such Code is amended

18 by striking the item relating to section 6677 and in19 serting the following new item:

‘‘Sec. 6677. Failure to file information with respect to certain foreign trusts.’’

20 (d) EFFECTIVE DATES.—

21 (1) REPORTABLE EVENTS.—To the extent re22 lated to subsection (a) of section 6048 of the Inter23 nal Revenue Code of 1986, as amended by this sec-
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1 tion, the amendments made by this section shall

2 apply to reportable events (as defined in such section

3 6048) occurring after the date of the enactment of

4 this Act.

5 (2) GRANTOR TRUST REPORTING.—To the ex6 tent related to subsection (b) of such section 6048,

7 the amendments made by this section shall apply to

8 taxable years of United States persons beginning

9 after the date of the enactment of this Act.

10 (3) REPORTING BY UNITED STATES BENE11 FICIARIES.—To the extent related to subsection (c)

12 of such section 6048, the amendments made by this

13 section shall apply to distributions received after the

14 date of the enactment of this Act.

15 SEC. ll302. MODIFICATIONS OF RULES RELATING TO FOR16 EIGN TRUSTS HAVING ONE OR MORE UNITED

17 STATES BENEFICIARIES.

18 (a) TREATMENT OF TRUST OBLIGATIONS, ETC.—

19 (1) Paragraph (2) of section 679(a) of the In20 ternal Revenue Code of 1986 is amended by striking

21 subparagraph (B) and inserting the following:

22 ‘‘(B) TRANSFERS AT FAIR MARKET

23 VALUE.—To any transfer of property to a trust

24 in exchange for consideration of at least the fair

25 market value of the transferred property. For
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1 purposes of the preceding sentence, consider2 ation other than cash shall be taken into ac3 count at its fair market value.’’

4 (2) Subsection (a) of section 679 of such Code

5 (relating to foreign trusts having one or more Unit6 ed States beneficiaries) is amended by adding at the

7 end the following new paragraph:

8 ‘‘(3) CERTAIN OBLIGATIONS NOT TAKEN INTO

9 ACCOUNT UNDER FAIR MARKET VALUE EXCEP10 TION.—

11 ‘‘(A) IN GENERAL.—In determining wheth12 er paragraph (2)(B) applies to any transfer by

13 a person described in clause (ii) or (iii) of sub14 paragraph (C), there shall not be taken into ac15 count—

16 ‘‘(i) any obligation of a person de17 scribed in subparagraph (C), and

18 ‘‘(ii) to the extent provided in regula19 tions, any obligation which is guaranteed

20 by a person described in subparagraph (C).

21 ‘‘(B) TREATMENT OF PRINCIPAL PAY22 MENTS ON OBLIGATION.—Principal payments

23 by the trust on any obligation referred to in

24 subparagraph (A) shall be taken into account

25 on and after the date of the payment in deter-
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1 mining the portion of the trust attributable to

2 the property transferred.

3 ‘‘(C) PERSONS DESCRIBED.—The persons

4 described in this subparagraph are—

5 ‘‘(i) the trust,

6 ‘‘(ii) any grantor or beneficiary of the

7 trust, and

8 ‘‘(iii) any person who is related (with9 in the meaning of section 643(i)(3)) to any

10 grantor or beneficiary of the trust.’’

11 (b) EXEMPTION OF TRANSFERS TO CHARITABLE

12 TRUSTS.—Subsection (a) of section 679 of such Code is

13 amended by striking ‘‘section 404(a)(4) or 404A’’ and in14 serting ‘‘section 6048(a)(3)(B)(ii)’’.

15 (c) OTHER MODIFICATIONS.—Subsection (a) of sec16 tion 679 of such Code is amended by adding at the end

17 the following new paragraphs:

18 ‘‘(4) SPECIAL RULES APPLICABLE TO FOREIGN

19 GRANTOR WHO LATER BECOMES A UNITED STATES

20 PERSON.—

21 ‘‘(A) IN GENERAL.—If a nonresident alien

22 individual has a residency starting date within

23 5 years after directly or indirectly transferring

24 property to a foreign trust, this section and sec25 tion 6048 shall be applied as if such individual
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1 transferred to such trust on the residency start2 ing date an amount equal to the portion of such

3 trust attributable to the property transferred by

4 such individual to such trust in such transfer.

5 ‘‘(B) TREATMENT OF UNDISTRIBUTED IN6 COME.—For purposes of this section, undistrib7 uted net income for periods before such individ8 ual’s residency starting date shall be taken into

9 account in determining the portion of the trust

10 which is attributable to property transferred by

11 such individual to such trust but shall not oth12 erwise be taken into account.

13 ‘‘(C) RESIDENCY STARTING DATE.—For

14 purposes of this paragraph, an individual’s resi15 dency starting date is the residency starting

16 date determined under section 7701(b)(2)(A).

17 ‘‘(5) OUTBOUND TRUST MIGRATIONS.—If—

18 ‘‘(A) an individual who is a citizen or resi19 dent of the United States transferred property

20 to a trust which was not a foreign trust, and

21 ‘‘(B) such trust becomes a foreign trust

22 while such individual is alive,

23 then this section and section 6048 shall be applied

24 as if such individual transferred to such trust on the

25 date such trust becomes a foreign trust an amount
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1 equal to the portion of such trust attributable to the

2 property previously transferred by such individual to

3 such trust. A rule similar to the rule of paragraph

4 (4)(B) shall apply for purposes of this paragraph.’’

5 (d) MODIFICATIONS RELATING TO WHETHER TRUST

6 HAS UNITED STATES BENEFICIARIES.—Subsection (c) of

7 section 679 of such Code is amended by adding at the

8 end the following new paragraphs:

9 ‘‘(3) CERTAIN UNITED STATES BENEFICIARIES

10 DISREGARDED.—A beneficiary shall not be treated

11 as a United States person in applying this section

12 with respect to any transfer of property to foreign

13 trust if such beneficiary first became a United

14 States person more than 5 years after the date of

15 such transfer.

16 ‘‘(4) TREATMENT OF FORMER UNITED STATES

17 PERSONS.—To the extent provided by the Secretary,

18 for purposes of this subsection, the term ‘United

19 States person’ includes any person who was a Unit20 ed States person at any time during the existence of

21 the trust.’’

22 (e) TECHNICAL AMENDMENT.—Subparagraph (A) of

23 section 679(c)(2) is amended to read as follows:
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1 ‘‘(A) in the case of a foreign corporation,

2 such corporation is a controlled foreign corpora3 tion (as defined in section 957(a)),’’.

4 (f) REGULATIONS.—Section 679 is amended by add5 ing at the end the following new subsection:

6 ‘‘(d) REGULATIONS.—The Secretary shall prescribe

7 such regulations as may be necessary or appropriate to

8 carry out the purposes of this section.’’

9 (g) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to transfers of property after Feb11 ruary 6, 1995.

12 SEC. ll303. FOREIGN PERSONS NOT TO BE TREATED AS

13 OWNERS UNDER GRANTOR TRUST RULES.

14 (a) GENERAL RULE.—

15 (1) Subsection (f) of section 672 of the Internal

16 Revenue Code of 1986 (relating to special rule where

17 grantor is foreign person) is amended to read as fol18 lows:

19 ‘‘(f) SUBPART NOT TO RESULT IN FOREIGN OWNER20 SHIP.—

21 ‘‘(1) IN GENERAL.—Notwithstanding any other

22 provision of this subpart, this subpart shall apply

23 only to the extent such application results in an

24 amount being currently taken into account (directly

25 or through 1 or more entities) under this chapter in
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1 computing the income of a citizen or resident of the

2 United States or a domestic corporation.

3 ‘‘(2) EXCEPTIONS.—

4 ‘‘(A) CERTAIN REVOCABLE AND IR-REV5 OCABLE TRUSTS.—

6 ‘‘(i) IN GENERAL.—Except as pro7 vided in clause (ii), paragraph (1) shall not

8 apply to any trust if—

9 ‘‘(I) the power to revest abso10 lutely in the grantor title to the trust

11 property is exercisable solely by the

12 grantor without the approval or con13 sent of any other person or with the

14 consent of a related or subordinate

15 party who is subservient to the grant16 or, or

17 ‘‘(II) the only amounts distribut18 able from such trust (whether income

19 or corpus) during the lifetime of the

20 grantor are amounts distributable to

21 the grantor or the spouse of the

22 grantor.

23 ‘‘(ii) EXCEPTION.—Clause (i) shall

24 not apply to any trust which has a bene25 ficiary who is a United States person to
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1 the extent such beneficiary has made

2 transfers of property by gift (directly or in3 directly) to a foreign person who is the

4 grantor of such trust. For purposes of the

5 preceding sentence, any gift shall not be

6 taken into account to the extent such gift

7 is excluded from taxable gifts under sec8 tion 2503(b).

9 ‘‘(B) COMPENSATORY TRUSTS.—Except as

10 provided in regulations, paragraph (1) shall not

11 apply to any portion of a trust distributions

12 from which are taxable as compensation for

13 services rendered.

14 ‘‘(3) SPECIAL RULES.—Except as otherwise

15 provided in regulations prescribed by the Sec16 retary—

17 ‘‘(A) a controlled foreign corporation (as

18 defined in section 957) shall be treated as a do19 mestic corporation for purposes of paragraph

20 (1), and

21 ‘‘(B) paragraph (1) shall not apply for

22 purposes of applying part III of subchapter G

23 (relating to foreign personal holding companies)

24 and part VI of subchapter P (relating to treat-
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1 ment of certain passive foreign investment com2 panies).

3 ‘‘(4) RECHARACTERIZATION OF PURPORTED

4 GIFTS.—In the case of any transfer directly or indi5 rectly from a partnership or foreign corporation

6 which the transferee treats as a gift or bequest, the

7 Secretary may recharacterize such transfer in such

8 circumstances as the Secretary determines to be ap9 propriate to prevent the avoidance of the purposes of

10 this subsection.

11 ‘‘(5) REGULATIONS.—The Secretary shall pre12 scribe such regulations as may be necessary or ap13 propriate to carry out the purposes of this sub14 section, including regulations providing that para15 graph (1) shall not apply in appropriate cases.’’

16 (2) The last sentence of subsection (c) of sec17 tion 672 of such Code is amended by inserting ‘‘sub18 section (f) and’’ before ‘‘sections 674’’.

19 (b) CREDIT FOR CERTAIN TAXES.—Paragraph (2) of

20 section 665(d) of such Code is amended by adding at the

21 end the following new sentence: ‘‘Under rules or regula22 tions prescribed by the Secretary, in the case of any for23 eign trust of which the settlor or another person would

24 be treated as owner of any portion of the trust under sub25 part E but for section 672(f), the term ‘taxes imposed on
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1 the trust’ includes the allocable amount of any income,

2 war profits, and excess profits taxes imposed by any for3 eign country or possession of the United States on the

4 settlor or such other person in respect of trust gross in5 come.’’

6 (c) DISTRIBUTIONS BY CERTAIN FOREIGN TRUSTS

7 THROUGH NOMINEES.—

8 (1) Section 643 of such Code is amended by

9 adding at the end the following new subsection:

10 ‘‘(h) DISTRIBUTIONS BY CERTAIN FOREIGN TRUSTS

11 THROUGH NOMINEES.—For purposes of this part, any

12 amount paid to a United States person which is derived

13 directly or indirectly from a foreign trust of which the

14 payor is not the grantor shall be deemed in the year of

15 payment to have been directly paid by the foreign trust

16 to such United States person.’’

17 (2) Section 665 of such Code is amended by

18 striking subsection (c).

19 (d) EFFECTIVE DATE.—

20 (1) IN GENERAL.—Except as provided by para21 graph (2), the amendments made by this section

22 shall take effect on the date of the enactment of this

23 Act.
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1 (2) EXCEPTION FOR CERTAIN TRUSTS.—The

2 amendments made by this section shall not apply to

3 any trust—

4 (A) which is treated as owned by the

5 grantor or another person under section 676 or

6 677 (other than subsection (a)(3) thereof) of

7 the Internal Revenue Code of 1986, and

8 (B) which is in existence on September 19,

9 1995.

10 The preceding sentence shall not apply to the por11 tion of any such trust attributable to any transfer to

12 such trust after September 19, 1995.

13 (e) TRANSITIONAL RULE.—If—

14 (1) by reason of the amendments made by this

15 section, any person other than a United States per16 son ceases to be treated as the owner of a portion

17 of a domestic trust, and

18 (2) before January 1, 1997, such trust becomes

19 a foreign trust, or the assets of such trust are trans20 ferred to a foreign trust,

21 no tax shall be imposed by section 1491 of the Internal

22 Revenue Code of 1986 by reason of such trust becoming

23 a foreign trust or the assets of such trust being trans24 ferred to a foreign trust.
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1 SEC. ll304. INFORMATION REPORTING REGARDING FOR2 EIGN GIFTS.

3 (a) IN GENERAL.—Subpart A of part III of sub4 chapter A of chapter 61 of the Internal Revenue Code of

5 1986 is amended by inserting after section 6039E the fol6 lowing new section:

7 ‘‘SEC. 6039F. NOTICE OF GIFTS RECEIVED FROM FOREIGN

8 PERSONS.

9 ‘‘(a) IN GENERAL.—If the value of the aggregate for10 eign gifts received by a United States person (other than

11 an organization described in section 501(c) and exempt

12 from tax under section 501(a)) during any taxable year

13 exceeds $10,000, such United States person shall furnish

14 (at such time and in such manner as the Secretary shall

15 prescribe) such information as the Secretary may pre16 scribe regarding each foreign gift received during such

17 year.

18 ‘‘(b) FOREIGN GIFT.—For purposes of this section,

19 the term ‘foreign gift’ means any amount received from

20 a person other than a United States person which the re21 cipient treats as a gift or bequest. Such term shall not

22 include any qualified transfer (within the meaning of sec23 tion 2503(e)(2)).

24 ‘‘(c) PENALTY FOR FAILURE TO FILE INFORMA25 TION.—
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1 ‘‘(1) IN GENERAL.—If a United States person

2 fails to furnish the information required by sub3 section (a) with respect to any foreign gift within

4 the time prescribed therefor (including extensions)—

5 ‘‘(A) the tax consequences of the receipt of

6 such gift shall be determined by the Secretary

7 in the Secretary’s sole discretion from the Sec8 retary’s own knowledge or from such informa9 tion as the Secretary may obtain through testi10 mony or otherwise, and

11 ‘‘(B) such United States person shall pay

12 (upon notice and demand by the Secretary and

13 in the same manner as tax) an amount equal to

14 5 percent of the amount of such foreign gift for

15 each month for which the failure continues (not

16 to exceed 25 percent of such amount in the ag17 gregate).

18 ‘‘(2) REASONABLE CAUSE EXCEPTION.— Para19 graph (1) shall not apply to any failure to report a

20 foreign gift if the United States person shows that

21 the failure is due to reasonable cause and not due

22 to willful neglect.

23 ‘‘(d) REGULATIONS.—The Secretary shall prescribe

24 such regulations as may be necessary or appropriate to

25 carry out the purposes of this section.’’
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1 (b) CLERICAL AMENDMENT.—The table of sections

2 for such subpart is amended by inserting after the item

3 relating to section 6039E the following new item:

‘‘Sec. 6039F. Notice of large gifts received from foreign persons.’’

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to amounts received after the date

6 of the enactment of this Act in taxable years ending after

7 such date.

8 SEC. ll305. MODIFICATION OF RULES RELATING TO FOR9 EIGN TRUSTS WHICH ARE NOT GRANTOR

10 TRUSTS.

11 (a) MODIFICATION OF INTEREST CHARGE ON ACCU12 MULATION DISTRIBUTIONS.—Subsection (a) of section

13 668 of the Internal Revenue Code of 1986 (relating to

14 interest charge on accumulation distributions from foreign

15 trusts) is amended to read as follows:

16 ‘‘(a) GENERAL RULE.—For purposes of the tax de17 termined under section 667(a)—

18 ‘‘(1) INTEREST DETERMINED USING

19 UNDERPAYMENT RATES.—The interest charge deter20 mined under this section with respect to any dis21 tribution is the amount of interest which would be

22 determined on the partial tax computed under sec23 tion 667(b) for the period described in paragraph
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1 (2) using the rates and the method under section

2 6621 applicable to underpayments of tax.

3 ‘‘(2) PERIOD.—For purposes of paragraph (1),

4 the period described in this paragraph is the period

5 which begins on the date which is the applicable

6 number of years before the date of the distribution

7 and which ends on the date of the distribution.

8 ‘‘(3) APPLICABLE NUMBER OF YEARS.—For

9 purposes of paragraph (2)—

10 ‘‘(A) IN GENERAL.—The applicable num11 ber of years with respect to a distribution is the

12 number determined by dividing—

13 ‘‘(i) the sum of the products described

14 in subparagraph (B) with respect to each

15 undistributed income year, by

16 ‘‘(ii) the aggregate undistributed net

17 income.

18 The quotient determined under the preceding

19 sentence shall be rounded under procedures

20 prescribed by the Secretary.

21 ‘‘(B) PRODUCT DESCRIBED.—For pur22 poses of subparagraph (A), the product de23 scribed in this subparagraph with respect to

24 any undistributed income year is the product

25 of—
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1 ‘‘(i) the undistributed net income for

2 such year, and

3 ‘‘(ii) the sum of the number of taxable

4 years between such year and the taxable

5 year of the distribution (counting in each

6 case the undistributed income year but not

7 counting the taxable year of the distribu8 tion).

9 ‘‘(4) UNDISTRIBUTED INCOME YEAR.—For pur10 poses of this subsection, the term ‘undistributed in11 come year’ means any prior taxable year of the trust

12 for which there is undistributed net income, other

13 than a taxable year during all of which the bene14 ficiary receiving the distribution was not a citizen or

15 resident of the United States.

16 ‘‘(5) DETERMINATION OF UNDISTRIBUTED NET

17 INCOME.—Notwithstanding section 666, for pur18 poses of this subsection, an accumulation distribu19 tion from the trust shall be treated as reducing pro20 portionately the undistributed net income for prior

21 taxable years.

22 ‘‘(6) PERIODS BEFORE 1996.—Interest for the

23 portion of the period described in paragraph (2)

24 which occurs before January 1, 1996, shall be deter25 mined—
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1 ‘‘(A) by using an interest rate of 6 percent,

2 and

3 ‘‘(B) without compounding until January

4 1, 1996.’’

5 (b) ABUSIVE TRANSACTIONS.—Section 643(a) of

6 such Code is amended by inserting after paragraph (6)

7 the following new paragraph:

8 ‘‘(7) ABUSIVE TRANSACTIONS.—The Secretary

9 shall prescribe such regulations as may be necessary

10 or appropriate to carry out the purposes of this part,

11 including regulations to prevent avoidance of such

12 purposes.’’

13 (c) TREATMENT OF USE OF TRUST PROPERTY.—

14 (1) IN GENERAL.—Section 643 of such Code

15 (relating to definitions applicable to subparts A, B,

16 C, and D) is amended by adding at the end the fol17 lowing new subsection:

18 ‘‘(i) USE OF FOREIGN TRUST PROPERTY.—For pur19 poses of subparts B, C, and D—

20 ‘‘(1) GENERAL RULE.—If a foreign trust makes

21 a loan of cash or marketable securities directly or in22 directly to—

23 ‘‘(A) any grantor or beneficiary of such

24 trust who is a United States person, or
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1 ‘‘(B) any United States person not de2 scribed in subparagraph (A) who is related to

3 such grantor or beneficiary,

4 the amount of such loan shall be treated as a dis5 tribution by such trust to such grantor or bene6 ficiary (as the case may be).

7 ‘‘(2) USE OF OTHER PROPERTY.—Except as

8 provided in regulations prescribed by the Secretary,

9 any direct or indirect use of trust property (other

10 than cash or marketable securities) by a person re11 ferred to in subparagraph (A) or (B) of paragraph

12 (1) shall be treated as a distribution to the grantor

13 or beneficiary (as the case may be) equal to the fair

14 market value of the use of such property. The Sec15 retary may prescribe regulations treating a loan

16 guarantee by the trust as a use of trust property

17 equal to the value of the guarantee.

18 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—For

19 purposes of this subsection—

20 ‘‘(A) CASH.—The term ‘cash’ includes for21 eign currencies and cash equivalents.

22 ‘‘(B) RELATED PERSON.—

23 ‘‘(i) IN GENERAL.—A person is relat24 ed to another person if the relationship be25 tween such persons would result in a dis-
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1 allowance of losses under section 267 or

2 707(b). In applying section 267 for pur3 poses of the preceding sentence, section

4 267(c)(4) shall be applied as if the family

5 of an individual includes the spouses of the

6 members of the family.

7 ‘‘(ii) ALLOCATION OF USE.—If any

8 person described in paragraph (1)(B) is re9 lated to more than one person, the grantor

10 or beneficiary to whom the treatment

11 under this subsection applies shall be de12 termined under regulations prescribed by

13 the Secretary.

14 ‘‘(C) EXCLUSION OF TAX-EXEMPTS.—The

15 term ‘United States person’ does not include

16 any entity exempt from tax under this chapter.

17 ‘‘(D) TRUST NOT TREATED AS SIMPLE

18 TRUST.—Any trust which is treated under this

19 subsection as making a distribution shall be

20 treated as not described in section 651.

21 ‘‘(4) SUBSEQUENT TRANSACTIONS REGARDING

22 LOAN PRINCIPAL.—If any loan is taken into account

23 under paragraph (1), any subsequent transaction be24 tween the trust and the original borrower regarding

25 the principal of the loan (by way of complete or par-
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1 tial repayment, satisfaction, cancellation, discharge,

2 or otherwise) shall be disregarded for purposes of

3 this title.’’

4 (2) TECHNICAL AMENDMENT.—Paragraph (8)

5 of section 7872(f) is amended by inserting ‘‘,

6 643(i),’’ before ‘‘or 1274’’ each place it appears.

7 (d) EFFECTIVE DATES.—

8 (1) INTEREST CHARGE.—The amendment made

9 by subsection (a) shall apply to distributions after

10 the date of the enactment of this Act.

11 (2) ABUSIVE TRANSACTIONS.—The amendment

12 made by subsection (b) shall take effect on the date

13 of the enactment of this Act.

14 (3) USE OF TRUST PROPERTY.—The amend15 ment made by subsection (c) shall apply to—

16 (A) loans of cash or marketable securities

17 after September 19, 1995, and

18 (B) uses of other trust property after De19 cember 31, 1995.

20 SEC. ll306. RESIDENCE OF ESTATES AND TRUSTS, ETC.

21 (a) TREATMENT AS UNITED STATES PERSON.—

22 (1) IN GENERAL.—Paragraph (30) of section

23 7701(a) of the Internal Revenue Code of 1986 is

24 amended by striking subparagraph (D) and by in25 serting after subparagraph (C) the following:
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1 ‘‘(D) any estate or trust if—

2 ‘‘(i) a court within the United States

3 is able to exercise primary supervision over

4 the administration of the estate or trust,

5 and

6 ‘‘(ii) in the case of a trust, one or

7 more United States fiduciaries have the

8 authority to control all substantial deci9 sions of the trust.’’

10 (2) CONFORMING AMENDMENT.—Paragraph

11 (31) of section 7701(a) of such Code is amended to

12 read as follows:

13 ‘‘(31) FOREIGN ESTATE OR TRUST.—The term

14 ‘foreign estate’ or ‘foreign trust’ means any estate or

15 trust other than an estate or trust described in sec16 tion 7701(a)(30)(D).’’

17 (3) EFFECTIVE DATE.—The amendments made

18 by this subsection shall apply—

19 (A) to taxable years beginning after De20 cember 31, 1996, or

21 (B) at the election of the trustee of a

22 trust, to taxable years ending after the date of

23 the enactment of this Act.

24 Such an election, once made, shall be irrevocable.
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1 (b) DOMESTIC TRUSTS WHICH BECOME FOREIGN

2 TRUSTS.—

3 (1) IN GENERAL.—Section 1491 of such Code

4 (relating to imposition of tax on transfers to avoid

5 income tax) is amended by adding at the end the fol6 lowing new flush sentence:

7 ‘‘If a trust which is not a foreign trust becomes a foreign

8 trust, such trust shall be treated for purposes of this sec9 tion as having transferred, immediately before becoming

10 a foreign trust, all of its assets to a foreign trust.’’

11 (2) PENALTY.—Section 1494 of the Internal

12 Revenue Code of 1986 is amended by adding at the

13 end the following new subsection:

14 ‘‘(c) PENALTY.—In the case of any failure to file a

15 return required by the Secretary with respect to any trans16 fer described in section 1491, the person required to file

17 such return shall be liable for the penalties provided in

18 section 6677 in the same manner as if such failure were

19 a failure to file a return under section 6048(a).’’

20 (3) EFFECTIVE DATE.—The amendments made

21 by this subsection shall take effect on the date of the

22 enactment of this Act.
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1 PART II—OTHER FOREIGN PROVISIONS

2 SEC. ll311. DEFINITION OF FOREIGN PERSONAL HOLD3 ING COMPANY INCOME.

4 (a) INCOME FROM NOTIONAL PRINCIPAL CON5 TRACTS.—

6 (1) IN GENERAL.—Paragraph (1) of section

7 954(c) (defining foreign personal holding company

8 income) is amended by adding at the end the follow9 ing new subparagraph:

10 ‘‘(F) INCOME FROM NOTIONAL PRINCIPAL

11 CONTRACTS.—Net income from notional prin12 cipal contracts. Any item of income, gain, de13 duction, or loss from a notional principal con14 tract entered into for purposes of hedging any

15 item described in subparagraph (B), (C), (D),

16 or (E) shall not be taken into account for pur17 poses of this subparagraph but shall be taken

18 into account under such other subparagraph.’’

19 (2) EXCEPTION FOR DEALERS.—Paragraph (2)

20 of section 954(c) is amended by adding at the end

21 the following new subparagraph:

22 ‘‘(C) EXCEPTION FOR DEALERS.—Except

23 as provided by regulations, in the case of a reg24 ular dealer in property, forward contracts, op25 tion contracts, or similar financial instruments

26 (including notional principal contracts), there
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1 shall not be taken into account in computing

2 foreign personal holding income any item of in3 come, gain, deduction, or loss from any trans4 action (including hedging transactions) entered

5 into in the ordinary course of such dealer’s

6 trade or business as such a dealer.’’

7 (3) CONFORMING AMENDMENT.—Subparagraph

8 (B) of section 954(c)(1) is amended—

9 (A) by striking the second sentence, and

10 (B) by striking ‘‘also’’ in the last sentence.

11 (b) PAYMENTS IN LIEU OF DIVIDENDS.—Paragraph

12 (1) of section 954(c), as amended by subsection (a), is

13 amended by adding at the end the following new subpara14 graph:

15 ‘‘(G) PAYMENTS IN LIEU OF DIVIDENDS.—

16 Payments in lieu of dividends which are made

17 pursuant to an agreement to which section

18 1058 applies.’’

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to taxable years beginning after

21 December 31, 1995.

22 SEC. ll312. TREATMENT OF FOREIGN OIL AND GAS EX23 TRACTION INCOME.

24 (a) DISALLOWANCE OF FOREIGN TAX CREDIT.—Sec25 tion 907(a) is amended to read as follows:
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1 ‘‘(a) DENIAL OF FOREIGN TAX CREDIT FOR EX2 TRACTION INCOME.—

3 ‘‘(1) IN GENERAL.—Notwithstanding any other

4 provision of this part—

5 ‘‘(A) no credit shall be allowed under sec6 tion 901(a) for any income, war profits, or ex7 cess profits taxes paid or accrued (or deemed

8 paid under section 902 or 960) to any country

9 which are attributable to foreign oil and gas ex10 traction income, and

11 ‘‘(B) subsections (a), (b), and (c) of sec12 tion 904 and sections 902 and 960 shall be ap13 plied separately with respect to foreign oil and

14 gas extraction income.

15 ‘‘(2) TAXES ALLOWED AS DEDUCTION, ETC.—

16 Sections 78 and 275 shall not apply to any tax

17 which is not allowable as a credit under section

18 901(a) by reason of this subsection.’’

19 (b) ELIMINATION OF DEFERRAL.—Section 954(g) is

20 amended by adding at the end the following new para21 graph:

22 ‘‘(3) NO EXCEPTIONS FOR EXTRACTION IN23 COME.—Notwithstanding paragraphs (1) and (2),

24 foreign base company oil related income shall include
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1 all foreign oil and gas extraction income (as defined

2 in section 907(c)(1)) for the taxable year.’’

3 (c) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to taxable years beginning after

5 December 31, 1995. The amendments made by this sec6 tion shall apply notwithstanding any treaty obligation of

7 the United States.

8 SEC. ll313. LIMITATION ON EXCLUSION OF EARNED IN9 COME OF CITIZENS OR RESIDENTS OF THE

10 UNITED STATES LIVING ABROAD.

11 (a) IN GENERAL.—Section 911 (relating to exclusion

12 of earned income of citizens or residents of the United

13 States living abroad) is amended by redesignating sub14 section (f) as subsection (g) and by inserting after sub15 section (e) the following new subsection:

16 ‘‘(f) EXCLUSION TO BE APPLIED AT LOWEST RATES

17 OF TAX.—If this section applies to a taxpayer for any tax18 able year, the tax imposed this chapter for such taxable

19 year shall be equal to the greater of—

20 ‘‘(1) such tax determined without regard to this

21 subsection, or

22 ‘‘(2) the excess of—

23 ‘‘(A) such tax determined without regard

24 to this section, over
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1 ‘‘(B) a tax determined under section 1 on

2 an amount of taxable income equal to the

3 amount of the exclusion under subsection (a).’’

4 (b) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to taxable years beginning after

6 December 31, 1995.

7 Subtitle D—Accounting Provisions

8 SEC. ll401. REPEAL OF BAD DEBT RESERVE METHOD FOR

9 THRIFT SAVINGS ASSOCIATIONS.

10 (a) IN GENERAL.—Section 593 (relating to reserves

11 for losses on loans) is hereby repealed.

12 (b) CONFORMING AMENDMENTS.—

13 (1) Subsection (d) of section 50 is amended by

14 adding at the end the following new sentence:

15 ‘‘Paragraphs (1)(A), (2)(A), and (4) of section 46(e) re16 ferred to in paragraph (1) of this subsection shall not

17 apply to any taxable year beginning after December 31,

18 1995.’’

19 (2) Subsection (e) of section 52 is amended by

20 striking paragraph (1) and by redesignating para21 graphs (2) and (3) as paragraphs (1) and (2), re22 spectively.

23 (3) Subsection (a) of section 57 is amended by

24 striking paragraph (4).
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1 (4) Section 246 is amended by striking sub2 section (f).

3 (5) Clause (i) of section 291(e)(1)(B) is amend4 ed by striking ‘‘or to which section 593 applies’’.

5 (6) Subparagraph (A) of section 585(a)(2) is

6 amended by striking ‘‘other than an organization to

7 which section 593 applies’’.

8 (7) Sections 595 and 596 are hereby repealed.

9 (8) Subsection (a) of section 860E is amend10 ed—

11 (A) by striking ‘‘Except as provided in

12 paragraph (2), the’’ in paragraph (1) and in13 serting ‘‘The’’,

14 (B) by striking paragraphs (2) and (4) and

15 redesignating paragraphs (3) and (5) as para16 graphs (2) and (3), respectively, and

17 (C) by striking in paragraph (2) (as so re18 designated) all that follows ‘‘subsection’’ and

19 inserting a period.

20 (9) Paragraph (3) of section 992(d) is amended

21 by striking ‘‘or 593’’.

22 (10) Section 1038 is amended by striking sub23 section (f).

24 (11) Clause (ii) of section 1042(c)(4)(B) is

25 amended by striking ‘‘or 593’’.
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1 (12) Subsection (c) of section 1277 is amended

2 by striking ‘‘or to which section 593 applies’’.

3 (13) Subparagraph (B) of section 1361(b)(2) is

4 amended by striking ‘‘or to which section 593 ap5 plies’’.

6 (14) The table of sections for part II of sub7 chapter H of chapter 1 is amended by striking the

8 items relating to sections 593, 595, and 596.

9 (c) EFFECTIVE DATE.—

10 (1) IN GENERAL.—Except as provided in para11 graph (2), the amendments made by this section

12 shall apply to taxable years beginning after Decem13 ber 31, 1995.

14 (2) REPEAL OF SECTION 595.—The repeal of

15 section 595 under subsection (b)(7) shall apply to

16 property acquired in taxable years beginning after

17 December 31, 1995.

18 (d) 6-YEAR SPREAD OF ADJUSTMENTS.—

19 (1) IN GENERAL.—In the case of any taxpayer

20 who is required by reason of the amendments made

21 by this section to change its method of computing

22 reserves for bad debts—

23 (A) such change shall be treated as a

24 change in a method of accounting,
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1 (B) such change shall be treated as initi2 ated by the taxpayer and as having been made

3 with the consent of the Secretary, and

4 (C) the net amount of the adjustments re5 quired to be taken into account by the taxpayer

6 under section 481(a)—

7 (i) shall be determined by taking into

8 account only applicable excess reserves,

9 and

10 (ii) as so determined, shall be taken

11 into account ratably over the 6-taxable

12 year period beginning with the first taxable

13 year beginning after December 31, 1995.

14 (2) APPLICABLE EXCESS RESERVES.—

15 (A) IN GENERAL.—For purposes of para16 graph (1), the term ‘applicable excess reserves’

17 means the excess (if any) of—

18 (i) the balance of the reserves de19 scribed in section 593(c)(1) of such Code

20 (as in effect on the day before the date of

21 the enactment of this Act) as of the close

22 of the taxpayer’s last taxable year begin23 ning before January 1, 1996, over

24 (ii) the lesser of—
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1 (I) the balance of such reserves

2 as of the close of the taxpayer’s last

3 taxable year beginning before January

4 1, 1988, or

5 (II) the balance of the reserves

6 described in subclause (I), reduce by

7 an amount determined in the same

8 manner as under section

9 585(b)(2)(B)(ii) on the basis of the

10 taxable years described in clause (i)

11 and this clause.

12 (B) SPECIAL RULE FOR THRIFTS WHICH

13 BECOME SMALL BANKS.—In the case of a bank

14 (as defined in section 581 of such Code) which

15 is not a large bank (as defined in section

16 585(c)(2) of such Code) for its first taxable

17 year beginning after December 31, 1995—

18 (i) the balance taken into account

19 under subparagraph (A)(ii) shall not be

20 less than the amount which would be the

21 balance of such reserve as of the close of

22 its last taxable year beginning before Jan23 uary 1, 1996, if the additions to such re24 serve for all taxable years had been deter25 mined under section 585(b)(2)(A), and
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1 (ii) the opening balance of the reserve

2 for bad debts as of the beginning of such

3 first taxable year shall be the balance

4 taken into account under subparagraph

5 (A)(ii) (determined after the application of

6 clause (i) of this subparagraph).

7 The preceding sentence shall not apply for pur8 poses of paragraphs (5), (6), and (7).

9 (3) RECAPTURE OF PRE-1988 RESERVES WHERE

10 TAXPAYER CEASES TO BE BANK.—If during any tax11 able year beginning after December 31, 1995, a tax12 payer to which paragraph (1) applied is not a bank

13 (as defined in section 581), paragraph (1) shall

14 apply to the reserves described in subparagraph

15 (A)(ii) except that such reserves shall be taken into

16 account ratably over the 6-taxable year period begin17 ning with such taxable year.

18 (4) SUSPENSION OF RECAPTURE IF RESIDEN19 TIAL LOAN REQUIREMENT MET.—

20 (A) IN GENERAL.—In the case of a bank

21 which meets the residential loan requirement of

22 subparagraph (B) for a taxable year beginning

23 after December 31, 1995, and before January

24 1, 1998—
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1 (i) no adjustment shall be taken into

2 account under paragraph (1) for such tax3 able year, and

4 (ii) such taxable year shall be dis5 regarded in determining—

6 (I) whether any other taxable

7 year is a taxable year for which an

8 adjustment is required to be taken

9 into account under paragraph (1), and

10 (II) the amount of such adjust11 ment.

12 (B) RESIDENTIAL LOAN REQUIREMENT.—

13 A taxpayer meets the residential loan require14 ment of this subparagraph for any taxable year

15 if the principal amount of the residential loans

16 made by the taxpayer during such year is not

17 less than the base amount for such year.

18 (C) RESIDENTIAL LOAN.—For purposes of

19 this paragraph, the term ‘‘residential loan’’

20 means any loan described in clause (v) of sec21 tion 7701(a)(19)(C) of such Code but only if

22 such loan is incurred in acquiring, constructing,

23 or improving the property described in such

24 clause.
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1 (D) BASE AMOUNT.—For purposes of sub2 paragraph (B), the base amount is the average

3 of the principal amounts of the residential loans

4 made by the taxpayer during the 6 most recent

5 taxable years beginning before January 1,

6 1996. At the election of the taxpayer who made

7 such loans during each of such 6 taxable years,

8 the preceding sentence shall be applied without

9 regard to the taxable year in which such prin10 cipal amount was the highest and the taxable

11 year in such principal amount was the lowest.

12 Such an election may be made only for the first

13 taxable year beginning after December 31,

14 1995, and, if made for such taxable year, shall

15 apply to the succeeding taxable year unless re16 voked with the consent of the Secretary of the

17 Treasury or his delegate.

18 (E) CONTROLLED GROUPS.—In the case of

19 a taxpayer which is a member of any controlled

20 group of corporations described in section

21 1563(a)(1) of such Code, subparagraph (B)

22 shall be applied with respect to such group.

23 (5) CONTINUED APPLICATION OF FRESH START

24 UNDER SECTION 585 TRANSITIONAL RULES.—In the

25 case of a taxpayer to which paragraph (1) applied
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1 and which was not a large bank (as defined in sec2 tion 585(c)(2) of such Code) for its first taxable

3 year beginning after December 31, 1995:

4 (A) IN GENERAL.—For purposes of deter5 mining the net amount of adjustments referred

6 to in section 585(c)(3)(A)(iii) of such Code,

7 there shall be taken into account only the ex8 cess of the reserve for bad debts as of the close

9 of the last taxable year before the disqualifica10 tion year over the balance taken into account by

11 such taxpayer under paragraph (2)(A)(ii) of

12 this subsection.

13 (B) TREATMENT UNDER ELECTIVE CUT14 OFF METHOD.—For purposes of applying sec15 tion 585(c)(4) of such Code—

16 (i) the balance of the reserve taken

17 into account under subparagraph (B)

18 thereof shall be reduced by the balance

19 taken into account by such taxpayer under

20 paragraph (2)(A)(ii) of this subsection,

21 and

22 (ii) no amount shall be includible in

23 gross income by reason of such reduction.

24 (6) CONTINUED APPLICATION OF SECTION

25 593(e).—Notwithstanding the amendments made by
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1 this section, in the case of a taxpayer to which para2 graph (1) of this subsection applies, section 593(e)

3 of such Code (as in effect on the day before the date

4 of the enactment of this Act) shall continue to apply

5 to such taxpayer as if such taxpayer were a domestic

6 building and loan association but the amount of the

7 reserves taken into account under subparagraphs

8 (B) and (C) of section 593(e)(1) (as so in effect)

9 shall be the balance taken into account by such tax10 payer under paragraph (2)(A)(ii) of this subsection.

11 (7) CERTAIN ITEMS INCLUDED AS SECTION

12 381(c) ITEMS.—The balance of the applicable excess

13 reserves, and the balance taken into account by a

14 taxpayer under paragraph (2)(A)(ii) of this sub15 section, shall be treated as items described in section

16 381(c) of such Code.

17 (8) CONVERSIONS TO CREDIT UNIONS.—In the

18 case of a taxpayer to which paragraph (1) applied

19 which becomes a credit union described in section

20 501(c)(14)(A)—

21 (A) any amount required to be included in

22 the gross income of the credit union by reason

23 of this subsection shall be treated as derived

24 from an unrelated trade or business (as defined

25 in section 513), and
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1 (B) for purposes of paragraph (3), the

2 credit union shall not be treated as if it were

3 a bank.

4 (9) REGULATIONS.—The Secretary of the

5 Treasury or his delegate shall prescribe such regula6 tions as may be necessary to carry out this sub7 section, including regulations providing for the appli8 cation of paragraphs (4) and (6) in the case of ac9 quisitions, mergers, spin-offs, and other reorganiza10 tions.

11 SEC. ll402. DEPRECIATION UNDER INCOME FORECAST

12 METHOD.

13 (a) GENERAL RULE.—Section 167 (relating to depre14 ciation) is amended by redesignating subsection (g) as

15 subsection (h) and by inserting after subsection (f) the

16 following new subsection:

17 ‘‘(g) DEPRECIATION UNDER INCOME FORECAST

18 METHOD.—

19 ‘‘(1) IN GENERAL.—If the depreciation deduc20 tion allowable under this section to any taxpayer

21 with respect to any property is determined under the

22 income forecast method or any similar method—

23 ‘‘(A) in applying such method, the income

24 from the property shall include all income

25 earned in connection with the property before
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1 the close of the 10th taxable year following the

2 taxable year in which the property was placed

3 in service,

4 ‘‘(B) the adjusted basis of the property

5 shall only include amounts with respect to

6 which the requirements of section 461(h) are

7 satisfied,

8 ‘‘(C) the depreciation deduction under such

9 method for the 10th taxable year beginning

10 after the taxable year in which the property was

11 placed in service shall be equal to the adjusted

12 basis of such property as of the beginning of

13 such 10th taxable year, and

14 ‘‘(D) such taxpayer shall pay (or be enti15 tled to receive) interest computed under the

16 look-back method of paragraph (2) for any re17 computation year.

18 ‘‘(2) LOOK-BACK METHOD.—The interest com19 puted under the look-back method of this paragraph

20 for any recomputation year shall be determined by—

21 ‘‘(A) first determining the depreciation de22 ductions under this section with respect to such

23 property which would have been allowable for

24 prior taxable years if the determination of the

25 amounts so allowable had been made on the
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1 basis of the sum of the following (instead of the

2 estimated income with respect to such prop3 erty)—

4 ‘‘(i) the actual income earned in con5 nection with such property for periods be6 fore the close of the recomputation year,

7 and

8 ‘‘(ii) an estimate of the future income

9 to be earned in connection with such prop10 erty for periods after the recomputation

11 year,

12 ‘‘(B) second, determining (solely for pur13 poses of computing such interest) the overpay14 ment or underpayment of tax for each such

15 prior taxable year which would result solely

16 from the application of subparagraph (A), and

17 ‘‘(C) then using the adjusted overpayment

18 rate (as defined in section 460(b)(7)),

19 compounded daily, on the overpayment or

20 underpayment determined under subparagraph

21 (B).

22 For purposes of the preceding sentence, any cost in23 curred after the property is placed in service (which

24 is not treated as a separate property under para25 graph (5)) shall be taken into account by discount-
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1 ing (using the Federal mid-term rate determined

2 under section 1274(d) as of the time such cost is in3 curred) such cost to its value as of the date the

4 property is placed in service. The taxpayer may elect

5 with respect to any property to have the preceding

6 sentence not apply to such property.

7 ‘‘(3) EXCEPTION FROM LOOK-BACK METHOD.—

8 Paragraph (1)(D) shall not apply with respect to

9 any property which, when placed in service by the

10 taxpayer, had a basis of $100,000 or less.

11 ‘‘(4) RECOMPUTATION YEAR.—For purposes of

12 this subsection, except as provided in regulations,

13 the term ‘recomputation year’ means, with respect to

14 any property, the 3d and the 10th taxable years be15 ginning after the taxable year in which the property

16 was placed in service, unless the actual income

17 earned in connection with the property for the pe18 riod before the close of such 3d or 10th taxable year

19 is within 10 percent of the income earned in connec20 tion with the property for such period which was

21 taken into account under paragraph (1)(A).

22 ‘‘(5) SPECIAL RULES.—

23 ‘‘(A) CERTAIN COSTS TREATED AS SEPA24 RATE PROPERTY.—For purposes of this sub-
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1 section, the following costs shall be treated as

2 separate properties:

3 ‘‘(i) Any costs incurred with respect

4 to any property after the 10th taxable year

5 beginning after the taxable year in which

6 the property was placed in service.

7 ‘‘(ii) Any costs incurred after the

8 property is placed in service and before the

9 close of such 10th taxable year if such

10 costs are significant and give rise to a sig11 nificant increase in the income from the

12 property which was not included in the es13 timated income from the property.

14 ‘‘(B) SYNDICATION INCOME FROM TELE15 VISION SERIES.—In the case of property which

16 is an episode in a television series, income from

17 syndicating such series shall not be required to

18 be taken into account under this subsection be19 fore the earlier of—

20 ‘‘(i) the 4th taxable year beginning

21 after the date the first episode in such se22 ries is placed in service, or

23 ‘‘(ii) the earliest taxable year in which

24 the taxpayer has an arrangement relating

25 to the future syndication of such series.
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1 ‘‘(C) SPECIAL RULES FOR FINANCIAL EX2 PLOITATION OF CHARACTERS, ETC.—For pur3 poses of this subsection, in the case of television

4 and motion picture films, the income from the

5 property shall include income from the exploi6 tation of characters, designs, scripts, scores,

7 and other incidental income associated with

8 such films, but only to the extent that such in9 come is earned in connection with the ultimate

10 use of such items by, or the ultimate sale of

11 merchandise to, persons who are not related

12 persons (within the meaning of section 267(b))

13 to the taxpayer.

14 ‘‘(D) COLLECTION OF INTEREST.—For

15 purposes of subtitle F (other than sections

16 6654 and 6655), any interest required to be

17 paid by the taxpayer under paragraph (1) for

18 any recomputation year shall be treated as an

19 increase in the tax imposed by this chapter for

20 such year.

21 ‘‘(E) DETERMINATIONS.—For purposes of

22 paragraph (2), determinations of the amount of

23 income earned in connection with any property

24 shall be determined in the same manner as for

25 purposes of applying the income forecast meth-
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1 od; except that any income from the disposition

2 of such property shall be taken into account.

3 ‘‘(F) TREATMENT OF PASS-THRU ENTI4 TIES.—Rules similar to the rules of section

5 460(b)(4) shall apply for purposes of this sub6 section.’’

7 (b) EFFECTIVE DATE.—

8 (1) IN GENERAL.—The amendment made by

9 subsection (a) shall apply to property placed in serv10 ice after September 13, 1995.

11 (2) BINDING CONTRACTS.—The amendment

12 made by subsection (a) shall not apply to any prop13 erty produced or acquired by the taxpayer pursuant

14 to a written contract which was binding on Septem15 ber 13, 1995, and at all times thereafter before such

16 production or acquisition.

17 SEC. ll403. REPEAL OF LOWER-OF-COST-OR-MARKET

18 METHOD OF ACCOUNTING FOR INVEN19 TORIES.

20 (a) IN GENERAL.—Section 471 (relating to general

21 rule for inventories) is amended by redesignating sub22 section (b) as subsection (c) and by inserting after sub23 section (a) the following new subsection:

24 ‘‘(b) CERTAIN WRITE-DOWNS NOT PERMITTED; USE

25 OF MARK-DOWNS REQUIRED UNDER RETAIL METHOD.—
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1 ‘‘(1) IN GENERAL.—A taxpayer—

2 ‘‘(A) may not use the lower-of-cost-or-mar3 ket method of accounting for inventories, and

4 ‘‘(B) may not write-down items by reason

5 of being unsalable at normal prices or unusable

6 in the normal way because of damage, imperfec7 tions, shop wear, changes of style, odd or bro8 ken lots, or other similar causes.

9 Subparagraph (B) shall not apply to a taxpayer

10 using a mark-to-market method of accounting for

11 both gains and losses in inventory values.

12 ‘‘(2) MARK-DOWNS REQUIRED TO BE TAKEN

13 INTO ACCOUNT UNDER RETAIL METHOD.—The retail

14 method of accounting for inventories shall be applied

15 by taking into account mark-downs in determining

16 the approximate cost of the inventories.

17 ‘‘(3) EXCEPTION FOR CERTAIN SMALL BUSI18 NESSES.—Paragraph (1) shall not apply to any tax19 payer for the taxable year if the average annual

20 gross receipts of the taxpayer for the 3 preceding

21 taxable years do not exceed $5,000,000. For pur22 poses of the preceding sentence, rules similar to the

23 rules of paragraph (2) and (3) of section 448(c)

24 shall apply.
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1 ‘‘(4) REGULATIONS.—The Secretary shall pre2 scribe such regulations as may be appropriate to

3 carry out the purposes of this subsection, including

4 regulations relating to wash-sale-type transactions.’’

5 (b) CONFORMING AMENDMENTS.—

6 (1) Clause (iii) of section 312(n)(4)(C) is

7 amended to read as follows:

8 ‘‘(iii) INVENTORY AMOUNT.—The in9 ventory amount of assets under the first10 in, first-out method authorized by section

11 471 shall be determined using the method

12 authorized to be used by the taxpayer

13 under such section.’’

14 (2) Subparagraph (C) of section 1363(d)(4) is

15 amended to read as follows:

16 ‘‘(iii) INVENTORY AMOUNT.—The in17 ventory amount of assets under a method

18 authorized by section 471 shall be deter19 mined using the method authorized to be

20 used by the corporation under such sec21 tion.’’

22 (c) EFFECTIVE DATE.—

23 (1) IN GENERAL.—The amendments made by

24 this section shall apply to taxable years beginning

25 after December 31, 1995.
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1 (2) CHANGE IN METHOD OF ACCOUNTING.—In

2 the case of any taxpayer required by this section to

3 change its method accounting for its first taxable

4 year beginning after December 31, 1995—

5 (A) such change shall be treated as initi6 ated by the taxpayer,

7 (B) such change shall be treated as made

8 with the consent of the Secretary of the Treas9 ury, and

10 (C) the net amount of the adjustments re11 quired to be taken into account by the taxpayer

12 under section 481 of the Internal Revenue Code

13 of 1986 shall be taken into account ratably over

14 the 4-taxable year period beginning with the

15 first taxable year beginning after December 31,

16 1995.

17 Subtitle E—Administrative

18 Provisions

19 SEC. ll501. REPEAL OF DIESEL FUEL TAX REBATE TO

20 PURCHASERS OF DIESEL-POWERED AUTO21 MOBILES AND LIGHT TRUCKS.

22 (a) IN GENERAL.—Section 6427 (relating to fuels

23 not used for taxable purposes) is amended by striking sub24 section (g).

25 (b) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (3) of section 34(a) is amended

2 to read as follows:

3 ‘‘(3) under section 6427 with respect to fuels

4 used for nontaxable purposes or resold during the

5 taxable year (determined without regard to section

6 6427(k)).’’.

7 (2) Paragraphs (1) and (2)(A) of section

8 6427(i) are each amended—

9 (A) by striking ‘‘(g),’’, and

10 (B) by striking ‘‘(or a qualified diesel pow11 ered highway vehicle purchased)’’ each place it

12 appears.

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to vehicles purchased after Decem15 ber 31, 1995.

16 SEC. ll502. INCREASED INFORMATION REPORTING PEN17 ALTIES.

18 (a) IN GENERAL.—Section 6721(a) (relating to impo19 sition of penalty) is amended by adding at the end the

20 following new paragraph:

21 ‘‘(3) INCREASED PENALTY IF LESS THAN 97

22 PERCENT OF AGGREGATE AMOUNT OF ITEMS RE23 PORTED CORRECTLY.—

24 ‘‘(A) IN GENERAL.—Subject to the overall

25 limitation of paragraph (1), the amount of the
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1 penalty under paragraph (1) for any failure

2 with respect to any information return shall be

3 equal to the greater of $50 or 5 percent of the

4 amount required to be reported correctly but

5 not so reported.

6 ‘‘(B) EXCEPTION WHERE SUBSTANTIAL

7 COMPLIANCE.—Subparagraph (A) shall not

8 apply to failures with respect to information re9 turns required to be filed by a person during

10 any calendar year if the aggregate amount

11 which is timely and correctly reported on such

12 returns filed by the person for the calendar year

13 is at least 97 percent of the aggregate amount

14 which is required to be reported on such re15 turns by the person for the calendar year.’’

16 (b) CONFORMING AMENDMENT.—Paragraph (1) of

17 section 6721(a) is amended by striking ‘‘In’’ and inserting

18 ‘‘Except as provided in paragraph (3), in’’.

19 (c) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to returns the due date for which

21 (without regard to extensions) is more than 90 days after

22 the date of the enactment of this Act.
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1 Subtitle F—Casualty and

2 Involuntary Conversion Provisions

3 SEC. ll601. BASIS ADJUSTMENT TO PROPERTY HELD BY

4 CORPORATION WHERE STOCK IN CORPORA5 TION IS REPLACEMENT PROPERTY UNDER

6 INVOLUNTARY CONVERSION RULES.

7 (a) IN GENERAL.—Subsection (b) of section 1033 is

8 amended to read as follows:

9 ‘‘(b) BASIS OF PROPERTY ACQUIRED THROUGH IN10 VOLUNTARY CONVERSION.—

11 ‘‘(1) CONVERSIONS DESCRIBED IN SUBSECTION

12 (a)(1).—If the property was acquired as the result

13 of a compulsory or involuntary conversion described

14 in subsection (a)(1), the basis shall be the same as

15 in the case of the property so converted—

16 ‘‘(A) decreased in the amount of any

17 money received by the taxpayer which was not

18 expended in accordance with the provisions of

19 law (applicable to the year in which such con20 version was made) determining the taxable sta21 tus of the gain or loss upon such conversion,

22 and

23 ‘‘(B) increased in the amount of gain or

24 decreased in the amount of loss to the taxpayer

25 recognized upon such conversion under the law
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1 applicable to the year in which such conversion

2 was made.

3 ‘‘(2) CONVERSIONS DESCRIBED IN SUBSECTION

4 (a)(2).—In the case of property purchased by the

5 taxpayer in a transaction described in subsection

6 (a)(2) which resulted in the nonrecognition of any

7 part of the gain realized as the result of a compul8 sory or involuntary conversion, the basis shall be the

9 cost of such property decreased in the amount of the

10 gain not so recognized; and if the property pur11 chased consists of more than 1 piece of property, the

12 basis determined under this sentence shall be allo13 cated to the purchased properties in proportion to

14 their respective costs.

15 ‘‘(3) PROPERTY HELD BY CORPORATION THE

16 STOCK OF WHICH IS REPLACEMENT PROPERTY.—

17 ‘‘(A) IN GENERAL.—If the basis of stock

18 in a corporation is decreased under paragraph

19 (2), an amount equal to such decrease shall also

20 be applied to reduce the basis of property held

21 by the corporation at the time the taxpayer ac22 quired control (as defined in subsection

23 (a)(2)(E)) of such corporation.

24 ‘‘(B) LIMITATION.—Subparagraph (A)

25 shall not apply to the extent that it would (but
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1 for this subparagraph) require a reduction in

2 the aggregate adjusted bases of the property of

3 the corporation below the taxpayer’s adjusted

4 basis of the stock in the corporation (deter5 mined immediately after such basis is decreased

6 under paragraph (2)).

7 ‘‘(C) ALLOCATION OF BASIS REDUCTION.—

8 The decrease required under subparagraph (A)

9 shall be allocated—

10 ‘‘(i) first to property which is similar

11 or related in service or use to the converted

12 property,

13 ‘‘(ii) second to depreciable property

14 (as defined in section 1017(b)(3)(B)) not

15 described in clause (i), and

16 ‘‘(iii) then to other property.

17 ‘‘(D) SPECIAL RULES.—

18 ‘‘(i) REDUCTION NOT TO EXCEED AD19 JUSTED BASIS OF PROPERTY.—No reduc20 tion in the basis of any property under this

21 paragraph shall exceed the adjusted basis

22 of such property (determined without re23 gard to such reduction).

24 ‘‘(ii) ALLOCATION OF REDUCTION

25 AMONG PROPERTIES.—If more than 1
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1 property is described in a clause of sub2 paragraph (C), the reduction under this

3 paragraph shall be allocated among such

4 property in proportion to the adjusted

5 bases of such property (as so deter6 mined).’’.

7 (b) EFFECTIVE DATE.—The amendment made by

8 this section shall apply to involuntary conversions occur9 ring after September 13, 1995.

10 Subtitle G—Excise Tax on Amounts

11 of Private Excess Benefits

12 SEC. ll701. EXCISE TAXES FOR FAILURE BY CERTAIN

13 CHARITABLE ORGANIZATIONS TO MEET CER14 TAIN QUALIFICATION REQUIREMENTS.

15 (a) IN GENERAL.—Chapter 42 (relating to private

16 foundations and certain other tax-exempt organizations)

17 is amended by redesignating subchapter D as subchapter

18 E and by inserting after subchapter C the following new

19 subchapter:

20 ‘‘Subchapter D—Failure By Certain

21 Charitable Organizations To

22 Meet Certain Qualification Re23 quirements

‘‘Sec. 4958. Taxes on excess benefit transactions.
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1 ‘‘SEC. 4958. TAXES ON EXCESS BENEFIT TRANSACTIONS.

2 ‘‘(a) INITIAL TAXES.—

3 ‘‘(1) ON THE DISQUALIFIED PERSON.—There is

4 hereby imposed on each excess benefit transaction a

5 tax equal to 25 percent of the excess benefit. The

6 tax imposed by this paragraph shall be paid by any

7 disqualified person referred to in subsection (f)(1)

8 with respect to such transaction.

9 ‘‘(2) ON THE MANAGEMENT.—In any case in

10 which a tax is imposed by paragraph (1), there is

11 hereby imposed on the participation of any organiza12 tion manager in the excess benefit transaction,

13 knowing that it is such a transaction, a tax equal to

14 10 percent of the excess benefit, unless such partici15 pation is not willful and is due to reasonable cause.

16 The tax imposed by this paragraph shall be paid by

17 any organization manager who participated in the

18 excess benefit transaction.

19 ‘‘(b) ADDITIONAL TAX ON THE DISQUALIFIED PER20 SON.—In any case in which an initial tax is imposed by

21 subsection (a)(1) on an excess benefit transaction and the

22 excess benefit involved in such transaction is not corrected

23 within the taxable period, there is hereby imposed a tax

24 equal to 200 percent of the excess benefit involved. The

25 tax imposed by this subsection shall be paid by any dis-
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1 qualified person referred to in subsection (f)(1) with re2 spect to such transaction.

3 ‘‘(c) EXCESS BENEFIT TRANSACTION; EXCESS BEN4 EFIT.—For purposes of this section—

5 ‘‘(1) EXCESS BENEFIT TRANSACTION.—

6 ‘‘(A) IN GENERAL.—The term ‘excess ben7 efit transaction’ means any transaction in

8 which an economic benefit is provided by an ap9 plicable tax-exempt organization directly or in10 directly to or for the use of any disqualified

11 person if the value of the economic benefit pro12 vided exceeds the value of the consideration (in13 cluding the performance of services) received

14 for providing such benefit. For purposes of the

15 preceding sentence, an economic benefit shall

16 not be treated as consideration for the perform17 ance of services unless such organization clearly

18 indicated its intent to so treat such benefit.

19 ‘‘(B) EXCESS BENEFIT.—The term ‘excess

20 benefit’ means the excess referred to in sub21 paragraph (A).

22 ‘‘(2) AUTHORITY TO INCLUDE CERTAIN OTHER

23 PRIVATE INUREMENT.—To the extent provided in

24 regulations prescribed by the Secretary, the term

25 ‘excess benefit transaction’ includes any transaction
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1 in which the amount of any economic benefit pro2 vided to or for the use of a disqualified person is de3 termined in whole or in part by the revenues of 1

4 or more activities of the organization but only if

5 such transaction results in inurement not permitted

6 under paragraph (3) or (4) of section 501(c), as the

7 case may be. In the case of any such transaction,

8 the excess benefit shall be the amount of the

9 inurement not so permitted.

10 ‘‘(d) SPECIAL RULES.—For purposes of this sec11 tion—

12 ‘‘(1) JOINT AND SEVERAL LIABILITY.—If more

13 than 1 person is liable for any tax imposed by sub14 section (a) or subsection (b), all such persons shall

15 be jointly and severally liable for such tax.

16 ‘‘(2) LIMIT FOR MANAGEMENT.—With respect

17 to any 1 excess benefit transaction, the maximum

18 amount of the tax imposed by subsection (a)(2) shall

19 not exceed $10,000.

20 ‘‘(e) APPLICABLE TAX-EXEMPT ORGANIZATION.—

21 For purposes of this subchapter, the term ‘applicable tax22 exempt organization’ means—

23 ‘‘(1) any organization which (without regard to

24 any excess benefit) would be described in paragraph
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1 (3) or (4) of section 501(c) and exempt from tax

2 under section 501(a), and

3 ‘‘(2) any organization which was described in

4 paragraph (1) at any time during the 10-year period

5 ending on the date of the transaction.

6 Such term shall not include a private foundation (as de7 fined in section 509(a)).

8 ‘‘(f) OTHER DEFINITIONS.—For purposes of this sec9 tion—

10 ‘‘(1) DISQUALIFIED PERSON.—The term ‘dis11 qualified person’ means, with respect to any trans12 action—

13 ‘‘(A) any person who was, at any time dur14 ing the 5-year period ending on the date of

15 such transaction, in a position to exercise sub16 stantial influence over the affairs of the organi17 zation,

18 ‘‘(B) a member of the family of an individ19 ual described in subparagraph (A), and

20 ‘‘(C) a 35-percent controlled entity.

21 ‘‘(2) ORGANIZATION MANAGER.—The term ‘or22 ganization manager’ means, with respect to any ap23 plicable tax-exempt organization, any officer, direc24 tor, or trustee of such organization (or any individ25 ual having powers or responsibilities similar to those
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1 of officers, directors, or trustees of the organiza2 tion).

3 ‘‘(3) 35-PERCENT CONTROLLED ENTITY.—

4 ‘‘(A) IN GENERAL.—The term ‘35-percent

5 controlled entity’ means—

6 ‘‘(i) a corporation in which persons

7 described in subparagraph (A) or (B) of

8 paragraph (1) own more than 35 percent

9 of the total combined voting power,

10 ‘‘(ii) a partnership in which such per11 sons own more than 35 percent of the

12 profits interest, and

13 ‘‘(iii) a trust or estate in which such

14 persons own more than 35 percent of the

15 beneficial interest.

16 ‘‘(B) CONSTRUCTIVE OWNERSHIP

17 RULES.—Rules similar to the rules of para18 graphs (3) and (4) of section 4946(a) shall

19 apply for purposes of this paragraph.

20 ‘‘(4) FAMILY MEMBERS.—The members of an

21 individual’s family shall be determined under section

22 4946(d); except that such members also shall in23 clude the brothers and sisters (whether by the whole

24 or half blood) of the individual and their spouses.
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1 ‘‘(5) TAXABLE PERIOD.—The term ‘taxable pe2 riod’ means, with respect to any excess benefit

3 transaction, the period beginning with the date on

4 which the transaction occurs and ending on the ear5 liest of—

6 ‘‘(A) the date of mailing a notice of defi7 ciency under section 6212 with respect to the

8 tax imposed by subsection (a)(1), or

9 ‘‘(B) the date on which the tax imposed by

10 subsection (a)(1) is assessed.

11 ‘‘(6) CORRECTION.—The terms ‘correction’ and

12 ‘correct’ mean, with respect to any excess benefit

13 transaction, undoing the excess benefit to the extent

14 possible, and where fully undoing the excess benefit

15 is not possible, such additional corrective action as

16 is prescribed by the Secretary by regulations.’’

17 (b) APPLICATION OF PRIVATE INUREMENT RULE TO

18 TAX-EXEMPT ORGANIZATIONS DESCRIBED IN SECTION

19 501(c)(4).—

20 (1) Paragraph (4) of section 501(c) is amended

21 by inserting ‘‘(A)’’ after ‘‘(4)’’ and by adding at the

22 end the following:

23 ‘‘(B) Subparagraph (A) shall not apply to an

24 entity unless no part of the net earnings of such en-
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1 tity inures to the benefit of any private shareholder

2 or individual.’’

3 (2) In the case of an organization operating on

4 a cooperative basis which, before the date of the en5 actment of this Act, was determined by the Sec6 retary of the Treasury or his delegate, to be de7 scribed in section 501(c)(4) of the Internal Revenue

8 Code of 1986 and exempt from tax under section

9 501(a) of such Code, the allocation or return of net

10 margins or capital to the members of such organiza11 tion in accordance with its incorporating statute and

12 bylaws shall not be treated for purposes of such

13 Code as the inurement of the net earnings of such

14 organization to the benefit of any private share15 holder or individual. The preceding sentence shall

16 apply only if such statute and bylaws are substan17 tially as such statute and bylaws were in existence

18 on the date of the enactment of this Act.

19 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

20 (1) Subsection (e) of section 4955 is amend21 ed—

22 (A) by striking ‘‘SECTION 4945’’ in the

23 heading and inserting ‘‘SECTIONS 4945 and

24 4958’’, and
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1 (B) by inserting before the period ‘‘or an

2 excess benefit for purposes of section 4958’’.

3 (2) Subsections (a), (b), and (c) of section 4963

4 are each amended by inserting ‘‘4958,’’ after

5 ‘‘4955,’’.

6 (3) Subsection (e) of section 6213 is amended

7 by inserting ‘‘4958 (relating to private excess bene8 fit),’’ before ‘‘4971’’.

9 (4) Paragraphs (2) and (3) of section 7422(g)

10 are each amended by inserting ‘‘4958,’’ after

11 ‘‘4955,’’.

12 (5) Subsection (b) of section 7454 is amended

13 by inserting ‘‘or whether an organization manager

14 (as defined in section 4958(f)(2)) has ‘knowingly’

15 participated in an excess benefit transaction (as de16 fined in section 4958(c)),’’ after ‘‘section 4912(b),’’.

17 (6) The table of subchapters for chapter 42 is

18 amended by striking the last item and inserting the

19 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.’’

20 (d) EFFECTIVE DATES.—

21 (1) IN GENERAL.—The amendments made by

22 this section (other than subsection (b)) shall apply
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1 to excess benefit transactions occurring on or after

2 September 14, 1995.

3 (2) BINDING CONTRACTS.—The amendments

4 referred to in paragraph (1) shall not apply to any

5 benefit arising from a transaction pursuant to any

6 written contract which was binding on September

7 13, 1995, and at all times thereafter before such

8 transaction occurred.

9 (3) APPLICATION OF PRIVATE INUREMENT

10 RULE TO TAX-EXEMPT ORGANIZATIONS DESCRIBED

11 IN SECTION 501(C)(4).—

12 (A) IN GENERAL.—The amendment made

13 by subsection (b) shall apply to inurement oc14 curring on or after September 14, 1995.

15 (B) BINDING CONTRACTS.—The amend16 ment made by subsection (b) shall not apply to

17 any inurement occurring before January 1,

18 1997, pursuant to a written contract which was

19 binding on September 13, 1995, and at all

20 times thereafter before such inurement oc21 curred.

22 SEC. ll702. REPORTING OF CERTAIN EXCISE TAXES AND

23 OTHER INFORMATION.

24 (a) REPORTING BY ORGANIZATIONS DESCRIBED IN

25 SECTION 501(c)(3).—Subsection (b) of section 6033 (re-
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1 lating to certain organizations described in section

2 501(c)(3)) is amended by striking ‘‘and’’ at the end of

3 paragraph (9), by redesignating paragraph (10) as para4 graph (14), and by inserting after paragraph (9) the fol5 lowing new paragraphs:

6 ‘‘(10) the respective amounts (if any) of the

7 taxes paid by the organization during the taxable

8 year under the following provisions:

9 ‘‘(A) section 4911 (relating to tax on ex10 cess expenditures to influence legislation),

11 ‘‘(B) section 4912 (relating to tax on dis12 qualifying lobbying expenditures of certain or13 ganizations), and

14 ‘‘(C) section 4955 (relating to taxes on po15 litical expenditures of section 501(c)(3) organi16 zations),

17 ‘‘(11) the respective amounts (if any) of the

18 taxes paid by the organization, or any disqualified

19 person with respect to such organization, during the

20 taxable year under section 4958 (relating to taxes on

21 private excess benefit from certain charitable organi22 zations),

23 ‘‘(12) such information as the Secretary may

24 require with respect to any excess benefit trans25 action (as defined in section 4958),
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1 ‘‘(13) the name of each disqualified person (as

2 defined in section 4958(f)(1)(A)) with respect to

3 such organization and such other information with

4 respect to such disqualified persons as the Secretary

5 may prescribe, and’’.

6 (b) ORGANIZATIONS DESCRIBED IN SECTION

7 501(c)(4).—Section 6033 is amended by redesignating

8 subsection (f) as subsection (g) and by inserting after sub9 section (e) the following new subsection:

10 ‘‘(f) CERTAIN ORGANIZATIONS DESCRIBED IN SEC11 TION 501(c)(4).—Every organization described in section

12 501(c)(4) which is subject to the requirements of sub13 section (a) shall include on the return required under sub14 section (a) the information referred to in paragraphs (11),

15 (12) and (13) of subsection (b) with respect to such orga16 nization.’’

17 (c) EFFECTIVE DATE.—The amendments made by

18 this section shall apply to returns for taxable years begin19 ning after the date of the enactment of this Act.

20 SEC. ll703. INCREASE IN PENALTIES ON EXEMPT ORGANI21 ZATIONS FOR FAILURE TO FILE COMPLETE

22 AND TIMELY ANNUAL RETURNS.

23 (a) IN GENERAL.—Subparagraph (A) of section

24 6652(c)(1) (relating to annual returns under section
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1 6033) is amended by striking ‘‘$10’’ and inserting ‘‘$20’’

2 and by striking ‘‘$5,000’’ and inserting ‘‘$10,000’’.

3 (b) LARGER PENALTY ON ORGANIZATIONS HAVING

4 GROSS RECEIPTS IN EXCESS OF $1,000,000.—Subpara5 graph (A) of section 6652(c)(1) is amended by adding at

6 the end the following new sentence: ‘‘In the case of an

7 organization having gross receipts exceeding $1,000,000

8 for any year, with respect to the return required under

9 section 6033 for such year, the first sentence of this sub10 paragraph shall be applied by substituting ‘$100’ for ‘$20’

11 and, in lieu of applying the second sentence of this sub12 paragraph, the maximum penalty under this subparagraph

13 shall not exceed $50,000.’’

14 (c) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to returns for taxable years ending

16 on or after December 31, 1995.

17 Subtitle H—Extension of Certain

18 Taxes

19 SEC. ll801. EXTENSION OF HAZARDOUS SUBSTANCE

20 SUPERFUND TAXES.

21 (a) EXTENSION OF TAXES.—

22 (1) ENVIRONMENTAL TAX.—Section 59A(e) is

23 amended to read as follows:
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1 ‘‘(e) APPLICATION OF TAX.—The tax imposed by this

2 section shall apply to taxable years beginning after De3 cember 31, 1986, and before January 1, 1997.’’.

4 (2) EXCISE TAXES.—Section 4611(e) is amend5 ed to read as follows:

6 ‘‘(e) APPLICATION OF HAZARDOUS SUBSTANCE

7 SUPERFUND FINANCING RATE.—The Hazardous Sub8 stance Superfund financing rate under this section shall

9 apply after December 31, 1986, and before October 1,

10 1996.’’.

11 (b) TERMINATION ON DEPOSITS OF TAXES INTO

12 HAZARDOUS SUBSTANCE SUPERFUND.—Paragraph (1) of

13 section 9507(b) is amended by inserting ‘‘before August

14 1, 1996’’ after ‘‘received’’.

15 (c) EFFECTIVE DATE.—The amendments made by

16 this section shall take effect on the date of the enactment

17 of this Act.

18 SEC. ll802. EXTENSION OF OIL SPILL LIABILITY TAX.

19 (a) IN GENERAL.—Section 4611(f)(1) (relating to

20 application of oil spill liability trust fund financing rate)

21 is amended by striking ‘‘after December 31, 1989, and

22 before January 1, 1995’’ and inserting ‘‘after December

23 31, 1995, and before October 1, 2002’’.

24 (b) EFFECTIVE DATE.—The amendment made by

25 this section shall take effect on January 1, 1996.
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1 SEC. ll803. EXTENSION OF FEDERAL UNEMPLOYMENT

2 TAX.

3 Section 3301 (relating to rate of Federal unemploy4 ment tax) is amended—

5 (1) by striking ‘‘1998’’ in paragraph (1) and in6 serting ‘‘2002’’, and

7 (2) by striking ‘‘1999’’ in paragraph (2) and in8 serting ‘‘2003’’.

9 Subtitle I—Provisions Relating To

10 Individuals

11 SEC. ll851. NO ROLLOVER OR EXCLUSION OF GAIN ON

12 SALE OF PRINCIPAL RESIDENCE WHICH IS

13 ATTRIBUTABLE TO DEPRECIATION DEDUC14 TIONS.

15 (a) IN GENERAL.—Subsection (d) of section 1034

16 (relating to limitations) is amended by adding at the end

17 the following new paragraph:

18 ‘‘(3) RECOGNITION OF GAIN ATTRIBUTABLE TO

19 DEPRECIATION.—Subsection (a) shall not apply to

20 so much of the gain from the sale of any residence

21 as does not exceed the portion of the depreciation

22 adjustments (as defined in section 1250(b)(3)) at23 tributable to periods after December 31, 1995, in re24 spect of such residence.’’.

25 (b) COMPARABLE TREATMENT UNDER 1-TIME EX26 CLUSION OF GAIN ON SALE OF PRINCIPAL RESIDENCE.—
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1 Subsection (d) of section 121 is amended by adding at

2 the end the following new paragraph:

3 ‘‘(10) RECOGNITION OF GAIN ATTRIBUTABLE

4 TO DEPRECIATION.—

5 ‘‘(A) IN GENERAL.—Subsection (a) shall

6 not apply to so much of the gain from the sale

7 of any property as does not exceed the portion

8 of the depreciation adjustments (as defined in

9 section 1250(b)(3)) attributable to periods after

10 December 31, 1995, in respect of such prop11 erty.

12 ‘‘(B) COORDINATION WITH PARAGRAPH

13 (5).—If this section does not apply to gain at14 tributable to a portion of a residence by reason

15 of paragraph (5), subparagraph (A) shall not

16 apply to depreciation adjustments attributable

17 to such portion.’’.

18 (c) EFFECTIVE DATE.—The amendments made by

19 this section shall apply to taxable years ending after De20 cember 31, 1995.

21 SEC. ll852. EXTENSION OF WITHHOLDING TO CERTAIN

22 GAMBLING WINNINGS.

23 (a) REPEAL OF EXEMPTION FOR BINGO AND

24 KENO.—Paragraph (5) of section 3402(q) is amended to

25 read as follows:
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1 ‘‘(5) EXEMPTION FOR SLOT MACHINES.—The

2 tax imposed under paragraph (1) shall not apply to

3 winnings from a slot machine.’’.

4 (b) THRESHOLD AMOUNT.—Paragraph (3) of section

5 3402(q) is amended—

6 (1) by striking ‘‘(B) and (C)’’ in subparagraph

7 (A) and inserting ‘‘(B), (C), and (D)’’, and

8 (2) by adding at the end the following new sub9 paragraph:

10 ‘‘(D) BINGO AND KENO.—Proceeds of

11 more than $5,000 from a wager placed in a

12 bingo or keno game.’’.

13 (c) EFFECTIVE DATE.—The amendments made by

14 this section shall take effect on January 1, 1996.

15 SEC. ll853. REPEAL OF SPECIAL RULE FOR RENTAL USE

16 OF VACATION HOMES, ETC., FOR LESS THAN

17 15 DAYS.

18 (a) IN GENERAL.—Section 280A (relating to dis19 allowance of certain expenses in connection with business

20 use of home, rental of vacation homes, etc.) is amended

21 by striking subsection (g).

22 (b) NO BASIS REDUCTION UNLESS DEPRECIATION

23 CLAIMED.—Section 1016 is amended by redesignating

24 subsection (e) as subsection (f) and by inserting after sub25 section (d) the following new subsection:
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1 ‘‘(e) SPECIAL RULE WHERE RENTAL USE OF VACA2 TION HOME, ETC., FOR LESS THAN 15 DAYS.—If a dwell3 ing unit is used during the taxable year by the taxpayer

4 as a residence and such dwelling unit is actually rented

5 for less than 15 days during the taxable year, the reduc6 tion under subsection (a)(2) by reason of such rental use

7 in any taxable year beginning after December 31, 1995,

8 shall not exceed the depreciation deduction allowed for

9 such rental use.’’

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to taxable years beginning after

12 December 31, 1995.

13 Subtitle J—Reform of Earned

14 Income Credit

15 SEC. ll901. EARNED INCOME CREDIT DENIED TO INDIVID16 UALS NOT AUTHORIZED TO BE EMPLOYED IN

17 THE UNITED STATES.

18 (a) IN GENERAL.—Section 32(c)(1) (relating to indi19 viduals eligible to claim the earned income credit) is

20 amended by adding at the end the following new subpara21 graph:

22 ‘‘(F) IDENTIFICATION NUMBER REQUIRE23 MENT.—The term ‘eligible individual’ does not

24 include any individual who does not include on

25 the return of tax for the taxable year—
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1 ‘‘(i) such individual’s taxpayer identi2 fication number, and

3 ‘‘(ii) if the individual is married (with4 in the meaning of section 7703), the tax5 payer identification number of such indi6 vidual’s spouse.’’.

7 (b) SPECIAL IDENTIFICATION NUMBER.—Section 32

8 is amended by adding at the end the following new sub9 section:

10 ‘‘(l) IDENTIFICATION NUMBERS.—Solely for pur11 poses of subsections (c)(1)(F) and (c)(3)(D), a taxpayer

12 identification number means a social security number is13 sued to an individual by the Social Security Administra14 tion (other than a social security number issued pursuant

15 to clause (II) (or that portion of clause (III) that relates

16 to clause (II)) of section 205(c)(2)(B)(i) of the Social Se17 curity Act).’’.

18 (c) EXTENSION OF PROCEDURES APPLICABLE TO

19 MATHEMATICAL OR CLERICAL ERRORS.—Section

20 6213(g)(2) (relating to the definition of mathematical or

21 clerical errors) is amended by striking ‘‘and’’ at the end

22 of subparagraph (D), by striking the period at the end

23 of subparagraph (E) and inserting a comma, and by in24 serting after subparagraph (E) the following new subpara25 graphs:
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1 ‘‘(F) an omission of a correct taxpayer

2 identification number required under section 32

3 (relating to the earned income credit) to be in4 cluded on a return, and

5 ‘‘(G) an entry on a return claiming the

6 credit under section 32 with respect to net

7 earnings from self-employment described in sec8 tion 32(c)(2)(A) to the extent the tax imposed

9 by section 1401 (relating to self-employment

10 tax) on such net earnings has not been paid.’’.

11 (d) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to taxable years beginning after

13 December 31, 1995.

14 SEC. ll902. RULES RELATING TO DENIAL OF EARNED IN15 COME CREDIT ON BASIS OF DISQUALIFIED

16 INCOME.

17 (a) DEFINITION OF DISQUALIFIED INCOME.—Para18 graph (2) of section 32(i) (defining disqualified income)

19 is amended by striking ‘‘and’’ at the end of subparagraph

20 (B), by striking the period at the end of subparagraph

21 (C) and inserting ‘‘, and’’, and by adding at the end the

22 following new subparagraph:

23 ‘‘(D) the net capital gain (as defined in

24 section 1222) of the taxpayer for such taxable

25 year.’’
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 TITLE 9—MIDDLE CLASS BILL OF

5 RIGHTS

6 SEC. ll00. SHORT TITLE; AMENDMENT OF 1986 CODE.

7 (a) SHORT TITLE.—This Act may be cited as the

8 ‘‘Middle-Class Bill of Rights Tax Relief Act of 1996’’.

9 (b) AMENDMENT OF 1986 CODE.—Except as other10 wise expressly provided, whenever in this Act an amend11 ment or repeal is expressed in terms of an amendment

12 to, or repeal of, a section or other provision, the reference

13 shall be considered to be made to a section or other provi14 sion of the Internal Revenue Code of 1986.

15 (c) TABLE OF CONTENTS.—

TITLE ll—MIDDLE CLASS BILL OF RIGHTS

Sec. ll00. Short title; amendment of 1986 Code.

Subtitle A—Middle Class Tax Relief

Sec. ll01. Credit for families with young children.

Sec. ll02. Deduction for higher education expenses.

Subtitle B—Provisions Relating To Individual Retirement Plans

PART I—RETIREMENT SAVINGS INCENTIVES

SUBPART A—IRA DEDUCTION

Sec. ll11. Increase in income limitations.

Sec. ll12. Inflation adjustment for deductible amount and income limitations.

Sec. ll13. Coordination of IRA deduction limit with elective deferral limit.

SUBPART B—NONDEDUCTIBLE TAX-FREE IRA’S

Sec. ll21. Establishment of nondeductible tax-free individual retirement accounts.
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PART II—PENALTY-FREE DISTRIBUTIONS

Sec. ll21. Distributions from certain plans may be used without penalty to

purchase first homes, to pay higher education or financially

devastating medical expenses, or by the unemployed.

Sec. ll22. Contributions must be held at least 5 years in certain cases.

Subtitle C—Increase in Deduction for Health Care Costs of Self-Employed

Individuals

Sec. ll31. Increase in self-employed individuals’ deduction for health insurance costs.

1 Subtitle A—Middle Class Tax Relief

2 SEC. ll01. CREDIT FOR FAMILIES WITH YOUNG CHIL3 DREN.

4 (a) IN GENERAL.—Subpart A of part IV of sub5 chapter A of chapter 1 (relating to nonrefundable personal

6 credits) is amended by inserting after section 22 the fol7 lowing new section:

8 ‘‘SEC. 23. FAMILIES WITH YOUNG CHILDREN.

9 ‘‘(a) ALLOWANCE OF CREDIT.—

10 ‘‘(1) IN GENERAL.—In the case of an individ11 ual, there shall be allowed as a credit against the tax

12 imposed by this chapter for the taxable year an

13 amount equal to $300 multiplied by the number of

14 eligible children of the taxpayer for the taxable year.

15 ‘‘(2) INCREASE IN CREDIT.—In the case of tax16 able years beginning after December 31, 1998, para17 graph (1) shall be applied by substituting ‘$500’ for

18 ‘$300’.

19 ‘‘(b) LIMITATIONS.—

20 ‘‘(1) PHASE-OUT OF CREDIT.—
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1 ‘‘(A) IN GENERAL.—The amount of the

2 credit allowed under subsection (a) shall be re3 duced (but not below zero) by the amount de4 termined under subparagraph (B).

5 ‘‘(B) AMOUNT OF REDUCTION.—The

6 amount determined under this subparagraph

7 equals the amount which bears the same ratio

8 to the credit (determined without regard to this

9 subsection) as—

10 ‘‘(i) the excess of—

11 ‘‘(I) the taxpayer’s adjusted

12 gross income for such taxable year,

13 over

14 ‘‘(II) $60,000, bears to

15 ‘‘(ii) $15,000.

16 Any amount determined under this subpara17 graph which is not a multiple of $10 shall be

18 rounded to the next lowest $10.

19 ‘‘(C) ADJUSTED GROSS INCOME.—For pur20 poses of this paragraph, adjusted gross income

21 of any taxpayer shall be increased by any

22 amount excluded from gross income under sec23 tion 911, 931, or 933.

24 ‘‘(2) LIMITATION BASED ON AMOUNT OF

25 TAX.—The credit allowed by subsection (a) for the
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1 taxable year (after the application of paragraph (1))

2 shall not exceed the excess (if any) of—

3 ‘‘(A) the taxpayer’s regular tax liability for

4 the taxable year reduced by the credits allow5 able against such tax under this subpart (other

6 than this section) determined without regard to

7 section 26, over

8 ‘‘(B) the sum of—

9 ‘‘(i) the taxpayer’s tentative minimum

10 tax for such taxable year, plus

11 ‘‘(ii) the credit allowed for the taxable

12 year under section 32.

13 ‘‘(c) ELIGIBLE CHILD.—For purposes of this section,

14 the term ‘eligible child’ means any child (as defined in sec15 tion 151(c)(3)) of the taxpayer—

16 ‘‘(1) who has not attained age 13 as of the

17 close of the calendar year in which the taxable year

18 of the taxpayer begins,

19 ‘‘(2) who is a dependent of the taxpayer with

20 respect to whom the taxpayer is allowed a deduction

21 under section 151 for such taxable year, and

22 ‘‘(3) whose TIN is included on the taxpayer’s

23 return for such taxable year.

24 ‘‘(d) INFLATION ADJUSTMENTS.—In the case of a

25 taxable year beginning in a calendar year after 1999—
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1 ‘‘(1) IN GENERAL.—The $500 and $60,000

2 amounts contained in subsections (a)(2) and (b)(2)

3 shall each be increased by an amount equal to—

4 ‘‘(A) such dollar amount, multiplied by

5 ‘‘(B) the cost-of-living adjustment deter6 mined under section 1(f)(3) for the calendar

7 year in which the taxable year begins, deter8 mined by substituting ‘calendar year 1998’ for

9 ‘calendar year 1992’ in subparagraph (B)

10 thereof.

11 ‘‘(2) INCREASE IN PHASEOUT RANGE.—If the

12 amount applicable under subsection (a) for any tax13 able year exceeds $500, subsection (b)(2)(B) shall be

14 applied by substituting an amount equal to 30 times

15 such applicable amount for ‘$15,000’.

16 ‘‘(3) ROUNDING.—If any amount as adjusted

17 under paragraph (1) is not a multiple of $100, such

18 amount shall be rounded to the next lowest multiple

19 of $100.

20 ‘‘(e) SPECIAL RULES.—

21 ‘‘(1) AMOUNT OF CREDIT MAY BE DETERMINED

22 UNDER TABLES.—The amount of the credit allowed

23 by this section may be determined under tables pre24 scribed by the Secretary.
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1 ‘‘(2) CERTAIN OTHER RULES APPLY.—Rules

2 similar to the rules of subsections (c)(1)(E) and (F),

3 (d), and (e) of section 32 shall apply for purposes

4 of this section.

5 ‘‘(f) TERMINATION.—This section shall not apply to

6 taxable years beginning after December 31, 2000.’’

7 (b) CLERICAL AMENDMENT.—The table of sections

8 for subpart A of part IV of subchapter A of chapter 1

9 is amended by inserting after the item relating to section

10 22 the following new item:

‘‘Sec. 23. Families with young children.’’

11 (c) EFFECTIVE DATE.—The amendments made by

12 this section shall apply to taxable years beginning after

13 December 31, 1995.

14 SEC. ll02. DEDUCTION FOR HIGHER EDUCATION EX15 PENSES.

16 (a) DEDUCTION ALLOWED.— Part VII of subchapter

17 B of chapter 1 (relating to additional itemized deductions

18 for individuals) is amended by redesignating section 220

19 as section 221 and by inserting after section 219 the fol20 lowing new section:

21 ‘‘SEC. 220. HIGHER EDUCATION TUITION AND FEES.

22 ‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an

23 individual, there shall be allowed as a deduction the
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1 amount of qualified higher education expenses paid by the

2 taxpayer during the taxable year.

3 ‘‘(b) LIMITATIONS.—

4 ‘‘(1) DOLLAR LIMITATION.—

5 ‘‘(A) IN GENERAL.—The amount allowed

6 as a deduction under subparagraph (a) for any

7 taxable year shall not exceed $10,000.

8 ‘‘(B) PHASE-IN.—In the case of taxable

9 years beginning in 1996, 1997, or 1998,

10 ‘$5,000’ shall be substituted for ‘$10,000’ in

11 subparagraph (A).

12 ‘‘(2) LIMITATION BASED ON MODIFIED AD13 JUSTED GROSS INCOME.—

14 ‘‘(A) IN GENERAL.—The amount which

15 would (but for this paragraph) be taken into ac16 count under paragraph (1) shall be reduced

17 (but not below zero) by the amount determined

18 under subparagraph (B).

19 ‘‘(B) AMOUNT OF REDUCTION.—The

20 amount determined under this subparagraph

21 equals the amount which bears the same ratio

22 to the amount which would be so taken into ac23 count as—

24 ‘‘(i) the excess of—
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1 ‘‘(I) the taxpayer’s modified ad2 justed gross income for such taxable

3 year, over

4 ‘‘(II) $70,000 ($100,000 in the

5 case of a joint return), bears to

6 ‘‘(ii) $20,000.

7 ‘‘(C) MODIFIED ADJUSTED GROSS IN8 COME.—The term ‘modified adjusted gross in9 come’ means the adjusted gross income of the

10 taxpayer for the taxable year determined—

11 ‘‘(i) without regard to this section and

12 sections 911, 931, and 933, and

13 ‘‘(ii) after the application of sections

14 86, 135, 219 and 469.

15 For purposes of sections 86, 135, 219, and

16 469, adjusted gross income shall be determined

17 without regard to the deduction allowed under

18 this section.

19 ‘‘(D) INFLATION ADJUSTMENTS.—

20 ‘‘(i) IN GENERAL.—In the case of a

21 taxable year beginning after 1999, the

22 $70,000 and $100,000 amounts described

23 in subparagraph (B) shall each be in24 creased by an amount equal to—
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1 ‘‘(I) such dollar amounts, multi2 plied by

3 ‘‘(II) the cost-of-living adjust4 ment determined under section 1(f)(3)

5 for the calendar year in which the tax6 able year begins, determined by sub7 stituting ‘calendar year 1998’ for ‘cal8 endar year 1992’ in subparagraph (B)

9 thereof.

10 ‘‘(ii) ROUNDING.—If any amount as

11 adjusted under clause (i) is not a multiple

12 of $5,000, such amount shall be rounded

13 to the next lowest multiple of $5,000.

14 ‘‘(c) QUALIFIED HIGHER EDUCATION EXPENSES.—

15 For purposes of this section—

16 ‘‘(1) QUALIFIED HIGHER EDUCATION EX17 PENSES.—

18 ‘‘(A) IN GENERAL.—The term ‘qualified

19 higher education expenses’ means tuition and

20 fees charged by an educational institution and

21 required for the enrollment or attendance of—

22 ‘‘(i) the taxpayer,

23 ‘‘(ii) the taxpayer’s spouse, or
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1 ‘‘(iii) any dependent of the taxpayer

2 with respect to whom the taxpayer is al3 lowed a deduction under section 151,

4 as an eligible student at an institution of higher

5 education.

6 ‘‘(B) EXCEPTION FOR EDUCATION INVOLV7 ING SPORTS, ETC.—Such term does not include

8 expenses with respect to any course or other

9 education involving sports, games, or hobbies,

10 unless such expenses—

11 ‘‘(i) are part of a degree program, or

12 ‘‘(ii) are deductible under this chapter

13 without regard to this section.

14 ‘‘(C) EXCEPTION FOR NONACADEMIC

15 FEES.—Such term does not include any student

16 activity fees, athletic fees, insurance expenses,

17 or other expenses unrelated to a student’s aca18 demic course of instruction.

19 ‘‘(D) ELIGIBLE STUDENT.—For purposes

20 of subparagraph (A), the term ‘eligible student’

21 means a student who—

22 ‘‘(i) meets the requirements of section

23 484(a)(1) of the Higher Education Act of

24 1965 (20 U.S.C. 1091(a)(1)), as in effect
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1 on the date of the enactment of this sec2 tion, and

3 ‘‘(ii)(I) is carrying at least one-half

4 the normal full-time work load for the

5 course of study the student is pursuing, as

6 determined by the institution of higher

7 education, or

8 ‘‘(II) is enrolled in a course which en9 ables the student to improve the student’s

10 job skills or to acquire new job skills.

11 ‘‘(E) IDENTIFICATION REQUIREMENT.—No

12 deduction shall be allowed under subsection (a)

13 to a taxpayer with respect to an eligible student

14 unless the taxpayer includes the name, age, and

15 taxpayer identification number of such eligible

16 student on the return of tax for the taxable

17 year.

18 ‘‘(2) INSTITUTION OF HIGHER EDUCATION.—

19 The term ‘institution of higher education’ means an

20 institution which—

21 ‘‘(A) is described in section 481 of the

22 Higher Education Act of 1965 (20 U.S.C.

23 1088), as in effect on the date of the enactment

24 of this section, and
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1 ‘‘(B) is eligible to participate in programs

2 under title IV of such Act.

3 ‘‘(d) SPECIAL RULES.—

4 ‘‘(1) NO DOUBLE BENEFIT.—

5 ‘‘(A) IN GENERAL.—No deduction shall be

6 allowed under subsection (a) for qualified high7 er education expenses with respect to which a

8 deduction is allowable to the taxpayer under

9 any other provision of this chapter unless the

10 taxpayer irrevocably waives his right to the de11 duction of such expenses under such other pro12 vision.

13 ‘‘(B) DEPENDENTS.—No deduction shall

14 be allowed under subsection (a) to any individ15 ual with respect to whom a deduction under

16 section 151 is allowable to another taxpayer for

17 a taxable year beginning in the calendar year in

18 which such individual’s taxable year begins.

19 ‘‘(C) SAVINGS BOND EXCLUSION.—A de20 duction shall be allowed under subsection (a)

21 for qualified higher education expenses only to

22 the extent the amount of such expenses exceeds

23 the amount excludable under section 135 for

24 the taxable year.
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1 ‘‘(2) LIMITATION ON TAXABLE YEAR OF DE2 DUCTION.—

3 ‘‘(A) IN GENERAL.—A deduction shall be

4 allowed under subsection (a) for any taxable

5 year only to the extent the qualified higher edu6 cation expenses are in connection with enroll7 ment at an institution of higher education dur8 ing the taxable year.

9 ‘‘(B) CERTAIN PREPAYMENTS ALLOWED.—

10 Subparagraph (A) shall not apply to qualified

11 higher education expenses paid during a taxable

12 year if such expenses are in connection with an

13 academic term beginning during such taxable

14 year or during the 1st 3 months of the next

15 taxable year.

16 ‘‘(3) ADJUSTMENT FOR CERTAIN SCHOLAR17 SHIPS AND VETERANS BENEFITS.—The amount of

18 qualified higher education expenses otherwise taken

19 into account under subsection (a) with respect to the

20 education of an individual shall be reduced (before

21 the application of subsection (b)) by the sum of the

22 amounts received with respect to such individual for

23 the taxable year as—

24 ‘‘(A) a qualified scholarship which under

25 section 117 is not includable in gross income,
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1 ‘‘(B) an educational assistance allowance

2 under chapter 30, 31, 32, 34, or 35 of title 38,

3 United States Code, or

4 ‘‘(C) a payment (other than a gift, be5 quest, devise, or inheritance within the meaning

6 of section 102(a)) for educational expenses, or

7 attributable to enrollment at an eligible edu8 cational institution, which is exempt from in9 come taxation by any law of the United States.

10 ‘‘(4) NO DEDUCTION FOR MARRIED INDIVID11 UALS FILING SEPARATE RETURNS.—If the taxpayer

12 is a married individual (within the meaning of sec13 tion 7703), this section shall apply only if the tax14 payer and the taxpayer’s spouse file a joint return

15 for the taxable year.

16 ‘‘(5) NONRESIDENT ALIENS.—If the taxpayer is

17 a nonresident alien individual for any portion of the

18 taxable year, this section shall apply only if such in19 dividual is treated as a resident alien of the United

20 States for purposes of this chapter by reason of an

21 election under subsection (g) or (h) of section 6013.

22 ‘‘(6) REGULATIONS.—The Secretary may pre23 scribe such regulations as may be necessary or ap24 propriate to carry out this section, including regula-
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1 tions requiring recordkeeping and information re2 porting.

3 ‘‘(e) TERMINATION.—This section shall not apply to

4 taxable years beginning after December 31, 2000.’’

5 (b) DEDUCTION ALLOWED IN COMPUTING AD6 JUSTED GROSS INCOME.—Section 62(a) is amended by in7 serting after paragraph (15) the following new paragraph:

8 ‘‘(16) HIGHER EDUCATION TUITION AND

9 FEES.—The deduction allowed by section 220.’’

10 (c) CONFORMING AMENDMENT.—The table of sec11 tions for part VII of subchapter B of chapter 1 is amended

12 by striking the item relating to section 220 and inserting:

‘‘Sec. 220. Higher education tuition and fees.

‘‘Sec. 221. Cross reference.’’

13 (d) EFFECTIVE DATE.—The amendments made by

14 this section shall apply to payments made after December

15 31, 1995.

16 Subtitle B—Provisions Relating To

17 Individual Retirement Plans

18 PART I—RETIREMENT SAVINGS INCENTIVES

19 Subpart A—IRA Deduction

20 SEC. ll11. INCREASE IN INCOME LIMITATIONS.

21 (a) IN GENERAL.—Subparagraph (B) of section

22 219(g)(3) is amended—

23 (1) by striking ‘‘$40,000’’ in clause (i) and in24 serting ‘‘$80,000’’, and
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1 (2) by striking ‘‘$25,000’’ in clause (ii) and in2 serting ‘‘$50,000’’.

3 (b) PHASE-OUT OF LIMITATIONS.—Clause (ii) of sec4 tion 219(g)(2)(A) is amended by striking ‘‘$10,000’’ and

5 inserting ‘‘an amount equal to 10 times the dollar amount

6 applicable for the taxable year under subsection

7 (b)(1)(A)’’.

8 (c) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to taxable years beginning after

10 December 31, 1995, and before January 1, 2001.

11 SEC. ll12. INFLATION ADJUSTMENT FOR DEDUCTIBLE

12 AMOUNT AND INCOME LIMITATIONS.

13 (a) IN GENERAL.—Section 219 is amended by redes14 ignating subsection (h) as subsection (i) and by inserting

15 after subsection (g) the following new subsection:

16 ‘‘(h) COST-OF-LIVING ADJUSTMENTS.—

17 ‘‘(1) IN GENERAL.—In the case of any taxable

18 year beginning in a calendar year after 1996, each

19 dollar amount to which this subsection applies shall

20 be increased by an amount equal to—

21 ‘‘(A) such dollar amount, multiplied by

22 ‘‘(B) the cost-of-living adjustment deter23 mined under section 1(f)(3) for the calendar

24 year in which the taxable year begins, deter25 mined by substituting ‘calendar year 1995’ for
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1 ‘calendar year 1992’ in subparagraph (B)

2 thereof.

3 ‘‘(2) DOLLAR AMOUNTS TO WHICH SUBSECTION

4 APPLIES.—This subsection shall apply to—

5 ‘‘(A) the $2,000 amounts under subsection

6 (b)(1)(A) and (c), and

7 ‘‘(B) the applicable dollar amounts under

8 subsection (g)(3)(B).

9 ‘‘(3) ROUNDING RULES.—

10 ‘‘(A) DEDUCTION AMOUNTS.—If any

11 amount referred to in paragraph (2)(A) as ad12 justed under paragraph (1) is not a multiple of

13 $500, such amount shall be rounded to the next

14 lowest multiple of $500.

15 ‘‘(B) APPLICABLE DOLLAR AMOUNTS.—If

16 any amount referred to in paragraph (2)(B) as

17 adjusted under paragraph (1) is not a multiple

18 of $5,000, such amount shall be rounded to the

19 next lowest multiple of $5,000.’’

20 (b) CONFORMING AMENDMENTS.—

21 (1) Clause (i) of section 219(c)(2)(A) is amend22 ed to read as follows:

23 ‘‘(i) the sum of $250 and the dollar

24 amount in effect for the taxable year under

25 subsection (b)(1)(A), or’’.
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1 (2) Section 408(a)(1) is amended by striking

2 ‘‘in excess of $2,000 on behalf of any individual’’

3 and inserting ‘‘on behalf of any individual in excess

4 of the amount in effect for such taxable year under

5 section 219(b)(1)(A)’’.

6 (3) Section 408(b)(2)(B) is amended by strik7 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

8 effect under section 219(b)(1)(A)’’.

9 (4) Subparagraph (A) of section 408(d)(5) is

10 amended by striking ‘‘$2,250’’ and inserting ‘‘the

11 dollar amount in effect for the taxable year under

12 section 219(c)(2)(A)(i)’’.

13 (5) Section 408(j) is amended by striking

14 ‘‘$2,000’’.

15 (c) EFFECTIVE DATE.—The amendments made by

16 this section shall apply to taxable years beginning after

17 December 31, 1995, and before January 1, 2001.

18 SEC. ll13. COORDINATION OF IRA DEDUCTION LIMIT

19 WITH ELECTIVE DEFERRAL LIMIT.

20 (a) IN GENERAL.—Section 219(b) (relating to maxi21 mum amount of deduction) is amended by adding at the

22 end the following new paragraph:

23 ‘‘(4) COORDINATION WITH ELECTIVE DEFER24 RAL LIMIT.—The amount determined under para25 graph (1) or subsection (c)(2) with respect to any
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1 individual for any taxable year shall not exceed the

2 excess (if any) of—

3 ‘‘(A) the limitation applicable for the tax4 able year under section 402(g)(1), over

5 ‘‘(B) the elective deferrals (as defined in

6 section 402(g)(3)) of such individual for such

7 taxable year.’’

8 (b) CONFORMING AMENDMENT.—Section 219(c) is

9 amended by adding at the end the following new para10 graph:

11 ‘‘(3) CROSS REFERENCE.—

‘‘For reduction in paragraph (2) amount, see

subsection (b)(4).’’

12 (c) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to taxable years beginning after

14 December 31, 1995, and before January 1, 2001.

15 Subpart B—Nondeductible Tax-Free IRA’s

16 SEC. ll21. ESTABLISHMENT OF NONDEDUCTIBLE TAX17 FREE INDIVIDUAL RETIREMENT ACCOUNTS.

18 (a) IN GENERAL.—Subpart A of part I of subchapter

19 D of chapter 1 (relating to pension, profit-sharing, stock

20 bonus plans, etc.) is amended by inserting after section

21 408 the following new section:

22 ‘‘SEC. 408A. SPECIAL INDIVIDUAL RETIREMENT ACCOUNTS.

23 ‘‘(a) GENERAL RULE.—Except as provided in this

24 chapter, a special individual retirement account shall be
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1 treated for purposes of this title in the same manner as

2 an individual retirement plan.

3 ‘‘(b) SPECIAL INDIVIDUAL RETIREMENT AC4 COUNT.—For purposes of this title, the term ‘special indi5 vidual retirement account’ means an individual retirement

6 plan which is designated at the time of establishment of

7 the plan as a special individual retirement account.

8 ‘‘(c) TREATMENT OF CONTRIBUTIONS.—

9 ‘‘(1) NO DEDUCTION ALLOWED.—No deduction

10 shall be allowed under section 219 for a contribution

11 to a special individual retirement account.

12 ‘‘(2) CONTRIBUTION LIMIT.—The aggregate

13 amount of contributions for any taxable year to all

14 special individual retirement accounts maintained for

15 the benefit of an individual shall not exceed the ex16 cess (if any) of—

17 ‘‘(A) the maximum amount allowable as a

18 deduction under section 219 with respect to

19 such individual for such taxable year, over

20 ‘‘(B) the amount so allowed.

21 ‘‘(3) SPECIAL RULES FOR QUALIFIED TRANS22 FERS.—

23 ‘‘(A) IN GENERAL.—No rollover contribu24 tion may be made to a special individual retire25 ment account unless it is a qualified transfer.
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1 ‘‘(B) LIMIT NOT TO APPLY.—The limita2 tion under paragraph (2) shall not apply to a

3 qualified transfer to a special individual retire4 ment account.

5 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—

6 ‘‘(1) IN GENERAL.—Except as provided in this

7 subsection, any amount paid or distributed out of a

8 special individual retirement account shall not be in9 cluded in the gross income of the distributee.

10 ‘‘(2) EXCEPTION FOR EARNINGS ON CONTRIBU11 TIONS HELD LESS THAN 5 YEARS.—

12 ‘‘(A) IN GENERAL.—Any amount distrib13 uted out of a special individual retirement ac14 count which consists of earnings allocable to

15 contributions made to the account during the 5-

16 year period ending on the day before such dis17 tribution shall be included in the gross income

18 of the distributee for the taxable year in which

19 the distribution occurs.

20 ‘‘(B) ORDERING RULE.—

21 ‘‘(i) FIRST-IN, FIRST-OUT RULE.—

22 Distributions from a special individual re23 tirement account shall be treated as having

24 been made—
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1 ‘‘(I) first from the earliest con2 tribution (and earnings allocable

3 thereto) remaining in the account at

4 the time of the distribution, and

5 ‘‘(II) then from other contribu6 tions (and earnings allocable thereto)

7 in the order in which made.

8 ‘‘(ii) ALLOCATIONS BETWEEN CON9 TRIBUTIONS AND EARNINGS.—Any portion

10 of a distribution allocated to a contribution

11 (and earnings allocable thereto) shall be

12 treated as allocated first to the earnings

13 and then to the contribution.

14 ‘‘(iii) ALLOCATION OF EARNINGS.—

15 Earnings shall be allocated to a contribu16 tion in such manner as the Secretary may

17 by regulations prescribe.

18 ‘‘(iv) CONTRIBUTIONS IN SAME

19 YEAR.—Except as provided in regulations,

20 all contributions made during the same

21 taxable year may be treated as 1 contribu22 tion for purposes of this subparagraph.

23 ‘‘(C) CROSS REFERENCE.—

‘‘For additional tax for early withdrawal, see

section 72(t).

24 ‘‘(3) QUALIFIED TRANSFER.—
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1 ‘‘(A) IN GENERAL.—Paragraph (2) shall

2 not apply to any distribution which is trans3 ferred in a qualified transfer to another special

4 individual retirement account.

5 ‘‘(B) CONTRIBUTION PERIOD.—For pur6 poses of paragraph (2), the special individual

7 retirement account to which any contributions

8 are transferred shall be treated as having held

9 such contributions during any period such con10 tributions were held (or are treated as held

11 under this subparagraph) by the special individ12 ual retirement account from which transferred.

13 ‘‘(4) SPECIAL RULES RELATING TO CERTAIN

14 TRANSFERS.—

15 ‘‘(A) IN GENERAL.—Notwithstanding any

16 other provision of law, in the case of a qualified

17 transfer to a special individual retirement ac18 count from an individual retirement plan which

19 is not a special individual retirement account—

20 ‘‘(i) there shall be included in gross

21 income any amount which, but for the

22 qualified transfer, would be includible in

23 gross income, but

24 ‘‘(ii) section 72(t) shall not apply to

25 such amount.
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1 ‘‘(B) TIME FOR INCLUSION.—In the case

2 of any qualified transfer which occurs before

3 January 1, 1997, any amount includible in

4 gross income under subparagraph (A) with re5 spect to such contribution shall be includible

6 ratably over the 4-taxable year period beginning

7 in the taxable year in which the amount was

8 paid or distributed out of the individual retire9 ment plan.

10 ‘‘(e) QUALIFIED TRANSFER.—For purposes of this

11 section—

12 ‘‘(1) IN GENERAL.—The term ‘qualified trans13 fer’ means a transfer to a special individual retire14 ment account from another such account or from an

15 individual retirement plan but only if such transfer

16 meets the requirements of section 408(d)(3).

17 ‘‘(2) LIMITATION.—A transfer otherwise de18 scribed in paragraph (1) shall not be treated as a

19 qualified transfer if the taxpayer’s adjusted gross in20 come for the taxable year of the transfer exceeds the

21 sum of—

22 ‘‘(A) the applicable dollar amount, plus

23 ‘‘(B) the dollar amount applicable for the

24 taxable year under section 219(g)(2)(A)(ii).
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1 This paragraph shall not apply to a transfer from a

2 special individual retirement account to another spe3 cial individual retirement account.

4 ‘‘(3) DEFINITIONS.—For purposes of this sub5 section, the terms ‘adjusted gross income’ and ‘ap6 plicable dollar amount’ have the meanings given

7 such terms by section 219(g)(3), except subpara8 graph (A)(ii) thereof shall be applied without regard

9 to the phrase ‘or the deduction allowable under this

10 section’.’’

11 (b) EARLY WITHDRAWAL PENALTY.—Section 72(t)

12 is amended by adding at the end the following new para13 graph:

14 ‘‘(6) RULES RELATING TO SPECIAL INDIVIDUAL

15 RETIREMENT ACCOUNTS.—In the case of a special

16 individual retirement account under section 408A—

17 ‘‘(A) this subsection shall only apply to

18 distributions out of such account which consist

19 of earnings allocable to contributions made to

20 the account during the 5-year period ending on

21 the day before such distribution, and

22 ‘‘(B) paragraph (2)(A)(i) shall not apply to

23 any distribution described in subparagraph

24 (A).’’
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1 (c) EXCESS CONTRIBUTIONS.—Section 4973(b) is

2 amended by adding at the end the following new sentence:

3 ‘‘For purposes of paragraphs (1)(B) and (2)(C), the

4 amount allowable as a deduction under section 219 shall

5 be computed without regard to section 408A.’’

6 (d) CONFORMING AMENDMENT.—The table of sec7 tions for subpart A of part I of subchapter D of chapter

8 1 is amended by inserting after the item relating to section

9 408 the following new item:

‘‘Sec. 408A. Special individual retirement accounts.’’

10 (e) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to taxable years beginning after

12 December 31, 1995, and before January 1, 2001.

13 PART II—PENALTY-FREE DISTRIBUTIONS

14 SEC. ll21. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE

15 USED WITHOUT PENALTY TO PURCHASE

16 FIRST HOMES, TO PAY HIGHER EDUCATION

17 OR FINANCIALLY DEVASTATING MEDICAL EX18 PENSES, OR BY THE UNEMPLOYED.

19 (a) IN GENERAL.—Paragraph (2) of section 72(t)

20 (relating to exceptions to 10-percent additional tax on

21 early distributions from qualified retirement plans) is

22 amended by adding at the end the following new subpara23 graph:
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1 ‘‘(D) DISTRIBUTIONS FROM CERTAIN

2 PLANS FOR FIRST HOME PURCHASES OR EDU3 CATIONAL EXPENSES.—Distributions to an in4 dividual from an individual retirement plan—

5 ‘‘(i) which are qualified first-time

6 homebuyer distributions (as defined in

7 paragraph (7)); or

8 ‘‘(ii) to the extent such distributions

9 do not exceed the qualified higher edu10 cation expenses (as defined in paragraph

11 (8)) of the taxpayer for the taxable year.’’

12 (b) FINANCIALLY DEVASTATING MEDICAL EX13 PENSES.—

14 (1) IN GENERAL.—Section 72(t)(3)(A) is

15 amended by striking ‘‘(B),’’.

16 (2) CERTAIN LINEAL DESCENDANTS AND AN17 CESTORS TREATED AS DEPENDENTS AND LONG18 TERM CARE SERVICES TREATED AS MEDICAL

19 CARE.—Subparagraph (B) of section 72(t)(2) is

20 amended by striking ‘‘medical care’’ and all that fol21 lows and inserting ‘‘medical care determined—

22 ‘‘(i) without regard to whether the

23 employee itemizes deductions for such tax24 able year, and
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1 ‘‘(ii) in the case of an individual re2 tirement plan—

3 ‘‘(I) by treating such employee’s

4 dependents as including all children,

5 grandchildren and ancestors of the

6 employee or such employee’s spouse

7 and

8 ‘‘(II) by treating qualified long9 term care services (as defined in para10 graph (9)) as medical care for pur11 poses of this subparagraph (B).’’

12 (3) CONFORMING AMENDMENT.—Subparagraph

13 (B) of section 72(t)(2) is amended by striking ‘‘or

14 (C)’’ and inserting ‘‘, (C) or (D)’’.

15 (c) DEFINITIONS.—Section 72(t), as amended by this

16 Act, is amended by adding at the end the following new

17 paragraphs:

18 ‘‘(7) QUALIFIED FIRST-TIME HOMEBUYER DIS19 TRIBUTIONS.—For purposes of paragraph

20 (2)(D)(i)—

21 ‘‘(A) IN GENERAL.—The term ‘qualified

22 first-time homebuyer distribution’ means any

23 payment or distribution received by an individ24 ual to the extent such payment or distribution

25 is used by the individual before the close of the
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1 60th day after the day on which such payment

2 or distribution is received to pay qualified ac3 quisition costs with respect to a principal resi4 dence of a first-time homebuyer who is such in5 dividual or the spouse, child (as defined in sec6 tion 151(c)(3)), or grandchild of such individ7 ual.

8 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

9 For purposes of this paragraph, the term

10 ‘qualified acquisition costs’ means the costs of

11 acquiring, constructing, or reconstructing a res12 idence. Such term includes any usual or reason13 able settlement, financing, or other closing

14 costs.

15 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

16 DEFINITIONS.—For purposes of this para17 graph—

18 ‘‘(i) FIRST-TIME HOMEBUYER.—The

19 term ‘first-time homebuyer’ means any in20 dividual if—

21 ‘‘(I) such individual (and if mar22 ried, such individual’s spouse) had no

23 present ownership interest in a prin24 cipal residence during the 3-year pe25 riod ending on the date of acquisition
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1 of the principal residence to which

2 this paragraph applies, and

3 ‘‘(II) subsection (h) or (k) of sec4 tion 1034 did not suspend the run5 ning of any period of time specified in

6 section 1034 with respect to such in7 dividual on the day before the date

8 the distribution is applied pursuant to

9 subparagraph (A).

10 In the case of an individual described in

11 section 143(i)(1)(C) for any year, an own12 ership interest shall not include any inter13 est under a contract of deed described in

14 such section. An individual who loses an

15 ownership interest in a principal residence

16 incident to a divorce or legal separation is

17 deemed for purposes of this subparagraph

18 to have had no ownership interest in such

19 principal residence within the period re20 ferred to in subclause (II).

21 ‘‘(ii) PRINCIPAL RESIDENCE.—The

22 term ‘principal residence’ has the same

23 meaning as when used in section 1034.

24 ‘‘(iii) DATE OF ACQUISITION.—The

25 term ‘date of acquisition’ means the date—
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1 ‘‘(I) on which a binding contract

2 to acquire the principal residence to

3 which subparagraph (A) applies is en4 tered into, or

5 ‘‘(II) on which construction or re6 construction of such a principal resi7 dence is commenced.

8 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC9 QUISITION.—If any distribution from any indi10 vidual retirement plan fails to meet the require11 ments of subparagraph (A) solely by reason of

12 a delay or cancellation of the purchase or con13 struction of the residence, the amount of the

14 distribution may be contributed to an individual

15 retirement plan as provided in section

16 408(d)(3)(A)(i) (determined by substituting

17 ‘120 days’ for ‘60 days’ in such section), except

18 that—

19 ‘‘(i) section 408(d)(3)(B) shall not be

20 applied to such contribution, and

21 ‘‘(ii) such amount shall not be taken

22 into account in determining whether sec23 tion 408(d)(3)(A)(i) applies to any other

24 amount.
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1 ‘‘(8) QUALIFIED HIGHER EDUCATION EX2 PENSES.—For purposes of paragraph (2)(D)(ii)—

3 ‘‘(A) IN GENERAL.—The term ‘qualified

4 higher education expenses’ means tuition and

5 fees required for the enrollment or attendance

6 of—

7 ‘‘(i) the taxpayer,

8 ‘‘(ii) the taxpayer’s spouse,

9 ‘‘(iii) a dependent of the taxpayer

10 with respect to whom the taxpayer is al11 lowed a deduction under section 151, or

12 ‘‘(iv) the taxpayer’s child (as defined

13 in section 151(c)(3)) or grandchild,

14 as an eligible student at an institution of higher

15 education (as defined in paragraphs (1)(D) and

16 (2) of section 220(c)).

17 ‘‘(B) EXCEPTIONS.—The term ‘qualified

18 higher education expenses’ does not include ex19 penses described in subparagraphs (B) and (C)

20 of section 220(c)(1).

21 ‘‘(C) COORDINATION WITH SAVINGS BOND

22 PROVISIONS.—The amount of qualified higher

23 education expenses for any taxable year shall be

24 reduced by any amount excludable from gross

25 income under section 135.
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1 ‘‘(9) QUALIFIED LONG-TERM CARE SERVICES.—

2 For purposes of paragraph (2)(B)—

3 ‘‘(A) IN GENERAL.—The term ‘qualified

4 long-term care services’ means necessary diag5 nostic, curing, mitigating, treating, preventive,

6 therapeutic, and rehabilitative services, and

7 maintenance and personal care services (wheth8 er performed in a residential or nonresidential

9 setting) which—

10 ‘‘(i) are required by an individual dur11 ing any period the individual is an inca12 pacitated individual (as defined in subpara13 graph (B)),

14 ‘‘(ii) have as their primary purpose—

15 ‘‘(I) the provision of needed as16 sistance with 1 or more activities of

17 daily living (as defined in subpara18 graph (C)), or

19 ‘‘(II) protection from threats to

20 health and safety due to severe cog21 nitive impairment, and

22 ‘‘(iii) are provided pursuant to a con23 tinuing plan of care prescribed by a li24 censed professional (as defined in subpara25 graph (D)).
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1 ‘‘(B) INCAPACITATED INDIVIDUAL.—The

2 term ‘incapacitated individual’ means any indi3 vidual who—

4 ‘‘(i) is unable to perform, without sub5 stantial assistance from another individual

6 (including assistance involving cueing or

7 substantial supervision), at least 2 activi8 ties of daily living as defined in subpara9 graph (C), or

10 ‘‘(ii) has severe cognitive impairment

11 as defined by the Secretary in consultation

12 with the Secretary of Health and Human

13 Services.

14 Such term shall not include any individual oth15 erwise meeting the requirements of the preced16 ing sentence unless a licensed professional with17 in the preceding 12-month period has certified

18 that such individual meets such requirements.

19 ‘‘(C) ACTIVITIES OF DAILY LIVING.—Each

20 of the following is an activity of daily living:

21 ‘‘(i) Eating.

22 ‘‘(ii) Toileting.

23 ‘‘(iii) Transferring.

24 ‘‘(iv) Bathing.

25 ‘‘(v) Dressing.
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1 ‘‘(D) LICENSED PROFESSIONAL.—The

2 term ‘licensed professional’ means—

3 ‘‘(i) a physician or registered profes4 sional nurse, or

5 ‘‘(ii) any other individual who meets

6 such requirements as may be prescribed by

7 the Secretary after consultation with the

8 Secretary of Health and Human Services.

9 ‘‘(E) CERTAIN SERVICES NOT IN10 CLUDED.—The term ‘qualified long-term care

11 services’ shall not include any services provided

12 to an individual—

13 ‘‘(i) by a relative (directly or through

14 a partnership, corporation, or other entity)

15 unless the relative is a licensed professional

16 with respect to such services, or

17 ‘‘(ii) by a corporation or partnership

18 which is related (within the meaning of

19 section 267(b) or 707(b)) to the individual.

20 For purposes of this subparagraph, the term

21 ‘relative’ means an individual bearing a rela22 tionship to the individual which is described in

23 paragraphs (1) through (8) of section 152(a).’’

24 (d) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN

25 UNEMPLOYED INDIVIDUALS.—Paragraph (2) of section
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1 72(t) is amended by adding at the end the following new

2 subparagraph:

3 ‘‘(E) DISTRIBUTIONS TO UNEMPLOYED IN4 DIVIDUALS.—A distribution from an individual

5 retirement plan to an individual after separa6 tion from employment, if—

7 ‘‘(i) such individual has received un8 employment compensation for 12 consecu9 tive weeks under any Federal or State un10 employment compensation law by reason of

11 such separation, and

12 ‘‘(ii) such distributions are made dur13 ing any taxable year during which such un14 employment compensation is paid or the

15 succeeding taxable year.’’

16 (e) EFFECTIVE DATE.—The amendments made by

17 this section shall apply to payments and distributions after

18 December 31, 1995, and before January 1, 2001.

19 SEC. ll22. CONTRIBUTIONS MUST BE HELD AT LEAST 5

20 YEARS IN CERTAIN CASES.

21 (a) IN GENERAL.—Section 72(t), as amended by this

22 Act, is amended by adding at the end the following new

23 paragraph:

24 ‘‘(10) CERTAIN CONTRIBUTIONS MUST BE HELD

25 5 YEARS.—
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1 ‘‘(A) IN GENERAL.—Paragraph (2)(A)(i)

2 shall not apply to any amount distributed out

3 of an individual retirement plan (other than a

4 special individual retirement account) which is

5 allocable to contributions made to the plan dur6 ing the 5-year period ending on the date of

7 such distribution (and earnings on such con8 tributions).

9 ‘‘(B) ORDERING RULE.—For purposes of

10 this paragraph, distributions shall be treated as

11 having been made—

12 ‘‘(i) first from the earliest contribu13 tion (and earnings allocable thereto) re14 maining in the account at the time of the

15 distribution, and

16 ‘‘(ii) then from other contributions

17 (and earnings allocable thereto) in the

18 order in which made.

19 Earnings shall be allocated to contributions in

20 such manner as the Secretary may prescribe.

21 ‘‘(C) SPECIAL RULE FOR ROLLOVERS.—

22 ‘‘(i) PENSION PLANS.—Subparagraph

23 (A) shall not apply to distributions out of

24 an individual retirement plan which are al25 locable to rollover contributions to which
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1 section 402(c), 403(a)(4), or 403(b)(8) ap2 plied.

3 ‘‘(ii) CONTRIBUTION PERIOD.—For

4 purposes of subparagraph (A), amounts

5 shall be treated as having been held by a

6 plan during any period such contributions

7 were held (or are treated as held under

8 this clause) by any individual retirement

9 plan from which transferred.

10 ‘‘(D) SPECIAL ACCOUNTS.—For rules ap11 plicable to special individual retirement ac12 counts under section 408A, see paragraph (8).’’

13 (b) EFFECTIVE DATE.—The amendment made by

14 this section shall apply to contributions (and earnings allo15 cable thereto) which are made after December 31, 1995,

16 and before January 1, 2001.

17 Subtitle C—Increase in Deduction

18 for Health Care Costs of Self19 Employed Individuals

20 SEC. ll31. INCREASE IN SELF-EMPLOYED INDIVIDUALS’

21 DEDUCTION FOR HEALTH INSURANCE COSTS.

22 (a) IN GENERAL.—Section 162(l) (relating to special

23 rules for health insurance costs of self-employed individ24 uals) is amended—
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1 (1) by striking ‘‘30 percent’’ in paragraph (1)

2 and inserting ‘‘the applicable percentage’’, and

3 (2) by adding at the end the following new

4 paragraph:

5 ‘‘(6) APPLICABLE PERCENTAGE.—For purposes

6 of this subsection, the term ‘applicable percentage’

7 means the percentage determined in accordance with

8 the following table:

‘‘In the case of taxable years The applicable

beginning in: percentage is:

1996 ......................................................................................... 35

1997 ......................................................................................... 35

1998 ......................................................................................... 40

1999 ......................................................................................... 45

2000 ......................................................................................... 50

2001 and thereafter ................................................................. 30.’’

9 (b) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to taxable years beginning after

11 December 31, 1995.

12 TITLE X—BUDGET ENFORCEMENT

13 SEC. 10001. PURPOSE.

14 The Congress declares that it is essential to—

15 (1) preserve the deficit reduction achieved by

16 this Act;

17 (2) extend the system of discretionary spending

18 limits for the single discretionary category set forth

19 in section 601 of the Congressional Budget Act of

20 1974;
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1 (3) extend the pay-as-you-go enforcement sys2 tem;

3 (4) prohibit the consideration of direct spending

4 or receipts legislation that would decrease the pay5 as-you-go surplus achieved by this Act and created

6 under section 252 of the Balanced Budget and

7 Emergency Deficit Contract of 1985; and

8 (5) provide for additional deficit reduction, in9 vestment, and tax relief in the event that actual defi10 cit reduction exceeds that currently projected by the

11 Congressional Budget Office to result from enact12 ment of this Act.

13 SEC. 10002. DISCRETIONARY SPENDING LIMITS.

14 (a) DEFINITION OF ‘‘DISCRETIONARY SPENDING

15 LIMIT’’.—Section 601(a)(2) of the Congressional Budget

16 Act of 1974 is amended—

17 (1) in subparagraph (E) by striking the word

18 ‘‘and’’; and

19 (2) by striking subparagraph (F) and inserting

20 the following:

21 ‘‘(F) with respect to fiscal year 1996, for the

22 discretionary category: $502,000,000,000 in new

23 budget authority and $539,535,000,000 in outlays;
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1 ‘‘(G) with respect to fiscal year 1997, for the

2 discretionary category: $508,000,000,000 in new

3 budget authority and $546,851,000,000 in outlays;

4 ‘‘(H) with respect to fiscal year 1998, for the

5 discretionary category: $514,000,000,000 in new

6 budget authority and $540,041,000,000 in outlays;

7 ‘‘(I) with respect to fiscal year 1999, for the

8 discretionary category: $508,000,000,000 in new

9 budget authority and $542,166,000,000 in outlays;

10 ‘‘(J) with respect to fiscal year 2000, for the

11 discretionary category: $504,000,000,000 in new

12 budget authority and $541,759,000,000 in outlays;

13 ‘‘(K) with respect to fiscal year 2001, for the

14 discretionary category: $500,000,000,000 in new

15 budget authority and $530,833,000,000 in outlays;

16 and

17 ‘‘(L) with respect to fiscal year 2002, for the

18 discretionary category: $482,000,000,000 in new

19 budget authority and $514,088,000,000 in outlays;’’.

20 (b) POINT OF ORDER IN THE SENATE.—Section

21 601(b)(1) of the Congressional Budget Act of 1974 is

22 amended to read as follows:

23 ‘‘(1) Except as otherwise provided in this Act, it shall

24 not be in order in the Senate to consider any concurrent

25 resolution on the budget for fiscal year 1996, 1997, 1998,
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1 1999, 2000, 2001, or 2002 (or amendment, motion, or

2 conference report on such a resolution) that would exceed

3 any of the deficit targets or discretionary spending limits

4 in this title.’’.

5 (c) CONFORMING AMENDMENTS.—(1) Section 251 of

6 the Balanced Budget and Emergency Deficit Control Act

7 of 1985 is amended—

8 (A) in subsection (a) by striking ‘‘FISCAL

9 YEARS 1991–1998 ENFORCEMENT.—’’ and inserting

10 ‘‘FISCAL YEARS 1991–2002 ENFORCEMENT.—’’;

11 (B) in subsection (b)(1)—

12 (i) in the matter before subparagraph (A),

13 by—

14 (I) striking ‘‘When the President sub15 mits the budget under section 1105(a) of

16 title 31, United States Code, for budget

17 year 1992, 1993, 1994, 1995, 1996, 1997,

18 or 1998’’ and inserting ‘‘When the Presi19 dent submits the budget under section

20 1105(a) of title 31, United States Code,

21 for budget year 1992, 1993, 1994, 1995,

22 1996, 1997, 1998, 1999, 2000, 2001, or

23 2002’’; and

24 (II) striking ‘‘the budget shall include,

25 adjustments to discretionary spending lim-
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1 its (and those limits as cumulatively ad2 justed) for the budget year and each out3 year through 1998’’ and inserting ‘‘the

4 budget shall include, adjustments to discre5 tionary spending limits (and those limits as

6 cumulatively adjusted) for the budget year

7 and each outyear through 2002’’;

8 (ii) in paragraph (1)(B), by striking

9 ‘‘budget year 1996, 1997, or 1998,’’ and insert10 ing ‘‘budget year 1996, 1997, 1998, 2000,

11 2001, or 2002,’’;

12 (iii) in the matter before subparagraph (A)

13 in paragraph (2) by—

14 (I) striking ‘‘When OMB submits a

15 sequestration report under section 254 (g)

16 or (h) for fiscal year 1991, 1992, 1993,

17 1994, 1995, 1996, 1997, or 1998,’’ and in18 serting ‘‘When OMB submits a sequestra19 tion report under section 254(g) or (h) for

20 fiscal year 1991, 1992, 1993, 1994, 1995,

21 1996, 1997, 1998, 1999, 2000, 2001, or

22 2002,’’; and

23 (II) striking ‘‘for the fiscal year and

24 each succeeding year through 1998,’’ and
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1 inserting ‘‘for the fiscal year and each suc2 ceeding year through 2002,’’;

3 ‘‘(iv) by amending paragraph (2)(A) to

4 read as follows:

5 ‘‘(A) IRS FUNDING.—(i) To the extent

6 that appropriations are enacted that provide ad7 ditional new budget authority or result in addi8 tional outlays for the Internal Revenue Service

9 compliance initiative in any fiscal year, the ad10 justments for that year shall be those amounts

11 of additional new budget authority or additional

12 outlays (as defined in clause (ii)), but not to ex13 ceed in any fiscal year $405,000,000 in new

14 budget authority and $405,000,000 in outlays.

15 ‘‘(ii) ADDITIONAL AMOUNTS.—As used in

16 this subparagraph, the terms ‘additional new

17 budget authority’ or ‘additional outlays’ shall

18 mean, for any fiscal year, budget authority or

19 outlays (as the case may be) in excess of the

20 amounts requested for that fiscal year for the

21 Internal Revenue Service in the President’s

22 Budget for fiscal year 1996.’’;

23 (v) in paragraph (2)(E)(iv), by striking

24 ‘‘fiscal years 1994, 1995, 1996, 1997, and

25 1998,’’ and inserting ‘‘fiscal years 1994, 1995,
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1 1996, 1997, 1998, 1999, 2000, 2001, and

2 2002’’; and

3 (vi) in paragraph (2)(F), by striking ‘‘fis4 cal year 1996, 1997, or 1998’’ and inserting

5 ‘‘fiscal year 1996, 1997, 1998, 1999, 2000,

6 2001, or 2002’’.

7 (2) REPORTS.—Sections 254(d)(2) and 254(g)(2)(A)

8 of the Balanced Budget and Emergency Deficit Control

9 Act of 1985 are each amended by striking ‘‘1998’’ and

10 inserting ‘‘2002’’.

11 (3) CONGRESSIONAL ENFORCEMENT.—

12 (A) Title VI of the Congressional Budget Act of

13 1974 is amended—

14 (i) in section 602(c) and (d), by striking

15 ‘‘1995’’ each time it appears and inserting

16 ‘‘2002’’;

17 (ii) in section 606(a), by striking ‘‘fiscal

18 year 1992, 1993, 1994, or 1995,’’ and inserting

19 ‘‘any fiscal year’’; and

20 (iii) in section 606(d)(1), by striking ‘‘fis21 cal years 1992, 1993, 1994, and 1995,’’ and in22 serting any fiscal year’’.

23 (B) Section 210 of House Concurrent Resolu24 tion 67 (104th Congress) is repealed.
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1 (4) EXPIRATION.—(A) Notwithstanding section

2 275(b) of the Balanced Budget and Emergency Deficit

3 Control Act of 1985, sections 250, 251, 252, and 254

4 through 258C of that Act, the second sentence of section

5 904(c) of the Congressional Budget Act, and the second

6 sentence of section 904(d) of the Congressional Budget

7 Act shall expire on September 30, 2002.

8 (B) Section 607 of the Congressional Budget Act of

9 1974 is amended by striking ‘‘shall apply to fiscal years

10 1991 to 1998’’ and inserting ‘‘shall apply to fiscal years

11 1991 to 2002’’

12 SEC. 10003. ENFORCING PAY-AS-YOU-GO.

13 (a) Section 252 of the Balanced Budget and Emer14 gency Deficit Control Act of 1985 is amended—

15 (1) in subsection (a), by striking ‘‘FISCAL YEAR

16 1992–1998 ENFORCEMENT.’’ and inserting ‘‘FISCAL

17 YEAR 1992–2002 ENFORCEMENT.’’;

18 (2) in subsection (d), by striking ‘‘estimate of

19 the amount of change in outlays or receipts, as the

20 case may be, in each fiscal year through fiscal year

21 1998’’ both places that it appears and inserting ‘‘es22 timate of the amount of change in outlays or re23 ceipts, as the case may be, in each fiscal year

24 through fiscal year 2002’’ both places; and
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1 (3) in subsection (e), by striking ‘‘for any fiscal

2 year from 1991 through 1998,’’ and inserting ‘‘for

3 any fiscal year from 1991 through 2002,’’.

4 (b) Section 254(g)(3) of the Balanced Budget and

5 Emergency Deficit Control Act of 1985 is amended by

6 striking ‘‘1998’’ and inserting ‘‘2002’’.

7 (c) Upon enactment of this Act, the director of the

8 Office of Management and Budget shall reduce the bal9 ances of direct spending and receipts legislation applicable

10 to each fiscal year under section 252 of the Balanced

11 Budget and Emergency Deficit Control Act of 1985 by

12 an amount equal to the net deficit reduction achieved

13 through the enactment in this Act of direct spending and

14 receipts legislation for that year.

15 SEC. 10004. FISCAL DIVIDEND FOR DEFICIT REDUCTION, IN16 VESTMENT, AND TAX REDUCTION.

17 Title VI of the Congressional Budget Act is amended

18 by inserting at the end thereof the following new section:

19 ‘‘SEC. 608. FISCAL DIVIDEND FOR DEFICIT REDUCTION, IN20 VESTMENT, AND TAX REDUCTION.

21 ‘‘(a) DEFINITIONS.—

22 ‘‘(1) DEFICIT TARGETS.—The term ‘deficit tar23 get’ means—

24 ‘‘(A) with respect to fiscal year 1999,

25 $131,000,000,000;
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1 ‘‘(B) with respect to fiscal year 2000,

2 $114,000,000,000;

3 ‘‘(C) with respect to fiscal year 2001,

4 $54,000,000,000; and

5 ‘‘(D) with respect to fiscal year 2002,

6 $0.’’.

7 ‘‘(2) FISCAL DIVIDEND.—The term ‘fiscal divi8 dend’ means, for any fisal year, the amount by

9 which the deficit target exceeds the actual deficit.

10 ‘‘(b) USE OF THE FISCAL DIVIDEND IN THE CON11 GRESSIONAL BUDGET PROCESS—

12 ‘‘(1) FILINGS—As soon as practicable after the

13 actual deficit for th prior fiscal year is known, the

14 Chairs of the Committees on the Budget of the Sen15 ate and House shall file with their respective

16 Houses—

17 ‘‘(A) revised allocations under sections

18 302(a) and 602(a) of the Congressional Budget

19 Act of 1974 to the Committees on Appropria20 tions for the current fiscal year and correspond21 ing aggregates, increased by one third of the

22 fiscal dividend for the prior fiscal year; and

23 ‘‘(B) revised revenue aggregates for the

24 current fiscal year, decreased by one third of

25 the fiscal dividend for the prior fiscal year.
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1 ‘‘(2) EFFECT OF REVISED ALLOCATIONS AND

2 AGGREGATES.—Revised allocations and aggregates

3 submitted under this subsection shall be considered

4 for the purposes of the Congressional Budget Act of

5 1974 as allocations and aggregates contained in the

6 most recently adopted concurrent resolution on the

7 budget.

8 ‘‘(B) USE OF THE FISCAL DIVIDEND IN

9 THE ENFORCEMENT OF DISCRETTIONARY

10 SPENDING LIMITS.—As soon as practicable

11 after the actual deficit for the prior fiscal year

12 is known, the Director of the Office of Manage13 ment and Budget shall increase the discre14 tionary spending limits for the current fiscal

15 year by one third of the fiscal dividend for the

16 prior fiscal year.

17 ‘‘(C) USE OF THE FISCAL DIVIDEND IN

18 THE ENFORCEMENT OF PAY-AS-YOU-GO.—As

19 soon as practicable after the actual deficit for

20 the prior fiscal year is known, the Director of

21 the Office of Management and Budget shall

22 credit the balances of direct spending and re23 ceipts legislation applicable to the current fiscal

24 year under section 252 of the Balanced Budget

25 and Emergency Deficit Control Act of 1985 by
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1 one third of the fiscal dividend for the prior fis2 cal year.’’

3 SEC. 10005. EXERCISE OF RULE-MAKING POWERS

4 The Congress enacts the provisions of this part—

5 (1) as an exercise of the rule-making power of

6 the Senate and the House of Representatives, re7 spectively, and as such these provisions shall be con8 sidered as part of the rules of each House, respec9 tively, or of that House to which they specifically

10 apply, and such rules shall supersede other rules

11 only to the extent that they are inconsistent there12 with; and

13 (2) with full recognition of the constitutional

14 right of either House to change such rules (so far

15 as relating to such House) at any time, in the same

16 manner, and to the same extent as in the case of

17 any other rule of such House.

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