H. R. 1180

One Hundred Sixth Congress

of the

United States of America

AT THE FIRST SESSION

Begun and held at the City of Washington on Wednesday,

the sixth day of January, one thousand nine hundred and ninety-nine

An Act

To amend the Social Security Act to expand the availability of health care coverage

for working individuals with disabilities, to establish a Ticket to Work and SelfSufficiency Program in the Social Security Administration to provide such individuals with meaningful opportunities to work, and for other purposes.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.—This Act may be cited as the ‘‘Ticket to

Work and Work Incentives Improvement Act of 1999’’.

(b) TABLE OF CONTENTS.—The table of contents is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings and purposes.

TITLE I—TICKET TO WORK AND SELF-SUFFICIENCY AND RELATED

PROVISIONS

Subtitle A—Ticket to Work and Self-Sufficiency

Sec. 101. Establishment of the Ticket to Work and Self-Sufficiency Program.

Subtitle B—Elimination of Work Disincentives

Sec. 111. Work activity standard as a basis for review of an individual’s disabled

status.

Sec. 112. Expedited reinstatement of disability benefits.

Subtitle C—Work Incentives Planning, Assistance, and Outreach

Sec. 121. Work incentives outreach program.

Sec. 122. State grants for work incentives assistance to disabled beneficiaries.

TITLE II—EXPANDED AVAILABILITY OF HEALTH CARE SERVICES

Sec. 201. Expanding State options under the medicaid program for workers with

disabilities.

Sec. 202. Extending medicare coverage for OASDI disability benefit recipients.

Sec. 203. Grants to develop and establish State infrastructures to support working

individuals with disabilities.

Sec. 204. Demonstration of coverage under the medicaid program of workers with

potentially severe disabilities.

Sec. 205. Election by disabled beneficiaries to suspend medigap insurance when

covered under a group health plan.

TITLE III—DEMONSTRATION PROJECTS AND STUDIES

Sec. 301. Extension of disability insurance program demonstration project authority.

Sec. 302. Demonstration projects providing for reductions in disability insurance

benefits based on earnings.

Sec. 303. Studies and reports.

TITLE IV—MISCELLANEOUS AND TECHNICAL AMENDMENTS

Sec. 401. Technical amendments relating to drug addicts and alcoholics.

Sec. 402. Treatment of prisoners.
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Sec. 403. Revocation by members of the clergy of exemption from social security

coverage.

Sec. 404. Additional technical amendment relating to cooperative research or demonstration projects under titles II and XVI.

Sec. 405. Authorization for State to permit annual wage reports.

Sec. 406. Assessment on attorneys who receive their fees via the Social Security

Administration.

Sec. 407. Extension of authority of State medicaid fraud control units.

Sec. 408. Climate database modernization.

Sec. 409. Special allowance adjustment for student loans.

Sec. 410. Schedule for payments under SSI state supplementation agreements.

Sec. 411. Bonus commodities.

Sec. 412. Simplification of definition of foster child under EIC.

Sec. 413. Delay of effective date of organ procurement and transplantation network

final rule.

TITLE V—TAX RELIEF EXTENSION ACT OF 1999

Sec. 500. Short title of title.

Subtitle A—Extensions

Sec. 501. Allowance of nonrefundable personal credits against regular and minimum tax liability.

Sec. 502. Research credit.

Sec. 503. Subpart F exemption for active financing income.

Sec. 504. Taxable income limit on percentage depletion for marginal production.

Sec. 505. Work opportunity credit and welfare-to-work credit.

Sec. 506. Employer-provided educational assistance.

Sec. 507. Extension and modification of credit for producing electricity from certain

renewable resources.

Sec. 508. Extension of duty-free treatment under Generalized System of Preferences. Sec. 509. Extension of credit for holders of qualified zone academy bonds.

Sec. 510. Extension of first-time homebuyer credit for District of Columbia.

Sec. 511. Extension of expensing of environmental remediation costs.

Sec. 512. Temporary increase in amount of rum excise tax covered over to Puerto

Rico and Virgin Islands.

Subtitle B—Other Time-Sensitive Provisions

Sec. 521. Advance pricing agreements treated as confidential taxpayer information.

Sec. 522. Authority to postpone certain tax-related deadlines by reason of Y2K

failures.

Sec. 523. Inclusion of certain vaccines against streptococcus pneumoniae to list of

taxable vaccines.

Sec. 524. Delay in effective date of requirement for approved diesel or kerosene

terminals.

Sec. 525. Production flexibility contract payments.

Subtitle C—Revenue Offsets

PART I—GENERAL PROVISIONS

Sec. 531. Modification of estimated tax safe harbor.

Sec. 532. Clarification of tax treatment of income and loss on derivatives.

Sec. 533. Expansion of reporting of cancellation of indebtedness income.

Sec. 534. Limitation on conversion of character of income from constructive ownership transactions.

Sec. 535. Treatment of excess pension assets used for retiree health benefits.

Sec. 536. Modification of installment method and repeal of installment method for

accrual method taxpayers.

Sec. 537. Denial of charitable contribution deduction for transfers associated with

split-dollar insurance arrangements.

Sec. 538. Distributions by a partnership to a corporate partner of stock in another

corporation.

PART II—PROVISIONS RELATING TO REAL ESTATE INVESTMENT TRUSTS

SUBPART A—TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT

SUBSIDIARIES

Sec. 541. Modifications to asset diversification test.

Sec. 542. Treatment of income and services provided by taxable REIT subsidiaries.

Sec. 543. Taxable REIT subsidiary.

Sec. 544. Limitation on earnings stripping.
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Sec. 545. 100 percent tax on improperly allocated amounts.

Sec. 546. Effective date.

Sec. 547. Study relating to taxable REIT subsidiaries.

SUBPART B—HEALTH CARE REITS

Sec. 551. Health care REITs.

SUBPART C—CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES

Sec. 556. Conformity with regulated investment company rules.

SUBPART D—CLARIFICATION OF EXCEPTION FROM IMPERMISSIBLE TENANT SERVICE

INCOME

Sec. 561. Clarification of exception for independent operators.

SUBPART E—MODIFICATION OF EARNINGS AND PROFITS RULES

Sec. 566. Modification of earnings and profits rules.

SUBPART F—MODIFICATION OF ESTIMATED TAX RULES

Sec. 571. Modification of estimated tax rules for closely held real estate investment

trusts.

SEC. 2. FINDINGS AND PURPOSES.

(a) FINDINGS.—The Congress makes the following findings:

(1) It is the policy of the United States to provide assistance

to individuals with disabilities to lead productive work lives.

(2) Health care is important to all Americans.

(3) Health care is particularly important to individuals

with disabilities and special health care needs who often cannot

afford the insurance available to them through the private

market, are uninsurable by the plans available in the private

sector, and are at great risk of incurring very high and economically devastating health care costs.

(4) Americans with significant disabilities often are unable

to obtain health care insurance that provides coverage of the

services and supports that enable them to live independently

and enter or rejoin the workforce. Personal assistance services

(such as attendant services, personal assistance with transportation to and from work, reader services, job coaches, and

related assistance) remove many of the barriers between significant disability and work. Coverage for such services, as well

as for prescription drugs, durable medical equipment, and basic

health care are powerful and proven tools for individuals with

significant disabilities to obtain and retain employment.

(5) For individuals with disabilities, the fear of losing

health care and related services is one of the greatest barriers

keeping the individuals from maximizing their employment,

earning potential, and independence.

(6) Social Security Disability Insurance and Supplemental

Security Income beneficiaries risk losing medicare or medicaid

coverage that is linked to their cash benefits, a risk that is

an equal, or greater, work disincentive than the loss of cash

benefits associated with working.

(7) Individuals with disabilities have greater opportunities

for employment than ever before, aided by important public

policy initiatives such as the Americans with Disabilities Act

of 1990 (42 U.S.C. 12101 et seq.), advancements in public

understanding of disability, and innovations in assistive technology, medical treatment, and rehabilitation.

(8) Despite such historic opportunities and the desire of

millions of disability recipients to work and support themselves,

fewer than one-half of one percent of Social Security Disability
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Insurance and Supplemental Security Income beneficiaries

leave the disability rolls and return to work.

(9) In addition to the fear of loss of health care coverage,

beneficiaries cite financial disincentives to work and earn

income and lack of adequate employment training and placement services as barriers to employment.

(10) Eliminating such barriers to work by creating financial

incentives to work and by providing individuals with disabilities

real choice in obtaining the services and technology they need

to find, enter, and maintain employment can greatly improve

their short and long-term financial independence and personal

well-being.

(11) In addition to the enormous advantages such changes

promise for individuals with disabilities, redesigning government programs to help individuals with disabilities return to

work may result in significant savings and extend the life

of the Social Security Disability Insurance Trust Fund.

(12) If only an additional one-half of one percent of the

current Social Security Disability Insurance and Supplemental

Security Income recipients were to cease receiving benefits

as a result of employment, the savings to the Social Security

Trust Funds and to the Treasury in cash assistance would

total $3,500,000,000 over the worklife of such individuals, far

exceeding the cost of providing incentives and services needed

to assist them in entering work and achieving financial

independence to the best of their abilities.

(b) PURPOSES.—The purposes of this Act are as follows:

(1) To provide health care and employment preparation

and placement services to individuals with disabilities that

will enable those individuals to reduce their dependency on

cash benefit programs.

(2) To encourage States to adopt the option of allowing

individuals with disabilities to purchase medicaid coverage that

is necessary to enable such individuals to maintain employment.

(3) To provide individuals with disabilities the option of

maintaining medicare coverage while working.

(4) To establish a return to work ticket program that will

allow individuals with disabilities to seek the services necessary

to obtain and retain employment and reduce their dependency

on cash benefit programs.

TITLE I—TICKET TO WORK AND SELFSUFFICIENCY AND RELATED PROVISIONS

Subtitle A—Ticket to Work and SelfSufficiency

SEC. 101. ESTABLISHMENT OF THE TICKET TO WORK AND SELF-SUFFICIENCY PROGRAM.

(a) IN GENERAL.—Part A of title XI of the Social Security

Act (42 U.S.C. 1301 et seq.) is amended by adding at the end

the following new section:
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‘‘THE TICKET TO WORK AND SELF-SUFFICIENCY PROGRAM

‘‘SEC. 1148. (a) IN GENERAL.—The Commissioner shall establish

a Ticket to Work and Self-Sufficiency Program, under which a

disabled beneficiary may use a ticket to work and self-sufficiency

issued by the Commissioner in accordance with this section to

obtain employment services, vocational rehabilitation services, or

other support services from an employment network which is of

the beneficiary’s choice and which is willing to provide such services

to such beneficiary.

‘‘(b) TICKET SYSTEM.—

‘‘(1) DISTRIBUTION OF TICKETS.—The Commissioner may

issue a ticket to work and self-sufficiency to disabled beneficiaries for participation in the Program.

‘‘(2) ASSIGNMENT OF TICKETS.—A disabled beneficiary

holding a ticket to work and self-sufficiency may assign the

ticket to any employment network of the beneficiary’s choice

which is serving under the Program and is willing to accept

the assignment.

‘‘(3) TICKET TERMS.—A ticket issued under paragraph (1)

shall consist of a document which evidences the Commissioner’s

agreement to pay (as provided in paragraph (4)) an employment

network, which is serving under the Program and to which

such ticket is assigned by the beneficiary, for such employment

services, vocational rehabilitation services, and other support

services as the employment network may provide to the beneficiary.

‘‘(4) PAYMENTS TO EMPLOYMENT NETWORKS.—The Commissioner shall pay an employment network under the Program

in accordance with the outcome payment system under subsection (h)(2) or under the outcome-milestone payment system

under subsection (h)(3) (whichever is elected pursuant to subsection (h)(1)). An employment network may not request or

receive compensation for such services from the beneficiary.

‘‘(c) STATE PARTICIPATION.—

‘‘(1) IN GENERAL.—Each State agency administering or

supervising the administration of the State plan approved

under title I of the Rehabilitation Act of 1973 (29 U.S.C. 720

et seq.) may elect to participate in the Program as an employment network with respect to a disabled beneficiary. If the

State agency does elect to participate in the Program, the

State agency also shall elect to be paid under the outcome

payment system or the outcome-milestone payment system in

accordance with subsection (h)(1). With respect to a disabled

beneficiary that the State agency does not elect to have participate in the Program, the State agency shall be paid for services

provided to that beneficiary under the system for payment

applicable under section 222(d) and subsections (d) and (e)

of section 1615. The Commissioner shall provide for periodic

opportunities for exercising such elections.

‘‘(2) EFFECT OF PARTICIPATION BY STATE AGENCY.—

‘‘(A) STATE AGENCIES PARTICIPATING.—In any case in

which a State agency described in paragraph (1) elects

under that paragraph to participate in the Program, the

employment services, vocational rehabilitation services, and

other support services which, upon assignment of tickets
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to work and self-sufficiency, are provided to disabled beneficiaries by the State agency acting as an employment

network shall be governed by plans for vocational

rehabilitation services approved under title I of the

Rehabilitation Act of 1973 (29 U.S.C. 720 et seq.).

‘‘(B) STATE AGENCIES ADMINISTERING MATERNAL AND

CHILD HEALTH SERVICES PROGRAMS.—Subparagraph (A)

shall not apply with respect to any State agency administering a program under title V of this Act.

‘‘(3) AGREEMENTS BETWEEN STATE AGENCIES AND EMPLOYMENT NETWORKS.—State agencies and employment networks

shall enter into agreements regarding the conditions under

which services will be provided when an individual is referred

by an employment network to a State agency for services.

The Commissioner shall establish by regulations the timeframe

within which such agreements must be entered into and the

mechanisms for dispute resolution between State agencies and

employment networks with respect to such agreements.

‘‘(d) RESPONSIBILITIES OF THE COMMISSIONER.—

‘‘(1) SELECTION AND QUALIFICATIONS OF PROGRAM MANAGERS.—The Commissioner shall enter into agreements with

1 or more organizations in the private or public sector for

service as a program manager to assist the Commissioner in

administering the Program. Any such program manager shall

be selected by means of a competitive bidding process, from

among organizations in the private or public sector with available expertise and experience in the field of vocational

rehabilitation or employment services.

‘‘(2) TENURE, RENEWAL, AND EARLY TERMINATION.—Each

agreement entered into under paragraph (1) shall provide for

early termination upon failure to meet performance standards

which shall be specified in the agreement and which shall

be weighted to take into account any performance in prior

terms. Such performance standards shall include—

‘‘(A) measures for ease of access by beneficiaries to

services; and

‘‘(B) measures for determining the extent to which

failures in obtaining services for beneficiaries fall within

acceptable parameters, as determined by the Commissioner.

‘‘(3) PRECLUSION FROM DIRECT PARTICIPATION IN DELIVERY

OF SERVICES IN OWN SERVICE AREA.—Agreements under paragraph (1) shall preclude—

‘‘(A) direct participation by a program manager in the

delivery of employment services, vocational rehabilitation

services, or other support services to beneficiaries in the

service area covered by the program manager’s agreement;

and

‘‘(B) the holding by a program manager of a financial

interest in an employment network or service provider

which provides services in a geographic area covered under

the program manager’s agreement.

‘‘(4) SELECTION OF EMPLOYMENT NETWORKS.—

‘‘(A) IN GENERAL.—The Commissioner shall select and

enter into agreements with employment networks for

service under the Program. Such employment networks
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shall be in addition to State agencies serving as employment networks pursuant to elections under subsection (c).

‘‘(B) ALTERNATE PARTICIPANTS.—In any State where

the Program is being implemented, the Commissioner shall

enter into an agreement with any alternate participant

that is operating under the authority of section 222(d)(2)

in the State as of the date of the enactment of this section

and chooses to serve as an employment network under

the Program.

‘‘(5) TERMINATION OF AGREEMENTS WITH EMPLOYMENT NETWORKS.—The Commissioner shall terminate agreements with

employment networks for inadequate performance, as determined by the Commissioner.

‘‘(6) QUALITY ASSURANCE.—The Commissioner shall provide

for such periodic reviews as are necessary to provide for effective quality assurance in the provision of services by employment networks. The Commissioner shall solicit and consider

the views of consumers and the program manager under which

the employment networks serve and shall consult with providers of services to develop performance measurements. The

Commissioner shall ensure that the results of the periodic

reviews are made available to beneficiaries who are prospective

service recipients as they select employment networks. The

Commissioner shall ensure that the periodic surveys of beneficiaries receiving services under the Program are designed

to measure customer service satisfaction.

‘‘(7) DISPUTE RESOLUTION.—The Commissioner shall provide for a mechanism for resolving disputes between beneficiaries and employment networks, between program managers

and employment networks, and between program managers

and providers of services. The Commissioner shall afford a

party to such a dispute a reasonable opportunity for a full

and fair review of the matter in dispute.

‘‘(e) PROGRAM MANAGERS.— ‘‘(1) IN GENERAL.—A program manager shall conduct tasks

appropriate to assist the Commissioner in carrying out the

Commissioner’s duties in administering the Program.

‘‘(2) RECRUITMENT OF EMPLOYMENT NETWORKS.—A program

manager shall recruit, and recommend for selection by the

Commissioner, employment networks for service under the Program. The program manager shall carry out such recruitment

and provide such recommendations, and shall monitor all

employment networks serving in the Program in the geographic

area covered under the program manager’s agreement, to the

extent necessary and appropriate to ensure that adequate

choices of services are made available to beneficiaries. Employment networks may serve under the Program only pursuant

to an agreement entered into with the Commissioner under

the Program incorporating the applicable provisions of this

section and regulations thereunder, and the program manager

shall provide and maintain assurances to the Commissioner

that payment by the Commissioner to employment networks

pursuant to this section is warranted based on compliance

by such employment networks with the terms of such agreement and this section. The program manager shall not impose

numerical limits on the number of employment networks to

be recommended pursuant to this paragraph.
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‘‘(3) FACILITATION OF ACCESS BY BENEFICIARIES TO EMPLOYMENT NETWORKS.—A program manager shall facilitate access

by beneficiaries to employment networks. The program manager shall ensure that each beneficiary is allowed changes

in employment networks without being deemed to have rejected

services under the Program. When such a change occurs, the

program manager shall reassign the ticket based on the choice

of the beneficiary. Upon the request of the employment network,

the program manager shall make a determination of the allocation of the outcome or milestone-outcome payments based on

the services provided by each employment network. The program manager shall establish and maintain lists of employment

networks available to beneficiaries and shall make such lists

generally available to the public. The program manager shall

ensure that all information provided to disabled beneficiaries

pursuant to this paragraph is provided in accessible formats.

‘‘(4) ENSURING AVAILABILITY OF ADEQUATE SERVICES.—The

program manager shall ensure that employment services, vocational rehabilitation services, and other support services are

provided to beneficiaries throughout the geographic area covered under the program manager’s agreement, including rural

areas.

‘‘(5) REASONABLE ACCESS TO SERVICES.—The program manager shall take such measures as are necessary to ensure

that sufficient employment networks are available and that

each beneficiary receiving services under the Program has

reasonable access to employment services, vocational rehabilitation services, and other support services. Services provided

under the Program may include case management, work incentives planning, supported employment, career planning, career

plan development, vocational assessment, job training, placement, follow-up services, and such other services as may be

specified by the Commissioner under the Program. The program

manager shall ensure that such services are available in each

service area.

‘‘(f ) EMPLOYMENT NETWORKS.—

‘‘(1) QUALIFICATIONS FOR EMPLOYMENT NETWORKS.—

‘‘(A) IN GENERAL.—Each employment network serving

under the Program shall consist of an agency or instrumentality of a State (or a political subdivision thereof ) or

a private entity, that assumes responsibility for the

coordination and delivery of services under the Program

to individuals assigning to the employment network tickets

to work and self-sufficiency issued under subsection (b).

‘‘(B) ONE-STOP DELIVERY SYSTEMS.—An employment

network serving under the Program may consist of a onestop delivery system established under subtitle B of title

I of the Workforce Investment Act of 1998 (29 U.S.C. 2811

et seq.).

‘‘(C) COMPLIANCE WITH SELECTION CRITERIA.—No

employment network may serve under the Program unless

it meets and maintains compliance with both general selection criteria (such as professional and educational qualifications, where applicable) and specific selection criteria (such

as substantial expertise and experience in providing relevant employment services and supports).
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‘‘(D) SINGLE OR ASSOCIATED PROVIDERS ALLOWED.—An

employment network shall consist of either a single provider of such services or of an association of such providers

organized so as to combine their resources into a single

entity. An employment network may meet the requirements

of subsection (e)(4) by providing services directly, or by

entering into agreements with other individuals or entities

providing appropriate employment services, vocational

rehabilitation services, or other support services.

‘‘(2) REQUIREMENTS RELATING TO PROVISION OF SERVICES.—

Each employment network serving under the Program shall

be required under the terms of its agreement with the Commissioner to—

‘‘(A) serve prescribed service areas; and

‘‘(B) take such measures as are necessary to ensure

that employment services, vocational rehabilitation services, and other support services provided under the Program by, or under agreements entered into with, the

employment network are provided under appropriate individual work plans that meet the requirements of subsection

(g).

‘‘(3) ANNUAL FINANCIAL REPORTING.—Each employment network shall meet financial reporting requirements as prescribed

by the Commissioner.

‘‘(4) PERIODIC OUTCOMES REPORTING.—Each employment

network shall prepare periodic reports, on at least an annual

basis, itemizing for the covered period specific outcomes

achieved with respect to specific services provided by the

employment network. Such reports shall conform to a national

model prescribed under this section. Each employment network

shall provide a copy of the latest report issued by the employment network pursuant to this paragraph to each beneficiary

upon enrollment under the Program for services to be received

through such employment network. Upon issuance of each

report to each beneficiary, a copy of the report shall be maintained in the files of the employment network. The program

manager shall ensure that copies of all such reports issued

under this paragraph are made available to the public under

reasonable terms.

‘‘(g) INDIVIDUAL WORK PLANS.—

‘‘(1) REQUIREMENTS.—Each employment network shall—

‘‘(A) take such measures as are necessary to ensure

that employment services, vocational rehabilitation services, and other support services provided under the Program by, or under agreements entered into with, the

employment network are provided under appropriate individual work plans that meet the requirements of subparagraph (C);

‘‘(B) develop and implement each such individual work

plan, in partnership with each beneficiary receiving such

services, in a manner that affords such beneficiary the

opportunity to exercise informed choice in selecting an

employment goal and specific services needed to achieve

that employment goal;

‘‘(C) ensure that each individual work plan includes

at least—
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‘‘(i) a statement of the vocational goal developed

with the beneficiary, including, as appropriate, goals

for earnings and job advancement;

‘‘(ii) a statement of the services and supports that

have been deemed necessary for the beneficiary to

accomplish that goal;

‘‘(iii) a statement of any terms and conditions

related to the provision of such services and supports;

and

‘‘(iv) a statement of understanding regarding the

beneficiary’s rights under the Program (such as the

right to retrieve the ticket to work and self-sufficiency

if the beneficiary is dissatisfied with the services being

provided by the employment network) and remedies

available to the individual, including information on

the availability of advocacy services and assistance

in resolving disputes through the State grant program

authorized under section 1150;

‘‘(D) provide a beneficiary the opportunity to amend

the individual work plan if a change in circumstances

necessitates a change in the plan; and

‘‘(E) make each beneficiary’s individual work plan

available to the beneficiary in, as appropriate, an accessible

format chosen by the beneficiary.

‘‘(2) EFFECTIVE UPON WRITTEN APPROVAL.—A beneficiary’s

individual work plan shall take effect upon written approval

by the beneficiary or a representative of the beneficiary and

a representative of the employment network that, in providing

such written approval, acknowledges assignment of the beneficiary’s ticket to work and self-sufficiency.

‘‘(h) EMPLOYMENT NETWORK PAYMENT SYSTEMS.—

‘‘(1) ELECTION OF PAYMENT SYSTEM BY EMPLOYMENT NETWORKS.—

‘‘(A) IN GENERAL.—The Program shall provide for payment authorized by the Commissioner to employment networks under either an outcome payment system or an

outcome-milestone payment system. Each employment network shall elect which payment system will be utilized

by the employment network, and, for such period of time

as such election remains in effect, the payment system

so elected shall be utilized exclusively in connection with

such employment network (except as provided in subparagraph (B)).

‘‘(B) NO CHANGE IN METHOD OF PAYMENT FOR BENEFICIARIES WITH TICKETS ALREADY ASSIGNED TO THE EMPLOYMENT NETWORKS.—Any election of a payment system by

an employment network that would result in a change

in the method of payment to the employment network

for services provided to a beneficiary who is receiving services from the employment network at the time of the election shall not be effective with respect to payment for

services provided to that beneficiary and the method of

payment previously selected shall continue to apply with

respect to such services.

‘‘(2) OUTCOME PAYMENT SYSTEM.—
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‘‘(A) IN GENERAL.—The outcome payment system shall

consist of a payment structure governing employment networks electing such system under paragraph (1)(A) which

meets the requirements of this paragraph.

‘‘(B) PAYMENTS MADE DURING OUTCOME PAYMENT

PERIOD.—The outcome payment system shall provide for

a schedule of payments to an employment network, in

connection with each individual who is a beneficiary, for

each month, during the individual’s outcome payment

period, for which benefits (described in paragraphs (3) and

(4) of subsection (k)) are not payable to such individual

because of work or earnings.

‘‘(C) COMPUTATION OF PAYMENTS TO EMPLOYMENT NETWORK.—The payment schedule of the outcome payment

system shall be designed so that—

‘‘(i) the payment for each month during the outcome payment period for which benefits (described in

paragraphs (3) and (4) of subsection (k)) are not payable is equal to a fixed percentage of the payment

calculation base for the calendar year in which such

month occurs; and

‘‘(ii) such fixed percentage is set at a percentage

which does not exceed 40 percent.

‘‘(3) OUTCOME-MILESTONE PAYMENT SYSTEM.—

‘‘(A) IN GENERAL.—The outcome-milestone payment

system shall consist of a payment structure governing

employment networks electing such system under paragraph (1)(A) which meets the requirements of this paragraph.

‘‘(B) EARLY PAYMENTS UPON ATTAINMENT OF MILESTONES IN ADVANCE OF OUTCOME PAYMENT PERIODS.—The

outcome-milestone payment system shall provide for 1 or

more milestones, with respect to beneficiaries receiving

services from an employment network under the Program,

that are directed toward the goal of permanent employment. Such milestones shall form a part of a payment

structure that provides, in addition to payments made

during outcome payment periods, payments made prior

to outcome payment periods in amounts based on the

attainment of such milestones.

‘‘(C) LIMITATION ON TOTAL PAYMENTS TO EMPLOYMENT

NETWORK.—The payment schedule of the outcome milestone

payment system shall be designed so that the total of

the payments to the employment network with respect

to each beneficiary is less than, on a net present value

basis (using an interest rate determined by the Commissioner that appropriately reflects the cost of funds faced

by providers), the total amount to which payments to the

employment network with respect to the beneficiary would

be limited if the employment network were paid under

the outcome payment system.

‘‘(4) DEFINITIONS.—In this subsection:

‘‘(A) PAYMENT CALCULATION BASE.—The term ‘payment

calculation base’ means, for any calendar year—

‘‘(i) in connection with a title II disability beneficiary, the average disability insurance benefit payable
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under section 223 for all beneficiaries for months

during the preceding calendar year; and

‘‘(ii) in connection with a title XVI disability beneficiary (who is not concurrently a title II disability

beneficiary), the average payment of supplemental

security income benefits based on disability payable

under title XVI (excluding State supplementation) for

months during the preceding calendar year to all beneficiaries who have attained 18 years of age but have

not attained 65 years of age.

‘‘(B) OUTCOME PAYMENT PERIOD.—The term ‘outcome

payment period’ means, in connection with any individual

who had assigned a ticket to work and self-sufficiency

to an employment network under the Program, a period—

‘‘(i) beginning with the first month, ending after

the date on which such ticket was assigned to the

employment network, for which benefits (described in

paragraphs (3) and (4) of subsection (k)) are not payable to such individual by reason of engagement in

substantial gainful activity or by reason of earnings

from work activity; and

‘‘(ii) ending with the 60th month (consecutive or

otherwise), ending after such date, for which such benefits are not payable to such individual by reason of

engagement in substantial gainful activity or by reason

of earnings from work activity.

‘‘(5) PERIODIC REVIEW AND ALTERATIONS OF PRESCRIBED

SCHEDULES.— ‘‘(A) PERCENTAGES AND PERIODS.—The Commissioner

shall periodically review the percentage specified in paragraph (2)(C), the total payments permissible under paragraph (3)(C), and the period of time specified in paragraph

(4)(B) to determine whether such percentages, such permissible payments, and such period provide an adequate incentive for employment networks to assist beneficiaries to

enter the workforce, while providing for appropriate economies. The Commissioner may alter such percentage, such

total permissible payments, or such period of time to the

extent that the Commissioner determines, on the basis

of the Commissioner’s review under this paragraph, that

such an alteration would better provide the incentive and

economies described in the preceding sentence.

‘‘(B) NUMBER AND AMOUNTS OF MILESTONE PAYMENTS.— The Commissioner shall periodically review the number

and amounts of milestone payments established by the

Commissioner pursuant to this section to determine

whether they provide an adequate incentive for employment networks to assist beneficiaries to enter the

workforce, taking into account information provided to the

Commissioner by program managers, the Ticket to Work

and Work Incentives Advisory Panel established by section

101(f ) of the Ticket to Work and Work Incentives Improvement Act of 1999, and other reliable sources. The Commissioner may from time to time alter the number and

amounts of milestone payments initially established by

the Commissioner pursuant to this section to the extent

that the Commissioner determines that such an alteration
H. R. 1180—13

would allow an adequate incentive for employment networks to assist beneficiaries to enter the workforce. Such

alteration shall be based on information provided to the

Commissioner by program managers, the Ticket to Work

and Work Incentives Advisory Panel established by section

101(f ) of the Ticket to Work and Work Incentives Improvement Act of 1999, or other reliable sources.

‘‘(C) REPORT ON THE ADEQUACY OF INCENTIVES.—The

Commissioner shall submit to the Congress not later than

36 months after the date of the enactment of the Ticket

to Work and Work Incentives Improvement Act of 1999

a report with recommendations for a method or methods

to adjust payment rates under subparagraphs (A) and (B),

that would ensure adequate incentives for the provision

of services by employment networks of—

‘‘(i) individuals with a need for ongoing support

and services;

‘‘(ii) individuals with a need for high-cost accommodations;

‘‘(iii) individuals who earn a subminimum wage;

and

‘‘(iv) individuals who work and receive partial cash

benefits.

The Commissioner shall consult with the Ticket to Work

and Work Incentives Advisory Panel established under section 101(f ) of the Ticket to Work and Work Incentives

Improvement Act of 1999 during the development and

evaluation of the study. The Commissioner shall implement

the necessary adjusted payment rates prior to full

implementation of the Ticket to Work and Self-Sufficiency

Program.

‘‘(i) SUSPENSION OF DISABILITY REVIEWS.—During any period

for which an individual is using, as defined by the Commissioner,

a ticket to work and self-sufficiency issued under this section,

the Commissioner (and any applicable State agency) may not initiate a continuing disability review or other review under section

221 of whether the individual is or is not under a disability or

a review under title XVI similar to any such review under section

221.

‘‘( j) AUTHORIZATIONS.— ‘‘(1) PAYMENTS TO EMPLOYMENT NETWORKS.— ‘‘(A) TITLE II DISABILITY BENEFICIARIES.—There are

authorized to be transferred from the Federal Old-Age and

Survivors Insurance Trust Fund and the Federal Disability

Insurance Trust Fund each fiscal year such sums as may

be necessary to make payments to employment networks

under this section. Money paid from the Trust Funds under

this section with respect to title II disability beneficiaries

who are entitled to benefits under section 223 or who

are entitled to benefits under section 202(d) on the basis

of the wages and self-employment income of such beneficiaries, shall be charged to the Federal Disability Insurance Trust Fund, and all other money paid from the Trust

Funds under this section shall be charged to the Federal

Old-Age and Survivors Insurance Trust Fund.

‘‘(B) TITLE XVI DISABILITY BENEFICIARIES.—Amounts

authorized to be appropriated to the Social Security
H. R. 1180—14

Administration under section 1601 (as in effect pursuant

to the amendments made by section 301 of the Social

Security Amendments of 1972) shall include amounts necessary to carry out the provisions of this section with

respect to title XVI disability beneficiaries.

‘‘(2) ADMINISTRATIVE EXPENSES.—The costs of administering

this section (other than payments to employment networks)

shall be paid from amounts made available for the administration of title II and amounts made available for the administration of title XVI, and shall be allocated among such amounts

as appropriate.

‘‘(k) DEFINITIONS.—In this section:

‘‘(1) COMMISSIONER.—The term ‘Commissioner’ means the

Commissioner of Social Security.

‘‘(2) DISABLED BENEFICIARY.—The term ‘disabled beneficiary’ means a title II disability beneficiary or a title XVI

disability beneficiary.

‘‘(3) TITLE II DISABILITY BENEFICIARY.—The term ‘title II

disability beneficiary’ means an individual entitled to disability

insurance benefits under section 223 or to monthly insurance

benefits under section 202 based on such individual’s disability

(as defined in section 223(d)). An individual is a title II disability beneficiary for each month for which such individual

is entitled to such benefits.

‘‘(4) TITLE XVI DISABILITY BENEFICIARY.—The term ‘title

XVI disability beneficiary’ means an individual eligible for

supplemental security income benefits under title XVI on the

basis of blindness (within the meaning of section 1614(a)(2))

or disability (within the meaning of section 1614(a)(3)). An

individual is a title XVI disability beneficiary for each month

for which such individual is eligible for such benefits.

‘‘(5) SUPPLEMENTAL SECURITY INCOME BENEFIT.—The term

‘supplemental security income benefit under title XVI’ means

a cash benefit under section 1611 or 1619(a), and does not

include a State supplementary payment, administered federally

or otherwise.

‘‘(l) REGULATIONS.—Not later than 1 year after the date of

the enactment of the Ticket to Work and Work Incentives Improvement Act of 1999, the Commissioner shall prescribe such regulations

as are necessary to carry out the provisions of this section.’’.

(b) CONFORMING AMENDMENTS.—

(1) AMENDMENTS TO TITLE II.—

(A) Section 221(i) of the Social Security Act (42 U.S.C.

421(i)) is amended by adding at the end the following

new paragraph:

‘‘(5) For suspension of reviews under this subsection in the

case of an individual using a ticket to work and self-sufficiency,

see section 1148(i).’’.

(B) Section 222(a) of such Act (42 U.S.C. 422(a)) is

repealed.

(C) Section 222(b) of such Act (42 U.S.C. 422(b)) is

repealed.

(D) Section 225(b)(1) of such Act (42 U.S.C. 425(b)(1))

is amended by striking ‘‘a program of vocational rehabilitation services’’ and inserting ‘‘a program consisting of the

Ticket to Work and Self-Sufficiency Program under section
H. R. 1180—15

1148 or another program of vocational rehabilitation services, employment services, or other support services’’.

(2) AMENDMENTS TO TITLE XVI.—

(A) Section 1615(a) of such Act (42 U.S.C. 1382d(a))

is amended to read as follows:

‘‘SEC. 1615. (a) In the case of any blind or disabled individual

who—

‘‘(1) has not attained age 16; and

‘‘(2) with respect to whom benefits are paid under this

title,

the Commissioner of Social Security shall make provision for

referral of such individual to the appropriate State agency administering the State program under title V.’’.

(B) Section 1615(c) of such Act (42 U.S.C. 1382d(c))

is repealed.

(C) Section 1631(a)(6)(A) of such Act (42 U.S.C.

1383(a)(6)(A)) is amended by striking ‘‘a program of vocational rehabilitation services’’ and inserting ‘‘a program

consisting of the Ticket to Work and Self-Sufficiency Program under section 1148 or another program of vocational

rehabilitation services, employment services, or other support services’’.

(D) Section 1633(c) of such Act (42 U.S.C. 1383b(c))

is amended—

(i) by inserting ‘‘(1)’’ after ‘‘(c)’’; and

(ii) by adding at the end the following new paragraph:

‘‘(2) For suspension of continuing disability reviews and other

reviews under this title similar to reviews under section 221 in

the case of an individual using a ticket to work and self-sufficiency,

see section 1148(i).’’.

(c) EFFECTIVE DATE.—Subject to subsection (d), the amendments made by subsections (a) and (b) shall take effect with the

first month following 1 year after the date of the enactment of

this Act.

(d) GRADUATED IMPLEMENTATION OF PROGRAM.—

(1) IN GENERAL.—Not later than 1 year after the date

of the enactment of this Act, the Commissioner of Social Security shall commence implementation of the amendments made

by this section (other than paragraphs (1)(C) and (2)(B) of

subsection (b)) in graduated phases at phase-in sites selected

by the Commissioner. Such phase-in sites shall be selected

so as to ensure, prior to full implementation of the Ticket

to Work and Self-Sufficiency Program, the development and

refinement of referral processes, payment systems, computer

linkages, management information systems, and administrative

processes necessary to provide for full implementation of such

amendments. Subsection (c) shall apply with respect to paragraphs (1)(C) and (2)(B) of subsection (b) without regard to

this subsection.

(2) REQUIREMENTS.—Implementation of the Program at

each phase-in site shall be carried out on a wide enough scale

to permit a thorough evaluation of the alternative methods

under consideration, so as to ensure that the most efficacious

methods are determined and in place for full implementation

of the Program on a timely basis.
H. R. 1180—16

(3) FULL IMPLEMENTATION.—The Commissioner shall

ensure that ability to provide tickets and services to individuals

under the Program exists in every State as soon as practicable

on or after the effective date specified in subsection (c) but

not later than 3 years after such date.

(4) ONGOING EVALUATION OF PROGRAM.—

(A) IN GENERAL.—The Commissioner shall provide for

independent evaluations to assess the effectiveness of the

activities carried out under this section and the amendments made thereby. Such evaluations shall address the

cost-effectiveness of such activities, as well as the effects

of this section and the amendments made thereby on work

outcomes for beneficiaries receiving tickets to work and

self-sufficiency under the Program.

(B) CONSULTATION.—Evaluations shall be conducted

under this paragraph after receiving relevant advice from

experts in the fields of disability, vocational rehabilitation,

and program evaluation and individuals using tickets to

work and self-sufficiency under the Program and in consultation with the Ticket to Work and Work Incentives

Advisory Panel established under section 101(f ) of this

Act, the Comptroller General of the United States, other

agencies of the Federal Government, and private organizations with appropriate expertise.

(C) METHODOLOGY.—

(i) IMPLEMENTATION.—The Commissioner, in consultation with the Ticket to Work and Work Incentives

Advisory Panel established under section 101(f ) of this

Act, shall ensure that plans for evaluations and data

collection methods under the Program are appropriately designed to obtain detailed employment

information.

(ii) SPECIFIC MATTERS TO BE ADDRESSED.—Each

such evaluation shall address (but is not limited to)—

(I) the annual cost (including net cost) of the

Program and the annual cost (including net cost)

that would have been incurred in the absence of

the Program;

(II) the determinants of return to work,

including the characteristics of beneficiaries in

receipt of tickets under the Program;

(III) the types of employment services, vocational rehabilitation services, and other support

services furnished to beneficiaries in receipt of

tickets under the Program who return to work

and to those who do not return to work;

(IV) the duration of employment services, vocational rehabilitation services, and other support

services furnished to beneficiaries in receipt of

tickets under the Program who return to work

and the duration of such services furnished to

those who do not return to work and the cost

to employment networks of furnishing such services;

(V) the employment outcomes, including

wages, occupations, benefits, and hours worked,

of beneficiaries who return to work after receiving
H. R. 1180—17

tickets under the Program and those who return

to work without receiving such tickets;

(VI) the characteristics of individuals in

possession of tickets under the Program who are

not accepted for services and, to the extent reasonably determinable, the reasons for which such

beneficiaries were not accepted for services;

(VII) the characteristics of providers whose

services are provided within an employment network under the Program;

(VIII) the extent (if any) to which employment

networks display a greater willingness to provide

services to beneficiaries with a range of disabilities;

(IX) the characteristics (including employment

outcomes) of those beneficiaries who receive services under the outcome payment system and of

those beneficiaries who receive services under the

outcome-milestone payment system;

(X) measures of satisfaction among beneficiaries in receipt of tickets under the Program;

and

(XI) reasons for (including comments solicited

from beneficiaries regarding) their choice not to

use their tickets or their inability to return to

work despite the use of their tickets.

(D) PERIODIC EVALUATION REPORTS.—Following the

close of the third and fifth fiscal years ending after the

effective date under subsection (c), and prior to the close

of the seventh fiscal year ending after such date, the

Commissioner shall transmit to the Committee on Ways

and Means of the House of Representatives and the Committee on Finance of the Senate a report containing the

Commissioner’s evaluation of the progress of activities conducted under the provisions of this section and the amendments made thereby. Each such report shall set forth the

Commissioner’s evaluation of the extent to which the Program has been successful and the Commissioner’s conclusions on whether or how the Program should be modified.

Each such report shall include such data, findings, materials, and recommendations as the Commissioner may consider appropriate.

(5) EXTENT OF STATE’S RIGHT OF FIRST REFUSAL IN ADVANCE

OF FULL IMPLEMENTATION OF AMENDMENTS IN SUCH STATE.— (A) IN GENERAL.—In the case of any State in which

the amendments made by subsection (a) have not been

fully implemented pursuant to this subsection, the Commissioner shall determine by regulation the extent to which—

(i) the requirement under section 222(a) of the

Social Security Act (42 U.S.C. 422(a)) for prompt referrals to a State agency; and

(ii) the authority of the Commissioner under section 222(d)(2) of such Act (42 U.S.C. 422(d)(2)) to provide vocational rehabilitation services in such State

by agreement or contract with other public or private

agencies, organizations, institutions, or individuals,

shall apply in such State.
H. R. 1180—18

(B) EXISTING AGREEMENTS.—Nothing in subparagraph

(A) or the amendments made by subsection (a) shall be

construed to limit, impede, or otherwise affect any agreement entered into pursuant to section 222(d)(2) of the

Social Security Act (42 U.S.C. 422(d)(2)) before the date

of the enactment of this Act with respect to services provided pursuant to such agreement to beneficiaries receiving

services under such agreement as of such date, except

with respect to services (if any) to be provided after 3

years after the effective date provided in subsection (c).

(e) SPECIFIC REGULATIONS REQUIRED.—

(1) IN GENERAL.—The Commissioner of Social Security shall

prescribe such regulations as are necessary to implement the

amendments made by this section.

(2) SPECIFIC MATTERS TO BE INCLUDED IN REGULATIONS.—

The matters which shall be addressed in such regulations shall

include—

(A) the form and manner in which tickets to work

and self-sufficiency may be distributed to beneficiaries

pursuant to section 1148(b)(1) of the Social Security Act;

(B) the format and wording of such tickets, which

shall incorporate by reference any contractual terms governing service by employment networks under the Program;

(C) the form and manner in which State agencies may

elect participation in the Ticket to Work and Self-Sufficiency Program pursuant to section 1148(c)(1) of such Act

and provision for periodic opportunities for exercising such

elections;

(D) the status of State agencies under section 1148(c)(1)

of such Act at the time that State agencies exercise elections under that section;

(E) the terms of agreements to be entered into with

program managers pursuant to section 1148(d) of such

Act, including—

(i) the terms by which program managers are precluded from direct participation in the delivery of services pursuant to section 1148(d)(3) of such Act;

(ii) standards which must be met by quality assurance measures referred to in paragraph (6) of section

1148(d) of such Act and methods of recruitment of

employment networks utilized pursuant to paragraph

(2) of section 1148(e) of such Act; and

(iii) the format under which dispute resolution will

operate under section 1148(d)(7) of such Act;

(F) the terms of agreements to be entered into with

employment networks pursuant to section 1148(d)(4) of

such Act, including—

(i) the manner in which service areas are specified

pursuant to section 1148(f )(2)(A) of such Act;

(ii) the general selection criteria and the specific

selection criteria which are applicable to employment

networks under section 1148(f )(1)(C) of such Act in

selecting service providers;

(iii) specific requirements relating to annual financial reporting by employment networks pursuant to

section 1148(f )(3) of such Act; and
H. R. 1180—19

(iv) the national model to which periodic outcomes

reporting by employment networks must conform

under section 1148(f )(4) of such Act;

(G) standards which must be met by individual work

plans pursuant to section 1148(g) of such Act;

(H) standards which must be met by payment systems

required under section 1148(h) of such Act, including—

(i) the form and manner in which elections by

employment networks of payment systems are to be

exercised pursuant to section 1148(h)(1)(A) of such Act;

(ii) the terms which must be met by an outcome

payment system under section 1148(h)(2) of such Act;

(iii) the terms which must be met by an outcomemilestone payment system under section 1148(h)(3) of

such Act;

(iv) any revision of the percentage specified in

paragraph (2)(C) of section 1148(h) of such Act or the

period of time specified in paragraph (4)(B) of such

section 1148(h) of such Act; and

(v) annual oversight procedures for such systems;

and

(I) procedures for effective oversight of the Program

by the Commissioner of Social Security, including periodic

reviews and reporting requirements.

(f ) THE TICKET TO WORK AND WORK INCENTIVES ADVISORY

PANEL.—

(1) ESTABLISHMENT.—There is established within the Social

Security Administration a panel to be known as the ‘‘Ticket

to Work and Work Incentives Advisory Panel’’ (in this subsection referred to as the ‘‘Panel’’).

(2) DUTIES OF PANEL.—It shall be the duty of the Panel

to—

(A) advise the President, the Congress, and the

Commissioner of Social Security on issues related to work

incentives programs, planning, and assistance for individuals with disabilities, including work incentive provisions

under titles II, XI, XVI, XVIII, and XIX of the Social

Security Act (42 U.S.C. 401 et seq., 1301 et seq., 1381

et seq., 1395 et seq., 1396 et seq.); and

(B) with respect to the Ticket to Work and Self-Sufficiency Program established under section 1148 of such

Act—

(i) advise the Commissioner of Social Security with

respect to establishing phase-in sites for such Program

and fully implementing the Program thereafter, the

refinement of access of disabled beneficiaries to employment networks, payment systems, and management

information systems, and advise the Commissioner

whether such measures are being taken to the extent

necessary to ensure the success of the Program;

(ii) advise the Commissioner regarding the most

effective designs for research and demonstration

projects associated with the Program or conducted

pursuant to section 302 of this Act;
H. R. 1180—20

(iii) advise the Commissioner on the development

of performance measurements relating to quality assurance under section 1148(d)(6) of the Social Security

Act; and

(iv) furnish progress reports on the Program to

the Commissioner and each House of Congress.

(3) MEMBERSHIP.—

(A) NUMBER AND APPOINTMENT.—The Panel shall be

composed of 12 members as follows:

(i) four members appointed by the President, not

more than two of whom may be of the same political

party;

(ii) two members appointed by the Speaker of the

House of Representatives, in consultation with the

Chairman of the Committee on Ways and Means of

the House of Representatives;

(iii) two members appointed by the minority leader

of the House of Representatives, in consultation with

the ranking member of the Committee on Ways and

Means of the House of Representatives;

(iv) two members appointed by the majority leader

of the Senate, in consultation with the Chairman of

the Committee on Finance of the Senate; and

(v) two members appointed by the minority leader

of the Senate, in consultation with the ranking member

of the Committee on Finance of the Senate.

(B) REPRESENTATION.—

(i) IN GENERAL.—The members appointed under

subparagraph (A) shall have experience or expert

knowledge as a recipient, provider, employer, or

employee in the fields of, or related to, employment

services, vocational rehabilitation services, and other

support services.

(ii) REQUIREMENT.—At least one-half of the members appointed under subparagraph (A) shall be

individuals with disabilities, or representatives of

individuals with disabilities, with consideration given

to current or former title II disability beneficiaries

or title XVI disability beneficiaries (as such terms are

defined in section 1148(k) of the Social Security Act

(as added by subsection (a)).

(C) TERMS.—

(i) IN GENERAL.—Each member shall be appointed

for a term of 4 years (or, if less, for the remaining

life of the Panel), except as provided in clauses (ii)

and (iii). The initial members shall be appointed not

later than 90 days after the date of the enactment

of this Act.

(ii) TERMS OF INITIAL APPOINTEES.—Of the members first appointed under each clause of subparagraph

(A), as designated by the appointing authority for each

such clause—

(I) one-half of such members shall be

appointed for a term of 2 years; and

(II) the remaining members shall be appointed

for a term of 4 years.
H. R. 1180—21

(iii) VACANCIES.—Any member appointed to fill a

vacancy occurring before the expiration of the term

for which the member’s predecessor was appointed

shall be appointed only for the remainder of that term.

A member may serve after the expiration of that member’s term until a successor has taken office. A vacancy

in the Panel shall be filled in the manner in which

the original appointment was made.

(D) BASIC PAY.—Members shall each be paid at a rate,

and in a manner, that is consistent with guidelines established under section 7 of the Federal Advisory Committee

Act (5 U.S.C. App.).

(E) TRAVEL EXPENSES.—Each member shall receive

travel expenses, including per diem in lieu of subsistence,

in accordance with sections 5702 and 5703 of title 5, United

States Code.

(F) QUORUM.—Eight members of the Panel shall constitute a quorum but a lesser number may hold hearings.

(G) CHAIRPERSON.—The Chairperson of the Panel shall

be designated by the President. The term of office of the

Chairperson shall be 4 years.

(H) MEETINGS.—The Panel shall meet at least quarterly and at other times at the call of the Chairperson

or a majority of its members.

(4) DIRECTOR AND STAFF OF PANEL; EXPERTS AND CONSULTANTS.—

(A) DIRECTOR.—The Panel shall have a Director who

shall be appointed by the Chairperson, and paid at a rate,

and in a manner, that is consistent with guidelines established under section 7 of the Federal Advisory Committee

Act (5 U.S.C. App.).

(B) STAFF.—Subject to rules prescribed by the Commissioner of Social Security, the Director may appoint and

fix the pay of additional personnel as the Director considers

appropriate.

(C) EXPERTS AND CONSULTANTS.—Subject to rules prescribed by the Commissioner of Social Security, the Director

may procure temporary and intermittent services under

section 3109(b) of title 5, United States Code.

(D) STAFF OF FEDERAL AGENCIES.—Upon request of

the Panel, the head of any Federal department or agency

may detail, on a reimbursable basis, any of the personnel

of that department or agency to the Panel to assist it

in carrying out its duties under this Act.

(5) POWERS OF PANEL.—

(A) HEARINGS AND SESSIONS.—The Panel may, for the

purpose of carrying out its duties under this subsection,

hold such hearings, sit and act at such times and places,

and take such testimony and evidence as the Panel considers appropriate.

(B) POWERS OF MEMBERS AND AGENTS.—Any member

or agent of the Panel may, if authorized by the Panel,

take any action which the Panel is authorized to take

by this section.

(C) MAILS.—The Panel may use the United States

mails in the same manner and under the same conditions

as other departments and agencies of the United States.
H. R. 1180—22

(6) REPORTS.— (A) INTERIM REPORTS.—The Panel shall submit to the

President and the Congress interim reports at least

annually.

(B) FINAL REPORT.—The Panel shall transmit a final

report to the President and the Congress not later than

eight years after the date of the enactment of this Act.

The final report shall contain a detailed statement of the

findings and conclusions of the Panel, together with its

recommendations for legislation and administrative actions

which the Panel considers appropriate.

(7) TERMINATION.—The Panel shall terminate 30 days after

the date of the submission of its final report under paragraph

(6)(B).

(8) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated from the Federal Old-Age and Survivors

Insurance Trust Fund, the Federal Disability Insurance Trust

Fund, and the general fund of the Treasury, as appropriate,

such sums as are necessary to carry out this subsection.

Subtitle B—Elimination of Work

Disincentives

SEC. 111. WORK ACTIVITY STANDARD AS A BASIS FOR REVIEW OF

AN INDIVIDUAL’S DISABLED STATUS.

(a) IN GENERAL.—Section 221 of the Social Security Act (42

U.S.C. 421) is amended by adding at the end the following new

subsection:

‘‘(m)(1) In any case where an individual entitled to disability

insurance benefits under section 223 or to monthly insurance benefits under section 202 based on such individual’s disability (as

defined in section 223(d)) has received such benefits for at least

24 months—

‘‘(A) no continuing disability review conducted by the

Commissioner may be scheduled for the individual solely as

a result of the individual’s work activity;

‘‘(B) no work activity engaged in by the individual may

be used as evidence that the individual is no longer disabled;

and

‘‘(C) no cessation of work activity by the individual may

give rise to a presumption that the individual is unable to

engage in work.

‘‘(2) An individual to which paragraph (1) applies shall continue

to be subject to—

‘‘(A) continuing disability reviews on a regularly scheduled

basis that is not triggered by work; and

‘‘(B) termination of benefits under this title in the event

that the individual has earnings that exceed the level of

earnings established by the Commissioner to represent substantial gainful activity.’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall take effect on January 1, 2002.

SEC. 112. EXPEDITED REINSTATEMENT OF DISABILITY BENEFITS.

(a) OASDI BENEFITS.—Section 223 of the Social Security Act

(42 U.S.C. 423) is amended—
H. R. 1180—23

(1) by redesignating subsection (i) as subsection ( j); and

(2) by inserting after subsection (h) the following new subsection:

‘‘Reinstatement of Entitlement

‘‘(i)(1)(A) Entitlement to benefits described in subparagraph

(B)(i)(I) shall be reinstated in any case where the Commissioner

determines that an individual described in subparagraph (B) has

filed a request for reinstatement meeting the requirements of paragraph (2)(A) during the period prescribed in subparagraph (C).

Reinstatement of such entitlement shall be in accordance with

the terms of this subsection.

‘‘(B) An individual is described in this subparagraph if—

‘‘(i) prior to the month in which the individual files a

request for reinstatement—

‘‘(I) the individual was entitled to benefits under this

section or section 202 on the basis of disability pursuant

to an application filed therefor; and

‘‘(II) such entitlement terminated due to the performance of substantial gainful activity;

‘‘(ii) the individual is under a disability and the physical

or mental impairment that is the basis for the finding of disability is the same as (or related to) the physical or mental

impairment that was the basis for the finding of disability

that gave rise to the entitlement described in clause (i); and

‘‘(iii) the individual’s disability renders the individual

unable to perform substantial gainful activity.

‘‘(C)(i) Except as provided in clause (ii), the period prescribed

in this subparagraph with respect to an individual is 60 consecutive

months beginning with the month following the most recent month

for which the individual was entitled to a benefit described in

subparagraph (B)(i)(I) prior to the entitlement termination

described in subparagraph (B)(i)(II).

‘‘(ii) In the case of an individual who fails to file a reinstatement

request within the period prescribed in clause (i), the Commissioner

may extend the period if the Commissioner determines that the

individual had good cause for the failure to so file.

‘‘(2)(A)(i) A request for reinstatement shall be filed in such

form, and containing such information, as the Commissioner may

prescribe.

‘‘(ii) A request for reinstatement shall include express declarations by the individual that the individual meets the requirements

specified in clauses (ii) and (iii) of paragraph (1)(B).

‘‘(B) A request for reinstatement filed in accordance with

subparagraph (A) may constitute an application for benefits in

the case of any individual who the Commissioner determines is

not entitled to reinstated benefits under this subsection.

‘‘(3) In determining whether an individual meets the requirements of paragraph (1)(B)(ii), the provisions of subsection (f ) shall

apply.

‘‘(4)(A)(i) Subject to clause (ii), entitlement to benefits reinstated

under this subsection shall commence with the benefit payable

for the month in which a request for reinstatement is filed.

‘‘(ii) An individual whose entitlement to a benefit for any month

would have been reinstated under this subsection had the individual

filed a request for reinstatement before the end of such month
H. R. 1180—24

shall be entitled to such benefit for such month if such request

for reinstatement is filed before the end of the twelfth month

immediately succeeding such month.

‘‘(B)(i) Subject to clauses (ii) and (iii), the amount of the benefit

payable for any month pursuant to the reinstatement of entitlement

under this subsection shall be determined in accordance with the

provisions of this title.

‘‘(ii) For purposes of computing the primary insurance amount

of an individual whose entitlement to benefits under this section

is reinstated under this subsection, the date of onset of the individual’s disability shall be the date of onset used in determining

the individual’s most recent period of disability arising in connection

with such benefits payable on the basis of an application.

‘‘(iii) Benefits under this section or section 202 payable for

any month pursuant to a request for reinstatement filed in accordance with paragraph (2) shall be reduced by the amount of any

provisional benefit paid to such individual for such month under

paragraph (7).

‘‘(C) No benefit shall be payable pursuant to an entitlement

reinstated under this subsection to an individual for any month

in which the individual engages in substantial gainful activity.

‘‘(D) The entitlement of any individual that is reinstated under

this subsection shall end with the benefits payable for the month

preceding whichever of the following months is the earliest:

‘‘(i) The month in which the individual dies.

‘‘(ii) The month in which the individual attains retirement

age.

‘‘(iii) The third month following the month in which the

individual’s disability ceases.

‘‘(5) Whenever an individual’s entitlement to benefits under

this section is reinstated under this subsection, entitlement to benefits payable on the basis of such individual’s wages and self-employment income may be reinstated with respect to any person previously entitled to such benefits on the basis of an application

if the Commissioner determines that such person satisfies all the

requirements for entitlement to such benefits except requirements

related to the filing of an application. The provisions of paragraph

(4) shall apply to the reinstated entitlement of any such person

to the same extent that they apply to the reinstated entitlement

of such individual.

‘‘(6) An individual to whom benefits are payable under this

section or section 202 pursuant to a reinstatement of entitlement

under this subsection for 24 months (whether or not consecutive)

shall, with respect to benefits so payable after such twenty-fourth

month, be deemed for purposes of paragraph (1)(B)(i)(I) and the

determination, if appropriate, of the termination month in accordance with subsection (a)(1) of this section, or subsection (d)(1),

(e)(1), or (f )(1) of section 202, to be entitled to such benefits on

the basis of an application filed therefor.

‘‘(7)(A) An individual described in paragraph (1)(B) who files

a request for reinstatement in accordance with the provisions of

paragraph (2)(A) shall be entitled to provisional benefits payable

in accordance with this paragraph, unless the Commissioner determines that the individual does not meet the requirements of paragraph (1)(B)(i) or that the individual’s declaration under paragraph

(2)(A)(ii) is false. Any such determination by the Commissioner
H. R. 1180—25

shall be final and not subject to review under subsection (b) or

(g) of section 205.

‘‘(B) The amount of a provisional benefit for a month shall

equal the amount of the last monthly benefit payable to the individual under this title on the basis of an application increased

by an amount equal to the amount, if any, by which such last

monthly benefit would have been increased as a result of the

operation of section 215(i).

‘‘(C)(i) Provisional benefits shall begin with the month in which

a request for reinstatement is filed in accordance with paragraph

(2)(A).

‘‘(ii) Provisional benefits shall end with the earliest of—

‘‘(I) the month in which the Commissioner makes a determination regarding the individual’s entitlement to reinstated

benefits;

‘‘(II) the fifth month following the month described in clause

(i);

‘‘(III) the month in which the individual performs substantial gainful activity; or

‘‘(IV) the month in which the Commissioner determines

that the individual does not meet the requirements of paragraph (1)(B)(i) or that the individual’s declaration made in

accordance with paragraph (2)(A)(ii) is false.

‘‘(D) In any case in which the Commissioner determines that

an individual is not entitled to reinstated benefits, any provisional

benefits paid to the individual under this paragraph shall not

be subject to recovery as an overpayment unless the Commissioner

determines that the individual knew or should have known that

the individual did not meet the requirements of paragraph (1)(B).’’.

(b) SSI BENEFITS.— (1) IN GENERAL.—Section 1631 of the Social Security Act

(42 U.S.C. 1383) is amended by adding at the end the following

new subsection:

‘‘Reinstatement of Eligibility on the Basis of Blindness or Disability

‘‘(p)(1)(A) Eligibility for benefits under this title shall be

reinstated in any case where the Commissioner determines that

an individual described in subparagraph (B) has filed a request

for reinstatement meeting the requirements of paragraph (2)(A)

during the period prescribed in subparagraph (C). Reinstatement

of eligibility shall be in accordance with the terms of this subsection.

‘‘(B) An individual is described in this subparagraph if—

‘‘(i) prior to the month in which the individual files a

request for reinstatement—

‘‘(I) the individual was eligible for benefits under this

title on the basis of blindness or disability pursuant to

an application filed therefor; and

‘‘(II) the individual thereafter was ineligible for such

benefits due to earned income (or earned and unearned

income) for a period of 12 or more consecutive months;

‘‘(ii) the individual is blind or disabled and the physical

or mental impairment that is the basis for the finding of blindness or disability is the same as (or related to) the physical

or mental impairment that was the basis for the finding of

blindness or disability that gave rise to the eligibility described

in clause (i);
H. R. 1180—26

‘‘(iii) the individual’s blindness or disability renders the

individual unable to perform substantial gainful activity; and

‘‘(iv) the individual satisfies the nonmedical requirements

for eligibility for benefits under this title.

‘‘(C)(i) Except as provided in clause (ii), the period prescribed

in this subparagraph with respect to an individual is 60 consecutive

months beginning with the month following the most recent month

for which the individual was eligible for a benefit under this title

(including section 1619) prior to the period of ineligibility described

in subparagraph (B)(i)(II).

‘‘(ii) In the case of an individual who fails to file a reinstatement

request within the period prescribed in clause (i), the Commissioner

may extend the period if the Commissioner determines that the

individual had good cause for the failure to so file.

‘‘(2)(A)(i) A request for reinstatement shall be filed in such

form, and containing such information, as the Commissioner may

prescribe.

‘‘(ii) A request for reinstatement shall include express declarations by the individual that the individual meets the requirements

specified in clauses (ii) through (iv) of paragraph (1)(B).

‘‘(B) A request for reinstatement filed in accordance with

subparagraph (A) may constitute an application for benefits in

the case of any individual who the Commissioner determines is

not eligible for reinstated benefits under this subsection.

‘‘(3) In determining whether an individual meets the requirements of paragraph (1)(B)(ii), the provisions of section 1614(a)(4)

shall apply.

‘‘(4)(A) Eligibility for benefits reinstated under this subsection

shall commence with the benefit payable for the month following

the month in which a request for reinstatement is filed.

‘‘(B)(i) Subject to clause (ii), the amount of the benefit payable

for any month pursuant to the reinstatement of eligibility under

this subsection shall be determined in accordance with the provisions of this title.

‘‘(ii) The benefit under this title payable for any month pursuant

to a request for reinstatement filed in accordance with paragraph

(2) shall be reduced by the amount of any provisional benefit

paid to such individual for such month under paragraph (7).

‘‘(C) Except as otherwise provided in this subsection, eligibility

for benefits under this title reinstated pursuant to a request filed

under paragraph (2) shall be subject to the same terms and conditions as eligibility established pursuant to an application filed

therefor.

‘‘(5) Whenever an individual’s eligibility for benefits under this

title is reinstated under this subsection, eligibility for such benefits

shall be reinstated with respect to the individual’s spouse if such

spouse was previously an eligible spouse of the individual under

this title and the Commissioner determines that such spouse satisfies all the requirements for eligibility for such benefits except

requirements related to the filing of an application. The provisions

of paragraph (4) shall apply to the reinstated eligibility of the

spouse to the same extent that they apply to the reinstated eligibility of such individual.

‘‘(6) An individual to whom benefits are payable under this

title pursuant to a reinstatement of eligibility under this subsection

for twenty-four months (whether or not consecutive) shall, with

respect to benefits so payable after such twenty-fourth month, be
H. R. 1180—27

deemed for purposes of paragraph (1)(B)(i)(I) to be eligible for

such benefits on the basis of an application filed therefor.

‘‘(7)(A) An individual described in paragraph (1)(B) who files

a request for reinstatement in accordance with the provisions of

paragraph (2)(A) shall be eligible for provisional benefits payable

in accordance with this paragraph, unless the Commissioner determines that the individual does not meet the requirements of paragraph (1)(B)(i) or that the individual’s declaration under paragraph

(2)(A)(ii) is false. Any such determination by the Commissioner

shall be final and not subject to review under paragraph (1) or

(3) of subsection (c).

‘‘(B)(i) Except as otherwise provided in clause (ii), the amount

of a provisional benefit for a month shall equal the amount of

the monthly benefit that would be payable to an eligible individual

under this title with the same kind and amount of income.

‘‘(ii) If the individual has a spouse who was previously an

eligible spouse of the individual under this title and the Commissioner determines that such spouse satisfies all the requirements

of section 1614(b) except requirements related to the filing of an

application, the amount of a provisional benefit for a month shall

equal the amount of the monthly benefit that would be payable

to an eligible individual and eligible spouse under this title with

the same kind and amount of income.

‘‘(C)(i) Provisional benefits shall begin with the month following

the month in which a request for reinstatement is filed in accordance with paragraph (2)(A).

‘‘(ii) Provisional benefits shall end with the earliest of—

‘‘(I) the month in which the Commissioner makes a determination regarding the individual’s eligibility for reinstated

benefits;

‘‘(II) the fifth month following the month for which provisional benefits are first payable under clause (i); or

‘‘(III) the month in which the Commissioner determines

that the individual does not meet the requirements of paragraph (1)(B)(i) or that the individual’s declaration made in

accordance with paragraph (2)(A)(ii) is false.

‘‘(D) In any case in which the Commissioner determines that

an individual is not eligible for reinstated benefits, any provisional

benefits paid to the individual under this paragraph shall not

be subject to recovery as an overpayment unless the Commissioner

determines that the individual knew or should have known that

the individual did not meet the requirements of paragraph (1)(B).

‘‘(8) For purposes of this subsection other than paragraph (7),

the term ‘benefits under this title’ includes State supplementary

payments made pursuant to an agreement under section 1616(a)

of this Act or section 212(b) of Public Law 93–66.’’.

(2) CONFORMING AMENDMENTS.—

(A) Section 1631( j)(1) of such Act (42 U.S.C. 1383( j)(1))

is amended by striking the period and inserting ‘‘, or has

filed a request for reinstatement of eligibility under subsection (p)(2) and been determined to be eligible for

reinstatement.’’.

(B) Section 1631( j)(2)(A)(i)(I) of such Act (42 U.S.C.

1383( j)(2)(A)(i)(I)) is amended by inserting ‘‘(other than

pursuant to a request for reinstatement under subsection

(p))’’ after ‘‘eligible’’.

(c) EFFECTIVE DATE.—
H. R. 1180—28

(1) IN GENERAL.—The amendments made by this section

shall take effect on the first day of the thirteenth month beginning after the date of the enactment of this Act.

(2) LIMITATION.—No benefit shall be payable under title

II or XVI on the basis of a request for reinstatement filed

under section 223(i) or 1631(p) of the Social Security Act (42

U.S.C. 423(i), 1383(p)) before the effective date described in

paragraph (1).

Subtitle C—Work Incentives Planning,

Assistance, and Outreach

SEC. 121. WORK INCENTIVES OUTREACH PROGRAM.

Part A of title XI of the Social Security Act (42 U.S.C. 1301

et seq.), as amended by section 101 of this Act, is amended by

adding after section 1148 the following new section:

‘‘WORK INCENTIVES OUTREACH PROGRAM

‘‘SEC. 1149. (a) ESTABLISHMENT.—

‘‘(1) IN GENERAL.—The Commissioner, in consultation with

the Ticket to Work and Work Incentives Advisory Panel established under section 101(f ) of the Ticket to Work and Work

Incentives Improvement Act of 1999, shall establish a community-based work incentives planning and assistance program

for the purpose of disseminating accurate information to disabled beneficiaries on work incentives programs and issues

related to such programs.

‘‘(2) GRANTS, COOPERATIVE AGREEMENTS, CONTRACTS, AND

OUTREACH.—Under the program established under this section,

the Commissioner shall—

‘‘(A) establish a competitive program of grants, cooperative agreements, or contracts to provide benefits planning

and assistance, including information on the availability

of protection and advocacy services, to disabled beneficiaries, including individuals participating in the Ticket

to Work and Self-Sufficiency Program established under

section 1148, the program established under section 1619,

and other programs that are designed to encourage disabled

beneficiaries to work;

‘‘(B) conduct directly, or through grants, cooperative

agreements, or contracts, ongoing outreach efforts to disabled beneficiaries (and to the families of such beneficiaries) who are potentially eligible to participate in Federal or State work incentive programs that are designed

to assist disabled beneficiaries to work, including—

‘‘(i) preparing and disseminating information

explaining such programs; and

‘‘(ii) working in cooperation with other Federal,

State, and private agencies and nonprofit organizations

that serve disabled beneficiaries, and with agencies

and organizations that focus on vocational rehabilitation and work-related training and counseling;

‘‘(C) establish a corps of trained, accessible, and responsive work incentives specialists within the Social Security
H. R. 1180—29

Administration who will specialize in disability work incentives under titles II and XVI for the purpose of disseminating accurate information with respect to inquiries and

issues relating to work incentives to—

‘‘(i) disabled beneficiaries;

‘‘(ii) benefit applicants under titles II and XVI;

and

‘‘(iii) individuals or entities awarded grants under

subparagraphs (A) or (B); and

‘‘(D) provide—

‘‘(i) training for work incentives specialists and

individuals providing planning assistance described in

subparagraph (C); and

‘‘(ii) technical assistance to organizations and entities that are designed to encourage disabled beneficiaries to return to work.

‘‘(3) COORDINATION WITH OTHER PROGRAMS.—The responsibilities of the Commissioner established under this section

shall be coordinated with other public and private programs

that provide information and assistance regarding rehabilitation services and independent living supports and benefits planning for disabled beneficiaries including the program under

section 1619, the plans for achieving self-support program

(PASS), and any other Federal or State work incentives programs that are designed to assist disabled beneficiaries,

including educational agencies that provide information and

assistance regarding rehabilitation, school-to-work programs,

transition services (as defined in, and provided in accordance

with, the Individuals with Disabilities Education Act (20 U.S.C.

1400 et seq.)), a one-stop delivery system established under

subtitle B of title I of the Workforce Investment Act of 1998

(29 U.S.C. 2811 et seq.), and other services.

‘‘(b) CONDITIONS.—

‘‘(1) SELECTION OF ENTITIES.—

‘‘(A) APPLICATION.—An entity shall submit an application for a grant, cooperative agreement, or contract to

provide benefits planning and assistance to the Commissioner at such time, in such manner, and containing such

information as the Commissioner may determine is necessary to meet the requirements of this section.

‘‘(B) STATEWIDENESS.—The Commissioner shall ensure

that the planning, assistance, and information described

in paragraph (2) shall be available on a statewide basis.

‘‘(C) ELIGIBILITY OF STATES AND PRIVATE ORGANIZATIONS.—

‘‘(i) IN GENERAL.—The Commissioner may award

a grant, cooperative agreement, or contract under this

section to a State or a private agency or organization

(other than Social Security Administration Field

Offices and the State agency administering the State

medicaid program under title XIX, including any

agency or entity described in clause (ii), that the

Commissioner determines is qualified to provide the

planning, assistance, and information described in

paragraph (2)).
H. R. 1180—30

‘‘(ii) AGENCIES AND ENTITIES DESCRIBED.—The

agencies and entities described in this clause are the

following:

‘‘(I) Any public or private agency or organization (including Centers for Independent Living

established under title VII of the Rehabilitation

Act of 1973 (29 U.S.C. 796 et seq.), protection

and advocacy organizations, client assistance programs established in accordance with section 112

of the Rehabilitation Act of 1973 (29 U.S.C. 732),

and State Developmental Disabilities Councils

established in accordance with section 124 of the

Developmental Disabilities Assistance and Bill of

Rights Act (42 U.S.C. 6024)) that the Commissioner determines satisfies the requirements of this

section.

‘‘(II) The State agency administering the State

program funded under part A of title IV.

‘‘(D) EXCLUSION FOR CONFLICT OF INTEREST.—The

Commissioner may not award a grant, cooperative agreement, or contract under this section to any entity that

the Commissioner determines would have a conflict of

interest if the entity were to receive a grant, cooperative

agreement, or contract under this section.

‘‘(2) SERVICES PROVIDED.—A recipient of a grant, cooperative agreement, or contract to provide benefits planning and

assistance shall select individuals who will act as planners

and provide information, guidance, and planning to disabled

beneficiaries on the—

‘‘(A) availability and interrelation of any Federal or

State work incentives programs designed to assist disabled

beneficiaries that the individual may be eligible to participate in;

‘‘(B) adequacy of any health benefits coverage that

may be offered by an employer of the individual and the

extent to which other health benefits coverage may be

available to the individual; and

‘‘(C) availability of protection and advocacy services

for disabled beneficiaries and how to access such services.

‘‘(3) AMOUNT OF GRANTS, COOPERATIVE AGREEMENTS, OR

CONTRACTS.— ‘‘(A) BASED ON POPULATION OF DISABLED BENE- FICIARIES.—Subject to subparagraph (B), the Commissioner

shall award a grant, cooperative agreement, or contract

under this section to an entity based on the percentage

of the population of the State where the entity is located

who are disabled beneficiaries.

‘‘(B) LIMITATIONS.—

‘‘(i) PER GRANT.—No entity shall receive a grant,

cooperative agreement, or contract under this section

for a fiscal year that is less than $50,000 or more

than $300,000.

‘‘(ii) TOTAL AMOUNT FOR ALL GRANTS, COOPERATIVE

AGREEMENTS, AND CONTRACTS.—The total amount of

all grants, cooperative agreements, and contracts

awarded under this section for a fiscal year may not

exceed $23,000,000.
H. R. 1180—31

‘‘(4) ALLOCATION OF COSTS.—The costs of carrying out this

section shall be paid from amounts made available for the

administration of title II and amounts made available for the

administration of title XVI, and shall be allocated among those

amounts as appropriate.

‘‘(c) DEFINITIONS.—In this section:

‘‘(1) COMMISSIONER.—The term ‘Commissioner’ means the

Commissioner of Social Security.

‘‘(2) DISABLED BENEFICIARY.—The term ‘disabled beneficiary’ has the meaning given that term in section 1148(k)(2).

‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There are authorized

to be appropriated to carry out this section $23,000,000 for each

of the fiscal years 2000 through 2004.’’.

SEC. 122. STATE GRANTS FOR WORK INCENTIVES ASSISTANCE TO DISABLED BENEFICIARIES.

Part A of title XI of the Social Security Act (42 U.S.C. 1301

et seq.), as amended by section 121 of this Act, is amended by

adding after section 1149 the following new section:

‘‘STATE GRANTS FOR WORK INCENTIVES ASSISTANCE TO DISABLED

BENEFICIARIES

‘‘SEC. 1150. (a) IN GENERAL.—Subject to subsection (c), the

Commissioner may make payments in each State to the protection

and advocacy system established pursuant to part C of title I

of the Developmental Disabilities Assistance and Bill of Rights

Act (42 U.S.C. 6041 et seq.) for the purpose of providing services

to disabled beneficiaries.

‘‘(b) SERVICES PROVIDED.—Services provided to disabled beneficiaries pursuant to a payment made under this section may

include—

‘‘(1) information and advice about obtaining vocational

rehabilitation and employment services; and

‘‘(2) advocacy or other services that a disabled beneficiary

may need to secure or regain gainful employment.

‘‘(c) APPLICATION.—In order to receive payments under this

section, a protection and advocacy system shall submit an application to the Commissioner, at such time, in such form and manner,

and accompanied by such information and assurances as the

Commissioner may require.

‘‘(d) AMOUNT OF PAYMENTS.— ‘‘(1) IN GENERAL.—Subject to the amount appropriated for

a fiscal year for making payments under this section, a protection and advocacy system shall not be paid an amount that

is less than—

‘‘(A) in the case of a protection and advocacy system

located in a State (including the District of Columbia and

Puerto Rico) other than Guam, American Samoa, the

United States Virgin Islands, and the Commonwealth of

the Northern Mariana Islands, the greater of—

‘‘(i) $100,000; or

‘‘(ii) 1⁄3 of 1 percent of the amount available for

payments under this section; and

‘‘(B) in the case of a protection and advocacy system

located in Guam, American Samoa, the United States

Virgin Islands, and the Commonwealth of the Northern

Mariana Islands, $50,000.
H. R. 1180—32

‘‘(2) INFLATION ADJUSTMENT.—For each fiscal year in which

the total amount appropriated to carry out this section exceeds

the total amount appropriated to carry out this section in

the preceding fiscal year, the Commissioner shall increase each

minimum payment under subparagraphs (A) and (B) of paragraph (1) by a percentage equal to the percentage increase

in the total amount so appropriated to carry out this section.

‘‘(e) ANNUAL REPORT.—Each protection and advocacy system

that receives a payment under this section shall submit an annual

report to the Commissioner and the Ticket to Work and Work

Incentives Advisory Panel established under section 101(f ) of the

Ticket to Work and Work Incentives Improvement Act of 1999

on the services provided to individuals by the system.

‘‘(f ) FUNDING.— ‘‘(1) ALLOCATION OF PAYMENTS.—Payments under this section shall be made from amounts made available for the

administration of title II and amounts made available for the

administration of title XVI, and shall be allocated among those

amounts as appropriate.

‘‘(2) CARRYOVER.—Any amounts allotted for payment to

a protection and advocacy system under this section for a

fiscal year shall remain available for payment to or on behalf

of the protection and advocacy system until the end of the

succeeding fiscal year.

‘‘(g) DEFINITIONS.—In this section:

‘‘(1) COMMISSIONER.—The term ‘Commissioner’ means the

Commissioner of Social Security.

‘‘(2) DISABLED BENEFICIARY.—The term ‘disabled beneficiary’ has the meaning given that term in section 1148(k)(2).

‘‘(3) PROTECTION AND ADVOCACY SYSTEM.—The term ‘protection and advocacy system’ means a protection and advocacy

system established pursuant to part C of title I of the Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C.

6041 et seq.).

‘‘(h) AUTHORIZATION OF APPROPRIATIONS.—There are authorized

to be appropriated to carry out this section $7,000,000 for each

of the fiscal years 2000 through 2004.’’.

TITLE II—EXPANDED AVAILABILITY OF

HEALTH CARE SERVICES

SEC. 201. EXPANDING STATE OPTIONS UNDER THE MEDICAID PROGRAM FOR WORKERS WITH DISABILITIES.

(a) IN GENERAL.— (1) STATE OPTION TO ELIMINATE INCOME, ASSETS, AND

RESOURCE LIMITATIONS FOR WORKERS WITH DISABILITIES BUYING

INTO MEDICAID.—Section 1902(a)(10)(A)(ii) of the Social Security

Act (42 U.S.C. 1396a(a)(10)(A)(ii)) is amended—

(A) in subclause (XIII), by striking ‘‘or’’ at the end;

(B) in subclause (XIV), by adding ‘‘or’’ at the end;

and

(C) by adding at the end the following new subclause:

‘‘(XV) who, but for earnings in excess of the

limit established under section 1905(q)(2)(B),

would be considered to be receiving supplemental

security income, who is at least 16, but less than
H. R. 1180—33

65, years of age, and whose assets, resources, and

earned or unearned income (or both) do not exceed

such limitations (if any) as the State may establish;’’.

(2) STATE OPTION TO PROVIDE OPPORTUNITY FOR EMPLOYED

INDIVIDUALS WITH A MEDICALLY IMPROVED DISABILITY TO BUY

INTO MEDICAID.—

(A) ELIGIBILITY.—Section 1902(a)(10) (A)(ii) of the

Social Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)), as

amended by paragraph (1), is amended—

(i) in subclause (XIV), by striking ‘‘or’’ at the end;

(ii) in subclause (XV), by adding ‘‘or’’ at the end;

and

(iii) by adding at the end the following new subclause:

‘‘(XVI) who are employed individuals with a

medically improved disability described in section

1905(v)(1) and whose assets, resources, and earned

or unearned income (or both) do not exceed such

limitations (if any) as the State may establish,

but only if the State provides medical assistance

to individuals described in subclause (XV);’’.

(B) DEFINITION OF EMPLOYED INDIVIDUALS WITH A MEDICALLY IMPROVED DISABILITY.—Section 1905 of the Social

Security Act (42 U.S.C. 1396d) is amended by adding at

the end the following new subsection:

‘‘(v)(1) The term ‘employed individual with a medically improved

disability’ means an individual who—

‘‘(A) is at least 16, but less than 65, years of age;

‘‘(B) is employed (as defined in paragraph (2));

‘‘(C) ceases to be eligible for medical assistance under section 1902(a)(10)(A)(ii)(XV) because the individual, by reason

of medical improvement, is determined at the time of a regularly scheduled continuing disability review to no longer be

eligible for benefits under section 223(d) or 1614(a)(3); and

‘‘(D) continues to have a severe medically determinable

impairment, as determined under regulations of the Secretary.

‘‘(2) For purposes of paragraph (1), an individual is considered

to be ‘employed’ if the individual—

‘‘(A) is earning at least the applicable minimum wage

requirement under section 6 of the Fair Labor Standards Act

(29 U.S.C. 206) and working at least 40 hours per month;

or

‘‘(B) is engaged in a work effort that meets substantial

and reasonable threshold criteria for hours of work, wages,

or other measures, as defined by the State and approved by

the Secretary.’’.

(C) CONFORMING AMENDMENT.—Section 1905(a) of such

Act (42 U.S.C. 1396d(a)) is amended in the matter preceding paragraph (1)—

(i) in clause (x), by striking ‘‘or’’ at the end;

(ii) in clause (xi), by adding ‘‘or’’ at the end; and

(iii) by inserting after clause (xi), the following

new clause:

‘‘(xii) employed individuals with a medically improved disability (as defined in subsection (v)),’’.
H. R. 1180—34

(3) STATE AUTHORITY TO IMPOSE INCOME-RELATED PREMIUMS

AND COST-SHARING.—Section 1916 of such Act (42 U.S.C. 1396o)

is amended—

(A) in subsection (a), by striking ‘‘The State plan’’

and inserting ‘‘Subject to subsection (g), the State plan’’;

and

(B) by adding at the end the following new subsection:

‘‘(g) With respect to individuals provided medical assistance

only under subclause (XV) or (XVI) of section 1902(a)(10)(A)(ii)—

‘‘(1) a State may (in a uniform manner for individuals

described in either such subclause)—

‘‘(A) require such individuals to pay premiums or other

cost-sharing charges set on a sliding scale based on income

that the State may determine; and

‘‘(B) require payment of 100 percent of such premiums

for such year in the case of such an individual who has

income for a year that exceeds 250 percent of the income

official poverty line (referred to in subsection (c)(1))

applicable to a family of the size involved, except that

in the case of such an individual who has income for

a year that does not exceed 450 percent of such poverty

line, such requirement may only apply to the extent such

premiums do not exceed 7.5 percent of such income; and

‘‘(2) such State shall require payment of 100 percent of

such premiums for a year by such an individual whose adjusted

gross income (as defined in section 62 of the Internal Revenue

Code of 1986) for such year exceeds $75,000, except that a

State may choose to subsidize such premiums by using State

funds which may not be federally matched under this title.

In the case of any calendar year beginning after 2000, the dollar

amount specified in paragraph (2) shall be increased in accordance

with the provisions of section 215(i)(2)(A)(ii).’’.

(4) PROHIBITION AGAINST SUPPLANTATION OF STATE FUNDS

AND STATE FAILURE TO MAINTAIN EFFORT.—Section 1903(i) of

such Act (42 U.S.C. 1396b(i)) is amended—

(A) by striking the period at the end of paragraph

(19) and inserting ‘‘; or’’; and

(B) by inserting after such paragraph the following

new paragraph:

‘‘(20) with respect to amounts expended for medical assistance provided to an individual described in subclause (XV)

or (XVI) of section 1902(a)(10)(A)(ii) for a fiscal year unless

the State demonstrates to the satisfaction of the Secretary

that the level of State funds expended for such fiscal year

for programs to enable working individuals with disabilities

to work (other than for such medical assistance) is not less

than the level expended for such programs during the most

recent State fiscal year ending before the date of the enactment

of this paragraph.’’.

(b) CONFORMING AMENDMENTS.—Section 1903(f )(4) of the Social

Security Act (42 U.S.C. 1396b(f )(4) is amended in the matter preceding subparagraph (A) by inserting ‘‘1902(a)(10)(A)(ii)(XV),

1902(a)(10)(A)(ii)(XVI),’’ before ‘‘1905(p)(1)’’.

(c) GAO REPORT.—Not later than 3 years after the date of

the enactment of this Act, the Comptroller General of the United

States shall submit a report to the Congress regarding the amendments made by this section that examines—
H. R. 1180—35

(1) the extent to which higher health care costs for individuals with disabilities at higher income levels deter employment

or progress in employment;

(2) whether such individuals have health insurance coverage or could benefit from the State option established under

such amendments to provide a medicaid buy-in; and

(3) how the States are exercising such option, including—

(A) how such States are exercising the flexibility

afforded them with regard to income disregards;

(B) what income and premium levels have been set;

(C) the degree to which States are subsidizing premiums above the dollar amount specified in section

1916(g)(2) of the Social Security Act (42 U.S.C. 1396o(g)(2));

and

(D) the extent to which there exists any crowd-out

effect.

(d) EFFECTIVE DATE.—The amendments made by this section

apply to medical assistance for items and services furnished on

or after October 1, 2000.

SEC. 202. EXTENDING MEDICARE COVERAGE FOR OASDI DISABILITY

BENEFIT RECIPIENTS.

(a) IN GENERAL.—The next to last sentence of section 226(b)

of the Social Security Act (42 U.S.C. 426) is amended by striking

‘‘24’’ and inserting ‘‘78’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall be effective on and after October 1, 2000.

(c) GAO REPORT.—Not later than 5 years after the date of

the enactment of this Act, the Comptroller General of the United

States shall submit a report to the Congress that—

(1) examines the effectiveness and cost of the amendment

made by subsection (a);

(2) examines the necessity and effectiveness of providing

continuation of medicare coverage under section 226(b) of the

Social Security Act (42 U.S.C. 426(b)) to individuals whose

annual income exceeds the contribution and benefit base (as

determined under section 230 of such Act (42 U.S.C. 430));

(3) examines the viability of providing the continuation

of medicare coverage under such section 226(b) based on a

sliding scale premium for individuals whose annual income

exceeds such contribution and benefit base;

(4) examines the viability of providing the continuation

of medicare coverage under such section 226(b) based on a

premium buy-in by the beneficiary’s employer in lieu of coverage

under private health insurance;

(5) examines the interrelation between the use of the

continuation of medicare coverage under such section 226(b)

and the use of private health insurance coverage by individuals

during the extended period; and

(6) recommends such legislative or administrative changes

relating to the continuation of medicare coverage for recipients

of social security disability benefits as the Comptroller General

determines are appropriate.

SEC. 203. GRANTS TO DEVELOP AND ESTABLISH STATE INFRASTRUCTURES TO SUPPORT WORKING INDIVIDUALS WITH

DISABILITIES.

(a) ESTABLISHMENT.—
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(1) IN GENERAL.—The Secretary of Health and Human

Services (in this section referred to as the ‘‘Secretary’’) shall

award grants described in subsection (b) to States to support

the design, establishment, and operation of State infrastructures that provide items and services to support working

individuals with disabilities.

(2) APPLICATION.—In order to be eligible for an award

of a grant under this section, a State shall submit an application

to the Secretary at such time, in such manner, and containing

such information as the Secretary shall require.

(3) DEFINITION OF STATE.—In this section, the term ‘‘State’’

means each of the 50 States, the District of Columbia, Puerto

Rico, Guam, the United States Virgin Islands, American Samoa,

and the Commonwealth of the Northern Mariana Islands.

(b) GRANTS FOR INFRASTRUCTURE AND OUTREACH.—

(1) IN GENERAL.—Out of the funds appropriated under subsection (e), the Secretary shall award grants to States to—

(A) support the establishment, implementation, and

operation of the State infrastructures described in subsection (a); and

(B) conduct outreach campaigns regarding the existence of such infrastructures.

(2) ELIGIBILITY FOR GRANTS.—

(A) IN GENERAL.—No State may receive a grant under

this subsection unless the State demonstrates to the satisfaction of the Secretary that the State makes personal

assistance services available under the State plan under

title XIX of the Social Security Act (42 U.S.C. 1396 et

seq.) to the extent necessary to enable individuals with

disabilities to remain employed, including individuals

described in section 1902(a)(10)(A)(ii)(XIII) of such Act (42

U.S.C. 1396a(a)(10)(A)(ii)(XIII)) if the State has elected

to provide medical assistance under such plan to such

individuals.

(B) DEFINITIONS.—In this section:

(i) EMPLOYED.—The term ‘‘employed’’ means—

(I) earning at least the applicable minimum

wage requirement under section 6 of the Fair

Labor Standards Act (29 U.S.C. 206) and working

at least 40 hours per month; or

(II) being engaged in a work effort that meets

substantial and reasonable threshold criteria for

hours of work, wages, or other measures, as

defined and approved by the Secretary.

(ii) PERSONAL ASSISTANCE SERVICES.—The term

‘‘personal assistance services’’ means a range of services, provided by 1 or more persons, designed to assist

an individual with a disability to perform daily activities on and off the job that the individual would typically perform if the individual did not have a disability.

Such services shall be designed to increase the individual’s control in life and ability to perform everyday

activities on or off the job.

(3) DETERMINATION OF AWARDS.—

(A) IN GENERAL.—Subject to subparagraph (B), the Secretary shall develop a methodology for awarding grants
H. R. 1180—37

to States under this section for a fiscal year in a manner

that—

(i) rewards States for their efforts in encouraging

individuals described in paragraph (2)(A) to be

employed; and

(ii) does not provide a State that has not elected

to provide medical assistance under title XIX of the

Social Security Act to individuals described in section

1902(a)(10)(A)(ii)(XIII) of that Act (42 U.S.C.

1396a(a)(10)(A)(ii)(XIII)) with proportionally more

funds for a fiscal year than a State that has exercised

such election.

(B) AWARD LIMITS.—

(i) MINIMUM AWARDS.—

(I) IN GENERAL.—Subject to subclause (II), no

State with an approved application under this section shall receive a grant for a fiscal year that

is less than $500,000.

(II) PRO RATA REDUCTIONS.—If the funds

appropriated under subsection (e) for a fiscal year

are not sufficient to pay each State with an

application approved under this section the minimum amount described in subclause (I), the Secretary shall pay each such State an amount equal

to the pro rata share of the amount made available.

(ii) MAXIMUM AWARDS.—

(I) STATES THAT ELECTED OPTIONAL MEDICAID

ELIGIBILITY.—No State that has an application that

has been approved under this section and that

has elected to provide medical assistance under

title XIX of the Social Security Act to individuals

described in section 1902(a)(10)(A)(ii)(XIII) of such

Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XIII)) shall

receive a grant for a fiscal year that exceeds 10

percent of the total expenditures by the State

(including the reimbursed Federal share of such

expenditures) for medical assistance provided

under such title for such individuals, as estimated

by the State and approved by the Secretary.

(II) OTHER STATES.—The Secretary shall determine, consistent with the limit described in subclause (I), a maximum award limit for a grant

for a fiscal year for a State that has an application

that has been approved under this section but

that has not elected to provide medical assistance

under title XIX of the Social Security Act to

individuals described in section

1902(a)(10)(A)(ii)(XIII) of that Act (42 U.S.C.

1396a(a)(10)(A)(ii)(XIII)).

(c) AVAILABILITY OF FUNDS.—

(1) FUNDS AWARDED TO STATES.—Funds awarded to a State

under a grant made under this section for a fiscal year shall

remain available until expended.

(2) FUNDS NOT AWARDED TO STATES.—Funds not awarded

to States in the fiscal year for which they are appropriated

shall remain available in succeeding fiscal years for awarding

by the Secretary.
H. R. 1180—38

(d) ANNUAL REPORT.—A State that is awarded a grant under

this section shall submit an annual report to the Secretary on

the use of funds provided under the grant. Each report shall include

the percentage increase in the number of title II disability beneficiaries, as defined in section 1148(k)(3) of the Social Security

Act (as added by section 101(a) of this Act) in the State, and

title XVI disability beneficiaries, as defined in section 1148(k)(4)

of the Social Security Act (as so added) in the State who return

to work.

(e) APPROPRIATION.—

(1) IN GENERAL.—Out of any funds in the Treasury not

otherwise appropriated, there is appropriated to make grants

under this section—

(A) for fiscal year 2001, $20,000,000;

(B) for fiscal year 2002, $25,000,000;

(C) for fiscal year 2003, $30,000,000;

(D) for fiscal year 2004, $35,000,000;

(E) for fiscal year 2005, $40,000,000; and

(F) for each of fiscal years 2006 through 2011, the

amount appropriated for the preceding fiscal year increased

by the percentage increase (if any) in the Consumer Price

Index for All Urban Consumers (United States city average)

for the preceding fiscal year.

(2) BUDGET AUTHORITY.—This subsection constitutes budget

authority in advance of appropriations Acts and represents

the obligation of the Federal Government to provide for the

payment of the amounts appropriated under paragraph (1).

(f ) RECOMMENDATION.—Not later than October 1, 2010, the

Secretary, in consultation with the Ticket to Work and Work Incentives Advisory Panel established by section 101(f ) of this Act, shall

submit a recommendation to the Committee on Commerce of the

House of Representatives and the Committee on Finance of the

Senate regarding whether the grant program established under

this section should be continued after fiscal year 2011.

SEC. 204. DEMONSTRATION OF COVERAGE UNDER THE MEDICAID PROGRAM OF WORKERS WITH POTENTIALLY SEVERE

DISABILITIES.

(a) STATE APPLICATION.—A State may apply to the Secretary

of Health and Human Services (in this section referred to as the

‘‘Secretary’’) for approval of a demonstration project (in this section

referred to as a ‘‘demonstration project’’) under which up to a

specified maximum number of individuals who are workers with

a potentially severe disability (as defined in subsection (b)(1)) are

provided medical assistance equal to—

(1) that provided under section 1905(a) of the Social Security Act (42 U.S.C. 1396d(a)) to individuals described in section

1902(a)(10)(A)(ii)(XIII) of that Act (42 U.S.C.

1396a(a)(10)(A)(ii)(XIII)); or

(2) in the case of a State that has not elected to provide

medical assistance under that section to such individuals, such

medical assistance as the Secretary determines is an appropriate equivalent to the medical assistance described in paragraph (1).

(b) WORKER WITH A POTENTIALLY SEVERE DISABILITY

DEFINED.—For purposes of this section—
H. R. 1180—39

(1) IN GENERAL.—The term ‘‘worker with a potentially

severe disability’’ means, with respect to a demonstration

project, an individual who—

(A) is at least 16, but less than 65, years of age;

(B) has a specific physical or mental impairment that,

as defined by the State under the demonstration project,

is reasonably expected, but for the receipt of items and

services described in section 1905(a) of the Social Security

Act (42 U.S.C. 1396d(a)), to become blind or disabled (as

defined under section 1614(a) of the Social Security Act

(42 U.S.C. 1382c(a))); and

(C) is employed (as defined in paragraph (2)).

(2) DEFINITION OF EMPLOYED.—An individual is considered

to be ‘‘employed’’ if the individual—

(A) is earning at least the applicable minimum wage

requirement under section 6 of the Fair Labor Standards

Act (29 U.S.C. 206) and working at least 40 hours per

month; or

(B) is engaged in a work effort that meets substantial

and reasonable threshold criteria for hours of work, wages,

or other measures, as defined under the demonstration

project and approved by the Secretary.

(c) APPROVAL OF DEMONSTRATION PROJECTS.—

(1) IN GENERAL.—Subject to paragraph (3), the Secretary

shall approve applications under subsection (a) that meet the

requirements of paragraph (2) and such additional terms and

conditions as the Secretary may require. The Secretary may

waive the requirement of section 1902(a)(1) of the Social Security Act (42 U.S.C. 1396a(a)(1)) to allow for sub-State demonstrations.

(2) TERMS AND CONDITIONS OF DEMONSTRATION PROJECTS.— The Secretary may not approve a demonstration project under

this section unless the State provides assurances satisfactory

to the Secretary that the following conditions are or will be

met:

(A) MAINTENANCE OF STATE EFFORT.—Federal funds

paid to a State pursuant to this section must be used

to supplement, but not supplant, the level of State funds

expended for workers with potentially severe disabilities

under programs in effect for such individuals at the time

the demonstration project is approved under this section.

(B) INDEPENDENT EVALUATION.—The State provides for

an independent evaluation of the project.

(3) LIMITATIONS ON FEDERAL FUNDING.— (A) APPROPRIATION.—

(i) IN GENERAL.—Out of any funds in the Treasury

not otherwise appropriated, there is appropriated to

carry out this section—

(I) $42,000,000 for each of fiscal years 2001

through 2004; and

(II) $41,000,000 for each of fiscal years 2005

and 2006.

(ii) BUDGET AUTHORITY.—Clause (i) constitutes

budget authority in advance of appropriations Acts

and represents the obligation of the Federal Government to provide for the payment of the amounts appropriated under clause (i).
H. R. 1180—40

(B) LIMITATION ON PAYMENTS.—In no case may—

(i) the aggregate amount of payments made by

the Secretary to States under this section exceed

$250,000,000;

(ii) the aggregate amount of payments made by

the Secretary to States for administrative expenses

relating to annual reports required under subsection

(d) exceed $2,000,000 of such $250,000,000; or

(iii) payments be provided by the Secretary for

a fiscal year after fiscal year 2009.

(C) FUNDS ALLOCATED TO STATES.—The Secretary shall

allocate funds to States based on their applications and

the availability of funds. Funds allocated to a State under

a grant made under this section for a fiscal year shall

remain available until expended.

(D) FUNDS NOT ALLOCATED TO STATES.—Funds not allocated to States in the fiscal year for which they are appropriated shall remain available in succeeding fiscal years

for allocation by the Secretary using the allocation formula

established under this section.

(E) PAYMENTS TO STATES.—The Secretary shall pay

to each State with a demonstration project approved under

this section, from its allocation under subparagraph (C),

an amount for each quarter equal to the Federal medical

assistance percentage (as defined in section 1905(b) of the

Social Security Act (42 U.S.C. 1395d(b)) of expenditures

in the quarter for medical assistance provided to workers

with a potentially severe disability.

(d) ANNUAL REPORT.—A State with a demonstration project

approved under this section shall submit an annual report to the

Secretary on the use of funds provided under the grant. Each

report shall include enrollment and financial statistics on—

(1) the total population of workers with potentially severe

disabilities served by the demonstration project; and

(2) each population of such workers with a specific physical

or mental impairment described in subsection (b)(1)(B) served

by such project.

(e) RECOMMENDATION.—Not later than October 1, 2004, the

Secretary shall submit a recommendation to the Committee on

Commerce of the House of Representatives and the Committee

on Finance of the Senate regarding whether the demonstration

project established under this section should be continued after

fiscal year 2006.

(f ) STATE DEFINED.—In this section, the term ‘‘State’’ has the

meaning given such term for purposes of title XIX of the Social

Security Act (42 U.S.C. 1396 et seq.).

SEC. 205. ELECTION BY DISABLED BENEFICIARIES TO SUSPEND

MEDIGAP INSURANCE WHEN COVERED UNDER A GROUP

HEALTH PLAN.

(a) IN GENERAL.—Section 1882(q) of the Social Security Act

(42 U.S.C. 1395ss(q)) is amended—

(1) in paragraph (5)(C), by inserting ‘‘or paragraph (6)’’

after ‘‘this paragraph’’; and

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

‘‘(6) Each medicare supplemental policy shall provide that

benefits and premiums under the policy shall be suspended
H. R. 1180—41

at the request of the policyholder if the policyholder is entitled

to benefits under section 226(b) and is covered under a group

health plan (as defined in section 1862(b)(1)(A)(v)). If such

suspension occurs and if the policyholder or certificate holder

loses coverage under the group health plan, such policy shall

be automatically reinstituted (effective as of the date of such

loss of coverage) under terms described in subsection

(n)(6)(A)(ii) as of the loss of such coverage if the policyholder

provides notice of loss of such coverage within 90 days after

the date of such loss.’’.

(b) EFFECTIVE DATE.—The amendments made by subsection

(a) apply with respect to requests made after the date of the

enactment of this Act.

TITLE III—DEMONSTRATION PROJECTS

AND STUDIES

SEC. 301. EXTENSION OF DISABILITY INSURANCE PROGRAM DEMONSTRATION PROJECT AUTHORITY.

(a) EXTENSION OF AUTHORITY.—Title II of the Social Security

Act (42 U.S.C. 401 et seq.) is amended by adding at the end

the following new section:

‘‘DEMONSTRATION PROJECT AUTHORITY

‘‘SEC. 234. (a) AUTHORITY.—

‘‘(1) IN GENERAL.—The Commissioner of Social Security

(in this section referred to as the ‘Commissioner’) shall develop

and carry out experiments and demonstration projects designed

to determine the relative advantages and disadvantages of—

‘‘(A) various alternative methods of treating the work

activity of individuals entitled to disability insurance benefits under section 223 or to monthly insurance benefits

under section 202 based on such individual’s disability

(as defined in section 223(d)), including such methods as

a reduction in benefits based on earnings, designed to

encourage the return to work of such individuals;

‘‘(B) altering other limitations and conditions applicable

to such individuals (including lengthening the trial work

period (as defined in section 222(c)), altering the 24-month

waiting period for hospital insurance benefits under section

226, altering the manner in which the program under

this title is administered, earlier referral of such individuals for rehabilitation, and greater use of employers and

others to develop, perform, and otherwise stimulate new

forms of rehabilitation); and

‘‘(C) implementing sliding scale benefit offsets using

variations in—

‘‘(i) the amount of the offset as a proportion of

earned income;

‘‘(ii) the duration of the offset period; and

‘‘(iii) the method of determining the amount of

income earned by such individuals,

to the end that savings will accrue to the Trust Funds, or

to otherwise promote the objectives or facilitate the administration of this title.
H. R. 1180—42

‘‘(2) AUTHORITY FOR EXPANSION OF SCOPE.—The Commissioner may expand the scope of any such experiment or demonstration project to include any group of applicants for benefits

under the program established under this title with impairments that reasonably may be presumed to be disabling for

purposes of such demonstration project, and may limit any

such demonstration project to any such group of applicants,

subject to the terms of such demonstration project which shall

define the extent of any such presumption.

‘‘(b) REQUIREMENTS.—The experiments and demonstration

projects developed under subsection (a) shall be of sufficient scope

and shall be carried out on a wide enough scale to permit a thorough

evaluation of the alternative methods under consideration while

giving assurance that the results derived from the experiments

and projects will obtain generally in the operation of the disability

insurance program under this title without committing such program to the adoption of any particular system either locally or

nationally.

‘‘(c) AUTHORITY TO WAIVE COMPLIANCE WITH BENEFITS

REQUIREMENTS.—In the case of any experiment or demonstration

project conducted under subsection (a), the Commissioner may

waive compliance with the benefit requirements of this title and

the requirements of section 1148 as they relate to the program

established under this title, and the Secretary may (upon the

request of the Commissioner) waive compliance with the benefits

requirements of title XVIII, insofar as is necessary for a thorough

evaluation of the alternative methods under consideration. No such

experiment or project shall be actually placed in operation unless

at least 90 days prior thereto a written report, prepared for purposes

of notification and information only and containing a full and complete description thereof, has been transmitted by the Commissioner

to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate. Periodic

reports on the progress of such experiments and demonstration

projects shall be submitted by the Commissioner to such committees. When appropriate, such reports shall include detailed recommendations for changes in administration or law, or both, to

carry out the objectives stated in subsection (a).

‘‘(d) REPORTS.— ‘‘(1) INTERIM REPORTS.—On or before June 9 of each year,

the Commissioner shall submit to the Committee on Ways

and Means of the House of Representatives and to the Committee on Finance of the Senate an annual interim report

on the progress of the experiments and demonstration projects

carried out under this subsection together with any related

data and materials that the Commissioner may consider appropriate.

‘‘(2) TERMINATION AND FINAL REPORT.—The authority under

the preceding provisions of this section (including any waiver

granted pursuant to subsection (c)) shall terminate 5 years

after the date of the enactment of this Act. Not later than

90 days after the termination of any experiment or demonstration project carried out under this section, the Commissioner

shall submit to the Committee on Ways and Means of the

House of Representatives and to the Committee on Finance

of the Senate a final report with respect to that experiment

or demonstration project.’’.
H. R. 1180—43

(b) CONFORMING AMENDMENTS; TRANSFER OF PRIOR

AUTHORITY.—

(1) CONFORMING AMENDMENTS.—

(A) REPEAL OF PRIOR AUTHORITY.—Paragraphs (1)

through (4) of subsection (a) and subsection (c) of section

505 of the Social Security Disability Amendments of 1980

(42 U.S.C. 1310 note) are repealed.

(B) CONFORMING AMENDMENT REGARDING FUNDING.—

Section 201(k) of the Social Security Act (42 U.S.C. 401(k))

is amended by striking ‘‘section 505(a) of the Social Security

Disability Amendments of 1980’’ and inserting ‘‘section

234’’.

(2) TRANSFER OF PRIOR AUTHORITY.—With respect to any

experiment or demonstration project being conducted under

section 505(a) of the Social Security Disability Amendments

of 1980 (42 U.S.C. 1310 note) as of the date of the enactment

of this Act, the authority to conduct such experiment or demonstration project (including the terms and conditions

applicable to the experiment or demonstration project) shall

be treated as if that authority (and such terms and conditions)

had been established under section 234 of the Social Security

Act, as added by subsection (a).

SEC. 302. DEMONSTRATION PROJECTS PROVIDING FOR REDUCTIONS

IN DISABILITY INSURANCE BENEFITS BASED ON

EARNINGS.

(a) AUTHORITY.—The Commissioner of Social Security shall conduct demonstration projects for the purpose of evaluating, through

the collection of data, a program for title II disability beneficiaries

(as defined in section 1148(k)(3) of the Social Security Act) under

which benefits payable under section 223 of such Act, or under

section 202 of such Act based on the beneficiary’s disability, are

reduced by $1 for each $2 of the beneficiary’s earnings that is

above a level to be determined by the Commissioner. Such projects

shall be conducted at a number of localities which the Commissioner

shall determine is sufficient to adequately evaluate the appropriateness of national implementation of such a program. Such projects

shall identify reductions in Federal expenditures that may result

from the permanent implementation of such a program.

(b) SCOPE AND SCALE AND MATTERS TO BE DETERMINED.—

(1) IN GENERAL.—The demonstration projects developed

under subsection (a) shall be of sufficient duration, shall be

of sufficient scope, and shall be carried out on a wide enough

scale to permit a thorough evaluation of the project to

determine—

(A) the effects, if any, of induced entry into the project

and reduced exit from the project;

(B) the extent, if any, to which the project being tested

is affected by whether it is in operation in a locality within

an area under the administration of the Ticket to Work

and Self-Sufficiency Program established under section

1148 of the Social Security Act; and

(C) the savings that accrue to the Federal Old-Age

and Survivors Insurance Trust Fund, the Federal Disability

Insurance Trust Fund, and other Federal programs under

the project being tested.
H. R. 1180—44

The Commissioner shall take into account advice provided by

the Ticket to Work and Work Incentives Advisory Panel pursuant to section 101(f )(2)(B)(ii) of this Act.

(2) ADDITIONAL MATTERS.—The Commissioner shall also

determine with respect to each project—

(A) the annual cost (including net cost) of the project

and the annual cost (including net cost) that would have

been incurred in the absence of the project;

(B) the determinants of return to work, including the

characteristics of the beneficiaries who participate in the

project; and

(C) the employment outcomes, including wages, occupations, benefits, and hours worked, of beneficiaries who

return to work as a result of participation in the project.

The Commissioner may include within the matters evaluated

under the project the merits of trial work periods and periods

of extended eligibility.

(c) WAIVERS.—The Commissioner may waive compliance with

the benefit provisions of title II of the Social Security Act (42

U.S.C. 401 et seq.), and the Secretary of Health and Human Services

may waive compliance with the benefit requirements of title XVIII

of such Act (42 U.S.C. 1395 et seq.), insofar as is necessary for

a thorough evaluation of the alternative methods under consideration. No such project shall be actually placed in operation unless

at least 90 days prior thereto a written report, prepared for purposes

of notification and information only and containing a full and complete description thereof, has been transmitted by the Commissioner

to the Committee on Ways and Means of the House of Representatives and to the Committee on Finance of the Senate. Periodic

reports on the progress of such projects shall be submitted by

the Commissioner to such committees. When appropriate, such

reports shall include detailed recommendations for changes in

administration or law, or both, to carry out the objectives stated

in subsection (a).

(d) INTERIM REPORTS.—Not later than 2 years after the date

of the enactment of this Act, and annually thereafter, the Commissioner of Social Security shall submit to the Congress an interim

report on the progress of the demonstration projects carried out

under this subsection together with any related data and materials

that the Commissioner of Social Security may consider appropriate.

(e) FINAL REPORT.—The Commissioner of Social Security shall

submit to the Congress a final report with respect to all demonstration projects carried out under this section not later than 1 year

after their completion.

(f ) EXPENDITURES.—Expenditures made for demonstration

projects under this section shall be made from the Federal Disability

Insurance Trust Fund and the Federal Old-Age and Survivors Insurance Trust Fund, as determined appropriate by the Commissioner

of Social Security, and from the Federal Hospital Insurance Trust

Fund and the Federal Supplementary Medical Insurance Trust

Fund, as determined appropriate by the Secretary of Health and

Human Services, to the extent provided in advance in appropriation

Acts.

SEC. 303. STUDIES AND REPORTS.

(a) STUDY BY GENERAL ACCOUNTING OFFICE OF EXISTING

DISABILITY-RELATED EMPLOYMENT INCENTIVES.—
H. R. 1180—45

(1) STUDY.—As soon as practicable after the date of the

enactment of this Act, the Comptroller General of the United

States shall undertake a study to assess existing tax credits

and other disability-related employment incentives under the

Americans with Disabilities Act of 1990 (42 U.S.C. 12101 et

seq.) and other Federal laws. In such study, the Comptroller

General shall specifically address the extent to which such

credits and other incentives would encourage employers to hire

and retain individuals with disabilities.

(2) REPORT.—Not later than 3 years after the date of the

enactment of this Act, the Comptroller General shall transmit

to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a

written report presenting the results of the Comptroller General’s study conducted pursuant to this subsection, together

with such recommendations for legislative or administrative

changes as the Comptroller General determines are appropriate.

(b) STUDY BY GENERAL ACCOUNTING OFFICE OF EXISTING

COORDINATION OF THE DI AND SSI PROGRAMS AS THEY RELATE

TO INDIVIDUALS ENTERING OR LEAVING CONCURRENT ENTITLEMENT.—

(1) STUDY.—As soon as practicable after the date of the

enactment of this Act, the Comptroller General of the United

States shall undertake a study to evaluate the coordination

under current law of the disability insurance program under

title II of the Social Security Act (42 U.S.C. 401 et seq.) and

the supplemental security income program under title XVI

of such Act (42 U.S.C. 1381 et seq.), as such programs relate

to individuals entering or leaving concurrent entitlement under

such programs. In such study, the Comptroller General shall

specifically address the effectiveness of work incentives under

such programs with respect to such individuals and the

effectiveness of coverage of such individuals under titles XVIII

and XIX of such Act (42 U.S.C. 1395 et seq., 1396 et seq.).

(2) REPORT.—Not later than 3 years after the date of the

enactment of this Act, the Comptroller General shall transmit

to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a

written report presenting the results of the Comptroller General’s study conducted pursuant to this subsection, together

with such recommendations for legislative or administrative

changes as the Comptroller General determines are appropriate.

(c) STUDY BY GENERAL ACCOUNTING OFFICE OF THE IMPACT

OF THE SUBSTANTIAL GAINFUL ACTIVITY LIMIT ON RETURN TO

WORK.—

(1) STUDY.—As soon as practicable after the date of the

enactment of this Act, the Comptroller General of the United

States shall undertake a study of the substantial gainful

activity level applicable as of that date to recipients of benefits

under section 223 of the Social Security Act (42 U.S.C. 423)

and under section 202 of such Act (42 U.S.C. 402) on the

basis of a recipient having a disability, and the effect of such

level as a disincentive for those recipients to return to work.

In the study, the Comptroller General also shall address the

merits of increasing the substantial gainful activity level
H. R. 1180—46

applicable to such recipients of benefits and the rationale for

not yearly indexing that level to inflation.

(2) REPORT.—Not later than 2 years after the date of the

enactment of this Act, the Comptroller General shall transmit

to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a

written report presenting the results of the Comptroller General’s study conducted pursuant to this subsection, together

with such recommendations for legislative or administrative

changes as the Comptroller General determines are appropriate.

(d) REPORT ON DISREGARDS UNDER THE DI AND SSI PROGRAMS.—Not later than 90 days after the date of the enactment

of this Act, the Commissioner of Social Security shall submit to

the Committee on Ways and Means of the House of Representatives

and the Committee on Finance of the Senate a report that—

(1) identifies all income, assets, and resource disregards

(imposed under statutory or regulatory authority) that are

applicable to individuals receiving benefits under title II or

XVI of the Social Security Act (42 U.S.C. 401 et seq., 1381

et seq.);

(2) with respect to each such disregard—

(A) specifies the most recent statutory or regulatory

modification of the disregard; and

(B) recommends whether further statutory or regulatory modification of the disregard would be appropriate;

and

(3) with respect to the disregard described in section

1612(b)(7) of such Act (42 U.S.C. 1382a(b)(7)) (relating to

grants, scholarships, or fellowships received for use in paying

the cost of tuition and fees at any educational (including technical or vocational education) institution)—

(A) identifies the number of individuals receiving benefits under title XVI of such Act (42 U.S.C. 1381 et seq.)

who have attained age 22 and have not had any portion

of any grant, scholarship, or fellowship received for use

in paying the cost of tuition and fees at any educational

(including technical or vocational education) institution

excluded from their income in accordance with that section;

(B) recommends whether the age at which such grants,

scholarships, or fellowships are excluded from income for

purposes of determining eligibility under title XVI of such

Act (42 U.S.C. 1381 et seq.) should be increased to age

25; and

(C) recommends whether such disregard should be

expanded to include any such grant, scholarship, or fellowship received for use in paying the cost of room and board

at any such institution.

(e) STUDY BY THE GENERAL ACCOUNTING OFFICE OF SOCIAL

SECURITY ADMINISTRATION’S DISABILITY INSURANCE PROGRAM DEMONSTRATION AUTHORITY.—

(1) STUDY.—As soon as practicable after the date of the

enactment of this Act, the Comptroller General of the United

States shall undertake a study to assess the results of the

Social Security Administration’s efforts to conduct disability

demonstrations authorized under prior law as well as under
H. R. 1180—47

section 234 of the Social Security Act (as added by section

301 of this Act).

(2) REPORT.—Not later than 5 years after the date of the

enactment of this Act, the Comptroller General shall transmit

to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate a

written report presenting the results of the Comptroller General’s study conducted pursuant to this section, together with

a recommendation as to whether the demonstration authority

authorized under section 234 of the Social Security Act (as

added by section 301 of this Act) should be made permanent.

TITLE IV—MISCELLANEOUS AND

TECHNICAL AMENDMENTS

SEC. 401. TECHNICAL AMENDMENTS RELATING TO DRUG ADDICTS AND

ALCOHOLICS.

(a) CLARIFICATION RELATING TO THE EFFECTIVE DATE OF THE

DENIAL OF SOCIAL SECURITY DISABILITY BENEFITS TO DRUG ADDICTS

AND ALCOHOLICS.—Section 105(a)(5) of the Contract with America

Advancement Act of 1996 (42 U.S.C. 405 note) is amended—

(1) in subparagraph (A), by striking ‘‘by the Commissioner

of Social Security’’ and ‘‘by the Commissioner’’; and

(2) by adding at the end the following new subparagraph:

‘‘(D) For purposes of this paragraph, an individual’s

claim, with respect to benefits under title II based on

disability, which has been denied in whole before the date

of the enactment of this Act, may not be considered to

be finally adjudicated before such date if, on or after such

date—

‘‘(i) there is pending a request for either administrative or judicial review with respect to such claim;

or

‘‘(ii) there is pending, with respect to such claim,

a readjudication by the Commissioner of Social Security pursuant to relief in a class action or implementation by the Commissioner of a court remand order.

‘‘(E) Notwithstanding the provisions of this paragraph,

with respect to any individual for whom the Commissioner

of Social Security does not perform the entitlement redetermination before the date prescribed in subparagraph (C),

the Commissioner shall perform such entitlement redetermination in lieu of a continuing disability review whenever

the Commissioner determines that the individual’s entitlement is subject to redetermination based on the preceding

provisions of this paragraph, and the provisions of section

223(f ) shall not apply to such redetermination.’’.

(b) CORRECTION TO EFFECTIVE DATE OF PROVISIONS CON- CERNING REPRESENTATIVE PAYEES AND TREATMENT REFERRALS OF

SOCIAL SECURITY BENEFICIARIES WHO ARE DRUG ADDICTS AND

ALCOHOLICS.—Section 105(a)(5)(B) of the Contract with America

Advancement Act of 1996 (42 U.S.C. 405 note) is amended to

read as follows:

‘‘(B) The amendments made by paragraphs (2) and

(3) shall take effect on July 1, 1996, with respect to any

individual—
H. R. 1180—48

‘‘(i) whose claim for benefits is finally adjudicated

on or after the date of the enactment of this Act;

or

‘‘(ii) whose entitlement to benefits is based upon

an entitlement redetermination made pursuant to

subparagraph (C).’’.

(c) EFFECTIVE DATES.—The amendments made by this section

shall take effect as if included in the enactment of section 105

of the Contract with America Advancement Act of 1996 (Public

Law 104–121; 110 Stat. 852 et seq.).

SEC. 402. TREATMENT OF PRISONERS.

(a) IMPLEMENTATION OF PROHIBITION AGAINST PAYMENT OF

TITLE II BENEFITS TO PRISONERS.—

(1) IN GENERAL.—Section 202(x)(3) of the Social Security

Act (42 U.S.C. 402(x)(3)) is amended—

(A) by inserting ‘‘(A)’’ after ‘‘(3)’’; and

(B) by adding at the end the following new subparagraph:

‘‘(B)(i) The Commissioner shall enter into an agreement under

this subparagraph with any interested State or local institution

comprising a jail, prison, penal institution, or correctional facility,

or comprising any other institution a purpose of which is to confine

individuals as described in paragraph (1)(A)(ii). Under such

agreement—

‘‘(I) the institution shall provide to the Commissioner, on

a monthly basis and in a manner specified by the Commissioner, the names, Social Security account numbers, dates of

birth, confinement commencement dates, and, to the extent

available to the institution, such other identifying information

concerning the individuals confined in the institution as the

Commissioner may require for the purpose of carrying out

paragraph (1) and other provisions of this title; and

‘‘(II) the Commissioner shall pay to the institution, with

respect to information described in subclause (I) concerning

each individual who is confined therein as described in paragraph (1)(A), who receives a benefit under this title for the

month preceding the first month of such confinement, and

whose benefit under this title is determined by the Commissioner to be not payable by reason of confinement based on

the information provided by the institution, $400 (subject to

reduction under clause (ii)) if the institution furnishes the

information to the Commissioner within 30 days after the date

such individual’s confinement in such institution begins, or

$200 (subject to reduction under clause (ii)) if the institution

furnishes the information after 30 days after such date but

within 90 days after such date.

‘‘(ii) The dollar amounts specified in clause (i)(II) shall be

reduced by 50 percent if the Commissioner is also required to

make a payment to the institution with respect to the same individual under an agreement entered into under section 1611(e)(1)(I).

‘‘(iii) There are authorized to be transferred from the Federal

Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, as appropriate, such sums as may

be necessary to enable the Commissioner to make payments to

institutions required by clause (i)(II).
H. R. 1180—49

‘‘(iv) The Commissioner shall maintain, and shall provide on

a reimbursable basis, information obtained pursuant to agreements

entered into under this paragraph to any agency administering

a Federal or federally-assisted cash, food, or medical assistance

program for eligibility and other administrative purposes under

such program.’’.

(2) CONFORMING AMENDMENTS TO THE PRIVACY ACT.—

Section 552a(a)(8)(B) of title 5, United States Code, is

amended—

(A) in clause (vi), by striking ‘‘or’’ at the end;

(B) in clause (vii), by adding ‘‘or’’ at the end; and

(C) by adding at the end the following new clause:

‘‘(viii) matches performed pursuant to section

202(x)(3) or 1611(e)(1) of the Social Security Act (42

U.S.C. 402(x)(3), 1382(e)(1));’’.

(3) CONFORMING AMENDMENTS TO TITLE XVI.—

(A) Section 1611(e)(1)(I)(i)(I) of the Social Security Act

(42 U.S.C. 1382(e)(1)(I)(i)(I)) is amended by striking ‘‘; and’’

and inserting ‘‘and the other provisions of this title; and’’.

(B) Section 1611(e)(1)(I)(ii)(II) of such Act (42 U.S.C.

1382(e)(1)(I)(ii)(II)) is amended by striking ‘‘is authorized

to provide, on a reimbursable basis,’’ and inserting ‘‘shall

maintain, and shall provide on a reimbursable basis,’’.

(4) EFFECTIVE DATE.—The amendments made by this subsection shall apply to individuals whose period of confinement

in an institution commences on or after the first day of the

fourth month beginning after the month in which this Act

is enacted.

(b) ELIMINATION OF TITLE II REQUIREMENT THAT CONFINEMENT

STEM FROM CRIME PUNISHABLE BY IMPRISONMENT FOR MORE THAN

1 YEAR.—

(1) IN GENERAL.—Section 202(x)(1)(A) of the Social Security

Act (42 U.S.C. 402(x)(1)(A)) is amended—

(A) in the matter preceding clause (i), by striking

‘‘during which’’ and inserting ‘‘ending with or during or

beginning with or during a period of more than 30 days

throughout all of which’’;

(B) in clause (i), by striking ‘‘an offense punishable

by imprisonment for more than 1 year (regardless of the

actual sentence imposed)’’ and inserting ‘‘a criminal

offense’’; and

(C) in clause (ii)(I), by striking ‘‘an offense punishable

by imprisonment for more than 1 year’’ and inserting ‘‘a

criminal offense’’.

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to individuals whose period of confinement

in an institution commences on or after the first day of the

fourth month beginning after the month in which this Act

is enacted.

(c) CONFORMING TITLE XVI AMENDMENTS.—

(1) FIFTY PERCENT REDUCTION IN TITLE XVI PAYMENT IN

CASE INVOLVING COMPARABLE TITLE II PAYMENT.—Section

1611(e)(1)(I) of the Social Security Act (42 U.S.C. 1382(e)(1)(I))

is amended—

(A) in clause (i)(II), by inserting ‘‘(subject to reduction

under clause (ii))’’ after ‘‘$400’’ and after ‘‘$200’’;
H. R. 1180—50

(B) by redesignating clauses (ii) and (iii) as clauses

(iii) and (iv) respectively; and

(C) by inserting after clause (i) the following new

clause:

‘‘(ii) The dollar amounts specified in clause (i)(II) shall be

reduced by 50 percent if the Commissioner is also required to

make a payment to the institution with respect to the same individual under an agreement entered into under section 202(x)(3)(B).’’.

(2) EXPANSION OF CATEGORIES OF INSTITUTIONS ELIGIBLE

TO ENTER INTO AGREEMENTS WITH THE COMMISSIONER.—Section

1611(e)(1)(I)(i) of such Act (42 U.S.C. 1382(e)(1)(I)(i)) is amended

in the matter preceding subclause (I) by striking ‘‘institution’’

and all that follows through ‘‘section 202(x)(1)(A),’’ and inserting

‘‘institution comprising a jail, prison, penal institution, or

correctional facility, or with any other interested State or local

institution a purpose of which is to confine individuals as

described in section 202(x)(1)(A)(ii),’’.

(3) ELIMINATION OF OVERLY BROAD EXEMPTION.—Section

1611(e)(1)(I)(iii) of such Act (42 U.S.C. 1382(e)(1)(I)(iii)) (as

redesignated by paragraph (1)(B)) is amended further—

(A) by striking ‘‘(I) The provisions’’ and all that follows

through ‘‘(II)’’; and

(B) by striking ‘‘eligibility purposes’’ and inserting

‘‘eligibility and other administrative purposes under such

program’’.

(4) EFFECTIVE DATE.—The amendments made by this subsection shall take effect as if included in the enactment of

section 203(a) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (Public Law 104–193; 110

Stat. 2186). The reference to section 202(x)(1)(A)(ii) of the Social

Security Act in section 1611(e)(1)(I)(i) of the Social Security

Act, as amended by paragraph (2) of this subsection, shall

be deemed a reference to such section 202(x)(1)(A)(ii) of such

Act as amended by subsection (b)(1)(C) of this section.

(d) CONTINUED DENIAL OF BENEFITS TO SEX OFFENDERS

REMAINING CONFINED TO PUBLIC INSTITUTIONS UPON COMPLETION

OF PRISON TERM.—

(1) IN GENERAL.—Section 202(x)(1)(A) of the Social Security

Act (42 U.S.C. 402(x)(1)(A)) is amended—

(A) in clause (i), by striking ‘‘or’’ at the end;

(B) in clause (ii)(IV), by striking the period and

inserting ‘‘, or’’; and

(C) by adding at the end the following new clause:

‘‘(iii) immediately upon completion of confinement as

described in clause (i) pursuant to conviction of a criminal

offense an element of which is sexual activity, is confined

by court order in an institution at public expense pursuant

to a finding that the individual is a sexually dangerous person

or a sexual predator or a similar finding.’’.

(2) CONFORMING AMENDMENT.—Section 202(x)(1)(B)(ii) of

such Act (42 U.S.C. 402(x)(1)(B)(ii)) is amended by striking

‘‘clause (ii)’’ and inserting ‘‘clauses (ii) and (iii)’’.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply with respect to benefits for months ending

after the date of the enactment of this Act.
H. R. 1180—51

SEC. 403. REVOCATION BY MEMBERS OF THE CLERGY OF EXEMPTION

FROM SOCIAL SECURITY COVERAGE.

(a) IN GENERAL.—Notwithstanding section 1402(e)(4) of the

Internal Revenue Code of 1986, any exemption which has been

received under section 1402(e)(1) of such Code by a duly ordained,

commissioned, or licensed minister of a church, a member of a

religious order, or a Christian Science practitioner, and which is

effective for the taxable year in which this Act is enacted, may

be revoked by filing an application therefor (in such form and

manner, and with such official, as may be prescribed by the

Commissioner of Internal Revenue), if such application is filed

no later than the due date of the Federal income tax return

(including any extension thereof ) for the applicant’s second taxable

year beginning after December 31, 1999. Any such revocation shall

be effective (for purposes of chapter 2 of the Internal Revenue

Code of 1986 and title II of the Social Security Act (42 U.S.C.

401 et seq.)), as specified in the application, either with respect

to the applicant’s first taxable year beginning after December 31,

1999, or with respect to the applicant’s second taxable year beginning after such date, and for all succeeding taxable years; and

the applicant for any such revocation may not thereafter again

file application for an exemption under such section 1402(e)(1).

If the application is filed after the due date of the applicant’s

Federal income tax return for a taxable year and is effective with

respect to that taxable year, it shall include or be accompanied

by payment in full of an amount equal to the total of the taxes

that would have been imposed by section 1401 of the Internal

Revenue Code of 1986 with respect to all of the applicant’s income

derived in that taxable year which would have constituted net

earnings from self-employment for purposes of chapter 2 of such

Code (notwithstanding paragraphs (4) and (5) of section 1402(c))

except for the exemption under section 1402(e)(1) of such Code.

(b) EFFECTIVE DATE.—Subsection (a) shall apply with respect

to service performed (to the extent specified in such subsection)

in taxable years beginning after December 31, 1999, and with

respect to monthly insurance benefits payable under title II on

the basis of the wages and self-employment income of any individual

for months in or after the calendar year in which such individual’s

application for revocation (as described in such subsection) is effective (and lump-sum death payments payable under such title on

the basis of such wages and self-employment income in the case

of deaths occurring in or after such calendar year).

SEC. 404. ADDITIONAL TECHNICAL AMENDMENT RELATING TO

COOPERATIVE RESEARCH OR DEMONSTRATION

PROJECTS UNDER TITLES II AND XVI.

(a) IN GENERAL.—Section 1110(a)(3) of the Social Security Act

(42 U.S.C. 1310(a)(3)) is amended by striking ‘‘title XVI’’ and

inserting ‘‘title II or XVI’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall take effect as if included in the enactment of the Social

Security Independence and Program Improvements Act of 1994

(Public Law 103–296; 108 Stat. 1464).
H. R. 1180—52

SEC. 405. AUTHORIZATION FOR STATE TO PERMIT ANNUAL WAGE

REPORTS.

(a) IN GENERAL.—Section 1137(a)(3) of the Social Security Act

(42 U.S.C. 1320b–7(a)(3)) is amended by inserting before the semicolon the following: ‘‘, and except that in the case of wage reports

with respect to domestic service employment, a State may permit

employers (as so defined) that make returns with respect to such

employment on a calendar year basis pursuant to section 3510

of the Internal Revenue Code of 1986 to make such reports on

an annual basis’’.

(b) TECHNICAL AMENDMENTS.—Section 1137(a)(3) of the Social

Security Act (42 U.S.C. 1320b–7(a)(3)) is amended—

(1) by striking ‘‘(as defined in section 453A(a)(2)(B)(iii))’’;

and

(2) by inserting ‘‘(as defined in section 453A(a)(2)(B))’’ after

‘‘employers’’ .

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to wage reports required to be submitted on and after

the date of the enactment of this Act.

SEC. 406. ASSESSMENT ON ATTORNEYS WHO RECEIVE THEIR FEES

VIA THE SOCIAL SECURITY ADMINISTRATION.

(a) ASSESSMENT ON ATTORNEYS.—

(1) IN GENERAL.—Section 206 of the Social Security Act

(42 U.S.C. 406) is amended by adding at the end the following

new subsection:

‘‘(d) ASSESSMENT ON ATTORNEYS.—

‘‘(1) IN GENERAL.—Whenever a fee for services is required

to be certified for payment to an attorney from a claimant’s

past-due benefits pursuant to subsection (a)(4) or (b)(1), the

Commissioner shall impose on the attorney an assessment calculated in accordance with paragraph (2).

‘‘(2) AMOUNT.—

‘‘(A) The amount of an assessment under paragraph

(1) shall be equal to the product obtained by multiplying

the amount of the representative’s fee that would be

required to be so certified by subsection (a)(4) or (b)(1)

before the application of this subsection, by the percentage

specified in subparagraph (B).

‘‘(B) The percentage specified in this subparagraph is—

‘‘(i) for calendar years before 2001, 6.3 percent,

and

‘‘(ii) for calendar years after 2000, such percentage

rate as the Commissioner determines is necessary in

order to achieve full recovery of the costs of determining and certifying fees to attorneys from the pastdue benefits of claimants, but not in excess of 6.3

percent.

‘‘(3) COLLECTION.—The Commissioner may collect the

assessment imposed on an attorney under paragraph (1) by

offset from the amount of the fee otherwise required by subsection (a)(4) or (b)(1) to be certified for payment to the attorney

from a claimant’s past-due benefits.

‘‘(4) PROHIBITION ON CLAIMANT REIMBURSEMENT.—An

attorney subject to an assessment under paragraph (1) may

not, directly or indirectly, request or otherwise obtain
H. R. 1180—53

reimbursement for such assessment from the claimant whose

claim gave rise to the assessment.

‘‘(5) DISPOSITION OF ASSESSMENTS.—Assessments on attorneys collected under this subsection shall be credited to the

Federal Old-Age and Survivors Insurance Trust Fund and the

Federal Disability Insurance Trust Fund, as appropriate.

‘‘(6) AUTHORIZATION OF APPROPRIATIONS.—The assessments

authorized under this section shall be collected and available

for obligation only to the extent and in the amount provided

in advance in appropriations Acts. Amounts so appropriated

are authorized to remain available until expended, for administrative expenses in carrying out this title and related laws.’’.

(2) CONFORMING AMENDMENTS.—

(A) Section 206(a)(4)(A) of such Act (42 U.S.C.

406(a)(4)(A)) is amended by inserting ‘‘and subsection (d)’’

after ‘‘subparagraph (B)’’.

(B) Section 206(b)(1)(A) of such Act (42 U.S.C.

406(b)(1)(A)) is amended by inserting ‘‘, but subject to subsection (d) of this section’’ after ‘‘section 205(i)’’.

(b) ELIMINATION OF 15-DAY WAITING PERIOD FOR PAYMENT

OF FEES.—Section 206(a)(4) of such Act (42 U.S.C. 406(a)(4)), as

amended by subsection (a)(2)(A) of this section, is amended—

(1) by striking ‘‘(4)(A)’’ and inserting ‘‘(4)’’;

(2) by striking ‘‘subparagraph (B) and’’; and

(3) by striking subparagraph (B).

(c) GAO STUDY AND REPORT.—

(1) STUDY.—The Comptroller General of the United States

shall conduct a study that—

(A) examines the costs incurred by the Social Security

Administration in administering the provisions of subsection (a)(4) and (b)(1) of section 206 of the Social Security

Act (42 U.S.C. 406) and itemizes the components of such

costs, including the costs of determining fees to attorneys

from the past-due benefits of claimants before the Commissioner of Social Security and of certifying such fees;

(B) identifies efficiencies that the Social Security

Administration could implement to reduce such costs;

(C) examines the feasibility and advisability of linking

the payment of, or the amount of, the assessment under

section 206(d) of the Social Security Act (42 U.S.C. 406(d))

to the timeliness of the payment of the fee to the attorney

as certified by the Commissioner of Social Security pursuant to subsection (a)(4) or (b)(1) of section 206 of such

Act (42 U.S.C. 406);

(D) determines whether the provisions of subsection

(a)(4) and (b)(1) of section 206 of such Act (42 U.S.C.

406) should be applied to claimants under title XVI of

such Act (42 U.S.C 1381 et seq.);

(E) determines the feasibility and advisability of

stating fees under section 206(d) of such Act (42 U.S.C.

406(d)) in terms of a fixed dollar amount as opposed to

a percentage;

(F) determines whether the dollar limit specified in

section 206(a)(2)(A)(ii)(II) of such Act (42 U.S.C.

406(a)(2)(A)(ii)(II)) should be raised; and

(G) determines whether the assessment on attorneys

required under section 206(d) of such Act (42 U.S.C. 406(d))
H. R. 1180—54

(as added by subsection (a)(1) of this section) impairs access

to legal representation for claimants.

(2) REPORT.—Not later than 1 year after the date of the

enactment of this Act, the Comptroller General of the United

States shall submit a report to the Committee on Ways and

Means of the House of Representatives and the Committee

on Finance of the Senate on the study conducted under paragraph (1), together with any recommendations for legislation

that the Comptroller General determines to be appropriate

as a result of such study.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply in the case of any attorney with respect to whom

a fee for services is required to be certified for payment from

a claimant’s past-due benefits pursuant to subsection (a)(4) or (b)(1)

of section 206 of the Social Security Act after the later of—

(1) December 31, 1999, or

(2) the last day of the first month beginning after the

month in which this Act is enacted.

SEC. 407. EXTENSION OF AUTHORITY OF STATE MEDICAID FRAUD CONTROL UNITS.

(a) EXTENSION OF AUTHORITY TO INVESTIGATE AND PROSECUTE

FRAUD IN OTHER FEDERAL HEALTH CARE PROGRAMS.—Section

1903(q)(3) of the Social Security Act (42 U.S.C. 1396b(q)(3)) is

amended—

(1) by inserting ‘‘(A)’’ after ‘‘in connection with’’; and

(2) by striking ‘‘title.’’ and inserting ‘‘title; and (B) upon

the approval of the Inspector General of the relevant Federal

agency, any aspect of the provision of health care services

and activities of providers of such services under any Federal

health care program (as defined in section 1128B(f )(1)), if the

suspected fraud or violation of law in such case or investigation

is primarily related to the State plan under this title.’’.

(b) RECOUPMENT OF FUNDS.—Section 1903(q)(5) of such Act

(42 U.S.C. 1396b(q)(5)) is amended—

(1) by inserting ‘‘or under any Federal health care program

(as so defined)’’ after ‘‘plan’’; and

(2) by adding at the end the following: ‘‘All funds collected

in accordance with this paragraph shall be credited exclusively

to, and available for expenditure under, the Federal health

care program (including the State plan under this title) that

was subject to the activity that was the basis for the collection.’’.

(c) EXTENSION OF AUTHORITY TO INVESTIGATE AND PROSECUTE

RESIDENT ABUSE IN NON-MEDICAID BOARD AND CARE FACILITIES.—

Section 1903(q)(4) of such Act (42 U.S.C. 1396b(q)(4)) is amended

to read as follows:

‘‘(4)(A) The entity has—

‘‘(i) procedures for reviewing complaints of abuse or

neglect of patients in health care facilities which receive

payments under the State plan under this title;

‘‘(ii) at the option of the entity, procedures for reviewing

complaints of abuse or neglect of patients residing in board

and care facilities; and

‘‘(iii) procedures for acting upon such complaints under

the criminal laws of the State or for referring such complaints to other State agencies for action.
H. R. 1180—55

‘‘(B) For purposes of this paragraph, the term ‘board and

care facility’ means a residential setting which receives payment (regardless of whether such payment is made under the

State plan under this title) from or on behalf of two or more

unrelated adults who reside in such facility, and for whom

one or both of the following is provided:

‘‘(i) Nursing care services provided by, or under the

supervision of, a registered nurse, licensed practical nurse,

or licensed nursing assistant.

‘‘(ii) A substantial amount of personal care services

that assist residents with the activities of daily living,

including personal hygiene, dressing, bathing, eating,

toileting, ambulation, transfer, positioning, self-medication,

body care, travel to medical services, essential shopping,

meal preparation, laundry, and housework.’’.

(d) EFFECTIVE DATE.—The amendments made by this section

take effect on the date of the enactment of this Act.

SEC. 408. CLIMATE DATABASE MODERNIZATION.

Notwithstanding any other provision of law, the National Oceanic and Atmospheric Administration shall initiate a new competitive contract procurement for its multi-year program for key entry

of valuable climate records, archive services, and database development in accordance with existing Federal procurement laws and

regulations.

SEC. 409. SPECIAL ALLOWANCE ADJUSTMENT FOR STUDENT LOANS.

(a) AMENDMENT.—Section 438(b)(2) of the Higher Education

Act of 1965 (20 U.S.C. 1087–1(b)(2)) is amended—

(1) in subparagraph (A), by striking ‘‘(G), and (H)’’ and

inserting ‘‘(G), (H), and (I)’’;

(2) in subparagraph (B)(iv), by striking ‘‘(G), or (H)’’ and

inserting ‘‘(G), (H), or (I)’’;

(3) in subparagraph (C)(ii), by striking ‘‘(G) and (H)’’ and

inserting ‘‘(G), (H), and (I)’’;

(4) in the heading of subparagraph (H), by striking ‘‘JULY

1, 2003’’ and inserting ‘‘JANUARY 1, 2000’’;

(5) in subparagraph (H), by striking ‘‘July 1, 2003,’’ each

place it appears and inserting ‘‘January 1, 2000,’’; and

(6) by inserting after subparagraph (H) the following new

subparagraph:

‘‘(I) LOANS DISBURSED ON OR AFTER JANUARY 1, 2000,

AND BEFORE JULY 1, 2003.—

‘‘(i) IN GENERAL.—Notwithstanding subparagraphs

(G) and (H), but subject to paragraph (4) and clauses

(ii), (iii), and (iv) of this subparagraph, and except

as provided in subparagraph (B), the special allowance

paid pursuant to this subsection on loans for which

the first disbursement is made on or after January

1, 2000, and before July 1, 2003, shall be computed—

‘‘(I) by determining the average of the bond

equivalent rates of the quotes of the 3-month

commercial paper (financial) rates in effect for each

of the days in such quarter as reported by the

Federal Reserve in Publication H–15 (or its successor) for such 3-month period;
H. R. 1180—56

‘‘(II) by subtracting the applicable interest

rates on such loans from such average bond equivalent rate;

‘‘(III) by adding 2.34 percent to the resultant

percent; and

‘‘(IV) by dividing the resultant percent by 4.

‘‘(ii) IN SCHOOL AND GRACE PERIOD.—In the case

of any loan for which the first disbursement is made

on or after January 1, 2000, and before July 1, 2003,

and for which the applicable rate of interest is

described in section 427A(k)(2), clause (i)(III) of this

subparagraph shall be applied by substituting ‘1.74

percent’ for ‘2.34 percent’.

‘‘(iii) PLUS LOANS.—In the case of any loan for

which the first disbursement is made on or after

January 1, 2000, and before July 1, 2003, and for

which the applicable rate of interest is described in

section 427A(k)(3), clause (i)(III) of this subparagraph

shall be applied by substituting ‘2.64 percent’ for ‘2.34

percent’, subject to clause (v) of this subparagraph.

‘‘(iv) CONSOLIDATION LOANS.—In the case of any

consolidation loan for which the application is received

by an eligible lender on or after January 1, 2000,

and before July 1, 2003, and for which the applicable

interest rate is determined under section 427A(k)(4),

clause (i)(III) of this subparagraph shall be applied

by substituting ‘2.64 percent’ for ‘2.34 percent’, subject

to clause (vi) of this subparagraph.

‘‘(v) LIMITATION ON SPECIAL ALLOWANCES FOR PLUS

LOANS.—In the case of PLUS loans made under section

428B and first disbursed on or after January 1, 2000,

and before July 1, 2003, for which the interest rate

is determined under section 427A(k)(3), a special allowance shall not be paid for such loan during any 12-

month period beginning on July 1 and ending on June

30 unless, on the June 1 preceding such July 1—

‘‘(I) the bond equivalent rate of 91-day

Treasury bills auctioned at the final auction held

prior to such June 1 (as determined by the Secretary for purposes of such section); plus

‘‘(II) 3.1 percent,

exceeds 9.0 percent.

‘‘(vi) LIMITATION ON SPECIAL ALLOWANCES FOR

CONSOLIDATION LOANS.—In the case of consolidation

loans made under section 428C and for which the

application is received on or after January 1, 2000,

and before July 1, 2003, for which the interest rate

is determined under section 427A(k)(4), a special allowance shall not be paid for such loan during any 3-

month period ending March 31, June 30, September

30, or December 31 unless—

‘‘(I) the average of the bond equivalent rates

of the quotes of the 3-month commercial paper

(financial) rates in effect for each of the days in

such quarter as reported by the Federal Reserve

in Publication H–15 (or its successor) for such

3-month period; plus
H. R. 1180—57

‘‘(II) 2.64 percent,

exceeds the rate determined under section 427A(k)(4).’’.

(b) EFFECTIVE DATE.—Subparagraph (I) of section 438(b)(2) of

the Higher Education Act of 1965 (20 U.S.C. 1087–1(b)(2)) as added

by subsection (a) of this section shall apply with respect to any

payment pursuant to such section with respect to any 3-month

period beginning on or after January 1, 2000, for loans for which

the first disbursement is made after such date.

SEC. 410. SCHEDULE FOR PAYMENTS UNDER SSI STATE SUPPLEMENTATION AGREEMENTS.

(a) SCHEDULE FOR SSI SUPPLEMENTATION PAYMENTS.—

(1) IN GENERAL.—Section 1616(d) of the Social Security

Act (42 U.S.C. 1382e(d)) is amended—

(A) in paragraph (1), by striking ‘‘at such times and

in such installments as may be agreed upon between the

Commissioner of Social Security and such State’’ and

inserting ‘‘in accordance with paragraph (5)’’; and

(B) by adding at the end the following new paragraph:

‘‘(5)(A)(i) Any State which has entered into an agreement with

the Commissioner of Social Security under this section shall remit

the payments and fees required under this subsection with respect

to monthly benefits paid to individuals under this title no later

than—

‘‘(I) the business day preceding the date that the Commissioner pays such monthly benefits; or

‘‘(II) with respect to such monthly benefits paid for the

month that is the last month of the State’s fiscal year, the

fifth business day following such date.

‘‘(ii) The Commissioner may charge States a penalty in an

amount equal to 5 percent of the payment and the fees due if

the remittance is received after the date required by clause (i).

‘‘(B) The Cash Management Improvement Act of 1990 shall

not apply to any payments or fees required under this subsection

that are paid by a State before the date required by subparagraph

(A)(i).

‘‘(C) Notwithstanding subparagraph (A)(i), the Commissioner

may make supplementary payments on behalf of a State with

funds appropriated for payment of benefits under this title, and

subsequently to be reimbursed for such payments by the State

at such times as the Commissioner and State may agree. Such

authority may be exercised only if extraordinary circumstances

affecting a State’s ability to make payment when required by

subparagraph (A)(i) are determined by the Commissioner to exist.’’.

(2) AMENDMENT TO SECTION 212.—Section 212 of Public

Law 93–66 (42 U.S.C. 1382 note) is amended—

(A) in subsection (b)(3)(A), by striking ‘‘at such times

and in such installments as may be agreed upon between

the Secretary and the State’’ and inserting ‘‘in accordance

with subparagraph (E)’’;

(B) by adding at the end of subsection (b)(3) the following new subparagraph:

‘‘(E)(i) Any State which has entered into an agreement with

the Commissioner of Social Security under this section shall remit

the payments and fees required under this paragraph with respect

to monthly benefits paid to individuals under title XVI of the

Social Security Act no later than—
H. R. 1180—58

‘‘(I) the business day preceding the date that the Commissioner pays such monthly benefits; or

‘‘(II) with respect to such monthly benefits paid for the

month that is the last month of the State’s fiscal year, the

fifth business day following such date.

‘‘(ii) The Cash Management Improvement Act of 1990 shall

not apply to any payments or fees required under this paragraph

that are paid by a State before the date required by clause (i).

‘‘(iii) Notwithstanding clause (i), the Commissioner may make

supplementary payments on behalf of a State with funds appropriated for payment of supplemental security income benefits under

title XVI of the Social Security Act, and subsequently to be

reimbursed for such payments by the State at such times as the

Commissioner and State may agree. Such authority may be exercised only if extraordinary circumstances affecting a State’s ability

to make payment when required by clause (i) are determined by

the Commissioner to exist.’’; and

(C) by striking ‘‘Secretary of Health, Education, and

Welfare’’ and ‘‘Secretary’’ each place such term appear and

inserting ‘‘Commissioner of Social Security’’.

(b) EFFECTIVE DATE.—The amendments made by subsection

(a) shall apply to payments and fees arising under an agreement

between a State and the Commissioner of Social Security under

section 1616 of the Social Security Act (42 U.S.C. 1382e) or under

section 212 of Public Law 93-66 (42 U.S.C. 1382 note) with respect

to monthly benefits paid to individuals under title XVI of the

Social Security Act for months after September 2009 (October 2009

in the case of a State with a fiscal year that coincides with the

Federal fiscal year), without regard to whether the agreement has

been modified to reflect such amendments or the Commissioner

has promulgated regulations implementing such amendments.

SEC. 411. BONUS COMMODITIES.

Section 6(e)(1) of the Richard B. Russell National School Lunch

Act (42 U.S.C. 1755(e)(1)) is amended—

(1) by striking ‘‘in the form of commodity assistance’’ and

inserting ‘‘in the form of—

‘‘(A) commodity assistance’’;

(2) by striking the period at the end and inserting ‘‘; or’’;

and

(3) by adding at the end the following:

‘‘(B) during the period beginning October 1, 2000, and

ending September 30, 2009, commodities provided by the Secretary under any provision of law.’’.

SEC. 412. SIMPLIFICATION OF DEFINITION OF FOSTER CHILD UNDER

EIC.

(a) IN GENERAL.—Section 32(c)(3)(B)(iii) of the Internal Revenue

Code of 1986 (defining eligible foster child) is amended by redesignating subclauses (I) and (II) as subclauses (II) and (III), respectively, and by inserting before subclause (II), as so redesignated,

the following:

‘‘(I) is a brother, sister, stepbrother, or stepsister of the taxpayer (or a descendant of any

such relative) or is placed with the taxpayer by

an authorized placement agency,’’.

(b) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 1999.
H. R. 1180—59

SEC. 413. DELAY OF EFFECTIVE DATE OF ORGAN PROCUREMENT AND

TRANSPLANTATION NETWORK FINAL RULE.

(a) IN GENERAL.—The final rule entitled ‘‘Organ Procurement

and Transplantation Network’’, promulgated by the Secretary of

Health and Human Services on April 2, 1998 (63 Fed. Reg. 16295

et seq.) (relating to part 121 of title 42, Code of Federal Regulations),

together with the amendments to such rules promulgated on

October 20, 1999 (64 Fed. Reg. 56649 et seq.) shall not become

effective before the expiration of the 90-day period beginning on

the date of the enactment of this Act.

(b) NOTICE AND REVIEW.—For purposes of subsection (a):

(1) Not later than 3 days after the date of the enactment

of this Act, the Secretary of Health and Human Services

(referred to in this subsection as the ‘‘Secretary’’) shall publish

in the Federal Register a notice providing that the period

within which comments on the final rule may be submitted

to the Secretary is 60 days after the date of such publication

of the notice.

(2) Not later than 21 days after the expiration of such

60-day period, the Secretary shall complete the review of the

comments submitted pursuant to paragraph (1) and shall

amend the final rule with any revisions appropriate according

to the review by the Secretary of such comments. The final

rule may be in the form of amendments to the rule referred

to in subsection (a) that was promulgated on April 2, 1998,

and in the form of amendments to the rule referred to in

such subsection that was promulgated on October 20, 1999.

TITLE V—TAX RELIEF EXTENSION ACT

OF 1999

SEC. 500. SHORT TITLE OF TITLE.

This title may be cited as the ‘‘Tax Relief Extension Act of

1999’’.

Subtitle A—Extensions

SEC. 501. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS

AGAINST REGULAR AND MINIMUM TAX LIABILITY.

(a) IN GENERAL.—Subsection (a) of section 26 of the Internal

Revenue Code of 1986 (relating to limitation based on amount

of tax) is amended to read as follows:

‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—

‘‘(1) IN GENERAL.—The aggregate amount of credits allowed

by this subpart for the taxable year shall not exceed the excess

(if any) of—

‘‘(A) the taxpayer’s regular tax liability for the taxable

year, over

‘‘(B) the tentative minimum tax for the taxable year

(determined without regard to the alternative minimum

tax foreign tax credit).

For purposes of subparagraph (B), the taxpayer’s tentative minimum tax for any taxable year beginning during 1999 shall

be treated as being zero.’’.
H. R. 1180—60

‘‘(2) SPECIAL RULE FOR 2000 AND 2001.—For purposes of

any taxable year beginning during 2000 or 2001, the aggregate

amount of credits allowed by this subpart for the taxable year

shall not exceed the sum of—

‘‘(A) the taxpayer’s regular tax liability for the taxable

year reduced by the foreign tax credit allowable under

section 27(a), and

‘‘(B) the tax imposed by section 55(a) for the taxable

year.’’.

(b) CONFORMING AMENDMENTS.—

(1) Section 24(d)(2) of such Code is amended by striking

‘‘1998’’ and inserting ‘‘2001’’.

(2) Section 904(h) of such Code is amended by adding

at the end the following: ‘‘This subsection shall not apply to

taxable years beginning during 2000 or 2001.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 1998.

SEC. 502. RESEARCH CREDIT.

(a) EXTENSION.—

(1) IN GENERAL.—Paragraph (1) of section 41(h) of the

Internal Revenue Code of 1986 (relating to termination) is

amended—

(A) by striking ‘‘June 30, 1999’’ and inserting ‘‘June

30, 2004’’; and

(B) by striking the material following subparagraph

(B).

(2) TECHNICAL AMENDMENT.—Subparagraph (D) of section

45C(b)(1) of such Code is amended by striking ‘‘June 30, 1999’’

and inserting ‘‘June 30, 2004’’.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to amounts paid or incurred after June

30, 1999.

(b) INCREASE IN PERCENTAGES UNDER ALTERNATIVE INCREMENTAL CREDIT.—

(1) IN GENERAL.—Subparagraph (A) of section 41(c)(4) of

such Code is amended—

(A) by striking ‘‘1.65 percent’’ and inserting ‘‘2.65 percent’’;

(B) by striking ‘‘2.2 percent’’ and inserting ‘‘3.2 percent’’; and

(C) by striking ‘‘2.75 percent’’ and inserting ‘‘3.75 percent’’.

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after June 30,

1999.

(c) EXTENSION OF RESEARCH CREDIT TO RESEARCH IN PUERTO

RICO AND THE POSSESSIONS OF THE UNITED STATES.—

(1) IN GENERAL.—Subsections (c)(6) and (d)(4)(F) of section

41 of such Code (relating to foreign research) are each amended

by inserting ‘‘, the Commonwealth of Puerto Rico, or any possession of the United States’’ after ‘‘United States’’.

(2) DENIAL OF DOUBLE BENEFIT.—Section 280C(c)(1) of such

Code is amended by inserting ‘‘or credit’’ after ‘‘deduction’’

each place it appears.
H. R. 1180—61

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to amounts paid or incurred after June

30, 1999.

(d) SPECIAL RULE.—

(1) IN GENERAL.—For purposes of the Internal Revenue

Code of 1986, the credit determined under section 41 of such

Code which is otherwise allowable under such Code—

(A) shall not be taken into account prior to October

1, 2000, to the extent such credit is attributable to the

first suspension period; and

(B) shall not be taken into account prior to October

1, 2001, to the extent such credit is attributable to the

second suspension period.

On or after the earliest date that an amount of credit may

be taken into account, such amount may be taken into account

through the filing of an amended return, an application for

expedited refund, an adjustment of estimated taxes, or other

means allowed by such Code.

(2) SUSPENSION PERIODS.—For purposes of this subsection—

(A) the first suspension period is the period beginning

on July 1, 1999, and ending on September 30, 2000; and

(B) the second suspension period is the period beginning on October 1, 2000, and ending on September 30,

2001.

(3) EXPEDITED REFUNDS.—

(A) IN GENERAL.—If there is an overpayment of tax

with respect to a taxable year by reason of paragraph

(1), the taxpayer may file an application for a tentative

refund of such overpayment. Such application shall be in

such manner and form, and contain such information, as

the Secretary may prescribe.

(B) DEADLINE FOR APPLICATIONS.—Subparagraph (A)

shall apply only to an application filed before the date

which is 1 year after the close of the suspension period

to which the application relates.

(C) ALLOWANCE OF ADJUSTMENTS.—Not later than 90

days after the date on which an application is filed under

this paragraph, the Secretary shall—

(i) review the application;

(ii) determine the amount of the overpayment; and

(iii) apply, credit, or refund such overpayment,

in a manner similar to the manner provided in section

6411(b) of such Code.

(D) CONSOLIDATED RETURNS.—The provisions of section

6411(c) of such Code shall apply to an adjustment under

this paragraph in such manner as the Secretary may provide.

(4) CREDIT ATTRIBUTABLE TO SUSPENSION PERIOD.—

(A) IN GENERAL.—For purposes of this subsection, in

the case of a taxable year which includes a portion of

the suspension period, the amount of credit determined

under section 41 of such Code for such taxable year which

is attributable to such period is the amount which bears

the same ratio to the amount of credit determined under

such section 41 for such taxable year as the number of

months in the suspension period which are during such
H. R. 1180—62

taxable year bears to the number of months in such taxable

year.

(B) WAIVER OF ESTIMATED TAX PENALTIES.—No addition

to tax shall be made under section 6654 or 6655 of such

Code for any period before July 1, 1999, with respect to

any underpayment of tax imposed by such Code to the

extent such underpayment was created or increased by

reason of subparagraph (A).

(5) SECRETARY.—For purposes of this subsection, the term

‘‘Secretary’’ means the Secretary of the Treasury (or such Secretary’s delegate).

SEC. 503. SUBPART F EXEMPTION FOR ACTIVE FINANCING INCOME.

(a) IN GENERAL.—Sections 953(e)(10) and 954(h)(9) of the

Internal Revenue Code of 1986 (relating to application) are each

amended—

(1) by striking ‘‘the first taxable year’’ and inserting ‘‘taxable years’’;

(2) by striking ‘‘January 1, 2000’’ and inserting ‘‘January

1, 2002’’; and

(3) by striking ‘‘within which such’’ and inserting ‘‘within

which any such’’.

(b) TECHNICAL AMENDMENT.—Paragraph (10) of section 953(e)

of such Code is amended by adding at the end the following new

sentence: ‘‘If this subsection does not apply to a taxable year of

a foreign corporation beginning after December 31, 2001 (and taxable years of United States shareholders ending with or within

such taxable year), then, notwithstanding the preceding sentence,

subsection (a) shall be applied to such taxable years in the same

manner as it would if the taxable year of the foreign corporation

began in 1998.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 1999.

SEC. 504. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR

MARGINAL PRODUCTION.

(a) IN GENERAL.—Subparagraph (H) of section 613A(c)(6) of

the Internal Revenue Code of 1986 (relating to temporary suspension of taxable limit with respect to marginal production) is

amended by striking ‘‘January 1, 2000’’ and inserting ‘‘January

1, 2002’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to taxable years beginning after December 31, 1999.

SEC. 505. WORK OPPORTUNITY CREDIT AND WELFARE-TO-WORK

CREDIT.

(a) TEMPORARY EXTENSION.—Sections 51(c)(4)(B) and 51A(f )

of the Internal Revenue Code of 1986 (relating to termination)

are each amended by striking ‘‘June 30, 1999’’ and inserting

‘‘December 31, 2001’’.

(b) CLARIFICATION OF FIRST YEAR OF EMPLOYMENT.—Paragraph

(2) of section 51(i) of such Code is amended by striking ‘‘during

which he was not a member of a targeted group’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to individuals who begin work for the employer after

June 30, 1999.
H. R. 1180—63

SEC. 506. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE.

(a) IN GENERAL.—Subsection (d) of section 127 of the Internal

Revenue Code of 1986 (relating to termination) is amended by

striking ‘‘May 31, 2000’’ and inserting ‘‘December 31, 2001’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to courses beginning after May 31, 2000.

SEC. 507. EXTENSION AND MODIFICATION OF CREDIT FOR PRODUCING

ELECTRICITY FROM CERTAIN RENEWABLE RESOURCES.

(a) EXTENSION AND MODIFICATION OF PLACED-IN-SERVICE

RULES.—Paragraph (3) of section 45(c) of the Internal Revenue

Code of 1986 is amended to read as follows:

‘‘(3) QUALIFIED FACILITY.—

‘‘(A) WIND FACILITY.—In the case of a facility using

wind to produce electricity, the term ‘qualified facility’

means any facility owned by the taxpayer which is originally placed in service after December 31, 1993, and before

January 1, 2002.

‘‘(B) CLOSED-LOOP BIOMASS FACILITY.—In the case of

a facility using closed-loop biomass to produce electricity,

the term ‘qualified facility’ means any facility owned by

the taxpayer which is originally placed in service after

December 31, 1992, and before January 1, 2002.

‘‘(C) POULTRY WASTE FACILITY.—In the case of a facility

using poultry waste to produce electricity, the term ‘qualified facility’ means any facility of the taxpayer which is

originally placed in service after December 31, 1999, and

before January 1, 2002.’’.

(b) EXPANSION OF QUALIFIED ENERGY RESOURCES.—

(1) IN GENERAL.—Section 45(c)(1) of such Code (defining

qualified energy resources) is amended by striking ‘‘and’’ at

the end of subparagraph (A), by striking the period at the

end of subparagraph (B) and inserting ‘‘, and’’, and by adding

at the end the following new subparagraph:

‘‘(C) poultry waste.’’.

(2) DEFINITION.—Section 45(c) of such Code is amended

by adding at the end the following new paragraph:

‘‘(4) POULTRY WASTE.—The term ‘poultry waste’ means

poultry manure and litter, including wood shavings, straw,

rice hulls, and other bedding material for the disposition of

manure.’’.

(c) SPECIAL RULES.—Section 45(d) of such Code (relating to

definitions and special rules) is amended by adding at the end

the following new paragraphs:

‘‘(6) CREDIT ELIGIBILITY IN THE CASE OF GOVERNMENTOWNED FACILITIES USING POULTRY WASTE.—In the case of a

facility using poultry waste to produce electricity and owned

by a governmental unit, the person eligible for the credit under

subsection (a) is the lessee or the operator of such facility.

‘‘(7) CREDIT NOT TO APPLY TO ELECTRICITY SOLD TO UTILITIES

UNDER CERTAIN CONTRACTS.—

‘‘(A) IN GENERAL.—The credit determined under subsection (a) shall not apply to electricity—

‘‘(i) produced at a qualified facility described in

paragraph (3)(A) which is placed in service by the

taxpayer after June 30, 1999, and
H. R. 1180—64

‘‘(ii) sold to a utility pursuant to a contract originally entered into before January 1, 1987 (whether

or not amended or restated after that date).

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply

if—

‘‘(i) the prices for energy and capacity from such

facility are established pursuant to an amendment to

the contract referred to in subparagraph (A)(ii),

‘‘(ii) such amendment provides that the prices set

forth in the contract which exceed avoided cost prices

determined at the time of delivery shall apply only

to annual quantities of electricity (prorated for partial

years) which do not exceed the greater of—

‘‘(I) the average annual quantity of electricity

sold to the utility under the contract during calendar years 1994, 1995, 1996, 1997, and 1998,

or

‘‘(II) the estimate of the annual electricity

production set forth in the contract, or, if there

is no such estimate, the greatest annual quantity

of electricity sold to the utility under the contract

in any of the calendar years 1996, 1997, or 1998,

and

‘‘(iii) such amendment provides that energy and

capacity in excess of the limitation in clause (ii) may

be—

‘‘(I) sold to the utility only at prices that do

not exceed avoided cost prices determined at the

time of delivery, or

‘‘(II) sold to a third party subject to a mutually

agreed upon advance notice to the utility.

For purposes of this subparagraph, avoided cost prices

shall be determined as provided for in 18 CFR 292.304(d)(1)

or any successor regulation.’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall take effect on the date of the enactment of this Act.

SEC. 508. EXTENSION OF DUTY-FREE TREATMENT UNDER GENERALIZED SYSTEM OF PREFERENCES.

(a) IN GENERAL.—Section 505 of the Trade Act of 1974 (19

U.S.C. 2465) is amended by striking ‘‘June 30, 1999’’ and inserting

‘‘September 30, 2001’’.

(b) EFFECTIVE DATE.— (1) IN GENERAL.—The amendment made by this section

applies to articles entered on or after the date of the enactment

of this Act.

(2) RETROACTIVE APPLICATION FOR CERTAIN LIQUIDATIONS

AND RELIQUIDATIONS.—

(A) GENERAL RULE.—Notwithstanding section 514 of

the Tariff Act of 1930 or any other provision of law, and

subject to paragraph (3), any entry—

(i) of an article to which duty-free treatment under

title V of the Trade Act of 1974 would have applied

if such entry had been made on July 1, 1999, and

such title had been in effect on July 1, 1999; and

(ii) that was made—

(I) after June 30, 1999; and
H. R. 1180—65

(II) before the date of the enactment of this

Act,

shall be liquidated or reliquidated as free of duty, and

the Secretary of the Treasury shall refund any duty paid

with respect to such entry.

(B) ENTRY.—As used in this paragraph, the term

‘‘entry’’ includes a withdrawal from warehouse for consumption.

(3) REQUESTS.—Liquidation or reliquidation may be made

under paragraph (2) with respect to an entry only if a request

therefore is filed with the Customs Service, within 180 days

after the date of the enactment of this Act, that contains

sufficient information to enable the Customs Service—

(A) to locate the entry; or

(B) to reconstruct the entry if it cannot be located.

SEC. 509. EXTENSION OF CREDIT FOR HOLDERS OF QUALIFIED ZONE

ACADEMY BONDS.

(a) IN GENERAL.—Section 1397E(e)(1) of the Internal Revenue

Code of 1986 (relating to national limitation) is amended by striking

‘‘and 1999’’ and inserting ‘‘, 1999, 2000, and 2001’’.

(b) LIMITATION ON CARRYOVER PERIODS.—Paragraph (4) of section 1397E(e) of such Code is amended by adding at the end

the following flush sentences:

‘‘Any carryforward of a limitation amount may be carried only

to the first 2 years (3 years for carryforwards from 1998 or

1999) following the unused limitation year. For purposes of

the preceding sentence, a limitation amount shall be treated

as used on a first-in first-out basis.’’.

SEC. 510. EXTENSION OF FIRST-TIME HOMEBUYER CREDIT FOR DISTRICT OF COLUMBIA.

Section 1400C(i) of the Internal Revenue Code of 1986 is

amended by striking ‘‘2001’’ and inserting ‘‘2002’’.

SEC. 511. EXTENSION OF EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

Section 198(h) of the Internal Revenue Code of 1986 is amended

by striking ‘‘2000’’ and inserting ‘‘2001’’.

SEC. 512. TEMPORARY INCREASE IN AMOUNT OF RUM EXCISE TAX

COVERED OVER TO PUERTO RICO AND VIRGIN ISLANDS.

(a) IN GENERAL.—Section 7652(f )(1) of the Internal Revenue

Code of 1986 (relating to limitation on cover over of tax on distilled

spirits) is amended to read as follows:

‘‘(1) $10.50 ($13.25 in the case of distilled spirits brought

into the United States after June 30, 1999, and before January

1, 2002), or’’.

(b) SPECIAL COVER OVER TRANSFER RULES.—Notwithstanding

section 7652 of the Internal Revenue Code of 1986, the following

rules shall apply with respect to any transfer before October 1,

2000, of amounts relating to the increase in the cover over of

taxes by reason of the amendment made by subsection (a):

(1) INITIAL TRANSFER OF INCREMENTAL INCREASE IN COVER

OVER.—The Secretary of the Treasury shall, within 15 days

after the date of the enactment of this Act, transfer an amount

equal to the lesser of—
H. R. 1180—66

(A) the amount of such increase otherwise required

to be covered over after June 30, 1999, and before the

date of the enactment of this Act; or (B) $20,000,000.

(2) TRANSFER OF INCREMENTAL INCREASE FOR FISCAL YEAR

2001.—The Secretary of the Treasury shall on October 1, 2000,

transfer an amount equal to the excess of—

(A) the amount of such increase otherwise required

to be covered over after June 30, 1999, and before October

1, 2000, over

(B) the amount of the transfer described in paragraph

(1).

(c) EFFECTIVE DATE.—The amendment made by subsection (a)

shall take effect on July 1, 1999.

Subtitle B—Other Time-Sensitive

Provisions

SEC. 521. ADVANCE PRICING AGREEMENTS TREATED AS CONFIDENTIAL TAXPAYER INFORMATION.

(a) IN GENERAL.— (1) TREATMENT AS RETURN INFORMATION.—Paragraph (2)

of section 6103(b) of the Internal Revenue Code of 1986

(defining return information) is amended by striking ‘‘and’’

at the end of subparagraph (A), by inserting ‘‘and’’ at the

end of subparagraph (B), and by inserting after subparagraph

(B) the following new subparagraph:

‘‘(C) any advance pricing agreement entered into by

a taxpayer and the Secretary and any background information related to such agreement or any application for an

advance pricing agreement,’’.

(2) EXCEPTION FROM PUBLIC INSPECTION AS WRITTEN DETER- MINATION.—Paragraph (1) of section 6110(b) of such Code

(defining written determination) is amended by adding at the

end the following new sentence: ‘‘Such term shall not include

any advance pricing agreement entered into by a taxpayer

and the Secretary and any background information related

to such agreement or any application for an advance pricing

agreement.’’.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall take effect on the date of the enactment of this

Act.

(b) ANNUAL REPORT REGARDING ADVANCE PRICING AGREE- MENTS.—

(1) IN GENERAL.—Not later than 90 days after the end

of each calendar year, the Secretary of the Treasury shall

prepare and publish a report regarding advance pricing agreements.

(2) CONTENTS OF REPORT.—The report shall include the

following for the calendar year to which such report relates:

(A) Information about the structure, composition, and

operation of the advance pricing agreement program office.

(B) A copy of each model advance pricing agreement.

(C) The number of—

(i) applications filed during such calendar year

for advance pricing agreements;
H. R. 1180—67

(ii) advance pricing agreements executed cumulatively to date and during such calendar year;

(iii) renewals of advance pricing agreements

issued;

(iv) pending requests for advance pricing agreements;

(v) pending renewals of advance pricing agreements;

(vi) for each of the items in clauses (ii) through

(v), the number that are unilateral, bilateral, and

multilateral, respectively;

(vii) advance pricing agreements revoked or canceled, and the number of withdrawals from the advance

pricing agreement program; and

(viii) advance pricing agreements finalized or

renewed by industry.

(D) General descriptions of—

(i) the nature of the relationships between the

related organizations, trades, or businesses covered by

advance pricing agreements;

(ii) the covered transactions and the business functions performed and risks assumed by such organizations, trades, or businesses;

(iii) the related organizations, trades, or businesses

whose prices or results are tested to determine compliance with transfer pricing methodologies prescribed

in advance pricing agreements;

(iv) methodologies used to evaluate tested parties

and transactions and the circumstances leading to the

use of those methodologies;

(v) critical assumptions made and sources of

comparables used;

(vi) comparable selection criteria and the rationale

used in determining such criteria;

(vii) the nature of adjustments to comparables or

tested parties;

(viii) the nature of any ranges agreed to, including

information regarding when no range was used and

why, when interquartile ranges were used, and when

there was a statistical narrowing of the comparables;

(ix) adjustment mechanisms provided to rectify

results that fall outside of the agreed upon advance

pricing agreement range;

(x) the various term lengths for advance pricing

agreements, including rollback years, and the number

of advance pricing agreements with each such term

length;

(xi) the nature of documentation required; and

(xii) approaches for sharing of currency or other

risks.

(E) Statistics regarding the amount of time taken to

complete new and renewal advance pricing agreements.

(F) A detailed description of the Secretary of the Treasury’s efforts to ensure compliance with existing advance

pricing agreements.

(3) CONFIDENTIALITY.—The reports required by this subsection shall be treated as authorized by the Internal Revenue
H. R. 1180—68

Code of 1986 for purposes of section 6103 of such Code, but

the reports shall not include information—

(A) which would not be permitted to be disclosed under

section 6110(c) of such Code if such report were a written

determination as defined in section 6110 of such Code;

or

(B) which can be associated with, or otherwise identify,

directly or indirectly, a particular taxpayer.

(4) FIRST REPORT.—The report for calendar year 1999 shall

include prior calendar years after 1990.

(c) REGULATIONS.—The Secretary of the Treasury or the Secretary’s delegate shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of section

6103(b)(2)(C), and the last sentence of section 6110(b)(1), of the

Internal Revenue Code of 1986, as added by this section.

SEC. 522. AUTHORITY TO POSTPONE CERTAIN TAX-RELATED DEADLINES BY REASON OF Y2K FAILURES.

(a) IN GENERAL.—In the case of a taxpayer determined by

the Secretary of the Treasury (or the Secretary’s delegate) to be

affected by a Y2K failure, the Secretary may disregard a period

of up to 90 days in determining, under the internal revenue laws,

in respect of any tax liability (including any interest, penalty,

additional amount, or addition to the tax) of such taxpayer—

(1) whether any of the acts described in paragraph (1)

of section 7508(a) of the Internal Revenue Code of 1986 (without

regard to the exceptions in parentheses in subparagraphs (A)

and (B)) were performed within the time prescribed therefor;

and

(2) the amount of any credit or refund.

(b) APPLICABILITY OF CERTAIN RULES.—For purposes of this

section, rules similar to the rules of subsections (b) and (e) of

section 7508 of the Internal Revenue Code of 1986 shall apply.

SEC. 523. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS PNEUMONIAE TO LIST OF TAXABLE VACCINES.

(a) INCLUSION OF VACCINES.— (1) IN GENERAL.—Section 4132(a)(1) of the Internal Revenue

Code of 1986 (defining taxable vaccine) is amended by adding

at the end the following new subparagraph:

‘‘(L) Any conjugate vaccine against streptococcus

pneumoniae.’’.

(2) EFFECTIVE DATE.— (A) SALES.—The amendment made by this subsection

shall apply to vaccine sales after the date of the enactment

of this Act, but shall not take effect if subsection (b) does

not take effect.

(B) DELIVERIES.—For purposes of subparagraph (A),

in the case of sales on or before the date described in

such subparagraph for which delivery is made after such

date, the delivery date shall be considered the sale date.

(b) VACCINE TAX AND TRUST FUND AMENDMENTS.—

(1) Sections 1503 and 1504 of the Vaccine Injury Compensation Program Modification Act (and the amendments made

by such sections) are hereby repealed.

(2) Subparagraph (A) of section 9510(c)(1) of such Code

is amended by striking ‘‘August 5, 1997’’ and inserting

‘‘December 31, 1999’’.
H. R. 1180—69

(3) The amendments made by this subsection shall take

effect as if included in the provisions of the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999

to which they relate.

(c) REPORT.—Not later than January 31, 2000, the Comptroller

General of the United States shall prepare and submit a report

to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the operation

of the Vaccine Injury Compensation Trust Fund and on the adequacy of such Fund to meet future claims made under the Vaccine

Injury Compensation Program.

SEC. 524. DELAY IN EFFECTIVE DATE OF REQUIREMENT FOR

APPROVED DIESEL OR KEROSENE TERMINALS.

Paragraph (2) of section 1032(f ) of the Taxpayer Relief Act

of 1997 is amended by striking ‘‘July 1, 2000’’ and inserting

‘‘January 1, 2002’’.

SEC. 525. PRODUCTION FLEXIBILITY CONTRACT PAYMENTS.

Any option to accelerate the receipt of any payment under

a production flexibility contract which is payable under the Federal

Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7200

et seq.), as in effect on the date of the enactment of this Act,

shall be disregarded in determining the taxable year for which

such payment is properly includible in gross income for purposes

of the Internal Revenue Code of 1986.

Subtitle C—Revenue Offsets

PART I—GENERAL PROVISIONS

SEC. 531. MODIFICATION OF ESTIMATED TAX SAFE HARBOR.

(a) IN GENERAL.—The table contained in clause (i) of section

6654(d)(1)(C) of the Internal Revenue Code of 1986 (relating to

limitation on use of preceding year’s tax) is amended by striking

the items relating to 1999 and 2000 and inserting the following

new items:

‘‘1999 .................................................................................................. 108.6

2000 ................................................................................................. 110’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply with respect to any installment payment for taxable

years beginning after December 31, 1999.

SEC. 532. CLARIFICATION OF TAX TREATMENT OF INCOME AND LOSS

ON DERIVATIVES.

(a) IN GENERAL.—Section 1221 of the Internal Revenue Code

of 1986 (defining capital assets) is amended—

(1) by striking ‘‘For purposes’’ and inserting the following:

‘‘(a) IN GENERAL.—For purposes’’;

(2) by striking the period at the end of paragraph (5)

and inserting a semicolon; and

(3) by adding at the end the following:

‘‘(6) any commodities derivative financial instrument held

by a commodities derivatives dealer, unless—

‘‘(A) it is established to the satisfaction of the Secretary

that such instrument has no connection to the activities

of such dealer as a dealer, and
H. R. 1180—70

‘‘(B) such instrument is clearly identified in such

dealer’s records as being described in subparagraph (A)

before the close of the day on which it was acquired, originated, or entered into (or such other time as the Secretary

may by regulations prescribe);

‘‘(7) any hedging transaction which is clearly identified

as such before the close of the day on which it was acquired,

originated, or entered into (or such other time as the Secretary

may by regulations prescribe); or

‘‘(8) supplies of a type regularly used or consumed by

the taxpayer in the ordinary course of a trade or business

of the taxpayer.

‘‘(b) DEFINITIONS AND SPECIAL RULES.—

‘‘(1) COMMODITIES DERIVATIVE FINANCIAL INSTRUMENTS.—

For purposes of subsection (a)(6)—

‘‘(A) COMMODITIES DERIVATIVES DEALER.—The term

‘commodities derivatives dealer’ means a person which

regularly offers to enter into, assume, offset, assign, or

terminate positions in commodities derivative financial

instruments with customers in the ordinary course of a

trade or business.

‘‘(B) COMMODITIES DERIVATIVE FINANCIAL

INSTRUMENT.—

‘‘(i) IN GENERAL.—The term ‘commodities derivative financial instrument’ means any contract or financial instrument with respect to commodities (other than

a share of stock in a corporation, a beneficial interest

in a partnership or trust, a note, bond, debenture,

or other evidence of indebtedness, or a section 1256

contract (as defined in section 1256(b)), the value or

settlement price of which is calculated by or determined by reference to a specified index.

‘‘(ii) SPECIFIED INDEX.—The term ‘specified index’

means any one or more or any combination of—

‘‘(I) a fixed rate, price, or amount, or

‘‘(II) a variable rate, price, or amount,

which is based on any current, objectively determinable

financial or economic information with respect to

commodities which is not within the control of any

of the parties to the contract or instrument and is

not unique to any of the parties’ circumstances.

‘‘(2) HEDGING TRANSACTION.—

‘‘(A) IN GENERAL.—For purposes of this section, the

term ‘hedging transaction’ means any transaction entered

into by the taxpayer in the normal course of the taxpayer’s

trade or business primarily—

‘‘(i) to manage risk of price changes or currency

fluctuations with respect to ordinary property which

is held or to be held by the taxpayer,

‘‘(ii) to manage risk of interest rate or price changes

or currency fluctuations with respect to borrowings

made or to be made, or ordinary obligations incurred

or to be incurred, by the taxpayer, or

‘‘(iii) to manage such other risks as the Secretary

may prescribe in regulations.
H. R. 1180—71

‘‘(B) TREATMENT OF NONIDENTIFICATION OR IMPROPER

IDENTIFICATION OF HEDGING TRANSACTIONS.—Notwithstanding subsection (a)(7), the Secretary shall prescribe

regulations to properly characterize any income, gain,

expense, or loss arising from a transaction—

‘‘(i) which is a hedging transaction but which was

not identified as such in accordance with subsection

(a)(7), or

‘‘(ii) which was so identified but is not a hedging

transaction.

‘‘(3) REGULATIONS.—The Secretary shall prescribe such

regulations as are appropriate to carry out the purposes of

paragraph (6) and (7) of subsection (a) in the case of transactions involving related parties.’’.

(b) MANAGEMENT OF RISK.—

(1) Section 475(c)(3) of such Code is amended by striking

‘‘reduces’’ and inserting ‘‘manages’’.

(2) Section 871(h)(4)(C)(iv) of such Code is amended by

striking ‘‘to reduce’’ and inserting ‘‘to manage’’.

(3) Clauses (i) and (ii) of section 988(d)(2)(A) of such Code

are each amended by striking ‘‘to reduce’’ and inserting ‘‘to

manage’’.

(4) Paragraph (2) of section 1256(e) of such Code is

amended to read as follows:

‘‘(2) DEFINITION OF HEDGING TRANSACTION.—For purposes

of this subsection, the term ‘hedging transaction’ means any

hedging transaction (as defined in section 1221(b)(2)(A)) if,

before the close of the day on which such transaction was

entered into (or such earlier time as the Secretary may prescribe by regulations), the taxpayer clearly identifies such transaction as being a hedging transaction.’’.

(c) CONFORMING AMENDMENTS.— (1) Each of the following sections of such Code are amended

by striking ‘‘section 1221’’ and inserting ‘‘section 1221(a)’’:

(A) Section 170(e)(3)(A).

(B) Section 170(e)(4)(B).

(C) Section 367(a)(3)(B)(i).

(D) Section 818(c)(3).

(E) Section 865(i)(1).

(F) Section 1092(a)(3)(B)(ii)(II).

(G) Subparagraphs (C) and (D) of section 1231(b)(1).

(H) Section 1234(a)(3)(A).

(2) Each of the following sections of such Code are amended

by striking ‘‘section 1221(1)’’ and inserting ‘‘section 1221(a)(1)’’:

(A) Section 198(c)(1)(A)(i).

(B) Section 263A(b)(2)(A).

(C) Clauses (i) and (iii) of section 267(f )(3)(B).

(D) Section 341(d)(3).

(E) Section 543(a)(1)(D)(i).

(F) Section 751(d)(1).

(G) Section 775(c).

(H) Section 856(c)(2)(D).

(I) Section 856(c)(3)(C).

(J) Section 856(e)(1).

(K) Section 856( j)(2)(B).

(L) Section 857(b)(4)(B)(i).

(M) Section 857(b)(6)(B)(iii).
H. R. 1180—72

(N) Section 864(c)(4)(B)(iii).

(O) Section 864(d)(3)(A).

(P) Section 864(d)(6)(A).

(Q) Section 954(c)(1)(B)(iii).

(R) Section 995(b)(1)(C).

(S) Section 1017(b)(3)(E)(i).

(T) Section 1362(d)(3)(C)(ii).

(U) Section 4662(c)(2)(C).

(V) Section 7704(c)(3).

(W) Section 7704(d)(1)(D).

(X) Section 7704(d)(1)(G).

(Y) Section 7704(d)(5).

(3) Section 818(b)(2) of such Code is amended by striking

‘‘section 1221(2)’’ and inserting ‘‘section 1221(a)(2)’’.

(4) Section 1397B(e)(2) of such Code is amended by striking

‘‘section 1221(4)’’ and inserting ‘‘section 1221(a)(4)’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to any instrument held, acquired, or entered into, any

transaction entered into, and supplies held or acquired on or after

the date of the enactment of this Act.

SEC. 533. EXPANSION OF REPORTING OF CANCELLATION OF INDEBTEDNESS INCOME.

(a) IN GENERAL.—Paragraph (2) of section 6050P(c) of the

Internal Revenue Code of 1986 (relating to definitions and special

rules) is amended by striking ‘‘and’’ at the end of subparagraph

(B), by striking the period at the end of subparagraph (C) and

inserting ‘‘, and’’, and by inserting after subparagraph (C) the

following new subparagraph:

‘‘(D) any organization a significant trade or business

of which is the lending of money.’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to discharges of indebtedness after December 31, 1999.

SEC. 534. LIMITATION ON CONVERSION OF CHARACTER OF INCOME

FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.

(a) IN GENERAL.—Part IV of subchapter P of chapter 1 of

the Internal Revenue Code of 1986 (relating to special rules for

determining capital gains and losses) is amended by inserting after

section 1259 the following new section:

‘‘SEC. 1260. GAINS FROM CONSTRUCTIVE OWNERSHIP TRANSACTIONS.

‘‘(a) IN GENERAL.—If the taxpayer has gain from a constructive

ownership transaction with respect to any financial asset and such

gain would (without regard to this section) be treated as a longterm capital gain—

‘‘(1) such gain shall be treated as ordinary income to the

extent that such gain exceeds the net underlying long-term

capital gain, and

‘‘(2) to the extent such gain is treated as a long-term

capital gain after the application of paragraph (1), the determination of the capital gain rate (or rates) applicable to such

gain under section 1(h) shall be determined on the basis of

the respective rate (or rates) that would have been applicable

to the net underlying long-term capital gain.

‘‘(b) INTEREST CHARGE ON DEFERRAL OF GAIN RECOGNITION.—

‘‘(1) IN GENERAL.—If any gain is treated as ordinary income

for any taxable year by reason of subsection (a)(1), the tax
H. R. 1180—73

imposed by this chapter for such taxable year shall be increased

by the amount of interest determined under paragraph (2)

with respect to each prior taxable year during any portion

of which the constructive ownership transaction was open. Any

amount payable under this paragraph shall be taken into

account in computing the amount of any deduction allowable

to the taxpayer for interest paid or accrued during such taxable

year.

‘‘(2) AMOUNT OF INTEREST.—The amount of interest determined under this paragraph with respect to a prior taxable

year is the amount of interest which would have been imposed

under section 6601 on the underpayment of tax for such year

which would have resulted if the gain (which is treated as

ordinary income by reason of subsection (a)(1)) had been

included in gross income in the taxable years in which it

accrued (determined by treating the income as accruing at

a constant rate equal to the applicable Federal rate as in

effect on the day the transaction closed). The period during

which such interest shall accrue shall end on the due date

(without extensions) for the return of tax imposed by this

chapter for the taxable year in which such transaction closed.

‘‘(3) APPLICABLE FEDERAL RATE.—For purposes of paragraph

(2), the applicable Federal rate is the applicable Federal rate

determined under section 1274(d) (compounded semiannually)

which would apply to a debt instrument with a term equal

to the period the transaction was open.

‘‘(4) NO CREDITS AGAINST INCREASE IN TAX.—Any increase

in tax under paragraph (1) shall not be treated as tax imposed

by this chapter for purposes of determining—

‘‘(A) the amount of any credit allowable under this

chapter, or

‘‘(B) the amount of the tax imposed by section 55.

‘‘(c) FINANCIAL ASSET.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘financial asset’ means—

‘‘(A) any equity interest in any pass-thru entity, and

‘‘(B) to the extent provided in regulations—

‘‘(i) any debt instrument, and

‘‘(ii) any stock in a corporation which is not a

pass-thru entity.

‘‘(2) PASS-THRU ENTITY.—For purposes of paragraph (1),

the term ‘pass-thru entity’ means—

‘‘(A) a regulated investment company,

‘‘(B) a real estate investment trust,

‘‘(C) an S corporation,

‘‘(D) a partnership,

‘‘(E) a trust,

‘‘(F) a common trust fund,

‘‘(G) a passive foreign investment company (as defined

in section 1297 without regard to subsection (e) thereof ),

‘‘(H) a foreign personal holding company,

‘‘(I) a foreign investment company (as defined in section

1246(b)), and

‘‘(J) a REMIC.

‘‘(d) CONSTRUCTIVE OWNERSHIP TRANSACTION.—For purposes

of this section—
H. R. 1180—74

‘‘(1) IN GENERAL.—The taxpayer shall be treated as having

entered into a constructive ownership transaction with respect

to any financial asset if the taxpayer—

‘‘(A) holds a long position under a notional principal

contract with respect to the financial asset,

‘‘(B) enters into a forward or futures contract to acquire

the financial asset,

‘‘(C) is the holder of a call option, and is the grantor

of a put option, with respect to the financial asset and

such options have substantially equal strike prices and

substantially contemporaneous maturity dates, or

‘‘(D) to the extent provided in regulations prescribed

by the Secretary, enters into one or more other transactions

(or acquires one or more positions) that have substantially

the same effect as a transaction described in any of the

preceding subparagraphs.

‘‘(2) EXCEPTION FOR POSITIONS WHICH ARE MARKED TO

MARKET.—This section shall not apply to any constructive

ownership transaction if all of the positions which are part

of such transaction are marked to market under any provision

of this title or the regulations thereunder.

‘‘(3) LONG POSITION UNDER NOTIONAL PRINCIPAL CONTRACT.—A person shall be treated as holding a long position

under a notional principal contract with respect to any financial

asset if such person—

‘‘(A) has the right to be paid (or receive credit for)

all or substantially all of the investment yield (including

appreciation) on such financial asset for a specified period,

and

‘‘(B) is obligated to reimburse (or provide credit for)

all or substantially all of any decline in the value of such

financial asset.

‘‘(4) FORWARD CONTRACT.—The term ‘forward contract’

means any contract to acquire in the future (or provide or

receive credit for the future value of ) any financial asset.

‘‘(e) NET UNDERLYING LONG-TERM CAPITAL GAIN.—For purposes

of this section, in the case of any constructive ownership transaction

with respect to any financial asset, the term ‘net underlying longterm capital gain’ means the aggregate net capital gain that the

taxpayer would have had if—

‘‘(1) the financial asset had been acquired for fair market

value on the date such transaction was opened and sold for

fair market value on the date such transaction was closed,

and

‘‘(2) only gains and losses that would have resulted from

the deemed ownership under paragraph (1) were taken into

account.

The amount of the net underlying long-term capital gain with

respect to any financial asset shall be treated as zero unless the

amount thereof is established by clear and convincing evidence.

‘‘(f ) SPECIAL RULE WHERE TAXPAYER TAKES DELIVERY.—Except

as provided in regulations prescribed by the Secretary, if a constructive ownership transaction is closed by reason of taking delivery,

this section shall be applied as if the taxpayer had sold all the

contracts, options, or other positions which are part of such transaction for fair market value on the closing date. The amount of

gain recognized under the preceding sentence shall not exceed the
H. R. 1180—75

amount of gain treated as ordinary income under subsection (a).

Proper adjustments shall be made in the amount of any gain

or loss subsequently realized for gain recognized and treated as

ordinary income under this subsection.

‘‘(g) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes

of this section, including regulations—

‘‘(1) to permit taxpayers to mark to market constructive

ownership transactions in lieu of applying this section, and

‘‘(2) to exclude certain forward contracts which do not

convey substantially all of the economic return with respect

to a financial asset.’’.

(b) CLERICAL AMENDMENT.—The table of sections for part IV

of subchapter P of chapter 1 of such Code is amended by adding

at the end the following new item:

‘‘Sec. 1260. Gains from constructive ownership transactions.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to transactions entered into after July 11, 1999.

SEC. 535. TREATMENT OF EXCESS PENSION ASSETS USED FOR

RETIREE HEALTH BENEFITS.

(a) EXTENSION.—

(1) IN GENERAL.—Paragraph (5) of section 420(b) of the

Internal Revenue Code of 1986 (relating to expiration) is

amended by striking ‘‘in any taxable year beginning after

December 31, 2000’’ and inserting ‘‘made after December 31,

2005’’.

(2) CONFORMING AMENDMENTS.—

(A) Section 101(e)(3) of the Employee Retirement

Income Security Act of 1974 (29 U.S.C. 1021(e)(3)) is

amended by striking ‘‘January 1, 1995’’ and inserting ‘‘the

date of the enactment of the Tax Relief Extension Act

of 1999’’.

(B) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1))

is amended by striking ‘‘January 1, 1995’’ and inserting

‘‘the date of the enactment of the Tax Relief Extension

Act of 1999’’.

(C) Paragraph (13) of section 408(b) of such Act (29

U.S.C. 1108(b)(13)) is amended—

(i) by striking ‘‘in a taxable year beginning before

January 1, 2001’’ and inserting ‘‘made before January

1, 2006’’; and

(ii) by striking ‘‘January 1, 1995’’ and inserting

‘‘the date of the enactment of the Tax Relief Extension

Act of 1999’’.

(b) APPLICATION OF MINIMUM COST REQUIREMENTS.—

(1) IN GENERAL.—Paragraph (3) of section 420(c) of the

Internal Revenue Code of 1986 is amended to read as follows:

‘‘(3) MINIMUM COST REQUIREMENTS.—

‘‘(A) IN GENERAL.—The requirements of this paragraph

are met if each group health plan or arrangement under

which applicable health benefits are provided provides that

the applicable employer cost for each taxable year during

the cost maintenance period shall not be less than the

higher of the applicable employer costs for each of the
H. R. 1180—76

2 taxable years immediately preceding the taxable year

of the qualified transfer.

‘‘(B) APPLICABLE EMPLOYER COST.—For purposes of this

paragraph, the term ‘applicable employer cost’ means, with

respect to any taxable year, the amount determined by

dividing—

‘‘(i) the qualified current retiree health liabilities

of the employer for such taxable year determined—

‘‘(I) without regard to any reduction under

subsection (e)(1)(B), and

‘‘(II) in the case of a taxable year in which

there was no qualified transfer, in the same

manner as if there had been such a transfer at

the end of the taxable year, by

‘‘(ii) the number of individuals to whom coverage

for applicable health benefits was provided during such

taxable year.

‘‘(C) ELECTION TO COMPUTE COST SEPARATELY.—An

employer may elect to have this paragraph applied separately with respect to individuals eligible for benefits under

title XVIII of the Social Security Act at any time during

the taxable year and with respect to individuals not so

eligible.

‘‘(D) COST MAINTENANCE PERIOD.—For purposes of this

paragraph, the term ‘cost maintenance period’ means the

period of 5 taxable years beginning with the taxable year

in which the qualified transfer occurs. If a taxable year

is in two or more overlapping cost maintenance periods,

this paragraph shall be applied by taking into account

the highest applicable employer cost required to be provided

under subparagraph (A) for such taxable year.

‘‘(E) REGULATIONS.—The Secretary shall prescribe such

regulations as may be necessary to prevent an employer

who significantly reduces retiree health coverage during

the cost maintenance period from being treated as satisfying the minimum cost requirement of this subsection.’’.

(2) CONFORMING AMENDMENTS.—

(A) Clause (iii) of section 420(b)(1)(C) of such Code

is amended by striking ‘‘benefits’’ and inserting ‘‘cost’’.

(B) Subparagraph (D) of section 420(e)(1) of such Code

is amended by striking ‘‘and shall not be subject to the

minimum benefit requirements of subsection (c)(3)’’ and

inserting ‘‘or in calculating applicable employer cost under

subsection (c)(3)(B)’’.

(c) EFFECTIVE DATES.—

(1) IN GENERAL.—The amendments made by this section

shall apply to qualified transfers occurring after the date of

the enactment of this Act.

(2) TRANSITION RULE.—If the cost maintenance period for

any qualified transfer after the date of the enactment of this

Act includes any portion of a benefit maintenance period for

any qualified transfer on or before such date, the amendments

made by subsection (b) shall not apply to such portion of the

cost maintenance period (and such portion shall be treated

as a benefit maintenance period).
H. R. 1180—77

SEC. 536. MODIFICATION OF INSTALLMENT METHOD AND REPEAL OF

INSTALLMENT METHOD FOR ACCRUAL METHOD TAXPAYERS.

(a) REPEAL OF INSTALLMENT METHOD FOR ACCRUAL BASIS TAX- PAYERS.—

(1) IN GENERAL.—Subsection (a) of section 453 of the

Internal Revenue Code of 1986 (relating to installment method)

is amended to read as follows:

‘‘(a) USE OF INSTALLMENT METHOD.— ‘‘(1) IN GENERAL.—Except as otherwise provided in this

section, income from an installment sale shall be taken into

account for purposes of this title under the installment method.

‘‘(2) ACCRUAL METHOD TAXPAYER.—The installment method

shall not apply to income from an installment sale if such

income would be reported under an accrual method of

accounting without regard to this section. The preceding sentence shall not apply to a disposition described in subparagraph

(A) or (B) of subsection (l)(2).’’.

(2) CONFORMING AMENDMENTS.—Sections 453(d)(1),

453(i)(1), and 453(k) of such Code are each amended by striking

‘‘(a)’’ each place it appears and inserting ‘‘(a)(1)’’.

(b) MODIFICATION OF PLEDGE RULES.—Paragraph (4) of section

453A(d) of such Code (relating to pledges, etc., of installment obligations) is amended by adding at the end the following: ‘‘A payment

shall be treated as directly secured by an interest in an installment

obligation to the extent an arrangement allows the taxpayer to

satisfy all or a portion of the indebtedness with the installment

obligation.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to sales or other dispositions occurring on or after

the date of the enactment of this Act.

SEC. 537. DENIAL OF CHARITABLE CONTRIBUTION DEDUCTION FOR

TRANSFERS ASSOCIATED WITH SPLIT-DOLLAR INSURANCE ARRANGEMENTS.

(a) IN GENERAL.—Subsection (f ) of section 170 of the Internal

Revenue Code of 1986 (relating to disallowance of deduction in

certain cases and special rules) is amended by adding at the end

the following new paragraph:

‘‘(10) SPLIT-DOLLAR LIFE INSURANCE, ANNUITY, AND ENDOW- MENT CONTRACTS.— ‘‘(A) IN GENERAL.—Nothing in this section or in section

545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 shall

be construed to allow a deduction, and no deduction shall

be allowed, for any transfer to or for the use of an organization described in subsection (c) if in connection with such

transfer—

‘‘(i) the organization directly or indirectly pays,

or has previously paid, any premium on any personal

benefit contract with respect to the transferor, or

‘‘(ii) there is an understanding or expectation that

any person will directly or indirectly pay any premium

on any personal benefit contract with respect to the

transferor.

‘‘(B) PERSONAL BENEFIT CONTRACT.—For purposes of

subparagraph (A), the term ‘personal benefit contract’

means, with respect to the transferor, any life insurance,
H. R. 1180—78

annuity, or endowment contract if any direct or indirect

beneficiary under such contract is the transferor, any

member of the transferor’s family, or any other person

(other than an organization described in subsection (c))

designated by the transferor.

‘‘(C) APPLICATION TO CHARITABLE REMAINDER TRUSTS.—

In the case of a transfer to a trust referred to in subparagraph (E), references in subparagraphs (A) and (F) to an

organization described in subsection (c) shall be treated

as a reference to such trust.

‘‘(D) EXCEPTION FOR CERTAIN ANNUITY CONTRACTS.—

If, in connection with a transfer to or for the use of an

organization described in subsection (c), such organization

incurs an obligation to pay a charitable gift annuity (as

defined in section 501(m)) and such organization purchases

any annuity contract to fund such obligation, persons

receiving payments under the charitable gift annuity shall

not be treated for purposes of subparagraph (B) as indirect

beneficiaries under such contract if—

‘‘(i) such organization possesses all of the incidents

of ownership under such contract,

‘‘(ii) such organization is entitled to all the payments under such contract, and

‘‘(iii) the timing and amount of payments under

such contract are substantially the same as the timing

and amount of payments to each such person under

such obligation (as such obligation is in effect at the

time of such transfer).

‘‘(E) EXCEPTION FOR CERTAIN CONTRACTS HELD BY

CHARITABLE REMAINDER TRUSTS.—A person shall not be

treated for purposes of subparagraph (B) as an indirect

beneficiary under any life insurance, annuity, or endowment contract held by a charitable remainder annuity trust

or a charitable remainder unitrust (as defined in section

664(d)) solely by reason of being entitled to any payment

referred to in paragraph (1)(A) or (2)(A) of section 664(d)

if—

‘‘(i) such trust possesses all of the incidents of

ownership under such contract, and

‘‘(ii) such trust is entitled to all the payments

under such contract.

‘‘(F) EXCISE TAX ON PREMIUMS PAID.—

‘‘(i) IN GENERAL.—There is hereby imposed on any

organization described in subsection (c) an excise tax

equal to the premiums paid by such organization on

any life insurance, annuity, or endowment contract

if the payment of premiums on such contract is in

connection with a transfer for which a deduction is

not allowable under subparagraph (A), determined

without regard to when such transfer is made.

‘‘(ii) PAYMENTS BY OTHER PERSONS.—For purposes

of clause (i), payments made by any other person

pursuant to an understanding or expectation referred

to in subparagraph (A) shall be treated as made by

the organization.
H. R. 1180—79

‘‘(iii) REPORTING.—Any organization on which tax

is imposed by clause (i) with respect to any premium

shall file an annual return which includes—

‘‘(I) the amount of such premiums paid during

the year and the name and TIN of each beneficiary

under the contract to which the premium relates,

and

‘‘(II) such other information as the Secretary

may require.

The penalties applicable to returns required under section 6033 shall apply to returns required under this

clause. Returns required under this clause shall be

furnished at such time and in such manner as the

Secretary shall by forms or regulations require.

‘‘(iv) CERTAIN RULES TO APPLY.—The tax imposed

by this subparagraph shall be treated as imposed by

chapter 42 for purposes of this title other than subchapter B of chapter 42.

‘‘(G) SPECIAL RULE WHERE STATE REQUIRES SPECIFICATION OF CHARITABLE GIFT ANNUITANT IN CONTRACT.—In

the case of an obligation to pay a charitable gift annuity

referred to in subparagraph (D) which is entered into under

the laws of a State which requires, in order for the charitable gift annuity to be exempt from insurance regulation

by such State, that each beneficiary under the charitable

gift annuity be named as a beneficiary under an annuity

contract issued by an insurance company authorized to

transact business in such State, the requirements of clauses

(i) and (ii) of subparagraph (D) shall be treated as met

if—

‘‘(i) such State law requirement was in effect on

February 8, 1999,

‘‘(ii) each such beneficiary under the charitable

gift annuity is a bona fide resident of such State at

the time the obligation to pay a charitable gift annuity

is entered into, and

‘‘(iii) the only persons entitled to payments under

such contract are persons entitled to payments as beneficiaries under such obligation on the date such obligation is entered into.

‘‘(H) MEMBER OF FAMILY.—For purposes of this paragraph, an individual’s family consists of the individual’s

grandparents, the grandparents of such individual’s spouse,

the lineal descendants of such grandparents, and any

spouse of such a lineal descendant.

‘‘(I) REGULATIONS.—The Secretary shall prescribe such

regulations as may be necessary or appropriate to carry

out the purposes of this paragraph, including regulations

to prevent the avoidance of such purposes.’’.

(b) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as otherwise provided in this section, the amendment made by this section shall apply to transfers made after February 8, 1999.

(2) EXCISE TAX.—Except as provided in paragraph (3) of

this subsection, section 170(f )(10)(F) of the Internal Revenue

Code of 1986 (as added by this section) shall apply to premiums

paid after the date of the enactment of this Act.
H. R. 1180—80

(3) REPORTING.—Clause (iii) of such section 170(f )(10)(F)

shall apply to premiums paid after February 8, 1999 (determined as if the tax imposed by such section applies to premiums

paid after such date).

SEC. 538. DISTRIBUTIONS BY A PARTNERSHIP TO A CORPORATE

PARTNER OF STOCK IN ANOTHER CORPORATION.

(a) IN GENERAL.—Section 732 of the Internal Revenue Code

of 1986 (relating to basis of distributed property other than money)

is amended by adding at the end the following new subsection:

‘‘(f ) CORRESPONDING ADJUSTMENT TO BASIS OF ASSETS OF A

DISTRIBUTED CORPORATION CONTROLLED BY A CORPORATE

PARTNER.—

‘‘(1) IN GENERAL.—If—

‘‘(A) a corporation (hereafter in this subsection referred

to as the ‘corporate partner’) receives a distribution from

a partnership of stock in another corporation (hereafter

in this subsection referred to as the ‘distributed corporation’),

‘‘(B) the corporate partner has control of the distributed

corporation immediately after the distribution or at any

time thereafter, and

‘‘(C) the partnership’s adjusted basis in such stock

immediately before the distribution exceeded the corporate

partner’s adjusted basis in such stock immediately after

the distribution,

then an amount equal to such excess shall be applied to reduce

(in accordance with subsection (c)) the basis of property held

by the distributed corporation at such time (or, if the corporate

partner does not control the distributed corporation at such

time, at the time the corporate partner first has such control).

‘‘(2) EXCEPTION FOR CERTAIN DISTRIBUTIONS BEFORE CON- TROL ACQUIRED.—Paragraph (1) shall not apply to any distribution of stock in the distributed corporation if—

‘‘(A) the corporate partner does not have control of

such corporation immediately after such distribution, and

‘‘(B) the corporate partner establishes to the satisfaction of the Secretary that such distribution was not part

of a plan or arrangement to acquire control of the distributed corporation.

‘‘(3) LIMITATIONS ON BASIS REDUCTION.— ‘‘(A) IN GENERAL.—The amount of the reduction under

paragraph (1) shall not exceed the amount by which the

sum of the aggregate adjusted bases of the property and

the amount of money of the distributed corporation exceeds

the corporate partner’s adjusted basis in the stock of the

distributed corporation.

‘‘(B) REDUCTION NOT TO EXCEED ADJUSTED BASIS OF

PROPERTY.—No reduction under paragraph (1) in the basis

of any property shall exceed the adjusted basis of such

property (determined without regard to such reduction).

‘‘(4) GAIN RECOGNITION WHERE REDUCTION LIMITED.—If the

amount of any reduction under paragraph (1) (determined after

the application of paragraph (3)(A)) exceeds the aggregate

adjusted bases of the property of the distributed corporation—

‘‘(A) such excess shall be recognized by the corporate

partner as long-term capital gain, and
H. R. 1180—81

‘‘(B) the corporate partner’s adjusted basis in the stock

of the distributed corporation shall be increased by such

excess.

‘‘(5) CONTROL.—For purposes of this subsection, the term

‘control’ means ownership of stock meeting the requirements

of section 1504(a)(2).

‘‘(6) INDIRECT DISTRIBUTIONS.—For purposes of paragraph

(1), if a corporation acquires (other than in a distribution from

a partnership) stock the basis of which is determined (by reason

of being distributed from a partnership) in whole or in part

by reference to subsection (a)(2) or (b), the corporation shall

be treated as receiving a distribution of such stock from a

partnership.

‘‘(7) SPECIAL RULE FOR STOCK IN CONTROLLED CORPORATION.—If the property held by a distributed corporation is stock

in a corporation which the distributed corporation controls,

this subsection shall be applied to reduce the basis of the

property of such controlled corporation. This subsection shall

be reapplied to any property of any controlled corporation which

is stock in a corporation which it controls.

‘‘(8) REGULATIONS.—The Secretary shall prescribe such

regulations as may be necessary to carry out the purposes

of this subsection, including regulations to avoid double

counting and to prevent the abuse of such purposes.’’.

(b) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraph (2), the

amendment made by this section shall apply to distributions

made after July 14, 1999.

(2) PARTNERSHIPS IN EXISTENCE ON JULY 14, 1999.—In the

case of a corporation which is a partner in a partnership as

of July 14, 1999, the amendment made by this section shall

apply to any distribution made (or treated as made) to such

partner from such partnership after June 30, 2001, except

that this paragraph shall not apply to any distribution after

the date of the enactment of this Act unless the partner makes

an election to have this paragraph apply to such distribution

on the partner’s return of Federal income tax for the taxable

year in which such distribution occurs.

PART II—PROVISIONS RELATING TO REAL

ESTATE INVESTMENT TRUSTS

Subpart A—Treatment of Income and Services

Provided by Taxable REIT Subsidiaries

SEC. 541. MODIFICATIONS TO ASSET DIVERSIFICATION TEST.

(a) IN GENERAL.—Subparagraph (B) of section 856(c)(4) of the

Internal Revenue Code of 1986 is amended to read as follows:

‘‘(B)(i) not more than 25 percent of the value of its

total assets is represented by securities (other than those

includible under subparagraph (A)),

‘‘(ii) not more than 20 percent of the value of its total

assets is represented by securities of one or more taxable

REIT subsidiaries, and

‘‘(iii) except with respect to a taxable REIT subsidiary

and securities includible under subparagraph (A)—
H. R. 1180—82

‘‘(I) not more than 5 percent of the value of its

total assets is represented by securities of any one

issuer,

‘‘(II) the trust does not hold securities possessing

more than 10 percent of the total voting power of

the outstanding securities of any one issuer, and

‘‘(III) the trust does not hold securities having

a value of more than 10 percent of the total value

of the outstanding securities of any one issuer.’’.

(b) EXCEPTION FOR STRAIGHT DEBT SECURITIES.—Subsection

(c) of section 856 of such Code is amended by adding at the end

the following new paragraph:

‘‘(7) STRAIGHT DEBT SAFE HARBOR IN APPLYING PARAGRAPH

(4).—Securities of an issuer which are straight debt (as defined

in section 1361(c)(5) without regard to subparagraph (B)(iii)

thereof ) shall not be taken into account in applying paragraph

(4)(B)(ii)(III) if—

‘‘(A) the issuer is an individual, or

‘‘(B) the only securities of such issuer which are held

by the trust or a taxable REIT subsidiary of the trust

are straight debt (as so defined), or

‘‘(C) the issuer is a partnership and the trust holds

at least a 20 percent profits interest in the partnership.’’.

SEC. 542. TREATMENT OF INCOME AND SERVICES PROVIDED BY TAXABLE REIT SUBSIDIARIES.

(a) INCOME FROM TAXABLE REIT SUBSIDIARIES NOT TREATED

AS IMPERMISSIBLE TENANT SERVICE INCOME.—Clause (i) of section

856(d)(7)(C) of the Internal Revenue Code of 1986 (relating to

exceptions to impermissible tenant service income) is amended by

inserting ‘‘or through a taxable REIT subsidiary of such trust’’

after ‘‘income’’.

(b) CERTAIN INCOME FROM TAXABLE REIT SUBSIDIARIES NOT

EXCLUDED FROM RENTS FROM REAL PROPERTY.— (1) IN GENERAL.—Subsection (d) of section 856 of such

Code (relating to rents from real property defined) is amended

by adding at the end the following new paragraphs:

‘‘(8) SPECIAL RULE FOR TAXABLE REIT SUBSIDIARIES.—For

purposes of this subsection, amounts paid to a real estate

investment trust by a taxable REIT subsidiary of such trust

shall not be excluded from rents from real property by reason

of paragraph (2)(B) if the requirements of either of the following

subparagraphs are met:

‘‘(A) LIMITED RENTAL EXCEPTION.—The requirements

of this subparagraph are met with respect to any property

if at least 90 percent of the leased space of the property

is rented to persons other than taxable REIT subsidiaries

of such trust and other than persons described in section

856(d)(2)(B). The preceding sentence shall apply only to

the extent that the amounts paid to the trust as rents

from real property (as defined in paragraph (1) without

regard to paragraph (2)(B)) from such property are substantially comparable to such rents made by the other tenants

of the trust’s property for comparable space.

‘‘(B) EXCEPTION FOR CERTAIN LODGING FACILITIES.—

The requirements of this subparagraph are met with

respect to an interest in real property which is a qualified
H. R. 1180—83

lodging facility leased by the trust to a taxable REIT subsidiary of the trust if the property is operated on behalf

of such subsidiary by a person who is an eligible independent contractor.

‘‘(9) ELIGIBLE INDEPENDENT CONTRACTOR.—For purposes of

paragraph (8)(B)—

‘‘(A) IN GENERAL.—The term ‘eligible independent contractor’ means, with respect to any qualified lodging facility,

any independent contractor if, at the time such contractor

enters into a management agreement or other similar

service contract with the taxable REIT subsidiary to

operate the facility, such contractor (or any related person)

is actively engaged in the trade or business of operating

qualified lodging facilities for any person who is not a

related person with respect to the real estate investment

trust or the taxable REIT subsidiary.

‘‘(B) SPECIAL RULES.—Solely for purposes of this paragraph and paragraph (8)(B), a person shall not fail to

be treated as an independent contractor with respect to

any qualified lodging facility by reason of any of the following:

‘‘(i) The taxable REIT subsidiary bears the

expenses for the operation of the facility pursuant to

the management agreement or other similar service

contract.

‘‘(ii) The taxable REIT subsidiary receives the revenues from the operation of such facility, net of expenses

for such operation and fees payable to the operator

pursuant to such agreement or contract.

‘‘(iii) The real estate investment trust receives

income from such person with respect to another property that is attributable to a lease of such other property to such person that was in effect as of the later

of—

‘‘(I) January 1, 1999, or

‘‘(II) the earliest date that any taxable REIT

subsidiary of such trust entered into a management agreement or other similar service contract

with such person with respect to such qualified

lodging facility.

‘‘(C) RENEWALS, ETC., OF EXISTING LEASES.—For purposes of subparagraph (B)(iii)—

‘‘(i) a lease shall be treated as in effect on January

1, 1999, without regard to its renewal after such date,

so long as such renewal is pursuant to the terms

of such lease as in effect on whichever of the dates

under subparagraph (B)(iii) is the latest, and

‘‘(ii) a lease of a property entered into after whichever of the dates under subparagraph (B)(iii) is the

latest shall be treated as in effect on such date if—

‘‘(I) on such date, a lease of such property

from the trust was in effect, and

‘‘(II) under the terms of the new lease, such

trust receives a substantially similar or lesser benefit in comparison to the lease referred to in subclause (I).
H. R. 1180—84

‘‘(D) QUALIFIED LODGING FACILITY.—For purposes of

this paragraph—

‘‘(i) IN GENERAL.—The term ‘qualified lodging

facility’ means any lodging facility unless wagering

activities are conducted at or in connection with such

facility by any person who is engaged in the business

of accepting wagers and who is legally authorized to

engage in such business at or in connection with such

facility.

‘‘(ii) LODGING FACILITY.—The term ‘lodging facility’

means a hotel, motel, or other establishment more

than one-half of the dwelling units in which are used

on a transient basis.

‘‘(iii) CUSTOMARY AMENITIES AND FACILITIES.—The

term ‘lodging facility’ includes customary amenities

and facilities operated as part of, or associated with,

the lodging facility so long as such amenities and facilities are customary for other properties of a comparable

size and class owned by other owners unrelated to

such real estate investment trust.

‘‘(E) OPERATE INCLUDES MANAGE.—References in this

paragraph to operating a property shall be treated as

including a reference to managing the property.

‘‘(F) RELATED PERSON.—Persons shall be treated as

related to each other if such persons are treated as a

single employer under subsection (a) or (b) of section 52.’’.

(2) CONFORMING AMENDMENT.—Subparagraph (B) of section

856(d)(2) of such Code is amended by inserting ‘‘except as

provided in paragraph (8),’’ after ‘‘(B)’’.

(3) DETERMINING RENTS FROM REAL PROPERTY.— (A)(i) Paragraph (1) of section 856(d) of such Code

is amended by striking ‘‘adjusted bases’’ each place it occurs

and inserting ‘‘fair market values’’.

(ii) The amendment made by this subparagraph shall

apply to taxable years beginning after December 31, 2000.

(B)(i) Clause (i) of section 856(d)(2)(B) of such Code

is amended by striking ‘‘number’’ and inserting ‘‘value’’.

(ii) The amendment made by this subparagraph shall

apply to amounts received or accrued in taxable years

beginning after December 31, 2000, except for amounts

paid pursuant to leases in effect on July 12, 1999, or

pursuant to a binding contract in effect on such date and

at all times thereafter.

SEC. 543. TAXABLE REIT SUBSIDIARY.

(a) IN GENERAL.—Section 856 of the Internal Revenue Code

of 1986 is amended by adding at the end the following new subsection:

‘‘(l) TAXABLE REIT SUBSIDIARY.—For purposes of this part—

‘‘(1) IN GENERAL.—The term ‘taxable REIT subsidiary’

means, with respect to a real estate investment trust, a corporation (other than a real estate investment trust) if—

‘‘(A) such trust directly or indirectly owns stock in

such corporation, and

‘‘(B) such trust and such corporation jointly elect that

such corporation shall be treated as a taxable REIT subsidiary of such trust for purposes of this part.
H. R. 1180—85

Such an election, once made, shall be irrevocable unless both

such trust and corporation consent to its revocation. Such election, and any revocation thereof, may be made without the

consent of the Secretary.

‘‘(2) THIRTY-FIVE PERCENT OWNERSHIP IN ANOTHER TAXABLE

REIT SUBSIDIARY.—The term ‘taxable REIT subsidiary’ includes,

with respect to any real estate investment trust, any corporation (other than a real estate investment trust) with respect

to which a taxable REIT subsidiary of such trust owns directly

or indirectly—

‘‘(A) securities possessing more than 35 percent of the

total voting power of the outstanding securities of such

corporation, or

‘‘(B) securities having a value of more than 35 percent

of the total value of the outstanding securities of such

corporation.

The preceding sentence shall not apply to a qualified REIT

subsidiary (as defined in subsection (i)(2)). The rule of section

856(c)(7) shall apply for purposes of subparagraph (B).

‘‘(3) EXCEPTIONS.—The term ‘taxable REIT subsidiary’ shall

not include—

‘‘(A) any corporation which directly or indirectly operates or manages a lodging facility or a health care facility,

and

‘‘(B) any corporation which directly or indirectly provides to any other person (under a franchise, license, or

otherwise) rights to any brand name under which any

lodging facility or health care facility is operated.

Subparagraph (B) shall not apply to rights provided to an

eligible independent contractor to operate or manage a lodging

facility if such rights are held by such corporation as a

franchisee, licensee, or in a similar capacity and such lodging

facility is either owned by such corporation or is leased to

such corporation from the real estate investment trust.

‘‘(4) DEFINITIONS.—For purposes of paragraph (3)—

‘‘(A) LODGING FACILITY.—The term ‘lodging facility’ has

the meaning given to such term by paragraph (9)(D)(ii).

‘‘(B) HEALTH CARE FACILITY.—The term ‘health care

facility’ has the meaning given to such term by subsection

(e)(6)(D)(ii).’’.

(b) CONFORMING AMENDMENT.—Paragraph (2) of section 856(i)

of such Code is amended by adding at the end the following new

sentence: ‘‘Such term shall not include a taxable REIT subsidiary.’’.

SEC. 544. LIMITATION ON EARNINGS STRIPPING.

Paragraph (3) of section 163( j) of the Internal Revenue Code

of 1986 (relating to limitation on deduction for interest on certain

indebtedness) is amended by striking ‘‘and’’ at the end of subparagraph (A), by striking the period at the end of subparagraph (B)

and inserting ‘‘, and’’, and by adding at the end the following

new subparagraph:

‘‘(C) any interest paid or accrued (directly or indirectly)

by a taxable REIT subsidiary (as defined in section 856(l))

of a real estate investment trust to such trust.’’.

SEC. 545. 100 PERCENT TAX ON IMPROPERLY ALLOCATED AMOUNTS.

(a) IN GENERAL.—Subsection (b) of section 857 of the Internal

Revenue Code of 1986 (relating to method of taxation of real estate
H. R. 1180—86

investment trusts and holders of shares or certificates of beneficial

interest) is amended by redesignating paragraphs (7) and (8) as

paragraphs (8) and (9), respectively, and by inserting after paragraph (6) the following new paragraph:

‘‘(7) INCOME FROM REDETERMINED RENTS, REDETERMINED

DEDUCTIONS, AND EXCESS INTEREST.—

‘‘(A) IMPOSITION OF TAX.—There is hereby imposed for

each taxable year of the real estate investment trust a

tax equal to 100 percent of redetermined rents, redetermined deductions, and excess interest.

‘‘(B) REDETERMINED RENTS.—

‘‘(i) IN GENERAL.—The term ‘redetermined rents’

means rents from real property (as defined in subsection 856(d)) the amount of which would (but for

subparagraph (E)) be reduced on distribution, apportionment, or allocation under section 482 to clearly

reflect income as a result of services furnished or rendered by a taxable REIT subsidiary of the real estate

investment trust to a tenant of such trust.

‘‘(ii) EXCEPTION FOR CERTAIN SERVICES.—Clause (i)

shall not apply to amounts received directly or

indirectly by a real estate investment trust for services

described in paragraph (1)(B) or (7)(C)(i) of section

856(d).

‘‘(iii) EXCEPTION FOR DE MINIMIS AMOUNTS.—

Clause (i) shall not apply to amounts described in

section 856(d)(7)(A) with respect to a property to the

extent such amounts do not exceed the one percent

threshold described in section 856(d)(7)(B) with respect

to such property.

‘‘(iv) EXCEPTION FOR COMPARABLY PRICED SERVICES.—Clause (i) shall not apply to any service rendered by a taxable REIT subsidiary of a real estate

investment trust to a tenant of such trust if—

‘‘(I) such subsidiary renders a significant

amount of similar services to persons other than

such trust and tenants of such trust who are unrelated (within the meaning of section 856(d)(8)(F))

to such subsidiary, trust, and tenants, but

‘‘(II) only to the extent the charge for such

service so rendered is substantially comparable to

the charge for the similar services rendered to

persons referred to in subclause (I).

‘‘(v) EXCEPTION FOR CERTAIN SEPARATELY CHARGED

SERVICES.—Clause (i) shall not apply to any service

rendered by a taxable REIT subsidiary of a real estate

investment trust to a tenant of such trust if—

‘‘(I) the rents paid to the trust by tenants

(leasing at least 25 percent of the net leasable

space in the trust’s property) who are not receiving

such service from such subsidiary are substantially

comparable to the rents paid by tenants leasing

comparable space who are receiving such service

from such subsidiary, and

‘‘(II) the charge for such service from such

subsidiary is separately stated.
H. R. 1180—87

‘‘(vi) EXCEPTION FOR CERTAIN SERVICES BASED ON

SUBSIDIARY’S INCOME FROM THE SERVICES.—Clause (i)

shall not apply to any service rendered by a taxable

REIT subsidiary of a real estate investment trust to

a tenant of such trust if the gross income of such

subsidiary from such service is not less than 150 percent of such subsidiary’s direct cost in furnishing or

rendering the service.

‘‘(vii) EXCEPTIONS GRANTED BY SECRETARY.—The

Secretary may waive the tax otherwise imposed by

subparagraph (A) if the trust establishes to the satisfaction of the Secretary that rents charged to tenants

were established on an arms’ length basis even though

a taxable REIT subsidiary of the trust provided services to such tenants.

‘‘(C) REDETERMINED DEDUCTIONS.—The term ‘redetermined deductions’ means deductions (other than redetermined rents) of a taxable REIT subsidiary of a real estate

investment trust if the amount of such deductions would

(but for subparagraph (E)) be decreased on distribution,

apportionment, or allocation under section 482 to clearly

reflect income as between such subsidiary and such trust.

‘‘(D) EXCESS INTEREST.—The term ‘excess interest’

means any deductions for interest payments by a taxable

REIT subsidiary of a real estate investment trust to such

trust to the extent that the interest payments are in excess

of a rate that is commercially reasonable.

‘‘(E) COORDINATION WITH SECTION 482.—The imposition

of tax under subparagraph (A) shall be in lieu of any

distribution, apportionment, or allocation under section

482.

‘‘(F) REGULATORY AUTHORITY.—The Secretary shall prescribe such regulations as may be necessary or appropriate

to carry out the purposes of this paragraph. Until the

Secretary prescribes such regulations, real estate investment trusts and their taxable REIT subsidiaries may base

their allocations on any reasonable method.’’.

(b) AMOUNT SUBJECT TO TAX NOT REQUIRED TO BE DISTRIB- UTED.—Subparagraph (E) of section 857(b)(2) of such Code (relating

to real estate investment trust taxable income) is amended by

striking ‘‘paragraph (5)’’ and inserting ‘‘paragraphs (5) and (7)’’.

SEC. 546. EFFECTIVE DATE.

(a) IN GENERAL.—The amendments made by this subpart shall

apply to taxable years beginning after December 31, 2000.

(b) TRANSITIONAL RULES RELATED TO SECTION 541.—

(1) EXISTING ARRANGEMENTS.—

(A) IN GENERAL.—Except as otherwise provided in this

paragraph, the amendment made by section 541 shall not

apply to a real estate investment trust with respect to—

(i) securities of a corporation held directly or

indirectly by such trust on July 12, 1999;

(ii) securities of a corporation held by an entity

on July 12, 1999, if such trust acquires control of

such entity pursuant to a written binding contract

in effect on such date and at all times thereafter before

such acquisition;
H. R. 1180—88

(iii) securities received by such trust (or a successor) in exchange for, or with respect to, securities

described in clause (i) or (ii) in a transaction in which

gain or loss is not recognized; and

(iv) securities acquired directly or indirectly by

such trust as part of a reorganization (as defined in

section 368(a)(1) of the Internal Revenue Code of 1986)

with respect to such trust if such securities are

described in clause (i), (ii), or (iii) with respect to

any other real estate investment trust.

(B) NEW TRADE OR BUSINESS OR SUBSTANTIAL NEW

ASSETS.—Subparagraph (A) shall cease to apply to securities of a corporation as of the first day after July 12,

1999, on which such corporation engages in a substantial

new line of business, or acquires any substantial asset,

other than—

(i) pursuant to a binding contract in effect on such

date and at all times thereafter before the acquisition

of such asset;

(ii) in a transaction in which gain or loss is not

recognized by reason of section 1031 or 1033 of the

Internal Revenue Code of 1986; or

(iii) in a reorganization (as so defined) with another

corporation the securities of which are described in

paragraph (1)(A) of this subsection.

(C) LIMITATION ON TRANSITION RULES.—Subparagraph

(A) shall cease to apply to securities of a corporation held,

acquired, or received, directly or indirectly, by a real estate

investment trust as of the first day after July 12, 1999,

on which such trust acquires any additional securities of

such corporation other than—

(i) pursuant to a binding contract in effect on July

12, 1999, and at all times thereafter; or

(ii) in a reorganization (as so defined) with another

corporation the securities of which are described in

paragraph (1)(A) of this subsection.

(2) TAX-FREE CONVERSION.—If—

(A) at the time of an election for a corporation to

become a taxable REIT subsidiary, the amendment made

by section 541 does not apply to such corporation by reason

of paragraph (1); and

(B) such election first takes effect before January 1,

2004,

such election shall be treated as a reorganization qualifying

under section 368(a)(1)(A) of such Code.

SEC. 547. STUDY RELATING TO TAXABLE REIT SUBSIDIARIES.

The Secretary of the Treasury shall conduct a study to determine how many taxable REIT subsidiaries are in existence and

the aggregate amount of taxes paid by such subsidiaries. The Secretary shall submit a report to the Congress describing the results

of such study.
H. R. 1180—89

Subpart B—Health Care REITs

SEC. 551. HEALTH CARE REITS.

(a) SPECIAL FORECLOSURE RULE FOR HEALTH CARE PROPERTIES.—Subsection (e) of section 856 of the Internal Revenue Code

of 1986 (relating to special rules for foreclosure property) is amended

by adding at the end the following new paragraph:

‘‘(6) SPECIAL RULE FOR QUALIFIED HEALTH CARE PROPERTIES.—For purposes of this subsection—

‘‘(A) ACQUISITION AT EXPIRATION OF LEASE.—The term

‘foreclosure property’ shall include any qualified health care

property acquired by a real estate investment trust as

the result of the termination of a lease of such property

(other than a termination by reason of a default, or the

imminence of a default, on the lease).

‘‘(B) GRACE PERIOD.—In the case of a qualified health

care property which is foreclosure property solely by reason

of subparagraph (A), in lieu of applying paragraphs (2)

and (3)—

‘‘(i) the qualified health care property shall cease

to be foreclosure property as of the close of the second

taxable year after the taxable year in which such trust

acquired such property, and

‘‘(ii) if the real estate investment trust establishes

to the satisfaction of the Secretary that an extension

of the grace period in clause (i) is necessary to the

orderly leasing or liquidation of the trust’s interest

in such qualified health care property, the Secretary

may grant one or more extensions of the grace period

for such qualified health care property.

Any such extension shall not extend the grace period

beyond the close of the 6th year after the taxable year

in which such trust acquired such qualified health care

property.

‘‘(C) INCOME FROM INDEPENDENT CONTRACTORS.—For

purposes of applying paragraph (4)(C) with respect to qualified health care property which is foreclosure property by

reason of subparagraph (A) or paragraph (1), income

derived or received by the trust from an independent contractor shall be disregarded to the extent such income

is attributable to—

‘‘(i) any lease of property in effect on the date

the real estate investment trust acquired the qualified

health care property (without regard to its renewal

after such date so long as such renewal is pursuant

to the terms of such lease as in effect on such date),

or

‘‘(ii) any lease of property entered into after such

date if—

‘‘(I) on such date, a lease of such property

from the trust was in effect, and

‘‘(II) under the terms of the new lease, such

trust receives a substantially similar or lesser benefit in comparison to the lease referred to in subclause (I).

‘‘(D) QUALIFIED HEALTH CARE PROPERTY.—
H. R. 1180—90

‘‘(i) IN GENERAL.—The term ‘qualified health care

property’ means any real property (including interests

therein), and any personal property incident to such

real property, which—

‘‘(I) is a health care facility, or

‘‘(II) is necessary or incidental to the use of

a health care facility.

‘‘(ii) HEALTH CARE FACILITY.—For purposes of

clause (i), the term ‘health care facility’ means a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility

(as defined in section 7872(g)(4)), or other licensed

facility which extends medical or nursing or ancillary

services to patients and which, immediately before the

termination, expiration, default, or breach of the lease

of or mortgage secured by such facility, was operated

by a provider of such services which was eligible for

participation in the medicare program under title XVIII

of the Social Security Act with respect to such facility.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to taxable years beginning after December 31, 2000.

Subpart C—Conformity With Regulated

Investment Company Rules

SEC. 556. CONFORMITY WITH REGULATED INVESTMENT COMPANY

RULES.

(a) DISTRIBUTION REQUIREMENT.—Clauses (i) and (ii) of section

857(a)(1)(A) of the Internal Revenue Code of 1986 (relating to

requirements applicable to real estate investment trusts) are each

amended by striking ‘‘95 percent (90 percent for taxable years

beginning before January 1, 1980)’’ and inserting ‘‘90 percent’’.

(b) IMPOSITION OF TAX.—Clause (i) of section 857(b)(5)(A) of

such Code (relating to imposition of tax in case of failure to meet

certain requirements) is amended by striking ‘‘95 percent (90 percent in the case of taxable years beginning before January 1,

1980)’’ and inserting ‘‘90 percent’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 2000.

Subpart D—Clarification of Exception From

Impermissible Tenant Service Income

SEC. 561. CLARIFICATION OF EXCEPTION FOR INDEPENDENT OPERATORS.

(a) IN GENERAL.—Paragraph (3) of section 856(d) of the Internal

Revenue Code of 1986 (relating to independent contractor defined)

is amended by adding at the end the following flush sentence:

‘‘In the event that any class of stock of either the real estate

investment trust or such person is regularly traded on an

established securities market, only persons who own, directly

or indirectly, more than 5 percent of such class of stock shall

be taken into account as owning any of the stock of such

class for purposes of applying the 35 percent limitation set

forth in subparagraph (B) (but all of the outstanding stock
H. R. 1180—91

of such class shall be considered outstanding in order to compute the denominator for purpose of determining the applicable

percentage of ownership).’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to taxable years beginning after December 31, 2000.

Subpart E—Modification of Earnings and Profits

Rules

SEC. 566. MODIFICATION OF EARNINGS AND PROFITS RULES.

(a) RULES FOR DETERMINING WHETHER REGULATED INVESTMENT

COMPANY HAS EARNINGS AND PROFITS FROM NON-RIC YEAR.— (1) IN GENERAL.—Subsection (c) of section 852 of the

Internal Revenue Code of 1986 is amended by adding at the

end the following new paragraph:

‘‘(3) DISTRIBUTIONS TO MEET REQUIREMENTS OF SUBSECTION

(a)(2)(B).—Any distribution which is made in order to comply

with the requirements of subsection (a)(2)(B)—

‘‘(A) shall be treated for purposes of this subsection

and subsection (a)(2)(B) as made from earnings and profits

which, but for the distribution, would result in a failure

to meet such requirements (and allocated to such earnings

on a first-in, first-out basis), and

‘‘(B) to the extent treated under subparagraph (A) as

made from accumulated earnings and profits, shall not

be treated as a distribution for purposes of subsection

(b)(2)(D) and section 855.’’.

(2) CONFORMING AMENDMENT.—Subparagraph (A) of section

857(d)(3) of such Code is amended to read as follows:

‘‘(A) shall be treated for purposes of this subsection

and subsection (a)(2)(B) as made from earnings and profits

which, but for the distribution, would result in a failure

to meet such requirements (and allocated to such earnings

on a first-in, first-out basis), and’’.

(b) CLARIFICATION OF APPLICATION OF REIT SPILLOVER DIVI- DEND RULES TO DISTRIBUTIONS TO MEET QUALIFICATION REQUIRE- MENT.—Subparagraph (B) of section 857(d)(3) of such Code is

amended by inserting before the period ‘‘and section 858’’.

(c) APPLICATION OF DEFICIENCY DIVIDEND PROCEDURES.—Paragraph (1) of section 852(e) of such Code is amended by adding

at the end the following new sentence: ‘‘If the determination under

subparagraph (A) is solely as a result of the failure to meet the

requirements of subsection (a)(2), the preceding sentence shall also

apply for purposes of applying subsection (a)(2) to the non-RIC

year and the amount referred to in paragraph (2)(A)(i) shall be

the portion of the accumulated earnings and profits which resulted

in such failure.’’.

(d) EFFECTIVE DATE.—The amendments made by this section

shall apply to distributions after December 31, 2000.

Subpart F—Modification of Estimated Tax Rules

SEC. 571. MODIFICATION OF ESTIMATED TAX RULES FOR CLOSELY

HELD REAL ESTATE INVESTMENT TRUSTS.

(a) IN GENERAL.—Subsection (e) of section 6655 of the Internal

Revenue Code of 1986 (relating to estimated tax by corporations)

is amended by adding at the end the following new paragraph:
H. R. 1180—92

‘‘(5) TREATMENT OF CERTAIN REIT DIVIDENDS.—

‘‘(A) IN GENERAL.—Any dividend received from a closely

held real estate investment trust by any person which

owns (after application of subsections (d)(5) and (l)(3)(B)

of section 856) 10 percent or more (by vote or value) of

the stock or beneficial interests in the trust shall be taken

into account in computing annualized income installments

under paragraph (2) in a manner similar to the manner

under which partnership income inclusions are taken into

account.

‘‘(B) CLOSELY HELD REIT.—For purposes of subparagraph (A), the term ‘closely held real estate investment

trust’ means a real estate investment trust with respect

to which 5 or fewer persons own (after application of subsections (d)(5) and (l)(3)(B) of section 856) 50 percent or

more (by vote or value) of the stock or beneficial interests

in the trust.’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a)

shall apply to estimated tax payments due on or after December

15, 1999.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.