II 

110TH CONGRESS 

1ST SESSION S. 1626 

To amend title IV of the Social Security Act to ensure funding for grants 

to promote responsible fatherhood and strengthen low-income families, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 14, 2007 

Mr. BAYH (for himself and Mr. OBAMA) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend title IV of the Social Security Act to ensure 

funding for grants to promote responsible fatherhood 

and strengthen low-income families, and for other purposes. 

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Responsible Fatherhood and Healthy Families Act of 

6 2007’’. 

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

8 this Act is as follows: 


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Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

TITLE I—PROMOTING RESPONSIBLE FATHERHOOD AND 

STRENGTHENING LOW-INCOME FAMILIES 

Sec. 101. Healthy marriage promotion and responsible fatherhood programs. 

Sec. 102. Grants to healthy family partnerships for domestic violence prevention, for services for families and individuals affected by domestic violence, and for developing and implementing best 

practices. 

Sec. 103. Elimination of separate TANF work participation rate for 2-parent 

families. 

Sec. 104. Ban on recovery of medicaid costs for births. 

Sec. 105. Improved collection and distribution of child support. 

Sec. 106. Grants to States to conduct demonstration projects to promote economic opportunity for low-income parents. 

Sec. 107. State assessments of barriers to employment and financial support of 

children. 

Sec. 108. Collection of child support under the food stamp program. 

TITLE II—REVENUE PROVISIONS 

Sec. 201. Modifications to the earned income tax credit. 

Sec. 202. Broker reporting of customer’s basis in securities transactions. 

Sec. 203. Modification of effective date of leasing provisions of the American 

Jobs Creation Act of 2004. 

Sec. 204. Clarification of economic substance doctrine. 

1 SEC. 2. FINDINGS. 

2 Congress makes the following findings: 

3 (1) The most important factor in a child’s up4 bringing is whether the child is brought up in a lov5 ing, healthy, supportive environment. 

6 (2) Children who grow up with two parents are, 

7 on average, more likely than their peers in single8 parent homes to finish high school and be economi9 cally self-sufficient. 

10 (3) Father-child interaction, like mother-child 

11 interaction, has been shown to promote the positive 

12 physical, social, emotional, and mental development 

13 of children. 


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1 (4) Children typically live without both parents 

2 when their parents are divorced or did not marry. 

More than 1 3 ⁄3 of all first marriages end in divorce, 

4 and 60 percent of divorcing couples have children. 

More than 1 5 ⁄3 of all births are to unmarried women. 

6 (5) More than 1 in 4 families with children 

7 have only 1 parent present, and more than 1 in 3 

8 children live absent their biological father. 

9 (6) Recent studies demonstrate that most 

10 unwed fathers in urban areas are highly involved 

11 with the mother of their child before and after the 

12 child’s birth, with 80 percent involved during the 

13 mother’s pregnancy, and 50 percent living with the 

14 child’s mother at the time of the child’s birth. How15 ever, the relationship between the parents often does 

16 not last, and many fathers do not maintain contact 

17 with their children as the children grow up. 

18 (7) An estimated 40 percent of the children 

19 who live in households without their father have not 

20 seen their fathers in at least 1 year. 

21 (8) The inability of parents to sustain a healthy 

22 relationship with their child’s other parent and re23 main involved in their child’s life can have severe 

24 negative consequences for the parents, the child, 

25 their community, and taxpayers. 


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1 (9) Single-parent families are 5 times as likely 

2 to be poor as married-couple families. 

3 (10) Children raised in single-parent families 

4 are more likely than children raised in 2-parent fam5 ilies to do poorly in school, have emotional and be6 havioral problems, become teenage parents, commit 

7 crimes, smoke cigarettes, abuse drugs and alcohol, 

8 and have poverty-level incomes as adults. 

9 (11) High rates of unemployment and low 

10 wages are primary reasons why parents do not 

11 marry, why 2-parent families break up, and why fa12 thers fail to remain involved with their children. 

13 (12) Domestic violence is also a significant 

14 problem leading to the non-formation or break-up of 

15 2-parent families. 

16 (13) A history of incarceration is a major bar17 rier to employment. 60 percent of young African18 American men who dropped out of high school have 

19 served time. When these men leave prison, they 

20 often have difficulty finding a job and supporting 

21 their children. 

(14) Over 1 22 ⁄2 of State prison inmates are par23 ents. When noncustodial parents go to prison, their 

24 child support obligations continue, even though they 

25 have little ability to pay the support. When these 


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1 parents leave prison, they typically owe more than 

2 $20,000 in child support debt. Noncustodial parents 

3 leaving prison often re-enter the underground econ4 omy because of financial pressures or to avoid the 

5 child support system, making it less likely that they 

6 will successfully rejoin society and reunite with their 

7 families. 

8 (15) Children should receive the child support 

9 paid by their parents, and the government should 

10 not keep the money to recover welfare costs. Regular 

11 child support income appears to have a greater posi12 tive impact on children dollar for dollar than other 

13 types of income. Researchers in Wisconsin found 

14 that when monthly child support was passed through 

15 to families receiving assistance under the Temporary 

16 Assistance for Needy Families program established 

17 under part A of title IV of the Social Security Act 

18 (TANF) and disregarded 100 percent in determining 

19 assistance for the families, fathers paid more child 

20 support, established their legal relationship with 

21 their children more quickly, and worked less in the 

22 underground economy. Moreover, the State costs of 

23 a full pass-through and disregard of child support 

24 were fully offset by increased payments by fathers 

25 and decreased public assistance use by families. 


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1 (16) The Department of Health and Human 

2 Services National Child Support Enforcement Stra3 tegic Plan for fiscal years 2005 through 2009 states 

4 that ‘‘child support is no longer a welfare reimburse5 ment, revenue-producing device for the Federal and 

6 State governments; it is a family-first program, in7 tended to ensure families’ self-sufficiency by making 

8 child support a more reliable source of income’’. 

9 (17) Current law permits States to apply the 

10 cost of passing through child support to families re11 ceiving assistance under the TANF program toward 

12 their maintenance of effort (MOE) requirements, 

13 but only to the extent that the State disregards the 

14 child support payments in determining the amount 

15 and type of TANF assistance. 

16 (18) Programs that increase employment oppor17 tunity and reduce barriers by increasing employment 

18 opportunity and reducing recidivism will benefit chil19 dren and families. 

20 (19) Transitional jobs programs have shown 

21 promise in reducing unemployment among chron22 ically unemployed or underemployed population 

23 groups, including formerly incarcerated individuals, 

24 the homeless, and young African-American men. 


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1 (20) To strengthen families it is important to 

2 improve the upward economic mobility of the custo3 dial and noncustodial parent wage-earners, as well 

4 as youth at risk of early parenthood or incarcer5 ation, by providing the skills and experience nec6 essary to access jobs with family-sustaining wages 

7 and benefits. In families in which all the members 

8 do not live together, this is important to enable the 

9 prompt and consistent payment of adequate child 

10 support. 

11 (21) It is important and useful to foster local 

12 and regional economic development and job advance13 ment for workers, especially young custodial and 

14 noncustodial parents, by funding local collaborations 

15 among business, education, and the community in 

16 the development of pathways for preparing disadvan17 taged citizens to meet the workforce needs of the 

18 local and regional economy. 

19 (22) Employers benefit from working with and 

20 being supported by the local education, post-sec21 ondary and workforce systems in identifying the aca22 demic and occupational skill sets needed to fill the 

23 skilled jobs in the changing economy. Local eco24 nomic and community development is enhanced 

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1 ment, thus increasing the tax base, fueling the econ2 omy, and contributing to greater family economic se3 curity. 

4 (23) Public-private career pathways partner5 ships are an important tool for linking employers 

6 and workers with the workforce education services 

7 they need and for integrating community economic 

8 development and workforce education services. Tran9 sitional jobs programs can serve as the first step in 

10 a career pathway by giving unemployed individuals 

11 with multiple barriers to employment, valuable work 

12 experience and related services. 

13 (24) The purpose of child support is to provide 

14 necessary income support for and increase the well15 being of children living apart from a parent. To im16 prove the ability of low-income noncustodial parents 

17 to provide long-term support and care for their chil18 dren throughout their entire childhood, it is impor19 tant that child support polices support parental ef20 forts to pursue education and employment and to 

21 stay involved with their children 

22 (25) Responsible parenthood includes active 

23 participation in financial support and child-rearing, 

24 as well as the formation and maintenance of a posi25 tive, healthy, and nonviolent relationship between 


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1 parent and child and a cooperative, healthy, and 

2 nonviolent relationship between parents. 

3 (26) States should be encouraged to implement 

4 voluntary programs that provide support for respon5 sible parenting, including by increasing the employ6 ment and financial security of parents, and the pa7 rental involvement of noncustodial parents. 

8 (27) Promoting responsible parenthood saves 

9 the government money by reducing the need for pub10 lic assistance, increasing the educational attainment 

11 of children, reducing juvenile delinquency and crime, 

12 reducing substance abuse, and lowering rates of un13 employment. 

14 (28) Programs to encourage responsible father15 hood or responsible motherhood should promote and 

16 provide support services for— 

17 (A) fostering loving and healthy relation18 ships between parents and children; 

19 (B) increasing responsibility of noncusto20 dial parents for the long-term care and finan21 cial well-being of their children; 

22 (C) increasing employment of low-income, 

23 noncustodial parents and improving compliance 

24 with child support obligations; and 


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1 (D) reducing barriers to active 2-parent in2 volvement and cooperative parenting. 

3 (29) The promotion of marriage and responsible 

4 parenthood should not denigrate the standing or 

5 parenting efforts of single parents or other care6 givers, lessen the protection of children from abusive 

7 parents, or compromise the safety or health of the 

8 custodial or noncustodial parent, but should increase 

9 the chance that children will have 2 caring parents 

10 to help them grow up healthy and secure. 

11 TITLE I—PROMOTING RESPON12 SIBLE FATHERHOOD AND 

13 STRENGTHENING LOW-IN14 COME FAMILIES 

15 SEC. 101. HEALTHY MARRIAGE PROMOTION AND RESPON16 SIBLE FATHERHOOD PROGRAMS. 

17 (a) ENSURING FUNDING FOR RESPONSIBLE FA18 THERHOOD PROGRAMS.—Section 403(a)(2)(C) of the So19 cial Security Act (42 U.S.C. 603(a)(2)(C)) is amended— 

20 (1) in the subparagraph heading, by striking 

21 ‘‘LIMITATION ON USE OF’’ and inserting ‘‘REQUIRE22 MENT TO USE CERTAIN’’; and 

23 (2) in clause (i), by striking ‘‘may not award 

24 more than $50,000,000’’ and inserting ‘‘shall award 

25 at least $100,000,000’’. 


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1 (b) REQUIREMENTS TO ENSURE PROCEDURES TO

2 ADDRESS DOMESTIC VIOLENCE PREVENTION.— 

3 (1) IN GENERAL.—Section 403(a)(2) of the So4 cial Security Act (42 U.S.C. 603(a)(2)) is amend5 ed— 

6 (A) by redesignating subparagraph (D) as 

7 subparagraph (G); and 

8 (B) by inserting after subparagraph (C) 

9 the following new subparagraphs: 

10 ‘‘(D) REQUIREMENTS FOR RECEIPT OF

11 FUNDS.—An entity may not be awarded a grant 

12 under this paragraph unless the entity, as a 

13 condition of receiving funds under such a 

14 grant— 

15 ‘‘(i) consults with domestic violence 

16 organizations that have demonstrated ex17 pertise working with survivors of domestic 

18 violence in developing policies, procedures, 

19 programs and training necessary to appro20 priately address domestic violence in fami21 lies served by programs and activities 

22 funded under such grant; 

23 ‘‘(ii) describes in the application for a 

24 grant under this paragraph— 


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1 ‘‘(I) how the programs or activi2 ties proposed to be conducted will ap3 propriately address issues of domestic 

4 violence; and 

5 ‘‘(II) what the entity will do, to 

6 the extent relevant, to ensure that 

7 participation in such programs or ac8 tivities is voluntary, and to inform po9 tential participants that their involve10 ment is voluntary; 

11 ‘‘(iii) establishes a written protocol for 

12 providers and administrators of programs 

13 and activities relevant to the grant that— 

14 ‘‘(I) provides for helping identify 

15 instances or risks of domestic violence; 

16 and 

17 ‘‘(II) specifies the procedures for 

18 making service referrals and providing 

19 protections and appropriate assistance 

20 for identified individuals and families; 

21 and 

22 ‘‘(iv) submits the annual reports re23 quired under subparagraph (E). 

24 ‘‘(E) ANNUAL REPORTS TO THE SEC25 RETARY.—Each entity awarded a grant under 


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1 this paragraph shall submit to the Secretary an 

2 annual report on the programs and activities 

3 funded under the grant that includes the fol4 lowing: 

5 ‘‘(i) A description of the written pro6 tocols developed in accordance with the re7 quirements of subparagraph (D)(iii) for 

8 each program or activity funded under the 

9 grant and how such protocols are used, in10 cluding specific policies and procedures for 

11 addressing domestic violence issues within 

12 each program or activity funded under the 

13 grant and how confidentiality issues are 

14 addressed. 

15 ‘‘(ii) The name of each individual, or16 ganization, or entity that was consulted in 

17 the development of such protocols. 

18 ‘‘(iii) A description of each individual, 

19 organization, or entity (if any) that pro20 vided training on domestic violence for the 

21 entity or for any subgrantees. 

22 ‘‘(iv) A description of any implemen23 tation issues identified with respect to do24 mestic violence and how such issues were 

25 addressed. 


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1 ‘‘(F) DOMESTIC VIOLENCE DEFINED.—In 

2 this paragraph, the term ‘domestic violence’ has 

3 the meaning given that term in section 

4 402(a)(7)(B).’’. 

5 (2) CONFORMING AMENDMENTS.—Section 

6 403(a)(2) of such Act (42 U.S.C. 603(a)(2)) is 

7 amended— 

8 (A) in subparagraph (A)(i)— 

9 (i) by striking ‘‘(B) and (C)’’ and in10 serting ‘‘(B), (C), (D), and (E)’’; and 

11 (ii) by striking ‘‘subparagraph (D)’’ 

12 and inserting ‘‘subparagraph (G)’’; 

13 (B) in subparagraphs (B)(i) and (C)(i), by 

14 striking ‘‘(D)’’ each place it appears and insert15 ing ‘‘(G)’’; and 

16 (C) in subparagraph (G) (as redesignated 

17 by paragraph (1)(A)), by striking 

18 ‘‘$150,000,000 for each of fiscal years 2006 

19 through 2010’’ and inserting ‘‘$150,000,000 

20 for each of fiscal years 2006 and 2007 and 

21 $200,000,000 for each of fiscal years 2008 

22 through 2010’’. 

23 (c) ASSURANCE OF VOLUNTARY PARTICIPATION.— 

24 Section 403(a)(2)(A)(ii)(II) of the Social Security Act (42 

25 U.S.C. 603(a)(2)(A)(ii)(II)) is amended— 


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1 (1) in item (aa), by striking ‘‘and’’ at the end; 

2 (2) in item (bb), by striking the period at the 

3 end and inserting a semicolon; and 

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

5 items: 

6 ‘‘(cc) to not condition the re7 ceipt of assistance under the pro8 gram funded under this part, 

9 under a program funded with 

10 qualified State expenditures (as 

11 defined in section 

12 409(a)(7)(B)(i)), or under any 

13 other program funded under this 

14 title on enrollment in any such 

15 programs or activities; and 

16 ‘‘(dd) to permit any indi17 vidual who has begun to partici18 pate in a particular program or 

19 activity funded under this para20 graph, including an individual 

21 whose participation is specified in 

22 the individual responsibility plan 

23 developed for the individual in 

24 accordance with section 408(b), 

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1 gram or activity funded under 

2 this paragraph upon notification 

3 to the entity and the State agen4 cy responsible for administering 

5 the State program funded under 

6 this part.’’. 

7 (d) ACTIVITIES PROMOTING RESPONSIBLE FATHER8 HOOD.—Section 403(a)(2)(C)(ii) of the Social Security 

9 Act (42 U.S.C. 603(a)(2)(C)(ii)) is amended— 

10 (1) in subclause (I), by striking ‘‘marriage or 

11 sustain marriage’’ and insert ‘‘healthy relationships 

12 and marriages or to sustain healthy relationships or 

13 marriages’’; 

14 (2) in subclause (II), by inserting ‘‘educating 

15 youth who are not yet parents about the economic, 

16 social, and family consequences of early parenting, 

17 helping participants in fatherhood programs work 

18 with their own children to break the cycle of early 

19 parenthood,’’ after ‘‘child support payments,’’; and 

20 (3) in subclause (III), by striking ‘‘fathers’’ and 

21 inserting ‘‘low-income fathers and other low-income 

22 noncustodial parents whom are not eligible for as23 sistance under the State program funded under this 

24 part’’. 


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1 (e) EFFECTIVE DATE.—The amendments made by 

2 this section shall take effect on October 1, 2007. 

3 SEC. 102. GRANTS TO HEALTHY FAMILY PARTNERSHIPS 

4 FOR DOMESTIC VIOLENCE PREVENTION, FOR 

5 SERVICES FOR FAMILIES AND INDIVIDUALS 

6 AFFECTED BY DOMESTIC VIOLENCE, AND 

7 FOR DEVELOPING AND IMPLEMENTING BEST 

8 PRACTICES. 

9 Section 403(a) of the Social Security Act (42 U.S.C. 

10 603(a)) is amended by adding at the end the following 

11 new paragraph: 

12 ‘‘(6) GRANTS TO HEALTHY FAMILY PARTNER13 SHIPS FOR DOMESTIC VIOLENCE PREVENTION, FOR

14 SERVICES FOR FAMILIES AND INDIVIDUALS AF15 FECTED BY DOMESTIC VIOLENCE, AND FOR DEVEL16 OPING AND IMPLEMENTING BEST PRACTICES.— 

17 ‘‘(A) IN GENERAL.—The Secretary shall 

18 award grants on a competitive basis to healthy 

19 family partnerships to— 

20 ‘‘(i) conduct programs and activities 

21 that are designed to prevent domestic vio22 lence; 

23 ‘‘(ii) provide services for victims of do24 mestic violence; and 


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1 ‘‘(iii) develop and implement best 

2 practices for preventing domestic violence, 

3 particularly as a barrier to economic secu4 rity, and for providing services to families 

5 and individuals affected by such violence 

6 including through caseworker training and 

7 the provision of technical assistance. 

8 ‘‘(B) EDUCATION SERVICES.—In awarding 

9 grants under subparagraph (A), the Secretary 

10 shall ensure that 10 percent of the funds made 

11 available under such grants are used for high 

12 schools and other secondary educational institu13 tions and institutions of higher education to 

14 provide education services on the value of 

15 healthy relationships, responsible parenting, 

16 and healthy marriages characterized by mutual 

17 respect and non-violence, and the importance of 

18 building relationships skills such as communica19 tion, conflict resolution, and budgeting. 

20 ‘‘(C) APPLICATION.—The respective entity 

21 and organization of a healthy family partner22 ship entered into for purposes of receiving a 

23 grant under this paragraph shall submit a joint 

24 application to the Secretary, at such time and 


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1 in such manner as the Secretary shall specify, 

2 containing— 

3 ‘‘(i) a description of how the partner4 ship intends to carry out the activities de5 scribed in subparagraph (A); 

6 ‘‘(ii) an assurance that funds made 

7 available under the grant shall be used to 

8 supplement, and not supplant, other funds 

9 used by the entity or organization to carry 

10 out programs, activities, or services de11 scribed in subparagraph (A) or (B); and 

12 ‘‘(iii) such other information as the 

13 Secretary may require. 

14 ‘‘(D) GENERAL RULES GOVERNING USE OF

15 FUNDS.—The rules of section 404, other than 

16 subsection (b) of that section, shall not apply to 

17 a grant made under this paragraph. 

18 ‘‘(E) DEFINITIONS.—In this paragraph: 

19 ‘‘(i) DOMESTIC VIOLENCE.—The term 

20 ‘domestic violence’ has the meaning given 

21 that term in section 402(a)(7)(B). 

22 ‘‘(ii) HEALTHY FAMILY PARTNER23 SHIP.—The term ‘healthy family partner24 ship’ means a partnership between— 


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1 ‘‘(I) an entity receiving funds 

2 under a grant made under paragraph 

3 (2) to promote healthy marriage or re4 sponsible fatherhood; and 

5 ‘‘(II) an organization described 

6 in paragraph (2)(D)(i). 

7 ‘‘(F) APPROPRIATION.—Out of any money 

8 in the Treasury of the United States not other9 wise appropriated, there are appropriated for 

10 each of fiscal years 2008 through 2010, 

11 $25,000,000 for purposes of awarding grants to 

12 healthy family partnerships under this para13 graph.’’. 

14 SEC. 103. ELIMINATION OF SEPARATE TANF WORK PAR15 TICIPATION RATE FOR 2-PARENT FAMILIES. 

16 (a) IN GENERAL.—Section 407 of the Social Security 

17 Act (42 U.S.C. 607) is amended— 

18 (1) in subsection (a)— 

19 (A) beginning in the heading, by striking 

20 ‘‘PARTICIPATION RATE REQUIREMENTS’’ and 

21 all that follows through ‘‘A State’’ in paragraph 

22 (1) and inserting ‘‘PARTICIPATION RATE RE23 QUIREMENTS.—A State’’; and 

24 (B) by striking paragraph (2); 

25 (2) in subsection (b)— 


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1 (A) in paragraph (1)(A), by striking ‘‘sub2 section (a)(1)’’ and inserting ‘‘subsection (a)’’; 

3 (B) in paragraph (2), by striking the para4 graph heading and all that follows through ‘‘A 

5 family’’ and inserting ‘‘SPECIAL RULE.—A fam6 ily’’; 

7 (C) in paragraph (4), by striking ‘‘para8 graphs (1)(B) and (2)(B)’’ and inserting ‘‘de9 termining monthly participation rates under 

10 paragraph (1)(B)’’; and 

11 (D) in paragraph (5), by striking ‘‘rates’’ 

12 and inserting ‘‘rate’’; and 

13 (3) in subsection (c)— 

14 (A) in paragraph (1)(B), in the matter 

15 preceding clause (i), by striking ‘‘subsection 

16 (b)(2)(B)’’ and inserting ‘‘subsection 

17 (b)(1)(B)(i)’’; and 

18 (B) in paragraph (2)(D)— 

19 (i) by striking ‘‘paragraphs (1)(B)(i) 

20 and (2)(B) of subsection (b)’’ and insert21 ing ‘‘subsection (b)(1)(B)(i)’’; and 

22 (ii) by striking ‘‘and in 2-parent fami23 lies, respectively,’’. 

24 (b) EFFECTIVE DATE.— 


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

2 subsection (a) shall take effect on the date of enact3 ment of this Act and shall apply to the determina4 tion of minimum participation rates for months be5 ginning on or after that date. 

6 (2) LIMITATION ON PENALTY IMPOSITION.— 

7 Notwithstanding section 409(a)(3) of the Social Se8 curity Act, the Secretary of Health and Human 

9 Services shall not impose a penalty against a State 

10 under that section on the basis of the State’s failure 

11 to satisfy the participation rate required for fiscal 

12 year 2006 and 2007 if the State demonstrates that 

13 the State would have met such requirement if, with 

14 respect to those months of fiscal year 2007 that 

15 began prior to or on the date of enactment of this 

16 Act, the State were permitted to count 2-parent 

17 families that met the requirements of section 

18 407(c)(1)(A) of the Social Security Act (42 U.S.C. 

19 607(c)(1)(A)) in the determination of monthly par20 ticipation rates under section 407(b)(1)(B)(i) of 

21 such Act (42 U.S.C. 607(b)(1)(B)(i)). 

22 SEC. 104. BAN ON RECOVERY OF MEDICAID COSTS FOR 

23 BIRTHS. 

24 (a) BA N ON RECOVERY.— 


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1 (1) IN GENERAL.—Section 454 of the Social 

2 Security Act (42 U.S.C. 654), is amended— 

3 (A) by striking ‘‘and’’ at the end of para4 graph (32); 

5 (B) by striking the period at the end of 

6 paragraph (33) and inserting a semicolon; and 

7 (C) by inserting after paragraph (33) the 

8 following: 

9 ‘‘(34) provide that, except as provided in sec10 tion 1902(a)(25)(F)(ii), the State shall not use the 

11 State program operated under this part to collect 

12 any amount owed to the State by reason of costs in13 curred under the State plan approved under title 

14 XIX for the birth of a child for whom support rights 

15 have been assigned pursuant to section 471(a)(17) 

16 or 1912; and’’. 

17 (2) RULE OF CONSTRUCTION.—Nothing in sec18 tion 454(34) of the Social Security Act (42 U.S.C. 

19 654(34)), as added by paragraph (1), shall be con20 strued as affecting the application of section 

21 1902(a)(25) of such Act (42 U.S.C. 1396a(a)(25)) 

22 with respect to a State (relating to the State Med23 icaid plan requirement for the State to take all rea24 sonable measures to ascertain the legal liability of 


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1 third parties to pay for care and services available 

2 under the plan). 

3 (3) REPEAL OF CERTAIN DRA AMENDMENTS.— 

4 For provisions repealing amendments to section 454 

5 of the Social Security Act made by section 

6 7301(b)(1)(C) of the Deficit Reduction Act of 2005, 

7 see section 105(a)(3) of this Act. 

8 (b) CLARIFICATION THAT BA N ON RECOVERY DOES

9 NOT APPLY WITH RESPECT TO INSURANCE OF A PARENT

10 WITH AN OBLIGATION TO PAY CHILD SUPPORT.—Clause 

11 (ii) of section 1902(a)(25)(F) of the Social Security Act 

12 (42 U.S.C. 1396a(a)(25)(F)) is amended by inserting 

13 ‘‘only if such third-party liability is derived through insur14 ance,’’ before ‘‘seek’’. 

15 (c) EFFECTIVE DATE.— 

16 (1) IN GENERAL.—Except as provided in para17 graph (2), the amendments made by this section 

18 take effect on October 1, 2007. 

19 (2) EXTENSION OF EFFECTIVE DATE FOR

20 STATE LAW AMENDMENT.—In the case of a State 

21 plan under title XIX of the Social Security Act (42 

22 U.S.C. 1396 et seq.) which the Secretary of Health 

23 and Human Services determines requires State legis24 lation in order for the plan to meet the additional 

25 requirements imposed by the amendments made by 


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1 this section, the State plan shall not be regarded as 

2 failing to comply with the requirements of such title 

3 solely on the basis of its failure to meet these addi4 tional requirements before the first day of the first 

5 calendar quarter beginning after the close of the 

6 first regular session of the State legislature that be7 gins after the date of enactment of this Act. For 

8 purposes of the previous sentence, in the case of a 

9 State that has a 2-year legislative session, each year 

10 of the session is considered to be a separate regular 

11 session of the State legislature. 

12 SEC. 105. IMPROVED COLLECTION AND DISTRIBUTION OF 

13 CHILD SUPPORT. 

14 (a) DISTRIBUTION OF CHILD SUPPORT.— 

15 (1) FULL DISTRIBUTION OF CHILD SUPPORT

16 COLLECTED; REFORM OF RULES FOR DISTRIBUTION

17 OF CHILD SUPPORT COLLECTED ON BEHALF OF

18 CHILDREN IN FOSTER CARE.— 

19 (A) IN GENERAL.—Section 457 of the So20 cial Security Act (42 U.S.C. 657) is amended— 

21 (i) by striking subsection (a) and in22 serting the following: 

23 ‘‘(a) FULL DISTRIBUTION OF AMOUNTS COLLECTED

24 ON BEHALF OF ANY FAMILY.—Subject to subsection (c), 

25 the entire amount collected on behalf of any family as supVerDate Aug 31 2005 02:16 Jun 20, 2007 Jkt 059200 PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 E:\BILLS\S1626.IS S1626

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1 port by a State pursuant to a plan approved under this 

2 part shall be paid by the State to the family, and shall 

3 not be retained by the State to reimburse costs of assist4 ance provided under part A, part E, or any State-funded 

5 assistance or benefits.’’; and 

6 (ii) by striking subsections (c) 

7 through (e) and inserting the following: 

8 ‘‘(c) AMOUNTS COLLECTED FOR CHILD FOR WHOM

9 FOSTER CARE MAINTENANCE PAYMENTS ARE MADE.— 

10 Notwithstanding the preceding provisions of this section, 

11 amounts collected by a State as child support for months 

12 in any period on behalf of a child for whom a public agen13 cy is making foster care maintenance payments under part 

14 E shall be paid to the public agency responsible for super15 vising the placement of the child, which, in the manner 

16 it determines will serve the best interests of the child, shall 

17 deposit the funds in a child asset account for the child’s 

18 future needs or make all or a part thereof available to 

19 the individual responsible for meeting the child’s day-to20 day needs.’’. 

21 (B) FOSTER CARE STATE PLAN AMEND22 MENT.—Section 471(a)(17) of the Social Secu23 rity Act (42 U.S.C. 671(a)(17)) is amended— 


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•S 1626 IS

1 (i) by inserting ‘‘and consistent with 

2 the child’s case plan’’ after ‘‘where appro3 priate’’; and 

4 (ii) by striking ‘‘secure an assignment 

5 to the State of any rights to support’’ and 

6 inserting ‘‘establish paternity and estab7 lish, modify, and enforce child support ob8 ligations’’. 

9 (C) SOCIAL SECURITY ACT AMEND10 MENTS.— 

11 (i) CHILD SUPPORT STATE PLAN

12 AMENDMENT.—Section 454 of the Social 

13 Security Act (42 U.S.C. 654), as amended 

14 by section 104(a)(1), is amended by adding 

15 at the end the following new paragraph: 

16 ‘‘(35) provide that a State shall pay all col17 lected child support to the payee, except as provided 

18 in section 457(c), and shall not use the State pro19 gram operated under this part to retain payments to 

20 recover the cost of State-funded assistance or bene21 fits.’’. 

22 (ii) DISBURSEMENT OF SUPPORT PAY23 MENTS.—Section 454B(c) of the Social Se24 curity Act (42 U.S.C. 654B(c)) is amended 


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•S 1626 IS

1 by adding at the end the following new 

2 paragraph: 

3 ‘‘(3) DISBURSEMENT TO FAMILIES.—The State 

4 disbursement unit shall pay all collected child sup5 port to the payee, except as otherwise provided in 

6 section 457, and may not disburse collections to the 

7 State to reimburse the State for assistance or bene8 fits provided under a State-funded program.’’. 

9 (2) CONFORMING AMENDMENTS.— 

10 (A) Section 409(a)(7)(B)(i)(I)(aa) of such 

11 Act (42 U.S.C. 609(a)(7)(B)(i)(I)(aa)) is 

12 amended by striking ‘‘457(a)(1)(B)’’ and in13 serting ‘‘457(a)’’. 

14 (B) Section 454(5) of such Act (42 U.S.C. 

15 654(5)) is amended by striking ‘‘(A) in any 

16 case’’ and all that follows through ‘‘(B)’’. 

17 (C) Section 466(a)(3)(B) of such Act (42 

18 U.S.C. 666(a)(3)(B)) is amended by striking 

19 ‘‘408(a)(3) or 671(a)(17)’’. 

20 (3) REPEAL OF CERTAIN DRA AMENDMENTS.— 

21 Effective on the date of enactment of this Act, sub22 sections (a) and (b) of section 7301 of the Deficit 

23 Reduction Act of 2005 (Public Law 109–171; 120 

24 Stat. 141) are repealed and parts A and D of title 

25 IV of the Social Security Act shall be applied as if 


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1 the amendments made by such subsections had not 

2 been enacted. 

3 (b) PROHIBITION ON CONDITIONING RECEIPT OF

4 TANF ON ASSIGNMENT OF SUPPORT.—Section 408(a)(3) 

5 of the Social Security Act (42 U.S.C. 608(a)(3)) is amend6 ed— 

7 (1) in the paragraph heading, by striking ‘‘NO

8 ASSISTANCE FOR FAMILIES NOT’’ and inserting 

9 ‘‘PROHIBITION ON CONDITIONING ASSISTANCE FOR

10 FAMILIES ON’’; 

11 (2) by inserting ‘‘not’’ after ‘‘shall’’; 

12 (3) by inserting ‘‘or under a program funded 

13 with qualified State expenditures (as defined in sec14 tion 409(a)(7)(B)(i))’’ after ‘‘this part’’; and 

15 (4) by striking ‘‘, not exceeding the total 

16 amount of assistance so paid to the family,’’. 

17 (c) REQUIREMENT TO DISREGARD PERCENTAGE OF

18 CHILD SUPPORT COLLECTED IN DETERMINING AMOUNT

19 AND TYPE OF TANF ASSISTANCE.—Section 408(a) of the 

20 Social Security Act (42 U.S.C. 608(a)) is amended by add21 ing at the end the following new paragraph: 

22 ‘‘(12) REQUIREMENT TO DISREGARD PERCENT23 AGE OF CHILD SUPPORT COLLECTED IN DETER24 MINING AMOUNT AND TYPE OF TANF ASSISTANCE.— 

25 A State to which a grant is made under section 403 


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1 shall disregard at least the same percentage of 

2 amounts collected as support on behalf of a family 

3 as the percentage of earned income that the State 

4 disregards in determining the amount or type of as5 sistance provided to the family under the State pro6 gram funded under this part or under a program 

7 funded with qualified State expenditures (as defined 

8 in section 409(a)(7)(B)(i)).’’. 

9 (d) STATE OPTION TO DISCONTINUE OLDER SUP10 PORT ASSIGNMENTS.—Effective as if included in the 

11 amendment made by section 7301(c) of the Deficit Reduc12 tion Act of 2005, section 457(b) of the Social Security 

13 Act (42 U.S.C. 657(b)) is amended to read as follows: 

14 ‘‘(b) CONTINUATION OF ASSIGNMENTS.— 

15 ‘‘(1) IN GENERAL.—Any rights to support obli16 gations assigned to a State as a condition of receiv17 ing assistance from the State under parts A and E 

18 and in effect on September 30, 2009 (or such earlier 

19 date as the State may choose), may be discontinued 

20 after such date. 

21 ‘‘(2) DISTRIBUTION OF AMOUNTS AFTER AS22 SIGNMENT DISCONTINUATION.—If a State chooses to 

23 discontinue the assignment of a support obligation 

24 described in paragraph (1), the State may treat 

25 amounts collected pursuant to the assignment as if 


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•S 1626 IS

1 the amounts had never been assigned and may dis2 tribute the amounts to the family in accordance with 

3 subsections (a) and (c).’’. 

4 (e) RESTORATION OF FEDERAL FUNDING.—Effec5 tive on the date of enactment of this Act, section 7309 

6 of the Deficit Reduction Act of 2005 (Public Law 109– 

7 171; 120 Stat. 147) is repealed and part D of title IV 

8 of the Social Security Act shall be applied as if the amend9 ment made by subsection (a) of that section had not been 

10 enacted. 

11 (f) REPEAL OF MANDATORY FEE FOR CHILD SUP12 PORT COLLECTION.—Effective on the date of enactment 

13 of this Act, section 7310 of the Deficit Reduction Act of 

14 2005 (Public Law 109–171; 120 Stat. 147) is repealed 

15 and part D of title IV of the Social Security Act shall 

16 be applied as if the amendments made by that section had 

17 not been enacted. 

18 (g) PROHIBITION ON CONSIDERING A PERIOD OF IN19 CARCERATION VOLUNTARY UNEMPLOYMENT.—Section 

20 466(a) of the Social Security Act (42 U.S.C. 666(a)) is 

21 amended by inserting after paragraph (19) the following 

22 new paragraph: 

23 ‘‘(20) PROCEDURES RELATING TO PERIODS OF

24 INCARCERATION OF NONCUSTODIAL PARENTS.— 


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1 ‘‘(A) IN GENERAL.—Procedures which re2 quire that, in determining or modifying the 

3 amount of, or terms and conditions of, any sup4 port obligation of a noncustodial parent, the 

5 State— 

6 ‘‘(i) shall not consider any period of 

7 incarceration of such parent as a period of 

8 voluntary unemployment that disqualifies 

9 the parent from obtaining a modification 

10 of the support obligation consistent with 

11 the parent’s ability to pay child support; 

12 and 

13 ‘‘(ii) subject to subparagraph (B) in 

14 the case of an incarcerated parent, may— 

15 ‘‘(I) temporarily suspend any 

16 support obligation on the parent and 

17 the enforcement of any support obli18 gation of the parent existing prior to 

19 the period of incarceration; and 

20 ‘‘(II) temporarily prohibit the ac21 crual of any interest on any support 

22 obligation of the parent existing prior 

23 to the period of incarceration during 

24 any such period. 


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1 ‘‘(B) NOTICE AND OPPORTUNITY TO CHAL2 LENGE SUSPENSION.—Such procedures shall re3 quire the State to provide a custodial parent 

4 with— 

5 ‘‘(i) notice of any suspension of re6 view, adjustment, or enforcement of a sup7 port obligation and of any prohibition on 

8 interest accrual on such obligation that is 

9 imposed in accordance with subparagraph 

10 (A)(ii); and 

11 ‘‘(ii) an opportunity to request that 

12 the suspension or prohibition be termi13 nated or modified on the basis that the 

14 noncustodial parent has sufficient income 

15 or resources to continue payment of the 

16 support obligation during the noncustodial 

17 parent’s period of incarceration.’’. 

18 (h) FORGIVING OR OTHER MODIFICATION OF CHILD

19 SUPPORT ARREARAGES ASSIGNED TO THE STATE.—Sec20 tion 466(a)(9) of the Social Security Act (42 U.S.C. 

21 666(a)(9)) is amended in the flush matter following sub22 paragraph (C), by inserting the following new sentence at 

23 the end: ‘‘Nothing in this paragraph shall be construed 

24 as prohibiting a State from forgiving, compromising, reVerDate Aug 31 2005 02:16 Jun 20, 2007 Jkt 059200 PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 E:\BILLS\S1626.IS S1626

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1 ducing or waiving arrearages permanently assigned to the 

2 State under part A or E or under title XIX.’’. 

3 (i) REVIEW AND ADJUSTMENT OF CHILD SUPPORT

4 ARREARAGES UPON REQUEST.—Section 466(a)(10) of 

5 the Social Security Act (42 U.S.C. 666(a)(10)) is amend6 ed by adding at the end the following new subparagraph: 

7 ‘‘(D) REVIEW AND ADJUSTMENT OF AR8 REARAGES.—Procedures which require the 

9 State to review, and if appropriate, reduce the 

10 balance of arrearages permanently assigned to 

11 the State under part A or E, or under title 

12 XIX, pursuant to standards and procedures es13 tablished by the State, in cases where the obli14 gor lacks sufficient ability to pay the arrears, 

15 adjustment will promote timely payment of cur16 rent support, or barriers, such as incarceration, 

17 may have limited the ability of the obligor to 

18 timely seek a modification of the order, and it 

19 is in the best interests of the child to make 

20 such reduction. Nothing in the preceding sen21 tence shall be construed as affecting arrearages 

22 that have not been permanently assigned to the 

23 State under such part or title.’’. 

24 (j) STUDY AND REPORT.—Not later than October 1, 

25 2008, the Secretary of Health and Human Services shall 


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•S 1626 IS

1 study and submit a report to Congress regarding the fol2 lowing: 

3 (1) The effect of age eligibility restrictions for 

4 the earned income tax credit established under sec5 tion 32 of the Internal Revenue Code of 1986 for in6 dividuals without qualifying children on— 

7 (A) the ability of young parents to pay 

8 child support; 

9 (B) compliance with child support orders; 

10 and 

11 (C) the relationship between young non12 custodial parents and their children. 

13 (2) The impact of State earned income tax 

14 credit programs, especially such programs with tar15 geted benefits for noncustodial parents, on— 

16 (A) the ability of noncustodial parents to 

17 pay child support; 

18 (B) compliance with child support orders; 

19 and 

20 (C) the relationship between noncustodial 

21 parents and their children. 

22 (3) The challenges faced by legal immigrants 

23 and individuals for whom English is not their pri24 mary language in fulfilling child support and other 

25 noncustodial parenting obligations. 


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1 (k) EFFECTIVE DATE.— 

2 (1) IN GENERAL.—Except as otherwise pro3 vided in this section, the amendments made by this 

4 section shall take effect on October 1, 2009, and 

5 shall apply to payments under parts A and D of title 

6 IV of the Social Security Act for calendar quarters 

7 beginning on or after that date, and without regard 

8 to whether regulations to implement the amend9 ments are promulgated by such date. 

10 (2) STATE OPTION TO ACCELERATE EFFECTIVE

11 DATE.—Notwithstanding paragraph (1), a State 

12 may elect to have the amendments made by the pre13 ceding provisions of this section apply to the State 

14 and to amounts collected by the State (and to pay15 ments under parts A and D of title IV of such Act), 

16 on and after such date as the State may select that 

17 is not later than September 30, 2009. 

18 SEC. 106. GRANTS TO STATES TO CONDUCT DEMONSTRA19 TION PROJECTS TO PROMOTE ECONOMIC OP20 PORTUNITY FOR LOW-INCOME PARENTS. 

21 (a) COURT–SUPERVISED OR IV–D AGENCY–SUPER22 VISED EMPLOYMENT PROGRAMS FOR NONCUSTODIAL

23 PARENTS.— 

24 (1) IN GENERAL.—The Secretary of Health and 

25 Human Services shall award grants to States to conVerDate Aug 31 2005 02:16 Jun 20, 2007 Jkt 059200 PO 00000 Frm 00036 Fmt 6652 Sfmt 6201 E:\BILLS\S1626.IS S1626

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1 duct demonstration projects to establish, in coordi2 nation with counties and other local or tribal govern3 ments, court-supervised or IV–D agency supervised4 employment programs for noncustodial parents who 

5 have barriers to employment and a history of non6 payment of child support obligations, as determined 

7 by a court or the IV–D agency, and who are deter8 mined by the court or agency to be in need of em9 ployment services or placement in order to pay such 

10 child support obligations. A noncustodial parent de11 scribed in the preceding sentence who is an ex-of12 fender shall be eligible to participate in a program 

13 established under this subsection. 

14 (2) REQUIREMENTS.— 

15 (A) OPTION TO PARTICIPATE PRIOR TO

16 CONTEMPT FINDING.—A State shall not be eli17 gible to receive a grant under this subsection 

18 unless any program established with funds 

19 made available under the grant provides non20 custodial parents described in paragraph (1) 

21 with an option to participate in the program 

22 prior to the court or agency entering a finding 

23 that the noncustodial parent is in contempt for 

24 failure to pay a child support obligation and, 

25 potentially subject to criminal penalties. 


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1 (B) PROGRAM GOALS.—An employment 

2 program established with funds made available 

3 under a grant awarded under this subsection 

4 shall be designed to do the following: 

5 (i) To assist noncustodial parents de6 scribed in paragraph (1) obtain and main7 tain unsubsidized employment. 

8 (ii) To increase the amount of finan9 cial support received by children. 

10 (iii) To help noncustodial parents de11 scribed in paragraph (1) improve relation12 ships with their children and their chil13 dren’s custodial parent. 

14 (C) 6 MONTHS OF CONTINUOUS, TIMELY

15 PAYMENTS.—An employment program estab16 lished with funds made available under this 

17 subsection shall not permit a noncustodial par18 ent placed in the program to graduate from the 

19 program and avoid penalties for failure to pay 

20 a child support obligation until the noncustodial 

21 parent completes at least 6 months of contin22 uous, timely payment of the parent’s child sup23 port obligations. 

24 (D) USE OF FUNDS.— 


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•S 1626 IS

1 (i) Services provided under an employ2 ment program established with funds made 

3 available under a grant made under this 

4 subsection must include the following: 

5 (I) Job placement, including job 

6 development and supervised job search 

7 as necessary. 

8 (II) Case management, including 

9 educational assessment and advising, 

10 vocational assessment and career ex11 ploration services, and court liaison 

12 services. 

13 (III) Counseling on responsible 

14 parenthood. 

15 (IV) Referral for support and 

16 educational services. 

17 (V) Employment retention serv18 ices. 

19 (ii) Services provided under an em20 ployment program established with funds 

21 made available under a grant made under 

22 this subsection may include the following: 

23 (I) Remedial education services 

24 or educational referral. 


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•S 1626 IS

1 (II) Support funds for services 

2 such as transportation, child care, or 

3 job readiness training. 

4 (III) Transitional jobs programs. 

5 (IV) Public-private career path6 way partnerships established in ac7 cordance with subsection (b)(2). 

8 (V) Occupational skill training, 

9 including college credit programs. 

10 (VI) Curricula development. 

11 (E) ADMINISTRATION.—A State that re12 ceives a grant under this subsection may con13 tract with a public or private nonprofit organi14 zation, including a faith-based or community15 based organization, to administer (in conjunc16 tion with the court of jurisdiction or the IV–D 

17 agency) the court-supervised or IV–D agency18 supervised employment program. 

19 (b) TRANSITIONAL JOBS AND CAREER PATHWAYS

20 PARTNERSHIP GRANTS.—The Secretary of Labor shall 

21 award grants to States to conduct demonstration projects 

22 to carry out one or more of the projects described in para23 graphs (1) and (2). 

24 (1) TRANSITIONAL JOBS GRANTS.— 


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•S 1626 IS

1 (A) IN GENERAL.—The Secretary of Labor 

2 may award grants under this subsection to es3 tablish and expand transitional jobs programs 

4 for eligible individuals, including such programs 

5 conducted by local governments, State employ6 ment agencies, nonprofit organizations, and 

7 faith-based or community-based organizations 

8 or intermediaries, that— 

9 (i) combine time-limited employment 

10 in transitional jobs that may be subsidized 

11 with public funds, with activities that pro12 mote skill development and remove barriers 

13 to employment, such as case management 

14 services and education, training, child sup15 port-related services, and other activities, 

16 pursuant to individual plans; and 

17 (ii) provide such individuals with— 

18 (I) transitional jobs placements 

19 and job placement assistance, to help 

20 the individuals make the transition 

21 from subsidized employment in transi22 tional jobs to stable unsubsidized em23 ployment; and 


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•S 1626 IS

1 (II) retention services after the 

2 transition to unsubsidized employ3 ment. 

4 (B) ELIGIBLE INDIVIDUALS.—For pur5 poses of this paragraph, the term ‘‘eligible indi6 viduals’’ means individuals within any of the 

7 following categories of disproportionately chron8 ically unemployed individuals: 

9 (i) Individuals who have attained age 

10 16, but not attained age 36, and who have 

11 documented barriers to employment such 

12 as lack of a high school diploma, limited 

13 English proficiency, aging out of foster 

14 care, or offender status, particularly such 

15 individuals who are parents or expectant 

16 parents. 

17 (ii) Formerly incarcerated individuals. 

18 (iii) Homeless or formerly homeless 

19 individuals. 

20 (iv) Individuals with disabilities. 

21 (v) Individuals designated by a court 

22 or the IV–D agency to participate in tran23 sitional jobs programs. 

24 (C) LIMITATIONS ON USE OF FUNDS.— 


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•S 1626 IS

1 (i) ALLOWABLE ACTIVITIES.—A State 

2 that receives a grant under this paragraph 

3 (or a subgrantee of such State) (referred 

4 to in this paragraph as the ‘‘program oper5 ator’’) shall use the funds made available 

6 under the grant to operate a transitional 

7 jobs program for eligible individuals con8 sistent with the following requirements: 

9 (I) JOBS.—The program oper10 ator shall place eligible individuals in 

11 temporary jobs, the incomes from 

12 which may be subsidized in whole or 

13 in part with public funds. An eligible 

14 individual placed in such a job (re15 ferred to in this paragraph as ‘‘a par16 ticipant’’) shall perform work directly 

17 for the program operator or another 

18 public, nonprofit, or private sector or19 ganization (which operator or organi20 zation may be referred to in this para21 graph as a ‘‘worksite employer’’) with22 in the community involved. 

23 (II) HOURS.— 

24 (aa) IN GENERAL.—Subject 

25 to item (bb), the transitional jobs 


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•S 1626 IS

1 program shall provide a partici2 pant with not less than 30, and 

3 not more than 40, hours per 

4 week of a combination of paid 

5 employment and the services de6 scribed in subclauses (III), (IV), 

7 and (V). 

8 (bb) ACCOMMODATION OF

9 SPECIAL CIRCUMSTANCES.—The 

10 number of hours per week re11 quired under item (aa) may be 

12 adjusted in the case of a partici13 pant who requires a modified 

14 work week to accommodate spe15 cial circumstances. 

16 (III) JOB PREPARATION AND

17 SERVICES.—The program operator 

18 shall— 

19 (aa) develop an individual 

20 plan for each participant, which 

21 shall contain a goal that focuses 

22 on preparation of the participant 

23 for unsubsidized jobs in demand 

24 in the local economy that offer 

25 the potential for advancement 


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•S 1626 IS

1 and growth (including increases 

2 in wages and benefits); 

3 (bb) develop transitional 

4 jobs placements for participants 

5 that will best prepare them for 

6 jobs described in item (aa) or 

7 participation in the public-private 

8 career pathway partnerships es9 tablished in accordance with 

10 paragraph (2); and 

11 (cc) provide case manage12 ment services and ensure that 

13 appropriate education, training, 

14 and other activities are available 

15 to participants, consistent with 

16 each participant’s individual 

17 plan. 

18 (IV) JOB PLACEMENT ASSIST19 ANCE AND RETENTION SERVICES.— 

20 The program operator shall provide 

21 job placement assistance to help par22 ticipants obtain unsubsidized employ23 ment and shall provide retention serv24 ices to the participants for a minimum 


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•S 1626 IS

1 of 6 months after entry into the un2 subsidized employment. 

3 (V) EDUCATION OR TRAINING.— 

4 In any workweek in which a partici5 pant is scheduled to work at least 30 

6 hours in the program, not less than 

7 20 percent of the scheduled hours and 

8 not more than 50 percent of the 

9 scheduled hours shall involve partici10 pation in— 

11 (aa) education or training 

12 activities designed to improve the 

13 participant’s employability and 

14 potential earnings; 

15 (bb) other activities designed 

16 to reduce or eliminate any bar17 riers that may impede the par18 ticipant’s ability to secure and 

19 advance in unsubsidized employ20 ment; or 

21 (cc) activities designed to 

22 promote financial literacy and the 

23 use of products and services that 

24 increase personal savings and 

25 build financial assets for family 


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•S 1626 IS

1 support, education, homeowner2 ship, and retirement. 

3 (VI) DURATION.— 

4 (aa) IN GENERAL.—Subject 

5 to item (bb), the duration of any 

6 placement in the program shall 

7 be for a minimum period of 3 

8 consecutive months. 

9 (bb) 3-MONTH EXTEN10 SION.—A program placement 

11 may be extended for up to 2 ad12 ditional consecutive 3-month pe13 riods upon the conclusion of the 

14 original 3-month placement pe15 riod if such extension would be 

16 consistent with the individual’s 

17 plan for transition to unsub18 sidized employment. 

19 (VII) SUPERVISION.—The work20 site employer or program operator 

21 shall supervise program participants, 

22 consistent with the goal of addressing 

23 the limited work experience and skills 

24 of the participants. 


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•S 1626 IS

1 (D) REPORTS.—Not later than 120 days 

2 after the end of the grant period, the State 

3 shall submit a report to the Secretary of Labor 

4 that contains information on the number of 

5 participants in the program who have entered 

6 unsubsidized employment, the percentage of 

7 program participants who are employed during 

8 the second quarter after exit, the percentage of 

9 program participants who are employed during 

10 the fourth quarter after exit, the median earn11 ings of program participants during the second 

12 quarter after exit, the percentage of program 

13 participants who obtain an education or train14 ing credential during participation or within one 

15 year of exit, and demographic information re16 garding the participants. 

17 (E) TECHNICAL ASSISTANCE.—The Sec18 retary of Labor shall enter into contracts with 

19 entities with demonstrated experience in the 

20 provision of transitional jobs to provide tech21 nical assistance to the program operators and 

22 worksite employers for the programs assisted 

23 under this paragraph. 

24 (2) PUBLIC-PRIVATE CAREER PATHWAYS PART25 NERSHIPS.— 


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•S 1626 IS

1 (A) IN GENERAL.—To allow workforce 

2 education providers representing career path3 way partnerships— 

4 (i) to create or expand career path5 ways, with groups of employers in specific 

6 industry or occupational sectors, for dis7 advantaged workers, which may include 

8 any mix of such employers’ existing lower 

9 wage employees, new hires or potential 

10 hires; or 

11 (ii) to fill in gaps in career pathways 

12 in particular localities or regions as needed 

13 to ensure that career pathways are acces14 sible to unemployed disadvantaged workers 

15 and at risk youth who have lower skills or 

16 limited English proficiency, including 

17 through the creation of workforce edu18 cation services, such as ‘‘bridge’’ programs 

19 that contextualize basic skills, English lan20 guage, or college remedial education serv21 ices to specific career pathways, and ef22 forts to create opportunities for gaining 

23 work experience in a career pathway. 

24 (B) USE OF FUNDS.—Funds made avail25 able under a grant under this paragraph may 


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•S 1626 IS

1 be used by career pathways partnerships for 

2 any expense reasonably related to the accom3 plishment of the specific objectives of the part4 nership and the purpose described in this para5 graph, including any of the activities described 

6 in subsection (a)(2)(D). 

7 (C) LIMITATIONS.— 

8 (i) IN GENERAL.—Of the funds made 

9 available to a career pathway partnership 

10 to carry out the purpose described in this 

11 paragraph— 

12 (I) not more than 30 percent of 

13 such funds may be used to pay or 

14 subsidize wages during a period of 

15 work experience or internship, not to 

16 exceed 90 days; and 

17 (II) not more than 10 percent of 

18 such funds may be used for adminis19 trative purposes, but this limitation 

20 shall not apply to activities related to 

21 building and maintaining partner22 ships, including such activities as con23 ducting workforce needs assessments, 

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1 tomized curricula, and developing 

2 work experience opportunities. 

3 (ii) PROHIBITION ON SUBSIDIZING

4 WAGES OF CURRENT EMPLOYEES.—No 

5 funds made available to carry out this 

6 paragraph shall be used to subsidize the 

7 wages of any individual who, as of the date 

8 of the establishment of the career pathway 

9 partnership, is an employee of any em10 ployer participating in the partnership. 

11 (D) REQUIREMENTS FOR AWARDING OF

12 SUBGRANTS.— 

13 (i) IN GENERAL.—Funds shall be 

14 made available to career pathway partner15 ships to carry out the purpose described in 

16 this paragraph based on a performance17 based accountability system that includes 

18 the following measures of performance: 

19 (I) The number of individuals to 

20 be trained. 

21 (II) The percentage of such indi22 viduals who complete the program. 

23 (III) The percentage of such in24 dividuals who enter or advance in em25 ployment. 


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1 (IV) The wage and benefit gains 

2 of individuals who complete the pro3 gram before and within 6 months 

4 after their program completion, in5 cluding the extent to which the indi6 viduals achieved economic self-suffi7 ciency. 

8 (V) The percentage of individuals 

9 who complete the program and enter 

10 employment who retain employment 

11 for at least 6 months. 

12 (VI) Where applicable, the per13 centage of individuals who owe child 

14 support and complete the program 

15 who improve in their payment of child 

16 support within 6 months after their 

17 program completion. 

18 In establishing goals for such measures, 

19 due consideration shall be given to the edu20 cation, work experience, and job readiness 

21 of the individuals expected to participate in 

22 the program; the barriers of such individ23 uals to employment, and the local job mar24 ket. 


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1 (ii) CONSIDERATIONS FOR FUNDING

2 RENEWALS.—A subgrantee’s level of suc3 cess in achieving employment, advance4 ment, wage, and employment retention 

5 goals shall be a primary consideration for 

6 determining whether to renew a grant 

7 made to such entity and the funding level 

8 for such grant. 

9 (iii) PRIORITIES FOR AWARDS OF SUB10 GRANTS.—In awarding subgrants under 

11 this paragraph, a State shall give priority 

12 to applications that— 

13 (I) propose to serve areas of high 

14 poverty, high youth unemployment, 

15 high drop out rates, or high rates of 

16 low-income single-parent families; 

17 (II) include a substantial cash or 

18 in-kind match by all employers, in19 cluding joint labor-management pro20 grams where applicable, in the part21 nerships, such as paid release time for 

22 employed workforce education partici23 pants; 

24 (III) use instructional materials 

25 and instructors directly used in the 


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1 specific business or industry sectors of 

2 the partnership employers; 

3 (IV) link successful completion of 

4 workforce education services to wage 

5 increases, promotions or job hires; 

6 (V) will result in attainment of 

7 employer-recognized occupational and 

8 educational credentials; 

9 (VI) address career guidance and 

10 adult basic education and English lan11 guage needs as well as job-specific 

12 skills; 

13 (VII) demonstrate a blending of 

14 resources from partner agencies in the 

15 workforce system and other sectors 

16 and Federal programs, including su17 perior procedures for coordinating re18 sponsible fatherhood promotion activi19 ties, where appropriate, to support the 

20 development of high quality pathways; 

21 (VIII) identify how the sub22 grantee will maximize services to un23 employed disadvantaged workers who 

24 also face other barriers in the labor 

25 market, such as high school dropout, 


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1 offender status, aging out of foster 

2 care, low basic skill level, including 

3 limited English proficiency, learning 

4 disabilities, physical, emotional or be5 havior disabilities, or substance abuse 

6 recovery, which may be through direct 

7 relationships with local providers of 

8 transitional jobs programs under 

9 which in appropriate circumstances 

10 transitional jobs participants may ac11 cess career pathways programs upon 

12 completion of the transitional jobs 

13 program; and 

14 (IX) support collaboration, as ap15 propriate, between employers and 

16 labor organizations and other work17 force development professionals, in18 cluding joint labor management train19 ing and education programs where ap20 propriate. 

21 (E) DEFINITIONS.—In this paragraph: 

22 (i) ADULT EDUCATION.—The term 

23 ‘‘adult education’’ has the meaning given 

24 that term in section 203 of the Workforce 

25 Investment Act of 1998 (20 U.S.C. 9202). 


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1 (ii) CAREER PATHWAY.—The term 

2 ‘‘career pathway’’ means a linked set of 

3 workforce education and job opportunities 

4 within a specific industry sector, or for an 

5 occupational sector that cuts across mul6 tiple business and industry sectors, which 

7 begins at the lowest skill and English lan8 guage levels, and extends through for-cred9 it college opportunities such as earning rel10 evant associate or bachelor’s degrees, and 

11 prepares individuals for advancement in 

12 jobs in demand in the local or regional 

13 labor market. 

14 (iii) COMMUNITY-BASED PROVIDER.— 

15 The term ‘‘community-based provider’’ 

16 means a not-for-profit organization, with 

17 local boards of directors, that directly pro18 vides workforce education services. 

19 (iv) INSTITUTION OF HIGHER EDU20 CATION.—The term ‘‘institution of higher 

21 education’’ has the meaning given that 

22 term in section 101 of the Higher Edu23 cation Act of 1965 (20 U.S.C. 1001). 

24 (v) CHARTER SCHOOL.—The term 

25 ‘‘charter school’’ has the meaning given 


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1 that term in section 5210 of the Elemen2 tary and Secondary Education Act of 1965 

3 (20 U.S.C. 7221i). 

4 (vi) AREA VOCATIONAL EDUCATION

5 SCHOOL.—The term ‘‘area vocational and 

6 technical education school’’ has the mean7 ing given that term in section 3 of the Carl 

8 D. Perkins Vocational and Technical Edu9 cation Act of 1998 (20 U.S.C. 2302). 

10 (vii) DISADVANTAGED WORKERS.— 

11 The term ‘‘disadvantaged workers’’ means 

12 unemployed individuals in low-income 

13 households or employed individuals in low14 income households with wages at or below 

2 15 ⁄3 of the median wage for the State or re16 gion applying for the grant. 

17 (viii) CAREER PATHWAY PARTNER18 SHIP.—The term ‘‘career pathway partner19 ship’’ means collaborations of 1 or more 

20 workforce education providers, 1 or more 

21 employers, 1 or more labor organizations, 

22 where applicable, as a result of such orga23 nization’s representation of employees at 

24 the worksite who have skills in which the 

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1 posed, and may include optional additional 

2 entities as needed to provide a comprehen3 sive range of workforce education and an4 cillary support services. 

5 (ix) WORKFORCE EDUCATION.—The 

6 term ‘‘workforce education’’ means a set of 

7 career guidance and exploration services, 

8 adult education and English language serv9 ices, job training, registered apprenticeship 

10 programs, and credit and non-credit post11 secondary education services aimed at pre12 paring individuals to enter and sustain em13 ployment in specific occupations and to 

14 have the sufficient skills to respond to 

15 shifting employment opportunities. 

16 (x) WORKFORCE EDUCATION PRO17 VIDER.—The term ‘‘workforce education 

18 provider’’ means community-based pro19 viders, institutions of higher education, 

20 area vocational and technical education 

21 schools, charter schools, and other public 

22 nonprofit entities that have a demonstrated 

23 capacity to provide quality workforce edu24 cation services. 

25 (c) MATCHING REQUIREMENT.— 


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

2 Human Services and the Secretary of Labor may 

3 not award a grant to a State under this section un4 less the State agrees that, with respect to the costs 

5 to be incurred by the State in conducting a dem6 onstration project with funds provided under the 

7 grant, the State will make available non-Federal 

8 contributions in an amount equal to 10 percent of 

9 the amount of Federal funds paid to the State under 

10 such grant. 

11 (2) NON-FEDERAL CONTRIBUTIONS.—In this 

12 subsection, the term ‘‘non-Federal contributions’’ in13 cludes contributions by the State and by public and 

14 private entities that may be in cash or in kind, but 

15 does not include any amounts provided by the Fed16 eral Government, or services assisted or subsidized 

17 to any significant extent by the Federal Government, 

18 or any amount expended by a State before October 

19 1, 2007. 

20 (d) WORKER PROTECTIONS AND LABOR STAND21 ARDS.— 

22 (1) RATE OF PAY; BENEFITS AND WORKING

23 CONDITIONS.— 

24 (A) IN GENERAL.—A worksite employer of 

25 a participant in a program or activity funded 


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1 under this section shall pay the participant at 

2 the rate paid to employees of the worksite em3 ployer who are not participants in such pro4 gram or activity and who perform comparable 

5 work at the worksite, including periodic in6 creases where appropriate. If no other employ7 ees of the worksite employer perform com8 parable work at the worksite, the worksite em9 ployer shall pay the participant not less than 

10 the applicable Federal or State minium wage, 

11 whichever is higher. 

12 (B) BENEFITS AND CONDITIONS.—An in13 dividual employed through participation in a 

14 program or activity funded under this section 

15 shall be provided with benefits and working 

16 conditions at the same level and to the same ex17 tent as such benefits and conditions are pro18 vided to other employees of the employer of the 

19 individual who have worked a similar length of 

20 time and perform the same work 

21 (2) NONDUPLICATION.— 

22 (A) IN GENERAL.—Funds provided 

23 through a grant made under this paragraph 

24 shall be used only for a program or activity that 

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1 gram or activity otherwise available in the local2 ity of the program or activity funded under this 

3 section. 

4 (B) PRIVATE, NONPROFIT ENTITY.—Funds 

5 provided through a grant made under this sec6 tion shall not be provided to a private nonprofit 

7 entity to conduct programs or activities that are 

8 the same as or substantially equivalent to ac9 tivities provided by a State or local government 

10 agency in the area in which such entity is lo11 cated, unless the requirements of paragraph (3) 

12 are met. 

13 (3) NONDISPLACEMENT.— 

14 (A) IN GENERAL.—A worksite employer 

15 shall not displace an employee or position (in16 cluding partial displacement such as reduction 

17 in hours, wages, or employment benefits) or im18 pair contracts for services or collective bar19 gaining agreements, as a result of the use by 

20 such employer of a participant in a program or 

21 activity funded under this section, and no par22 ticipant in the program or activity shall be as23 signed to fill any established unfilled position 

24 vacancy. 


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1 (B) JOB OPPORTUNITIES.—A job oppor2 tunity shall not be created under this paragraph 

3 that will infringe in any manner on the pro4 motional opportunity of an employed individual. 

5 (C) LIMITATION ON SERVICES.— 

6 (i) SUPPLANTATION OF HIRING.—A 

7 participant in any program or activity 

8 funded under this section shall not perform 

9 any services or duties, or engage in activi10 ties, that will supplant the hiring of em11 ployees that are not participants in the 

12 program or activity. 

13 (ii) DUTIES FORMERLY PERFORMED

14 BY ANOTHER EMPLOYEE.—A participant 

15 in any program or activity funded under 

16 this section shall not perform services or 

17 duties, or engage in activities, that are 

18 services, duties, or activities that had been 

19 performed by or were assigned to any em20 ployee who recently resigned or was dis21 charged, who is subject to a reduction in 

22 force, who has recall rights pursuant to a 

23 collective bargaining agreement or applica24 ble personnel procedures, who is on leave 

25 (such as terminal, temporary, vacation, 


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1 emergency, or sick leave), who is on strike, 

2 or who is being locked out. 

3 (D) CONCURRENCE OF LOCAL LABOR OR4 GANIZATION.—No placement shall be made 

5 under a program or activity funded under this 

6 section until the entity conducting the program 

7 or activity has obtained the written concurrence 

8 of any local labor organization representing em9 ployees who are engaged in the same or sub10 stantially similar work as that proposed to be 

11 carried out for the worksite employer with 

12 whom a participant is to be placed under the 

13 program or activity. 

14 (4) NO IMPACT ON UNION ORGANIZING.—A 

15 State conducting a demonstration project funded 

16 under this section and any entity conducting a pro17 gram or activity funded under this section shall pro18 vide the Secretary with a certified assurance that 

19 none of such funds shall be used to assist or deter 

20 union organizing. 

21 (5) ACCOUNTABILITY.— 

22 (A) IN GENERAL.—Funds provided under 

23 this section shall not be used to subsidize train24 ing or employment with an employer that has 

25 a demonstrable record of noncompliance with 


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1 Federal labor, civil rights, workplace safety, or 

2 related laws. 

3 (B) CERTIFIED SATISFACTORY RECORD.— 

4 Employers who receive training or wage sub5 sidies under programs or activities funded 

6 under this section shall have a satisfactory 

7 record in labor relations and employment prac8 tices, as certified by the Secretary of Labor. 

9 (C) APPLICATION OF WORKER PROTEC10 TION LAWS.—A participant in a program or ac11 tivity funded under this section shall be consid12 ered to be an employee of any employer that 

13 the participant is placed with for all purposes 

14 under Federal and State law, including laws re15 lating to health and safety, civil rights, and 

16 worker’s compensation. 

17 (D) OTHER JOB QUALITY STANDARDS.— 

18 Employers who receive training or wage sub19 sidies under programs or activities funded 

20 under this section shall meet all applicable 

21 State or local job or employer quality standards 

22 regarding such issues as wages, benefits, ad23 vancement opportunities, and turnover rates es24 tablished for programs funded under the WorkVerDate Aug 31 2005 02:16 Jun 20, 2007 Jkt 059200 PO 00000 Frm 00064 Fmt 6652 Sfmt 6201 E:\BILLS\S1626.IS S1626

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1 force Investment Act of 1998 (29 U.S.C. 2801 

2 et seq.). 

3 (6) GRIEVANCE PROCEDURE.—An entity con4 ducting a program or activity funded under this sec5 tion shall establish and maintain a procedure for the 

6 filing and adjudication of grievances by employees of 

7 worksite employers who are not participants in the 

8 program, or such employees’ representatives, or by 

9 participants in such a program or activity alleging a 

10 violation of a provision of this subsection that is 

11 similar to the grievance procedure established by a 

12 State for purposes of section 407(f)(3) of the Social 

13 Security Act (42 U.S.C. 607(f)(3)). 

14 (7) NONPREEMPTION OF STATE LAW.—The 

15 provisions of this subsection shall not be construed 

16 to preempt any provision of State law that affords 

17 greater protections to employees or participants than 

18 are afforded by this subsection. 

19 (8) TREATMENT OF AMOUNTS PAID TO PAR20 TICIPANTS.—Amounts paid to a participant in a 

21 program or activity funded under this section shall 

22 be— 

23 (A) considered earned income for purpose 

24 of determining the participant’s eligibility for 

25 the child tax credit established under section 24 


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1 of the Internal Revenue Code of 1986, the 

2 earned income tax credit established under sec3 tion 32 of such Code, and any other tax benefit 

4 established under such Code the eligibility for 

5 which is based on earned income; and 

6 (B) disregarded for purposes of deter7 mining the participant’s, the participant’s fam8 ily’s, or the participant’s household’s eligibility 

9 for, or amount of, assistance or benefits pro10 vided under any means-tested program funded 

11 in whole or in part with Federal funds. 

12 (e) APPLICATION.— 

13 (1) REQUIREMENTS FOR ALL APPLICATIONS.— 

14 (A) IN GENERAL.—A State desiring to re15 ceive a grant to conduct a demonstration 

16 project under this section shall submit an appli17 cation— 

18 (i) to the Secretary of Health and 

19 Human Services, in the case of a grant 

20 under subsection (a); or 

21 (ii) to the Secretary of Labor, in the 

22 case of a grant under subsection (b); 

23 at such time, in such manner, and containing 

24 such information or assurances as the Secretary 


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1 of Health and Human Services or the Secretary 

2 of Labor, as appropriate, may require. 

3 (B) COMPLIANCE WITH WORKER PROTEC4 TIONS AND LABOR STANDARDS.—The applica5 tion shall include an assurance that the State 

6 and any entity conducting a program or activity 

7 under the project shall comply with the worker 

8 protections and labor standards established in 

9 accordance with such protections under sub10 section (d). 

11 (C) NONDISCRIMINATION.—The applica12 tion shall include an assurance that the State 

13 and any entity conducting a program or activity 

14 under the demonstration project shall comply 

15 with section 188(a)(2) of the Workforce Invest16 ment Act of 1998 (29 U.S.C. 2938(a)(2)) to 

17 the same extent that such section would apply 

18 to the entity if the program or activity con19 ducted under the demonstration project was 

20 considered to be funded or otherwise financially 

21 assisted under that Act. 

22 (D) ASSURANCE GRANT WILL SUPPLE23 MENT, NOT SUPPLANT, OTHER STATE FUND24 ING.—The application shall include an assur25 ance from the chief executive officer of the 


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1 State that funds made available under the 

2 grant will supplement, and not supplant, other 

3 funds used by the State to establish or support 

4 employment placements for low-income parents. 

5 (2) SPECIFIC DEMONSTRATION PROJECT RE6 QUIREMENTS.— 

7 (A) COURT–SUPERVISED OR IV–D AGENCY– 

8 SUPERVISED EMPLOYMENT PROGRAMS FOR

9 NONCUSTODIAL PARENTS.—In order to conduct 

10 a demonstration project described in subsection 

11 (a), a State shall include in the application sub12 mitted to the Secretary of Health and Human 

13 Services the following: 

14 (i) Evidence of an agreement between 

15 the State and 1 or more counties to estab16 lish an employment program that meets 

17 the requirements of subsection (a). 

18 (ii) The number of potential noncusto19 dial parents to be served by the program. 

20 (iii) The purposes specific to that 

21 State’s program. 

22 (iv) The median income of the target 

23 population. 

24 (B) PUBLIC-PRIVATE CAREER PATHWAYS

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1 onstration project described in paragraph (2) of 

2 subsection (b), a State shall include in the ap3 plication submitted to the Secretary of Labor a 

4 description of— 

5 (i) the number, characteristics, and 

6 employment and earnings status of dis7 advantaged individuals in the State or ap8 plicable region where the program is to be 

9 conducted; 

10 (ii) which business and industry sec11 tors, or occupational clusters that cut 

12 across sectors, will be targeted by the ca13 reer pathways partnership, based on over14 all economic benefit to the community, the 

15 current and future demand for workers, 

16 the advancement opportunities for workers, 

17 the wages at each step of the career path18 way, and availability of worker benefits; 

19 (iii) the interventions that will be put 

20 in place to address any educational defi21 cits, limited English proficiency, or learn22 ing disabilities of individuals who partici23 pate in the program and to ensure that 

24 such individuals have the academic, tech25 nical, communications, and other job skills 


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1 to function in the jobs targeted by the 

2 partnership; 

3 (iv) how the members of the partner4 ship will collaborate on the development of 

5 curriculum and delivery of training that 

6 will provide the necessary occupational, 

7 academic and other work-related skills and 

8 credentialing needed for the specific labor 

9 market areas; 

10 (v) the supports that will be used to 

11 provide counseling, mentoring or other 

12 support to individuals while in training or 

13 to assist them in navigating in complicated 

14 work environments; 

15 (vi) the set of career exposure activi16 ties that will be put in place to provide 

17 hands-on experience such as work experi18 ence, on the job training, internships, or 

19 work-study; 

20 (vii) the agreements that are in place 

21 with employers, industry groups, and labor 

22 organizations, where applicable, to ensure 

23 access to jobs and advancement opportuni24 ties in the targeted businesses, industry or 

25 occupations; 


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1 (viii) how the workforce education 

2 providers in the partnership will assess the 

3 employment barriers and needs of local 

4 disadvantaged individuals who participate 

5 in the program and will identify resources 

6 for meeting those needs; 

7 (ix) how the workforce education pro8 viders will work with partnership employ9 ers, business and industry groups, labor 

10 organizations, where applicable, and local 

11 economic development organizations to 

12 identify the priority workforce needs of the 

13 local industry; 

14 (x) how the partnerships will ensure 

15 that the appropriate program delivery 

16 models and formal agreements are in place 

17 to ensure maximum benefits to the individ18 uals receiving career pathway partnership 

19 services and to the employers and labor or20 ganizations, where applicable, in the part21 nership and the industries or businesses 

22 they represent; 

23 (xi) how partnership employers and 

24 labor organizations, where applicable, will 

25 be actively involved in identifying specific 


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1 workforce education needs, planning the 

2 curriculum, assisting in training activities, 

3 providing job opportunities, and coordi4 nating job retention for individuals hired 

5 after training through the program and 

6 follow-up support; and 

7 (xii) how the partnership will build on 

8 existing career pathways programs, where 

9 applicable, to serve the targeted popu10 lation. 

11 (3) APPLICATIONS BY INDIAN TRIBES OR TRIB12 AL ORGANIZATIONS.—The Secretary of Health and 

13 Human Services and the Secretary of Labor may ex14 empt an Indian tribe or tribal organization from any 

15 requirement of this section that the Secretary of 

16 Health and Human Services or the Secretary of 

17 Labor determines would be inappropriate to apply to 

18 the Indian tribe or tribal organization, taking into 

19 account the resources, needs, and other cir20 cumstances of the Indian tribe or tribal organiza21 tion. 

22 (f) PRIORITIES AND REQUIREMENTS FOR AWARDING

23 GRANTS.— 

24 (1) IN GENERAL.—Subject to paragraphs (2) 

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1 ices (in the case of a grant under subsection (a)) 

2 and the Secretary of Labor (in the case of a grant 

3 under subsection (b)) shall give priority to making 

4 grants under this section to entities that— 

5 (A) demonstrate success with respect to 

6 meeting the goals of quality job placement, 

7 long-term unsubsidized job retention, and, 

8 where applicable, increasing child support pay9 ments, decreasing unpaid child support arrear10 ages, and increasing the involvement of low-in11 come noncustodial parents with their children 

12 through their participation in responsible fa13 therhood activities, including participation in 

14 programs that provide culturally-relevant cur15 ricula in core subjects including— 

16 (i) conducting activities with children; 

17 (ii) improving communication skills; 

18 (iii) child support management; 

19 (iv) providing financially for the fam20 ily’s security and well-being; 

21 (v) managing stress and anger; 

22 (vi) maintaining physical and mental 

23 health; 

24 (vii) parenting and relationship skills; 

25 (viii) child development; and 


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1 (ix) barriers to responsible parent2 hood, including substance abuse, unem3 ployment, criminal justice system involve4 ment, and inadequate housing; and 

5 (B) coordinate with, and link individuals 

6 as applicable to, other public and private bene7 fits and employment services for low-income 

8 adults among the different systems or programs 

9 in which such adults are involved, including the 

10 criminal justice system, the State programs 

11 funded under each part of title IV of the Social 

12 Security Act (42 U.S.C. 601 et seq.) (including 

13 programs and activities funded under section 

14 403(a)(2) of the Social Security Act (42 U.S.C. 

15 603(a)(2)), educational assistance and student 

16 aid programs, and job training or employment 

17 programs, including State employment agencies. 

18 (2) PERFORMANCE MEASURES.—In making 

19 grants under this section, the Secretary of Health 

20 and Human Services (in the case of a grant under 

21 subsection (a)) and the Secretary of Labor (in the 

22 case of a grant under subsection (b)) shall ensure 

23 that grantees demonstrate a plan for implementing 

24 measures to track their performance with respect to 

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1 term unsubsidized job retention, and, where applica2 ble, increasing child support payments, decreasing 

3 child support arrearages, and increasing the involve4 ment of low-income noncustodial parents with their 

5 children. 

6 (3) REFLECTIVE OF TARGET POPULATIONS.— 

7 In making grants under this section, the Secretary 

8 of Health and Human Services (in the case of a 

9 grant under subsection (a)) and the Secretary of 

10 Labor (in the case of a grant under subsection (b)) 

11 shall give priority to States with proposed dem12 onstration projects that are designed to target low13 income adults, including custodial and noncustodial 

14 parents, and low-income married couples. 

15 (4) SUBSTANTIAL FUNDING FOR EACH OF THE

16 PURPOSES.—In making grants under subsection (b), 

17 the Secretary of Labor shall ensure that a substan18 tial share of the amount appropriated under sub19 section (j) for a fiscal year is used for carrying out 

20 each of the projects described in paragraphs (1) and 

21 (2) of subsection (b). 

22 (g) REGULATORY AND POLICY FLEXIBILITY.—The 

23 Secretary of Labor and the Secretary of Health and 

24 Human Services, in coordination with the Secretary of 

25 Education and the Attorney General, shall work with 


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1 grantees under this section to resolve policy barriers that 

2 may impede blending of federal resources to support these 

3 demonstration projects. 

4 (h) EVALUATION.—The Secretary of Health and 

5 Human Services (in the case of a grant under subsection 

6 (a)) and the Secretary of Labor (in the case of a grant 

7 under subsection (b)) shall provide for an independent and 

8 rigorous evaluation of the demonstration projects con9 ducted under this section that includes, to the maximum 

10 extent feasible, random assignment or other appropriate 

11 statistical techniques, in order to assess the effectiveness 

12 of the projects. 

13 (i) GENERAL DEFINITIONS.—In this section: 

14 (1) STATE.—The term ‘‘State’’ means each of 

15 the 50 States, the District of Columbia, the Com16 monwealth of Puerto Rico, the United States Virgin 

17 Islands, Guam, American Samoa, and includes an 

18 Indian tribe or tribal organization. 

19 (2) IV–D AGENCY.—The term ‘‘IV–D agency’’ 

20 means the State or local agency responsible for ad21 ministering the State program established under 

22 part D of title IV of the Social Security Act (42 

23 U.S.C. 651 et seq.). 

24 (3) INDIAN TRIBE; TRIBAL ORGANIZATION.— 

25 The terms ‘‘Indian tribe’’ and ‘‘tribal organization’’ 


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1 have the meaning given such terms in section 4 of 

2 the Indian Self-Determination and Education Assist3 ance Act (25 U.S.C. 450b). 

4 (j) APPROPRIATION.—Out of any money in the 

5 Treasury of the United States not otherwise appropriated, 

6 there are appropriated to carry out this section— 

7 (1) for programs administered by the Secretary 

8 of Health and Human Services under subsection (a), 

9 $15,000,000 for each of fiscal years 2008 through 

10 2010; and 

11 (2) for programs administered by the Secretary 

12 of Labor under subsection (b), $35,000,000 for each 

13 of fiscal years 2008 through 2010. 

14 SEC. 107. STATE ASSESSMENTS OF BARRIERS TO EMPLOY15 MENT AND FINANCIAL SUPPORT OF CHIL16 DREN. 

17 (a) STATE ASSESSMENTS AND REPORTS.—As a con18 dition of the continued approval of a State plan under part 

19 D of title IV of the Social Security Act (42 U.S.C. 651 

20 et seq.), each State with an approved such plan, acting 

21 through the appropriate State agencies, shall assess the 

22 State policies with respect to the issues described in sub23 section (b) and submit a report to the Secretary of Health 

24 and Human Services on the results of such assessment 

25 not later than March 15, 2008. 


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1 (b) ISSUES DESCRIBED.—For purposes of subsection 

2 (a), the issues described in this subsection are the fol3 lowing: 

4 (1) The process of setting and modifying child 

5 support obligations, particularly with respect to low6 income parents, including— 

7 (A) the role and criteria for using imputed 

8 income in determining child support obligations; 

9 (B) the process of modifying obligations; 

10 (C) the consideration of income and em11 ployment status, including efforts to identify 

12 unreported income; 

13 (D) the consideration of incarceration; 

14 (E) the consideration of disability; 

15 (F) the treatment of arrearages, including 

16 interest charged, and laws or procedures that 

17 interfere with forgiveness, adjustment, waiver, 

18 or compromise of arrears owed to the State by 

19 low-income noncustodial parents who lack suffi20 cient ability to pay such arrearages; 

21 (G) the procedures related to retroactive 

22 support; and 

23 (H) State pass-through and disregard poli24 cies for recipients of means tested public bene25 fits. 


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1 (2) The impact of state criminal laws and law 

2 enforcement practices on the employment acquisi3 tion, retention, and advancement prospects of indi4 viduals following arrest, conviction, or incarceration, 

5 including— 

6 (A) any efforts, including counseling or 

7 employment support, to assist ex-prisoners with 

8 reentry to a community and successful reunifi9 cation with their families; and 

10 (B) an assessment of any efforts to seal or 

11 expunge arrest and conviction records and any 

12 efforts to grant certificates or other acknowl13 edgments of rehabilitation to ex-prisoners, and 

14 to examine State occupational licensing and cer15 tification procedures. 

16 (3) An assessment of the impact of debt on em17 ployment retention, including child support and non18 child support debts imposed to recover costs related 

19 to welfare and criminal justice. 

20 (4) An assessment of State practices related to 

21 providing prisoners and ex-prisoners with valid iden22 tification documents upon release from prison. 

23 (5) Identification of any other barriers to 

24 healthy family formation or sustainable economic op25 portunity for custodial and noncustodial parents that 


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1 are created or exacerbated by Federal or State laws, 

2 policies, or procedures, including an examination of 

3 the rules of Federal and State means-tested pro4 grams, the operation of the State workforce system, 

5 the availability of financial education services, and 

6 the availability of domestic violence services and 

7 child support procedures to help victims of domestic 

8 violence stay safe and obtain the child support they 

9 are owed. 

10 (c) GRANTS TO STATES FOR COMMISSIONS ON STATE

11 LAW IMPROVEMENTS IN THE BEST INTEREST OF CHIL12 DREN AND FAMILIES.—The Secretary of Health and 

13 Human Services shall award grants to States to establish 

14 or support commissions to review the State assessment 

15 conducted in accordance with subsection (a) and to make 

16 recommendations on ways to improve State law in the best 

17 interest of children and families. 

18 (d) APPROPRIATIONS.—Out of any money in the 

19 Treasury of the United States not otherwise appropriated, 

20 there are appropriated to the Secretary of Health and 

21 Human Services for the period of fiscal years 2008 

22 through 2009, $3,000,000, to remain available until ex23 pended, for the purpose of making— 


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1 (1) payments to States to offset all or a portion 

2 of the costs of conducting the State assessments and 

3 reports required under subsection (a); and 

4 (2) grants to States under subsection (c). 

5 SEC. 108. COLLECTION OF CHILD SUPPORT UNDER THE 

6 FOOD STAMP PROGRAM. 

7 (a) ENCOURAGEMENT OF COLLECTION OF CHILD

8 SUPPORT.—Section 5 of the Food Stamp Act of 1977 (7 

9 U.S.C. 2014) is amended— 

10 (1) in subsection (e)— 

11 (A) by redesignating paragraphs (5) and 

12 (6) as paragraphs (6) and (7), respectively; 

13 (B) in paragraph (4)(B), by striking 

14 ‘‘paragraph (6)’’ and inserting ‘‘paragraph 

15 (7)’’; and 

16 (C) by inserting after paragraph (4) the 

17 following: 

18 ‘‘(5) DEDUCTION FOR CHILD SUPPORT RE19 CEIVED.— 

20 ‘‘(A) IN GENERAL.—A household shall be 

21 allowed a deduction of 20 percent of all legally 

22 obligated child support payments received from 

23 an identified or putative parent of a child in the 

24 household if that parent is not a household 

25 member. 


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1 ‘‘(B) ORDER OF DETERMINING DEDUC2 TIONS.—A deduction under this paragraph shall 

3 be determined before the computation of the ex4 cess shelter deduction under paragraph (7).’’; 

5 and 

6 (2) in subsection (k)(4)(B), by striking ‘‘sub7 section (e)(6)’’ and inserting ‘‘subsection (e)(7)’’. 

8 (b) SIMPLIFIED VERIFICATION OF CHILD SUPPORT

9 PAYMENTS.—Section 5(n) of the Food Stamp Act of 1977 

10 (7 U.S.C. 2014(n)) is amended— 

11 (1) in the subsection heading, by striking 

12 ‘‘STATE OPTIONS TO SIMPLIFY’’, and inserting 

13 ‘‘SIMPLIFIED’’; and 

14 (2) by striking ‘‘Regardless of whether’’ and in15 serting the following: 

16 ‘‘(1) IN GENERAL.—A household that is paying 

17 legally obligated child support through the program 

18 under part D of title IV of the Social Security Act 

19 (42 U.S.C. 651 et seq.) shall receive— 

20 ‘‘(A) a deduction under subsection (e)(4); 

21 or 

22 ‘‘(B) an exclusion for paid child support 

23 under subsection (d)(3). 

24 ‘‘(2) STATE OPTIONS.—Regardless of whether’’. 


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1 (c) INCLUSION OF ECONOMIC OPPORTUNITIES PRO2 GRAMS IN DEFINITION OF WORK PROGRAM.—Section 

3 6(o)(2) of the Food Stamp Act of 1977 (7 U.S.C. 

4 2015(o)(2)) is amended— 

5 (1) in subparagraph (C), by striking ‘‘or’’ at 

6 the end; 

7 (2) in subparagraph (D), by striking the period 

8 at the end and inserting ‘‘; or’’; and 

9 (3) by adding at the end the following: 

10 ‘‘(E) participate in and comply with the re11 quirements of a demonstration project under 

12 section 106 of the Responsible Fatherhood and 

13 Healthy Families Act of 2007;’’. 

14 (d) EFFECTIVE DATE.— 

15 (1) IN GENERAL.—This section and the amend16 ments made by this section take effect on October 

17 1, 2007. 

18 (2) STATE OPTION.—A State may implement 

19 the amendments made by subsections (a) and (b) for 

20 participating households at the first recertification of 

21 the households that occurs on or after October 1, 

22 2007. 


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1 TITLE II—REVENUE PROVISIONS 

2 SEC. 201. MODIFICATIONS TO THE EARNED INCOME TAX 

3 CREDIT. 

4 (a) INCREASE IN EARNED INCOME CREDIT FOR

5 WORKERS WITH NO QUALIFYING CHILDREN.— 

6 (1) EARNED INCOME AMOUNT.— 

7 (A) IN GENERAL.—The table under section 

8 32(b)(2)(A) of the Internal Revenue Code of 

9 1986 is amended by striking ‘‘$4,220’’ and in10 serting ‘‘$7,250’’. 

11 (B) TRANSITION FOR EARNED INCOME

12 AMOUNT.—Section 32(b)(2) of such Code is 

13 amended by adding at the end the following 

14 new subparagraph: 

15 ‘‘(C) TRANSITION FOR EARNED INCOME

16 AMOUNT.—For purposes of subparagraph (A), 

17 in lieu of the earned income amount specified 

18 for eligible individuals with no qualifying chil19 dren, the earned income amount for such indi20 viduals for 2008 is $5,900, for 2009 is $6,200, 

21 for 2010 is $6,500, and for 2011 is $6,900.’’. 

22 (2) PHASEOUT AMOUNT.— 

23 (A) IN GENERAL.—The table under section 

24 32(b)(2)(A) of the Internal Revenue Code of 

25 1986 is amended by striking ‘‘$5,280’’ and inVerDate Aug 31 2005 02:16 Jun 20, 2007 Jkt 059200 PO 00000 Frm 00084 Fmt 6652 Sfmt 6201 E:\BILLS\S1626.IS S1626

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1 serting ‘‘phaseout amount % of annual min2 imum wage’’. 

3 (B) PHASEOUT AMOUNT PERCENTAGE.— 

4 Section 32(b)(2) of such Code, as amended by 

5 this Act, is amended by adding at the end the 

6 following new subparagraph: 

7 ‘‘(D) PHASEOUT AMOUNT PERCENTAGE.— 

8 For purposes of subparagraph (A), the phase9 out amount percentage is 70 percent for 2008, 

10 72 percent for 2009, 75 percent for 2010, 85 

11 percent in 2011, and 100 percent in 2012 and 

12 thereafter.’’. 

13 (3) ANNUAL MINIMUM WAGE.—Section 32(b)(2) 

14 of such Code, as amended by this Act, is amended 

15 by adding at the end the following new subpara16 graph: 

17 ‘‘(E) ANNUAL MINIMUM WAGE.—For pur18 poses of subparagraph (A), the annual min19 imum wage for any calendar year is an amount 

20 equal to the product of 2,000 and the minimum 

21 hourly wage effective on January 1 of such year 

22 under section 6(a)(1) of the Fair Labor Stand23 ards Act of 1938.’’. 

24 (4) INFLATION ADJUSTMENT.— 


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1 (A) IN GENERAL.—Section 32(j) of such 

2 Code is amended by redesignating paragraph 

3 (2) as paragraph (3) and by inserting after 

4 paragraph (1) the following new paragraph: 

5 ‘‘(2) EARNED INCOME AMOUNT AND PHASEOUT

6 AMOUNT FOR INDIVIDUALS WITH NO QUALIFYING

7 CHILDREN.—In the case of any taxable year begin8 ning after calendar year 2012, the earned income 

9 amount and the phaseout amount in effect for an el10 igible individual with no qualifying children in sub11 section (b)(2)(A) shall be increased by an amount 

12 equal to— 

13 ‘‘(A) such amount, multiplied by 

14 ‘‘(B) the cost-of-living adjustment deter15 mined under section 1(f)(3) for the calendar 

16 year in which the taxable year begins, deter17 mined by substituting ‘calendar year 2011’ for 

18 ‘calendar year 1992’ in subparagraph (B) 

19 thereof.’’. 

20 (B) CONFORMING AMENDMENT.—Section 

21 32(j)(1)(B)(i) of such Code is amended by in22 serting ‘‘(other than the amount described in 

23 paragraph (2))’’ after ‘‘subsections (b)(2)(A)’’. 

24 (5) CONFORMING AMENDMENT.—Section 

25 32(b)(2)(A) of such Code is amended by striking 


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1 ‘‘Subject to subparagraph (B)’’ and inserting ‘‘Ex2 cept as otherwise provided in this paragraph’’. 

3 (6) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to taxable years begin5 ning after December 31, 2007. 

6 (b) ENHANCED CREDIT FOR CERTAIN WORKERS

7 WITH NO QUALIFYING CHILDREN.— 

8 (1) IN GENERAL.—Section 32 of the Internal 

9 Revenue Code of 1986 is amended by adding at the 

10 end the following new subsection: 

11 ‘‘(n) ADDITIONAL CREDIT FOR CERTAIN WORK12 ERS.— 

13 ‘‘(1) IN GENERAL.—In the case of a qualified 

14 individual, the credit allowed under subsection (a) 

15 shall be increased by an amount equal to 100 per16 cent of the amount of the credit allowed under this 

17 section (without regard to this subsection). 

18 ‘‘(2) QUALIFIED INDIVIDUAL.—For purposes of 

19 this subsection, the term ‘qualified individual’ means 

20 an eligible individual who— 

21 ‘‘(A) is described in clause (ii) of sub22 section (c)(1)(A), 

23 ‘‘(B) is the parent of a child who meets the 

24 age requirements of section 152(c)(3) before 


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1 the end of the taxable year of the eligible indi2 vidual, 

3 ‘‘(C) is required to make child support 

4 payments with respect to such child— 

5 ‘‘(i) pursuant to an order which is in 

6 effect for not less than one-half of the tax7 able year of such individual, and 

8 ‘‘(ii) through a State agency respon9 sible for administering the State plan 

10 under part D of title IV of the Social Secu11 rity Act, and 

12 ‘‘(D) has paid child support during the 

13 taxable year in an amount not less than the 

14 amount of child support due during the taxable 

15 year for every order requiring the individual to 

16 make child support payments. 

17 ‘‘(3) REGULATIONS.—The Secretary shall es18 tablish regulations to carry out the purposes of this 

19 subsection, including regulations which provide for 

20 the verification of the payment of child support in 

21 accordance with paragraph (2)(D).’’. 

22 (2) VERIFICATION OF PAYMENT.— 

23 (A) IN GENERAL.—The Secretary of 

24 Health and Human Services, in consultation 

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1 clude in the Federal Case Registry of Child 

2 Support Orders established under section 

3 453(h) of the Social Security Act (42 U.S.C. 

4 653(h)) such information as the Secretary of 

5 the Treasury determines necessary to allow for 

6 verification of the status of individuals as quali7 fied individuals (as defined under section 32(n) 

8 of the Internal Revenue Code of 1986, as added 

9 by paragraph (1)). 

10 (B) ADDITIONAL FEDERAL PROCE11 DURES.—In addition to the authority provided 

12 under subparagraph (A), the Secretary of 

13 Health and Human Services and the Secretary 

14 of the Treasury may establish such additional 

15 procedures as are appropriate to ensure that 

16 the Secretary of the Treasury has the informa17 tion that the Secretary of the Treasury needs to 

18 verify payment of child support obligations in a 

19 timely fashion. 

20 (C) STATE PROCEDURES.—The Secretary 

21 of Health and Human States, in consultation 

22 with the States, shall establish procedures for 

23 informing a noncustodial parent in a timely 

24 fashion when the parent has paid the amount of 

25 child support owed by the parent for a taxable 


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1 year so that the parent may determine the ex2 tent to which the parent is a qualified indi3 vidual for purposes of qualifying for the addi4 tional credit established under section 32(n) of 

5 the Internal Revenue Code of 1986, as added 

6 by paragraph (1). 

7 (3) EFFECTIVE DATE.—The amendment made 

8 by paragraph (1) shall apply to taxable years begin9 ning after December 31, 2007. 

10 (c) MARRIAGE PENALTY RELIEF.— 

11 (1) IN GENERAL.—Clause (iii) of section 

12 32(b)(2)(B) of the Internal Revenue Code of 1986 

13 is amended to read as follows: 

14 ‘‘(iii) $4,000 in the case of taxable 

15 years beginning after 2007.’’. 

16 (2) INFLATION ADJUSTMENT.—Section 

17 32(j)(1)(B)(ii) of such Code is amended by striking 

18 ‘‘$3,000’’ and inserting ‘‘$4,000’’. 

19 (3) EFFECTIVE DATE.—The amendments made 

20 by this subsection shall apply to taxable years begin21 ning after December 31, 2007. 

22 SEC. 202. BROKER REPORTING OF CUSTOMER’S BASIS IN 

23 SECURITIES TRANSACTIONS. 

24 (a) IN GENERAL.—Section 6045 of the Internal Rev25 enue Code of 1986 (relating to returns of brokers) is 


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1 amended by adding at the end the following new sub2 section: 

3 ‘‘(g) ADDITIONAL INFORMATION REQUIRED IN THE

4 CASE OF SECURITIES TRANSACTIONS.— 

5 ‘‘(1) IN GENERAL.—If a broker is otherwise re6 quired to make a return under subsection (a) with 

7 respect to any applicable security, the broker shall 

8 include in such return the information described in 

9 paragraph (2). 

10 ‘‘(2) ADDITIONAL INFORMATION REQUIRED.— 

11 ‘‘(A) IN GENERAL.—The information re12 quired under paragraph (1) to be shown on a 

13 return with respect to an applicable security of 

14 a customer shall include for each reported ap15 plicable security the customer’s adjusted basis 

16 in such security. 

17 ‘‘(B) EXEMPTION FROM REQUIREMENT.— 

18 The Secretary shall issue such regulations or 

19 guidance as necessary concerning the applica20 tion of the requirement under subparagraph (A) 

21 in cases in which a broker in making a return 

22 does not have sufficient information to meet 

23 such requirement with respect to the reported 

24 applicable security. Such regulations or guid25 ance may— 


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1 ‘‘(i) require such other information re2 lated to such adjusted basis as the Sec3 retary may prescribe, and 

4 ‘‘(ii) exempt classes of cases in which 

5 the broker does not have sufficient infor6 mation to meet either the requirement 

7 under subparagraph (A) or the require8 ment under clause (i). 

9 ‘‘(3) INFORMATION TRANSFERS.—To the extent 

10 provided in regulations, there shall be such ex11 changes of information between brokers as such reg12 ulations may require for purposes of enabling such 

13 brokers to meet the requirements of this subsection. 

14 ‘‘(4) DEFINITIONS.—For purposes of this sub15 section, the term ‘applicable security’ means any— 

16 ‘‘(A) security described in subparagraph 

17 (A) or (C) of section 475(c)(2), 

18 ‘‘(B) interest in a regulated investment 

19 company (as defined in section 851), or 

20 ‘‘(C) other financial instrument designated 

21 in regulations prescribed by the Secretary.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to returns the due date for which 

24 (determined without regard to extensions) is after DecemVerDate Aug 31 2005 02:16 Jun 20, 2007 Jkt 059200 PO 00000 Frm 00092 Fmt 6652 Sfmt 6201 E:\BILLS\S1626.IS S1626

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1 ber 31, 2009, with respect to securities acquired after De2 cember 31, 2008. 

3 SEC. 203. MODIFICATION OF EFFECTIVE DATE OF LEASING 

4 PROVISIONS OF THE AMERICAN JOBS CRE5 ATION ACT OF 2004. 

6 (a) LEASES TO FOREIGN ENTITIES.—Section 849(b) 

7 of the American Jobs Creation Act of 2004 is amended 

8 by adding at the end the following new paragraph: 

9 ‘‘(5) LEASES TO FOREIGN ENTITIES.—In the 

10 case of tax-exempt use property leased to a tax-ex11 empt entity which is a foreign person or entity, the 

12 amendments made by this part shall apply to taxable 

13 years beginning after December 31, 2006, with re14 spect to leases entered into on or before March 12, 

15 2004.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 this section shall take effect as if included in the enact18 ment of the American Jobs Creation Act of 2004. 

19 SEC. 204. CLARIFICATION OF ECONOMIC SUBSTANCE DOC20 TRINE. 

21 (a) IN GENERAL.—Section 7701 of the Internal Rev22 enue Code of 1986 is amended by redesignating subsection 

23 (o) as subsection (p) and by inserting after subsection (n) 

24 the following new subsection: 


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1 ‘‘(o) CLARIFICATION OF ECONOMIC SUBSTANCE

2 DOCTRINE; ETC.— 

3 ‘‘(1) GENERAL RULES.— 

4 ‘‘(A) IN GENERAL.—In any case in which 

5 a court determines that the economic substance 

6 doctrine is relevant for purposes of this title to 

7 a transaction (or series of transactions), such 

8 transaction (or series of transactions) shall have 

9 economic substance only if the requirements of 

10 this paragraph are met. 

11 ‘‘(B) DEFINITION OF ECONOMIC SUB12 STANCE.—For purposes of subparagraph (A)— 

13 ‘‘(i) IN GENERAL.—A transaction has 

14 economic substance only if— 

15 ‘‘(I) the transaction changes in a 

16 meaningful way (apart from Federal 

17 tax effects) the taxpayer’s economic 

18 position, and 

19 ‘‘(II) the taxpayer has a substan20 tial nontax purpose for entering into 

21 such transaction and the transaction 

22 is a reasonable means of accom23 plishing such purpose. 

24 In applying subclause (II), a purpose of 

25 achieving a financial accounting benefit 


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1 shall not be taken into account in deter2 mining whether a transaction has a sub3 stantial nontax purpose if the origin of 

4 such financial accounting benefit is a re5 duction of income tax. 

6 ‘‘(ii) SPECIAL RULE WHERE TAX7 PAYER RELIES ON PROFIT POTENTIAL.—A 

8 transaction shall not be treated as having 

9 economic substance by reason of having a 

10 potential for profit unless— 

11 ‘‘(I) the present value of the rea12 sonably expected pre-tax profit from 

13 the transaction is substantial in rela14 tion to the present value of the ex15 pected net tax benefits that would be 

16 allowed if the transaction were re17 spected, and 

18 ‘‘(II) the reasonably expected 

19 pre-tax profit from the transaction ex20 ceeds a risk-free rate of return. 

21 ‘‘(C) TREATMENT OF FEES AND FOREIGN

22 TAXES.—Fees and other transaction expenses 

23 and foreign taxes shall be taken into account as 

24 expenses in determining pre-tax profit under 

25 subparagraph (B)(ii). 


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1 ‘‘(2) SPECIAL RULES FOR TRANSACTIONS WITH

2 TAX-INDIFFERENT PARTIES.— 

3 ‘‘(A) SPECIAL RULES FOR FINANCING

4 TRANSACTIONS.—The form of a transaction 

5 which is in substance the borrowing of money 

6 or the acquisition of financial capital directly or 

7 indirectly from a tax-indifferent party shall not 

8 be respected if the present value of the deduc9 tions to be claimed with respect to the trans10 action is substantially in excess of the present 

11 value of the anticipated economic returns of the 

12 person lending the money or providing the fi13 nancial capital. A public offering shall be treat14 ed as a borrowing, or an acquisition of financial 

15 capital, from a tax-indifferent party if it is rea16 sonably expected that at least 50 percent of the 

17 offering will be placed with tax-indifferent par18 ties. 

19 ‘‘(B) ARTIFICIAL INCOME SHIFTING AND

20 BASIS ADJUSTMENTS.—The form of a trans21 action with a tax-indifferent party shall not be 

22 respected if— 

23 ‘‘(i) it results in an allocation of in24 come or gain to the tax-indifferent party in 


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1 excess of such party’s economic income or 

2 gain, or 

3 ‘‘(ii) it results in a basis adjustment 

4 or shifting of basis on account of over5 stating the income or gain of the tax-indif6 ferent party. 

7 ‘‘(3) DEFINITIONS AND SPECIAL RULES.—For 

8 purposes of this subsection— 

9 ‘‘(A) ECONOMIC SUBSTANCE DOCTRINE.— 

10 The term ‘economic substance doctrine’ means 

11 the common law doctrine under which tax bene12 fits under subtitle A with respect to a trans13 action are not allowable if the transaction does 

14 not have economic substance or lacks a business 

15 purpose. 

16 ‘‘(B) TAX-INDIFFERENT PARTY.—The 

17 term ‘tax-indifferent party’ means any person 

18 or entity not subject to tax imposed by subtitle 

19 A. A person shall be treated as a tax-indifferent 

20 party with respect to a transaction if the items 

21 taken into account with respect to the trans22 action have no substantial impact on such per23 son’s liability under subtitle A. 

24 ‘‘(C) EXCEPTION FOR PERSONAL TRANS25 ACTIONS OF INDIVIDUALS.—In the case of an 


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1 individual, this subsection shall apply only to 

2 transactions entered into in connection with a 

3 trade or business or an activity engaged in for 

4 the production of income. 

5 ‘‘(D) TREATMENT OF LESSORS.—In apply6 ing paragraph (1)(B)(ii) to the lessor of tan7 gible property subject to a lease— 

8 ‘‘(i) the expected net tax benefits with 

9 respect to the leased property shall not in10 clude the benefits of— 

11 ‘‘(I) depreciation, 

12 ‘‘(II) any tax credit, or 

13 ‘‘(III) any other deduction as 

14 provided in guidance by the Secretary, 

15 and 

16 ‘‘(ii) subclause (II) of paragraph 

17 (1)(B)(ii) shall be disregarded in deter18 mining whether any of such benefits are al19 lowable. 

20 ‘‘(4) OTHER COMMON LAW DOCTRINES NOT AF21 FECTED.—Except as specifically provided in this 

22 subsection, the provisions of this subsection shall not 

23 be construed as altering or supplanting any other 

24 rule of law, and the requirements of this subsection 


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1 shall be construed as being in addition to any such 

2 other rule of law. 

3 ‘‘(5) REGULATIONS.—The Secretary shall pre4 scribe such regulations as may be necessary or ap5 propriate to carry out the purposes of this sub6 section. Such regulations may include exemptions 

7 from the application of this subsection.’’. 

8 (b) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to transactions entered into after 

10 the date of the enactment of this Act. 

Æ 


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