H. R. 2264

One Hundred Third Congress

of the

United States of America

AT THE FIRST SESSION

Begun and held at the City of Washington on Tuesday,

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

An Act

To provide for reconciliation pursuant to section 7 of the concurrent resolution

on the budget for fiscal year 1994.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Omnibus Budget Reconciliation

Act of 1993’’.

SEC. 2. TABLE OF CONTENTS.

The table of contents is as follows:

TITLE I—AGRICULTURE AND RELATED PROVISIONS

TITLE II—ARMED SERVICES PROVISIONS

TITLE III—BANKING AND HOUSING PROVISIONS

TITLE IV—STUDENT LOANS AND ERISA PROVISIONS

TITLE V—TRANSPORTATION AND PUBLIC WORKS PROVISIONS

TITLE VI—COMMUNICATIONS LICENSING AND SPECTRUM ALLOCATION

PROVISIONS

TITLE VII—NUCLEAR REGULATORY COMMISSION PROVISIONS

TITLE VIII—PATENT AND TRADEMARK OFFICE PROVISIONS

TITLE IX—MERCHANT MARINE PROVISIONS

TITLE X—NATURAL RESOURCES PROVISIONS

TITLE XI—CIVIL SERVICE AND POST OFFICE PROVISIONS

TITLE XII—VETERANS’ AFFAIRS PROVISIONS

TITLE XIII—REVENUE, HEALTH CARE, HUMAN RESOURCES, INCOME SECURITY, CUSTOMS AND TRADE PROVISIONS, FOOD STAMP PROGRAM,

AND TIMBER SALE PROVISIONS

TITLE XIV—BUDGET PROCESS PROVISIONS

TITLE I—AGRICULTURAL PROGRAMS

SEC. 1001. SHORT TITLE AND TABLE OF CONTENTS.

(a) SHORT TITLE.—This title may be cited as the ‘‘Agricultural

Reconciliation Act of 1993’’.
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(b) TABLE OF CONTENTS.—The table of contents of this title

is as follows:

Sec. 1001. Short title and table of contents.

Subtitle A—Commodity Programs

Sec. 1101. Upland cotton program.

Sec. 1102. Wheat program.

Sec. 1103. Feed grain program.

Sec. 1104. Rice program.

Sec. 1105. Dairy program.

Sec. 1106. Tobacco program.

Sec. 1107. Sugar program.

Sec. 1108. Oilseeds program.

Sec. 1109. Peanut program.

Sec. 1110. Honey program.

Sec. 1111. Wool and mohair program.

Subtitle B—Rural Electrification

Sec. 1201. Refinancing and prepayment of FFB loans.

Subtitle C—Agricultural Trade

Sec. 1301. Acreage reduction requirements.

Sec. 1302. Market promotion program.

Subtitle D—Miscellaneous

Sec. 1401. Admission, entrance, and recreation fees.

Sec. 1402. Environmental conservation acreage reserve program amendments.

Sec. 1403. Federal crop insurance.

Subtitle A—Commodity Programs

SEC. 1101. UPLAND COTTON PROGRAM.

(a) IN GENERAL.—Section 103B of the Agricultural Act of 1949 (7 U.S.C. 1444–2) is amended—

(1) in the section heading, by striking ‘‘1995’’ and inserting ‘‘1997’’;

(2) in subsections (a)(1), (b)(1), (c)(1)(A), (c)(1)(B)(ii), and

(o), by striking ‘‘1995’’ each place it appears and inserting

‘‘1997’’;

(3) in subparagraphs (B)(i), (D)(i), (E)(i), and (F)(i) of sub- section (a)(5), by striking ‘‘1996’’ each place it appears and

inserting ‘‘1998’’; (4) in subsection (c)(1)(D)—

(A) in the subparagraph heading, by striking ‘‘50/92

PROGRAM’’ and inserting ‘‘50/85 PROGRAM’’;

(B) by inserting after ‘‘8 percent’’ both places it appears

the following: ‘‘for each of the 1991 through 1993 crops,

and 15 percent for each of the 1994 through 1997 crops

(except as provided in clause (v)(II)),’’; and

(C) in clause (v)—

(i) by striking ‘‘(v) PREVENTED PLANTING.—If’’ and

inserting the following:

‘‘(v) PREVENTED PLANTING AND REDUCED YIELDS.—

‘‘(I) 1991 THROUGH 1993 CROPS.—In the case

of each of the 1991 through 1993 crops of upland

cotton, if’’; and

(ii) by adding at the end the following new

subclause:

‘‘(II) 1994 THROUGH 1997 CROPS.—In the case

of each of the 1994 through 1997 crops of upland
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cotton, producers on a farm shall be eligible to

receive deficiency payments as provided in clause

(iii) if an acreage limitation program under subsection (e) is in effect for the crop and—

‘‘(aa) the producers have been determined

by the Secretary (in accordance with section

503(c)) to be prevented from planting the crop

or have incurred a reduced yield for the crop

(due to a natural disaster) and the producers

elect to devote a portion of the maximum payment acres for upland cotton (as calculated

under subparagraph (C)(ii)) equal to more

than 8 percent of the upland cotton acreage,

to conservation uses; or

‘‘(bb) the producers elect to devote a portion of the maximum payment acres for upland

cotton (as calculated under subparagraph

(C)(ii)) equal to more than 8 percent of the

upland cotton acreage, to alternative crops as

provided in subparagraph (E).’’; and

(5) in subsection (e)(1)(D), by inserting after ‘‘30 percent’’

the following: ‘‘for each of the 1991 through 1994 crops, 291⁄2

percent for each of the 1995 and 1996 crops, and 29 percent

for the 1997 crop’’.

(b) PROVISIONS NECESSARY TO THE OPERATION OF THE PROGRAM.—

(1) DEFICIENCY AND LAND DIVERSION PAYMENTS.—Section

114 of the Agricultural Act of 1949 (7 U.S.C. 1445j) is amended

by striking ‘‘1995’’ each place it appears in subsections (a)(1)

and (c) and inserting ‘‘1997’’. (2) ACREAGE BASE AND YIELD SYSTEM.—Title V of such

Act (7 U.S.C. 1461 et seq.) is amended—

(A) in section 503 (7 U.S.C. 1463)—

(i) in subsection (c)(3)—

(I) by striking ‘‘0/92 or 50/92’’; and

(II) by striking ‘‘1995’’ and inserting ‘‘1997’’;

and

(ii) in subsection (h)(2)(A), by striking ‘‘1995’’ each

place it appears and inserting ‘‘1997’’;

(B) in paragraphs (1) and (2) of section 505(b) (7 U.S.C. 1465(b)), by striking ‘‘1995’’ each place it appears and

inserting ‘‘1997’’; and (C) in section 509 (7 U.S.C. 1469), by striking ‘‘1995’’

and inserting ‘‘1997’’.

(3) PAYMENT LIMITATIONS.—The Food Security Act of 1985

(Public Law 99–198; 99 Stat. 1354) is amended—

(A) in paragraphs (1)(A), (1)(B), and (2)(A) of section

1001 (7 U.S.C. 1308), by striking ‘‘1995’’ each place it

appears and inserting ‘‘1997’’; and

(B) in section 1001C(a) (7 U.S.C. 1308–3(a)), by striking

‘‘1995’’ both places it appears and inserting ‘‘1997’’.

SEC. 1102. WHEAT PROGRAM.

Section 107B(c)(1)(E) of the Agricultural Act of 1949 (7 U.S.C.

1445b–3a(c)(1)(E)) is amended—

(1) in the subparagraph heading, by striking ‘‘0/92 PROGRAM’’ and inserting ‘‘0/85 PROGRAM’’;
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(2) in clause (i), by inserting after ‘‘8 percent’’ both places

it appears the following: ‘‘for each of the 1991 through 1993

crops, and 15 percent for each of the 1994 through 1997 crops

(except as provided in clause (vii)),’’; and

(3) by adding at the end of the subparagraph the following

new clause:

‘‘(vii) EXCEPTIONS TO 0/85.—In the case of each

of the 1994 through 1997 crops of wheat, producers

on a farm shall be eligible to receive deficiency payments as provided in clause (ii) if an acreage limitation

program under subsection (e) is in effect for the crop

and—

‘‘(I)(aa) the producers have been determined

by the Secretary (in accordance with section 503(c))

to be prevented from planting the crop or have

incurred a reduced yield for the crop (due to a

natural disaster); and

‘‘(bb) the producers elect to devote a portion

of the maximum payment acres for wheat (as calculated under subparagraph (C)(ii)) equal to more

than 8 percent of the wheat acreage, to conservation uses; or

‘‘(II) the producers elect to devote a portion

of the maximum payment acres for wheat (as calculated under subparagraph (C)(ii)) equal to more

than 8 percent of the wheat acreage, to alternative

crops as provided in subparagraph (F).’’.

SEC. 1103. FEED GRAIN PROGRAM.

Section 105B(c)(1)(E) of the Agricultural Act of 1949 (7 U.S.C. 1444f(c)(1)(E)) is amended—

(1) in the subparagraph heading, by striking ‘‘0/92 PROGRAM’’ and inserting ‘‘0/85 PROGRAM’’;

(2) in clause (i), by inserting after ‘‘8 percent’’ both places

it appears the following: ‘‘for each of the 1991 through 1993

crops, and 15 percent for each of the 1994 through 1997 crops

(except as provided in clause (vii)),’’; and

(3) by adding at the end of the subparagraph the following

new clause:

‘‘(vii) EXCEPTIONS TO 0/85.—In the case of each

of the 1994 through 1997 crops of feed grains, producers on a farm shall be eligible to receive deficiency

payments as provided in clause (ii) if an acreage limitation program under subsection (e) is in effect for the

crop and—

‘‘(I)(aa) the producers have been determined

by the Secretary (in accordance with section 503(c))

to be prevented from planting the crop or have

incurred a reduced yield for the crop (due to a

natural disaster); and

‘‘(bb) the producers elect to devote a portion

of the maximum payment acres for feed grains

(as calculated under subparagraph (C)(ii)) equal

to more than 8 percent of the feed grain acreage,

to conservation uses; or

‘‘(II) the producers elect to devote a portion

of the maximum payment acres for feed grains
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(as calculated under subparagraph (C)(ii)) equal

to more than 8 percent of the feed grain acreage,

to alternative crops as provided in subparagraph

(F).’’.

SEC. 1104. RICE PROGRAM.

Section 101B(c)(1)(D) of the Agricultural Act of 1949 (7 U.S.C.

1441–2(c)(1)(D)) is amended—

(1) in the subparagraph heading, by striking ‘‘50/92 PROGRAM’’ and inserting ‘‘50/85 PROGRAM’’;

(2) in clause (i), by inserting after ‘‘8 percent’’ both places

it appears the following: ‘‘for each of the 1991 through 1993

crops, and 15 percent for each of the 1994 through 1997 crops

(except as provided in clause (v)(II)),’’; and

(3) in clause (v)—

(A) by striking ‘‘(v) PREVENTED PLANTING.—If’’ and

inserting the following:

‘‘(v) PREVENTED PLANTING AND REDUCED YIELDS.—

‘‘(I) 1991 THROUGH 1993 CROPS.—In the case

of each of the 1991 through 1993 crops of rice,

if’’; and

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

‘‘(II) 1994 THROUGH 1997 CROPS.—In the case

of each of the 1994 through 1997 crops of rice,

producers on a farm shall be eligible to receive

deficiency payments as provided in clause (iii) if

an acreage limitation program under subsection

(e) is in effect for the crop and—

‘‘(aa) the producers have been determined

by the Secretary (in accordance with section

503(c)) to be prevented from planting the crop

or have incurred a reduced yield for the crop

(due to a natural disaster) and the producers

elect to devote a portion of the maximum payment acres for rice (as calculated under

subparagraph (C)(ii)) equal to more than 8

percent of the rice acreage, to conservation

uses; or

‘‘(bb) the producers elect to devote a portion of the maximum payment acres for rice

(as calculated under subparagraph (C)(ii))

equal to more than 8 percent of the rice acreage, to alternative crops as provided in

subparagraph (E).’’.

SEC. 1105. DAIRY PROGRAM.

(a) IN GENERAL.—Section 204 of the Agricultural Act of 1949

(7 U.S.C. 1446e) is amended—

(1) in the section heading, by striking ‘‘1995’’ and inserting

‘‘1996’’;

(2) in subsections (a), (b), (d)(1)(A), (d)(2)(A), (d)(3), (g)(1),

and (k), by striking ‘‘1995’’ each place it appears and inserting

‘‘1996’’;

(3) in subsection (c)(3)—

(A) in the first sentence of subparagraph (A), by striking ‘‘The Secretary’’ and inserting ‘‘Subject to subparagraph

(B), the Secretary’’;
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(B) by redesignating subparagraph (B) as subparagraph (C); and

(C) by inserting after subparagraph (A) the following

new subparagraph:

‘‘(B) GUIDELINES.—In the case of purchases of butter

and nonfat dry milk that are made by the Secretary under

this section on or after the date of enactment of the Omnibus Budget Reconciliation Act of 1993, in allocating the

rate of price support between the purchase prices of butter

and nonfat dry milk under this paragraph, the Secretary

may not—

‘‘(i) offer to purchase butter for more than $0.65

per pound; or

‘‘(ii) offer to purchase nonfat dry milk for less

than $1.034 per pound.’’;

(4) in subsection (h)(2)—

(A) by striking ‘‘and’’ at the end of subparagraph (A);

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

(B) and inserting ‘‘; and’’; and

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

‘‘(C) during each of calendar years 1996 and 1997,

10 cents per hundredweight of milk marketed, which rate

shall be adjusted on or before May 1 of the respective

calendar year in the manner provided in subparagraph

(B).’’; and

(5) in subsection (g)(2), by striking ‘‘1994’’ and inserting

‘‘1996’’.

(b) PROVISIONS NECESSARY TO THE OPERATION OF THE PROGRAM.—Section 101(b) of the Agriculture and Food Act of 1981

(7 U.S.C. 608c note) is amended by striking ‘‘1995’’ and inserting

‘‘1996’’.

(c) REDUCTION IN PRICE RECEIVED.—

(1) DEFINITIONS.—As used in this subsection:

(A) BOVINE GROWTH HORMONE.—The term ‘‘bovine

growth hormone’’ means a synthetic growth hormone produced through the process of recombinant DNA techniques

that is intended for use in bovine animals.

(B) DATE OF APPROVAL.—The term ‘‘date of approval’’

means the date the Food and Drug Administration, pursuant to authority under section 512 of the Federal Food,

Drug, and Cosmetic Act (21 U.S.C. 360b), first approves

an application with respect to the use of bovine growth

hormone.

(2) REDUCTION IN PRICE RECEIVED.—In order to offset the

economic effects of the sale of bovine growth hormone, the

Secretary of Agriculture shall decrease the amount of the reduction in price received by producers specified in subparagraph

(B) or (C) (as appropriate) of section 204(h)(2) of the Agricultural Act of 1949 (7 U.S.C. 1446e(h)(2)) by 10 percent during

the period beginning on the date of approval and ending 90

days after the date of approval and, during the period, it

shall be unlawful for a person to sell bovine growth hormone

for commercial agricultural purposes.
H. R. 2264—7

SEC. 1106. TOBACCO PROGRAM.

(a) DOMESTIC MARKETING ASSESSMENT.—Part I of subtitle B

of title III of the Agricultural Adjustment Act of 1938 (7 U.S.C.

1311 et seq.) is amended by adding at the end the following new

section:

‘‘SEC. 320C. DOMESTIC MARKETING ASSESSMENT.

‘‘(a) CERTIFICATION.—A domestic manufacturer of cigarettes

shall certify to the Secretary, for each calendar year, the percentage

of the quantity of tobacco used by the manufacturer to produce

cigarettes during the year that is produced in the United States.

‘‘(b) PENALTIES.—

‘‘(1) IN GENERAL.—Subject to subsection (f), a domestic

manufacturer of cigarettes that has failed, as determined by

the Secretary after notice and opportunity for a hearing, to

use in the manufacture of cigarettes during a calendar year

a quantity of tobacco grown in the United States that is at

least 75 percent of the total quantity of tobacco used by the

manufacturer, or to comply with subsection (a), shall be subject

to the requirements of subsections (c), (d), and (e).

‘‘(2) FAILURE TO CERTIFY.—For purposes of this section,

if a manufacturer fails to comply with subsection (a), the manufacturer shall be presumed to have used only imported tobacco

in the manufacture of cigarettes produced by the manufacturer.

‘‘(3) REPORTS AND RECORDS.—

‘‘(A) IN GENERAL.—The Secretary shall require manufacturers of domestic cigarettes to make such reports and

maintain such records as are necessary to carry out this

section. If the reports and records are insufficient, the

Secretary may request other persons to provide supplemental information.

‘‘(B) EXAMINATIONS.—For the purpose of ascertaining

the correctness of any report or record required under

this section, or of obtaining further information required

under this section, the Secretary and the Office of Inspector

General may examine such records, books, and other materials as the Secretary has reason to believe may be relevant.

In the case of a manufacturer of domestic cigarettes, the

Secretary may charge a fee to the manufacturer to cover

the reasonable costs of any such examination.

‘‘(C) PENALTIES.—Any person who fails to provide

information required under this paragraph or who provides

false information under this paragraph shall be subject

to section 1001 of title 18, United States Code.

‘‘(D) CONFIDENTIALITY.—Section 320A(c) shall apply to

information submitted by manufacturers of domestic cigarettes and other persons under this paragraph.

‘‘(E) DISCLOSURE.—Notwithstanding any other provision of law, information on the percentage or quantity

of domestic or imported tobacco in cigarettes or on the

volume of cigarette production that is submitted under

this section shall be exempt from disclosure under section

552 of title 5, United States Code.

‘‘(c) DOMESTIC MARKETING ASSESSMENT.—

‘‘(1) IN GENERAL.—A domestic manufacturer of cigarettes

described in subsection (b) shall remit to the Commodity Credit
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Corporation a nonrefundable marketing assessment in accordance with this subsection.

‘‘(2) AMOUNT.—The amount of an assessment imposed on

a manufacturer under this subsection shall be determined by

multiplying—

‘‘(A) the quantity by which the quantity of imported

tobacco used by the manufacturer to produce cigarettes

during a preceding calendar year exceeds 25 percent of

the quantity of all tobacco used by the manufacturer to

produce cigarettes during the preceding calendar year; by

‘‘(B) the difference between—

‘‘(i) 1⁄2 of the sum of—

‘‘(I) the average price per pound received by

domestic producers for Burley tobacco during the

preceding calendar year; and

‘‘(II) the average price per pound received by

domestic producers for Flue-cured tobacco during

the preceding calendar year; and

‘‘(ii) the average price per pound of unmanufactured imported tobacco during the preceding calendar

year, as determined by the Secretary.

‘‘(3) COLLECTION.—An assessment imposed under this subsection shall be—

‘‘(A) collected by the Secretary and transmitted to the

Commodity Credit Corporation; and

‘‘(B) enforced in the same manner as provided in section

320B.

‘‘(d) PURCHASE OF BURLEY TOBACCO.— ‘‘(1) IN GENERAL.—A domestic manufacturer of cigarettes described in subsection (b) shall purchase from the inventories

of the producer-owned cooperative marketing associations for

Burley tobacco described in section 320B(a)(2), at the applicable

list price published by the association, the quantity of tobacco

described in paragraph (2). ‘‘(2) QUANTITY.—Subject to paragraph (3), the quantity of

Burley tobacco required to be purchased by a manufacturer

during a calendar year under this subsection shall equal 1⁄2

of the quantity of imported tobacco used by the manufacturer

to produce cigarettes during the preceding calendar year that

exceeds 25 percent of the quantity of all tobacco used by the

manufacturer to produce cigarettes during the preceding calendar year. ‘‘(3) LIMITATION.—If the total quantity of Burley tobacco

required to be purchased by all manufacturers under paragraph

(2) would reduce the inventories of the producer-owned cooperative marketing associations for Burley tobacco to less than

the reserve stock level for Burley tobacco, the Secretary shall

reduce the quantity of tobacco required to be purchased by

manufacturers under paragraph (2), on a pro rata basis, to

ensure that the inventories will not be less than the reserve

stock level for Burley tobacco.

‘‘(4) NONCOMPLIANCE.—If a manufacturer fails to purchase

from the inventories of the producer-owned cooperative marketing associations the quantity of Burley tobacco required under

this subsection, the manufacturer shall be subject to a penalty

of 75 percent of the average market price (calculated to the

nearest whole cent) for Burley tobacco for the immediately
H. R. 2264—9

preceding year on the quantity of tobacco as to which the

failure occurs.

‘‘(5) PURCHASE REQUIREMENTS.—Tobacco purchased by a

manufacturer under this subsection shall not be included in

determining the quantity of tobacco purchased by the manufacturer under section 320B.

‘‘(e) PURCHASE OF FLUE-CURED TOBACCO.—

‘‘(1) IN GENERAL.—A domestic manufacturer of cigarettes

described in subsection (b) shall purchase from the inventories

of the producer-owned cooperative marketing association for

Flue-cured tobacco described in section 320B(a)(2), at the

applicable list price published by the association, the quantity

of tobacco described in paragraph (2).

‘‘(2) QUANTITY.—Subject to paragraph (3), the quantity of

Flue-cured tobacco required to be purchased by a manufacturer

during a calendar year under this subsection shall equal 1⁄2

of the quantity of imported tobacco used by the manufacturer

to produce cigarettes during the preceding calendar year that

exceeds 25 percent of the quantity of all tobacco used by the

manufacturer to produce cigarettes during the preceding calendar year.

‘‘(3) LIMITATION.—If the total quantity of Flue-cured tobacco

required to be purchased by all manufacturers under paragraph

(2) would reduce the inventories of the producer-owned cooperative marketing association for Flue-cured tobacco to less than

the reserve stock level for Flue-cured tobacco, the Secretary

shall reduce the quantity of tobacco required to be purchased

by manufacturers under paragraph (2), on a pro rata basis,

to ensure that the inventories will not be less than the reserve

stock level for Flue-cured tobacco.

‘‘(4) NONCOMPLIANCE.—If a manufacturer fails to purchase

from the inventories of the producer-owned cooperative marketing association the quantity of Flue-cured tobacco required

under this subsection, the manufacturer shall be subject to

a penalty of 75 percent of the average market price (calculated

to the nearest whole cent) for Flue-cured tobacco for the immediately preceding year on the quantity of tobacco as to which

the failure occurs.

‘‘(5) PURCHASE REQUIREMENTS.—Tobacco purchased by a

manufacturer under this subsection shall not be included in

determining the quantity of tobacco purchased by the manufacturer under section 320B.

‘‘(f) CROP LOSSES DUE TO DISASTERS.— ‘‘(1) IN GENERAL.—If the Secretary, in consultation with

producer-owned cooperative marketing associations, determines

that because of drought, insect or disease infestation, or other

natural disaster, or other condition beyond the control of

producers, the total quantity of a crop of domestic Burley

tobacco or Flue-cured tobacco that is harvested and suitable

for marketing is substantially less than the expected yield

for the crop, and that pool inventories for the kind of tobacco

involved have been depleted, effective for the calendar year

following the year in which the crop loss occurs, the Secretary

may reduce the minimum percentage of domestic tobacco specified in subsection (a) to a percentage below 75 percent, as

determined by the Secretary, that reflects the reduced availability of domestic supplies of the kind of tobacco involved.
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‘‘(2) DETERMINATION OF EXPECTED YIELD.—For purposes of

paragraph (1), the Secretary shall determine the expected yield

for a crop of Burley tobacco or Flue-cured tobacco by taking

into consideration—

‘‘(A) the total acreage planted to the crop (including

acreage that the producers were prevented from planting

because of a condition referred to in paragraph (1)); and

‘‘(B) normal farm yields established for the crop.

‘‘(3) DEADLINE FOR DETERMINATIONS.—The Secretary shall

make determinations under paragraph (1) about crop losses

and announce the reduced percentage of the domestic tobacco

pool not later than November 30 of the year in which the

applicable crop of Burley tobacco or Flue-cured tobacco is harvested.’’.

(b) BUDGET DEFICIT ASSESSMENT.—

(1) IN GENERAL.—Section 106 of the Agricultural Act of

1949 (7 U.S.C. 1445) is amended by adding at the end the

following new subsection:

‘‘(h)(1) Effective only for each of the 1994 through 1998 crops

of tobacco, an importer of tobacco that is produced outside the

United States shall remit to the Commodity Credit Corporation

a nonrefundable marketing assessment in an amount equal to the

product obtained by multiplying—

‘‘(A) the number of pounds of tobacco that is imported

by the importer; by

‘‘(B) the sum of—

‘‘(i) the per pound marketing assessment imposed on

purchasers of domestic Burley tobacco pursuant to subsection (g); and ‘‘(ii) the per pound marketing assessment imposed on

purchasers of domestic Flue-cured tobacco pursuant to subsection (g). ‘‘(2) An assessment imposed under this subsection shall be

paid by the importer. ‘‘(3)(A) The importer shall remit the assessment at such time

and in such manner as may be prescribed by the Secretary. ‘‘(B) If the importer fails to comply with subparagraph (A),

the importer shall be liable, in addition, for a marketing penalty

at a rate equal to 37.5 percent of the sum of the average market

price (calculated to the nearest whole cent) of Flue-cured and Burley

tobacco for the immediately preceding year on the quantity of

tobacco as to which the failure occurs.

‘‘(C) This subsection shall be enforced in the same manner

as subparagraphs (B) and (C) of paragraph (1), and paragraphs

(2) and (3), of section 106A(h).

‘‘(4) Any penalty collected by the Secretary under this subsection shall be deposited for use by the Commodity Credit Corporation.’’.

(2) IMPORTER ASSESSMENTS FOR NO NET COST TOBACCO

FUND.—Section 106A of such Act (7 U.S.C. 1445–1) is

amended—

(A) in subsection (c), by inserting ‘‘and importers’’ after

‘‘purchasers’’;

(B) in subsection (d)(1)(A)—

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

(ii) by inserting after clause (ii) the following new

clause:
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‘‘(iii) each importer of Flue-cured or Burley tobacco

shall pay to the appropriate association, for deposit

in the Fund of the association, an assessment, in an

amount that is equal to the product obtained by

multiplying—

‘‘(I) the number of pounds of tobacco that is

imported by the importer; by

‘‘(II) the sum of the amount of per pound producer contributions and purchaser assessments

that are payable by domestic producers and purchasers of Flue-cured and Burley tobacco under

clauses (i) and (ii); and’’;

(C) in subsection (d)(2)—

(i) by inserting ‘‘or importer’’ after ‘‘or purchaser’’;

(ii) by striking ‘‘and’’ at the end of subparagraph

(B);

(iii) by inserting ‘‘and’’ at the end of subparagraph

(C); and

(iv) by adding at the end the following new

subparagraph:

‘‘(D) if the tobacco involved is imported by an importer,

from the importer.’’; and

(D) in subsection (h)(1)—

(i) by redesignating subparagraphs (B) and (C)

as subparagraphs (C) and (D), respectively; and

(ii) by inserting after subparagraph (A) the following new subparagraph:

‘‘(B) Each importer who fails to pay to the association an assessment as required by subsection (d)(2) at such time and in

such manner as may be prescribed by the Secretary, shall be

liable, in addition to any amount due, for a marketing penalty

at a rate equal to 75 percent of the average market price (calculated

to the nearest whole cent) for the respective kind of tobacco for

the immediately preceding year on the quantity of tobacco as to

which the failure occurs.’’.

(3) IMPORTER ASSESSMENTS TO NO NET COST TOBACCO

ACCOUNT.—Section 106B of such Act (7 U.S.C. 1445–2) is

amended—

(A) in subsection (c)(1), by striking ‘‘producers and

purchasers’’ and inserting ‘‘producers, purchasers, and

importers’’;

(B) in subsection (d)(1)—

(i) by designating the first and second sentences as subparagraphs (A) and (B), respectively; and (ii) by adding at the end the following new

subparagraph:

‘‘(C) The Secretary shall also require (in lieu of any requirement

under section 106A(d)(1)) that each importer of Flue-cured and

Burley tobacco shall pay to the Corporation, for deposit in the

Account of the association, an assessment, as determined under

paragraph (2) and collected under paragraph (3), with respect to

purchases of all such kinds of tobacco imported by the importer.’’;

(C) in subsection (d)(2), by adding at the end the following new subparagraph:

‘‘(C) The amount of the assessment to be paid by importers

shall be an amount that is equal to the product obtained by

multiplying—
H. R. 2264—12

‘‘(i) the number of pounds of tobacco that is imported by

the importer; by

‘‘(ii) the sum of the amount of per pound producer and

purchaser assessments that are payable by domestic producers

and purchasers of the respective kind of tobacco under this

paragraph.’’;

(D) in subsection (d)(3), by adding at the end the following new subparagraph:

‘‘(D) If Flue-cured or Burley tobacco is imported by an importer,

any importer assessment required by subsection (d) shall be collected from the importer.’’; and

(E) in subsection (j)(1)—

(i) by redesignating subparagraphs (B) and (C)

as subparagraphs (C) and (D), respectively; and

(ii) by inserting after subparagraph (A) the following new subparagraph:

‘‘(B) Each importer who fails to pay to the Corporation an

assessment as required by subsection (d) at such time and in

such manner as may be prescribed by the Secretary, shall be

liable, in addition to any amount due, to a marketing penalty

at a rate equal to 75 percent of the average market price (calculated

to the nearest whole cent) for the respective kind of tobacco for

the immediately preceding year on the quantity of tobacco as to

which the failure occurs.’’.

(c) FEES FOR INSPECTING IMPORTED TOBACCO.—The second sentence of section 213(d) of the Tobacco Adjustment Act of 1983

(7 U.S.C. 511r(d)) is amended by inserting before the period at

the end the following: ‘‘, and which shall be comparable to fees

and charges fixed and collected for services provided in connection

with tobacco produced in the United States’’.

(d) EXTENSION OF QUOTA REDUCTION FLOORS.—

(1) BURLEY TOBACCO.—Section 319(c)(3)(C)(ii) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314e(c)(3)(C)(ii))

is amended—

(A) by striking ‘‘1993’’ and inserting ‘‘1996’’; and

(B) by inserting before the period at the end the following: ‘‘, except that, in the case of each of the 1995 and

1996 crops of Burley tobacco, the Secretary may waive

the requirements of this clause if the Secretary determines

that the requirements would likely result in inventories

of the producer-owned cooperative marketing associations

for Burley tobacco described in section 320B(a)(2) to exceed

150 percent of the reserve stock level for Burley tobacco’’.

(2) FLUE-CURED TOBACCO.—Section 317(a)(1)(C)(ii) of such

Act (7 U.S.C. 1314c(a)(1)(C)(ii)) is amended—

(A) by striking ‘‘1993’’ and inserting ‘‘1996’’; and

(B) by inserting before the period at the end the following: ‘‘, except that, in the case of each of the 1995 and

1996 crops of Flue-cured tobacco, the Secretary may waive

the requirements of this clause if the Secretary determines

that the requirements would likely result in inventories

of the producer-owned cooperative marketing association

for Flue-cured tobacco described in section 320B(a)(2) to

exceed 150 percent of the reserve stock level for Fluecured tobacco’’.
H. R. 2264—13

SEC. 1107. SUGAR PROGRAM.

(a) IN GENERAL.—Section 206 of the Agricultural Act of 1949 (7 U.S.C. 1446g) is amended— (1) in the section heading, by striking ‘‘1995’’ and inserting ‘‘1997’’;

(2) in subsections (a), (c), (d)(1), and (j), by striking ‘‘1995’’ each place it appears and inserting ‘‘1997’’; and (3) in subsection (i)—

(A) in paragraph (1), by striking ‘‘equal to’’ and all that follows through the period at the end and inserting

the following: ‘‘equal to— ‘‘(A) in the case of marketings during each of fiscal years 1992 through 1994, 1.0 percent of the loan level

established under subsection (b) per pound of raw cane

sugar (but not more than .18 cents per pound of raw

cane sugar), processed by the processor from domestically

produced sugarcane or sugarcane molasses, that has been

marketed (including the transfer or delivery of the sugar

to a refinery for further processing or marketing); and ‘‘(B) in the case of marketings during each of fiscal years 1995 through 1998, 1.1 percent of the loan level

established under subsection (b) per pound of raw cane

sugar (but not more than .198 cents per pound of raw

cane sugar), processed by the processor from domestically

produced sugarcane or sugarcane molasses, that has been

marketed (including the transfer or delivery of the sugar

to a refinery for further processing or marketing).’’; (B) in paragraph (2), by striking ‘‘equal to’’ and all

that follows through the period at the end and inserting

the following: ‘‘equal to—

‘‘(A) in the case of marketings during each of fiscal

years 1992 through 1994, 1.0722 percent of the loan level

established under subsection (b) per pound of beet sugar

(but not more than .193 cents per pound of beet sugar),

processed by the processor from domestically produced

sugar beets or sugar beet molasses, that has been marketed; and

‘‘(B) in the case of marketings during each of fiscal

years 1995 through 1998, 1.1794 percent of the loan level

established under subsection (b) per pound of beet sugar

(but not more than .2123 cents per pound of beet sugar),

processed by the processor from domestically produced

sugar beets or sugar beet molasses, that has been marketed.’’; and

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

‘‘(6) EXCESS MARKETINGS.—In addition to the assessment

required under paragraph (1) or (2), a processor who knowingly

markets sugar in excess of the allocated allotment of the processor under section 359d of the Agricultural Adjustment Act

of 1938 (7 U.S.C. 1359dd) shall pay an assessment in an amount

that is double the applicable assessment required under paragraph (1) or (2) per pound of sugar marketed.’’.

(b) PROVISIONS NECESSARY TO THE OPERATION OF THE PROGRAM.—Section 359b of the Agricultural Adjustment Act of 1938

(7 U.S.C. 1359bb) is amended—

(1) in subsection (a)(1), by striking ‘‘1996’’ and inserting

‘‘1998’’; and
H. R. 2264—14

(2) in subsection (d)—

(A) by striking paragraph (1) and inserting the following new paragraph:

‘‘(1) IN GENERAL.—During any fiscal year or portion thereof

for which marketing allotments have been established, no processor of sugar beets or sugarcane shall market a quantity

of sugar in excess of the allocation established for such processor, except to enable another processor to fulfill an allocation

established for such other processor or to facilitate the exportation of such sugar.’’; and

(B) in paragraph (3), by inserting ‘‘knowingly’’ after

‘‘who’’ each place it appears.

SEC. 1108. OILSEEDS PROGRAM.

Section 205 of the Agricultural Act of 1949 (7 U.S.C. 1446f)

is amended—

(1) in subsection (c)—

(A) in paragraph (1), by inserting after ‘‘$5.02 per

bushel’’ the following: ‘‘for each of the 1991 through 1993

crops and $4.92 per bushel for each of the 1994 through

1997 crops’’; and

(B) in paragraph (2), by inserting after ‘‘$0.089 per

pound’’ the following: ‘‘for each of the 1991 through 1993

crops and $0.087 per pound for each of the 1994 through

1997 crops’’;

(2) in subsection (h), by striking ‘‘mature on the last day

of the 9th month following the month the application for the

loan is made.’’ and inserting the following: ‘‘mature— ‘‘(1) in the case of each of the 1991 through 1993 crops,

on the last day of the 9th month following the month the

application for the loan is made; and

‘‘(2) in the case of each of the 1994 through 1997 crops,

on the last day of the 9th month following the month the

application for the loan is made, except that the loan may

not mature later than the last day of the fiscal year in which

the application is made.’’; and

(3) in subsection (m), by adding at the end the following

new paragraph: ‘‘(3) APPLICABILITY.—This subsection shall apply only to

each of the 1991 through 1993 crops of oilseeds.’’.

SEC. 1109. PEANUT PROGRAM.

(a) IN GENERAL.—Section 108B of the Agricultural Act of 1949 (7 U.S.C. 1445c–3) is amended—

(1) in the section heading, by striking ‘‘1995’’ and inserting

‘‘1997’’;

(2) in subsections (a)(1), (a)(2), (b)(1), (g)(1), and (h), by

striking ‘‘1995’’ each place it appears and inserting ‘‘1997’’;

and

(3) in subsection (g)—

(A) in paragraph (1), by inserting after ‘‘1 percent’’

both places it appears the following: ‘‘for each of the 1991

through 1993 crops, 1.1 percent for each of the 1994 and

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

for the 1997 crop,’’; and

(B) in paragraph (2)(A), by striking clauses (i) and

(ii) and inserting the following new clauses:
H. R. 2264—15

‘‘(i) collect from the producer a marketing assessment equal to the quantity of peanuts acquired multiplied by—

‘‘(I) in the case of each of the 1991 through

1993 crops, .5 percent of the applicable national

average support rate;

‘‘(II) in the case of each of the 1994 and 1995

crops, .55 percent of the applicable national average support rate;

‘‘(III) in the case of the 1996 crop, .6 percent

of the applicable national average support rate;

and

‘‘(IV) in the case of the 1997 crop, .65 percent

of the applicable national average support rate;

‘‘(ii) pay, in addition to the amount collected under

clause (i), a marketing assessment in an amount equal

to the quantity of peanuts acquired multiplied by—

‘‘(I) in the case of each of the 1991 through

1993 crops, .5 percent of the applicable national

average support rate; and

‘‘(II) in the case of each of the 1994 through

1997 crops, .55 percent of the applicable national

average support rate; and’’.

(b) ASSESSMENT UNDER PEANUT MARKETING AGREEMENT.—Section 8b(b)(1) of the Agricultural Adjustment Act (7 U.S.C.

608b(b)(1)), reenacted with amendments by the Agricultural

Marketing Agreement Act of 1937, is amended—

(1) by striking ‘‘and’’ at the end of subparagraph (A);

(2) by striking the period at the end of subparagraph (B)

and inserting ‘‘; and’’; and (3) by adding at the end the following new subparagraph:

‘‘(C) any assessment (except with respect to any assessment for the indemnification of losses on rejected peanuts) imposed

under the agreement shall— ‘‘(i) apply to peanut handlers (as defined by the Sec- retary) who have not entered into such an agreement with

the Secretary in addition to those handlers who have

entered into the agreement; and ‘‘(ii) be paid to the Secretary.’’. (c) PROVISIONS NECESSARY TO THE OPERATION OF THE PROGRAM.—Part VI of subtitle B of title III of the Agricultural Adjustment Act of 1938 is amended—

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

(A) in the section heading, by striking ‘‘1995’’ and inserting ‘‘1997’’; and

(B) in subsections (a)(1), (b)(1)(A), (b)(1)(B), (b)(2)(A),

(b)(2)(C), (b)(3)(A), and (f), by striking ‘‘1995’’ each place

it appears and inserting ‘‘1997’’; and

(2) in section 358e (7 U.S.C. 1359a)—

(A) in the section heading, by striking ‘‘1995’’ and inserting ‘‘1997’’; and

(B) in subsection (i), by striking ‘‘1995’’ and inserting

‘‘1997’’.

SEC. 1110. HONEY PROGRAM.

Section 207 of the Agricultural Act of 1949 (7 U.S.C. 1446h)

is amended—
H. R. 2264—16

(1) by striking ‘‘1995’’ each place it appears in subsections

(a), (c)(1), and (j) and inserting ‘‘1998’’;

(2) in subsection (a), by striking ‘‘than 53.8 cents per

pound.’’ and inserting ‘‘than—

‘‘(1) 53.8 cents per pound for each of the 1991 through

1993 crop years;

‘‘(2) 50 cents per pound for each of the 1994 and 1995

crop years;

‘‘(3) 49 cents per pound for the 1996 crop year;

‘‘(4) 48 cents per pound for the 1997 crop year; and

‘‘(5) 47 cents per pound for the 1998 crop year.’’;

(3) in subsection (e)(1)—

(A) by striking ‘‘and’’ at the end of subparagraph (C);

and

(B) by striking subparagraph (D) and inserting the

following new subparagraphs:

‘‘(D) $125,000 in the 1994 crop year;

‘‘(E) $100,000 in the 1995 crop year;

‘‘(F) $75,000 in the 1996 crop year; and

‘‘(G) $50,000 in each of the 1997 and 1998 crop years.’’;

and

(4) in subsection (i)(1), by striking ‘‘1995’’ and inserting

‘‘1993’’.

SEC. 1111. WOOL AND MOHAIR PROGRAM.

The National Wool Act of 1954 (7 U.S.C. 1781 et seq.) is

amended—

(1) in section 703 (7 U.S.C. 1782), by striking ‘‘1995’’ both

places it appears in subsections (a) and (b)(2) and inserting

‘‘1997’’;

(2) in section 704 (7 U.S.C. 1783)—

(A) in subsection (b)(1)—

(i) by striking ‘‘and’’ at the end of subparagraph

(C); and

(ii) by striking subparagraph (D) and inserting

the following new subparagraphs:

‘‘(D) $125,000 for the 1994 marketing year;

‘‘(E) $100,000 for the 1995 marketing year;

‘‘(F) $75,000 for the 1996 marketing year; and

‘‘(G) $50,000 for the 1997 marketing year.’’; and

(B) in subsection (c), by striking ‘‘through 1995’’ and

inserting ‘‘and 1992’’; and

(3) in section 706 (7 U.S.C. 1785), by inserting after the

second sentence the following new sentence: ‘‘In determining

the net sales proceeds and national payment rates for shorn

wool and shorn mohair, the Secretary shall not deduct marketing charges for commissions, coring, or grading.’’.

Subtitle B—Rural Electrification

SEC. 1201. REFINANCING AND PREPAYMENT OF FFB LOANS.

(a) IN GENERAL.—Title III of the Rural Electrification Act of

1936 (7 U.S.C. 931 et seq.) is amended by inserting after section

306B (7 U.S.C. 936b) the following new section:
H. R. 2264—17

‘‘SEC. 306C. REFINANCING AND PREPAYMENT OF FFB LOANS.

‘‘(a) IN GENERAL.—A borrower of a loan made by the Federal Financing Bank and guaranteed under section 306 may, at the

option of the borrower, refinance or prepay the loan or an advance

on the loan, or any portion of the loan or advance. ‘‘(b) PENALTY.— ‘‘(1) DETERMINATION OF PENALTY.—A penalty shall be assessed against a borrower that refinances or prepays a loan

or loan advance, or any portion of a loan or advance, under

this section. Except as provided in paragraph (2), the penalty

shall be equal to the lesser of— ‘‘(A) the difference between the outstanding principal balance of the loan being refinanced and the present value

of the loan discounted at a rate equal to the then current

cost of funds to the Department of the Treasury for obligations of comparable maturity to the loan being refinanced

or prepaid; ‘‘(B) 100 percent of the amount of interest for 1 year on the outstanding principal balance of the loan or loan

advance, or any portion of the loan or advance, being

refinanced, multiplied by the ratio that— ‘‘(i) the number of quarterly payment dates

between the date of the refinancing or prepayment

and the maturity date for the loan advance; bears

to

‘‘(ii) the number of quarterly payment dates

between the first quarterly payment date that occurs

12 years after the end of the year in which the amount

being refinanced was advanced and the maturity date

of the loan advance; and

‘‘(C)(i) the present value of 100 percent of the amount

of interest for 1 year on the outstanding principal balance

of the loan or loan advance, or any portion of the loan

or advance, being refinanced or prepaid; plus

‘‘(ii) for the interval between the date of the refinancing

or prepayment and the first quarterly payment date that

occurs 12 years after the end of the year in which the

amount being refinanced or prepaid was advanced, the

present value of the difference between—

‘‘(I) each payment scheduled for the interval on

the loan amount being refinanced or prepaid; and

‘‘(II) the payment amounts that would be required

during the interval on the amounts being refinanced

or prepaid if the interest rate on the loan were equal

to the then current cost of funds to the Department

of the Treasury for obligations of comparable maturity

to the loan being refinanced or prepaid.

‘‘(2) LIMITATION.— ‘‘(A) IN GENERAL.—Except as provided in subparagraph (B), the penalty provided by paragraph (1)(A) shall be

required for refinancing or prepayment under this section. ‘‘(B) EXCEPTION.—In the case of a loan advanced under

an agreement that permits the refinancing or prepayment

of the loan advance based on the payment of 1 year of

interest on the outstanding principal balance of the loan

advance, a borrower may, in lieu of the penalty required

by paragraph (1)(A), pay a penalty as provided by—
H. R. 2264—18

‘‘(i) paragraph (1)(B), if the loan advance has

reached the 12-year maturity required under the loan

agreement for the refinancing or prepayment; or

‘‘(ii) paragraph (1)(C), if the loan advance has not

reached the 12-year maturity required under the loan

agreement for the refinancing or prepayment.

‘‘(3) FINANCING OF PENALTY.—

‘‘(A) IN GENERAL.—In the case of a refinancing under

this section, a borrower may, at the option of the borrower,

meet the penalty requirements of paragraph (1) by—

‘‘(i) making a payment in the amount of the

required penalty at the time of the refinancing; or

‘‘(ii) increasing the outstanding principal balance

of the loan advance guaranteed by the Administrator

that is being refinanced under this section by the

amount of the penalty.

‘‘(B) INCREASED PRINCIPAL.—If a borrower meets the

penalty requirements of paragraph (1) by increasing the

outstanding principal balance of the loan advance that

is being refinanced, the borrower shall make a payment

at the time of the refinancing equal to 2.5 percent of

the amount of the penalty that is added to the outstanding

principal balance of the loan.

‘‘(c) LOAN TERMS AND CONDITIONS AFTER REFINANCING.—

‘‘(1) IN GENERAL.—On the payment of a penalty as provided

by subsection (b), the loan or loan advance, or any portion

of the loan or advance, shall be refinanced at the interest

rate described in paragraph (2) for a term selected by the

borrower pursuant to paragraph (3), except that this paragraph

shall not apply if the loan advance, or any portion of the

advance, is prepaid by the borrower. ‘‘(2) INTEREST RATE.—The interest rate on a loan refinanced

under this section shall be determined to be equal to the

then current cost of funds to the Department of the Treasury

for obligations of comparable maturity to a term selected by

the borrower pursuant to paragraph (3). ‘‘(3) LOAN TERM.—Subject to paragraph (4), the borrower

of a loan that is refinanced under this section—

‘‘(A) shall select the term for which an interest rate

shall be determined pursuant to paragraph (2); and ‘‘(B) at the end of the term (and any succeeding term selected by the borrower under this paragraph), may renew

the loan for another term selected by the borrower.

‘‘(4) MAXIMUM TERM.—The borrower may not select a term pursuant to paragraph (3) that ends after the maturity date

set for the loan before the refinancing of the loan under this

section.

‘‘(5) EXISTING LOANS.—In the case of the refinancing of

a loan of a borrower pursuant to this section and the inclusion

of a penalty in the outstanding principal balance of the

refinanced loan pursuant to subsection (b)(3)—

‘‘(A) the refinancing and inclusion of the penalty shall

not be subject to appropriations or limited by the amount

provided during a fiscal year for new loans, loan guarantees, or other credit activity;

‘‘(B) the request of the borrower for the refinancing

under this section may not be denied or delayed; and
H. R. 2264—19

‘‘(C) the borrower may not be limited in the selection

of any refinancing or prepayment option provided by this

section to the borrower.’’.

(b) REGULATIONS.—Not later than 45 days after the date of

enactment of this section, the Administrator of the Rural Electrification Administration shall issue interim final regulations to carry

out the amendment made by subsection (a).

Subtitle C—Agricultural Trade

SEC. 1301. ACREAGE REDUCTION REQUIREMENTS.

(a) IN GENERAL.—Section 1104 of the Omnibus Budget Reconciliation Act of 1990 (7 U.S.C. 1445b–3a note) is amended—

(1) in subsection (a), by striking paragraph (2) and inserting

the following new paragraph:

‘‘(2) corn under which the acreage planted to corn for harvest on a farm would be limited to the corn crop acreage

base for the farm for the crop reduced by not less than 71⁄2

percent.’’; and

(2) in subsection (b)(2), by striking ‘‘grain sorghum, and

barley,’’.

(b) READJUSTMENT OF SUPPORT LEVELS.—Section 1302 of such

Act (7 U.S.C. 1421 note) is amended—

(1) in subsection (b)—

(A) by striking paragraph (1); and

(B) by redesignating paragraphs (2) and (3) as paragraphs (1) and (2), respectively;

(2) in subsection (c), by striking ‘‘and other programs’’;

and

(3) in subsection (d)—

(A) in paragraph (1)— (i) by striking subparagraph (A); and

(ii) by redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively;

(B) in paragraph (2), by striking ‘‘(A), (B), and (C)’’ and inserting ‘‘(A) and (B)’’; and (C) in paragraph (3)— (i) by striking ‘‘measures specified in subparagraph (A) of paragraph (1) and’’; and (ii) by striking ‘‘(B) or (C)’’ and inserting ‘‘(A) or (B)’’.

SEC. 1302. MARKET PROMOTION PROGRAM.

(a) REDUCTION OF FUNDING LEVEL.—Section 211(c)(1) of the

Agricultural Trade Act of 1978 (7 U.S.C. 5641(c)(1)) is amended

by striking ‘‘through 1995’’ and inserting ‘‘through 1993, and not

less than $110,000,000 for each of the fiscal years 1994 through

1997,’’.

(b) SECRETARIAL ACTIONS TO ACHIEVE SAVINGS.—In order to

enable the Secretary of Agriculture to achieve the savings required

in the market promotion program established by section 203 of

the Agricultural Trade Act of 1978 (7 U.S.C. 5623) as a result

of the amendments made by this section:

(1) UNFAIR TRADE PRACTICES.—Paragraph (2) of section

203(c) of such Act is amended to read as follows:

‘‘(2) UNFAIR TRADE PRACTICES.—
H. R. 2264—20

‘‘(A) REQUIREMENT.—Except as provided in subparagraph (B), the Secretary shall provide assistance under

this section only to counter or offset the adverse effects

of a subsidy, import quota, or other unfair trade practice

of a foreign country.

‘‘(B) EXCEPTION.—The Secretary shall waive the

requirements of this paragraph in the case of activities

conducted by small entities operating through the regional

State-related organizations.’’.

(2) GUIDELINES.—The Secretary of Agriculture should

implement changes in the market promotion program established by section 203 of such Act, beginning with fiscal year

1994, in order to improve the effectiveness of the program

and to meet the following objectives:

(A) PRIORITY.—In providing assistance for branded promotion, the Secretary should give priority to small-sized

entities.

(B) GRADUATION.—The Secretary should not provide

assistance under the program to promote a specific branded

product in a single market for more than 5 years unless

the Secretary determines that further assistance is necessary in order to meet the objectives of the program.

(C) CONTRIBUTION LEVEL.—

(i) IN GENERAL.—The Secretary should require a

minimum contribution level of 10 percent from an

eligible trade organization that receives assistance for

nonbranded promotion.

(ii) INCREASES IN CONTRIBUTION LEVEL.—The Secretary may increase the contribution level in any subsequent year that an eligible trade organization receives

assistance for nonbranded promotion.

(D) ADDITIONALITY.—The Secretary should require

each participant in the program to certify that any Federal

funds received supplement, but do not supplant, private

or third party participant funds or other contributions to

program activities. (E) INDEPENDENT AUDITS.—If as a result of an evaluation or audit of activities of a participant under the program, the Secretary determines that a further review is

justified in order to ensure compliance with the requirements of the program, the Secretary should require the

participant to contract for an independent audit of the

program activities, including activities of any subcontractor.

(3) TOBACCO.—No funds made available under the market

promotion program may be used for activities to develop, maintain, or expand foreign markets for tobacco.

(c) REGULATIONS.—Not later than 90 days after the date of

enactment of this Act, the Secretary of Agriculture shall issue

regulations to implement this section and the amendments made

by this section.

Subtitle D—Miscellaneous

SEC. 1401. ADMISSION, ENTRANCE, AND RECREATION FEES.

(a) DEFINITIONS.—As used in this section:
H. R. 2264—21

(1) AREA OF CONCENTRATED PUBLIC USE.—The term ‘‘area

of concentrated public use’’ means an area administered by

the Secretary that meets each of the following criteria:

(A) The area is managed primarily for outdoor recreation purposes.

(B) Facilities and services necessary to accommodate

heavy public use are provided in the area.

(C) The area contains at least 1 major recreation attraction.

(D) Public access to the area is provided in such a

manner that admission fees can be efficiently collected

at 1 or more centralized locations.

(2) BOAT LAUNCHING FACILITY.—The term ‘‘boat launching

facility’’ includes any boat launching facility, regardless of

whether specialized facilities or services, such as mechanical

or hydraulic boat lifts or facilities, are provided.

(3) CAMPGROUND.—The term ‘‘campground’’ means any

campground where a majority of the following amenities are

provided, as determined by the Secretary:

(A) Tent or trailer spaces.

(B) Drinking water.

(C) An access road.

(D) Refuse containers.

(E) Toilet facilities.

(F) The personal collection of recreation use fees by

an employee or agent of the Secretary.

(G) Reasonable visitor protection.

(H) If campfires are permitted in the campground,

simple devices for containing the fires.

(4) SECRETARY.—The term ‘‘Secretary’’ means the Secretary

of Agriculture.

(b) AUTHORITY TO IMPOSE FEES.—The Secretary may charge—

(1) admission or entrance fees at national monuments,

national volcanic monuments, national scenic areas, and areas

of concentrated public use administered by the Secretary; and

(2) recreation use fees at lands administered by the Secretary in connection with the use of specialized outdoor recreation sites, equipment, services, and facilities, including visitors’

centers, picnic tables, boat launching facilities, and campgrounds.

(c) AMOUNT OF FEES.—The amount of the admission, entrance,

and recreation fees authorized to be imposed under this section

shall be determined by the Secretary.

SEC. 1402. ENVIRONMENTAL CONSERVATION ACREAGE RESERVE PROGRAM AMENDMENTS.

(a) ENVIRONMENTAL CONSERVATION ACREAGE RESERVE PROGRAM.—Section 1230(b) of the Food Security Act of 1985 (16 U.S.C.

3830(b)) is amended by striking ‘‘to place in’’ and all that follows

through ‘‘acres’’.

(b) CONSERVATION RESERVE PROGRAM.—Section 1231(d) of such

Act (16 U.S.C. 3831(d)) is amended—

(1) by striking ‘‘may’’ and inserting ‘‘shall’’;

(2) by striking ‘‘the amount of acres specified in section

1230(b)’’ and inserting ‘‘a total of 38,000,000 acres during the

1986 through 1995 calendar years’’; and
H. R. 2264—22

(3) by striking ‘‘each of calendar years 1994 and 1995’’

and inserting ‘‘the 1995 calendar year’’.

(c) WETLANDS RESERVE PROGRAM.—Section 1237 of such Act

(16 U.S.C. 3837) is amended—

(1) by striking subsection (b) and inserting the following

new subsection:

‘‘(b) MINIMUM ENROLLMENT.—The Secretary shall enroll into

the wetlands reserve program—

‘‘(1) a total of not less than 330,000 acres by the end

of the 1995 calendar year; and

‘‘(2) a total of not less than 975,000 acres during the 1991

through 2000 calendar years.’’; and

(2) in subsection (c), by striking ‘‘1995’’ and inserting

‘‘2000’’.

SEC. 1403. FEDERAL CROP INSURANCE.

(a) ACTUARIAL SOUNDNESS.—Section 506 of the Federal Crop

Insurance Act (7 U.S.C. 1506) is amended by adding at the end

the following new subsection:

‘‘(n) ACTUARIAL SOUNDNESS.—The Corporation shall take such

actions as are necessary to improve the actuarial soundness of

Federal multiperil crop insurance coverage made available under

this title to achieve, on and after October 1, 1995, an overall

projected loss ratio of not greater than 1.1, including—

‘‘(1) instituting appropriate requirements for documentation

of the actual production history of insured producers to establish recorded or appraised yields for Federal crop insurance

coverage that more accurately reflect the associated actuarial

risk, except that the Corporation may not carry out this paragraph in a manner that would prevent beginning farmers from

obtaining adequate Federal crop insurance, as determined by

the Corporation;

‘‘(2) establishing in counties, to the extent practicable, a

crop insurance option based on area yields in a manner that

allows an insured producer to qualify for an indemnity if a

loss has occurred in a specified area in which the farm of

the insured producer is located;

‘‘(3) establishing a database that contains the social security

account and employee identification numbers of participating

producers and using the numbers to identify insured producers

who are high risk for actuarial purposes and insured producers

who have not documented at least 4 years of production history,

to assess the performance of insurance providers, and for other

purposes permitted by law; and

‘‘(4) taking any other measures authorized by law to

improve the actuarial soundness of the Federal crop insurance

program while maintaining fairness and effective coverage for

agricultural producers.’’.

(b) CONFORMING AMENDMENTS.—

(1) REINSURANCE.—Section 508(h) of such Act (7 U.S.C.

1508(h)) is amended by striking the fifth sentence and inserting

the following new sentence: ‘‘The Corporation shall also pay

operating and administrative costs to insurers of policies on

which the Corporation provides reinsurance in an amount determined by the Corporation.’’.
H. R. 2264—23

(2) AREA YIELD PLAN.—Section 508 of such Act (7 U.S.C.

1508) is amended by adding at the end the following new

subsection:

‘‘(n) AREA YIELD PLAN.—

‘‘(1) IN GENERAL.—Notwithstanding any other provision of

this title, the Corporation may offer, only as an option to

individual crop insurance coverage available under this Act,

a crop insurance plan based on an area yield that allows

an insured producer to qualify for an indemnity if a loss has

occurred in an area, as specified by the Corporation, in which

the farm of the producer is located.

‘‘(2) LEVEL OF COVERAGE.—Under a plan offered under

paragraph (1), an insured producer shall be allowed to select

the level of production at which an indemnity will be paid

consistent with terms and conditions established by the Corporation.’’.

(3) YIELD COVERAGE.—Section 508A of such Act (7 U.S.C.

1508a) is amended—

(A) in subsection (a)(1), by striking ‘‘may’’ and inserting

‘‘shall’’; and

(B) in subsection (b)—

(i) in paragraph (1)(A)—

(I) by striking ‘‘A crop insurance contract’’ and

all that follows through ‘‘producer—’’ and inserting

‘‘Under regulations issued by the Corporation, a

crop insurance contract offered under this title

to an eligible insured producer of a commodity

with respect to which the Corporation provides

crop insurance coverage shall make available to

the producer either—’’;

(II) by striking ‘‘or’’ at the end of clause (i);

(III) in clause (ii)—

(aa) by striking ‘‘5’’ and inserting ‘‘4 building to 10’’; and (bb) by striking the period at the end and

inserting ‘‘; or’’; and

(IV) by adding at the end the following new

clause:

‘‘(iii) yield coverage based on— ‘‘(I) not less than 65 percent of the transitional

yield of the producer (adjusted to reflect actual

experience), as specified in regulations issued by

the Corporation based on production history

requirements; or

‘‘(II) the area yield under section 508(n) for

the crop established under the program for the

commodity involved.’’;

(ii) in paragraph (1)(B)—

(I) by striking ‘‘two’’ and inserting ‘‘3’’; and

(II) by inserting after ‘‘subparagraph (A)’’ the

following: ‘‘, where available (as determined by

the Corporation),’’;

(iii) in paragraph (2)—

(I) by striking ‘‘5’’ and inserting ‘‘4 building

to 10’’; and

(II) by inserting after ‘‘previous crops,’’ the

following: ‘‘not less than 65 percent of the transi-
H. R. 2264—24

tional yield of the producer (adjusted to reflect

actual experience), or the area yield,’’; and

(iv) in paragraph (3)(A)(i), by inserting after ‘‘farm

program yield’’ the following: ‘‘, not less than 65 percent

of the transitional yield of the producer (adjusted to

reflect actual experience), as specified in regulations

issued by the Corporation based on production history

requirements, or the area yield under section 508(n),

whichever is applicable,’’.

(c) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in paragraph (2), this

section and the amendments made by this section shall become

effective on October 1, 1993.

(2) REGULATIONS.—Not later than 30 days after the date

of enactment of this Act, the Secretary of Agriculture shall

publish, for public comment, proposed regulations to implement

the amendments made by this section.

TITLE II—ARMED SERVICES

PROVISIONS

SEC. 2001. LIMITATION ON COST-OF-LIVING ADJUSTMENTS FOR MILITARY RETIREES.

Section 1401a(b) of title 10, United States Code, is amended—

(1) in paragraph (2), by striking out ‘‘The Secretary’’ and

inserting in lieu thereof ‘‘Except as provided in paragraph (6),

the Secretary’’; and

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

‘‘(6) SPECIAL RULES FOR PARAGRAPH (2) FOR FISCAL YEARS

1994 THROUGH 1998.—

‘‘(A) FISCAL YEAR 1994.—In the case of an increase

in the retired pay of a member or former member referred

to in paragraph (2) that, pursuant to paragraph (1),

becomes effective on December 1, 1993, the initial month

for which such increase is payable as part of such retired

pay shall (notwithstanding such December 1 effective date)

be March 1994.

‘‘(B) FISCAL YEARS 1995 THROUGH 1998.—In the case

of an increase in retired pay of a member or former member

referred to in paragraph (2) that, pursuant to paragraph

(1), becomes effective on December 1 of 1994, 1995, 1996,

or 1997, the initial month for which such increase is payable as part of such retired pay shall (notwithstanding

such December 1 effective date) be September of the following year.

‘‘(C) INAPPLICABILITY TO DISABILITY RETIREES.—Subparagraphs (A) and (B) do not apply with respect to the

retired pay of a member retired under chapter 61 of this

title.’’.
H. R. 2264—25

TITLE III—BANKING AND HOUSING

PROVISIONS

SEC. 3001. NATIONAL DEPOSITOR PREFERENCE.

(a) IN GENERAL.—Section 11(d)(11) of the Federal Deposit Insurance Act (12 U.S.C. 1821(d)(11)) is amended to read as follows:

‘‘(11) DEPOSITOR PREFERENCE.— ‘‘(A) IN GENERAL.—Subject to section 5(e)(2)(C), amounts realized from the liquidation or other resolution

of any insured depository institution by any receiver

appointed for such institution shall be distributed to pay

claims (other than secured claims to the extent of any

such security) in the following order of priority: ‘‘(i) Administrative expenses of the receiver.

‘‘(ii) Any deposit liability of the institution.

‘‘(iii) Any other general or senior liability of the institution (which is not a liability described in clause

(iv) or (v)).

‘‘(iv) Any obligation subordinated to depositors or general creditors (which is not an obligation described

in clause (v)).

‘‘(v) Any obligation to shareholders or members arising as a result of their status as shareholders or

members (including any depository institution holding

company or any shareholder or creditor of such company).

‘‘(B) EFFECT ON STATE LAW.— ‘‘(i) IN GENERAL.—The provisions of subparagraph (A) shall not supersede the law of any State except

to the extent such law is inconsistent with the provisions of such subparagraph, and then only to the extent

of the inconsistency. ‘‘(ii) PROCEDURE FOR DETERMINATION OF INCONSISTENCY.—Upon the Corporation’s own motion or upon

the request of any person with a claim described in

subparagraph (A) or any State which is submitted

to the Corporation in accordance with procedures which

the Corporation shall prescribe, the Corporation shall

determine whether any provision of the law of any

State is inconsistent with any provision of subparagraph (A) and the extent of any such inconsistency. ‘‘(iii) JUDICIAL REVIEW.—The final determination

of the Corporation under clause (ii) shall be subject

to judicial review under chapter 7 of title 5, United

States Code.

‘‘(C) ACCOUNTING REPORT.—Any distribution by the Corporation in connection with any claim described in

subparagraph (A)(v) shall be accompanied by the accounting report required under paragraph (15)(B).’’. (b) TECHNICAL AND CONFORMING AMENDMENTS.— (1) Section 11(c)(13) of the Federal Deposit Insurance Act (12 U.S.C. 1821(c)(13)) is amended—

(A) in subparagraph (A), by striking ‘‘subject to subparagraph (B),’’; (B) by inserting ‘‘and’’ after the semicolon at the end

of subparagraph (A);
H. R. 2264—26

(C) by striking subparagraph (B); and

(D) by redesignating subparagraph (C) as subparagraph (B).

(2) Section 11(g)(4) of the Federal Deposit Insurance Act

(12 U.S.C. 1921(g)(4)) is amended by striking ‘‘If the Corporation’’ and inserting ‘‘Subject to subsection (d)(11), if the Corporation’’.

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

shall apply with respect to insured depository institutions for which

a receiver is appointed after the date of the enactment of this

Act.

SEC. 3002. TRANSFER OF FEDERAL RESERVE SURPLUSES.

(a) IN GENERAL.—The 1st undesignated paragraph of section

7 of the Federal Reserve Act (12 U.S.C. 289) is amended to read

as follows:

‘‘(a) DIVIDENDS AND SURPLUS FUNDS OF RESERVE BANKS.—

‘‘(1) STOCKHOLDER DIVIDENDS.—

‘‘(A) IN GENERAL.—After all necessary expenses of a

Federal reserve bank have been paid or provided for, the

stockholders of the bank shall be entitled to receive an

annual dividend of 6 percent on paid-in capital stock.

‘‘(B) DIVIDEND CUMULATIVE.—The entitlement to dividends under subparagraph shall be cumulative.

‘‘(2) DEPOSIT OF NET EARNINGS IN SURPLUS FUND.—That

portion of net earnings of each Federal reserve bank which

remains after dividend claims under subparagraph (A) have

been fully met shall be deposited in the surplus fund of the

bank.

‘‘(3) PAYMENT TO TREASURY.—During fiscal years 1997 and

1998, any amount in the surplus fund of any Federal reserve

bank in excess of the amount equal to 3 percent of the total

paid-in capital and surplus of the member banks of such bank

shall be transferred to the Board for transfer to the Secretary

of the Treasury for deposit in the general fund of the Treasury.’’.

(b) ADDITIONAL TRANSFERS FOR FISCAL YEARS 1997 AND 1998.—

(1) IN GENERAL.—In addition to the amounts required to

be transferred from the surplus funds of the Federal reserve

banks pursuant to section 7(a)(3) of the Federal Reserve Act,

the Federal reserve banks shall transfer from such surplus

funds to the Board of Governors of the Federal Reserve System

for transfer to the Secretary of the Treasury for deposit in

the general fund of the Treasury, a total amount of

$106,000,000 in fiscal year 1997 and a total amount of

$107,000,000 in fiscal year 1998.

(2) ALLOCATION BY FED.—Of the total amount required

to be paid by the Federal reserve banks under paragraph

(1) for fiscal year 1997 or 1998, the Board of Governors of

the Federal Reserve System shall determine the amount each

such bank shall pay in such fiscal year.

(3) REPLENISHMENT OF SURPLUS FUND PROHIBITED.—No

Federal reserve bank may replenish such bank’s surplus fund

by the amount of any transfer by such bank under paragraph

(1) during fiscal years 1997 and 1998.

(c) TECHNICAL AND CONFORMING AMENDMENTS.—

(1) The penultimate undesignated paragraph of section 7

of the Federal Reserve Act (12 U.S.C. 290) is amended by
H. R. 2264—27

striking ‘‘The net earnings derived’’ and inserting ‘‘(b) USE

OF EARNINGS TRANSFERRED TO THE TREASURY.—The net earnings derived’’.

(2) The last undesignated paragraph of section 7 of the

Federal Reserve Act (12 U.S.C. 531) is amended by striking

‘‘Federal reserve banks’’ and inserting ‘‘(c) EXEMPTION FROM

TAXATION.—Federal reserve banks’’.

SEC. 3003. USE OF RETURN DATA FOR INCOME VERIFICATION UNDER

CERTAIN HOUSING ASSISTANCE PROGRAMS.

Section 904 of the Stewart B. McKinney Homeless Assistance

Amendments Act of 1988 (42 U.S.C. 3544) is amended as follows:

(1) DEFINITION.—In subsection (a), by adding at the end

the following:

‘‘(4) PROGRAM OF THE DEPARTMENT OF HOUSING AND URBAN

DEVELOPMENT.—The term ‘program of the Department of Housing and Urban Development’ includes Indian housing programs

assisted under title II of the United States Housing Act of

1937.’’.

(2) CONSENT FORMS.—In subsection (b)—

(A) in paragraph (1), by striking ‘‘and’’ at the end;

(B) in paragraph (2), by striking the period at the

end and inserting ‘‘; and’’;

(C) by inserting after paragraph (2) the following new

paragraph:

‘‘(3) sign a consent form approved by the Secretary authorizing the Secretary to request the Commissioner of Social Security

and the Secretary of the Treasury to release information pursuant to section 6103(l)(7)(D)(ix) of the Internal Revenue Code

of 1986 with respect to such applicant or participant for the

sole purpose of the Secretary verifying income information

pertinent to the applicant’s or participant’s eligibility or level

of benefits.’’; and

(D) in the last sentence, by striking ‘‘This’’ and inserting the following: ‘‘Except as provided in this subsection,

this’’.

(3) APPLICANT, PARTICIPANT, AND PUBLIC HOUSING AGENCY

PROTECTIONS.—In subsection (c)(2)—

(A) in subparagraph (A)—

(i) in the matter preceding clause (i)—

(I) by inserting after ‘‘compensation law’’ the

following: ‘‘or pursuant to section 6103(l)(7)(D)(ix)

of the Internal Revenue Code of 1986 from the

Commissioner of Social Security or the Secretary

of the Treasury’’; and

(II) by inserting ‘‘(in the case of information

obtained pursuant to such section 303(i))’’ before

‘‘representatives’’; and

(ii) in clause (ii), by inserting ‘‘or public housing

agency’’ after ‘‘owner’’ each place it appears; and

(B) in subparagraph (B), by inserting after ‘‘wages’’

each place it appears the following: ‘‘, other earnings or

income,’’.

(4) PENALTY.—In subsection (c)(3)—

(A) in subparagraph (A), by inserting ‘‘or section

6103(l)(7)(D)(ix) of the Internal Revenue Code of 1986 with-
H. R. 2264—28

out consent pursuant to subsection (b) of this section or’’

after ‘‘Social Security Act’’; and

(B) in the first sentence of subparagraph (B)—

(i) by striking clause (i) and inserting the following:

‘‘(i) a negligent or knowing disclosure of information

referred to in this section, section 303(i) of the Social

Security Act, or section 6103(l)(7)(D)(ix) of the Internal

Revenue Code of 1986 about such person by an officer

or employee of any public housing agency or owner

(or employee thereof), which disclosure is not authorized by this section, such section 303(i), such section

6103(l)(7)(D)(ix), or any regulation implementing this

section, such section 303(i), or such section

6103(l)(7)(D)(ix), or for which consent, pursuant to subsection (b) of this section, has not been granted, or’’;

and

(ii) in clause (ii), by inserting ‘‘such section

6103(l)(7)(D)(ix),’’ after ‘‘303(i),’’.

(5) CONFORMING AMENDMENT.—The heading of subsection

(c) of section 904 of the Stewart B. McKinney Homeless Assistance Amendments Act of 1988 is amended by striking ‘‘STATE

EMPLOYMENT’’.

SEC. 3004. GNMA REMIC GUARANTEE FEES.

Section 306(g)(3) of the National Housing Act (12 U.S.C.

1721(g)(3)) is amended by adding at the end the following new

subparagraph:

‘‘(E)(i) Notwithstanding subparagraphs (A) through (D), fees

charged for the guarantee of, or commitment to guarantee,

multiclass securities backed by a trust or pool of securities or

notes guaranteed by the Association under this subsection, and

other related fees shall be charged by the Association in an amount

the Association deems appropriate. The Association shall take such

action as may be necessary to reasonably assure that such portion

of the benefit, resulting from the Association’s multiclass securities

program, as the Association determines is appropriate accrues to

mortgagors who execute eligible mortgages after the date of the

enactment of this subparagraph. ‘‘(ii) The Association shall provide for the initial implementation

of the program for which fees are charged under the first sentence

of clause (i) by notice published in the Federal Register. The notice

shall be effective upon publication and shall provide an opportunity

for public comment. Not later than 12 months after publication

of the notice, the Association shall issue regulations for such program based on the notice, comments received, and the experience

of the Association in carrying out the program during such period.

‘‘(iii) The Association shall consult with persons or entities

in such manner as the Association deems appropriate to ensure

the efficient commencement and operation of the multiclass securities program.

‘‘(iv) No State or local law, and no Federal law (except Federal

law enacted expressly in limitation of this clause after the effective

date of this subparagraph) shall preclude or limit the exercise

by the Association of its power to contract with persons or entities,

and its rights to enforce such contracts, for the purpose of ensuring

the efficient commencement and continued operation of the

multiclass securities program.’’.
H. R. 2264—29

SEC. 3005. MUTUAL MORTGAGE INSURANCE FUND PREMIUMS.

To improve the actuarial soundness of the Mutual Mortgage

Insurance Fund under the National Housing Act, the Secretary

of Housing and Urban Development shall increase the rate at

which the Secretary earns the single premium payment collected

at the time of insurance of a mortgage that is an obligation of

such Fund (with respect to the rate in effect on the date of the

enactment of this Act). In establishing such increased rate, the

Secretary shall consider any current audit findings and reserve

analyses and information regarding the expected average duration

of mortgages that are obligations of such Fund and may consider

any other information that the Secretary determines to be appropriate.

TITLE IV—STUDENT LOAN AND ERISA

PROVISIONS

SEC. 4001. TABLE OF CONTENTS.

The table of contents for this title is as follows:

TITLE IV—STUDENT LOAN AND ERISA PROVISIONS

Sec. 4001. Table of contents.

Subtitle A—Direct Student Loan Provisions

Sec. 4011. Short title; references.

CHAPTER 1—FEDERAL DIRECT STUDENT LOAN PROGRAM

Sec. 4021. Federal direct student loan program.

CHAPTER 2—CONFORMING AMENDMENTS TO THE HIGHER EDUCATION ACT OF 1965

Sec. 4041. Preserving loan access.

Sec. 4042. Guaranty agency reserves.

Sec. 4043. Terms of loans.

Sec. 4044. Assignment of loans.

Sec. 4045. Termination of guaranty agency agreements; assumption of guaranty

agency functions by the Secretary.

Sec. 4046. Consolidation loans.

Sec. 4047. Consolidation of programs.

Subtitle B—Additional Savings from the Student Loan Programs

Sec. 4101. Reduction of borrower interest rates.

Sec. 4102. Reduction in loan fees paid by students.

Sec. 4103. Loan fees from lenders.

Sec. 4104. Offset fee.

Sec. 4105. Elimination of tax exempt floor.

Sec. 4106. Reduction in interest rate for consolidation loans; rebate fee.

Sec. 4107. Reinsurance fees and administrative cost allowance.

Sec. 4108. Risk sharing.

Sec. 4109. Plus loan disbursements.

Sec. 4110. Secretary’s equitable share.

Sec. 4111. Reduction in the special allowance payment.

Sec. 4112. Supplemental preclaims assistance.

Subtitle C—Cost Sharing by States

Sec. 4201. Cost sharing by States.

Subtitle D—Group Health Plans

Sec. 4301. Standards for group health plan coverage.
H. R. 2264—30

Subtitle A—Direct Student Loan

Provisions

SEC. 4011. SHORT TITLE; REFERENCES.

(a) SHORT TITLE.—This subtitle may be cited as the ‘‘Student

Loan Reform Act of 1993’’.

(b) REFERENCES.—References in this subtitle and subtitles B

and C to ‘‘the Act’’ are references to the Higher Education Act

of 1965 (20 U.S.C. 1001 et seq.).

CHAPTER 1—FEDERAL DIRECT STUDENT LOAN

PROGRAM

SEC. 4021. FEDERAL DIRECT STUDENT LOAN PROGRAM.

Part D of title IV (20 U.S.C. 1087a) is amended to read as

follows:

‘‘PART D—FEDERAL DIRECT STUDENT LOAN

PROGRAM

‘‘SEC. 451. PROGRAM AUTHORITY.

There are hereby made available, in accordance with the provisions of this part, such sums as may be necessary to make loans

to all eligible students (and the eligible parents of such students)

in attendance at participating institutions of higher education

selected by the Secretary, to enable such students to pursue their

courses of study at such institutions during the period beginning

July 1, 1994. Such loans shall be made by participating institutions,

or consortia thereof, that have agreements with the Secretary to

originate loans, or by alternative originators designated by the

Secretary to make loans for students in attendance at participating

institutions (and their parents).

‘‘SEC. 452. FUNDS FOR ORIGINATION OF DIRECT STUDENT LOANS.

‘‘(a) IN GENERAL.—The Secretary shall provide, on the basis

of the need and the eligibility of students at each participating

institution, and parents of such students, for such loans, funds

for student and parent loans under this part—

‘‘(1) directly to an institution of higher education that has

an agreement with the Secretary under section 454(a) to participate in the direct student loan programs under this part and

that also has an agreement with the Secretary under section

454(b) to originate loans under this part; or ‘‘(2) through an alternative originator designated by the Secretary to students (and parents of students) attending

institutions of higher education that have an agreement with

the Secretary under section 454(a) but that do not have an

agreement with the Secretary under section 454(b).

‘‘(b) FEES FOR ORIGINATION SERVICES.— ‘‘(1) FEES FOR INSTITUTIONS.—The Secretary shall pay fees

to institutions of higher education (or a consortium of such

institutions) with agreements under section 454(b), in an

amount established by the Secretary, to assist in meeting the

costs of loan origination. Such fees—
H. R. 2264—31

‘‘(A) shall be paid by the Secretary based on all the

loans made under this part to a particular borrower in

the same academic year;

‘‘(B) shall be subject to a sliding scale that decreases

the per borrower amount of such fees as the number of

borrowers increases; and

‘‘(C)(i) for academic year 1994–1995, shall not exceed

a program-wide average of $10 per borrower for all the

loans made under this part to such borrower in the same

academic year; and

‘‘(ii) for succeeding academic years, shall not exceed

such average fee as the Secretary shall establish pursuant

to regulations.

‘‘(2) FEES FOR ALTERNATIVE ORIGINATORS.—The Secretary

shall pay fees for loan origination services to alternative originators of loans made under this part in an amount established

by the Secretary in accordance with the terms of the contract

described in section 456(b) between the Secretary and each

such alternative originator.

‘‘(c) NO ENTITLEMENT TO PARTICIPATE OR ORIGINATE.—No

institution of higher education shall have a right to participate

in the programs authorized by this part, to originate loans, or

to perform any program function under this part. Nothing in this

subsection shall be construed so as to limit the entitlement of

an eligible student attending a participating institution (or the

eligible parent of such student) to borrow under this part.

‘‘(d) DELIVERY OF LOAN FUNDS.—Loan funds shall be paid and

delivered to an institution by the Secretary prior to the beginning

of the payment period established by the Secretary in a manner

that is consistent with payment and delivery of basic grants under

subpart 1 of part A of this title.

‘‘SEC. 453. SELECTION OF INSTITUTIONS FOR PARTICIPATION AND

ORIGINATION.

‘‘(a) PHASE-IN OF PROGRAM.— ‘‘(1) GENERAL AUTHORITY.—The Secretary shall enter into agreements pursuant to section 454(a) with institutions of

higher education to participate in the direct student loan program under this part, and agreements pursuant to section

454(b) with institutions of higher education, or consortia

thereof, to originate loans in such program, for academic years

beginning on or after July 1, 1994. Alternative origination

services, through which an entity other than the participating

institution at which the student is in attendance originates

the loan, shall be provided by the Secretary, through 1 or

more contracts under section 456(b) or such other means as

the Secretary may provide, for students attending participating

institutions that do not originate direct student loans under

this part. Such agreements for the academic year 1994–1995

shall, to the extent feasible, be entered into not later than

January 1, 1994.

‘‘(2) TRANSITION PROVISIONS.—In order to ensure an expeditious but orderly transition from the loan programs under

part B of this title to the direct student loan program under

this part, the Secretary shall, in the exercise of the Secretary’s

discretion, determine the number of institutions with which

the Secretary shall enter into agreements under subsections
H. R. 2264—32

(a) and (b) of section 454 for any academic year, except that

the Secretary shall exercise such discretion so as to achieve

the following goals:

‘‘(A) for academic year 1994–1995, loans made under

this part shall represent 5 percent of the new student

loan volume for such year;

‘‘(B) for academic year 1995–1996, loans made under

this part shall represent 40 percent of the new student

loan volume for such year;

‘‘(C) for academic years 1996–1997 and 1997–1998,

loans made under this part shall represent 50 percent

of the new student loan volume for such years; and

‘‘(D) for the academic year that begins in fiscal year

1998, loans made under this part shall represent 60 percent

of the new student loan volume for such year.

‘‘(3) EXCEPTION.—The Secretary may exceed the percentage

goals described in subparagraphs (C) or (D) of paragraph (2)

if the Secretary determines that a higher percentage is warranted by the number of institutions of higher education that

desire to participate in the program under this part and that

meet the eligibility requirements for such participation.

‘‘(4) NEW STUDENT LOAN VOLUME.—For the purpose of this

subsection, the term ‘new student loan volume’ means the

estimated sum of all loans (other than consolidation loans)

that will be made, insured or guaranteed under this part and

part B in the year for which the determination is made. The

Secretary shall base the estimate described in the preceding

sentence on the most recent program data available.

‘‘(b) SELECTION CRITERIA.— ‘‘(1) APPLICATION.—Each institution of higher education

desiring to participate in the direct student loan program under

this part shall submit an application satisfactory to the Secretary containing such information and assurances as the Secretary may require. ‘‘(2) SELECTION PROCEDURE.—The Secretary shall select

institutions for participation in the direct student loan program

under this part, and shall enter into agreements with such

institutions under section 454(a), from among those institutions

that submit the applications described in paragraph (1), and

meet such other eligibility requirements as the Secretary shall

prescribe, by, to the extent possible— ‘‘(A)(i) categorizing such institutions according to

anticipated loan volume, length of academic program, control of the institution, highest degree offered, size of student

enrollment, geographic location, annual loan volume, and

default experience; and

‘‘(ii) beginning in academic year 1995–1996 selecting

institutions that are reasonably representative of each of

the categories described pursuant to clause (i); and

‘‘(B) if the Secretary determines it necessary to carry

out the purposes of this part, selecting additional institutions.

‘‘(c) SELECTION CRITERIA FOR ORIGINATION.—

‘‘(1) IN GENERAL.—The Secretary may enter into a supplemental agreement with an institution (or a consortium of such

institutions) that—

‘‘(A) has an agreement under subsection 454(a);
H. R. 2264—33

‘‘(B) desires to originate loans under this part; and

‘‘(C) meets the criteria described in paragraph (2).

‘‘(2) TRANSITION SELECTION CRITERIA.—For academic year

1994–1995, the Secretary may approve an institution to originate loans only if such institution—

‘‘(A) made loans under part E of this title in academic

year 1993–1994 and did not exceed the applicable maximum default rate under section 462(g) for the most recent

fiscal year for which data are available;

‘‘(B) is not on the reimbursement system of payment

for any of the programs under subpart 1 or 3 of part

A, part C, or part E of this title;

‘‘(C) is not overdue on program or financial reports

or audits required under this title;

‘‘(D) is not subject to an emergency action, or a limitation, suspension, or termination under section 428(b)(1)(T),

432(h), or 487(c);

‘‘(E) in the opinion of the Secretary, has not had significant deficiencies identified by a State postsecondary review

entity under subpart 1 of part H of this title;

‘‘(F) in the opinion of the Secretary, has not had severe

performance deficiencies for any of the programs under

this title, including such deficiencies demonstrated by

audits or program reviews submitted or conducted during

the 5 calendar years immediately preceding the date of

application;

‘‘(G) provides an assurance that such institution has

no delinquent outstanding debts to the Federal Government, unless such debts are being repaid under or in

accordance with a repayment arrangement satisfactory to

the Federal Government, or the Secretary in the Secretary’s

discretion determines that the existence or amount of such

debts has not been finally determined by the cognizant

Federal agency; and

‘‘(H) meets such other criteria as the Secretary may

establish to protect the financial interest of the United

States and to promote the purposes of this part.

‘‘(3) REGULATIONS GOVERNING APPROVAL AFTER TRANSITION.—For academic year 1995–1996 and subsequent academic

years, the Secretary shall promulgate and publish in the Federal Register regulations governing the approval of institutions

to originate loans under this part in accordance with section

457(a)(2).

‘‘(d) ELIGIBLE INSTITUTIONS.—The Secretary may not select an

institution of higher education for participation under this section

unless such institution is an eligible institution under section 435(a).

‘‘(e) CONSORTIA.—Subject to such requirements as the Secretary

may prescribe, eligible institutions of higher education (as determined under subsection (d)) with agreements under section 454(a)

may apply to the Secretary as consortia to originate loans under

this part for students in attendance at such institutions. Each

such institution shall be required to meet the requirements of

subsection (c) with respect to loan origination.
H. R. 2264—34

‘‘SEC. 454. AGREEMENTS WITH INSTITUTIONS.

‘‘(a) PARTICIPATION AGREEMENTS.—An agreement with any institution of higher education for participation in the direct student

loan program under this part shall— ‘‘(1) provide for the establishment and maintenance of a

direct student loan program at the institution under which

the institution will—

‘‘(A) identify eligible students who seek student finan- cial assistance at such institution in accordance with section 484;

‘‘(B) estimate the need of each such student as required

by part F of this title for an academic year, except that,

any loan obtained by a student under this part with the

same terms as loans made under section 428H (except

as otherwise provided in this part), or a loan obtained

by a parent under this part with the same terms as loans

made under section 428B (except as otherwise provided

in this part), or obtained under any State-sponsored or

private loan program, may be used to offset the expected

family contribution of the student for that year; ‘‘(C) provide a statement that certifies the eligibility

of any student to receive a loan under this part that is

not in excess of the annual or aggregate limit applicable

to such loan, except that the institution may, in exceptional

circumstances identified by the Secretary, refuse to certify

a statement that permits a student to receive a loan under

this part, or certify a loan amount that is less than the

student’s determination of need (as determined under part

F of this title), if the reason for such action is documented

and provided in written form to such student;

‘‘(D) set forth a schedule for disbursement of the proceeds of the loan in installments, consistent with the

requirements of section 428G; and

‘‘(E) provide timely and accurate information— ‘‘(i) concerning the status of student borrowers (and

students on whose behalf parents borrow under this

part) while such students are in attendance at the

institution and concerning any new information of

which the institution becomes aware for such students

(or their parents) after such borrowers leave the

institution, to the Secretary for the servicing and

collecting of loans made under this part; and ‘‘(ii) if the institution does not have an agreement with the Secretary under subsection (b), concerning

student eligibility and need, as determined under subparagraphs (A) and (B), to the Secretary as needed

for the alternative origination of loans to eligible students and parents in accordance with this part;

‘‘(2) provide assurances that the institution will comply

with requirements established by the Secretary relating to student loan information with respect to loans made under this

part;

‘‘(3) provide that the institution accepts responsibility and

financial liability stemming from its failure to perform its functions pursuant to the agreement;

‘‘(4) provide that students at the institution and their parents (with respect to such students) will be eligible to partici-
H. R. 2264—35

pate in the programs under part B of this title at the discretion

of the Secretary for the period during which such institution

participates in the direct student loan program under this

part, except that a student or parent may not receive loans

under both this part and part B for the same period of enrollment;

‘‘(5) provide for the implementation of a quality assurance

system, as established by the Secretary and developed in consultation with institutions of higher education, to ensure that

the institution is complying with program requirements and

meeting program objectives;

‘‘(6) provide that the institution will not charge any fees

of any kind, however described, to student or parent borrowers

for origination activities or the provision of any information

necessary for a student or parent to receive a loan under

this part, or any benefits associated with such loan; and

‘‘(7) include such other provisions as the Secretary determines are necessary to protect the interests of the United

States and to promote the purposes of this part.

‘‘(b) ORIGINATION.—An agreement with any institution of higher

education, or consortia thereof, for the origination of loans under

this part shall—

‘‘(1) supplement the agreement entered into in accordance

with subsection (a);

‘‘(2) include provisions established by the Secretary that

are similar to the participation agreement provisions described

in paragraphs (1)(E)(ii), (2), (3), (4), (5), (6), and (7) of subsection

(a), as modified to relate to the origination of loans by the

institution or consortium;

‘‘(3) provide that the institution or consortium will originate

loans to eligible students and parents in accordance with this

part; and

‘‘(4) provide that the note or evidence of obligation on

the loan shall be the property of the Secretary.

‘‘(c) WITHDRAWAL AND TERMINATION PROCEDURES.—The Secretary shall establish procedures by which institutions or consortia

may withdraw or be terminated from the program under this part.

‘‘SEC. 455. TERMS AND CONDITIONS OF LOANS.

‘‘(a) IN GENERAL.— ‘‘(1) PARALLEL TERMS, CONDITIONS, BENEFITS, AND

AMOUNTS.—Unless otherwise specified in this part, loans made

to borrowers under this part shall have the same terms, conditions, and benefits, and be available in the same amounts,

as loans made to borrowers under sections 428, 428B, and

428H of this title.

‘‘(2) DESIGNATION OF LOANS.—Loans made to borrowers

under this part that, except as otherwise specified in this

part, have the same terms, conditions, and benefits as loans

made to borrowers under—

‘‘(A) section 428 shall be known as ‘Federal Direct

Stafford Loans’;

‘‘(B) section 428B shall be known as ‘Federal Direct

PLUS Loans’; and

‘‘(C) section 428H shall be known as ‘Federal Direct

Unsubsidized Stafford Loans’.

‘‘(b) INTEREST RATE.—
H. R. 2264—36

‘‘(1) RATES FOR FDSL AND FDUSL.—For Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans

for which the first disbursement is made on or after July

1, 1994, the applicable rate of interest shall, during any 12-

month period beginning on July 1 and ending on June 30,

be determined on the preceding June 1 and be equal to—

‘‘(A) the bond equivalent rate of 91-day Treasury bills

auctioned at the final auction held prior to such June

1; plus

‘‘(B) 3.1 percent,

except that such rate shall not exceed 8.25 percent.

‘‘(2) IN SCHOOL AND GRACE PERIOD RULES.—(A) Notwithstanding the provisions of paragraph (1), but subject to paragraph (3), with respect to any Federal Direct Stafford Loan

or Federal Direct Unsubsidized Stafford Loan for which the

first disbursement is made on or after July 1, 1995, the

applicable rate of interest for interest which accrues—

‘‘(i) prior to the beginning of the repayment period

of the loan; or

‘‘(ii) during the period in which principal need not

be paid (whether or not such principal is in fact paid)

by reason of a provision described in section 428(b)(1)(M)

or 427(a)(2)(C),

shall not exceed the rate determined under subparagraph (B).

‘‘(B) For the purpose of subparagraph (A), the rate determined under this subparagraph shall, during any 12-month

period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to— ‘‘(i) the bond equivalent rate of 91-day Treasury bills

auctioned at the final auction prior to such June 1; plus

‘‘(ii) 2.5 percent,

except that such rate shall not exceed 8.25 percent.

‘‘(3) OUT-YEAR RULE.—Notwithstanding paragraphs (1) and (2), for Federal Direct Stafford Loans and Federal Direct

Unsubsidized Stafford Loans made on or after July 1, 1998,

the applicable rate of interest shall, during any 12-month period

beginning on July 1 and ending on June 30, be determined

on the preceding June 1 and be equal to— ‘‘(A) the bond equivalent rate of the security with a

comparable maturity as established by the Secretary; plus ‘‘(B) 1.0 percent,

except that such rate shall not exceed 8.25 percent.

‘‘(4) RATES FOR FDPLUS.—(A) For Federal Direct PLUS

Loans for which the first disbursement is made on or after

July 1, 1994, the applicable rate of interest shall, during any

12-month period beginning on July 1 and ending on June

30, be determined on the preceding June 1 and be equal to—

‘‘(i) the bond equivalent rate of 52-week Treasury bills

auctioned at final auction held prior to such June 1; plus

‘‘(ii) 3.1 percent,

except that such rate shall not exceed 9 percent.

‘‘(B) For Federal Direct PLUS loans made on or after July

1, 1998, the applicable rate of interest shall, during any 12-

month period beginning on July 1 and ending on June 30,

be determined on the preceding June 1 and be equal to—

‘‘(i) the bond equivalent rate of the security with a

comparable maturity as established by the Secretary; plus
H. R. 2264—37

‘‘(ii) 2.1 percent,

except that such rate shall not exceed 9 percent.

‘‘(5) PUBLICATION.—The Secretary shall determine the

applicable rates of interest under this subsection after consultation with the Secretary of the Treasury and shall publish such

rate in the Federal Register as soon as practicable after the

date of determination.

‘‘(c) LOAN FEE.—The Secretary shall charge the borrower of

a loan made under this part an origination fee of 4.0 percent

of the principal amount of loan.

‘‘(d) REPAYMENT PLANS.—

‘‘(1) DESIGN AND SELECTION.—Consistent with criteria

established by the Secretary, the Secretary shall offer a borrower of a loan made under this part a variety of plans for

repayment of such loan, including principal and interest on

the loan. The borrower shall be entitled to accelerate, without

penalty, repayment on the borrower’s loans under this part.

The borrower may choose—

‘‘(A) a standard repayment plan, with a fixed annual

repayment amount paid over a fixed period of time, consistent with subsection (a)(1) of this section;

‘‘(B) an extended repayment plan, with a fixed annual

repayment amount paid over an extended period of time,

except that the borrower shall annually repay a minimum

amount determined by the Secretary in accordance with

section 428(b)(1)(L);

‘‘(C) a graduated repayment plan, with annual repayment amounts established at 2 or more graduated levels

and paid over a fixed or extended period of time, except

that the borrower’s scheduled payments shall not be less

than 50 percent, nor more than 150 percent, of what the

amortized payment on the amount owed would be if the

loan were repaid under the standard repayment plan; and ‘‘(D) an income contingent repayment plan, with varying annual repayment amounts based on the income of

the borrower, paid over an extended period of time prescribed by the Secretary, not to exceed 25 years, except

that the plan described in this subparagraph shall not

be available to the borrower of a Federal Direct PLUS

loan.

‘‘(2) SELECTION BY SECRETARY.—If a borrower of a loan

made under this part does not select a repayment plan

described in paragraph (1), the Secretary may provide the borrower with a repayment plan described in subparagraph (A),

(B), or (C) of paragraph (1).

‘‘(3) CHANGES IN SELECTIONS.—The borrower of a loan made

under this part may change the borrower’s selection of a repayment plan under paragraph (1), or the Secretary’s selection

of a plan for the borrower under paragraph (2), as the case

may be, under such terms and conditions as may be established

by the Secretary.

‘‘(4) ALTERNATIVE REPAYMENT PLANS.—The Secretary may

provide, on a case by case basis, an alternative repayment

plan to a borrower of a loan made under this part who demonstrates to the satisfaction of the Secretary that the terms

and conditions of the repayment plans available under paragraph (1) are not adequate to accommodate the borrower’s
H. R. 2264—38

exceptional circumstances. In designing such alternative repayment plans, the Secretary shall ensure that such plans do

not exceed the cost to the Federal Government, as determined

on the basis of the present value of future payments by such

borrowers, of loans made using the plans available under paragraph (1).

‘‘(5) REPAYMENT AFTER DEFAULT.—The Secretary may

require any borrower who has defaulted on a loan made under

this part to—

‘‘(A) pay all reasonable collection costs associated with

such loan; and

‘‘(B) repay the loan pursuant to an income contingent

repayment plan.

‘‘(e) INCOME CONTINGENT REPAYMENT.—

‘‘(1) INFORMATION AND PROCEDURES.—The Secretary may

obtain such information as is reasonably necessary regarding

the income of a borrower (and the borrower’s spouse, if

applicable) of a loan made under this part that is, or may

be, repaid pursuant to income contingent repayment, for the

purpose of determining the annual repayment obligation of

the borrower. Returns and return information (as defined in

section 6103 of the Internal Revenue Code of 1986) may be

obtained under the preceding sentence only to the extent

authorized by section 6103(l)(13) of such Code. The Secretary

shall establish procedures for determining the borrower’s repayment obligation on that loan for such year, and such other

procedures as are necessary to implement effectively income

contingent repayment. ‘‘(2) REPAYMENT BASED ON ADJUSTED GROSS INCOME.—A

repayment schedule for a loan made under this part and repaid

pursuant to income contingent repayment shall be based on

the adjusted gross income (as defined in section 62 of the

Internal Revenue Code of 1986) of the borrower or, if the

borrower is married and files a Federal income tax return

jointly with the borrower’s spouse, on the adjusted gross income

of the borrower and the borrower’s spouse.

‘‘(3) ADDITIONAL DOCUMENTS.—A borrower who chooses, or

is required, to repay a loan made under this part pursuant

to income contingent repayment, and for whom adjusted gross

income is unavailable or does not reasonably reflect the

borrower’s current income, shall provide to the Secretary other

documentation of income satisfactory to the Secretary, which

documentation the Secretary may use to determine an appropriate repayment schedule. ‘‘(4) REPAYMENT SCHEDULES.—Income contingent repayment schedules shall be established by regulations promulgated

by the Secretary and shall require payments that vary in

relation to the appropriate portion of the annual income of

the borrower (and the borrower’s spouse, if applicable) as determined by the Secretary.

‘‘(5) CALCULATION OF BALANCE DUE.—The balance due on

a loan made under this part that is repaid pursuant to income

contingent repayment shall equal the unpaid principal amount

of the loan, any accrued interest, and any fees, such as late

charges, assessed on such loan. The Secretary may promulgate

regulations limiting the amount of interest that may be capitalized on such loan, and the timing of any such capitalization.
H. R. 2264—39

‘‘(6) NOTIFICATION TO BORROWERS.—The Secretary shall

establish procedures under which a borrower of a loan made

under this part who chooses or is required to repay such loan

pursuant to income contingent repayment is notified of the

terms and conditions of such plan, including notification of

such borrower—

‘‘(A) that the Internal Revenue Service will disclose

to the Secretary tax return information as authorized under

section 6103(l)(13) of the Internal Revenue Code of 1986;

and

‘‘(B) that if a borrower considers that special circumstances, such as a loss of employment by the borrower

or the borrower’s spouse, warrant an adjustment in the

borrower’s loan repayment as determined using the

information described in subparagraph (A), or the alternative documentation described in paragraph (3), the borrower may contact the Secretary, who shall determine

whether such adjustment is appropriate, in accordance with

criteria established by the Secretary.

‘‘(f) DEFERMENT.—

‘‘(1) EFFECT ON PRINCIPAL AND INTEREST.—A borrower of

a loan made under this part who meets the requirements

described in paragraph (2) shall be eligible for a deferment,

during which periodic installments of principal need not be

paid, and interest—

‘‘(A) shall not accrue, in the case of a—

‘‘(i) Federal Direct Stafford Loan; or

‘‘(ii) a Federal Direct Consolidation Loan that

consolidated only Federal Direct Stafford Loans, or

a combination of such loans and Federal Stafford Loans

for which the student borrower received an interest

subsidy under section 428; or

‘‘(B) shall accrue and be capitalized or paid by the

borrower, in the case of a Federal Direct PLUS Loan,

a Federal Direct Unsubsidized Stafford Loan, or a Federal

Direct Consolidation Loan not described in subparagraph

(A)(ii).

‘‘(2) ELIGIBILITY.—A borrower of a loan made under this

part shall be eligible for a deferment during any period— ‘‘(A) during which the borrower— ‘‘(i) is carrying at least one-half the normal fulltime work load for the course of study that the

borrower is pursuing, as determined by the eligible

institution (as such term is defined in section 435(a))

the borrower is attending; or

‘‘(ii) is pursuing a course of study pursuant to

a graduate fellowship program approved by the Secretary, or pursuant to a rehabilitation training program for individuals with disabilities approved by the

Secretary,

except that no borrower shall be eligible for a deferment

under this subparagraph, or a loan made under this part

(other than a Federal Direct PLUS Loan or a Federal

Direct Consolidation Loan), while serving in a medical

internship or residency program;

‘‘(B) not in excess of 3 years during which the borrower

is seeking and unable to find full-time employment;
H. R. 2264—40

‘‘(C) not in excess of 3 years during which the Secretary

determines, in accordance with regulations prescribed

under section 435(o), that the borrower has experienced

or will experience an economic hardship.

‘‘(g) FEDERAL DIRECT CONSOLIDATION LOANS.—A borrower of

a loan made under this part may consolidate such loan with the

loans described in section 428C(a)(4) only under such terms and

conditions as the Secretary shall establish pursuant to section

457(a)(1) or regulations promulgated under this part. Loans made

under this subsection shall be known as ‘Federal Direct Consolidation Loans’.

‘‘(h) BORROWER DEFENSES.—Notwithstanding any other provision of State or Federal law, the Secretary shall specify in regulations (except as authorized under section 457(a)(1)) which acts

or omissions of an institution of higher education a borrower may

assert as a defense to repayment of a loan made under this part,

except that in no event may a borrower recover from the Secretary,

in any action arising from or relating to a loan made under this

part, an amount in excess of the amount such borrower has repaid

on such loan.

‘‘(i) LOAN APPLICATION AND PROMISSORY NOTE.—The common

financial reporting form required in section 483(a)(1) shall constitute the application for loans made under this part (other than

a Federal Direct PLUS loan). The Secretary shall develop, print,

and distribute to participating institutions a standard promissory

note and loan disclosure form.

‘‘(j) LOAN DISBURSEMENT.—

‘‘(1) IN GENERAL.—Proceeds of loans to students under this

part shall be applied to the student’s account for tuition and

fees, and, in the case of institutionally owned housing, to room

and board. Loan proceeds that remain after the application

of the previous sentence shall be delivered to the borrower

by check or other means that is payable to and requires the

endorsement or other certification by such borrower.

‘‘(2) PAYMENT PERIODS.—The Secretary shall establish periods for the payments described in paragraph (1) in a manner

consistent with payment of basic grants under subpart 1 of

part A of this title.

‘‘(k) FISCAL CONTROL AND FUND ACCOUNTABILITY.—

‘‘(1) IN GENERAL.—(A) An institution shall maintain financial records in a manner consistent with records maintained

for other programs under this title.

‘‘(B) Except as otherwise required by regulations of the

Secretary, or in a notice under section 457(a)(1), an institution

may maintain loan funds under this part in the same account

as other Federal student financial assistance.

‘‘(2) PAYMENTS AND REFUNDS.—Payments and refunds shall

be reconciled in a manner consistent with the manner set

forth for the submission of a payment summary report required

of institutions participating in the program under subpart 1

of part A, except that nothing in this paragraph shall prevent

such reconciliations on a monthly basis.

‘‘(3) TRANSACTION HISTORIES.—All transaction histories

under this part shall be maintained using the same system

designated by the Secretary for the provision of basic grants

under subpart 1 of part A of this title.
H. R. 2264—41

‘‘SEC. 456. CONTRACTS.

‘‘(a) CONTRACTS FOR SUPPLIES AND SERVICES.— ‘‘(1) IN GENERAL.—The Secretary shall, to the extent practicable, award contracts for origination, servicing, and collection

described in subsection (b). In awarding such contracts, the

Secretary shall ensure that such services and supplies are

provided at competitive prices.

‘‘(2) ENTITIES.—The entities with which the Secretary may

enter into contracts shall include only entities which the Secretary determines are qualified to provide such services and

supplies and will comply with the procedures applicable to

the award of such contracts. In the case of awarding contracts

for the origination, servicing, and collection of loans under

this part, the Secretary shall enter into contracts only with

entities that have extensive and relevant experience and demonstrated effectiveness. The entities with which the Secretary

may enter into such contracts shall include, where practicable,

agencies with agreements with the Secretary under sections

428(b) and (c), if such agencies meet the qualifications as determined by the Secretary under this subsection and if those

agencies have such experience and demonstrated effectiveness.

In awarding contracts to such State agencies, the Secretary

shall, to the extent practicable and consistent with the purposes

of this part, give special consideration to State agencies with

a history of high quality performance to perform services for

institutions of higher education within their State. ‘‘(3) RULE OF CONSTRUCTION.—Nothing in this section shall

be construed as a limitation of the authority of any State

agency to enter into an agreement for the purposes of this

section as a member of a consortium of State agencies.

‘‘(b) CONTRACTS FOR ORIGINATION, SERVICING, AND DATA SYSTEMS.—The Secretary may enter into contracts for—

‘‘(1) the alternative origination of loans to students attending institutions of higher education with agreements to participate in the program under this part (or their parents), if such

institutions do not have agreements with the Secretary under

section 454(b);

‘‘(2) the servicing and collection of loans made under this

part;

‘‘(3) the establishment and operation of 1 or more data

systems for the maintenance of records on all loans made

under this part;

‘‘(4) services to assist in the orderly transition from the

loan programs under part B to the direct student loan program

under this part; and

‘‘(5) such other aspects of the direct student loan program

as the Secretary determines are necessary to ensure the

successful operation of the program.

‘‘SEC. 457. REGULATORY ACTIVITIES.

‘‘(a) NOTICE IN LIEU OF REGULATIONS FOR FIRST YEAR OF PROGRAM.—

‘‘(1) NOTICE IN LIEU OF REGULATIONS FOR FIRST YEAR OF

PROGRAM.—The Secretary shall publish in the Federal Register

whatever standards, criteria, and procedures, consistent with

the provisions of this part, the Secretary, in consultation with

members of the higher education community, determines are
H. R. 2264—42

reasonable and necessary to the successful implementation of

the first year of the direct student loan program authorized

by this part. Section 431 of the General Education Provisions

Act shall not apply to the publication of such standards, criteria,

and procedures.

‘‘(2) NEGOTIATED RULEMAKING.—Beginning with academic

year 1995–1996, all standards, criteria, procedures, and regulations implementing this part as amended by the Student Loan

Reform Act of 1993 shall, to the extent practicable, be subject

to negotiated rulemaking, including all such standards, criteria,

procedures, and regulations promulgated from the date of enactment of such Act.

‘‘(b) CLOSING DATE FOR APPLICATIONS FROM INSTITUTIONS.—

The Secretary shall establish a date not later than October 1,

1993, as the closing date for receiving applications from institutions

of higher education desiring to participate in the first year of

the direct loan program under this part.

‘‘(c) PUBLICATION OF LIST OF PARTICIPATING INSTITUTIONS.—

Not later than January 1, 1994, the Secretary shall publish in

the Federal Register a list of the institutions of higher education

selected to participate in the first year of the direct loan program

under this part.

‘‘SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES.

‘‘(a) IN GENERAL.—Each fiscal year, there shall be available

to the Secretary of Education from funds available pursuant to

section 422(g) and from funds not otherwise appropriated, funds

to be obligated for administrative costs under this part, including

the costs of the transition from the loan programs under part

B to the direct student loan programs under this part (including

the costs of annually assessing the program under this part and

the progress of the transition) and transition support (including

administrative costs) for the expenses of guaranty agencies in servicing outstanding loans in their portfolios and in guaranteeing new

loans, not to exceed (from such funds not otherwise appropriated)

$260,000,000 in fiscal year 1994, $345,000,000 in fiscal year 1995,

$550,000,000 in fiscal year 1996, $595,000,000 in fiscal year 1997,

and $750,000,000 in fiscal year 1998. If in any fiscal year the

Secretary determines that additional funds for administrative

expenses are needed as a result of such transition or the expansion

of the direct student loan programs under this part, the Secretary

is authorized to use funds available under this section for a subsequent fiscal year for such expenses, except that the total expenditures by the Secretary (from such funds not otherwise appropriated)

shall not exceed $2,500,000,000 in fiscal years 1994 through 1998.

The Secretary is also authorized to carry over funds available

under this section to a subsequent fiscal year.

‘‘(b) AVAILABILITY.—Funds made available under subsection (a)

shall remain available until expended.

‘‘(c) BUDGET JUSTIFICATION.—No funds may be expended under

this section unless the Secretary includes in the Department of

Education’s annual budget justification to Congress a detailed

description of the specific activities for which the funds made available by this section have been used in the prior and current years

(if applicable), the activities and costs planned for the budget year,

and the projection of activities and costs for each remaining year
H. R. 2264—43

for which administrative expenses under this section are made

available.

‘‘(d) NOTIFICATION.—In the event the Secretary finds it nec- essary to use the authority provided to the Secretary under subsection (a) to draw funds for administrative expenses from a future

year’s funds, no funds may be expended under this section unless

the Secretary immediately notifies the Committees on Appropriations of the Senate and of the House of Representatives, and the

Labor and Human Resources Committee of the Senate and the

Education and Labor Committee of the House of Representatives,

of such action and explain the reasons for such action.’’.

CHAPTER 2—CONFORMING AMENDMENTS TO THE

HIGHER EDUCATION ACT OF 1965

SEC. 4041. PRESERVING LOAN ACCESS.

(a) ADVANCES TO GUARANTY AGENCIES FOR LENDER-OF-LASTRESORT SERVICES.—

(1) AMENDMENT.—Section 428(j) of the Act (20 U.S.C.

1078(j)) is amended by striking paragraph (3) and inserting

the following:

‘‘(3) ADVANCES TO GUARANTY AGENCIES FOR LENDER-OFLAST-RESORT SERVICES DURING TRANSITION TO DIRECT LENDING.—(A) In order to ensure the availability of loan capital

during the transition from the Federal Family Education Loan

Program under this part to the Federal Direct Student Loan

Program under part D of this title, the Secretary is authorized

to provide a guaranty agency with additional advance funds

in accordance with section 422(c)(7), with such restrictions on

the use of such funds as are determined appropriate by the

Secretary, in order to ensure that the guaranty agency will

make loans as the lender-of-last-resort. Such agency shall make

such loans in accordance with this subsection and the requirements of the Secretary.

‘‘(B) Notwithstanding any other provision in this part, a

guaranty agency serving as a lender-of-last-resort under this

paragraph shall be paid a fee, established by the Secretary,

for making such loans in lieu of interest and special allowance

subsidies, and shall be required to assign such loans to the

Secretary on demand. Upon such assignment, the portion of

the advance represented by the loans assigned shall be considered repaid by such guaranty agency.’’.

(2) CONFORMING AMENDMENTS.—

(A) ADVANCES TO GUARANTEE AGENCIES.—Section

422(c)(7) of the Act (20 U.S.C. 1072(c)(7)) is amended by

striking all beginning with ‘‘to a guaranty agency’’ through

the period and inserting ‘‘to a guaranty agency— ‘‘(A) in accordance with section 428(j), in order to

ensure that the guaranty agency shall make loans as the

lender-of-last-resort during the transition from the Federal

Family Education Loan Program under this part to the

Federal Direct Student Loan Program under part D of

this title; or

‘‘(B) if the Secretary is seeking to terminate the guaranty agency’s agreement, or assuming the guaranty agency’s functions, in accordance with section 428(c)(10)(F)(v),

in order to assist the agency in meeting its immediate
H. R. 2264—44

cash needs, ensure the uninterrupted payment of claims,

or ensure that the guaranty agency shall make loans as

described in subparagraph (A);’’.

(B) RULES AND OPERATING PROCEDURES.—Section

428(j)(2) of the Act (20 U.S.C. 1078(j)(2)) is amended—

(i) in subparagraph (A), by inserting before the

semicolon at the end the following: ‘‘and ensure a

response within 60 days after the student’s original

complete application is filed under this subsection’’;

(ii) by redesignating subparagraphs (B) through

(D) as subparagraphs (C) through (E), respectively;

and

(iii) by inserting after subparagraph (A) the following new subparagraph:

‘‘(B) consistent with standards established by the Secretary, students applying for loans under this subsection

shall not be subject to additional eligibility requirements

or requests for additional information beyond what is

required under this title in order to receive a loan under

this part from an eligible lender, nor be required to receive

more than two rejections from eligible lenders in order

to obtain a loan under this subsection;’’.

(b) LENDER REFERRAL SERVICES.—Section 428(e) of the Act

(20 U.S.C. 1078(e)) is amended—

(1) in paragraph (1)—

(A) by amending the paragraph heading to read as

follows: ‘‘IN GENERAL; AGREEMENTS WITH GUARANTY AGENCIES.—’’;

(B) by inserting the subparagraph designation ‘‘(A)’’

immediately before ‘‘The Secretary’’; (C) by striking ‘‘in any State’’ and inserting ‘‘with which the Secretary has an agreement under subparagraph (B)’’;

and

(D) by adding at the end the following new subparagraph:

‘‘(B)(i) The Secretary may enter into agreements with guaranty agencies that meet standards established by the Secretary

to provide lender referral services in geographic areas specified

by the Secretary. Such guaranty agencies shall be paid in

accordance with paragraph (3) for such services. ‘‘(ii) The Secretary shall publish in the Federal Register

whatever standards, criteria, and procedures, consistent with

the provisions of this part and part D of this title, the Secretary

determines are reasonable and necessary to provide lender

referral services under this subsection and ensure loan access

to student and parent borrowers during the transition from

the loan programs under this part to the direct student loan

programs under part D of this title. Section 431 of the General

Education Provisions Act shall not apply to the publication

of such standards, criteria, and procedures.’’;

(2) in paragraph (2)—

(A) in the matter preceding subparagraph (A), by striking ‘‘in a State’’ and inserting ‘‘with which the Secretary

has an agreement under paragraph (1)(B)’’;

(B) by amending subparagraph (A) to read as follows:

‘‘(A)(i) such student is either a resident of, or is

accepted for enrollment in, or is attending, an eligible
H. R. 2264—45

institution located in a geographic area for which the Secretary (I) determines that loans are not available to all

eligible students, and (II) has entered into an agreement

with a guaranty agency under paragraph (1)(B) to provide

lender referral services; and’’;

(3) in paragraph (3), by striking ‘‘The’’ and inserting ‘‘From

funds available for costs of transition under section 458 of

the Act, the’’; and

(4) by striking paragraph (5).

(c) LENDER-OF-LAST-RESORT FUNCTIONS OF STUDENT LOAN

MARKETING ASSOCIATION.—Subsection (q) of section 439 of the Act

(20 U.S.C. 1087–2(q)) is amended to read as follows:

‘‘(q) LENDER-OF-LAST-RESORT.—

‘‘(1) ACTION AT REQUEST OF SECRETARY.—(A) Whenever the

Secretary determines that eligible borrowers are seeking and

are unable to obtain loans under this part, the Association

or its designated agent shall, not later than 90 days after

the date of enactment of the Student Loan Reform Act of

1993, begin making loans to such eligible borrowers in accordance with this subsection at the request of the Secretary. The

Secretary may request that the Association make loans to

borrowers within a geographic area or for the benefit of students

attending institutions of higher education that certify, in accordance with standards established by the Secretary, that their

students are seeking and unable to obtain loans.

‘‘(B) Loans made pursuant to this subsection shall be insurable by the Secretary under section 429 with a certificate

of comprehensive insurance coverage provided for under section

429(b)(1) or by a guaranty agency under paragraph (2)(A) of

this subsection.

‘‘(2) ISSUANCE AND COVERAGE OF LOANS.—(A) Whenever

the Secretary, after consultation with, and with the agreement

of, representatives of the guaranty agency in a State, or an

eligible lender in a State described in section 435(d)(1)(D),

determines that a substantial portion of eligible borrowers in

such State or within an area of such State are seeking and

are unable to obtain loans under this part, the Association

or its designated agent shall begin making such loans to borrowers in such State or within an area of such State in accordance

with this subsection at the request of the Secretary.

‘‘(B) Loans made pursuant to this subsection shall be insurable by the agency identified in subparagraph (A) having an

agreement pursuant to section 428(b). For loans insured by

such agency, the agency shall provide the Association with

a certificate of comprehensive insurance coverage, if the

Association and the agency have mutually agreed upon a means

to determine that the agency has not already guaranteed a

loan under this part to a student which would cause a subsequent loan made by the Association to be in violation of any

provision under this part.

‘‘(3) TERMINATION OF LENDING.—The Association or its designated agent shall cease making loans under this subsection

at such time as the Secretary determines that the conditions

which caused the implementation of this subsection have ceased

to exist.’’.
H. R. 2264—46

SEC. 4042. GUARANTY AGENCY RESERVES.

Section 422 of the Act (20 U.S.C. 1072) is amended by adding at the end the following new subsection: ‘‘(g) PRESERVATION AND RECOVERY OF GUARANTY AGENCY

RESERVES.—

‘‘(1) AUTHORITY TO RECOVER FUNDS.—Notwithstanding any other provision of law, the reserve funds of the guaranty agencies, and any assets purchased with such reserve funds, regardless of who holds or controls the reserves or assets, shall be

considered to be the property of the United States to be used

in the operation of the program authorized by this part or

the program authorized by part D of this title. However, the

Secretary may not require the return of all reserve funds of

a guaranty agency to the Secretary unless the Secretary determines that such return is in the best interest of the operation

of the program authorized by this part or the program authorized by part D of this title, or to ensure the proper maintenance

of such agency’s funds or assets or the orderly termination

of the guaranty agency’s operations and the liquidation of its

assets. The reserves shall be maintained by each guaranty

agency to pay program expenses and contingent liabilities, as

authorized by the Secretary, except that—

‘‘(A) the Secretary may direct a guaranty agency to

return to the Secretary a portion of its reserve fund which

the Secretary determines is unnecessary to pay the program expenses and contingent liabilities of the guaranty

agency; ‘‘(B) the Secretary may direct the guaranty agency

to require the return, to the guaranty agency or to the

Secretary, of any reserve funds or assets held by, or under

the control of, any other entity, which the Secretary determines are necessary to pay the program expenses and

contingent liabilities of the guaranty agency, or which are

required for the orderly termination of the guaranty

agency’s operations and the liquidation of its assets;

‘‘(C) the Secretary may direct a guaranty agency, or

such agency’s officers or directors, to cease any activities

involving expenditure, use or transfer of the guaranty

agency’s reserve funds or assets which the Secretary determines is a misapplication, misuse, or improper expenditure

of such funds or assets; and

‘‘(D) any such determination under subparagraph (A)

or (B) shall be based on standards prescribed by regulations

that are developed through negotiated rulemaking and that

include procedures for administrative due process.

‘‘(2) TERMINATION PROVISIONS IN CONTRACTS.—(A) To

ensure that the funds and assets of the guaranty agency are

preserved, any contract with respect to the administration of

a guaranty agency’s reserve funds, or the administration of

any assets purchased or acquired with the reserve funds of

the guaranty agency, that is entered into or extended by the

guaranty agency, or any other party on behalf of or with the

concurrence of the guaranty agency, after the date of enactment

of this subsection shall provide that the contract is terminable

by the Secretary upon 30 days notice to the contracting parties

if the Secretary determines that such contract includes an

impermissible transfer of the reserve funds or assets, or is
H. R. 2264—47

otherwise inconsistent with the terms or purposes of this section.

‘‘(B) The Secretary may direct a guaranty agency to suspend

or cease activities under any contract entered into by or on

behalf of such agency after January 1, 1993, if the Secretary

determines that the misuse or improper expenditure of such

guaranty agency’s funds or assets or such contract provides

unnecessary or improper benefits to such agency’s officers or

directors.

‘‘(3) PENALTIES.—Violation of any direction issued by the

Secretary under this subsection may be subject to the penalties

described in section 490 of this Act.

‘‘(4) AVAILABILITY OF FUNDS.—Any funds that are returned

or otherwise recovered by the Secretary pursuant to this subsection shall be available for expenditure for expenses pursuant

to section 458 of this Act.’’.

SEC. 4043. TERMS OF LOANS.

(a) AMENDMENT.—Section 428 of the Act (20 U.S.C. 1078) is

amended—

(1) in subsection (b)(1)(D), by striking ‘‘be subject to’’

through the semicolon and inserting ‘‘be subject to income

contingent repayment in accordance with subsection (m);’’; and

(2) in subsection (m)—

(A) by amending paragraph (1) to read as follows:

‘‘(1) AUTHORITY OF SECRETARY TO REQUIRE.—The Secretary

shall require at least 10 percent of the borrowers who have

defaulted on loans made under this part that are assigned

to the Secretary under subsection (c)(8) to repay those loans

under an income contingent repayment plan, the terms and

conditions of which shall be established by the Secretary and

the same as, or similar to, an income contingent repayment

plan established for purposes of part D of this title.’’; and

(B) by striking paragraphs (2), (3), and (4) and inserting the following new paragraph:

‘‘(2) LOANS FOR WHICH INCOME CONTINGENT REPAYMENT

MAY BE REQUIRED.—A loan made under this part may be

required to be repaid under this subsection if the note or

other evidence of the loan has been assigned to the Secretary

pursuant to subsection (c)(8).’’.

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

shall take effect on July 1, 1994.

SEC. 4044. ASSIGNMENT OF LOANS.

Section 428(c)(8) of the Act (20 U.S.C. 1078(c)(8)) is amended—

(1) in the first sentence, by inserting the subparagraph

designation ‘‘(A)’’ before ‘‘If the’’;

(2) by striking the second and third sentences; and

(3) by adding at the end the following new subparagraph:

‘‘(B) An orderly transition from the Federal Family Education Loan Program under this part to the Federal Direct

Student Loan Program under part D of this title shall be

deemed to be in the Federal fiscal interest, and a guaranty

agency shall promptly assign loans to the Secretary under

this paragraph upon the Secretary’s request.’’.
H. R. 2264—48

SEC. 4045. TERMINATION OF GUARANTY AGENCY AGREEMENTS;

ASSUMPTION OF GUARANTY AGENCY FUNCTIONS BY THE

SECRETARY.

Section 428(c)(10) of the Act is amended—

(1) in subparagraph (C), by inserting ‘‘, as appropriate,’’

after ‘‘the Secretary shall require’’;

(2) in subparagraph (D)—

(A) by inserting the clause designation ‘‘(i)’’ before

‘‘Each’’;

(B) by striking ‘‘Each’’ and inserting ‘‘If the Secretary

is not seeking to terminate the guaranty agency’s agreement under subparagraph (E), or assuming the guaranty

agency’s functions under subparagraph (F), a’’;

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

‘‘(ii) If the Secretary is seeking to terminate the guaranty

agency’s agreement under subparagraph (E), or assuming the

guaranty agency’s functions under subparagraph (F), a management plan described in subparagraph (C) shall include the

means by which the Secretary and the guaranty agency shall

work together to ensure the orderly termination of the operations, and liquidation of the assets, of the guaranty agency.’’;

(3) in subparagraph (E)—

(A) in clause (ii), by striking ‘‘or’’ after the semicolon;

(B) in clause (iii), by striking the period and inserting

a semicolon; and

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

‘‘(iv) the Secretary determines that such action is necessary to protect the Federal fiscal interest;

‘‘(v) the Secretary determines that such action is necessary to ensure the continued availability of loans to student or parent borrowers; or

‘‘(vi) the Secretary determines that such action is necessary to ensure an orderly transition from the loan programs under this part to the direct student loan programs

under part D of this title.’’;

(4) in subparagraph (F)—

(A) in the matter preceding clause (i), by striking

‘‘Except as provided in subparagraph (G), if’’ and inserting

‘‘If’’;

(B) by amending clause (v) to read as follows:

‘‘(v) provide the guaranty agency with additional

advance funds in accordance with section 422(c)(7), with

such restrictions on the use of such funds as is determined

appropriate by the Secretary, in order to—

‘‘(I) meet the immediate cash needs of the guaranty

agency;

‘‘(II) ensure the uninterrupted payment of claims;

or

‘‘(III) ensure that the guaranty agency will make

loans as the lender-of-last-resort, in accordance with

subsection (j);’’;

(C) in clause (vi)—

(i) by striking ‘‘and to avoid’’ and inserting ‘‘to

avoid’’;

(ii) by striking the period and inserting a comma

and ‘‘and to ensure an orderly transition from the
H. R. 2264—49

loan programs under this part to the direct student

loan programs under part D of this title.’’; and

(iii) by redesignating such clause as clause (vii);

and

(D) by inserting after clause (v) the following new

clause:

‘‘(vi) use all funds and assets of the guaranty agency

to assist in the activities undertaken in accordance with

this subparagraph and take appropriate action to require

the return, to the guaranty agency or the Secretary, of

any funds or assets provided by the guaranty agency, under

contract or otherwise, to any person or organization; or’’;

(5) by striking subparagraph (G);

(6) by redesignating subparagraphs (H), (I), and (J) as

subparagraphs (I), (J), and (K), respectively;

(7) by inserting after subparagraph (F) the following new

subparagraphs:

‘‘(G) Notwithstanding any other provision of Federal or

State law, if the Secretary has terminated or is seeking to

terminate a guaranty agency’s agreement under subparagraph

(E), or has assumed a guaranty agency’s functions under

subparagraph (F)—

‘‘(i) no State court may issue any order affecting the

Secretary’s actions with respect to such guaranty agency;

‘‘(ii) any contract with respect to the administration

of a guaranty agency’s reserve funds, or the administration

of any assets purchased or acquired with the reserve funds

of the guaranty agency, that is entered into or extended

by the guaranty agency, or any other party on behalf

of or with the concurrence of the guaranty agency, after

the date of enactment of this subparagraph shall provide

that the contract is terminable by the Secretary upon 30

days notice to the contracting parties if the Secretary

determines that such contract includes an impermissible

transfer of the reserve funds or assets, or is otherwise

inconsistent with the terms or purposes of this section;

and

‘‘(iii) no provision of State law shall apply to the actions

of the Secretary in terminating the operations of a guaranty

agency.

‘‘(H) Notwithstanding any other provision of law, the Secretary’s liability for any outstanding liabilities of a guaranty

agency (other than outstanding student loan guarantees under

this part), the functions of which the Secretary has assumed,

shall not exceed the fair market value of the reserves of the

guaranty agency, minus any necessary liquidation or other

administrative costs.’’; and

(8) in subparagraph (K) (as redesignated by paragraph

(5)), by striking all beginning with ‘‘system, together’’ through

the period and inserting ‘‘system and the progress of the transition from the loan programs under this part to the direct

student loan programs under part D of this title.’’.

SEC. 4046. CONSOLIDATION LOANS.

(a) COST SAVINGS FROM CONSOLIDATION LOANS.—Section 428C

of the Act (20 U.S.C. 1078–3) is amended—
H. R. 2264—50

(1) in subsection (a) by amending paragraph (3)(A) to read

as follows:

‘‘(3) DEFINITION OF ELIGIBLE BORROWERS.—(A) For the purpose of this section, the term ‘eligible borrower’ means a borrower who, at the time of application for a consolidation loan

is in repayment status, or in a grace period preceding repayment, or is a delinquent or defaulted borrower who will reenter

repayment through loan consolidation.’’;

(2) in subsection (b)—

(A) in paragraph (1)—

(i) in subparagraph (A)(ii), by inserting ‘‘with

income-sensitive repayment terms’’ after ‘‘obtain a

consolidation loan’’;

(ii) by redesignating subparagraph (E) as subparagraph (F); and

(iii) by inserting after subparagraph (D) the following new subparagraph:

‘‘(E) that the lender shall offer an income-sensitive

repayment schedule, established by the lender in accordance with the regulations promulgated by the Secretary,

to the borrower of any consolidation loan made by the

lender on or after July 1, 1994; and’’;

(B) in paragraph (4), by amending subparagraph (C)

to read as follows:

‘‘(C)(i) provides that periodic installments of principal

need not be paid, but interest shall accrue and be paid

in accordance with clause (ii), during any period for which

the borrower would be eligible for a deferral under section

428(b)(1)(M), and that any such period shall not be included

in determining the repayment schedule pursuant to subsection (c)(2) of this section; and

‘‘(ii) provides that interest shall accrue and be paid—

‘‘(I) by the Secretary, in the case of a consolidation

loan that consolidated only Federal Stafford Loans for

which the student borrower received an interest subsidy under section 428; or

‘‘(II) by the borrower, or capitalized, in the case

of a consolidation loan other than a loan described

in subclause (I);’’; and

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

‘‘(5) DIRECT LOANS.—In the event that a borrower is unable

to obtain a consolidation loan from a lender with an agreement

under subsection (a)(1), or is unable to obtain a consolidation

loan with income-sensitive repayment terms acceptable to the

borrower from such a lender, the Secretary shall offer any

such borrower who applies for it, a direct consolidation loan.

Such direct consolidation loan shall, as requested by the borrower, be repaid either pursuant to income contingent repayment under part D of this title or pursuant to any other

repayment provision under this section. The Secretary shall

not offer such loans if, in the Secretary’s judgment, the Department of Education does not have the necessary origination

and servicing arrangements in place for such loans.’’; and

(3) in subsection (c)—

(A) in paragraph (1), by amending subparagraphs (B)

and (C) to read as follows:
H. R. 2264—51

‘‘(B) A consolidation loan made before July 1, 1994, shall

bear interest at an annual rate on the unpaid principal balance

of the loan that is equal to the greater of—

‘‘(i) the weighted average of the interest rates on the

loans consolidated, rounded to the nearest whole percent;

or

‘‘(ii) 9 percent.

‘‘(C) A consolidation loan made on or after July 1, 1994,

shall bear interest at an annual rate on the unpaid principal

balance of the loan that is equal to the weighted average

of the interest rates on the loans consolidated, rounded upward

to the nearest whole percent.’’;

(B) in paragraph (2)—

(i) in subparagraph (A)—

(I) in the matter preceding clause (i), by striking ‘‘income sensitive repayment schedules. Such

repayment terms’’ and inserting ‘‘income-sensitive

repayment schedules, established by the lender

in accordance with the regulations of the Secretary. Except as required by such income-sensitive repayment schedules, or by the terms of

repayment pursuant to income contingent repayment offered by the Secretary under subsection

(b)(5), such repayment terms’’;

(II) by redesignating clauses (i), (ii), (iii), (iv),

and (v) as clauses (ii), (iii), (iv), (v), and (vi), respectively; and

(III) by inserting before clause (ii) (as redesig- nated by subclause (II)) the following new clause: ‘‘(i) is less than $7,500, then such consolidation loan

shall be repaid in not more than 10 years;’’; (ii) by striking subparagraph (B); and

(iii) by redesignating subparagraph (C) as subpara- graph (B); and

(C) in paragraph (3)(B), by inserting ‘‘except as

required by the terms of repayment pursuant to income

contingent repayment offered by the Secretary under subsection (b)(5),’’ before ‘‘the lender’’.

(b) COHORT DEFAULT RATE CONFORMING AMENDMENTS.— (1) AMENDMENTS TO DEFINITION.—Section 435(m)(1) of the

Act (20 U.S.C. 1085) is amended—

(A) in subparagraph (A), by inserting ‘‘(or on the portion of a loan made under section 428C that is used to

repay any such loans)’’ immediately after ‘‘on such loans’’; (B) in subparagraph (C), by inserting ‘‘(or on the portion of a loan made under section 428C that is used to

repay any such loans)’’ immediately after ‘‘on such loans’’;

and

(C) in subparagraph (D)—

(i) by inserting ‘‘(or the portion of a loan made

under section 428C that is used to repay a loan made

under such section)’’ after ‘‘section 428A’’ the first place

it appears; and

(ii) by inserting ‘‘(or a loan made under section

428C a portion of which is used to repay a loan made

under such section)’’ after ‘‘section 428A’’ the second

place it appears.
H. R. 2264—52

(2) CONFORMING AMENDMENT.—Section 428C(a)(3)(B)(ii) of

the Act (20 U.S.C. 1078–3(a)(3)(B)(ii)) is amended by striking

the second sentence.

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

shall take effect on July 1, 1994, except that the amendments

made by subsection (a)(2)(B) shall take effect upon enactment.

SEC. 4047. CONSOLIDATION OF PROGRAMS.

(a) IN GENERAL.—Section 428H of the Act (20 U.S.C. 1078–

9) is amended—

(1) in the matter preceding paragraph (1) of subsection

(b), by inserting ‘‘(including graduate and professional students

as defined in regulations promulgated by the Secretary)’’ after

‘‘484’’;

(2) by amending subsection (d) to read as follows:

‘‘(d) LOAN LIMITS.—

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

and (3), the annual and aggregate limits for loans under this

section shall be the same as those established under section

428(b)(1), less any amount received by such student pursuant

to the subsidized loan program established under section 428.

‘‘(2) ANNUAL LIMITS FOR INDEPENDENT, GRADUATE, AND

PROFESSIONAL STUDENTS.—The maximum annual amount of

loans under this section an independent student (or a student

whose parents are unable to borrow under section 428B or

the Federal Direct PLUS Loan Program) may borrow in any

academic year or its equivalent or in any period of 7 consecutive

months, whichever is longer, shall be the amount determined

under paragraph (1), plus— ‘‘(A) in the case of such a student attending an eligible

institution who has not completed such student’s first 2

years of undergraduate study— ‘‘(i) $4,000, if such student is enrolled in a program

whose length is at least one academic year in length

(as determined under section 481);

‘‘(ii) $2,500, if such student is enrolled in a program

whose length is less than one academic year, but at

least 2⁄3 of such an academic year; and ‘‘(iii) $1,500, if such student is enrolled in a program whose length is less than 2⁄3, but at least 1⁄3, of such an academic year;

‘‘(B) in the case of such a student attending an eligible

institution who has completed the first 2 years of undergraduate study but who has not completed the remainder

of a program of undergraduate study—

‘‘(i) $5,000, if such student is enrolled in a program

whose length is at least one academic year in length

(as determined under section 481);

‘‘(ii) $3,325, if such student is enrolled in a program

whose length is less than one academic year, but at

least 2⁄3 of such an academic year; and

‘‘(iii) $1,675, if such student is enrolled in a program whose length is less than 2⁄3, but at least 1⁄3,

of such an academic year; and

‘‘(C) in the case of such a student who is a graduate

or professional student attending an eligible institution,

$10,000.
H. R. 2264—53

‘‘(3) AGGREGATE LIMITS FOR INDEPENDENT, GRADUATE, AND

PROFESSIONAL STUDENTS.—The maximum aggregate amount of loans under this section a student described in paragraph (2)

may borrow shall be the amount described in paragraph (1),

adjusted to reflect the increased annual limits described in

paragraph (2), as prescribed by the Secretary by regulation.’’;

and

(3) in subsection (e), by adding at the end the following new paragraphs: ‘‘(5) AMORTIZATION.—The amount of the periodic payment and the repayment schedule for any loan made pursuant to

this section shall be established by assuming an interest rate

equal to the applicable rate of interest at the time the repayment of the principal amount of the loan commences. At the

option of the lender, the note or other written evidence of

the loan may require that— ‘‘(A) the amount of the periodic payment will be adjusted annually; or ‘‘(B) the period of repayment of principal will be length- ened or shortened,

in order to reflect adjustments in interest rates occurring as

a consequence of section 427A(c)(4). ‘‘(6) REPAYMENT PERIOD.—For purposes of calculating the 10-year repayment period under section 428(b)(1)(D), such

period shall commence at the time the first payment of principal

is due from the borrower.’’.

(b) REPEAL.—Section 428A of the Act is repealed. (c) TERMS, CONDITIONS AND BENEFITS.—Notwithstanding the amendments made by this section, with respect to loans provided

under sections 428A and 428H of the Act (as such sections existed

on the date preceding the date of enactment of this Act) the terms,

conditions and benefits applicable to such loans under such sections

shall continue to apply to such loans after the date of enactment

of this Act.

(d) EFFECTIVE DATE.—Except as otherwise provided herein,

the amendments made by this section shall take effect on July

1, 1994.

Subtitle B—Additional Savings From The

Student Loan Programs

SEC. 4101. REDUCTION OF BORROWER INTEREST RATES.

Section 427A of the Act (20 U.S.C. 1077a) is amended—

(1) in subsection (c)(4), by adding at the end the following new subparagraph: ‘‘(E) Notwithstanding subparagraphs (A) and (D) for any loan made pursuant to section 428B for which the first disbursement is made on or after July 1, 1994— ‘‘(i) subparagraph (B) shall be applied by substituting

‘‘3.1’’ for ‘‘3.25’’; and

‘‘(ii) the interest rate shall not exceed 9 percent.’’;

(2) by redesignating subsections (f), (g), and (h) as subsections (i), (j), and (k) respectively;

(3) by adding after subsection (e) the following new subsections:

‘‘(f) INTEREST RATES FOR NEW LOANS AFTER JULY 1, 1994.—
H. R. 2264—54

‘‘(1) IN GENERAL.—Notwithstanding subsections (a), (b), (d),

and (e) of this section, with respect to any loan made, insured,

or guaranteed under this part (other than a loan made pursuant

to section 428B or 428C) for which the first disbursement

is made on or after July 1, 1994, the applicable rate of interest

shall, during any 12-month period beginning on July 1 and

ending on June 30, be determined on the preceding June 1

and be equal to—

‘‘(A) the bond equivalent rate of 91-day Treasury bills

auctioned at the final auction held prior to such June

1; plus

‘‘(B) 3.10 percent,

except that such rate shall not exceed 8.25 percent.

‘‘(2) CONSULTATION.—The Secretary shall determine the

applicable rate of interest under paragraph (1) after consultation with the Secretary of the Treasury and shall publish such

rate in the Federal Register as soon as practicable after the

date of determination.

‘‘(g) IN SCHOOL AND GRACE PERIOD RULES.—

‘‘(1) GENERAL RULE.—Notwithstanding the provisions of

subsection (f), but subject to subsection (h), with respect to

any loan under section 428 or 428H of this part for which

the first disbursement is made on or after July 1, 1995, the

applicable rate of interest for interest which accrues—

‘‘(A) prior to the beginning of the repayment period

of the loan; or

‘‘(B) during the period in which principal need not

be paid (whether or not such principal is in fact paid)

by reason of a provision described in section 428(b)(1)(M)

or 427(a)(2)(C),

shall not exceed the rate determined under paragraph (2). ‘‘(2) RATE DETERMINATION.—For purposes of paragraph (1),

the rate determined under this paragraph shall, during any

12-month period beginning on July 1 and ending on June

30, be determined on the preceding June 1 and be equal to— ‘‘(A) the bond equivalent rate of 91-day Treasury bills

auctioned at the final auction prior to such June 1; plus

‘‘(B) 2.5 percent,

except that such rate shall not exceed 8.25 percent.

‘‘(3) CONSULTATION.—The Secretary shall determine the

applicable rate of interest under this subsection after consultation with the Secretary of the Treasury and shall publish such

rate in the Federal Register as soon as practicable after the

date of determination.

‘‘(h) INTEREST RATES FOR NEW LOANS AFTER JULY 1, 1998.—

‘‘(1) IN GENERAL.—Notwithstanding subsections (a), (b), (d),

(e), (f), and (g) of this section, with respect to any loan made,

insured, or guaranteed under this part (other than a loan

made pursuant to sections 428B and 428C) for which the first

disbursement is made on or after July 1, 1998, the applicable

rate of interest shall, during any 12-month period beginning

on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to—

‘‘(A) the bond equivalent rate of the securities with

a comparable maturity as established by the Secretary;

plus

‘‘(B) 1.0 percent,
H. R. 2264—55

except that such rate shall not exceed 8.25 percent.

‘‘(2) INTEREST RATES FOR NEW PLUS LOANS AFTER JULY

1, 1998.—Notwithstanding subsections (a), (b), (d), (e), (f), and

(g), with respect to any loan made under section 428B for

which the first disbursement is made on or after July 1, 1998,

paragraph (1) shall be applied—

‘‘(A) by substituting ‘2.1 percent’ for ‘1.0 percent’ in

subparagraph (B); and

‘‘(B) by substituting ‘9.0 percent’ for ‘8.25 percent’ in

the matter following such subparagraph.

‘‘(3) CONSULTATION.—The Secretary shall determine the

applicable rate of interest under this subsection after consultation with the Secretary of the Treasury and shall publish such

rate in the Federal Register as soon as practicable after the

date of determination.’’.

SEC. 4102. REDUCTION IN LOAN FEES PAID BY STUDENTS.

(a) ORIGINATION FEES.—Section 438 of the Act (20 U.S.C. 1087–

1) is amended—

(1) in the heading of subsection (c) by inserting ‘‘FROM

STUDENTS’’ after ‘‘ORIGINATION FEES’’; and

(2) in subsection (c)—

(A) in paragraph (2)—

(i) by striking ‘‘428A, 428B, 428C,’’ and inserting

‘‘428C’’; and

(ii) by striking ‘‘5 percent’’ and inserting ‘‘3.0 percent’’; and

(B) in paragraph (6), by striking ‘‘5 percent’’ and inserting ‘‘3.0 percent’’. (b) ORIGINATION FEE; INSURANCE PREMIUM FOR UNSUBSIDIZED

LOANS.—Section 428H of the Act (20 U.S.C. 1078–8) is amended—

(1) in subsection (f)—

(A) in the subsection heading, by striking ‘‘INSURANCE

PREMIUM’’ and inserting ‘‘ORIGINATION FEE’’;

(B) in the heading of paragraph (1), by striking

‘‘/INSURANCE PREMIUM’’;

(C) in paragraph (1)— (i) by striking ‘‘a combined origination fee and

insurance premium in the amount of 6.5 percent’’ and

inserting ‘‘an origination fee in the amount of 3.0 percent’’; and

(ii) by striking the second sentence; (D) in paragraph (2), by striking ‘‘combined fee and

premium’’ and inserting ‘‘origination fee’’; (E) in paragraph (3), by striking ‘‘combined origination

fee and insurance premium’’ and inserting ‘‘origination fee’’;

(F) in paragraph (4)—

(i) in the heading, by striking ‘‘INSURANCE PREMIUM’’ and inserting ‘‘ORIGINATION FEE’’;

(ii) by striking ‘‘combined origination fee and insurance premiums’’ and inserting ‘‘origination fees’’; and

(iii) by striking ‘‘and premiums to pay’’ and inserting ‘‘to pay’’; and

(G) in paragraph (5)—

(i) in the heading, by inserting ‘‘ORIGINATION FEE

AND’’ before ‘‘INSURANCE’’; and

(ii) in the second sentence—
H. R. 2264—56

(I) by striking ‘‘6.5 percent insurance premium’’ and inserting ‘‘combined origination fee

under this subsection and the insurance premium

under subsection (h)’’; and

(II) by inserting ‘‘origination fee and’’ before

‘‘insurance’’; and

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

‘‘(l) INSURANCE PREMIUM.—Each State or nonprofit private

institution or organization having an agreement with the Secretary

under section 428(b)(1) may charge a borrower under this section

an insurance premium equal to not more than 1.0 percent of the

principal amount of the loan, if such premium will not be used

for incentive payments to lenders.’’.

(c) INSURANCE PREMIUM.—Section 428(b)(1)(H) of the Act (20

U.S.C. 1078(b)(1)(H)) is amended by striking ‘‘3 percent’’ and inserting ‘‘1.0 percent’’.

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

shall take effect on July 1, 1994.

SEC. 4103. LOAN FEES FROM LENDERS.

Section 438 of the Act (20 U.S.C 1087–1) is further amended—

(1) by redesignating subsections (d) and (e) as subsections

(e) and (f), respectively; and

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

‘‘(d) LOAN FEES FROM LENDERS.—

‘‘(1) DEDUCTION FROM INTEREST AND SPECIAL ALLOWANCE

SUBSIDIES.—Notwithstanding subsection (b), the Secretary shall

reduce the total amount of interest and special allowance payable under section 428(a)(3)(A) and subsection (b) of this section,

respectively, to any holder of a loan by a loan fee in an amount

determined in accordance with paragraph (2) of this subsection.

If the total amount of interest and special allowance payable

under section 428(a)(3)(A) and subsection (b) of this section,

respectively, is less than the amount of such loan fee, then

the Secretary shall deduct such excess amount from subsequent

quarters’ payments until the total amount has been deducted.

‘‘(2) AMOUNT OF LOAN FEES.—With respect to any loan

under this part for which the first disbursement was made

on or after October 1, 1993, the amount of the loan fee which

shall be deducted under paragraph (1) shall be equal to 0.50

percent of the principal amount of the loan.

‘‘(3) DISTRIBUTION OF LOAN FEES.—The Secretary shall

deposit all fees collected pursuant to paragraph (3) into the

insurance fund established in section 431.’’.

SEC. 4104. OFFSET FEE.

Subsection (h) of section 439 of the Act (20 U.S.C. 1087–2(h))

is amended by adding at the end the following new paragraph:

‘‘(7) OFFSET FEE.—(A) The Association shall pay to the

Secretary, on a monthly basis, an offset fee calculated on an

annual basis in an amount equal to 0.30 percent of the principal

amount of each loan made, insured or guaranteed under this

part that the Association holds (except for loans made pursuant

to sections 428C, 439(o), or 439(q)) and that was acquired

on or after the date of enactment of this paragraph.
H. R. 2264—57

‘‘(B) If the Secretary determines that the Association has substantially failed to comply with subsection (q), subparagraph

(A) shall be applied by substituting ‘1.0 percent’ for ‘0.3 percent’. ‘‘(C) The Secretary shall deposit all fees collected pursuant to this paragraph into the insurance fund established in section

431.’’.

SEC. 4105. ELIMINATION OF TAX EXEMPT FLOOR.

Section 438(b)(2)(B) of the Act (20 U.S.C. 1087–1(b)(2)(B)) is

amended by adding at the end the following new clause: ‘‘(iv) Notwithstanding clauses (i) and (ii), the quarterly rate of the special allowance for holders of loans which are

financed with funds obtained by the holder from the issuance

of obligations originally issued on or after October 1, 1993,

the income from which is excluded from gross income under

the Internal Revenue Code of 1986, shall be the quarterly

rate of the special allowance established under subparagraph

(A), (E), or (F), as the case may be. Such rate shall also

apply to holders of loans which were made or purchased with

funds obtained by the holder from collections or default

reimbursements on, or interest or other income pertaining to,

eligible loans made or purchased with funds described in the

preceding sentence of this subparagraph or from income on

the investment of such funds.’’.

SEC. 4106. REDUCTION IN INTEREST RATE FOR CONSOLIDATION

LOANS; REBATE FEE.

(a) AMENDMENT.—Section 428C of the Act (20 U.S.C. 1078–

3) is amended by adding at the end the following new subsection:

‘‘(f) INTEREST PAYMENT REBATE FEE.—

‘‘(1) IN GENERAL.—For any month beginning on or after

October 1, 1993, each holder of a consolidation loan under

this section for which the first disbursement was made on

or after October 1, 1993, shall pay to the Secretary, on a

monthly basis and in such manner as the Secretary shall prescribe, a rebate fee calculated on an annual basis equal to

1.05 percent of the principal plus accrued unpaid interest on

such loan.

‘‘(2) DEPOSIT.—The Secretary shall deposit all fees collected pursuant to subsection (a) into the insurance fund established

in section 431.’’.

(b) ENFORCEMENT.—Subsection (d) of section 435 of the Act

(20 U.S.C. 1085(d)) is amended—

(1) in the matter preceding subparagraph (A) of paragraph

(1), by striking ‘‘(5)’’ and inserting ‘‘(6)’’; and

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

‘‘(6) REBATE FEE REQUIREMENT.—To be an eligible lender

under this part, an eligible lender shall pay rebate fees in

accordance with section 428C(f).’’.

SEC. 4107. REINSURANCE FEES AND ADMINISTRATIVE COST ALLOWANCE.

(a) REINSURANCE FEES.—Section 428(c) of the Act (20 U.S.C.

1078(c)) is amended—

(1) by striking paragraph (9); and

(2) by redesignating paragraph (10) as paragraph (9).

(b) ADMINISTRATIVE COST ALLOWANCE.—Section 428(f)(1) of the

Act (20 U.S.C. 1078(f)(1)) is amended—
H. R. 2264—58

(1) in subparagraph (A), by striking ‘‘The Secretary’’ and inserting ‘‘For a fiscal year prior to fiscal year 1994, the Secretary’’; and (2) in subparagraph (B), by inserting ‘‘prior to fiscal year 1994’’ after ‘‘any fiscal year’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall take effect on October 1, 1993.

SEC. 4108. RISK SHARING.

(a) GUARANTY AGENCY REINSURANCE PERCENTAGE.—Section

428(c)(1) of the Act (20 U.S.C. 1078(c)(1)) is amended—

(1) in the fourth sentence of subparagraph (A), by striking ‘‘100 percent’’ and inserting ‘‘98 percent’’; (2) in subparagraph (B)(i), by striking ‘‘90 percent’’ and

inserting ‘‘88 percent’’; (3) in subparagraph (B)(ii), by striking ‘‘80 percent’’ and inserting ‘‘78 percent’’; and (4) by adding at the end the following new subparagraphs:

‘‘(E) Notwithstanding any other provisions of this section, in the case of a loan made pursuant to a lender-of-last-resort

program, the Secretary shall apply the provisions of— ‘‘(i) the fourth sentence of subparagraph (A) by substituting ‘100 percent’ for ‘98 percent’; ‘‘(ii) subparagraph (B)(i) by substituting ‘100 percent’ for ‘88 percent’; and ‘‘(iii) subparagraph (B)(ii) by substituting ‘100 percent’ for ‘78 percent’.

‘‘(F) Notwithstanding any other provisions of this section, in the case of an outstanding loan transferred to a guaranty

agency from another guaranty agency pursuant to a plan

approved by the Secretary in response to the insolvency of

the latter such guarantee agency, the Secretary shall apply

the provision of— ‘‘(i) the fourth sentence of subparagraph (A) by substituting ‘100 percent’ for ‘98 percent’; ‘‘(ii) subparagraph (B)(i) by substituting ‘90 percent’ for ‘88 percent’; and ‘‘(iii) subparagraph (B)(ii) by substituting ‘80 percent’ for ‘78 percent’.’’. (b) RISK SHARING BY THE LOAN HOLDERS.—Section 428(b)(1)(G)

of the Act (20 U.S.C. 1078(b)(1)(G)) is amended—

(1) by striking ‘‘100 percent’’ and inserting ‘‘98 percent’’; and

(2) by adding before the semicolon at the end the following: ‘‘, except that such program shall insure 100 percent of the

unpaid principal of loans made with funds advanced pursuant

to section 428(j) or 439(q)’’.

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

shall apply to any loan for which the first disbursement is made

on or after October 1, 1993.

SEC. 4109. PLUS LOAN DISBURSEMENTS.

(a) MULTIPLE DISBURSEMENT REQUIRED.—The matter preceding

paragraph (1) of section 428B(c) of the Act (20 U.S.C. 1078–2(c))

is amended by inserting ‘‘shall be disbursed in accordance with

the requirements of section 428G and’’ after ‘‘under this section’’.

(b) CONFORMING AMENDMENTS.—Section 428G(e) of the Act (20

U.S.C. 1078–7(e) is amended—
H. R. 2264—59

(1) in the subsection heading, by striking ‘‘PLUS, CONSOLIDATION,’’ and inserting ‘‘CONSOLIDATION’’; and

(2) by striking ‘‘section 428B or 428C’’ and inserting ‘‘section

428C’’.

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

shall be effective with respect to loans for which the first disbursement is made on or after October 1, 1993.

SEC. 4110. SECRETARY’S EQUITABLE SHARE.

(a) AMENDMENT.—Section 428(c)(6)(A)(ii) of the Act (20 U.S.C.

1078(c)(6)(A)(ii)) is amended by striking ‘‘30 percent’’ and inserting

‘‘27 percent’’.

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

shall take effect on October 1, 1993.

SEC. 4111. REDUCTION IN THE SPECIAL ALLOWANCE PAYMENT.

Paragraph (2) of section 438(b) of the Act (20 U.S.C. 1087– 1(b)(2)) is amended—

(1) in subparagraph (A)— (A) by striking ‘‘and (D)’’ and inserting ‘‘(D), (E), and (F)’’; and

(B) by striking ‘‘427A(e)’’ and inserting ‘‘427A(f)’’; and (2) by adding at the end the following new subparagraphs:

‘‘(E) In the case of any loan for which the applicable rate of interest is described in section 427A(g)(2), subparagraph

(A)(iii) shall be applied by substituting ‘2.5 percent’ for ‘3.10

percent’.

‘‘(F) Subject to paragraph (4), the special allowance paid

pursuant to this subsection on loans for which the applicable

rate of interest is determined under section 427A(h) shall be

computed (i) by determining the applicable bond equivalent

rate of the security with a comparable maturity, as established

by the Secretary, (ii) by subtracting the applicable interest

rates on such loans from such applicable bond equivalent rate,

(iii) by adding 1.0 percent to the resultant percent, and (iv)

by dividing the resultant percent by 4. If such computation

produces a number less than zero, such loans shall be subject

to section 427A(f).’’.

SEC. 4112. SUPPLEMENTAL PRECLAIMS ASSISTANCE.

(a) AMENDMENT.—Section 428(l)(2) of the Act (20 U.S.C.

1078(l)(2)) is amended by striking the second sentence and inserting

the following: ‘‘For each loan on which such assistance is performed

and for which a default claim is not presented to the guaranty

agency by the lender on or before the 150th day after the loan

becomes 120 days delinquent, such payment shall be equal to one

percent of the total of the unpaid principal and the accrued unpaid

interest of the loan.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect on October 1, 1993.

Subtitle C—Cost Sharing by States

SEC. 4201. COST SHARING BY STATES.

(a) AMENDMENT.—Section 428 of the Act (20 U.S.C. 1078) is

amended by adding at the end the following new subsection: ‘‘(n) STATE SHARE OF DEFAULT COSTS.—
H. R. 2264—60

‘‘(1) IN GENERAL.—In the case of any State in which there

are located any institutions of higher education that have a

cohort default rate that exceeds 20 percent, such State shall

pay to the Secretary an amount equal to—

‘‘(A) the new loan volume attributable to all institutions

in the State for the current fiscal year; multiplied by

‘‘(B) the percentage specified in paragraph (2); multiplied by

‘‘(C) the quotient of—

‘‘(i) the sum of the amounts calculated under paragraph (3) for each such institution in the State; divided

by

‘‘(ii) the total amount of loan volume attributable

to current and former students of institutions located

in that State entering repayment in the period used

to calculate the cohort default rate.

‘‘(2) PERCENTAGE.—For purposes of paragraph (1)(B), the

percentage used shall be—

‘‘(A) 12.5 percent for fiscal year 1995;

‘‘(B) 20 percent for fiscal year 1996; and

‘‘(C) 50 percent for fiscal year 1997 and succeeding

fiscal years.

‘‘(3) CALCULATION.—For purposes of paragraph (1)(C)(i),

the amount shall be determined by calculating for each institution the amount by which—

‘‘(A) the amount of the loans received for attendance

by such institution’s current and former students who (i)

enter repayment during the fiscal year used for the calculation of the cohort default rate, and (ii) default before the

end of the following fiscal year; exceeds

‘‘(B) 20 percent of the loans received for attendance

by all the current and former students who enter repayment during the fiscal year used for the calculation of

the cohort default rate.

‘‘(4) FEE.—A State may charge a fee to an institution of

higher education that participates in the program under this

part and is located in that State according to a fee structure,

approved by the Secretary, that is based on the institution’s

cohort default rate and the State’s risk of loss under this

subsection. Such fee structure shall include a process by which

an institution with a high cohort default rate is exempt from

any fees under this paragraph if such institution demonstrates

to the satisfaction of the State that exceptional mitigating

circumstances, as determined by the State and approved by

the Secretary, contributed to its cohort default rate.’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect on October 1, 1994.

Subtitle D—Group Health Plans

SEC. 4301. STANDARDS FOR GROUP HEALTH PLAN COVERAGE.

(a) IN GENERAL.—Part 6 of subtitle B of title I of the Employee

Retirement Income Security Act of 1974 (29 U.S.C. 1161 et seq.)

is amended by adding at the end the following new section:
H. R. 2264—61

‘‘ADDITIONAL STANDARDS FOR GROUP HEALTH PLANS

‘‘SEC. 609. (a) GROUP HEALTH PLAN COVERAGE PURSUANT TO

MEDICAL CHILD SUPPORT ORDERS.—

‘‘(1) IN GENERAL.—Each group health plan shall provide

benefits in accordance with the applicable requirements of any

qualified medical child support order.

‘‘(2) DEFINITIONS.—For purposes of this subsection—

‘‘(A) QUALIFIED MEDICAL CHILD SUPPORT ORDER.—The

term ‘qualified medical child support order’ means a medical child support order—

‘‘(i) which creates or recognizes the existence of

an alternate recipient’s right to, or assigns to an alternate recipient the right to, receive benefits for which

a participant or beneficiary is eligible under a group

health plan, and

‘‘(ii) with respect to which the requirements of

paragraphs (3) and (4) are met.

‘‘(B) MEDICAL CHILD SUPPORT ORDER.—The term ‘medical child support order’ means any judgment, decree, or

order (including approval of a settlement agreement) issued

by a court of competent jurisdiction which—

‘‘(i) provides for child support with respect to a

child of a participant under a group health plan or

provides for health benefit coverage to such a child,

is made pursuant to a State domestic relations law

(including a community property law), and relates to

benefits under such plan, or

‘‘(ii) enforces a law relating to medical child support described in section 1908 of the Social Security

Act (as added by section 13822 of the Omnibus Budget

Reconciliation Act of 1993) with respect to a group

health plan.

‘‘(C) ALTERNATE RECIPIENT.—The term ‘alternate

recipient’ means any child of a participant who is recognized under a medical child support order as having a

right to enrollment under a group health plan with respect

to such participant.

‘‘(3) INFORMATION TO BE INCLUDED IN QUALIFIED ORDER.—

A medical child support order meets the requirements of this

paragraph only if such order clearly specifies—

‘‘(A) the name and the last known mailing address

(if any) of the participant and the name and mailing

address of each alternate recipient covered by the order, ‘‘(B) a reasonable description of the type of coverage

to be provided by the plan to each such alternate recipient,

or the manner in which such type of coverage is to be

determined,

‘‘(C) the period to which such order applies, and

‘‘(D) each plan to which such order applies.

‘‘(4) RESTRICTION ON NEW TYPES OR FORMS OF BENEFITS.— A medical child support order meets the requirements of this

paragraph only if such order does not require a plan to provide

any type or form of benefit, or any option, not otherwise provided under the plan, except to the extent necessary to meet

the requirements of a law relating to medical child support

described in section 1908 of the Social Security Act (as added
H. R. 2264—62

by section 13822 of the Omnibus Budget Reconciliation Act

of 1993).

‘‘(5) PROCEDURAL REQUIREMENTS.—

‘‘(A) TIMELY NOTIFICATIONS AND DETERMINATIONS.—In

the case of any medical child support order received by

a group health plan—

‘‘(i) the plan administrator shall promptly notify

the participant and each alternate recipient of the

receipt of such order and the plan’s procedures for

determining whether medical child support orders are

qualified medical child support orders, and

‘‘(ii) within a reasonable period after receipt of

such order, the plan administrator shall determine

whether such order is a qualified medical child support

order and notify the participant and each alternate

recipient of such determination.

‘‘(B) ESTABLISHMENT OF PROCEDURES FOR DETERMINING

QUALIFIED STATUS OF ORDERS.—Each group health plan

shall establish reasonable procedures to determine whether

medical child support orders are qualified medical child

support orders and to administer the provision of benefits

under such qualified orders. Such procedures—

‘‘(i) shall be in writing,

‘‘(ii) shall provide for the notification of each person

specified in a medical child support order as eligible

to receive benefits under the plan (at the address

included in the medical child support order) of such

procedures promptly upon receipt by the plan of the

medical child support order, and

‘‘(iii) shall permit an alternate recipient to designate a representative for receipt of copies of notices

that are sent to the alternate recipient with respect

to a medical child support order.

‘‘(6) ACTIONS TAKEN BY FIDUCIARIES.—If a plan fiduciary

acts in accordance with part 4 of this subtitle in treating

a medical child support order as being (or not being) a qualified

medical child support order, then the plan’s obligation to the

participant and each alternate recipient shall be discharged

to the extent of any payment made pursuant to such act of

the fiduciary.

‘‘(7) TREATMENT OF ALTERNATE RECIPIENTS.—

‘‘(A) TREATMENT AS BENEFICIARY GENERALLY.—A person who is an alternate recipient under a qualified medical

child support order shall be considered a beneficiary under

the plan for purposes of any provision of this Act.

‘‘(B) TREATMENT AS PARTICIPANT FOR PURPOSES OF

REPORTING AND DISCLOSURE REQUIREMENTS.—A person who

is an alternate recipient under any medical child support

order shall be considered a participant under the plan

for purposes of the reporting and disclosure requirements

of part 1.

‘‘(8) DIRECT PROVISION OF BENEFITS PROVIDED TO ALTERNATE RECIPIENTS.—Any payment for benefits made by a group

health plan pursuant to a medical child support order in

reimbursement for expenses paid by an alternate recipient or

an alternate recipient’s custodial parent or legal guardian shall
H. R. 2264—63

be made to the alternate recipient or the alternate recipient’s

custodial parent or legal guardian.

‘‘(b) RIGHTS OF STATES WITH RESPECT TO GROUP HEALTH PLANS

WHERE PARTICIPANTS OR BENEFICIARIES THEREUNDER ARE ELIGIBLE

FOR MEDICAID BENEFITS.—

‘‘(1) COMPLIANCE BY PLANS WITH ASSIGNMENT OF RIGHTS.—

A group health plan shall provide that payment for benefits

with respect to a participant under the plan will be made

in accordance with any assignment of rights made by or on

behalf of such participant or a beneficiary of the participant

as required by a State plan for medical assistance approved

under title XIX of the Social Security Act pursuant to section

1912(a)(1)(A) of such Act (as in effect on the date of the enactment of the Omnibus Budget Reconciliation Act of 1993).

‘‘(2) ENROLLMENT AND PROVISION OF BENEFITS WITHOUT

REGARD TO MEDICAID ELIGIBILITY.—A group health plan shall

provide that, in enrolling an individual as a participant or

beneficiary or in determining or making any payments for

benefits of an individual as a participant or beneficiary, the

fact that the individual is eligible for or is provided medical

assistance under a State plan for medical assistance approved

under title XIX of the Social Security Act will not be taken

into account.

‘‘(3) ACQUISITION BY STATES OF RIGHTS OF THIRD PARTIES.—

A group health plan shall provide that, to the extent that

payment has been made under a State plan for medical assistance approved under title XIX of the Social Security Act in

any case in which a group health plan has a legal liability

to make payment for items or services constituting such assistance, payment for benefits under the plan will be made in

accordance with any State law which provides that the State

has acquired the rights with respect to a participant to such

payment for such items or services.

‘‘(c) GROUP HEALTH PLAN COVERAGE OF DEPENDENT CHILDREN

IN CASES OF ADOPTION.—

‘‘(1) COVERAGE EFFECTIVE UPON PLACEMENT FOR ADOPTION.—In any case in which a group health plan provides

coverage for dependent children of participants or beneficiaries,

such plan shall provide benefits to dependent children placed

with participants or beneficiaries for adoption under the same

terms and conditions as apply in the case of dependent children

who are natural children of participants or beneficiaries under

the plan, irrespective of whether the adoption has become final.

‘‘(2) RESTRICTIONS BASED ON PREEXISTING CONDITIONS AT

TIME OF PLACEMENT FOR ADOPTION PROHIBITED.—A group

health plan may not restrict coverage under the plan of any

dependent child adopted by a participant or beneficiary, or

placed with a participant or beneficiary for adoption, solely

on the basis of a preexisting condition of such child at the

time that such child would otherwise become eligible for coverage under the plan, if the adoption or placement for adoption

occurs while the participant or beneficiary is eligible for coverage under the plan.

‘‘(3) DEFINITIONS.—For purposes of this subsection—

‘‘(A) CHILD.—The term ‘child’ means, in connection with

any adoption, or placement for adoption, of the child, an
H. R. 2264—64

individual who has not attained age 18 as of the date

of such adoption or placement for adoption.

‘‘(B) PLACEMENT FOR ADOPTION.—The term ‘placement’,

or being ‘placed’, for adoption, in connection with any placement for adoption of a child with any person, means the

assumption and retention by such person of a legal obligation for total or partial support of such child in anticipation

of adoption of such child. The child’s placement with such

person terminates upon the termination of such legal

obligation.

‘‘(d) CONTINUED COVERAGE OF COSTS OF A PEDIATRIC VACCINE

UNDER GROUP HEALTH PLANS.—A group health plan may not reduce

its coverage of the costs of pediatric vaccines (as defined under

section 1928(h)(6) of the Social Security Act as amended by section

13830 of the Omnibus Budget Reconciliation Act of 1993) below

the coverage it provided as of May 1, 1993.

‘‘(e) REGULATIONS.—Any regulations prescribed under this section shall be prescribed by the Secretary of Labor, in consultation

with the Secretary of Health and Human Services.’’.

(b) CONFORMING AMENDMENTS TO ERISA TO ENSURE COMPLIANCE WITH MEDICARE AND MEDICAID COVERAGE DATA BANK

REQUIREMENTS.—

(1) REPORTS TO DATA BANK.—Section 101 of the Employee

Retirement Income Security Act of 1974 (29 U.S.C. 1021) is

amended—

(A) by redesignating subsection (f) as subsection (g);

and

(B) by inserting after subsection (e) the following new

subsection:

‘‘(f) INFORMATION NECESSARY TO COMPLY WITH MEDICARE AND

MEDICAID COVERAGE DATA BANK REQUIREMENTS.— ‘‘(1) PROVISION OF INFORMATION BY GROUP HEALTH PLAN

UPON REQUEST OF EMPLOYER.— ‘‘(A) IN GENERAL.—An employer shall comply with the

applicable requirements of section 1144 of the Social Security Act (as added by section 13581 of the Omnibus Budget

Reconciliation Act of 1993). Upon the request of an

employer maintaining a group health plan, any plan sponsor, plan administrator, insurer, third-party administrator,

or other person who maintains under the plan the information necessary to enable the employer to comply with the

applicable requirements of section 1144 of the Social Security Act shall, in such form and manner as may be prescribed in regulations of the Secretary (in consultation

with the Secretary of Health and Human Services), provide

such information (not inconsistent with paragraph (2))—

‘‘(i) in the case of a request by an employer

described in subparagraph (B) and a plan that is not

a multiemployer plan or a component of an arrangement described in subparagraph (C), to the Medicare

and Medicaid Coverage Data Bank;

‘‘(ii) in the case of a plan that is a multiemployer

plan or is a component of an arrangement described

in subparagraph (C), to the employer or to such Data

Bank, at the option of the plan; and

‘‘(iii) in any other case, to the employer or to such

Data Bank, at the option of the employer.
H. R. 2264—65

‘‘(B) EMPLOYER DESCRIBED.—An employer is described

in this subparagraph for any calendar year if such employer

normally employed fewer than 50 employees on a typical

business day during such calendar year.

‘‘(C) ARRANGEMENT DESCRIBED.—An arrangement

described in this subparagraph is any arrangement in

which two or more employers contribute for the purpose

of providing group health plan coverage for employees.

‘‘(2) INFORMATION NOT REQUIRED TO BE PROVIDED.—Any

plan sponsor, plan administrator, insurer, third-party administrator, or other person described in paragraph (1)(A) (other

than the employer) that maintains the information under the

plan shall not provide to an employer in order to satisfy the

requirements of section 1144 of the Social Security Act, and

shall not provide to the Data Bank under such section, information that pertains in any way to—

‘‘(A) the health status of a participant, or of the participant’s spouse, dependent child, or other beneficiary,

‘‘(B) the cost of coverage provided to any participant

or beneficiary, or

‘‘(C) any limitations on such coverage specific to any

participant or beneficiary.

‘‘(3) REGULATIONS.—The Secretary may, in consultation

with the Secretary of Health and Human Services, prescribe

such regulations as are necessary to carry out this subsection.’’.

(c) CONFORMING AMENDMENTS.—

(1) CIVIL ACTIONS.—Section 502(a) of such Act (29 U.S.C.

1132(a)) is amended—

(A) in paragraph (5), by striking ‘‘or’’ at the end;

(B) in paragraph (6), by striking the period and inserting a semicolon; and

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

‘‘(7) by a State to enforce compliance with a qualified medical child support order (as defined in section 609(a)(2)(A));

or

‘‘(8) by the Secretary, or by an employer or other person

referred to in section 101(f)(1), (A) to enjoin any act or practice

which violates subsection (f) of section 101, or (B) to obtain

appropriate equitable relief (i) to redress such violation or (ii)

to enforce such subsection.’’.

(2) CIVIL PENALTY.—Section 502(c) of such Act (29 U.S.C.

1132(c)) is amended by adding at the end the following new

paragraph:

‘‘(4) The Secretary may assess a civil penalty of not more

than $1,000 for each violation by any person of section 101(f)(1).

For purposes of this paragraph, each violation described in subparagraph (A) with respect to any single participant, and each violation

described in subparagraph (B) with respect to any single participant

or beneficiary, shall be treated as a separate violation. The Secretary and the Secretary of Health and Human Services shall

maintain such ongoing consultation as may be necessary and appropriate to coordinate enforcement under this subsection with enforcement under section 1144(c)(8) of the Social Security Act.’’.

(3) JURISDICTION.—Section 502(e)(1) of such Act (29 U.S.C.

1132(e)(1)) is amended—
H. R. 2264—66

(A) in the first sentence, by striking ‘‘or fiduciary’’

and inserting ‘‘fiduciary, or any person referred to in section

101(f)(1)’’; and

(B) in the second sentence, by striking ‘‘subsection

(a)(1)(B)’’ and inserting ‘‘paragraphs (1)(B) and (7) of subsection (a)’’.

(4) EFFECT ON OTHER LAWS.—Section 514 of such Act (29

U.S.C. 1144) is amended—

(A) in subsection (b)(7)(D), by inserting ‘‘, qualified

medical child support orders (within the meaning of section

609(a)(2)(A)), and the provisions of law referred to in section

609(a)(2)(B)(ii) to the extent enforced by qualified medical

child support orders’’ before the period; and

(B) by striking subsection (b)(8) and inserting the following:

‘‘(8) Subsection (a) of this section shall not be construed to

preclude any State cause of action—

‘‘(A) with respect to which the State exercises its acquired

rights under section 609(b)(3) with respect to a group health

plan (as defined in section 607(1)), or

‘‘(B) for recoupment of payment with respect to items or

services pursuant to a State plan for medical assistance

approved under title XIX of the Social Security Act which

would not have been payable if such acquired rights had been

executed before payment with respect to such items or services

by the group health plan.’’;

(5) CLERICAL AMENDMENTS.—

(A) The heading for part 6 of subtitle B of title I

of such Act is amended to read as follows:

‘‘PART 6—GROUP HEALTH PLANS’’.

(B) The table of contents in section 1 of such Act

is amended—

(i) by striking the item relating to the heading

for part 6 of subtitle B of title I and inserting the

following:

‘‘PART 6—GROUP HEALTH PLANS’’;

and

(ii) by inserting after the item relating to section

608 the following new item:

‘‘Sec. 609. Additional standards for group health plans.’’.

(d) EFFECTIVE DATE.—

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

shall take effect on the date of the enactment of this Act.

(2) PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1,

1994.—Any amendment to a plan required to be made by an

amendment made by this section shall not be required to be

made before the first plan year beginning on or after January

1, 1994, if—

(A) during the period after the date before the date

of the enactment of this Act and before such first plan

year, the plan is operated in accordance with the requirements of the amendments made by this section, and
H. R. 2264—67

(B) such plan amendment applies retroactively to the

period after the date before the date of the enactment

of this Act and before such first plan year.

A plan shall not be treated as failing to be operated in accordance with the provisions of the plan merely because it operates

in accordance with this paragraph.

Subtitle E—Fee Increase

SEC. 4401. FEE INCREASE.

The Tea Importation Act (21 U.S.C. 41 et seq.) is amended—

(1) by inserting the 4th undesignated paragraph under

the center heading ‘‘FOOD AND DRUG ADMINISTRATION’’ of title

II of the Labor-Federal Security Appropriation Act, 1942 (21

U.S.C. 46a) as a new section 13 of the Tea Importation Act,

and

(2) by amending such new section 13 to read as follows:

‘‘SEC. 13. No tea or merchandise described as tea shall be

examined for importation into the United States, or released by

the Customs Service, under the Tea Importation Act unless the

importer or consignee of such tea or merchandise has paid, before

the examination, a fee in an amount equal to—

‘‘(1) 10 cents for each hundred weight or fraction thereof

of the tea or merchandise; or

‘‘(2) the approximate cost of the examinations;

whichever amount is less. Such fee shall be deposited into the

Treasury of the United States as miscellaneous receipts.’’

TITLE V—TRANSPORTATION AND

PUBLIC WORKS PROVISIONS

SEC. 5001. RECREATIONAL USER FEES.

(a) IN GENERAL.—Section 210 of the Flood Control Act of 1968

(16 U.S.C. 460d–3) is amended—

(1) by striking ‘‘SEC. 210. No entrance’’ and inserting the

following:

‘‘SEC. 210. RECREATIONAL USER FEES.

‘‘(a) PROHIBITION ON ADMISSIONS FEES.—No entrance’’;

(2) by striking the second sentence; and

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

‘‘(b) FEES FOR USE OF DEVELOPED RECREATION SITES AND

FACILITIES.—

‘‘(1) ESTABLISHMENT AND COLLECTION.—Notwithstanding section 4(b) of the Land and Water Conservation Fund Act

of 1965 (16 U.S.C. 460l–6a(b)), the Secretary of the Army is

authorized, subject to paragraphs (2) and (3), to establish and

collect fees for the use of developed recreation sites and facilities, including campsites, swimming beaches, and boat launching ramps but excluding a site or facility which includes only

a boat launch ramp and a courtesy dock.

‘‘(2) EXEMPTION OF CERTAIN FACILITIES.—The Secretary

shall not establish or collect fees under this subsection for

the use or provision of drinking water, wayside exhibits, roads,

scenic drives, overlook sites, picnic tables, toilet facilities, sur-
H. R. 2264—68

face water areas, undeveloped or lightly developed shoreland,

or general visitor information.

‘‘(3) PER VEHICLE LIMIT.—The fee under this subsection

for use of a site or facility (other than an overnight camping

site or facility or any other site or facility at which a fee

is charged for use of the site or facility as of the date of

the enactment of this paragraph) for persons entering the site

or facility by private, noncommercial vehicle transporting not

more than 8 persons (including the driver) shall not exceed

$3 per day per vehicle. Such maximum amount may be adjusted

annually by the Secretary for changes in the Consumer Price

Index of All Urban Consumers published by the Bureau of

Labor Statistics of the Department of Labor.

‘‘(4) DEPOSIT INTO TREASURY ACCOUNT.—All fees collected

under this subsection shall be deposited into the Treasury

account for the Corps of Engineers established by section 4(i)

of the Land and Water Conservation Fund Act of 1965 (16

U.S.C. 460l–6a(i)).’’.

(b) CONFORMING AMENDMENT FOR CAMPSITES.—Section 4(b) of

the Land and Water Conservation Fund Act of 1965 (16 U.S.C.

460l–6a(b)) is amended by striking the next to the last sentence.

TITLE VI—COMMUNICATIONS LICENSING AND SPECTRUM ALLOCATION IMPROVEMENT

SEC. 6001. TRANSFER OF AUCTIONABLE FREQUENCIES.

(a) AMENDMENT.—The National Telecommunications and

Information Administration Organization Act (47 U.S.C. 901 et

seq.) is amended—

(1) by striking the heading of part B and inserting the

following:

‘‘PART C—SPECIAL AND TEMPORARY

PROVISIONS’’;

(2) by redesignating sections 131 through 135 as sections

151 through 155, respectively; and (3) by inserting after part A the following new part:

‘‘PART B—TRANSFER OF AUCTIONABLE

FREQUENCIES.

‘‘SEC. 111. DEFINITIONS.

‘‘As used in this part:

‘‘(1) The term ‘allocation’ means an entry in the National

Table of Frequency Allocations of a given frequency band for

the purpose of its use by one or more radiocommunication

services.

‘‘(2) The term ‘assignment’ means an authorization given

to a station licensee to use specific frequencies or channels.

‘‘(3) The term ‘the 1934 Act’ means the Communications

Act of 1934 (47 U.S.C. 151 et seq.).
H. R. 2264—69

‘‘SEC. 112. NATIONAL SPECTRUM ALLOCATION PLANNING.

‘‘The Assistant Secretary and the Chairman of the Commission

shall meet, at least biannually, to conduct joint spectrum planning

with respect to the following issues: ‘‘(1) the extent to which licenses for spectrum use can

be issued pursuant to section 309(j) of the 1934 Act to increase

Federal revenues;

‘‘(2) the future spectrum requirements for public and private uses, including State and local government public safety

agencies; ‘‘(3) the spectrum allocation actions necessary to accommodate those uses; and

‘‘(4) actions necessary to promote the efficient use of the

spectrum, including spectrum management techniques to promote increased shared use of the spectrum that does not cause

harmful interference as a means of increasing commercial

access.

‘‘SEC. 113. IDENTIFICATION OF REALLOCABLE FREQUENCIES.

‘‘(a) IDENTIFICATION REQUIRED.—The Secretary shall, within

18 months after the date of the enactment of the Omnibus Budget

Reconciliation Act of 1993, prepare and submit to the President

and the Congress a report identifying and recommending for

reallocation bands of frequencies—

‘‘(1) that are allocated on a primary basis for Federal

Government use;

‘‘(2) that are not required for the present or identifiable

future needs of the Federal Government;

‘‘(3) that can feasibly be made available, as of the date

of submission of the report or at any time during the next

15 years, for use under the 1934 Act (other than for Federal

Government stations under section 305 of the 1934 Act);

‘‘(4) the transfer of which (from Federal Government use)

will not result in costs to the Federal Government, or losses

of services or benefits to the public, that are excessive in

relation to the benefits to the public that may be provided

by non-Federal licensees; and ‘‘(5) that are most likely to have the greatest potential

for productive uses and public benefits under the 1934 Act

if allocated for non-Federal use.

‘‘(b) MINIMUM AMOUNT OF SPECTRUM RECOMMENDED.— ‘‘(1) IN GENERAL.—In accordance with the provisions of

this section, the Secretary shall recommend for reallocation,

for use other than by Federal Government stations under section 305 of the 1934 Act (47 U.S.C. 305), bands of frequencies

that in the aggregate span not less than 200 megahertz, that

are located below 5 gigahertz, and that meet the criteria specified in paragraphs (1) through (5) of subsection (a). Such bands

of frequencies shall include bands of frequencies, located below

3 gigahertz, that span in the aggregate not less than 100

megahertz.

‘‘(2) MIXED USES PERMITTED TO BE COUNTED.—Bands of

frequencies which a report of the Secretary under subsection

(a) or (d)(1) recommends be partially retained for use by Federal

Government stations, but which are also recommended to be

reallocated to be made available under the 1934 Act for use

by non-Federal stations, may be counted toward the minimum
H. R. 2264—70

spectrum required by paragraph (1) of this subsection, except

that—

‘‘(A) the bands of frequencies counted under this paragraph may not count toward more than one-half of the

minimums required by paragraph (1) of this subsection;

‘‘(B) a band of frequencies may not be counted under

this paragraph unless the assignments of the band to Federal Government stations under section 305 of the 1934

Act (47 U.S.C. 305) are limited by geographic area, by

time, or by other means so as to guarantee that the potential use to be made by such Federal Government stations

is substantially less (as measured by geographic area, time,

or otherwise) than the potential use to be made by nonFederal stations; and

‘‘(C) the operational sharing permitted under this paragraph shall be subject to the interference regulations prescribed by the Commission pursuant to section 305(a) of

the 1934 Act and to coordination procedures that the

Commission and the Secretary shall jointly establish and

implement to ensure against harmful interference.

‘‘(c) CRITERIA FOR IDENTIFICATION.—

‘‘(1) NEEDS OF THE FEDERAL GOVERNMENT.—In determining

whether a band of frequencies meets the criteria specified in

subsection (a)(2), the Secretary shall—

‘‘(A) consider whether the band of frequencies is used

to provide a communications service that is or could be

available from a commercial provider or other vendor;

‘‘(B) seek to promote—

‘‘(i) the maximum practicable reliance on commercially available substitutes;

‘‘(ii) the sharing of frequencies (as permitted under

subsection (b)(2));

‘‘(iii) the development and use of new communications technologies; and

‘‘(iv) the use of nonradiating communications systems where practicable; and

‘‘(C) seek to avoid—

‘‘(i) serious degradation of Federal Government

services and operations;

‘‘(ii) excessive costs to the Federal Government

and users of Federal Government services; and

‘‘(iii) excessive disruption of existing use of Federal

Government frequencies by amateur radio licensees.

‘‘(2) FEASIBILITY OF USE.—In determining whether a frequency band meets the criteria specified in subsection (a)(3),

the Secretary shall—

‘‘(A) assume that the frequency will be assigned by

the Commission under section 303 of the 1934 Act (47

U.S.C. 303) within 15 years;

‘‘(B) assume reasonable rates of scientific progress and

growth of demand for telecommunications services;

‘‘(C) seek to include frequencies which can be used

to stimulate the development of new technologies; and

‘‘(D) consider the immediate and recurring costs to

reestablish services displaced by the reallocation of spectrum.
H. R. 2264—71

‘‘(3) ANALYSIS OF BENEFITS.—In determining whether a

band of frequencies meets the criteria specified in subsection

(a)(5), the Secretary shall consider—

‘‘(A) the extent to which equipment is or will be available that is capable of utilizing the band;

‘‘(B) the proximity of frequencies that are already

assigned for commercial or other non-Federal use;

‘‘(C) the extent to which, in general, commercial users

could share the frequency with amateur radio licensees;

and

‘‘(D) the activities of foreign governments in making

frequencies available for experimentation or commercial

assignments in order to support their domestic manufacturers of equipment.

‘‘(4) POWER AGENCY FREQUENCIES.—

‘‘(A) APPLICABILITY OF CRITERIA.—The criteria specified

by subsection (a) shall be deemed not to be met for any

purpose under this part with regard to any frequency

assignment to, or any frequency assignment used by, a

Federal power agency for the purpose of withdrawing that

assignment.

‘‘(B) MIXED USE ELIGIBILITY.—The frequencies assigned

to any Federal power agency may only be eligible for mixed

use under subsection (b)(2) in geographically separate

areas, but in those cases where a frequency is to be shared

by an affected Federal power agency and a non-Federal

user, such use by the non-Federal user shall not cause

harmful interference to the affected Federal power agency

or adversely affect the reliability of its power system.

‘‘(C) DEFINITION.—As used in this paragraph, the term

‘Federal power agency’ means the Tennessee Valley Authority, the Bonneville Power Administration, the Western Area

Power Administration, the Southwestern Power Administration, the Southeastern Power Administration, or the

Alaska Power Administration.

‘‘(5) LIMITATION ON REALLOCATION.—None of the frequencies recommended for reallocation in the reports required

by this subsection shall have been recommended, prior to the

date of enactment of the Omnibus Budget Reconciliation Act

of 1993, for reallocation to non-Federal use by international

agreement.

‘‘(d) PROCEDURE FOR IDENTIFICATION OF REALLOCABLE BANDS

OF FREQUENCIES.—

‘‘(1) SUBMISSION OF PRELIMINARY IDENTIFICATION TO CONGRESS.—Within 6 months after the date of the enactment of

the Omnibus Budget Reconciliation Act of 1993, the Secretary

shall prepare, make publicly available, and submit to the President, the Congress, and the Commission a report which makes

a preliminary identification of reallocable bands of frequencies

which meet the criteria established by this section.

‘‘(2) PUBLIC COMMENT.—The Secretary shall provide

interested persons with the opportunity to submit, within 90

days after the date of its publication, written comment on

the preliminary report required by paragraph (1). The Secretary

shall immediately transmit a copy of any such comment to

the Commission.
H. R. 2264—72

‘‘(3) COMMENT AND RECOMMENDATIONS FROM COMMISSION.—The Commission shall, within 90 days after the conclusion of the period for comment provided pursuant to paragraph

(2), submit to the Secretary the Commission’s analysis of such

comments and the Commission’s recommendations for

responses to such comments, together with such other comments and recommendations as the Commission deems appropriate.

‘‘(4) DIRECT DISCUSSIONS.—The Secretary shall encourage

and provide opportunity for direct discussions among commercial representatives and Federal Government users of the spectrum to aid the Secretary in determining which frequencies

to recommend for reallocation. The Secretary shall provide

notice to the public and the Commission of any such discussions,

including the name or names of any businesses or other persons

represented in such discussions. A representative of the

Commission (and of the Secretary at the election of the Secretary) shall be permitted to attend any such discussions. The

Secretary shall provide the public and the Commission with

an opportunity to comment on the results of any such discussions prior to the submission of the final report required by

subsection (a).

‘‘(e) TIMETABLE FOR REALLOCATION AND LIMITATION.—

‘‘(1) TIMETABLE REQUIRED.—The Secretary shall, as part

of the reports required by subsections (a) and (d)(1), include

a timetable that recommends effective dates by which the President shall withdraw or limit assignments of the frequencies

specified in such reports.

‘‘(2) EXPEDITED REALLOCATION.—

‘‘(A) REQUIRED REALLOCATION.—The Secretary shall,

as part of the report required by subsection (d)(1), specifically identify and recommend for immediate reallocation

bands of frequencies that in the aggregate span not less

than 50 megahertz, that meet the criteria described in

subsection (a), and that can be made available for

reallocation immediately upon issuance of the report

required by subsection (d)(1). Such bands of frequencies

shall include bands of frequencies, located below 3

gigahertz, that in the aggregate span not less than 25

megahertz .

‘‘(B) PERMITTED REALLOCATION.—The Secretary may,

as part of such report, identify and recommend bands of

frequencies for immediate reallocation for a mixed use

pursuant to subsection (b)(2), but such bands of frequencies

may not count toward the minimums required by subparagraph (A).

‘‘(3) DELAYED EFFECTIVE DATES.—In setting the recommended delayed effective dates, the Secretary shall—

‘‘(A) consider the need to reallocate bands of frequencies

as early as possible, taking into account the requirements

of paragraphs (1) and (2) of section 115(b);

‘‘(B) be based on the useful remaining life of equipment

that has been purchased or contracted for to operate on

identified frequencies;

‘‘(C) consider the need to coordinate frequency use with

other nations; and
H. R. 2264—73

‘‘(D) take into account the relationship between the

costs to the Federal Government of changing to different

frequencies and the benefits that may be obtained from

commercial and other non-Federal uses of the reassigned

frequencies.

‘‘SEC. 114. WITHDRAWAL OR LIMITATION OF ASSIGNMENT TO FEDERAL GOVERNMENT STATIONS.

‘‘(a) IN GENERAL.—The President shall—

‘‘(1) within 6 months after receipt of a report by the Secretary under subsection (a) or (d)(1) of section 113, withdraw

the assignment to a Federal Government station of any frequency which the report recommends for immediate

reallocation;

‘‘(2) within either such 6-month period, limit the assignment to a Federal Government station of any frequency which

the report recommends be made immediately available for

mixed use under section 113(b)(2);

‘‘(3) by the delayed effective date recommended by the

Secretary under section 113(e) (except as provided in subsection

(b)(4) of this section), withdraw or limit the assignment to

a Federal Government station of any frequency which the report

recommends be reallocated or made available for mixed use

on such delayed effective date;

‘‘(4) assign or reassign other frequencies to Federal Government stations as necessary to adjust to such withdrawal or

limitation of assignments; and

‘‘(5) transmit a notice and description to the Commission

and each House of Congress of the actions taken under this

subsection.

‘‘(b) EXCEPTIONS.— ‘‘(1) AUTHORITY TO SUBSTITUTE.—If the President determines that a circumstance described in paragraph (2) exists,

the President—

‘‘(A) may substitute an alternative frequency or frequencies for the frequency that is subject to such determination and withdraw (or limit) the assignment of that

alternative frequency in the manner required by subsection

(a); and

‘‘(B) shall submit a statement of the reasons for taking the action described in subparagraph (A) to the Commission, Committee on Energy and Commerce of the House

of Representatives, and the Committee on Commerce,

Science, and Transportation of the Senate.

‘‘(2) GROUNDS FOR SUBSTITUTION.—For purposes of paragraph (1), the following circumstances are described in this

paragraph:

‘‘(A) the reassignment would seriously jeopardize the

national defense interests of the United States;

‘‘(B) the frequency proposed for reassignment is

uniquely suited to meeting important governmental needs;

‘‘(C) the reassignment would seriously jeopardize public

health or safety;

‘‘(D) the reassignment will result in costs to the Federal

Government that are excessive in relation to the benefits

that may be obtained from commercial or other non-Federal

uses of the reassigned frequency; or
H. R. 2264—74

‘‘(E) the reassignment will disrupt the existing use

of a Federal Government band of frequencies by amateur

radio licensees.

‘‘(3) CRITERIA FOR SUBSTITUTED FREQUENCIES.—For purposes of paragraph (1), a frequency may not be substituted

for a frequency identified and recommended by the report of

the Secretary under section 113(a) unless the substituted frequency also meets each of the criteria specified by section

113(a).

‘‘(4) DELAYS IN IMPLEMENTATION.—If the President determines that any action cannot be completed by the delayed

effective date recommended by the Secretary pursuant to section 113(e), or that such an action by such date would result

in a frequency being unused as a consequence of the Commission’s plan under section 115, the President may—

‘‘(A) withdraw or limit the assignment to Federal

Government stations on a later date that is consistent

with such plan, except that the President shall notify each

committee specified in paragraph (1)(B) and the Commission of the reason that withdrawal or limitation at a later

date is required; or

‘‘(B) substitute alternative frequencies pursuant to the

provisions of this subsection.

‘‘SEC. 115. DISTRIBUTION OF FREQUENCIES BY THE COMMISSION.

‘‘(a) ALLOCATION AND ASSIGNMENT OF IMMEDIATELY AVAILABLE

FREQUENCIES.—With respect to the frequencies made available for

immediate reallocation pursuant to section 113(e)(2), the Commission, not later than 18 months after the date of enactment of

the Omnibus Budget Reconciliation Act of 1993, shall issue regulations to allocate such frequencies and shall propose regulations

to assign such frequencies.

‘‘(b) ALLOCATION AND ASSIGNMENT OF REMAINING AVAILABLE

FREQUENCIES.—With respect to the frequencies made available for

reallocation pursuant to section 113(e)(3), the Commission shall,

not later than 1 year after receipt of the report required by section

113(a), prepare, submit to the President and the Congress, and

implement, a plan for the allocation and assignment under the

1934 Act of such frequencies. Such plan shall—

‘‘(1) not propose the immediate allocation and assignment

of all such frequencies but, taking into account the timetable

recommended by the Secretary pursuant to section 113(e), shall

propose—

‘‘(A) gradually to allocate and assign the frequencies

remaining, after making the reservation required by

subparagraph (B), over the course of 10 years beginning

on the date of submission of such plan; and

‘‘(B) to reserve a significant portion of such frequencies

for allocation and assignment beginning after the end of

such 10-year period;

‘‘(2) contain appropriate provisions to ensure—

‘‘(A) the availability of frequencies for new technologies

and services in accordance with the policies of section 7

of the 1934 Act (47 U.S.C. 157);

‘‘(B) the availability of frequencies to stimulate the

development of such technologies; and
H. R. 2264—75

‘‘(C) the safety of life and property in accordance with the policies of section 1 of the 1934 Act (47 U.S.C. 151);

‘‘(3) address (A) the feasibility of reallocating portions of the spectrum from current commercial and other non-Federal

uses to provide for more efficient use of the spectrum, and

(B) innovation and marketplace developments that may affect

the relative efficiencies of different spectrum allocations; ‘‘(4) not prevent the Commission from allocating fre- quencies, and assigning licenses to use frequencies, not included

in the plan; and ‘‘(5) not preclude the Commission from making changes to the plan in future proceedings.

‘‘SEC. 116. AUTHORITY TO RECOVER REASSIGNED FREQUENCIES.

‘‘(a) AUTHORITY OF PRESIDENT.—Subsequent to the withdrawal

of assignment to Federal Government stations pursuant to section

114, the President may reclaim reassigned frequencies for reassignment to Federal Government stations in accordance with this section.

‘‘(b) PROCEDURE FOR RECLAIMING FREQUENCIES.— ‘‘(1) UNALLOCATED FREQUENCIES.—If the frequencies to be

reclaimed have not been allocated or assigned by the Commission pursuant to the 1934 Act, the President shall follow the

procedures for substitution of frequencies established by section

114(b) of this part. ‘‘(2) ALLOCATED FREQUENCIES.—If the frequencies to be

reclaimed have been allocated or assigned by the Commission,

the President shall follow the procedures for substitution of

frequencies established by section 114(b) of this part, except

that the statement required by section 114(b)(1)(B) shall

include—

‘‘(A) a timetable to accommodate an orderly transition for licensees to obtain new frequencies and equipment necessary for its utilization; and ‘‘(B) an estimate of the cost of displacing spectrum users licensed by the Commission. ‘‘(c) COSTS OF RECLAIMING FREQUENCIES.—The Federal Government shall bear all costs of reclaiming frequencies pursuant to

this section, including the cost of equipment which is rendered

unusable, the cost of relocating operations to a different frequency,

and any other costs that are directly attributable to the reclaiming

of the frequency pursuant to this section, and there are authorized

to be appropriated such sums as may be necessary to carry out

the purposes of this section. ‘‘(d) EFFECTIVE DATE OF RECLAIMED FREQUENCIES.—The

Commission shall not withdraw licenses for any reclaimed frequencies until the end of the fiscal year following the fiscal year

in which a statement under section 114(b)(1)(B) pertaining to such

frequencies is received by the Commission.

‘‘(e) EFFECT ON OTHER LAW.—Nothing in this section shall

be construed to limit or otherwise affect the authority of the President under section 706 of the 1934 Act (47 U.S.C. 606).

‘‘SEC. 117. EXISTING ALLOCATION AND TRANSFER AUTHORITY

RETAINED.

‘‘(a) ADDITIONAL REALLOCATION.—Nothing in this part prevents

or limits additional reallocation of spectrum from the Federal

Government to other users.
H. R. 2264—76

‘‘(b) IMPLEMENTATION OF NEW TECHNOLOGIES AND SERVICES.—

Notwithstanding any other provision of this part—

‘‘(1) the Secretary may, consistent with section 104(e) of

this Act, at any time allow frequencies allocated on a primary

basis for Federal Government use to be used by non-Federal

licensees on a mixed-use basis for the purpose of facilitating

the prompt implementation of new technologies or services

and for other purposes; and

‘‘(2) the Commission shall make any allocation and licensing decisions with respect to such frequencies in a timely manner and in no event later than the date required by section

7 of the 1934 Act.’’.

(b) CONFORMING AMENDMENT TO ENSURE COLLECTION OF FCC

FEES.—Section 104 of the National Telecommunications and

Information Administration Organization Act (47 U.S.C. 903) is

amended by adding at the end the following new subsection:

‘‘(e) PROOF OF COMPLIANCE WITH FCC LICENSING REQUIREMENTS.—

‘‘(1) AMENDMENT TO MANUAL REQUIRED.—Within 90 days

after the date of enactment of this subsection, the Secretary

and the NTIA shall amend the spectrum management document described in subsection (a) to require that—

‘‘(A) no person or entity (other than an agency or

instrumentality of the United States) shall be permitted,

after 1 year after such date of enactment, to operate a

radio station utilizing a frequency that is authorized for

the use of government stations pursuant to section

103(b)(2)(A) of this Act for any non-government application

unless such person or entity has submitted to the NTIA

proof, in a form prescribed by such manual, that such

person or entity has obtained a license from the Commission; and

‘‘(B) no person or entity (other than an agency or instrumentality of the United States) shall be permitted,

after 1 year after such date of enactment, to utilize a

radio station belonging to the United States for any nongovernment application unless such person or entity has

submitted to the NTIA proof, in a form prescribed by

such manual, that such person or entity has obtained a

license from the Commission.

‘‘(2) RETENTION OF FORMS.—The NTIA shall maintain on

file the proofs submitted under paragraph (1), or facsimiles

thereof.

‘‘(3) CERTIFICATION.—Within 1 year after the date of enactment of this subsection, the Secretary and the NTIA shall

certify to the Committee on Energy and Commerce of the

House of Representatives and the Committee on Commerce,

Science, and Transportation of the Senate that—

‘‘(A) the amendments required by paragraph (1) have

been accomplished; and

‘‘(B) the requirements of subparagraphs (A) and (B)

of such paragraph are being enforced.’’.

SEC. 6002. AUTHORITY TO USE COMPETITIVE BIDDING.

(a) USE OF COMPETITIVE BIDDING.—Section 309 of the Communications Act of 1934 (47 U.S.C. 309) is amended by adding at

the end the following new subsection:
H. R. 2264—77

‘‘(j) USE OF COMPETITIVE BIDDING.—

‘‘(1) GENERAL AUTHORITY.—If mutually exclusive applications are accepted for filing for any initial license or construction permit which will involve a use of the electromagnetic

spectrum described in paragraph (2), then the Commission

shall have the authority, subject to paragraph (10), to grant

such license or permit to a qualified applicant through the

use of a system of competitive bidding that meets the requirements of this subsection.

‘‘(2) USES TO WHICH BIDDING MAY APPLY.—A use of the

electromagnetic spectrum is described in this paragraph if the

Commission determines that—

‘‘(A) the principal use of such spectrum will involve,

or is reasonably likely to involve, the licensee receiving

compensation from subscribers in return for which the

licensee—

‘‘(i) enables those subscribers to receive communications signals that are transmitted utilizing frequencies on which the licensee is licensed to operate;

or

‘‘(ii) enables those subscribers to transmit directly

communications signals utilizing frequencies on which

the licensee is licensed to operate; and

‘‘(B) a system of competitive bidding will promote the

objectives described in paragraph (3).

‘‘(3) DESIGN OF SYSTEMS OF COMPETITIVE BIDDING.—For

each class of licenses or permits that the Commission grants

through the use of a competitive bidding system, the Commission shall, by regulation, establish a competitive bidding methodology. The Commission shall seek to design and test multiple

alternative methodologies under appropriate circumstances. In

identifying classes of licenses and permits to be issued by

competitive bidding, in specifying eligibility and other

characteristics of such licenses and permits, and in designing

the methodologies for use under this subsection, the Commission shall include safeguards to protect the public interest

in the use of the spectrum and shall seek to promote the

purposes specified in section 1 of this Act and the following

objectives:

‘‘(A) the development and rapid deployment of new

technologies, products, and services for the benefit of the

public, including those residing in rural areas, without

administrative or judicial delays;

‘‘(B) promoting economic opportunity and competition

and ensuring that new and innovative technologies are

readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses

among a wide variety of applicants, including small

businesses, rural telephone companies, and businesses

owned by members of minority groups and women;

‘‘(C) recovery for the public of a portion of the value

of the public spectrum resource made available for commercial use and avoidance of unjust enrichment through the

methods employed to award uses of that resource; and

‘‘(D) efficient and intensive use of the electromagnetic

spectrum.
H. R. 2264—78

‘‘(4) CONTENTS OF REGULATIONS.—In prescribing regulations pursuant to paragraph (3), the Commission shall—

‘‘(A) consider alternative payment schedules and methods of calculation, including lump sums or guaranteed

installment payments, with or without royalty payments,

or other schedules or methods that promote the objectives

described in paragraph (3)(B), and combinations of such

schedules and methods;

‘‘(B) include performance requirements, such as appropriate deadlines and penalties for performance failures,

to ensure prompt delivery of service to rural areas, to

prevent stockpiling or warehousing of spectrum by licensees

or permittees, and to promote investment in and rapid

deployment of new technologies and services;

‘‘(C) consistent with the public interest, convenience,

and necessity, the purposes of this Act, and the characteristics of the proposed service, prescribe area designations

and bandwidth assignments that promote (i) an equitable

distribution of licenses and services among geographic

areas, (ii) economic opportunity for a wide variety of

applicants, including small businesses, rural telephone

companies, and businesses owned by members of minority

groups and women, and (iii) investment in and rapid

deployment of new technologies and services;

‘‘(D) ensure that small businesses, rural telephone

companies, and businesses owned by members of minority

groups and women are given the opportunity to participate

in the provision of spectrum-based services, and, for such

purposes, consider the use of tax certificates, bidding preferences, and other procedures; and

‘‘(E) require such transfer disclosures and

antitrafficking restrictions and payment schedules as may

be necessary to prevent unjust enrichment as a result

of the methods employed to issue licenses and permits.

‘‘(5) BIDDER AND LICENSEE QUALIFICATION.—No person shall

be permitted to participate in a system of competitive bidding

pursuant to this subsection unless such bidder submits such

information and assurances as the Commission may require

to demonstrate that such bidder’s application is acceptable for

filing. No license shall be granted to an applicant selected

pursuant to this subsection unless the Commission determines

that the applicant is qualified pursuant to subsection (a) and

sections 308(b) and 310. Consistent with the objectives

described in paragraph (3), the Commission shall, by regulation,

prescribe expedited procedures consistent with the procedures

authorized by subsection (i)(2) for the resolution of any substantial and material issues of fact concerning qualifications.

‘‘(6) RULES OF CONSTRUCTION.—Nothing in this subsection,

or in the use of competitive bidding, shall—

‘‘(A) alter spectrum allocation criteria and procedures

established by the other provisions of this Act;

‘‘(B) limit or otherwise affect the requirements of subsection (h) of this section, section 301, 304, 307, 310, or

706, or any other provision of this Act (other than subsections (d)(2) and (e) of this section);
H. R. 2264—79

‘‘(C) diminish the authority of the Commission under

the other provisions of this Act to regulate or reclaim

spectrum licenses;

‘‘(D) be construed to convey any rights, including any

expectation of renewal of a license, that differ from the

rights that apply to other licenses within the same service

that were not issued pursuant to this subsection;

‘‘(E) be construed to relieve the Commission of the

obligation in the public interest to continue to use engineering solutions, negotiation, threshold qualifications, service

regulations, and other means in order to avoid mutual

exclusivity in application and licensing proceedings;

‘‘(F) be construed to prohibit the Commission from

issuing nationwide, regional, or local licenses or permits;

‘‘(G) be construed to prevent the Commission from

awarding licenses to those persons who make significant

contributions to the development of a new telecommunications service or technology; or

‘‘(H) be construed to relieve any applicant for a license

or permit of the obligation to pay charges imposed pursuant

to section 8 of this Act.

‘‘(7) CONSIDERATION OF REVENUES IN PUBLIC INTEREST

DETERMINATIONS.—

‘‘(A) CONSIDERATION PROHIBITED.—In making a decision pursuant to section 303(c) to assign a band of frequencies to a use for which licenses or permits will be

issued pursuant to this subsection, and in prescribing regulations pursuant to paragraph (4)(C) of this subsection,

the Commission may not base a finding of public interest,

convenience, and necessity on the expectation of Federal

revenues from the use of a system of competitive bidding

under this subsection.

‘‘(B) CONSIDERATION LIMITED.—In prescribing regula- tions pursuant to paragraph (4)(A) of this subsection, the

Commission may not base a finding of public interest,

convenience, and necessity solely or predominantly on the

expectation of Federal revenues from the use of a system

of competitive bidding under this subsection. ‘‘(C) CONSIDERATION OF DEMAND FOR SPECTRUM NOT

AFFECTED.—Nothing in this paragraph shall be construed

to prevent the Commission from continuing to consider

consumer demand for spectrum-based services.

‘‘(8) TREATMENT OF REVENUES.— ‘‘(A) GENERAL RULE.—Except as provided in subparagraph (B), all proceeds from the use of a competitive bidding

system under this subsection shall be deposited in the

Treasury in accordance with chapter 33 of title 31, United

States Code.

‘‘(B) RETENTION OF REVENUES.—Notwithstanding

subparagraph (A), the salaries and expenses account of

the Commission shall retain as an offsetting collection such

sums as may be necessary from such proceeds for the

costs of developing and implementing the program required

by this subsection. Such offsetting collections shall be available for obligation subject to the terms and conditions

of the receiving appropriations account, and shall be deposited in such accounts on a quarterly basis. Any funds
H. R. 2264—80

appropriated to the Commission for fiscal years 1994

through 1998 for the purpose of assigning licenses using

random selection under subsection (i) shall be used by

the Commission to implement this subsection.

‘‘(9) USE OF FORMER GOVERNMENT SPECTRUM.—The

Commission shall, not later than 5 years after the date of

enactment of this subsection, issue licenses and permits pursuant to this subsection for the use of bands of frequencies that—

‘‘(A) in the aggregate span not less than 10 megahertz;

and

‘‘(B) have been reassigned from Government use pursuant to part B of the National Telecommunications and

Information Administration Organization Act.

‘‘(10) AUTHORITY CONTINGENT ON AVAILABILITY OF ADDITIONAL SPECTRUM.—

‘‘(A) INITIAL CONDITIONS.—The Commission’s authority

to issue licenses or permits under this subsection shall

not take effect unless—

‘‘(i) the Secretary of Commerce has submitted to

the Commission the report required by section

113(d)(1) of the National Telecommunications and

Information Administration Organization Act;

‘‘(ii) such report recommends for immediate

reallocation bands of frequencies that, in the aggregate,

span not less than 50 megahertz;

‘‘(iii) such bands of frequencies meet the criteria

required by section 113(a) of such Act; and

‘‘(iv) the Commission has completed the rulemaking required by section 332(c)(1)(D) of this Act.

‘‘(B) SUBSEQUENT CONDITIONS.—The Commission’s

authority to issue licenses or permits under this subsection

on and after 2 years after the date of the enactment of

this subsection shall cease to be effective if—

‘‘(i) the Secretary of Commerce has failed to submit

the report required by section 113(a) of the National

Telecommunications and Information Administration

Organization Act;

‘‘(ii) the President has failed to withdraw and limit

assignments of frequencies as required by paragraphs

(1) and (2) of section 114(a) of such Act;

‘‘(iii) the Commission has failed to issue the regulations required by section 115(a) of such Act;

‘‘(iv) the Commission has failed to complete and

submit to Congress, not later than 18 months after

the date of enactment of this subsection, a study of

current and future spectrum needs of State and local

government public safety agencies through the year

2010, and a specific plan to ensure that adequate frequencies are made available to public safety licensees;

or

‘‘(v) the Commission has failed under section

332(c)(3) to grant or deny within the time required

by such section any petition that a State has filed

within 90 days after the date of enactment of this

subsection;

until such failure has been corrected.
H. R. 2264—81

‘‘(11) TERMINATION.—The authority of the Commission to

grant a license or permit under this subsection shall expire

September 30, 1998.

‘‘(12) EVALUATION.—Not later than September 30, 1997,

the Commission shall conduct a public inquiry and submit

to the Congress a report—

‘‘(A) containing a statement of the revenues obtained,

and a projection of the future revenues, from the use of

competitive bidding systems under this subsection;

‘‘(B) describing the methodologies established by the

Commission pursuant to paragraphs (3) and (4);

‘‘(C) comparing the relative advantages and disadvantages of such methodologies in terms of attaining the objectives described in such paragraphs;

‘‘(D) evaluating whether and to what extent—

‘‘(i) competitive bidding significantly improved the

efficiency and effectiveness of the process for granting

radio spectrum licenses;

‘‘(ii) competitive bidding facilitated the introduction

of new spectrum-based technologies and the entry of

new companies into the telecommunications market;

‘‘(iii) competitive bidding methodologies have

secured prompt delivery of service to rural areas and

have adequately addressed the needs of rural spectrum

users; and

‘‘(iv) small businesses, rural telephone companies,

and businesses owned by members of minority groups

and women were able to participate successfully in

the competitive bidding process; and

‘‘(E) recommending any statutory changes that are

needed to improve the competitive bidding process.’’.

(b) CONFORMING AMENDMENTS.—

(1) LIMITATIONS ON LOTTERIES.—Section 309 of the Communications Act of 1934 (47 U.S.C. 309) is further amended—

(A) by striking subsection (i)(1) and inserting the following:

‘‘(i) RANDOM SELECTION.—

‘‘(1) GENERAL AUTHORITY.—If—

‘‘(A) there is more than one application for any initial

license or construction permit which will involve a use

of the electromagnetic spectrum; and

‘‘(B) the Commission has determined that the use is

not described in subsection (j)(2)(A);

then the Commission shall have the authority to grant such

license or permit to a qualified applicant through the use of

a system of random selection.’’; and

(B) in paragraph (4), by adding at the end the following

new subparagraph:

‘‘(C) Not later than 180 days after the date of enactment of

this subparagraph, the Commission shall prescribe such transfer

disclosures and antitrafficking restrictions and payment schedules

as are necessary to prevent the unjust enrichment of recipients

of licenses or permits as a result of the methods employed to

issue licenses under this subsection.’’.

(2) REGULATORY TREATMENT TO ENHANCE AUCTION VALUE

OF SPECTRUM LICENSES.—
H. R. 2264—82

(A) AMENDMENT.—Section 332 of the Communications

Act of 1934 (47 U.S.C. 332) is amended—

(i) by striking ‘‘PRIVATE LAND’’ from the heading

of the section;

(ii) by striking ‘‘land’’ each place it appears in

subsections (a) and (b); and

(iii) by striking subsection (c) and inserting the

following:

‘‘(c) REGULATORY TREATMENT OF MOBILE SERVICES.—

‘‘(1) COMMON CARRIER TREATMENT OF COMMERCIAL MOBILE

SERVICES.—(A) A person engaged in the provision of a service

that is a commercial mobile service shall, insofar as such person

is so engaged, be treated as a common carrier for purposes

of this Act, except for such provisions of title II as the Commission may specify by regulation as inapplicable to that service

or person. In prescribing or amending any such regulation,

the Commission may not specify any provision of section 201,

202, or 208, and may specify any other provision only if the

Commission determines that—

‘‘(i) enforcement of such provision is not necessary in

order to ensure that the charges, practices, classifications,

or regulations for or in connection with that service are

just and reasonable and are not unjustly or unreasonably

discriminatory;

‘‘(ii) enforcement of such provision is not necessary

for the protection of consumers; and

‘‘(iii) specifying such provision is consistent with the

public interest.

‘‘(B) Upon reasonable request of any person providing

commercial mobile service, the Commission shall order a common carrier to establish physical connections with such service

pursuant to the provisions of section 201 of this Act. Except

to the extent that the Commission is required to respond to

such a request, this subparagraph shall not be construed as

a limitation or expansion of the Commission’s authority to

order interconnection pursuant to this Act.

‘‘(C) The Commission shall review competitive market

conditions with respect to commercial mobile services and shall

include in its annual report an analysis of those conditions.

Such analysis shall include an identification of the number

of competitors in various commercial mobile services, an analysis of whether or not there is effective competition, an analysis

of whether any of such competitors have a dominant share

of the market for such services, and a statement of whether

additional providers or classes of providers in those services

would be likely to enhance competition. As a part of making

a determination with respect to the public interest under

subparagraph (A)(iii), the Commission shall consider whether

the proposed regulation (or amendment thereof) will promote

competitive market conditions, including the extent to which

such regulation (or amendment) will enhance competition

among providers of commercial mobile services. If the Commission determines that such regulation (or amendment) will

promote competition among providers of commercial mobile

services, such determination may be the basis for a Commission

finding that such regulation (or amendment) is in the public

interest.
H. R. 2264—83

‘‘(D) The Commission shall, not later than 180 days after

the date of enactment of this subparagraph, complete a rulemaking required to implement this paragraph with respect

to the licensing of personal communications services, including

making any determinations required by subparagraph (C).

‘‘(2) NON-COMMON CARRIER TREATMENT OF PRIVATE MOBILE

SERVICES.—A person engaged in the provision of a service that

is a private mobile service shall not, insofar as such person

is so engaged, be treated as a common carrier for any purpose

under this Act. A common carrier (other than a person that

was treated as a provider of a private land mobile service

prior to the enactment of the Omnibus Budget Reconciliation

Act of 1993) shall not provide any dispatch service on any

frequency allocated for common carrier service, except to the

extent such dispatch service is provided on stations licensed

in the domestic public land mobile radio service before January

1, 1982. The Commission may by regulation terminate, in whole

or in part, the prohibition contained in the preceding sentence

if the Commission determines that such termination will serve

the public interest.

‘‘(3) STATE PREEMPTION.—(A) Notwithstanding sections 2(b)

and 221(b), no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service, except that

this paragraph shall not prohibit a State from regulating the

other terms and conditions of commercial mobile services. Nothing in this subparagraph shall exempt providers of commercial

mobile services (where such services are a substitute for land

line telephone exchange service for a substantial portion of

the communications within such State) from requirements

imposed by a State commission on all providers of telecommunications services necessary to ensure the universal availability

of telecommunications service at affordable rates. Notwithstanding the first sentence of this subparagraph, a State may

petition the Commission for authority to regulate the rates

for any commercial mobile service and the Commission shall

grant such petition if such State demonstrates that— ‘‘(i) market conditions with respect to such services

fail to protect subscribers adequately from unjust and

unreasonable rates or rates that are unjustly or unreasonably discriminatory; or ‘‘(ii) such market conditions exist and such service

is a replacement for land line telephone exchange service

for a substantial portion of the telephone land line exchange

service within such State.

The Commission shall provide reasonable opportunity for public

comment in response to such petition, and shall, within 9

months after the date of its submission, grant or deny such

petition. If the Commission grants such petition, the Commission shall authorize the State to exercise under State law

such authority over rates, for such periods of time, as the

Commission deems necessary to ensure that such rates are

just and reasonable and not unjustly or unreasonably discriminatory.

‘‘(B) If a State has in effect on June 1, 1993, any regulation

concerning the rates for any commercial mobile service offered

in such State on such date, such State may, no later than
H. R. 2264—84

1 year after the date of enactment of the Omnibus Budget

Reconciliation Act of 1993, petition the Commission requesting

that the State be authorized to continue exercising authority

over such rates. If a State files such a petition, the State’s

existing regulation shall, notwithstanding subparagraph (A),

remain in effect until the Commission completes all action

(including any reconsideration) on such petition. The Commission shall review such petition in accordance with the procedures established in such subparagraph, shall complete all

action (including any reconsideration) within 12 months after

such petition is filed, and shall grant such petition if the

State satisfies the showing required under subparagraph (A)(i)

or (A)(ii). If the Commission grants such petition, the Commission shall authorize the State to exercise under State law

such authority over rates, for such period of time, as the

Commission deems necessary to ensure that such rates are

just and reasonable and not unjustly or unreasonably discriminatory. After a reasonable period of time, as determined by

the Commission, has elapsed from the issuance of an order

under subparagraph (A) or this subparagraph, any interested

party may petition the Commission for an order that the exercise of authority by a State pursuant to such subparagraph

is no longer necessary to ensure that the rates for commercial

mobile services are just and reasonable and not unjustly or

unreasonably discriminatory. The Commission shall provide

reasonable opportunity for public comment in response to such

petition, and shall, within 9 months after the date of its submission, grant or deny such petition in whole or in part. ‘‘(4) REGULATORY TREATMENT OF COMMUNICATIONS SATELLITE CORPORATION.—Nothing in this subsection shall be construed to alter or affect the regulatory treatment required by

title IV of the Communications Satellite Act of 1962 of the

corporation authorized by title III of such Act. ‘‘(5) SPACE SEGMENT CAPACITY.—Nothing in this section

shall prohibit the Commission from continuing to determine

whether the provision of space segment capacity by satellite

systems to providers of commercial mobile services shall be

treated as common carriage. ‘‘(6) FOREIGN OWNERSHIP.—The Commission, upon a petition for waiver filed within 6 months after the date of enactment

of the Omnibus Budget Reconciliation Act of 1993, may waive

the application of section 310(b) to any foreign ownership that

lawfully existed before May 24, 1993, of any provider of a

private land mobile service that will be treated as a common

carrier as a result of the enactment of the Omnibus Budget

Reconciliation Act of 1993, but only upon the following conditions:

‘‘(A) The extent of foreign ownership interest shall

not be increased above the extent which existed on May

24, 1993.

‘‘(B) Such waiver shall not permit the subsequent

transfer of ownership to any other person in violation of

section 310(b).

‘‘(d) DEFINITIONS.—For purposes of this section—

‘‘(1) the term ‘commercial mobile service’ means any mobile

service (as defined in section 3(n)) that is provided for profit

and makes interconnected service available (A) to the public
H. R. 2264—85

or (B) to such classes of eligible users as to be effectively

available to a substantial portion of the public, as specified

by regulation by the Commission;

‘‘(2) the term ‘interconnected service’ means service that

is interconnected with the public switched network (as such

terms are defined by regulation by the Commission) or service

for which a request for interconnection is pending pursuant

to subsection (c)(1)(B); and

‘‘(3) the term ‘private mobile service’ means any mobile

service (as defined in section 3(n)) that is not a commercial

mobile service or the functional equivalent of a commercial

mobile service, as specified by regulation by the Commission.’’.

(B) ADDITIONAL CONFORMING AMENDMENTS.—(i) Section 2(b) of the Communications Act of 1934 (47 U.S.C.

152(b)) is amended by inserting ‘‘and section 332,’’ after

‘‘inclusive,’’.

(ii) Section 3 of the Communications Act of 1934 (47

U.S.C. 153) is amended—

(I) in subsection (n) by inserting ‘‘(1)’’ after ‘‘and

includes’’, and by inserting before the period at the

end the following: ‘‘, (2) a mobile service which provides

a regularly interacting group of base, mobile, portable,

and associated control and relay stations (whether

licensed on an individual, cooperative, or multiple

basis) for private one-way or two-way land mobile radio

communications by eligible users over designated areas

of operation, and (3) any service for which a license

is required in a personal communications service established pursuant to the proceeding entitled ‘Amendment

to the Commission’s Rules to Establish New Personal

Communications Services’ (GEN Docket No. 90–314;

ET Docket No. 92–100), or any successor proceeding’’;

and

(II) by striking subsection (gg). (c) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section are effective on the date

of enactment of this Act.

(2) EFFECTIVE DATES OF MOBILE SERVICE AMENDMENTS.— The amendments made by subsection (b)(2) shall be effective

on the date of enactment of this Act, except that—

(A) section 332(c)(3)(A) of the Communications Act of

1934, as amended by such subsection, shall take effect

1 year after such date of enactment; and (B) any private land mobile service provided by any

person before such date of enactment, and any paging

service utilizing frequencies allocated as of January 1, 1993,

for private land mobile services, shall, except for purposes

of section 332(c)(6) of such Act, be treated as a private

mobile service until 3 years after such date of enactment.

(d) DEADLINES FOR COMMISSION ACTION.—

(1) GENERAL RULEMAKING.—The Federal Communications

Commission shall prescribe regulations to implement section

309(j) of the Communications Act of 1934 (as added by this

section) within 210 days after the date of enactment of this

Act.

(2) PCS ORDERS AND LICENSING.—The Commission shall—
H. R. 2264—86

(A) within 180 days after such date of enactment,

issue a final report and order (i) in the matter entitled

‘‘Redevelopment of Spectrum to Encourage Innovation in

the Use of New Telecommunications Technologies’’ (ET

Docket No. 92–9); and (ii) in the matter entitled ‘‘Amendment of the Commission’s Rules to Establish New Personal

Communications Services’’ (GEN Docket No. 90–314; ET

Docket No. 92–100); and

(B) within 270 days after such date of enactment,

commence issuing licenses and permits in the personal

communications service.

(3) TRANSITIONAL RULEMAKING FOR MOBILE SERVICE PROVIDERS.—Within 1 year after the date of enactment of this Act,

the Federal Communications Commission—

(A) shall issue such modifications or terminations of

the regulations applicable (before the date of enactment

of this Act) to private land mobile services as are necessary

to implement the amendments made by subsection (b)(2);

(B) in the regulations that will, after such date of

enactment, apply to a service that was a private land

mobile service and that becomes a commercial mobile service (as a consequence of such amendments), shall make

such other modifications or terminations as may be necessary and practical to assure that licensees in such service

are subjected to technical requirements that are comparable to the technical requirements that apply to licensees that are providers of substantially similar common

carrier services;

(C) shall issue such other regulations as are necessary to implement the amendments made by subsection (b)(2);

and

(D) shall include, in such regulations, modifications,

and terminations, such provisions as are necessary to provide for an orderly transition. (e) SPECIAL RULE.—The Federal Communications Commission

shall not issue any license or permit pursuant to section 309(i)

of the Communications Act of 1934 (47 U.S.C. 309(i)) after the

date of enactment of this Act unless—

(1) the Commission has made the determination required

by paragraph (1)(B) of such section (as added by this section);

or

(2) one or more applications for such license were accepted

for filing by the Commission before July 26, 1993.

SEC. 6003. ADDITIONAL COMMUNICATIONS FEES.

(a) REGULATORY FEES.—

(1) AMENDMENT.—Title I of the Communications Act of

1934 is amended by inserting after section 8 the following

new section:

‘‘SEC. 9. REGULATORY FEES.

‘‘(a) GENERAL AUTHORITY.—The Commission, in accordance

with this section, shall assess and collect regulatory fees to recover

the costs of the following regulatory activities of the Commission:

enforcement activities, policy and rulemaking activities, user

information services, and international activities.

‘‘(b) ESTABLISHMENT AND ADJUSTMENT OF REGULATORY FEES.—
H. R. 2264—87

‘‘(1) IN GENERAL.—The fees assessed under subsection (a)

shall—

‘‘(A) be derived by determining the full-time equivalent

number of employees performing the activities described

in subsection (a) within the Private Radio Bureau, Mass

Media Bureau, Common Carrier Bureau, and other offices

of the Commission, adjusted to take into account factors

that are reasonably related to the benefits provided to

the payor of the fee by the Commission’s activities, including such factors as service area coverage, shared use versus

exclusive use, and other factors that the Commission determines are necessary in the public interest;

‘‘(B) be established at amounts that will result in collection, during each fiscal year, of an amount that can reasonably be expected to equal the amount appropriated for

such fiscal year for the performance of the activities

described in subsection (a); and

‘‘(C) until adjusted or amended by the Commission

pursuant to paragraph (2) or (3), be the fees established

by the Schedule of Regulatory Fees in subsection (g).

‘‘(2) MANDATORY ADJUSTMENT OF SCHEDULE.—For any fiscal

year after fiscal year 1994, the Commission shall, by rule,

revise the Schedule of Regulatory Fees by proportionate

increases or decreases to reflect, in accordance with paragraph

(1)(B), changes in the amount appropriated for the performance

of the activities described in subsection (a) for such fiscal year.

Such proportionate increases or decreases shall—

‘‘(A) be adjusted to reflect, within the overall amounts

described in appropriations Acts under the authority of

paragraph (1)(A), unexpected increases or decreases in the

number of licensees or units subject to payment of such

fees; and

‘‘(B) be established at amounts that will result in collection of an aggregate amount of fees pursuant to this section

that can reasonably be expected to equal the aggregate

amount of fees that are required to be collected by appropriations Acts pursuant to paragraph (1)(B).

Increases or decreases in fees made by adjustments pursuant

to this paragraph shall not be subject to judicial review. In

making adjustments pursuant to this paragraph the Commission may round such fees to the nearest $5 in the case of

fees under $1,000, or to the nearest $25 in the case of fees

of $1,000 or more.

‘‘(3) PERMITTED AMENDMENTS.—In addition to the adjustments required by paragraph (2), the Commission shall, by

regulation, amend the Schedule of Regulatory Fees if the

Commission determines that the Schedule requires amendment

to comply with the requirements of paragraph (1)(A). In making

such amendments, the Commission shall add, delete, or

reclassify services in the Schedule to reflect additions, deletions,

or changes in the nature of its services as a consequence of

Commission rulemaking proceedings or changes in law.

Increases or decreases in fees made by amendments pursuant

to this paragraph shall not be subject to judicial review.

‘‘(4) NOTICE TO CONGRESS.—The Commission shall—
H. R. 2264—88

‘‘(A) transmit to the Congress notification of any adjustment made pursuant to paragraph (2) immediately upon

the adoption of such adjustment; and

‘‘(B) transmit to the Congress notification of any

amendment made pursuant to paragraph (3) not later than

90 days before the effective date of such amendment.

‘‘(c) ENFORCEMENT.—

‘‘(1) PENALTIES FOR LATE PAYMENT.—The Commission shall

prescribe by regulation an additional charge which shall be

assessed as a penalty for late payment of fees required by

subsection (a) of this section. Such penalty shall be 25 percent

of the amount of the fee which was not paid in a timely

manner.

‘‘(2) DISMISSAL OF APPLICATIONS FOR FILINGS.—The

Commission may dismiss any application or other filing for

failure to pay in a timely manner any fee or penalty under

this section.

‘‘(3) REVOCATIONS.—In addition to or in lieu of the penalties

and dismissals authorized by paragraphs (1) and (2), the

Commission may revoke any instrument of authorization held

by any entity that has failed to make payment of a regulatory

fee assessed pursuant to this section. Such revocation action

may be taken by the Commission after notice of the Commission’s intent to take such action is sent to the licensee by

registered mail, return receipt requested, at the licensee’s last

known address. The notice will provide the licensee at least

30 days to either pay the fee or show cause why the fee

does not apply to the licensee or should otherwise be waived

or payment deferred. A hearing is not required under this

subsection unless the licensee’s response presents a substantial

and material question of fact. In any case where a hearing

is conducted pursuant to this section, the hearing shall be

based on written evidence only, and the burden of proceeding

with the introduction of evidence and the burden of proof shall

be on the licensee. Unless the licensee substantially prevails

in the hearing, the Commission may assess the licensee for

the costs of such hearing. Any Commission order adopted pursuant to this subsection shall determine the amount due, if any,

and provide the licensee with at least 30 days to pay that

amount or have its authorization revoked. No order of revocation under this subsection shall become final until the licensee

has exhausted its right to judicial review of such order under

section 402(b)(5) of this title.

‘‘(d) WAIVER, REDUCTION, AND DEFERMENT.—The Commission

may waive, reduce, or defer payment of a fee in any specific instance

for good cause shown, where such action would promote the public

interest.

‘‘(e) DEPOSIT OF COLLECTIONS.—Moneys received from fees

established under this section shall be deposited as an offsetting

collection in, and credited to, the account providing appropriations

to carry out the functions of the Commission.

‘‘(f) REGULATIONS.—

‘‘(1) IN GENERAL.—The Commission shall prescribe appropriate rules and regulations to carry out the provisions of

this section. Such rules and regulations shall permit payment

by installments in the case of fees in large amounts, and

in the case of fees in small amounts, shall require the payment
H. R. 2264—89

of the fee in advance for a number of years not to exceed

the term of the license held by the payor.

‘‘(g) SCHEDULE.—Until amended by the Commission pursuant

to subsection (b), the Schedule of Regulatory Fees which the Federal

Communications Commission shall, subject to subsection (a)(2),

assess and collect shall be as follows:

‘‘SCHEDULE OF REGULATORY FEES

Bureau/Category Annual Regulatory Fee

Private Radio Bureau

Exclusive use services (per license) Land Mobile (above 470 MHz, Base Station and SMRS) (47

C.F.R. Part 90) ............................................................................. $16

Microwave (47 C.F.R. Part 94) ....................................................... 16

Interactive Video Data Service (47 C.F.R. Part ) .......................... 16

Shared use services (per license unless otherwise noted) ................ 7

Amateur vanity call-signs ................................................................... 7

Mass Media Bureau (per license) AM radio (47 C.F.R. Part 73)

Class D Daytime .............................................................................. 250

Class A Fulltime .............................................................................. 900

Class B Fulltime .............................................................................. 500

Class C Fulltime .............................................................................. 200

Construction permits ....................................................................... 100

FM radio (47 C.F.R. Part 73)

Classes C, C1, C2, B ........................................................................ 900

Classes A, B1, C3 ............................................................................. 600

Construction permits ....................................................................... 500

TV (47 C.F.R. Part 73)

VHF Commercial

Markets 1 thru 10 ........................................................................ 18,000

Markets 11 thru 25 ...................................................................... 16,000

Markets 26 thru 50 ...................................................................... 12,000

Markets 51 thru 100 .................................................................... 8,000

Remaining Markets ..................................................................... 5,000

Construction permits ................................................................... 4,000

UHF Commercial

Markets 1 thru 10 ........................................................................ 14,400

Markets 11 thru 25 ...................................................................... 12,800

Markets 26 thru 50 ...................................................................... 9,600

Markets 51 thru 100 .................................................................... 6,400

Remaining Markets ..................................................................... 4,000

Construction permits ................................................................... 3,200

Low Power TV, TV Translator, and TV Booster (47 C.F.R. Part

74) ..................................................................................................... 135

Broadcast Auxiliary (47 C.F.R. Part 74) ........................................... 25

International (HF) Broadcast (47 C.F.R. Part 73) ............................ 200

Cable Antenna Relay Service (47 C.F.R. Part 78) ............................ 220

Cable Television System (per 1,000 subscribers) (47 C.F.R. Part

76) ..................................................................................................... 370

Common Carrier Bureau

Radio Facilities

Cellular Radio (per 1,000 subscribers) (47 C.F.R. Part 22) .......... 60

Personal Communications (per 1,000 subscribers) (47 C.F.R.) .... 60

Space Station (per operational station in geosynchronous orbit)

(47 C.F.R. Part 25) ....................................................................... 65,000

Space Station (per system in low-earth orbit) (47 C.F.R. Part

25) .................................................................................................. 90,000

Public Mobile (per 1,000 subscribers) (47 C.F.R. Part 22) ........... 60

Domestic Public Fixed (per call sign) (47 C.F.R. Part 21) ........... 55

International Public Fixed (per call sign) (47 C.F.R. Part 23) ..... 110

Earth Stations (47 C.F.R. Part 25)

VSAT and equivalent C-Band antennas (per 100 antennas) ....... 6

Mobile satellite earth stations (per 100 antennas) ....................... 6

Earth station antennas

Less than 9 meters (per 100 antennas) ...................................... 6

9 Meters or more
H. R. 2264—90

‘‘SCHEDULE OF REGULATORY FEES—Continued

Bureau/Category Annual Regulatory Fee

Transmit/Receive and Transmit Only (per meter) ................ 85

Receive only (per meter) .......................................................... 55

Carriers

Inter-Exchange Carrier (per 1,000 presubscribed access lines) ...... 60

Local Exchange Carrier (per 1,000 access lines) .............................. 60

Competitive access provider (per 1,000 subscribers) ........................ 60

International circuits (per 100 active 64KB circuit or equivalent) . 220

‘‘(h) EXCEPTIONS.—The charges established under this section

shall not be applicable to (1) governmental entities or nonprofit

entities; or (2) to amateur radio operator licenses under part 97

of the Commission’s regulations (47 C.F.R. Part 97).

‘‘(i) ACCOUNTING SYSTEM.—The Commission shall develop

accounting systems necessary to making the adjustments authorized

by subsection (b)(3). In the Commission’s annual report, the

Commission shall prepare an analysis of its progress in developing

such systems and shall afford interested persons the opportunity

to submit comments concerning the allocation of the costs of

performing the functions described in subsection (a) among the

services in the Schedule.’’.

(2) CONFORMING AMENDMENTS.—Section 8 of the Communications Act of 1934 (47 U.S.C. 158) is amended—

(A) by striking the heading of such section and inserting ‘‘APPLICATION FEES’’;

(B) by striking ‘‘charges’’ each place it appears and

inserting ‘‘application fees’’; (C) by striking ‘‘charge’’ each place it appears in sub- section (c) and inserting ‘‘application fee’’; (D) by striking out ‘‘Schedule of Charges’’ each place

it appears and inserting ‘‘Schedule of Application Fees’’;

and

(E) in the schedule contained in subsection (g)— (i) by striking ‘‘SCHEDULE OF CHARGES’’ and inserting ‘‘SCHEDULE OF APPLICATION FEES’’;

(ii) by striking ‘‘charge’’ and ‘‘Charges’’ each place

they appear and inserting ‘‘application fee’’ and

‘‘Application fees’’, respectively; and

(iii) by striking ‘‘CHARGES’’ and inserting ‘‘APPLICATION FEES’’.

(b) USE OF REGULATORY FEES.—Section 6 of the Communications Act of 1934 (47 U.S.C. 156) is amended by adding at the

end the following new subsection:

‘‘(d) Of the sum appropriated in any fiscal year under this

section, a portion, in an amount determined under section 9(b),

shall be derived from fees authorized by section 9.’’.

TITLE VII—NUCLEAR REGULATORY

COMMISSION PROVISIONS

SEC. 7001. NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.

Section 6101(a)(3) of the Omnibus Budget Reconciliation Act of 1990 (42 U.S.C. 2214(a)(3)) is amended by striking ‘‘September

30, 1995’’ and inserting ‘‘September 30, 1998’’.
H. R. 2264—91

TITLE VIII—PATENT AND TRADEMARK

FEES

SEC. 8001. PATENT AND TRADEMARK FEES.

Section 10101 of the Omnibus Budget Reconciliation Act of

1990 (35 U.S.C. 41 note) is amended—

(1) in subsection (a) by striking ‘‘1995’’ and inserting ‘‘1998’’;

(2) in subsection (b)(2) by striking ‘‘1995’’ and inserting

‘‘1998’’; and

(3) in subsection (c)—

(A) by striking ‘‘through 1995’’ and inserting ‘‘through

1998’’; and

(B) by adding at the end the following:

‘‘(6) $111,000,000 in fiscal year 1996.

‘‘(7) $115,000,000 in fiscal year 1997.

‘‘(8) $119,000,000 in fiscal year 1998.’’.

TITLE IX—MERCHANT MARINE

PROVISIONS

SEC. 9001. EXTENSION OF VESSEL TONNAGE DUTIES.

(a) EXTENSION OF DUTIES.—Section 36 of the Act of August 5, 1909 (36 Stat. 111; 46 App. U.S.C. 121), is amended by— (1) striking ‘‘and 1995,’’ each place it appears and inserting

‘‘1995, 1996, 1997, 1998,’’;

(2) striking ‘‘place,’’ and inserting ‘‘place;’’; and

(3) striking ‘‘port, not, however, to include vessels in distress or not engaged in trade’’ and inserting ‘‘port. However,

neither duty shall be imposed on vessels in distress or not

engaged in trade’’.

(b) CONFORMING AMENDMENT.—The Act of March 8, 1910 (36

Stat. 234; 46 App. U.S.C. 132), is amended by striking ‘‘and 1995,’’

and inserting ‘‘1995, 1996, 1997, and 1998,’’. (c) TECHNICAL CORRECTION.— (1) CORRECTION.—Section 10402(a) of the Omnibus Budget Reconciliation Act of 1990 (104 Stat. 1388–398) is amended

by striking ‘‘in the second paragraph’’.

(2) EFFECTIVE DATE.—The amendment made by paragraph

(1) shall be effective on and after November 5, 1990.

TITLE X—NATURAL RESOURCE

PROVISIONS

Subtitle A—Recreation Use Fees

SEC. 10001. ADMISSION FEES.

(a) ADDITIONAL AREAS.—(1) The first sentence of section 4(a)

of the Land and Water Conservation Fund Act of 1965 (16 U.S.C.

4601–6a(a)) is amended by inserting after ‘‘National Park System’’

the phrase ‘‘or National Conservation Areas’’ and by inserting after

‘‘National Recreation Areas’’ the following ‘‘, National Monuments,
H. R. 2264—92

National Volcanic Monuments, National Scenic Areas, and no more

than 21 areas of concentrated public use’’.

(2) Section 4(a) of the Land and Water Conservation Fund

Act of 1965 (16 U.S.C. 4601–6a(a)) is amended by inserting the

following after the first sentence: ‘‘For purposes of this subsection,

the term ‘area of concentrated public use’ means an area that

is managed primarily for outdoor recreation purposes, contains at

least one major recreation attraction, where facilities and services

necessary to accommodate heavy public use are provided, and public

access to the area is provided in such a manner that admission

fees can be efficiently collected at one or more centralized locations.’’.

(b) GOLDEN AGE PASSPORT.—The second sentence of section

4(a)(4) of the Land and Water Conservation Fund Act of 1965

(16 U.S.C. 4601–6a(a)(4)) is amended by striking ‘‘without charge,’’

and inserting in lieu thereof ‘‘for a one-time charge of $10,’’.

SEC. 10002. RECREATION USER FEES.

(a) IN GENERAL.—(1) The first sentence of section 4(b) of the

Land and Water Conservation Fund Act of 1965 (16 U.S.C. 4601–

6a(b)) is amended by striking out ‘‘toilet facilities, picnic tables,

or boat ramps’’ and all that follows down through the end of the

sentence and inserting in lieu thereof: ‘‘or toilet facilities, nor shall

there be any such charge solely for the use of picnic tables: Provided,

That in no event shall there be a charge for the use of any campground not having a majority of the following: tent or trailer spaces,

picnic tables, drinking water, access road, refuse containers, toilet

facilities, personal collection of the fee by an employee or agent

of the Federal agency operating the facility, reasonable visitor

protection, and simple devices for containing a campfire (where

campfires are permitted). For the purposes of this subsection, the

term ‘specialized outdoor recreation sites’ includes, but is not limited

to, campgrounds, swimming sites, boat launch facilities, and managed parking lots.’’. (2) Section 4(b) of the Land and Water Conservation Fund

Act of 1965 (16 U.S.C. 4601–6a(b)) is amended by striking the

second sentence.

(b) COSTS OF COLLECTION.—Section 4(i)(1) of the Land and

Water Conservation Fund Act of 1965 (16 U.S.C. 4601–6a(i)) is

amended by inserting ‘‘(A)’’ after ‘‘(1)’’ and by adding the following

at the end of paragraph (1): ‘‘(B) Notwithstanding subparagraph (A), in any fiscal year, the

Secretary of Agriculture and the Secretary of the Interior may

withhold from the special account established under subparagraph

(A) such portion of all receipts collected from fees imposed under

this section in such fiscal year as the Secretary of Agriculture

or the Secretary of the Interior, as appropriate, determines to

be equal to the fee collection costs for that fiscal year: Provided,

That such costs shall not exceed 15 percent of all receipts collected

from fees imposed under this section in that fiscal year. The

amounts so withheld shall be retained by the Secretary of Agriculture or the Secretary of the Interior, as appropriate, and shall

be available, without further appropriation, for expenditure by the

Secretary concerned to cover fee collection costs in that fiscal year.

The Secretary concerned shall deposit into the special account established pursuant to subparagraph (A) any amounts so retained which

remain unexpended and unobligated at the end of the fiscal year.

For the purposes of this subparagraph, for any fiscal year, the
H. R. 2264—93

term ‘fee collection costs’ means those costs for personnel and infrastructure directly associated with the collection of fees imposed

under this section.’’.

(c) COMMERCIAL TOUR USE FEES.—Section 4 of the Land and

Water Conservation Fund Act of 1965 (16 U.S.C. 4601–6a) is

amended by adding the following new subsection at the end thereof:

‘‘(n)(1) In the case of each unit of the National Park System

for which an admission fee is charged under this section, the Secretary of the Interior shall establish, by October 1, 1993, a commercial tour use fee to be imposed on each vehicle entering the unit

for the purpose of providing commercial tour services within the

unit. Fee revenue derived from such commercial tour use fees

shall be deposited into the special account established under subsection (i).

‘‘(2) The Secretary shall establish the amount of fee per entry

as follows:

‘‘(A) $25 per vehicle with a passenger capacity of 25 persons

or less, and

‘‘(B) $50 per vehicle with a passenger capacity of more

than 25 persons.

‘‘(3) The Secretary may periodically make reasonable adjustments to the commercial tour use fee imposed under this subsection.

‘‘(4) The commercial tour use fee imposed under this subsection

shall not apply to either of the following:

‘‘(A) Any vehicle transporting organized school groups or

outings conducted for educational purposes by schools or other

bona fide educational institutions.

‘‘(B) Any vehicle entering a park system unit pursuant to a contract issued under the Act of October 9, 1965 (16

U.S.C. 20–20g) entitled ‘An Act relating to the establishment

of concession policies in the areas administered by the National

Park Service and for other purposes.’.

‘‘(5)(A) The provisions of this subsection shall apply to aircraft

entering the airspace of units of the National Park System identified

in section 2(b) and section 3 of Public Law 100–91 for the specific

purpose of providing commercial tour services within the airspace

of such units.

‘‘(B) The provisions of this subsection shall also apply to aircraft

entering the airspace of other units of the National Park System

for the specific purpose of providing commercial tour services if

the Secretary determines that the level of such services is equal

to or greater than the level at those units of the National Park

System specified in subparagraph (A).’’. (d) NON-FEDERAL GOLDEN EAGLE PASSPORT SALES.—Section

4(a)(1)(A) of the Land and Water Conservation Fund Act of 1965

(16 U.S.C. 4601–6a(a)(1)(A)) is amended by inserting ‘‘(i)’’ after

‘‘(A)’’ and by adding at the end thereof the following new clause:

‘‘(ii) The Secretary of the Interior and the Secretary of Agriculture may authorize businesses, nonprofit entities, and other

organizations to sell and collect fees for the Golden Eagle Passport

subject to such terms and conditions as the Secretaries may jointly

prescribe. The Secretaries shall develop detailed guidelines for promotional advertising of non-Federal Golden Eagle Passport sales

and shall monitor compliance with such guidelines. The Secretaries

may authorize the sellers to withhold amounts up to, but not

exceeding 8 percent of the gross fees collected from the sale of

such passports as reimbursement for actual expenses of the sales.
H. R. 2264—94

Receipts from such non-Federal sales of the Golden Eagle Passport

shall be deposited into the special account established in subsection

(i), to be allocated between the Secretary of the Interior and the

Secretary of Agriculture in the same ratio as receipts from admission into Federal fee areas administered by the Secretary of Agriculture and the Secretary of the Interior pursuant to subsection

(a).’’.

(e) CONFORMING AMENDMENT.—Section 4(a)(1)(A) of the Land

and Water Conservation Fund Act of 1965 (16 U.S.C. 4601–

6a(a)(1)(A)) is amended by striking the third sentence in its entirety

and inserting in lieu thereof ‘‘The annual permit shall be valid

for a period of 12 months from the date the annual fee is paid.’’.

SEC. 10003. COMMUNICATION SITE FEES.

Notwithstanding any other provision of law, for fiscal year 1994, the Secretary of Agriculture and the Secretary of the Interior

shall assess and collect annual charges for the utilization of existing

radio, television, and commercial telephone transmission communication sites located on Federal lands administered by the Forest

Service and the Bureau of Land Management at a level 10 percent

above the fee assessed and collected during fiscal year 1993. For

a site located after the enactment of this Act, the charges for

fiscal year 1994 shall be equal in amount to the charges assessed

for a comparable new site located before the enactment of this

Act, plus 10 percent.

Subtitle B—Hardrock Mining Claim

Maintenance Fee

SEC. 10101. FEE.

(a) CLAIM MAINTENANCE FEE.—The holder of each unpatented

mining claim, mill or tunnel site located pursuant to the Mining

Laws of the United States, whether located before or after the

enactment of this Act, shall pay to the Secretary of the Interior,

on or before August 31 of each year, for years 1994 through 1998,

a claim maintenance fee of $100 per claim. Such claim maintenance

fee shall be in lieu of the assessment work requirement contained

in the Mining Law of 1872 (30 U.S.C. 28–28e) and the related

filing requirements contained in section 314 (a) and (c) of the

Federal Land Policy and Management Act of 1976 (43 U.S.C. 1744

(a) and (c)).

(b) TIME OF PAYMENT.—The claim maintenance fee payable

pursuant to subsection (a) for any assessment year shall be paid

before the commencement of the assessment year, except that for

the initial assessment year in which the location is made, the

locator shall pay the claim maintenance fee at the time the location

notice is recorded with the Bureau of Land Management. The

location fee imposed under section 10102 shall be payable not

later than 90 days after the date of location. (c) OIL SHALE CLAIMS SUBJECT TO CLAIM MAINTENANCE FEES

UNDER ENERGY POLICY ACT OF 1992.—This section shall not apply

to any oil shale claims for which a fee is required to be paid

under section 2511(e)(2) of the Energy Policy Act of 1992 (Public

Law 102–486; 106 Stat. 3111; 30 U.S.C. 242).

(d) WAIVER.—(1) The claim maintenance fee required under

this section may be waived for a claimant who certifies in writing
H. R. 2264—95

to the Secretary that on the date the payment was due, the claimant

and all related parties—

(A) held not more than 10 mining claims, mill sites, or

tunnel sites, or any combination thereof, on public lands; and

(B) have performed assessment work required under the

Mining Law of 1872 (30 U.S.C. 28–28e) to maintain the mining

claims held by the claimant and such related parties for the

assessment year ending on noon of September 1 of the calendar

year in which payment of the claim maintenance fee was due.

(2) For purposes of paragraph (1), with respect to any claimant,

the term ‘‘related party’’ means—

(A) the spouse and dependent children (as defined in section

152 of the Internal Revenue Code of 1986), of the claimant;

and

(B) a person who controls, is controlled by, or is under

common control with the claimant.

For purposes of this section, the term control includes actual control,

legal control, and the power to exercise control, through or by

common directors, officers, stockholders, a voting trust, or a holding

company or investment company, or any other means.

SEC. 10102. LOCATION FEE.

Notwithstanding any other provision of law, for every

unpatented mining claim, mill or tunnel site located after the

date of enactment of this subtitle and before September 30, 1998,

pursuant to the Mining Laws of the United States, the locator

shall, at the time the location notice is recorded with the Bureau

of Land Management, pay to the Secretary of the Interior a location

fee, in addition to the claim maintenance fee required by section

10101, of $25.00 per claim.

SEC. 10103. CO-OWNERSHIP.

The co-ownership provisions of the Mining Law of 1872 (30 U.S.C. 28) shall remain in effect, except that in applying such

provisions, the annual claim maintenance fee required under this

Act shall, where applicable, replace applicable assessment requirements and expenditures.

SEC. 10104. FAILURE TO PAY.

Failure to pay the claim maintenance fee or the location fee

as required by this subtitle shall conclusively constitute a forfeiture

of the unpatented mining claim, mill or tunnel site by the claimant

and the claim shall be deemed null and void by operation of law.

SEC. 10105. OTHER REQUIREMENTS.

(a) FEDERAL LAND POLICY AND MANAGEMENT ACT REQUIREMENTS.—Nothing in this subtitle shall change or modify the requirements of section 314(b) of the Federal Land Policy and Management

Act of 1976 (43 U.S.C. 1744(b)), or the requirements of section

314(c) of the Federal Land Policy and Management Act of 1976

(43 U.S.C. 1744(c)) related to filings required by section 314(b),

and such requirements shall remain in effect with respect to claims,

and mill or tunnel sites for which fees are required to be paid

under this section.

(b) REVISED STATUTES SECTION 2324.—The third sentence of

section 2324 of the Revised Statutes (30 U.S.C. 28) is amended

by inserting after ‘‘On each claim located after the tenth day of

May, eighteen hundred and seventy-two,’’ the following: ‘‘that is
H. R. 2264—96

granted a waiver under section 10101 of the Omnibus Budget

Reconciliation Act of 1993,’’.

(c) FEE ADJUSTMENTS.—(1) The Secretary of the Interior shall

adjust the fees required by this subtitle to reflect changes in the

Consumer Price Index published by the Bureau of Labor Statistics

of the Department of Labor every 5 years after the date of the

enactment of this Act, or more frequently if the Secretary determines an adjustment to be reasonable.

(2) The Secretary shall provide claimants notice of any adjustment made under this subsection not later than July 1 of any

year in which the adjustment is made.

(3) A fee adjustment under this subsection shall begin to apply

the first assessment year which begins after adjustment is made.

SEC. 10106. REGULATIONS.

The Secretary of the Interior shall promulgate rules and regulations to carry out the terms and conditions of this subtitle as

soon as practicable after the date of the enactment of this subtitle.

Subtitle C—Mineral Receipts

SEC. 10201. AMENDMENT TO THE MINERAL LEASING ACT.

Section 35 of the Mineral Leasing Act (30 U.S.C. 191) is

amended as follows:

(1) Delete the last sentence and redesignate the remaining

language as subsection (a).

(2) Amend subsection (a) by inserting ‘‘and, subject to the

provisions of subsection (b),’’ between the words ‘‘United

States;’’ and ‘‘50 per centum’’.

(3) Add a new subsection (b) as follows:

‘‘(b)(1) In calculating the amount to be paid to States during

any fiscal year under this section or under any other provision

of law requiring payment to a State of any revenues derived from

the leasing of any onshore lands or interest in land owned by

the United States for the production of the same types of minerals

leasable under this Act or of geothermal steam, 50 percent of

the portion of the enacted appropriation of the Department of

the Interior and any other agency during the preceding fiscal year

allocable to the administration of all laws providing for the leasing

of any onshore lands or interest in land owned by the United

States for the production of the same types of minerals leasable

under this Act or of geothermal steam, and to enforcement of

such laws, shall be deducted from the receipts derived under those

laws in approximately equal amounts each month (subject to paragraph (4)) prior to the division and distribution of such receipts

between the States and the United States.

‘‘(2) The proportion of the deduction provided in paragraph

(1) allocable to each State shall be determined by dividing the

monies disbursed to the State during the preceding fiscal year

derived from onshore mineral leasing referred to in paragraph

(1) in that State by the total money disbursed to States during

the preceding fiscal year from such onshore mineral leasing in

all States.

‘‘(3) In the event the deduction apportioned to any State under

this subsection exceeds 50 percent of the Secretary of the Interior’s

estimate of the amounts attributable to onshore mineral leasing
H. R. 2264—97

referred to in paragraph (1) within that State during the preceding

fiscal year, the deduction from receipts received from leases in

that State shall be limited to such estimated amounts and the

total amount to be deducted from such onshore mineral leasing

receipts shall be reduced accordingly.

‘‘(4) If the amount otherwise deductible under this subsection

in any month from the portion of receipts to be distributed to

a State exceeds the amount payable to the State during that month,

any amount exceeding the amount payable shall be carried forward

and deducted from amounts payable to the State in subsequent

months. If any amount remains to be carried forward at the end

of the fiscal year, such amount shall not be deducted from any

disbursements in any subsequent fiscal year.

‘‘(5) All deductions to be made pursuant to this subsection

shall be made in full during the fiscal year in which such deductions

were incurred.’’.

SEC. 10202. CONFORMING AMENDMENTS.

(a) MINERAL LEASING ACT FOR ACQUIRED LANDS.—Section 6(a)

of the Mineral Leasing Act for Acquired Lands (30 U.S.C. 355)

is amended by striking ‘‘All receipts’’ at the beginning of the first

sentence and inserting the following: ‘‘Subject to the provisions

of section 35(b) of the Mineral Leasing Act (30 U.S.C. 191(b)),

all receipts’’.

(b) GEOTHERMAL STEAM ACT.—Section 20 of the Geothermal

Steam Act (30 U.S.C. 1019) is amended by striking ‘‘All moneys’’

at the beginning thereof and inserting ‘‘Subject to the provisions

of section 35(b) of the Mineral Leasing Act (30 U.S.C. 191(b)),

all moneys’’.

TITLE XI—CIVIL SERVICE AND POST

OFFICE PROVISIONS

Subtitle A—Civil Service

SEC. 11001. DELAY IN COST-OF-LIVING ADJUSTMENTS IN FEDERAL

EMPLOYEE RETIREMENT BENEFITS DURING FISCAL

YEARS 1994, 1995, AND 1996.

(a) APPLICABILITY.—This section shall apply with respect to

any cost-of-living increase scheduled to take effect, during fiscal

year 1994, 1995, or 1996, under— (1) section 8340(b) or 8462(b) of title 5, United States

Code;

(2) section 826 or 858 of the Foreign Service Act of 1980;

or

(3) section 291 of the Central Intelligence Agency Retirement Act (50 U.S.C. 2131), as set forth in section 802 of the

CIARDS Technical Corrections Act of 1992 (Public Law 102–

496; 106 Stat. 3196).

(b) DELAY IN EFFECTIVE DATE OF ADJUSTMENTS.—A cost-ofliving increase described in subsection (a) shall not take effect

until the first day of the third calendar month after the date

such increase would otherwise take effect.

(c) RULE OF CONSTRUCTION.—Nothing in this section shall be

considered to affect any determination relating to eligibility for
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an annuity increase or the amount of the first increase in an

annuity under section 8340 (b) or (c) or section 8462 (b) or (c)

of title 5, United States Code, or comparable provisions of law.

SEC. 11002. PERMANENT ELIMINATION OF THE ALTERNATIVE-FORMOF-ANNUITY OPTION EXCEPT FOR INDIVIDUALS WITH

A CRITICAL MEDICAL CONDITION.

(a) CIVIL SERVICE RETIREMENT SYSTEM; FEDERAL EMPLOYEES’ RETIREMENT SYSTEM.—Sections 8343a and 8420a of title 5, United

States Code, are each amended—

(1) in subsection (a) by striking ‘‘an employee or Member may,’’ and inserting ‘‘any employee or Member who has a

life-threatening affliction or other critical medical condition

may,’’; and (2) by striking subsection (f). (b) FOREIGN SERVICE RETIREMENT AND DISABILITY SYSTEM.— Section 807(e)(1) of the Foreign Service Act of 1980 (22 U.S.C.

4047(e)(1)) is amended by striking ‘‘a participant may,’’ and inserting ‘‘any participant who has a life-threatening affliction or other

critical medical condition may,’’. (c) CENTRAL INTELLIGENCE AGENCY RETIREMENT AND DISABILITY SYSTEM.—Section 294(a) of the Central Intelligence Agency Retirement Act (50 U.S.C. 2143(a)), as set forth in section 802

of the CIARDS Technical Corrections Act of 1992 (Public Law

102–496; 106 Stat. 3196), is amended by striking ‘‘a participant

may,’’ and inserting ‘‘any participant who has a life-threatening

affliction or other critical medical condition may,’’. (d) EFFECTIVE DATE.—The amendments made by this section shall become effective on October 1, 1994, and shall apply with

respect to any annuity commencing on or after that date.

SEC. 11003. APPLICATION OF MEDICARE PART B LIMITS TO PHYSICIANS’ SERVICES FURNISHED TO FEDERAL EMPLOYEE

HEALTH BENEFITS ENROLLEES AGE 65 OR OLDER.

(a) IN GENERAL.—Section 8904(b) of title 5, United States Code,

is amended—

(1) in paragraph (1) by inserting ‘‘(A)’’ after ‘‘(b)(1)’’ and by adding at the end the following:

‘‘(B)(i) A plan, other than a prepayment plan described in section 8903(4), may not provide benefits, in the case of any retired

enrolled individual who is age 65 or older and is not entitled

to Medicare supplementary medical insurance benefits under part

B of title XVIII of the Social Security Act (42 U.S.C. 1395j et

seq.), to pay a charge imposed for physicians’ services (as defined

in section 1848(j) of such Act, 42 U.S.C. 1395w–4(j)) which are

covered for purposes of benefit payments under this chapter and

under such part, to the extent that such charge exceeds the fee

schedule amount under section 1848(a) of such Act (42 U.S.C.

1395w–4(a)).

‘‘(ii) Physicians and suppliers who have in force participation

agreements with the Secretary of Health and Human Services

consistent with section 1842(h)(1) of such Act (42 U.S.C.

1395u(h)(1)), whereby the participating provider accepts Medicare

benefits (including allowable deductible and coinsurance amounts)

as full payment for covered items and services shall accept equivalent benefit and enrollee cost-sharing under this chapter as full

payment for services described in clause (i). Physicians and suppliers who are nonparticipating physicians and suppliers for purposes
H. R. 2264—99

of part B of title XVIII of such Act shall not impose charges

that exceed the limiting charge under section 1848(g) of such Act

(42 U.S.C. 1395w–4(g)) with respect to services described in clause

(i) provided to enrollees described in such clause. The Office of

Personnel Management shall notify a physician or supplier who

is found to have violated this clause and inform them of the requirements of this clause and sanctions for such a violation. The Office

of Personnel Management shall notify the Secretary of Health and

Human Services if a physician or supplier is found to knowingly

and willfully violate this clause on a repeated basis and the Secretary of Health and Human Services may invoke appropriate sanctions in accordance with sections 1128A(a) and 1848(g)(1) of such

Act (42 U.S.C. 1320a–7a(a), 1395w–4(g)(1)) and applicable regulations.

‘‘(C) If the Secretary of Health and Human Services determines

that a violation of this subsection warrants excluding a provider

from participation for a specified period under title XVIII of the

Social Security Act, the Office shall enforce a corresponding exclusion of such provider for purposes of this chapter.’’;

(2) in paragraph (3)(B)—

(A) by inserting ‘‘(i)’’ after ‘‘includes’’; and

(B) by inserting before the period at the end the following: ‘‘, and (ii) the fee schedule amounts and limiting

charges for physicians’ services established under section

1848 of such Act (42 U.S.C. 1395w–4) and the identity

of participating physicians and suppliers who have in force

agreements with such Secretary under section 1842(h) of

such Act (42 U.S.C. 1395u(h))’’; and

(3) by adding at the end the following: ‘‘(4) The Director of the Office of Personnel Management shall

enter into an arrangement with the Secretary of Health and Human

Services, to be effective before the first day of the fifth month

that begins before each contract year, under which— ‘‘(A) physicians and suppliers (whether or not participating)

under the Medicare program will be notified of the requirements

of paragraph (1)(B); ‘‘(B) enforcement procedures will be in place to carry out such paragraph (including enforcement of protections against

overcharging of beneficiaries); and ‘‘(C) Medicare program information described in paragraph (3)(B)(ii) will be supplied to carriers under paragraph (3)(A).’’.

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply with respect to contract years beginning on or

after January 1, 1995.

SEC. 11004. FEDERAL EMPLOYEES’ SURVIVOR ANNUITY IMPROVEMENTS.

(a) CIVIL SERVICE RETIREMENT SYSTEM.—

(1) REDUCTION FOR SPOUSAL ANNUITY.—Section 8339(j) of

title 5, United States Code, is amended—

(A) in paragraph (3)—

(i) in the second sentence by striking ‘‘, within

such 2-year period,’’; and

(ii) by striking the fourth sentence and inserting

the following: ‘‘The Office shall, by regulation, provide

for payment of the deposit required under this paragraph by a reduction in the annuity of the employee
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or Member. The reduction shall, to the extent practicable, be designed so that the present value of the

future reduction is actuarially equivalent to the deposit

required under this paragraph, except that the total

reductions in the annuity of an employee or Member

to pay deposits required by the provisions of this paragraph, paragraph (5), or subsection (k)(2) shall not

exceed 25 percent of the annuity computed under subsections (a) through (i), (n), and (q), including adjustments under section 8340. The reduction, which shall

be effective on the same date as the election under

this paragraph, shall be permanent and unaffected

by any future termination of the entitlement of the

former spouse. Such reduction shall be independent

of and in addition to the reduction required under

the first sentence of this paragraph.’’; and

(B) in paragraph (5)(C)—

(i) in clause (ii) by striking ‘‘, within 2 years after

the date of the remarriage or, if later, the death or

remarriage of the former spouse (or of the last such

surviving former spouse),’’; and

(ii) by amending clause (iii) to read as follows:

‘‘(iii) The Office shall, by regulation, provide for payment of the deposit required under clause (ii) by a reduction

in the annuity of the employee or Member. The reduction

shall, to the extent practicable, be designed so that the

present value of the future reduction is actuarially equivalent to the deposit required under clause (ii), except that

total reductions in the annuity of an employee or Member

to pay deposits required by the provisions of this paragraph

or paragraph (3) shall not exceed 25 percent of the annuity

computed under subsections (a) through (i), (n), and (q),

including adjustments under section 8340. The reduction

required by this clause, which shall be effective on the

same date as the election under clause (i), shall be permanent and unaffected by any future termination of the

marriage. Such reduction shall be independent of and in

addition to the reduction required under clause (i).’’.

(2) REDUCTION RELATING TO FORMER SPOUSE.—Section

8339(k)(2) of title 5, United States Code, is amended—

(A) in subparagraph (B)(ii) by striking ‘‘Within 2 years

after the date of the marriage, the’’ and inserting ‘‘The’’;

and

(B) by amending subparagraph (C) to read as follows: ‘‘(C) The Office shall, by regulation, provide for payment

of the deposit required under subparagraph (B)(ii) by a reduction in the annuity of the employee or Member. The reduction

shall, to the extent practicable, be designed so that the present

value of the future reduction is actuarially equivalent to the

deposit required under subparagraph (B)(ii), except that total

reductions in the annuity of an employee or Member to pay

deposits required by this subsection or subsection (j)(3) shall

not exceed 25 percent of the annuity computed under subsections (a) through (i), (n), and (q), including adjustments

under section 8340. The reduction required by this subparagraph, which shall be effective on the same date as the election

under subparagraph (A), shall be permanent and unaffected
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by any future termination of the marriage. Such reduction

shall be independent of and in addition to the reduction

required under subparagraph (A).’’.

(3) DEPOSITS.—Section 8334(h) of title 5, United States

Code, is amended by striking ‘‘and by section 8339(j)(5)(C)

and the last sentence of section 8339(k)(2) of this title’’.

(b) FEDERAL EMPLOYEES’ RETIREMENT SYSTEM.—Section 8418

of title 5, United States Code, is amended—

(1) in subsection (a)(1) by striking ‘‘, before the expiration

of the 2-year period involved,’’; and

(2) by amending subsection (b) to read as follows:

‘‘(b) The Office shall, by regulation, provide for payment of

the deposit required under subsection (a) by a reduction in the

annuity of the employee or Member. The reduction shall, to the

extent practicable, be designed so that the present value of the

future reduction is actuarially equivalent to the deposit required

under subsection (a), except that the total reductions in the annuity

of an employee or Member to pay deposits required by this section

shall not exceed 25 percent of the annuity computed under section

8415 or section 8452, including adjustments under section 8462.

The reduction required by this subsection, which shall be effective

at the same time as the election under section 8416 (b) and (c)

or section 8417(b), shall be permanent and unaffected by any future

termination of the marriage or the entitlement of the former spouse.

Such reduction shall be independent of and in addition to the

reduction required under section 8416 (b) and (c) or section

8417(b).’’.

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

shall take effect on the first day of the first month beginning

at least 30 days after the date of the enactment of this Act

and shall apply to all deposits required under section 8339(j)

(3) or (5), 8339(k)(2), or 8418 of title 5, United States Code,

on which no payment has been made prior to such effective

date.

(2) PARTIAL DEPOSIT.—For any deposit required under sec- tion 8339(j) (3) or (5), 8339(k)(2), or 8418 of title 5, United

States Code, or section 4 (b) or (c) of the Civil Service Retirement Spouse Equity Act of 1984 (5 U.S.C. 8341 note) that

has been partially, but not fully, paid before the effective date

of this Act, the Office shall by regulation provide for determining the remaining portion of the deposit and for payment of

the remaining portion of the deposit by a prospective reduction

in the annuity of the employee or Member. The reduction

shall be similar to the reductions provided pursuant to the

amendments made under this section.

SEC. 11005. TEMPORARY EXTENSION AND MODIFICATION OF THE

METHOD FOR DETERMINING GOVERNMENT CONTRIBUTIONS UNDER FEHBP IN THE ABSENCE OF A GOVERNMENT-WIDE INDEMNITY BENEFIT PLAN.

Public Law 101–76 (5 U.S.C. 8906 note) is amended by striking

the matter after the enacting clause and before paragraph (2)

of subsection (a) and inserting the following:

‘‘That (a)(1) in the administration of chapter 89 of title 5, United

States Code, for each of contract years 1990 through 1998 (inclusive), in order to compute the average subscription charges under
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section 8906(a) of such title for such contract years, the subscription

charges in effect for the indemnity benefit plan on the beginning

date of each such contract year—

‘‘(A) shall be deemed to be the subscription charges which

were in effect for such plan on the beginning date of the

preceding contract year as adjusted under paragraph (2); or

‘‘(B) if subparagraph (A) does not apply, shall be deemed

to be—

‘‘(i) the subscription charges which were deemed under

this Act to have been in effect for such plan with respect

to the preceding contract year as adjusted under paragraph

(2), except as provided in clause (ii); or

‘‘(ii) for each of contract years 1997 and 1998, the

subscription charges which would be derived by applying

the terms of clause (i), reduced by 1 percent.’’.

Subtitle B—Postal Service

SEC. 11101. PAYMENTS TO BE MADE BY THE UNITED STATES POSTAL

SERVICE.

(a) RELATING TO CORRECTED CALCULATIONS FOR PAST RETIREMENT COLAS.—In addition to any other payments required under

section 8348(m) of title 5, United States Code, or any other provision

of law, the United States Postal Service shall pay into the Civil

Service Retirement and Disability Fund a total of $693,000,000,

of which—

(1) at least one-third shall be paid not later than September

30, 1996;

(2) at least two-thirds shall be paid not later than September 30, 1997; and

(3) any remaining balance shall be paid not later than

September 30, 1998.

(b) RELATING TO CORRECTED CALCULATIONS FOR PAST HEALTH

BENEFITS.—In addition to any other payments required under section 8906(g)(2) of title 5, United States Code, or any other provision

of law, the United States Postal Service shall pay into the Employees Health Benefits Fund a total of $348,000,000, of which—

(1) at least one-third shall be paid not later than September

30, 1996;

(2) at least two-thirds shall be paid not later than September 30, 1997; and

(3) any remaining balance shall be paid not later than

September 30, 1998.

TITLE XII—VETERANS’ AFFAIRS

PROVISIONS

SEC. 12001. SHORT TITLE.

This title may be cited as the ‘‘Veterans Reconciliation Act

of 1993’’.
H. R. 2264—103

SEC. 12002. EXTENSION OF AUTHORITY TO REQUIRE THAT CERTAIN

VETERANS AGREE TO MAKE COPAYMENTS IN EXCHANGE

FOR RECEIVING HEALTH-CARE BENEFITS.

(a) HOSPITAL AND MEDICAL CARE.—Section 8013(e) of the Omnibus Budget Reconciliation Act of 1990 (Public Law 101–508; 38

U.S.C. 1710 note) is amended—

(1) by striking out ‘‘September 30, 1992’’ in the first sentence and inserting in lieu thereof ‘‘September 30, 1998’’; and (2) by striking out the second sentence. (b) OUTPATIENT MEDICATIONS.—Section 1722A(c) of title 38,

United States Code, is amended—

(1) by striking out ‘‘September 30, 1992’’ in the first sentence and inserting in lieu thereof ‘‘September 30, 1998’’; and (2) by striking out the second sentence.

SEC. 12003. EXTENSION OF AUTHORITY FOR MEDICAL CARE COST

RECOVERY.

Section 1729(a)(2)(E) of title 38, United States Code, is amended

by striking out ‘‘before August 1, 1994,’’ and inserting in lieu thereof

‘‘before October 1, 1998,’’.

SEC. 12004. EXTENSION OF CERTAIN INCOME VERIFICATION AUTHORITY.

Section 5317(g) of title 38, United States Code, is amended

by striking out ‘‘September 30, 1997’’ and inserting in lieu thereof

‘‘September 30, 1998’’.

SEC. 12005. EXTENSION OF LIMITATION ON PENSION FOR CERTAIN

RECIPIENTS OF MEDICAID-COVERED NURSING HOME

CARE.

Section 5503(f)(7) of title 38, United States Code, is amended

by striking out ‘‘September 30, 1997’’ and inserting in lieu thereof

‘‘September 30, 1998’’.

SEC. 12006. EXTENSION OF PROCEDURES APPLICABLE TO LIQUIDATION SALES ON DEFAULTED HOME LOANS GUARANTEED

BY THE DEPARTMENT OF VETERANS AFFAIRS.

(a) INCLUSION OF LOSSES.—Section 3732(c) of title 38, United

States Code, is amended—

(1) in paragraph (1)(C), by striking out ‘‘resale,’’ and inserting in lieu thereof ‘‘resale (including losses sustained on the

resale of the property),’’; and

(2) in paragraph (11), by striking out ‘‘shall’’ and all that

follows and inserting in lieu thereof ‘‘shall apply to loans closed

before October 1, 1998.’’.

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

shall become effective October 1, 1993.

SEC. 12007. LOAN FEES.

(a) INCREASE IN HOME LOAN FEES.—Subsection (a) of section

3729 of title 38, United States Code, is amended—

(1) by striking out paragraph (6); and

(2) by inserting after paragraph (3) the following:

‘‘(4) With respect to a loan closed after September 30, 1993,

and before October 1, 1998, for which a fee is collected under

paragraph (1), the amount of such fee, as computed under paragraph (2), shall be increased by 0.75 percent of the total loan
H. R. 2264—104

amount other than in the case of a loan described in subparagraph

(A), (D)(ii), or (E) of paragraph (2).’’.

(b) FEE FOR MULTIPLE USE OF HOUSING ASSISTANCE.—Subsection (a) of such section, as amended by subsection (a) of this

section, is amended by adding at the end the following:

‘‘(5)(A) Except as provided in subparagraph (B) of this paragraph, notwithstanding paragraphs (2) and (4) of this subsection,

after a veteran has obtained an initial loan pursuant to section

3710 of this title, the amount of such fee with respect to any

additional loan obtained under this chapter by such veteran shall

be 3 percent of the total loan amount.

‘‘(B) Subparagraph (A) of this paragraph does not apply with

respect to (i) a loan obtained by a veteran with a downpayment

described in paragraph (2)(B), (2)(C), or (2)(D)(iii) of this subsection,

and (ii) loans described in paragraph (2)(E) of this subsection.

‘‘(C) This paragraph applies with respect to a loan closed after

September 30, 1993, and before October 1, 1998.’’.

(c) CONFORMING AMENDMENT.—Paragraph (2) of subsection (a)

of such section is amended by striking out ‘‘paragraph (6)’’ and

inserting in lieu thereof ‘‘paragraphs (4) and (5)’’.

SEC. 12008. POLICY REGARDING COST-OF-LIVING ADJUSTMENT IN

COMPENSATION RATES.

(a) POLICY.—The fiscal year 1994 cost-of-living adjustments

in the rates of and limitations for compensation payable under

chapter 11 of title 38, United States Code, and of dependency

and indemnity compensation payable under chapter 13 of such

title, except as provided in subsection (b) of this section, will be

no more than a percentage equal to the percentage by which benefit

amounts payable under title II of the Social Security Act (42 U.S.C.

401 et seq.) are increased effective December 1, 1993, as a result

of a determination under section 215(i) of such Act (42 U.S.C.

415(i)), with all increased monthly rates and limitations (other

than increased rates or limitations equal to a whole dollar amount)

rounded down to the next lower dollar.

(b) LIMITATION ON FISCAL YEAR 1994 COST-OF-LIVING ADJUSTMENT FOR CERTAIN DIC RECIPIENTS.—(1) During fiscal year 1994,

the amount of any increase in any of the rates of dependency

and indemnity compensation in effect under section 1311(a)(3) of

title 38, United States Code, will not exceed 50 percent of the

new law increase, rounded down (if not an even dollar amount)

to the next lower dollar.

(2) For purposes of paragraph (1), the new law increase is

the amount by which the rate of dependency and indemnity compensation provided for recipients under section 1311(a)(1) of such

title is increased for fiscal year 1994.

SEC. 12009. LIMITATION REGARDING COST-OF-LIVING ADJUSTMENTS

FOR MONTGOMERY GI BILL BENEFITS.

(a) BENEFITS PAYABLE UNDER CHAPTER 30.—Section 3015(g)

of title 38, United States Code, is amended—

(1) by striking out ‘‘(1)’’ and all that follows through ‘‘(2)’’

and by redesignating subparagraphs (A) and (B) as paragraphs

(1) and (2), respectively; and

(2) in paragraph (2), as redesignated by paragraph (1)

of this subsection, by striking out ‘‘subparagraph (A)’’ and

inserting in lieu thereof ‘‘paragraph (1)’’.
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(b) BENEFITS PAYABLE UNDER SELECTED RESERVE PROGRAM.—

Section 2131(b)(2) of title 10, United States Code, is amended—

(1) by striking out ‘‘(A)’’ the first place it appears and

all that follows through ‘‘(B) With respect to’’ and inserting

in lieu thereof ‘‘With respect to’’;

(2) by redesignating clauses (i) and (ii) as subparagraphs

(A) and (B), respectively; and

(3) in subparagraph (B), as redesignated by paragraph

(2) of this subsection, by striking out ‘‘clause (i)’’ and inserting

in lieu thereof ‘‘subparagraph (A)’’.

(c) LIMITATION.—The fiscal year 1995 cost-of-living adjustments

in the rates of educational assistance payable under chapter 30

of title 38, United States Code, and under chapter 106 of title

10, United States Code, shall be the percentage equal to 50 percent

of the percentage by which such assistance would be increased

under section 3015(g) of title 38, and under section 2131(b)(2)

of title 10, United States Code, respectively, but for this section.

(d) TECHNICAL AMENDMENTS.—(1) Section 301(c) of Public Law

102–568 (106 Stat. 4326) is amended by striking out ‘‘Section

3015(f)’’ and inserting in lieu thereof ‘‘Section 3015(g) (as redesignated by section 307(a)(1))’’.

(2) Section 307(a) of such Public Law (106 Stat. 4328) is

amended by striking out ‘‘(as amended by section 301)’’.

(3) The amendments made by paragraphs (1) and (2) shall

apply as if included in the enactment of Public Law 102–568.

TITLE XIII—REVENUE, HEALTH CARE,

HUMAN RESOURCES, INCOME SECURITY, CUSTOMS AND TRADE, FOOD

STAMP PROGRAM, AND TIMBER SALE

PROVISIONS

CHAPTER 1—REVENUE PROVISIONS

SEC. 13001. SHORT TITLE; ETC.

(a) SHORT TITLE.—This chapter may be cited as the ‘‘Revenue

Reconciliation Act of 1993’’.

(b) AMENDMENT TO 1986 CODE.—Except as otherwise expressly

provided, whenever in this chapter an amendment or repeal is

expressed in terms of an amendment to, or repeal of, a section

or other provision, the reference shall be considered to be made

to a section or other provision of the Internal Revenue Code of

1986.

(c) SECTION 15 NOT TO APPLY.—Except in the case of the

amendments made by section 13221 (relating to corporate rate

increase), no amendment made by this chapter shall be treated

as a change in a rate of tax for purposes of section 15 of the

Internal Revenue Code of 1986.

(d) WAIVER OF ESTIMATED TAX PENALTIES.—No addition to

tax shall be made under section 6654 or 6655 of the Internal

Revenue Code of 1986 for any period before April 16, 1994 (March

16, 1994, in the case of a corporation), with respect to any

underpayment to the extent such underpayment was created or

increased by any provision of this chapter.
H. R. 2264—106

(e) TABLE OF CONTENTS.—

CHAPTER 1—REVENUE PROVISIONS

Sec. 13001. Short title; etc.

Subchapter A—Training and Investment Incentives

PART I—PROVISIONS RELATING TO EDUCATION AND TRAINING

Sec. 13101. Employer-provided educational assistance. Sec. 13102. Targeted jobs credit.

PART II—INVESTMENT INCENTIVES

SUBPART A—RESEARCH AND CLINICAL TESTING CREDITS

Sec. 13111. Extension of research and clinical testing credits. Sec. 13112. Modification of fixed base percentage for startup companies.

SUBPART B—CAPITAL GAIN PROVISIONS

Sec. 13113. 50-percent exclusion for gain from certain small business stock. Sec. 13114. Rollover of gain from sale of publicly traded securities into specialized

small business investment companies.

SUBPART C—MODIFICATION TO MINIMUM TAX DEPRECIATION RULES

Sec. 13115. Modification to minimum tax depreciation rules.

SUBPART D—INCREASE IN EXPENSE TREATMENT FOR SMALL BUSINESSES

Sec. 13116. Increase in expense treatment for small businesses.

SUBPART E—TAX EXEMPT BONDS

Sec. 13121. High-speed intercity rail facility bonds exempt from State volume cap. Sec. 13122. Permanent extension of qualified small issue bonds.

PART III—EXPANSION AND SIMPLIFICATION OF EARNED INCOME TAX CREDIT

Sec. 13131. Expansion and simplification of earned income tax credit.

PART IV—INCENTIVES FOR INVESTMENT IN REAL ESTATE

SUBPART A—EXTENSION OF QUALIFIED MORTGAGE BONDS AND LOW-INCOME HOUSING

CREDIT

Sec. 13141. Permanent extension of qualified mortgage bonds. Sec. 13142. Low-income housing credit.

SUBPART B—PASSIVE LOSS RULES

Sec. 13143. Application of passive loss rules to rental real estate activities.

SUBPART C—PROVISIONS RELATING TO REAL ESTATE INVESTMENTS BY PENSION FUNDS

Sec. 13144. Real estate property acquired by a qualified organization. Sec. 13145. Repeal of special treatment of publicly treated partnerships. Sec. 13146. Title-holding companies permitted to receive small amounts of unrelated business taxable income.

Sec. 13147. Exclusion from unrelated business tax of gains from certain property. Sec. 13148. Exclusion from unrelated business tax of certain fees and option premiums.

Sec. 13149. Treatment of pension fund investments in real estate investment

trusts.

SUBPART D—DISCHARGE OF INDEBTEDNESS

Sec. 13150. Exclusion from gross income for income from discharge of qualified real

property business indebtedness.

SUBPART E—INCREASE IN RECOVERY PERIOD FOR NONRESIDENTIAL REAL PROPERTY

Sec. 13151. Increase in recovery period for nonresidential real property.

PART V—LUXURY TAX

Sec. 13161. Repeal of luxury excise taxes other than on passenger vehicles. Sec. 13162. Exemption from luxury excise tax for certain equipment installed on

passenger vehicles for use by disabled individuals. Sec. 13163. Tax on diesel fuel used in noncommercial boats.

PART VI—OTHER CHANGES

Sec. 13171. Alternative minimum tax treatment of contributions of appreciated

property.
H. R. 2264—107

Sec. 13172. Substantiation requirement for deduction of certain charitable contributions.

Sec. 13173. Disclosure related to quid pro quo contributions. Sec. 13174. Temporary extension of deduction for health insurance costs of self-employed individuals.

Subchapter B—Revenue Increases

PART I—PROVISIONS AFFECTING INDIVIDUALS

SUBPART A—RATE INCREASES

Sec. 13201. Increase in top marginal rate under section 1. Sec. 13202. Surtax on high-income taxpayers. Sec. 13203. Modifications to alternative minimum tax rates and exemption

amounts.

Sec. 13204. Overall limitation on itemized deductions for high-income taxpayers

made permanent. Sec. 13205. Phaseout of personal exemption of high-income taxpayers made permanent.

Sec. 13206. Provisions to prevent conversion of ordinary income to capital gain.

SUBPART B—OTHER PROVISIONS

Sec. 13207. Repeal of limitation on amount of wages subject to health insurance

employment tax. Sec. 13208. Top estate and gift tax rates made permanent. Sec. 13209. Reduction in deductible portion of business meals and entertainment. Sec. 13210. Elimination of deduction for club membership fees. Sec. 13211. Disallowance of deduction for certain employee remuneration in excess

of $1,000,000.

Sec. 13212. Reduction in compensation taken into account in determining contributions and benefits under qualified retirement plans. Sec. 13213. Modifications to deduction for moving expenses. Sec. 13214. Simplification of individual estimated tax safe harbor based on last

year’s tax. Sec. 13215. Social security and tier 1 railroad retirement benefits.

PART II—PROVISIONS AFFECTING BUSINESSES

Sec. 13221. Increase in top marginal rate under section 11. Sec. 13222. Denial of deduction for lobbying expenses. Sec. 13223. Mark to market accounting method for securities dealers. Sec. 13224. Clarification of treatment of certain FSLIC financial assistance.

Sec. 13225. Modification of corporate estimated tax rules. Sec. 13226. Modifications of discharge of indebtedness provisions. Sec. 13227. Limitation on section 936 credit.

Sec. 13228. Modification to limitation on deduction for certain interest.

PART III—FOREIGN TAX PROVISIONS

SUBPART A—CURRENT TAXATION OF CERTAIN EARNINGS OF CONTROLLED FOREIGN

CORPORATIONS

Sec. 13231. Earnings invested in excess passive assets. Sec. 13232. Modification to taxation of investment in United States property. Sec. 13233. Other modifications to subpart F.

SUBPART B—ALLOCATION OF RESEARCH AND EXPERIMENTAL EXPENDITURES

Sec. 13234. Allocation of research and experimental expenditures.

SUBPART C—OTHER PROVISIONS

Sec. 13235. Repeal of certain exceptions for working capital. Sec. 13236. Modifications of accuracy-related penalty.

Sec. 13237. Denial of portfolio interest exemption for contingent interest.

Sec. 13238. Regulations dealing with conduit arrangements.

Sec. 13239. Treatment of export of certain softwood logs.

PART IV—TRANSPORTATION FUELS PROVISIONS

SUBPART A—TRANSPORTATION FUELS TAX

Sec. 13241. Transportation fuels tax.

SUBPART B—MODIFICATIONS TO TAX ON DIESEL FUEL

Sec. 13242. Modifications to tax on diesel fuel.

Sec. 13243. Floor stocks tax.

SUBPART C—OTHER PROVISIONS
H. R. 2264—108

Sec. 13244. Increased deposits into Mass Transit Account.

Sec. 13245. Floor stocks tax on aviation fuel held on October 1, 1995.

PART V—COMPLIANCE PROVISIONS

Sec. 13251. Modifications to substantial understatement penalty.

Sec. 13252. Returns relating to the cancellation of indebtedness by certain financial

entities.

PART VI—TREATMENT OF INTANGIBLES

Sec. 13261. Amortization of goodwill and certain other intangibles.

Sec. 13262. Treatment of certain payments to retired or deceased partner.

PART VII—MISCELLANEOUS PROVISIONS

Sec. 13271. Disallowance of interest on certain overpayments of tax.

Sec. 13272. Denial of deduction relating to travel expenses.

Sec. 13273. Increase in withholding from supplemental wage payments.

Subchapter C—Empowerment Zones, Enterprise Communities, Rural Development

Investment Areas, Etc.

PART I—EMPOWERMENT ZONES, ENTERPRISE COMMUNITIES, AND RURAL

DEVELOPMENT INVESTMENT AREAS

Sec. 13301. Designation and treatment of empowerment zones, enterprise communities, and rural development investment areas.

Sec. 13302. Technical and conforming amendments.

Sec. 13303. Effective date.

PART II—CREDIT FOR CONTRIBUTIONS TO CERTAIN COMMUNITY DEVELOPMENT

CORPORATIONS

Sec. 13311. Credit for contributions to certain community development corporations.

PART III—INVESTMENT IN INDIAN RESERVATIONS

Sec. 13321. Accelerated depreciation for property on Indian reservations.

Sec. 13322. Indian employment credit.

Subchapter D—Other Provisions

PART I—DISCLOSURE PROVISIONS

Sec. 13401. Disclosure of return information for administration of certain veterans

programs.

Sec. 13402. Disclosure of return information to carry out income contingent repayment of student loans.

Sec. 13403. Use of return information for income verification under certain housing

assistance programs.

PART II—PUBLIC DEBT LIMIT

Sec. 13411. Increase in public debt limit.

PART III—VACCINE PROVISIONS

Sec. 13421. Excise tax on certain vaccines made permanent.

Sec. 13422. Continuation coverage under group health plans of costs of pediatric

vaccines.

PART IV—DISASTER RELIEF PROVISIONS

Sec. 13431. Modification of involuntary conversion rules for certain disaster-related

conversions.

PART V—MISCELLANEOUS PROVISIONS

Sec. 13441. Increase in presidential election campaign check-off.

Sec. 13442 Special rule for hospital services.

Sec. 13443. Credit for portion of employer social security taxes paid with respect

to employee cash tips.

Sec. 13444. Availability and use of death information.
H. R. 2264—109

Subchapter A—Training and Investment Incentives

PART I—PROVISIONS RELATING TO

EDUCATION AND TRAINING

SEC. 13101. EMPLOYER-PROVIDED EDUCATIONAL ASSISTANCE.

(a) EXTENSION OF EXCLUSION.— (1) IN GENERAL.—Subsection (d) of section 127 (relating to educational assistance programs) is amended to read as

follows:

‘‘(d) TERMINATION.—This section shall not apply to taxable years beginning after December 31, 1994.’’ (2) CONFORMING AMENDMENT.—Paragraph (2) of section 103(a) of the Tax Extension Act of 1991 is hereby repealed.

(b) COORDINATION WITH SECTION 132.—Paragraph (8) of section 132(i) is amended to read as follows:

‘‘(8) APPLICATION OF SECTION TO OTHERWISE TAXABLE EDUCATIONAL OR TRAINING BENEFITS.—Amounts paid or expenses

incurred by the employer for education or training provided

to the employee which are not excludable from gross income

under section 127 shall be excluded from gross income under

this section if (and only if) such amounts or expenses are

a working condition fringe.’’

(c) EFFECTIVE DATES.—

(1) SUBSECTION (a).—The amendments made by subsection

(a) shall apply to taxable years ending after June 30, 1992.

(2) SUBSECTION (b).—The amendment made by subsection

(b) shall apply to taxable years beginning after December 31,

1988.

SEC. 13102. TARGETED JOBS CREDIT.

(a) EXTENSION OF CREDIT.—Paragraph (4) of section 51(c) (relating to termination) is amended by striking ‘‘June 30, 1992’’ and

inserting ‘‘December 31, 1994’’.

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

shall apply to individuals who begin work for the employer after

June 30, 1992.

PART II—INVESTMENT INCENTIVES

Subpart A—Research and Clinical Testing Credits

SEC. 13111. EXTENSION OF RESEARCH AND CLINICAL TESTING CREDITS.

(a) RESEARCH CREDIT.— (1) IN GENERAL.—Subsection (h) of section 41 (relating to credit for research activities) is amended—

(A) by striking ‘‘June 30, 1992’’ each place it appears

and inserting ‘‘June 30, 1995’’, and (B) by striking ‘‘July 1, 1992’’ each place it appears

and inserting ‘‘July 1, 1995’’.

(2) CONFORMING AMENDMENT.—Subparagraph (D) of sec- tion 28(b)(1) is amended by striking ‘‘June 30, 1992’’ and inserting ‘‘June 30, 1995’’.

(b) CLINICAL TESTING CREDIT.—Subsection (e) of section 28

is amended by striking ‘‘June 30, 1992’’ and inserting ‘‘December

31, 1994’’.
H. R. 2264—110

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

shall apply to taxable years ending after June 30, 1992.

SEC. 13112. MODIFICATION OF FIXED-BASE PERCENTAGE FOR

STARTUP COMPANIES.

(a) GENERAL RULE.—Clause (ii) of section 41(c)(3)(B) is amended

to read as follows:

‘‘(ii) FIXED-BASE PERCENTAGE.—In a case to which

this subparagraph applies, the fixed-base percentage

is—

‘‘(I) 3 percent for each of the taxpayer’s 1st

5 taxable years beginning after December 31, 1993,

for which the taxpayer has qualified research

expenses,

‘‘(II) in the case of the taxpayer’s 6th such

taxable year, 1⁄6 of the percentage which the aggregate qualified research expenses of the taxpayer

for the 4th and 5th such taxable years is of the

aggregate gross receipts of the taxpayer for such

years,

‘‘(III) in the case of the taxpayer’s 7th such

taxable year, 1⁄3 of the percentage which the aggregate qualified research expenses of the taxpayer

for the 5th and 6th such taxable years is of the

aggregate gross receipts of the taxpayer for such

years,

‘‘(IV) in the case of the taxpayer’s 8th such

taxable year, 1⁄2 of the percentage which the aggregate qualified research expenses of the taxpayer

for the 5th, 6th, and 7th such taxable years is

of the aggregate gross receipts of the taxpayer

for such years,

‘‘(V) in the case of the taxpayer’s 9th such

taxable year, 2⁄3 of the percentage which the aggregate qualified research expenses of the taxpayer

for the 5th, 6th, 7th, and 8th such taxable years

is of the aggregate gross receipts of the taxpayer

for such years,

‘‘(VI) in the case of the taxpayer’s 10th such

taxable year, 5⁄6 of the percentage which the aggregate qualified research expenses of the taxpayer

for the 5th, 6th, 7th, 8th, and 9th such taxable

years is of the aggregate gross receipts of the

taxpayer for such years, and

‘‘(VII) for taxable years thereafter, the percentage which the aggregate qualified research

expenses for any 5 taxable years selected by the

taxpayer from among the 5th through the 10th

such taxable years is of the aggregate gross

receipts of the taxpayer for such selected years.’’.

(b) CONFORMING AMENDMENTS.—

(1) Clause (iii) of section 41(c)(3)(B) is amended by striking

‘‘clause (i)’’ and inserting ‘‘clauses (i) and (ii)’’.

(2) Subparagraph (D) of section 41(c)(3) is amended by

striking ‘‘subparagraph (A)’’ and inserting ‘‘subparagraphs (A)

and (B)(ii)’’.
H. R. 2264—111

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

shall apply to taxable years beginning after December 31, 1993.

Subpart B—Capital Gain Provisions

SEC. 13113. 50-PERCENT EXCLUSION FOR GAIN FROM CERTAIN SMALL

BUSINESS STOCK.

(a) GENERAL RULE.—Part I of subchapter P of chapter 1 (relating to capital gains and losses) is amended by adding at the end

thereof the following new section:

‘‘SEC. 1202. 50-PERCENT EXCLUSION FOR GAIN FROM CERTAIN SMALL

BUSINESS STOCK.

‘‘(a) 50-PERCENT EXCLUSION.—In the case of a taxpayer other

than a corporation, gross income shall not include 50 percent of

any gain from the sale or exchange of qualified small business

stock held for more than 5 years.

‘‘(b) PER-ISSUER LIMITATION ON TAXPAYER’S ELIGIBLE GAIN.—

‘‘(1) IN GENERAL.—If the taxpayer has eligible gain for

the taxable year from 1 or more dispositions of stock issued

by any corporation, the aggregate amount of such gain from

dispositions of stock issued by such corporation which may

be taken into account under subsection (a) for the taxable

year shall not exceed the greater of—

‘‘(A) $10,000,000 reduced by the aggregate amount of

eligible gain taken into account by the taxpayer under

subsection (a) for prior taxable years and attributable to

dispositions of stock issued by such corporation, or ‘‘(B) 10 times the aggregate adjusted bases of qualified

small business stock issued by such corporation and disposed of by the taxpayer during the taxable year. For purposes of subparagraph (B), the adjusted basis of any

stock shall be determined without regard to any addition to

basis after the date on which such stock was originally issued. ‘‘(2) ELIGIBLE GAIN.—For purposes of this subsection, the

term ‘eligible gain’ means any gain from the sale or exchange

of qualified small business stock held for more than 5 years. ‘‘(3) TREATMENT OF MARRIED INDIVIDUALS.— ‘‘(A) SEPARATE RETURNS.—In the case of a separate

return by a married individual, paragraph (1)(A) shall be

applied by substituting ‘$5,000,000’ for ‘$10,000,000’. ‘‘(B) ALLOCATION OF EXCLUSION.—In the case of any

joint return, the amount of gain taken into account under

subsection (a) shall be allocated equally between the

spouses for purposes of applying this subsection to subsequent taxable years.

‘‘(C) MARITAL STATUS.—For purposes of this subsection,

marital status shall be determined under section 7703.

‘‘(c) QUALIFIED SMALL BUSINESS STOCK.—For purposes of this

section—

‘‘(1) IN GENERAL.—Except as otherwise provided in this

section, the term ‘qualified small business stock’ means any

stock in a C corporation which is originally issued after the

date of the enactment of the Revenue Reconciliation Act of

1993, if—

‘‘(A) as of the date of issuance, such corporation is

a qualified small business, and
H. R. 2264—112

‘‘(B) except as provided in subsections (f) and (h), such

stock is acquired by the taxpayer at its original issue

(directly or through an underwriter)—

‘‘(i) in exchange for money or other property (not

including stock), or

‘‘(ii) as compensation for services provided to such

corporation (other than services performed as an

underwriter of such stock).

‘‘(2) ACTIVE BUSINESS REQUIREMENT; ETC.—

‘‘(A) IN GENERAL.—Stock in a corporation shall not

be treated as qualified small business stock unless, during

substantially all of the taxpayer’s holding period for such

stock, such corporation meets the active business requirements of subsection (e) and such corporation is a C corporation.

‘‘(B) SPECIAL RULE FOR CERTAIN SMALL BUSINESS

INVESTMENT COMPANIES.—

‘‘(i) WAIVER OF ACTIVE BUSINESS REQUIREMENT.—

Notwithstanding any provision of subsection (e), a corporation shall be treated as meeting the active business

requirements of such subsection for any period during

which such corporation qualifies as a specialized small

business investment company.

‘‘(ii) SPECIALIZED SMALL BUSINESS INVESTMENT

COMPANY.—For purposes of clause (i), the term ‘specialized small business investment company’ means any

eligible corporation (as defined in subsection (e)(4))

which is licensed to operate under section 301(d) of

the Small Business Investment Act of 1958 (as in

effect on May 13, 1993). ‘‘(3) CERTAIN PURCHASES BY CORPORATION OF ITS OWN

STOCK.—‘‘(A) REDEMPTIONS FROM TAXPAYER OR RELATED PERSON.—Stock acquired by the taxpayer shall not be treated

as qualified small business stock if, at any time during

the 4-year period beginning on the date 2 years before

the issuance of such stock, the corporation issuing such

stock purchased (directly or indirectly) any of its stock

from the taxpayer or from a person related (within the

meaning of section 267(b) or 707(b)) to the taxpayer. ‘‘(B) SIGNIFICANT REDEMPTIONS.—Stock issued by a corporation shall not be treated as qualified business stock

if, during the 2-year period beginning on the date 1 year

before the issuance of such stock, such corporation made

1 or more purchases of its stock with an aggregate value

(as of the time of the respective purchases) exceeding 5

percent of the aggregate value of all of its stock as of

the beginning of such 2-year period.

‘‘(C) TREATMENT OF CERTAIN TRANSACTIONS.—If any

transaction is treated under section 304(a) as a distribution

in redemption of the stock of any corporation, for purposes

of subparagraphs (A) and (B), such corporation shall be

treated as purchasing an amount of its stock equal to

the amount treated as such a distribution under section

304(a).

‘‘(d) QUALIFIED SMALL BUSINESS.—For purposes of this

section—
H. R. 2264—113

‘‘(1) IN GENERAL.—The term ‘qualified small business’

means any domestic corporation which is a C corporation if—

‘‘(A) the aggregate gross assets of such corporation

(or any predecessor thereof) at all times on or after the

date of the enactment of the Revenue Reconciliation Act

of 1993 and before the issuance did not exceed $50,000,000,

‘‘(B) the aggregate gross assets of such corporation

immediately after the issuance (determined by taking into

account amounts received in the issuance) do not exceed

$50,000,000, and

‘‘(C) such corporation agrees to submit such reports

to the Secretary and to shareholders as the Secretary may

require to carry out the purposes of this section.

‘‘(2) AGGREGATE GROSS ASSETS.—

‘‘(A) IN GENERAL.—For purposes of paragraph (1), the

term ‘aggregate gross assets’ means the amount of cash

and the aggregate adjusted bases of other property held

by the corporation.

‘‘(B) TREATMENT OF CONTRIBUTED PROPERTY.—For purposes of subparagraph (A), the adjusted basis of any property contributed to the corporation (or other property with

a basis determined in whole or in part by reference to

the adjusted basis of property so contributed) shall be

determined as if the basis of the property contributed to

the corporation (immediately after such contribution) were

equal to its fair market value as of the time of such contribution.

‘‘(3) AGGREGATION RULES.—

‘‘(A) IN GENERAL.—All corporations which are members

of the same parent-subsidiary controlled group shall be

treated as 1 corporation for purposes of this subsection.

‘‘(B) PARENT-SUBSIDIARY CONTROLLED GROUP.—For purposes of subparagraph (A), the term ‘parent-subsidiary controlled group’ means any controlled group of corporations

as defined in section 1563(a)(1), except that—

‘‘(i) ‘more than 50 percent’ shall be substituted

for ‘at least 80 percent’ each place it appears in section

1563(a)(1), and

‘‘(ii) section 1563(a)(4) shall not apply.

‘‘(e) ACTIVE BUSINESS REQUIREMENT.—

‘‘(1) IN GENERAL.—For purposes of subsection (c)(2), the

requirements of this subsection are met by a corporation for

any period if during such period—

‘‘(A) at least 80 percent (by value) of the assets of

such corporation are used by such corporation in the active

conduct of 1 or more qualified trades or businesses, and

‘‘(B) such corporation is an eligible corporation.

‘‘(2) SPECIAL RULE FOR CERTAIN ACTIVITIES.—For purposes

of paragraph (1), if, in connection with any future qualified

trade or business, a corporation is engaged in—

‘‘(A) start-up activities described in section 195(c)(1)(A),

‘‘(B) activities resulting in the payment or incurring

of expenditures which may be treated as research and

experimental expenditures under section 174, or

‘‘(C) activities with respect to in-house research

expenses described in section 41(b)(4),
H. R. 2264—114

assets used in such activities shall be treated as used in the

active conduct of a qualified trade or business. Any determination under this paragraph shall be made without regard to

whether a corporation has any gross income from such activities

at the time of the determination.

‘‘(3) QUALIFIED TRADE OR BUSINESS.—For purposes of this

subsection, the term ‘qualified trade or business’ means any

trade or business other than—

‘‘(A) any trade or business involving the performance

of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts,

consulting, athletics, financial services, brokerage services,

or any trade or business where the principal asset of such

trade or business is the reputation or skill of 1 or more

of its employees,

‘‘(B) any banking, insurance, financing, leasing, investing, or similar business,

‘‘(C) any farming business (including the business of

raising or harvesting trees),

‘‘(D) any business involving the production or extraction of products of a character with respect to which a

deduction is allowable under section 613 or 613A, and

‘‘(E) any business of operating a hotel, motel, restaurant, or similar business.

‘‘(4) ELIGIBLE CORPORATION.—For purposes of this subsection, the term ‘eligible corporation’ means any domestic corporation; except that such term shall not include—

‘‘(A) a DISC or former DISC,

‘‘(B) a corporation with respect to which an election

under section 936 is in effect or which has a direct or

indirect subsidiary with respect to which such an election

is in effect,

‘‘(C) a regulated investment company, real estate

investment trust, or REMIC, and

‘‘(D) a cooperative.

‘‘(5) STOCK IN OTHER CORPORATIONS.— ‘‘(A) LOOK-THRU IN CASE OF SUBSIDIARIES.—For purposes of this subsection, stock and debt in any subsidiary

corporation shall be disregarded and the parent corporation

shall be deemed to own its ratable share of the subsidiary’s

assets, and to conduct its ratable share of the subsidiary’s

activities.

‘‘(B) PORTFOLIO STOCK OR SECURITIES.—A corporation

shall be treated as failing to meet the requirements of

paragraph (1) for any period during which more than 10

percent of the value of its assets (in excess of liabilities)

consists of stock or securities in other corporations which

are not subsidiaries of such corporation (other than assets

described in paragraph (6)).

‘‘(C) SUBSIDIARY.—For purposes of this paragraph, a

corporation shall be considered a subsidiary if the parent

owns more than 50 percent of the combined voting power

of all classes of stock entitled to vote, or more than 50

percent in value of all outstanding stock, of such corporation.

‘‘(6) WORKING CAPITAL.—For purposes of paragraph (1)(A),

any assets which—
H. R. 2264—115

‘‘(A) are held as a part of the reasonably required

working capital needs of a qualified trade or business of

the corporation, or

‘‘(B) are held for investment and are reasonably

expected to be used within 2 years to finance research

and experimentation in a qualified trade or business or

increases in working capital needs of a qualified trade

or business,

shall be treated as used in the active conduct of a qualified

trade or business. For periods after the corporation has been

in existence for at least 2 years, in no event may more than

50 percent of the assets of the corporation qualify as used

in the active conduct of a qualified trade or business by reason

of this paragraph.

‘‘(7) MAXIMUM REAL ESTATE HOLDINGS.—A corporation shall

not be treated as meeting the requirements of paragraph (1)

for any period during which more than 10 percent of the total

value of its assets consists of real property which is not used

in the active conduct of a qualified trade or business. For

purposes of the preceding sentence, the ownership of, dealing

in, or renting of real property shall not be treated as the

active conduct of a qualified trade or business.

‘‘(8) COMPUTER SOFTWARE ROYALTIES.—For purposes of

paragraph (1), rights to computer software which produces

active business computer software royalties (within the meaning of section 543(d)(1)) shall be treated as an asset used

in the active conduct of a trade or business.

‘‘(f) STOCK ACQUIRED ON CONVERSION OF OTHER STOCK.—If

any stock in a corporation is acquired solely through the conversion

of other stock in such corporation which is qualified small business

stock in the hands of the taxpayer— ‘‘(1) the stock so acquired shall be treated as qualified

small business stock in the hands of the taxpayer, and ‘‘(2) the stock so acquired shall be treated as having been

held during the period during which the converted stock was

held.

‘‘(g) TREATMENT OF PASS-THRU ENTITIES.— ‘‘(1) IN GENERAL.—If any amount included in gross income

by reason of holding an interest in a pass-thru entity meets

the requirements of paragraph (2)— ‘‘(A) such amount shall be treated as gain described in subsection (a), and

‘‘(B) for purposes of applying subsection (b), such

amount shall be treated as gain from a disposition of stock

in the corporation issuing the stock disposed of by the

pass-thru entity and the taxpayer’s proportionate share

of the adjusted basis of the pass-thru entity in such stock

shall be taken into account.

‘‘(2) REQUIREMENTS.—An amount meets the requirements

of this paragraph if—

‘‘(A) such amount is attributable to gain on the sale

or exchange by the pass-thru entity of stock which is qualified small business stock in the hands of such entity (determined by treating such entity as an individual) and which

was held by such entity for more than 5 years, and

‘‘(B) such amount is includible in the gross income

of the taxpayer by reason of the holding of an interest
H. R. 2264—116

in such entity which was held by the taxpayer on the

date on which such pass-thru entity acquired such stock

and at all times thereafter before the disposition of such

stock by such pass-thru entity.

‘‘(3) LIMITATION BASED ON INTEREST ORIGINALLY HELD BY

TAXPAYER.—Paragraph (1) shall not apply to any amount to

the extent such amount exceeds the amount to which paragraph

(1) would have applied if such amount were determined by

reference to the interest the taxpayer held in the pass-thru

entity on the date the qualified small business stock was

acquired.

‘‘(4) PASS-THRU ENTITY.—For purposes of this subsection,

the term ‘pass-thru entity’ means—

‘‘(A) any partnership,

‘‘(B) any S corporation,

‘‘(C) any regulated investment company, and

‘‘(D) any common trust fund.

‘‘(h) CERTAIN TAX-FREE AND OTHER TRANSFERS.—For purposes

of this section—

‘‘(1) IN GENERAL.—In the case of a transfer described in

paragraph (2), the transferee shall be treated as—

‘‘(A) having acquired such stock in the same manner

as the transferor, and

‘‘(B) having held such stock during any continuous

period immediately preceding the transfer during which

it was held (or treated as held under this subsection) by

the transferor.

‘‘(2) DESCRIPTION OF TRANSFERS.—A transfer is described

in this subsection if such transfer is—

‘‘(A) by gift,

‘‘(B) at death, or

‘‘(C) from a partnership to a partner of stock with

respect to which requirements similar to the requirements

of subsection (g) are met at the time of the transfer (without

regard to the 5-year holding period requirement).

‘‘(3) CERTAIN RULES MADE APPLICABLE.—Rules similar to

the rules of section 1244(d)(2) shall apply for purposes of this

section.

‘‘(4) INCORPORATIONS AND REORGANIZATIONS INVOLVING

NONQUALIFIED STOCK.—

‘‘(A) IN GENERAL.—In the case of a transaction

described in section 351 or a reorganization described in

section 368, if qualified small business stock is exchanged

for other stock which would not qualify as qualified small

business stock but for this subparagraph, such other stock

shall be treated as qualified small business stock acquired

on the date on which the exchanged stock was acquired.

‘‘(B) LIMITATION.—This section shall apply to gain from

the sale or exchange of stock treated as qualified small

business stock by reason of subparagraph (A) only to the

extent of the gain which would have been recognized at

the time of the transfer described in subparagraph (A)

if section 351 or 368 had not applied at such time. The

preceding sentence shall not apply if the stock which is

treated as qualified small business stock by reason of

subparagraph (A) is issued by a corporation which (as
H. R. 2264—117

of the time of the transfer described in subparagraph (A))

is a qualified small business.

‘‘(C) SUCCESSIVE APPLICATION.—For purposes of this

paragraph, stock treated as qualified small business stock

under subparagraph (A) shall be so treated for subsequent

transactions or reorganizations, except that the limitation

of subparagraph (B) shall be applied as of the time of

the first transfer to which such limitation applied (determined after the application of the second sentence of

subparagraph (B)).

‘‘(D) CONTROL TEST.—In the case of a transaction

described in section 351, this paragraph shall apply only

if, immediately after the transaction, the corporation issuing the stock owns directly or indirectly stock representing

control (within the meaning of section 368(c)) of the corporation whose stock was exchanged.

‘‘(i) BASIS RULES.—For purposes of this section—

‘‘(1) STOCK EXCHANGED FOR PROPERTY.—In the case where

the taxpayer transfers property (other than money or stock)

to a corporation in exchange for stock in such corporation—

‘‘(A) such stock shall be treated as having been acquired

by the taxpayer on the date of such exchange, and

‘‘(B) the basis of such stock in the hands of the taxpayer

shall in no event be less than the fair market value of

the property exchanged.

‘‘(2) TREATMENT OF CONTRIBUTIONS TO CAPITAL.—If the

adjusted basis of any qualified small business stock is adjusted

by reason of any contribution to capital after the date on

which such stock was originally issued, in determining the

amount of the adjustment by reason of such contribution, the

basis of the contributed property shall in no event be treated

as less than its fair market value on the date of the contribution.

‘‘(j) TREATMENT OF CERTAIN SHORT POSITIONS.— ‘‘(1) IN GENERAL.—If the taxpayer has an offsetting short

position with respect to any qualified small business stock,

subsection (a) shall not apply to any gain from the sale or

exchange of such stock unless— ‘‘(A) such stock was held by the taxpayer for more

than 5 years as of the first day on which there was such

a short position, and

‘‘(B) the taxpayer elects to recognize gain as if such

stock were sold on such first day for its fair market value.

‘‘(2) OFFSETTING SHORT POSITION.—For purposes of paragraph (1), the taxpayer shall be treated as having an offsetting

short position with respect to any qualified small business

stock if—

‘‘(A) the taxpayer has made a short sale of substantially

identical property,

‘‘(B) the taxpayer has acquired an option to sell

substantially identical property at a fixed price, or

‘‘(C) to the extent provided in regulations, the taxpayer

has entered into any other transaction which substantially

reduces the risk of loss from holding such qualified small

business stock.

For purposes of the preceding sentence, any reference to the

taxpayer shall be treated as including a reference to any person
H. R. 2264—118

who is related (within the meaning of section 267(b) or 707(b))

to the taxpayer.

‘‘(k) REGULATIONS.—The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this

section, including regulations to prevent the avoidance of the purposes of this section through split-ups, shell corporations, partnerships, or otherwise.’’

(b) ONE-HALF OF EXCLUSION TREATED AS PREFERENCE FOR

MINIMUM TAX.—

(1) IN GENERAL.—Subsection (a) of section 57 (relating to

items of tax preference) is amended by adding at the end

thereof the following new paragraph:

‘‘(8) EXCLUSION FOR GAINS ON SALE OF CERTAIN SMALL

BUSINESS STOCK.—An amount equal to one-half of the amount

excluded from gross income for the taxable year under section

1202.’’

(2) CONFORMING AMENDMENT.—Subclause (II) of section

53(d)(1)(B)(ii) is amended by striking ‘‘and (6)’’ and inserting

‘‘(6), and (8)’’.

(c) PENALTY FOR FAILURE TO COMPLY WITH REPORTING

REQUIREMENTS.—Section 6652 is amended by inserting before the

last subsection thereof the following new subsection:

‘‘(k) FAILURE TO MAKE REPORTS REQUIRED UNDER SECTION

1202.—In the case of a failure to make a report required under

section 1202(d)(1)(C) which contains the information required by

such section on the date prescribed therefor (determined with regard

to any extension of time for filing), there shall be paid (on notice

and demand by the Secretary and in the same manner as tax)

by the person failing to make such report, an amount equal to

$50 for each report with respect to which there was such a failure.

In the case of any failure due to negligence or intentional disregard,

the preceding sentence shall be applied by substituting ‘$100’ for

‘$50’. In the case of a report covering periods in 2 or more years,

the penalty determined under preceding provisions of this subsection shall be multiplied by the number of such years.’’ (d) CONFORMING AMENDMENTS.— (1)(A) Section 172(d)(2) (relating to modifications with respect to net operating loss deduction) is amended to read

as follows:

‘‘(2) CAPITAL GAINS AND LOSSES OF TAXPAYERS OTHER THAN

CORPORATIONS.—In the case of a taxpayer other than a

corporation—

‘‘(A) the amount deductible on account of losses from

sales or exchanges of capital assets shall not exceed the

amount includable on account of gains from sales or

exchanges of capital assets; and

‘‘(B) the exclusion provided by section 1202 shall not

be allowed.’’

(B) Subparagraph (B) of section 172(d)(4) is amended by

inserting ‘‘, (2)(B),’’ after ‘‘paragraph (1)’’.

(2) Paragraph (4) of section 642(c) is amended to read

as follows:

‘‘(4) ADJUSTMENTS.—To the extent that the amount otherwise allowable as a deduction under this subsection consists

of gain described in section 1202(a), proper adjustment shall

be made for any exclusion allowable to the estate or trust

under section 1202. In the case of a trust, the deduction allowed
H. R. 2264—119

by this subsection shall be subject to section 681 (relating

to unrelated business income).’’

(3) Paragraph (3) of section 643(a) is amended by adding

at the end thereof the following new sentence: ‘‘The exclusion

under section 1202 shall not be taken into account.’’.

(4) Paragraph (4) of section 691(c) is amended by striking

‘‘1201, and 1211’’ and inserting ‘‘1201, 1202, and 1211’’.

(5) The second sentence of paragraph (2) of section 871(a)

is amended by inserting ‘‘such gains and losses shall be determined without regard to section 1202 and’’ after ‘‘except that’’.

(6) The table of sections for part I of subchapter P of

chapter 1 is amended by adding after the item relating to

section 1201 the following new item:

‘‘Sec. 1202. 50-percent exclusion for gain from certain small business stock.’’

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

shall apply to stock issued after the date of the enactment of

this Act.

SEC. 13114. ROLLOVER OF GAIN FROM SALE OF PUBLICLY TRADED

SECURITIES INTO SPECIALIZED SMALL BUSINESS

INVESTMENT COMPANIES.

(a) IN GENERAL.—Part III of subchapter O of chapter 1 (relating

to common nontaxable exchanges) is amended by adding at the

end the following new section:

‘‘SEC. 1044. ROLLOVER OF PUBLICLY TRADED SECURITIES GAIN INTO

SPECIALIZED SMALL BUSINESS INVESTMENT COMPANIES.

‘‘(a) NONRECOGNITION OF GAIN.—In the case of the sale of

any publicly traded securities with respect to which the taxpayer

elects the application of this section, gain from such sale shall

be recognized only to the extent that the amount realized on such

sale exceeds—

‘‘(1) the cost of any common stock or partnership interest

in a specialized small business investment company purchased

by the taxpayer during the 60-day period beginning on the

date of such sale, reduced by

‘‘(2) any portion of such cost previously taken into account

under this section.

This section shall not apply to any gain which is treated as ordinary

income for purposes of this subtitle.

‘‘(b) LIMITATIONS.— ‘‘(1) LIMITATION ON INDIVIDUALS.—In the case of an individual, the amount of gain which may be excluded under subsection (a) for any taxable year shall not exceed the lesser

of—

‘‘(A) $50,000, or

‘‘(B) $500,000, reduced by the amount of gain excluded

under subsection (a) for all preceding taxable years.

‘‘(2) LIMITATION ON C CORPORATIONS.—In the case of a

C corporation, the amount of gain which may be excluded

under subsection (a) for any taxable year shall not exceed

the lesser of—

‘‘(A) $250,000, or

‘‘(B) $1,000,000, reduced by the amount of gain

excluded under subsection (a) for all preceding taxable

years.
H. R. 2264—120

‘‘(3) SPECIAL RULES FOR MARRIED INDIVIDUALS.—For purposes of this subsection— ‘‘(A) SEPARATE RETURNS.—In the case of a separate return by a married individual, paragraph (1) shall be

applied by substituting ‘$25,000’ for ‘$50,000’ and ‘$250,000’

for ‘$500,000’.

‘‘(B) ALLOCATION OF GAIN.—In the case of any joint return, the amount of gain excluded under subsection (a)

for any taxable year shall be allocated equally between

the spouses for purposes of applying this subsection to

subsequent taxable years. ‘‘(C) MARITAL STATUS.—For purposes of this subsection,

marital status shall be determined under section 7703.

‘‘(4) SPECIAL RULES FOR C CORPORATION.—For purposes of

this subsection—

‘‘(A) all corporations which are members of the same controlled group of corporations (within the meaning of

section 52(a)) shall be treated as 1 taxpayer, and ‘‘(B) any gain excluded under subsection (a) by a prede- cessor of any C corporation shall be treated as having

been excluded by such C corporation. ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For purposes of this

section—

‘‘(1) PUBLICLY TRADED SECURITIES.—The term ‘publicly traded securities’ means securities which are traded on an

established securities market.

‘‘(2) PURCHASE.—The term ‘purchase’ has the meaning given such term by section 1043(b)(4). ‘‘(3) SPECIALIZED SMALL BUSINESS INVESTMENT COMPANY.— The term ‘specialized small business investment company’

means any partnership or corporation which is licensed by

the Small Business Administration under section 301(d) of the

Small Business Investment Act of 1958 (as in effect on May

13, 1993).

‘‘(4) CERTAIN ENTITIES NOT ELIGIBLE.—This section shall

not apply to any estate, trust, partnership, or S corporation.

‘‘(d) BASIS ADJUSTMENTS.—If gain from any sale is not recognized by reason of subsection (a), such gain shall be applied to

reduce (in the order acquired) the basis for determining gain or

loss of any common stock or partnership interest in any specialized

small business investment company which is purchased by the

taxpayer during the 60-day period described in subsection (a). This

subsection shall not apply for purposes of section 1202.’’

(b) CONFORMING AMENDMENT.—Paragraph (24) of section

1016(a) is amended—

(1) by striking ‘‘section 1043’’ and inserting ‘‘section 1043

or 1044’’, and

(2) by striking ‘‘section 1043(c)’’ and inserting ‘‘section

1043(c) or 1044(d), as the case may be’’.

(c) CLERICAL AMENDMENT.—The table of sections for part III

of subchapter O of chapter 1 is amended by adding at the end

the following new item:

‘‘Sec. 1044. Rollover of publicly traded securities gain into specialized small

business investment companies.’’

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

shall apply to sales on and after the date of the enactment of

this Act, in taxable years ending on and after such date.
H. R. 2264—121

Subpart C—Modification to Minimum Tax

Depreciation Rules

SEC. 13115. MODIFICATION TO MINIMUM TAX DEPRECIATION RULES.

(a) ELIMINATION OF ACE DEPRECIATION ADJUSTMENT.—Clause

(i) of section 56(g)(4)(A) (relating to depreciation adjustments for

computing adjusted current earnings) is amended by adding at

the end thereof the following new sentence: ‘‘The preceding sentence

shall not apply to any property placed in service after December

31, 1993, and the depreciation deduction with respect to such property shall be determined under the rules of subsection (a)(1)(A).’’. (b) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section shall apply to property placed

in service after December 31, 1993.

(2) COORDINATION WITH TRANSITIONAL RULES.—The amendments made by this section shall not apply to any property

to which paragraph (1) of section 56(a) of the Internal Revenue

Code of 1986 does not apply by reason of subparagraph (C)(i)

thereof.

Subpart D—Increase in Expense Treatment for

Small Businesses

SEC. 13116. INCREASE IN EXPENSE TREATMENT FOR SMALL

BUSINESSES.

(a) GENERAL RULE.—Paragraph (1) of section 179(b) (relating to dollar limitation) is amended by striking ‘‘$10,000’’ and inserting

‘‘$17,500’’.

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

shall apply to taxable years beginning after December 31, 1992.

Subpart E—Tax Exempt Bonds

SEC. 13121. HIGH-SPEED INTERCITY RAIL FACILITY BONDS EXEMPT

FROM STATE VOLUME CAP.

(a) IN GENERAL.—Paragraph (4) of section 146(g) (relating to exemption for certain bonds) is amended by adding at the end

thereof the following flush sentence:

‘‘Paragraph (4) shall be applied without regard to ‘75 percent of’

if all of the property to be financed by the net proceeds of the

issue is to be owned by a governmental unit (within the meaning

of section 142(b)(1)).’’

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

shall apply to bonds issued after December 31, 1993.

SEC. 13122. PERMANENT EXTENSION OF QUALIFIED SMALL ISSUE

BONDS.

(a) IN GENERAL.—Subparagraph (B) of section 144(a)(12) is

amended to read as follows:

‘‘(B) BONDS ISSUED TO FINANCE MANUFACTURING FACILITIES AND FARM PROPERTY.—Subparagraph (A) shall not

apply to any bond issued as part of an issue 95 percent

or more of the net proceeds of which are to be used to

provide—

‘‘(i) any manufacturing facility, or
H. R. 2264—122

‘‘(ii) any land or property in accordance with section 147(c)(2).’’

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

shall apply to bonds issued after June 30, 1992.

(c) TREATMENT UNDER INDUCEMENT REGULATIONS.—If the 1-

year period specified in Treasury Regulation § 1.103–8(a)(5) (as

in effect before July 1, 1993) or any successor regulation would

(but for this subsection) expire after June 30, 1992, and before

January 1, 1994, such period shall not expire before January 1,

1994.

PART III—EXPANSION AND SIMPLIFICATION

OF EARNED INCOME TAX CREDIT

SEC. 13131. EXPANSION AND SIMPLIFICATION OF EARNED INCOME

TAX CREDIT.

(a) GENERAL RULE.—Section 32 (relating to earned income

credit) is amended by striking subsections (a) and (b) and inserting

the following:

‘‘(a) ALLOWANCE OF CREDIT.—

‘‘(1) IN GENERAL.—In the case of an eligible individual,

there shall be allowed as a credit against the tax imposed

by this subtitle for the taxable year an amount equal to the

credit percentage of so much of the taxpayer’s earned income

for the taxable year as does not exceed the earned income

amount.

‘‘(2) LIMITATION.—The amount of the credit allowable to

a taxpayer under paragraph (1) for any taxable year shall

not exceed the excess (if any) of—

‘‘(A) the credit percentage of the earned income

amount, over

‘‘(B) the phaseout percentage of so much of the adjusted

gross income (or, if greater, the earned income) of the

taxpayer for the taxable year as exceeds the phaseout

amount.

‘‘(b) PERCENTAGES AND AMOUNTS.—For purposes of subsection

(a)—

‘‘(1) PERCENTAGES.—The credit percentage and the phaseout percentage shall be determined as follows:

‘‘(A) IN GENERAL.—In the case of taxable years beginning after 1995:

In the case of an eligible

individual with: The credit percentage is: The phaseout percentageis:

1 qualifying child ........ 34 ...................................... 15.98

2 or more qualifying

children ....................

40 ...................................... 21.06

No qualifying children 7.65 ................................. 7.65

‘‘(B) TRANSITIONAL PERCENTAGES FOR 1995.—In the case

of taxable years beginning in 1995:

In the case of an eligible

individual with: The credit percentage is: The phaseout percentageis:

1 qualifying child ........ 34 ...................................... 15.98

2 or more qualifying

children ....................

36 ...................................... 20.22

No qualifying children 7.65 ................................. 7.65
H. R. 2264—123

‘‘(C) TRANSITIONAL PERCENTAGES FOR 1994.—In the case

of a taxable year beginning in 1994:

In the case of an eligible

individual with: The credit percentage is: The phaseout percentageis:

1 qualifying child ........ 26.3 ................................... 15.98

2 or more qualifying

children ....................

30 ...................................... 17.68

No qualifying children 7.65 ................................. 7.65

‘‘(2) AMOUNTS.—The earned income amount and the phaseout amount shall be determined as follows:

‘‘(A) IN GENERAL.—In the case of taxable years beginning after 1994:

In the case of an eligible

individual with:

The earned income

amount is: The phaseout amount is:

1 qualifying child ........ $6,000 ............................... $11,000

2 or more qualifying

children ....................

$8,425 ............................... $11,000

No qualifying children $4,000 ............................... $5,000

‘‘(B) TRANSITIONAL AMOUNTS.—In the case of a taxable

year beginning in 1994:

In the case of an eligible

individual with:

The earned income

amount is: The phaseout amount is:

1 qualifying child ........ $7,750 ............................... $11,000

2 or more qualifying

children ....................

$8,425 ............................... $11,000

No qualifying children $4,000 ............................... $5,000’’.

(b) ELIGIBLE INDIVIDUAL.—Subparagraph (A) of section 32(c)(1)

(defining eligible individual) is amended to read as follows:

‘‘(A) IN GENERAL.—The term ‘eligible individual’

means—

‘‘(i) any individual who has a qualifying child for

the taxable year, or

‘‘(ii) any other individual who does not have a

qualifying child for the taxable year, if—

‘‘(I) such individual’s principal place of abode

is in the United States for more than one-half

of such taxable year,

‘‘(II) such individual (or, if the individual is

married, either the individual or the individual’s

spouse) has attained age 25 but not attained age

65 before the close of the taxable year, and

‘‘(III) such individual is not a dependent for

whom a deduction is allowable under section 151

to another taxpayer for any taxable year beginning

in the same calendar year as such taxable year.

For purposes of the preceding sentence, marital status

shall be determined under section 7703.’’

(c) INFLATION ADJUSTMENTS.—Section 32(i) (relating to inflation

adjustments) is amended—

(1) by striking paragraphs (1) and (2) and inserting the

following new paragraph:
H. R. 2264—124

‘‘(1) IN GENERAL.—In the case of any taxable year beginning

after 1994, each dollar amount contained in subsection (b)(2)(A)

shall be increased by an amount equal to—

‘‘(A) such dollar amount, multiplied by

‘‘(B) the cost-of-living adjustment determined under

section 1(f)(3), for the calendar year in which the taxable

year begins, by substituting ‘calendar year 1993’ for ‘calendar year 1992’.’’, and

(2) by redesignating paragraph (3) as paragraph (2).

(d) CONFORMING AMENDMENTS.—

(1) Subparagraph (D) of section 32(c)(3) is amended—

(A) by striking ‘‘clause (i) or (ii)’’ in clause (iii) and

inserting ‘‘clause (i)’’,

(B) by striking clause (ii), and

(C) by redesignating clause (iii) as clause (ii).

(2) Paragraph (3) of section 162(l) is amended to read

as follows:

‘‘(3) COORDINATION WITH MEDICAL DEDUCTION.—Any

amount paid by a taxpayer for insurance to which paragraph

(1) applies shall not be taken into account in computing the

amount allowable to the taxpayer as a deduction under section

213(a).’’

(3) Section 213 is amended by striking subsection (f).

(4) Subsection (b) of section 3507 is amended by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively, and by inserting after paragraph (1) the following new

paragraph:

‘‘(2) certifies that the employee has 1 or more qualifying

children (within the meaning of section 32(c)(3)) for such taxable

year,’’.

(5) Subparagraph (B) of section 3507(c)(2) is amended by

striking clauses (i) and (ii) and inserting the following:

‘‘(i) of not more than 60 percent of the credit

percentage in effect under section 32(b)(1) for an

eligible individual with 1 qualifying child and with

earned income not in excess of the earned income

amount in effect under section 32(b)(2) for such an

eligible individual, which

‘‘(ii) phases out at 60 percent of the phaseout

percentage in effect under section 32(b)(1) for such

an eligible individual between the phaseout amount

in effect under section 32(b)(2) for such an eligible

individual and the amount of earned income at which

the credit under section 32(a) phases out for such

an eligible individual, or’’.

(6) Section 3507 is amended by adding at the end thereof

the following new subsection:

‘‘(f) INTERNAL REVENUE SERVICE NOTIFICATION.—The Internal

Revenue Service shall take such steps as may be appropriate to

ensure that taxpayers who have 1 or more qualifying children

and who receive a refund of the credit under section 32 are aware

of the availability of earned income advance amounts under this

section.’’

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

shall apply to taxable years beginning after December 31, 1993.
H. R. 2264—125

PART IV—INCENTIVES FOR INVESTMENT IN

REAL ESTATE

Subpart A—Extension of Qualified Mortgage

Bonds and Low-Income Housing Credit

SEC. 13141. PERMANENT EXTENSION OF QUALIFIED MORTGAGE

BONDS.

(a) IN GENERAL.—Paragraph (1) of section 143(a) (defining

qualified mortgage bond) is amended to read as follows:

‘‘(1) QUALIFIED MORTGAGE BOND DEFINED.—For purposes

of this title, the term ‘qualified mortgage bond’ means a bond

which is issued as part of a qualified mortgage issue.’’

(b) MORTGAGE CREDIT CERTIFICATES.—Section 25 is amended

by striking subsection (h) and by redesignating subsections (i) and

(j) as subsections (h) and (i), respectively.

(c) TREATMENT OF RESALE PRICE CONTROL AND SUBSIDY LIEN

PROGRAMS.—Subsection (k) of section 143 is amended by adding

at the end thereof the following new paragraph:

‘‘(10) TREATMENT OF RESALE PRICE CONTROL AND SUBSIDY

LIEN PROGRAMS.—

‘‘(A) IN GENERAL.—In the case of a residence which

is located in a high housing cost area (as defined in section

143(f)(5)), the interest of a governmental unit in such residence by reason of financing provided under any qualified

program shall not be taken into account under this section

(other than subsection (m)), and the acquisition cost of

the residence which is taken into account under subsection

(e) shall be such cost reduced by the amount of such financing.

‘‘(B) QUALIFIED PROGRAM.—For purposes of subparagraph (A), the term ‘qualified program’ means any governmental program providing mortgage loans (other than 1st

mortgage loans) or grants—

‘‘(i) which restricts (throughout the 9-year period

beginning on the date the financing is provided) the

resale of the residence to a purchaser qualifying under

this section and to a price determined by an index

that reflects less than the full amount of any appreciation in the residence’s value, or

‘‘(ii) which provides for deferred or reduced interest

payments on such financing and grants the governmental unit a share in the appreciation of the residence,

but only if such financing is not provided directly or

indirectly through the use of any tax-exempt private activity bond.’’

(d) FINANCING ALLOWED FOR CONTRACT FOR DEED AGREEMENTS.—

(1) IN GENERAL.—Paragraph (2) of section 143(d) (relating to exceptions to 3-year requirement) is amended— (A) by striking ‘‘and’’ at the end of subparagraph (A),

(B) by adding ‘‘and’’ at the end of subparagraph (B),

and

(C) by inserting after subparagraph (B) the following

new subparagraph:
H. R. 2264—126

‘‘(C) financing with respect to land described in subsection (i)(1)(C) and the construction of any residence

thereon.’’

(2) EXCEPTION TO NEW MORTGAGE REQUIREMENT.—Paragraph (1) of section 143(i) (relating to mortgages must be new

mortgages) is amended by adding at the end thereof the following new subparagraph:

‘‘(C) EXCEPTION FOR CERTAIN CONTRACT FOR DEED

AGREEMENTS.—

‘‘(i) IN GENERAL.—In the case of land possessed

under a contract for deed by a mortgagor—

‘‘(I) whose principal residence (within the

meaning of section 1034) is located on such land,

and

‘‘(II) whose family income (as defined in subsection (f)(2)) is not more than 50 percent of

applicable median family income (as defined in

subsection (f)(4)),

the contract for deed shall not be treated as an existing

mortgage for purposes of subparagraph (A).

‘‘(ii) CONTRACT FOR DEED DEFINED.—For purposes

of this subparagraph, the term ‘contract for deed’

means a seller-financed contract for the conveyance

of land under which—

‘‘(I) legal title does not pass to the purchaser

until the consideration under the contract is fully

paid to the seller, and

‘‘(II) the seller’s remedy for nonpayment is

forfeiture rather than judicial or nonjudicial foreclosure.’’

(3) ACQUISITION COST INCLUDES COST OF LAND.—Clause

(iii) of section 143(k)(3)(B) is amended by inserting ‘‘(other

than land described in subsection (i)(1)(C)(i))’’ after ‘‘cost of

land’’.

(e) FINANCING OF NEW 2-FAMILY RESIDENCES PERMITTED.— Paragraph (7) of section 143(k) is amended by adding at the end

thereof the following flush sentence: ‘‘Subparagraph (B) shall not apply to any 2-family residence

if the residence is a targeted area residence and the family

income of the mortgagor meets the requirement of subsection

(f)(3)(B).’’

(f) EFFECTIVE DATES.— (1) BONDS.—The amendment made by subsection (a) shall

apply to bonds issued after June 30, 1992. (2) CERTIFICATES.—The amendment made by subsection

(b) shall apply to elections for periods after June 30, 1992.

(3) SUBSECTIONS (c) AND (e).—The amendments made by

subsections (c) and (e) shall apply to qualified mortgage bonds

issued and mortgage credit certificates provided on or after

the date of enactment of this Act.

(4) CONTRACT FOR DEED AGREEMENTS.—The amendments

made by subsection (d) shall apply to loans originated and

credit certificates provided after the date of the enactment

of this Act.

SEC. 13142. LOW-INCOME HOUSING CREDIT.

(a) PERMANENT EXTENSION.—
H. R. 2264—127

(1) IN GENERAL.—Section 42 (relating to low-income housing credit) is amended by striking subsection (o).

(2) EFFECTIVE DATE.—The amendment made by paragraph

(1) shall apply to periods ending after June 30, 1992.

(b) MODIFICATIONS.—

(1) HOUSING CREDIT AGENCY DETERMINATION OF REASONABLENESS OF PROJECT COSTS.—Subparagraph (B) of section

42(m)(2) (relating to credit allocated to building not to exceed

amount necessary to assure project feasibility) is amended—

(A) by striking ‘‘and’’ at the end of clause (ii),

(B) by striking the period at the end of clause (iii)

and inserting ‘‘, and’’, and

(C) by inserting after clause (iii) the following new

clause:

‘‘(iv) the reasonableness of the developmental and

operational costs of the project.’’

(2) UNITS WITH CERTAIN FULL-TIME STUDENTS NOT DISQUALIFIED.—Subparagraph (D) of section 42(i)(3) (defining low-income

unit) is amended to read as follows:

‘‘(D) CERTAIN STUDENTS NOT TO DISQUALIFY UNIT.—

A unit shall not fail to be treated as a low-income unit

merely because it is occupied—

‘‘(i) by an individual who is—

‘‘(I) a student and receiving assistance under

title IV of the Social Security Act, or

‘‘(II) enrolled in a job training program receiving assistance under the Job Training Partnership

Act or under other similar Federal, State, or local

laws, or

‘‘(ii) entirely by full-time students if such students

are—

‘‘(I) single parents and their children and such

parents and children are not dependents (as

defined in section 152) of another individual, or

‘‘(II) married and file a joint return.’’

(3) TREASURY WAIVERS OF CERTAIN DE MINIMIS ERRORS AND

RECERTIFICATIONS.—Subsection (g) of section 42 (relating to

qualified low-income housing projects) is amended by adding

at the end thereof the following new paragraph:

‘‘(8) WAIVER OF CERTAIN DE MINIMIS ERRORS AND

RECERTIFICATIONS.—On application by the taxpayer, the Secretary may waive—

‘‘(A) any recapture under subsection (j) in the case

of any de minimis error in complying with paragraph (1),

or

‘‘(B) any annual recertification of tenant income for

purposes of this subsection, if the entire building is occupied by low-income tenants.’’

(4) DISCRIMINATION AGAINST TENANTS PROHIBITED.—Section

42(h)(6)(B) (defining extended low-income housing commitment)

is amended by redesignating clauses (iv) and (v) as clauses

(v) and (vi) and by inserting after clause (iii) the following

new clause:

‘‘(iv) which prohibits the refusal to lease to a holder

of a voucher or certificate of eligibility under section

8 of the United States Housing Act of 1937 because
H. R. 2264—128

of the status of the prospective tenant as such a

holder,’’.

(5) HOME ASSISTANCE NOT TO RESULT IN CERTAIN BUILDINGS BEING FEDERALLY SUBSIDIZED.—Paragraph (2) of section

42(i) (relating to determination of whether building is federally

subsidized) is amended by adding at the end thereof the following new subparagraph:

‘‘(E) BUILDINGS RECEIVING HOME ASSISTANCE.—

‘‘(i) IN GENERAL.—Assistance provided under the

HOME Investment Partnerships Act (as in effect on

the date of the enactment of this subparagraph) with

respect to any building shall not be taken into account

under subparagraph (D) if 40 percent or more of the

residential units in the building are occupied by

individuals whose income is 50 percent or less of area

median gross income. Subsection (d)(5)(C) shall not

apply to any building to which the preceding sentence

applies.

‘‘(ii) SPECIAL RULE FOR CERTAIN HIGH-COST HOUSING AREAS.—In the case of a building located in a

city described in section 142(d)(6), clause (i) shall be

applied by substituting ‘25 percent’ for ‘40 percent’.’’

(6) EFFECTIVE DATES.—

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

(B) and (C), the amendments made by this subsection shall

apply to—

(i) determinations under section 42 of the Internal

Revenue Code of 1986 with respect to housing credit

dollar amounts allocated from State housing credit ceilings after June 30, 1992, or (ii) buildings placed in service after June 30, 1992, to the extent paragraph (1) of section 42(h) of such

Code does not apply to any building by reason of paragraph (4) thereof, but only with respect to bonds issued

after such date.

(B) WAIVER AUTHORITY AND PROHIBITED DISCRIMINATION.—The amendments made by paragraphs (3) and (4)

shall take effect on the date of the enactment of this

Act.

(C) HOME ASSISTANCE.—The amendment made by paragraph (2) shall apply to periods after the date of the

enactment of this Act.

(c) ELECTION TO DETERMINE RENT LIMITATION BASED ON NUMBER OF BEDROOMS AND DEEP RENT SKEWING.— (1) In the case of a building to which the amendments

made by subsection (e)(1) or (n)(2) of section 7108 of the Revenue Reconciliation Act of 1989 did not apply, the taxpayer

may elect to have such amendments apply to such building

if the taxpayer has met the requirements of the procedures

described in section 42(m)(1)(B)(iii) of the Internal Revenue

Code of 1986.

(2) In the case of the amendment made by such subsection

(e)(1), such election shall apply only with respect to tenants

first occupying any unit in the building after the date of the

election.

(3) In the case of the amendment made by such subsection

(n)(2), such election shall apply only if rents of low-income
H. R. 2264—129

tenants in such building do not increase as a result of such

election.

(4) An election under this subsection may be made only during the 180-day period beginning on the date of the enactment of this Act and, once made, shall be irrevocable.

Subpart B—Passive Loss Rules

SEC. 13143. APPLICATION OF PASSIVE LOSS RULES TO RENTAL REAL

ESTATE ACTIVITIES.

(a) RENTAL REAL ESTATE ACTIVITIES OF PERSONS IN REAL PROPERTY BUSINESS NOT AUTOMATICALLY TREATED AS PASSIVE ACTIVITIES.—Subsection (c) of section 469 (defining passive activity) is

amended by adding at the end thereof the following new paragraph:

‘‘(7) SPECIAL RULES FOR TAXPAYERS IN REAL PROPERTY BUSINESS.—

‘‘(A) IN GENERAL.—If this paragraph applies to any

taxpayer for a taxable year—

‘‘(i) paragraph (2) shall not apply to any rental

real estate activity of such taxpayer for such taxable

year, and

‘‘(ii) this section shall be applied as if each interest

of the taxpayer in rental real estate were a separate

activity.

Notwithstanding clause (ii), a taxpayer may elect to treat

all interests in rental real estate as one activity. Nothing

in the preceding provisions of this subparagraph shall be

construed as affecting the determination of whether the

taxpayer materially participates with respect to any

interest in a limited partnership as a limited partner.

‘‘(B) TAXPAYERS TO WHOM PARAGRAPH APPLIES.—This

paragraph shall apply to a taxpayer for a taxable year

if—

‘‘(i) more than one-half of the personal services

performed in trades or businesses by the taxpayer

during such taxable year are performed in real property trades or businesses in which the taxpayer materially participates, and

‘‘(ii) such taxpayer performs more than 750 hours

of services during the taxable year in real property

trades or businesses in which the taxpayer materially

participates.

In the case of a joint return, the requirements of the

preceding sentence are satisfied if and only if either spouse

separately satisfies such requirements. For purposes of the

preceding sentence, activities in which a spouse materially

participates shall be determined under subsection (h).

‘‘(C) REAL PROPERTY TRADE OR BUSINESS.—For purposes

of this paragraph, the term ‘real property trade or business’

means any real property development, redevelopment,

construction, reconstruction, acquisition, conversion, rental,

operation, management, leasing, or brokerage trade or business.

‘‘(D) SPECIAL RULES FOR SUBPARAGRAPH (B).—

‘‘(i) CLOSELY HELD C CORPORATIONS.—In the case

of a closely held C corporation, the requirements of

subparagraph (B) shall be treated as met for any tax-
H. R. 2264—130

able year if more than 50 percent of the gross receipts

of such corporation for such taxable year are derived

from real property trades or businesses in which the

corporation materially participates. ‘‘(ii) PERSONAL SERVICES AS AN EMPLOYEE.—For

purposes of subparagraph (B), personal services performed as an employee shall not be treated as performed in real property trades or businesses. The

preceding sentence shall not apply if such employee

is a 5-percent owner (as defined in section 416(i)(1)(B))

in the employer.’’ (b) CONFORMING AMENDMENTS.— (1) Paragraph (2) of section 469(c) is amended by striking ‘‘The’’ and inserting ‘‘Except as provided in paragraph (7), the’’. (2) Clause (iv) of section 469(i)(3)(E) is amended by insert- ing ‘‘or any loss allowable by reason of subsection (c)(7)’’ after

‘‘loss’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1993.

Subpart C—Provisions Relating to Real Estate

Investments by Pension Funds

SEC. 13144. REAL ESTATE PROPERTY ACQUIRED BY A QUALIFIED

ORGANIZATION.

(a) MODIFICATIONS OF EXCEPTIONS.—Paragraph (9) of section 514(c) (relating to real property acquired by a qualified organization)

is amended by adding at the end thereof the following new

subparagraphs: ‘‘(G) SPECIAL RULES FOR PURPOSES OF THE EXCEPTIONS.—Except as otherwise provided by regulations— ‘‘(i) SMALL LEASES DISREGARDED.—For purposes of clauses (iii) and (iv) of subparagraph (B), a lease to

a person described in such clause (iii) or (iv) shall

be disregarded if no more than 25 percent of the

leasable floor space in a building (or complex of buildings) is covered by the lease and if the lease is on

commercially reasonable terms. ‘‘(ii) COMMERCIALLY REASONABLE FINANCING.— Clause (v) of subparagraph (B) shall not apply if the

financing is on commercially reasonable terms.

‘‘(H) QUALIFYING SALES BY FINANCIAL INSTITUTIONS.— ‘‘(i) IN GENERAL.—In the case of a qualifying sale by a financial institution, except as provided in regulations, clauses (i) and (ii) of subparagraph (B) shall

not apply with respect to financing provided by such

institution for such sale.

‘‘(ii) QUALIFYING SALE.—For purposes of this

clause, there is a qualifying sale by a financial institution if—

‘‘(I) a qualified organization acquires property

described in clause (iii) from a financial institution

and any gain recognized by the financial institution with respect to the property is ordinary

income,

‘‘(II) the stated principal amount of the financing provided by the financial institution does not
H. R. 2264—131

exceed the amount of the outstanding indebtedness

(including accrued but unpaid interest) of the

financial institution with respect to the property

described in clause (iii) immediately before the

acquisition referred to in clause (iii) or (v), whichever is applicable, and

‘‘(III) the present value (determined as of the

time of the sale and by using the applicable Federal rate determined under section 1274(d)) of the

maximum amount payable pursuant to the financing that is determined by reference to the revenue,

income, or profits derived from the property cannot

exceed 30 percent of the total purchase price of

the property (including the contingent payments).

‘‘(iii) PROPERTY TO WHICH SUBPARAGRAPH

APPLIES.—Property is described in this clause if such

property is foreclosure property, or is real property

which—

‘‘(I) was acquired by the qualified organization

from a financial institution which is in

conservatorship or receivership, or from the conservator or receiver of such an institution, and

‘‘(II) was held by the financial institution at

the time it entered into conservatorship or

receivership.

‘‘(iv) FINANCIAL INSTITUTION.—For purposes of this

subparagraph, the term ‘financial institution’ means—

‘‘(I) any financial institution described in section 581 or 591(a),

‘‘(II) any other corporation which is a direct

or indirect subsidiary of an institution referred

to in subclause (I) but only if, by virtue of being

affiliated with such institution, such other corporation is subject to supervision and examination by

a Federal or State agency which regulates institutions referred to in subclause (I), and

‘‘(III) any person acting as a conservator or

receiver of an entity referred to in subclause (I)

or (II) (or any government agency or corporation

succeeding to the rights or interest of such person).

‘‘(v) FORECLOSURE PROPERTY.—For purposes of this

subparagraph, the term ‘foreclosure property’ means

any real property acquired by the financial institution

as the result of having bid on such property at foreclosure, or by operation of an agreement or process

of law, after there was a default (or a default was

imminent) on indebtedness which such property

secured.’’.

(b) CONFORMING AMENDMENT.—Paragraph (9) of section 514(c)

is amended—

(1) by adding the following new sentence at the end of

subparagraph (A): ‘‘For purposes of this paragraph, an interest

in a mortgage shall in no event be treated as real property.’’,

and

(2) by striking the last sentence of subparagraph (B).

(c) EFFECTIVE DATES.—
H. R. 2264—132

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

shall apply to acquisitions on or after January 1, 1994.

(2) SMALL LEASES.—The provisions of section 514(c)(9)(G)(i)

of the Internal Revenue Code of 1986 shall, in addition to

any leases to which the provisions apply by reason of paragraph

(1), apply to leases entered into on or after January 1, 1994.

SEC. 13145. REPEAL OF SPECIAL TREATMENT OF PUBLICLY TREATED

PARTNERSHIPS.

(a) GENERAL RULE.—Subsection (c) of section 512 is amended—

(1) by striking paragraph (2),

(2) by redesignating paragraph (3) as paragraph (2), and

(3) by striking ‘‘paragraph (1) or (2)’’ in paragraph (2)

(as so redesignated) and inserting ‘‘paragraph (1)’’.

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

(a) shall apply to partnership years beginning on or after January

1, 1994.

SEC. 13146. TITLE-HOLDING COMPANIES PERMITTED TO RECEIVE

SMALL AMOUNTS OF UNRELATED BUSINESS TAXABLE

INCOME.

(a) GENERAL RULE.—Paragraph (25) of section 501(c) is

amended by adding at the end thereof the following new subparagraph:

‘‘(G)(i) An organization shall not be treated as failing

to be described in this paragraph merely by reason of

the receipt of any otherwise disqualifying income which

is incidentally derived from the holding of real property. ‘‘(ii) Clause (i) shall not apply if the amount of gross

income described in such clause exceeds 10 percent of the

organization’s gross income for the taxable year unless

the organization establishes to the satisfaction of the Secretary that the receipt of gross income described in clause

(i) in excess of such limitation was inadvertent and reasonable steps are being taken to correct the circumstances

giving rise to such income.’’ (b) CONFORMING AMENDMENT.—Paragraph (2) of section 501(c)

is amended by adding at the end thereof the following new sentence:

‘‘Rules similar to the rules of subparagraph (G) of paragraph (25)

shall apply for purposes of this paragraph.’’ (c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning on or after January 1, 1994.

SEC. 13147. EXCLUSION FROM UNRELATED BUSINESS TAX OF GAINS

FROM CERTAIN PROPERTY.

(a) GENERAL RULE.—Subsection (b) of section 512 (relating

to modifications) is amended by adding at the end thereof the

following new paragraph:

‘‘(16)(A) Notwithstanding paragraph (5)(B), there shall be

excluded all gains or losses from the sale, exchange, or other

disposition of any real property described in subparagraph (B)

if—

‘‘(i) such property was acquired by the organization

from—

‘‘(I) a financial institution described in section 581

or 591(a) which is in conservatorship or receivership,

or
H. R. 2264—133

‘‘(II) the conservator or receiver of such an institution (or any government agency or corporation succeeding to the rights or interests of the conservator or

receiver),

‘‘(ii) such property is designated by the organization

within the 9-month period beginning on the date of its

acquisition as property held for sale, except that not more

than one-half (by value determined as of such date) of

property acquired in a single transaction may be so

designated,

‘‘(iii) such sale, exchange, or disposition occurs before

the later of—

‘‘(I) the date which is 30 months after the date

of the acquisition of such property, or

‘‘(II) the date specified by the Secretary in order

to assure an orderly disposition of property held by

persons described in subparagraph (A), and

‘‘(iv) while such property was held by the organization,

the aggregate expenditures on improvements and development activities included in the basis of the property are

(or were) not in excess of 20 percent of the net selling

price of such property.

‘‘(B) Property is described in this subparagraph if it is

real property which—

‘‘(i) was held by the financial institution at the time

it entered into conservatorship or receivership, or

‘‘(ii) was foreclosure property (as defined in section

514(c)(9)(H)(v)) which secured indebtedness held by the

financial institution at such time.

For purposes of this subparagraph, real property includes an

interest in a mortgage.’’

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

shall apply to property acquired on or after January 1, 1994.

SEC. 13148. EXCLUSION FROM UNRELATED BUSINESS TAX OF CERTAIN FEES AND OPTION PREMIUMS.

(a) LOAN COMMITMENT FEES.—Paragraph (1) of section 512(b)

(relating to modifications) is amended by inserting ‘‘amounts

received or accrued as consideration for entering into agreements

to make loans,’’ before ‘‘and annuities’’.

(b) OPTION PREMIUMS.—The second sentence of section 512(b)(5)

is amended—

(1) by striking ‘‘all gains on’’ and inserting ‘‘all gains or

losses recognized, in connection with the organization’s investment activities, from’’,

(2) by striking ‘‘, written by the organization in connection

with its investment activities,’’ and

(3) by inserting ‘‘or real property and all gains or losses

from the forfeiture of good-faith deposits (that are consistent

with established business practice) for the purchase, sale, or

lease of real property in connection with the organization’s

investment activities’’ before the period.

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

shall apply to amounts received on or after January 1, 1994.
H. R. 2264—134

SEC. 13149. TREATMENT OF PENSION FUND INVESTMENTS IN REAL

ESTATE INVESTMENT TRUSTS.

(a) GENERAL RULE.—Subsection (h) of section 856 (relating

to closely held determinations) is amended by adding at the end

thereof the following new paragraph:

‘‘(3) TREATMENT OF TRUSTS DESCRIBED IN SECTION 401(a).—

‘‘(A) LOOK-THRU TREATMENT.—

‘‘(i) IN GENERAL.—Except as provided in clause

(ii), in determining whether the stock ownership

requirement of section 542(a)(2) is met for purposes

of paragraph (1)(A), any stock held by a qualified trust

shall be treated as held directly by its beneficiaries

in proportion to their actuarial interests in such trust

and shall not be treated as held by such trust.

‘‘(ii) CERTAIN RELATED TRUSTS NOT ELIGIBLE.—

Clause (i) shall not apply to any qualified trust if

one or more disqualified persons (as defined in section

4975(e)(2), without regard to subparagraphs (B) and

(I) thereof) with respect to such qualified trust hold

in the aggregate 5 percent or more in value of the

interests in the real estate investment trust and such

real estate investment trust has accumulated earnings

and profits attributable to any period for which it

did not qualify as a real estate investment trust.

‘‘(B) COORDINATION WITH PERSONAL HOLDING COMPANY

RULES.—If any entity qualifies as a real estate investment

trust for any taxable year by reason of subparagraph (A),

such entity shall not be treated as a personal holding

company for such taxable year for purposes of part II

of subchapter G of this chapter.

‘‘(C) TREATMENT FOR PURPOSES OF UNRELATED BUSINESS TAX.—If any qualified trust holds more than 10 percent (by value) of the interests in any pension-held REIT

at any time during a taxable year, the trust shall be

treated as having for such taxable year gross income from

an unrelated trade or business in an amount which bears

the same ratio to the aggregate dividends paid (or treated

as paid) by the REIT to the trust for the taxable year

of the REIT with or within which the taxable year of

the trust ends (the ‘REIT year’) as—

‘‘(i) the gross income (less direct expenses related

thereto) of the REIT for the REIT year from unrelated

trades or businesses (determined as if the REIT were

a qualified trust), bears to

‘‘(ii) the gross income (less direct expenses related

thereto) of the REIT for the REIT year.

This subparagraph shall apply only if the ratio determined

under the preceding sentence is at least 5 percent.

‘‘(D) PENSION-HELD REIT.—The purposes of subparagraph (C)—

‘‘(i) IN GENERAL.—A real estate investment trust

is a pension-held REIT if such trust would not have

qualified as a real estate investment trust but for

the provisions of this paragraph and if such trust is

predominantly held by qualified trusts.
H. R. 2264—135

‘‘(ii) PREDOMINANTLY HELD.—For purposes of clause (i), a real estate investment trust is predominantly held by qualified trusts if— ‘‘(I) at least 1 qualified trust holds more than 25 percent (by value) of the interests in such real

estate investment trust, or

‘‘(II) 1 or more qualified trusts (each of whom

own more than 10 percent by value of the interests

in such real estate investment trust) hold in the

aggregate more than 50 percent (by value) of the

interests in such real estate investment trust.

‘‘(E) QUALIFIED TRUST.—For purposes of this paragraph, the term ‘qualified trust’ means any trust described

in section 401(a) and exempt from tax under section

501(a).’’

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to taxable years beginning after December 31, 1993.

Subpart D—Discharge of Indebtedness

SEC. 13150. EXCLUSION FROM GROSS INCOME FOR INCOME FROM DISCHARGE OF QUALIFIED REAL PROPERTY BUSINESS

INDEBTEDNESS.

(a) IN GENERAL.—Paragraph (1) of section 108(a) (relating to

income from discharge of indebtedness) is amended by striking

‘‘or’’ at the end of subparagraph (B), by striking the period at

the end of subparagraph (C) and inserting ‘‘, or’’, and by adding

at the end the following new subparagraph:

‘‘(D) in the case of a taxpayer other than a C corporation,

the indebtedness discharged is qualified real property business

indebtedness.’’

(b) QUALIFIED REAL PROPERTY BUSINESS INDEBTEDNESS.—Section 108 is amended by inserting after subsection (b) the following

new subsection:

‘‘(c) TREATMENT OF DISCHARGE OF QUALIFIED REAL PROPERTY

BUSINESS INDEBTEDNESS.—

‘‘(1) BASIS REDUCTION.—

‘‘(A) IN GENERAL.—The amount excluded from gross

income under subparagraph (D) of subsection (a)(1) shall

be applied to reduce the basis of the depreciable real property of the taxpayer.

‘‘(B) CROSS REFERENCE.—For provisions making the

reduction described in subparagraph (A), see section 1017.

‘‘(2) LIMITATIONS.—

‘‘(A) INDEBTEDNESS IN EXCESS OF VALUE.—The amount

excluded under subparagraph (D) of subsection (a)(1) with

respect to any qualified real property business indebtedness

shall not exceed the excess (if any) of— ‘‘(i) the outstanding principal amount of such indebtedness (immediately before the discharge), over ‘‘(ii) the fair market value of the real property described in paragraph (3)(A) (as of such time), reduced

by the outstanding principal amount of any other qualified real property business indebtedness secured by

such property (as of such time).

‘‘(B) OVERALL LIMITATION.—The amount excluded

under subparagraph (D) of subsection (a)(1) shall not exceed
H. R. 2264—136

the aggregate adjusted bases of depreciable real property

(determined after any reductions under subsections (b) and

(g)) held by the taxpayer immediately before the discharge

(other than depreciable real property acquired in contemplation of such discharge).

‘‘(3) QUALIFIED REAL PROPERTY BUSINESS INDEBTEDNESS.—

The term ‘qualified real property business indebtedness’ means

indebtedness which—

‘‘(A) was incurred or assumed by the taxpayer in

connection with real property used in a trade or business

and is secured by such real property,

‘‘(B) was incurred or assumed before January 1, 1993,

or if incurred or assumed on or after such date, is qualified

acquisition indebtedness, and

‘‘(C) with respect to which such taxpayer makes an

election to have this paragraph apply.

Such term shall not include qualified farm indebtedness.

Indebtedness under subparagraph (B) shall include indebtedness resulting from the refinancing of indebtedness under

subparagraph (B) (or this sentence), but only to the extent

it does not exceed the amount of the indebtedness being

refinanced.

‘‘(4) QUALIFIED ACQUISITION INDEBTEDNESS.—For purposes

of paragraph (3)(B), the term ‘qualified acquisition indebtedness’ means, with respect to any real property described in

paragraph (3)(A), indebtedness incurred or assumed to acquire,

construct, reconstruct, or substantially improve such property.

‘‘(5) REGULATIONS.—The Secretary shall issue such regulations as are necessary to carry out this subsection, including

regulations preventing the abuse of this subsection through

cross-collateralization or other means.’’

(c) TECHNICAL AMENDMENTS.—

(1) Subparagraph (A) of section 108(a)(2) is amended by

striking ‘‘and (C)’’ and inserting ‘‘, (C), and (D)’’.

(2) Subparagraph (B) of section 108(a)(2) is amended to

read as follows:

‘‘(B) INSOLVENCY EXCLUSION TAKES PRECEDENCE OVER

QUALIFIED FARM EXCLUSION AND QUALIFIED REAL PROPERTY

BUSINESS EXCLUSION.—Subparagraphs (C) and (D) of paragraph (1) shall not apply to a discharge to the extent

the taxpayer is insolvent.’’

(3) Subsection (d) of section 108 is amended—

(A) by striking ‘‘subsections (a), (b), and (g)’’ in paragraphs (6) and (7)(A) and inserting ‘‘subsections (a), (b),

(c), and (g)’’,

(B) by striking ‘‘SUBSECTIONS (a), (b), AND (g)’’ in the

subsection heading and inserting ‘‘CERTAIN PROVISIONS’’,

and

(C) by striking ‘‘SUBSECTIONS (a), (b), AND (g)’’ in the

headings of paragraphs (6) and (7)(A) and inserting ‘‘CERTAIN PROVISIONS’’.

(4) Subparagraph (B) of section 108(d)(7) is amended by

adding at the end thereof the following new sentence: ‘‘The

preceding sentence shall not apply to any discharge to the

extent that subsection (a)(1)(D) applies to such discharge.’’
H. R. 2264—137

(5) Subparagraph (A) of section 108(d)(9) is amended by

inserting ‘‘or under paragraph (3)(B) of subsection (c)’’ after

‘‘subsection (b)’’.

(6) Paragraph (2) of section 1017(a) is amended by striking

‘‘or (b)(5)’’ and inserting ‘‘, (b)(5), or (c)(1)’’.

(7) Subparagraph (A) of section 1017(b)(3) is amended by

inserting ‘‘or (c)(1)’’ after ‘‘subsection (b)(5)’’.

(8) Section 1017(b)(3) is amended by adding at the end

the following new subparagraph:

‘‘(F) SPECIAL RULES FOR QUALIFIED REAL PROPERTY

BUSINESS INDEBTEDNESS.—In the case of any amount which

under section 108(c)(1) is to be applied to reduce basis—

‘‘(i) depreciable property shall only include depreciable real property for purposes of subparagraphs (A)

and (C),

‘‘(ii) subparagraph (E) shall not apply, and

‘‘(iii) in the case of property taken into account

under section 108(c)(2)(B), the reduction with respect

to such property shall be made as of the time immediately before disposition if earlier than the time under

subsection (a).’’

(9) Paragraph (1) of section 703(b) is amended by striking

‘‘subsection (b)(5)’’ and inserting ‘‘subsection (b)(5) or (c)(3)’’.

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

shall apply to discharges after December 31, 1992, in taxable years

ending after such date.

Subpart E—Increase in Recovery Period for

Nonresidential Real Property

SEC. 13151. INCREASE IN RECOVERY PERIOD FOR NONRESIDENTIAL

REAL PROPERTY.

(a) GENERAL RULE.—Paragraph (1) of section 168(c) (relating

to applicable recovery period) is amended by striking the item

relating to nonresidential real property and inserting the following:

‘‘Nonresidential real property .......................................................... 39 years.’’.

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in paragraph (2), the

amendment made by subsection (a) shall apply to property

placed in service by the taxpayer on or after May 13, 1993.

(2) EXCEPTION.—The amendments made by this section

shall not apply to property placed in service by the taxpayer

before January 1, 1994, if—

(A) the taxpayer or a qualified person entered into

a binding written contract to purchase or construct such

property before May 13, 1993, or

(B) the construction of such property was commenced

by or for the taxpayer or a qualified person before

May 13, 1993.

For purposes of this paragraph, the term ‘‘qualified person’’

means any person who transfers his rights in such a contract

or such property to the taxpayer but only if the property is

not placed in service by such person before such rights are

transferred to the taxpayer.
H. R. 2264—138

PART V—LUXURY TAX

SEC. 13161. REPEAL OF LUXURY EXCISE TAXES OTHER THAN ON PASSENGER VEHICLES.

(a) IN GENERAL.—Subchapter A of chapter 31 (relating to retail excise taxes) is amended to read as follows:

‘‘Subchapter A—Luxury Passenger Automobiles

‘‘Sec. 4001. Imposition of tax.

‘‘Sec. 4002. 1st retail sale; uses, etc. treated as sales; determination of price.

‘‘Sec. 4003. Special rules.

‘‘SEC. 4001. IMPOSITION OF TAX.

‘‘(a) IMPOSITION OF TAX.—There is hereby imposed on the 1st retail sale of any passenger vehicle a tax equal to 10 percent

of the price for which so sold to the extent such price exceeds

$30,000.

‘‘(b) PASSENGER VEHICLE.— ‘‘(1) IN GENERAL.—For purposes of this subchapter, the

term ‘passenger vehicle’ means any 4-wheeled vehicle— ‘‘(A) which is manufactured primarily for use on public streets, roads, and highways, and ‘‘(B) which is rated at 6,000 pounds unloaded gross

vehicle weight or less.

‘‘(2) SPECIAL RULES.— ‘‘(A) TRUCKS AND VANS.—In the case of a truck or

van, paragraph (1)(B) shall be applied by substituting ‘gross

vehicle weight’ for ‘unloaded gross vehicle weight’. ‘‘(B) LIMOUSINES.—In the case of a limousine, paragraph (1) shall be applied without regard to subparagraph

(B) thereof.

‘‘(c) EXCEPTIONS FOR TAXICABS, ETC.—The tax imposed by this

section shall not apply to the sale of any passenger vehicle for

use by the purchaser exclusively in the active conduct of a trade

or business of transporting persons or property for compensation

or hire.

‘‘(d) EXEMPTION FOR LAW ENFORCEMENT USES, ETC.—No tax

shall be imposed by this section on the sale of any passenger

vehicle—

‘‘(1) to the Federal Government, or a State or local government, for use exclusively in police, firefighting, search and

rescue, or other law enforcement or public safety activities,

or in public works activities, or

‘‘(2) to any person for use exclusively in providing emergency medical services.

‘‘(e) INFLATION ADJUSTMENT.— ‘‘(1) IN GENERAL.—If, for any calendar year, the excess (if any) of—‘‘(A) $30,000, increased by the cost-of-living adjustment

for the calendar year, over ‘‘(B) the dollar amount in effect under subsection (a)

for the calendar year,

is equal to or greater than $2,000, then the $30,000 amount

in subsection (a) and section 4003(a) (as previously adjusted

under this subsection) for any subsequent calendar year shall

be increased by the amount of such excess rounded to the

next lowest multiple of $2,000.
H. R. 2264—139

‘‘(2) COST-OF-LIVING ADJUSTMENT.—For purposes of paragraph (1), the cost-of-living adjustment for any calendar year

shall be the cost-of-living adjustment under section 1(f)(3) for

such calendar year, determined by substituting ‘calendar year

1990’ for ‘calendar year 1992’ in subparagraph (B) thereof.

‘‘(f) TERMINATION.—The tax imposed by this section shall not

apply to any sale or use after December 31, 1999.

‘‘SEC. 4002. 1ST RETAIL SALE; USES, ETC. TREATED AS SALES; DETERMINATION OF PRICE.

‘‘(a) 1ST RETAIL SALE.—For purposes of this subchapter, the

term ‘1st retail sale’ means the 1st sale, for a purpose other than

resale, after manufacture, production, or importation.

‘‘(b) USE TREATED AS SALE.—

‘‘(1) IN GENERAL.—If any person uses a passenger vehicle

(including any use after importation) before the 1st retail sale

of such vehicle, then such person shall be liable for tax under

this subchapter in the same manner as if such vehicle were

sold at retail by him.

‘‘(2) EXEMPTION FOR FURTHER MANUFACTURE.—Paragraph

(1) shall not apply to use of a vehicle as material in the

manufacture or production of, or as a component part of,

another vehicle taxable under this subchapter to be manufactured or produced by him.

‘‘(3) EXEMPTION FOR DEMONSTRATION USE.—Paragraph (1)

shall not apply to any use of a passenger vehicle as a demonstrator.

‘‘(4) EXCEPTION FOR USE AFTER IMPORTATION OF CERTAIN

VEHICLES.—Paragraph (1) shall not apply to the use of a vehicle

after importation if the user or importer establishes to the

satisfaction of the Secretary that the 1st use of the vehicle

occurred before January 1, 1991, outside the United States.

‘‘(5) COMPUTATION OF TAX.—In the case of any person made

liable for tax by paragraph (1), the tax shall be computed

on the price at which similar vehicles are sold at retail in

the ordinary course of trade, as determined by the Secretary.

‘‘(c) LEASES CONSIDERED AS SALES.—For purposes of this

subchapter—

‘‘(1) IN GENERAL.—Except as otherwise provided in this

subsection, the lease of a vehicle (including any renewal or

any extension of a lease or any subsequent lease of such vehicle)

by any person shall be considered a sale of such vehicle at

retail.

‘‘(2) SPECIAL RULES FOR LONG-TERM LEASES.—

‘‘(A) TAX NOT IMPOSED ON SALE FOR LEASING IN A

QUALIFIED LEASE.—The sale of a passenger vehicle to a

person engaged in a passenger vehicle leasing or rental

trade or business for leasing by such person in a longterm lease shall not be treated as the 1st retail sale of

such vehicle.

‘‘(B) LONG-TERM LEASE.—For purposes of subparagraph

(A), the term ‘long-term lease’ means any long-term lease

(as defined in section 4052).

‘‘(C) SPECIAL RULES.—In the case of a long-term lease

of a vehicle which is treated as the 1st retail sale of

such vehicle—
H. R. 2264—140

‘‘(i) DETERMINATION OF PRICE.—The tax under this

subchapter shall be computed on the lowest price for

which the vehicle is sold by retailers in the ordinary

course of trade.

‘‘(ii) PAYMENT OF TAX.—Rules similar to the rules

of section 4217(e)(2) shall apply.

‘‘(iii) NO TAX WHERE EXEMPT USE BY LESSEE.—

No tax shall be imposed on any lease payment under

a long-term lease if the lessee’s use of the vehicle

under such lease is an exempt use (as defined in section

4003(b)) of such vehicle.

‘‘(d) DETERMINATION OF PRICE.—

‘‘(1) IN GENERAL.—In determining price for purposes of

this subchapter—

‘‘(A) there shall be included any charge incident to

placing the passenger vehicle in condition ready for use,

‘‘(B) there shall be excluded—

‘‘(i) the amount of the tax imposed by this subchapter,

‘‘(ii) if stated as a separate charge, the amount

of any retail sales tax imposed by any State or political

subdivision thereof or the District of Columbia,

whether the liability for such tax is imposed on the

vendor or vendee, and

‘‘(iii) the value of any component of such passenger

vehicle if—

‘‘(I) such component is furnished by the 1st

user of such passenger vehicle, and

‘‘(II) such component has been used before

such furnishing, and

‘‘(C) the price shall be determined without regard to

any trade-in.

‘‘(2) OTHER RULES.—Rules similar to the rules of paragraphs (2) and (4) of section 4052(b) shall apply for purposes

of this subchapter.

‘‘SEC. 4003. SPECIAL RULES.

‘‘(a) SEPARATE PURCHASE OF VEHICLE AND PARTS AND ACCESSORIES THEREFOR.—Under regulations prescribed by the

Secretary—

‘‘(1) IN GENERAL.—Except as provided in paragraph (2),

if—

‘‘(A) the owner, lessee, or operator of any passenger

vehicle installs (or causes to be installed) any part or

accessory on such vehicle, and

‘‘(B) such installation is not later than the date 6

months after the date the vehicle was 1st placed in service,

then there is hereby imposed on such installation a tax equal

to 10 percent of the price of such part or accessory and its

installation.

‘‘(2) LIMITATION.—The tax imposed by paragraph (1) on

the installation of any part or accessory shall not exceed 10

percent of the excess (if any) of—

‘‘(A) the sum of—

‘‘(i) the price of such part or accessory and its

installation,
H. R. 2264—141

‘‘(ii) the aggregate price of the parts and accessories (and their installation) installed before such part

or accessory, plus

‘‘(iii) the price for which the passenger vehicle

was sold, over

‘‘(B) $30,000.

‘‘(3) EXCEPTIONS.—Paragraph (1) shall not apply if—

‘‘(A) the part or accessory installed is a replacement

part or accessory,

‘‘(B) the part or accessory is installed to enable or

assist an individual with a disability to operate the vehicle,

or to enter or exit the vehicle, by compensating for the

effect of such disability, or

‘‘(C) the aggregate price of the parts and accessories

(and their installation) described in paragraph (1) with

respect to the vehicle does not exceed $200 (or such other

amount or amounts as the Secretary may by regulation

prescribe).

The price of any part or accessory (and its installation) to

which paragraph (1) does not apply by reason of this paragraph

shall not be taken into account under paragraph (2)(A).

‘‘(4) INSTALLERS SECONDARILY LIABLE FOR TAX.—The owners

of the trade or business installing the parts or accessories

shall be secondarily liable for the tax imposed by this subsection.

‘‘(b) IMPOSITION OF TAX ON SALES, ETC., WITHIN 2 YEARS OF

VEHICLES PURCHASED TAX-FREE.—

‘‘(1) IN GENERAL.—If—

‘‘(A) no tax was imposed under this subchapter on

the 1st retail sale of any passenger vehicle by reason of

its exempt use, and

‘‘(B) within 2 years after the date of such 1st retail

sale, such vehicle is resold by the purchaser or such purchaser makes a substantial nonexempt use of such vehicle,

then such sale or use of such vehicle by such purchaser shall

be treated as the 1st retail sale of such vehicle for a price

equal to its fair market value at the time of such sale or

use.

‘‘(2) EXEMPT USE.—For purposes of this subsection, the

term ‘exempt use’ means any use of a vehicle if the 1st retail

sale of such vehicle is not taxable under this subchapter by

reason of such use.

‘‘(c) PARTS AND ACCESSORIES SOLD WITH TAXABLE PASSENGER

VEHICLE.—Parts and accessories sold on, in connection with, or

with the sale of any passenger vehicle shall be treated as part

of the vehicle.

‘‘(d) PARTIAL PAYMENTS, ETC.—In the case of a contract, sale,

or arrangement described in paragraph (2), (3), or (4) of section

4216(c), rules similar to the rules of section 4217(e)(2) shall apply

for purposes of this subchapter.’’

(b) TECHNICAL AMENDMENTS.—

(1) Subsection (c) of section 4221 is amended by striking

‘‘4002(b), 4003(c), 4004(a)’’ and inserting ‘‘4001(d)’’.

(2) Subsection (d) of section 4222 is amended by striking

‘‘4002(b), 4003(c), 4004(a)’’ and inserting ‘‘4001(d)’’.
H. R. 2264—142

(3) The table of subchapters for chapter 31 is amended

by striking the item relating to subchapter A and inserting

the following:

‘‘Subchapter A. Luxury passenger vehicles.’’

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

shall take effect on January 1, 1993, except that the provisions

of section 4001(e) of the Internal Revenue Code of 1986 (as amended

by subsection (a)) shall take effect on the date of the enactment

of this Act.

SEC. 13162. EXEMPTION FROM LUXURY EXCISE TAX FOR CERTAIN

EQUIPMENT INSTALLED ON PASSENGER VEHICLES FOR

USE BY DISABLED INDIVIDUALS.

(a) IN GENERAL.—Paragraph (3) of section 4004(b) (relating

to separate purchase of article and parts and accessories therefor),

as in effect on the day before the date of the enactment of this

Act, is amended—

(1) by striking ‘‘or’’ at the end of subparagraph (A),

(2) by redesignating subparagraph (B) as subparagraph

(C),

(3) by inserting after subparagraph (A) the following new

subparagraph:

‘‘(B) the part or accessory is installed on a passenger

vehicle to enable or assist an individual with a disability

to operate the vehicle, or to enter or exit the vehicle,

by compensating for the effect of such disability, or’’, and

(4) by inserting after subparagraph (C) the following flush

sentence:

‘‘The price of any part or accessory (and its installation) to

which paragraph (1) does not apply by reason of this paragraph

shall not be taken into account under paragraph (2)(A).’’

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

shall take effect as if included in the amendments made by section

11221(a) of the Omnibus Budget Reconciliation Act of 1990.

(c) PERIOD FOR FILING CLAIMS.—If refund or credit of any

overpayment of tax resulting from the application of the amendments made by this section is prevented at any time before the

close of the 1-year period beginning on the date of the enactment

of this Act by the operation of any law or rule of law (including

res judicata), refund or credit of such overpayment (to the extent

attributable to such amendments) may, nevertheless, be made or

allowed if claim therefor is filed before the close of such 1-year

period.

SEC. 13163. TAX ON DIESEL FUEL USED IN NONCOMMERCIAL BOATS.

(a) GENERAL RULE.— (1) Paragraph (2) of section 4092(a) (defining diesel fuel)

is amended by striking ‘‘or a diesel-powered train’’ and inserting

‘‘, a diesel-powered train, or a diesel-powered boat’’.

(2) Paragraph (1) of section 4041(a) is amended— (A) by striking ‘‘diesel-powered highway vehicle’’ each

place it appears and inserting ‘‘diesel-powered highway

vehicle or diesel-powered boat’’, and

(B) by striking ‘‘such vehicle’’ and inserting ‘‘such

vehicle or boat’’.

(3) Subparagraph (B) of section 4092(b)(1) is amended by

striking ‘‘commercial and noncommercial vessels’’ each place
H. R. 2264—143

it appears and inserting ‘‘vessels for use in an off-highway

business use (as defined in section 6421(e)(2)(B))’’.

(b) EXEMPTION FOR USE IN FISHERIES OR COMMERCIAL

TRANSPORTATION.—Subparagraph (B) of section 6421(e)(2) is

amended to read as follows:

‘‘(B) USES IN BOATS.—

‘‘(i) IN GENERAL.—Except as otherwise provided

in this subparagraph, the term ‘off-highway business

use’ does not include any use in a motorboat.

‘‘(ii) FISHERIES AND WHALING.—The term ‘off-highway business use’ shall include any use in a vessel

employed in the fisheries or in the whaling business.

‘‘(iii) EXCEPTION FOR DIESEL FUEL.—The term ‘offhighway business use’ shall include the use of diesel

fuel in a boat in the active conduct of—

‘‘(I) a trade or business of commercial fishing

or transporting persons or property for compensation or hire, and

‘‘(II) except as provided in clause (iv), any

other trade or business.

‘‘(iv) NONCOMMERCIAL BOATS.—In the case of a

boat used predominantly in any activity which is of

a type generally considered to constitute entertainment, amusement, or recreation, clause (iii)(II) shall

not apply to—

‘‘(I) the taxes under sections 4041(a)(1) and

4081 for the period after December 31, 1993, and

before January 1, 2000, and

‘‘(II) so much of the tax under sections

4041(a)(1) and 4081 as does not exceed 4.3 cents

per gallon for the period after December 31, 1999.’’

(c) RETENTION OF TAXES IN GENERAL FUND.—Subsection (b)

of section 9508 (relating to transfers to Leaking Underground Storage Tank Trust Fund) is amended by adding at the end thereof

the following new sentence: ‘‘For purposes of this subsection, there

shall not be taken into account the taxes imposed by sections

4041 and 4081 on diesel fuel sold for use or used as fuel in a

diesel-powered boat.’’

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

shall take effect on January 1, 1994.

PART VI—OTHER CHANGES

SEC. 13171. ALTERNATIVE MINIMUM TAX TREATMENT OF CONTRIBUTIONS OF APPRECIATED PROPERTY.

(a) REPEAL OF TAX PREFERENCE.—Subsection (a) of section

57 (as amended by section 13113) is amended by striking paragraph

(6) (relating to appreciated property charitable deduction) and by

redesignating paragraphs (7) and (8) as paragraphs (6) and (7),

respectively. (b) EFFECT ON ADJUSTED CURRENT EARNINGS.—Paragraph (4) of section 56(g) is amended by adding at the end thereof the following new subparagraph:

‘‘(J) TREATMENT OF CHARITABLE CONTRIBUTIONS.—Notwithstanding subparagraphs (B) and (C), no adjustment

related to the earnings and profits effects of any charitable
H. R. 2264—144

contribution shall be made in computing adjusted current

earnings.’’

(c) CONFORMING AMENDMENT.—Subclause (II) of section

53(d)(1)(B)(ii) (as amended by section 13113) is amended by striking

‘‘(5), (6), and (8)’’ and inserting ‘‘(5), and (7)’’.

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

shall apply to contributions made after June 30, 1992, except that

in the case of any contribution of capital gain property which

is not tangible personal property, such amendments shall apply

only if the contribution is made after December 31, 1992.

SEC. 13172. SUBSTANTIATION REQUIREMENT FOR DEDUCTION OF

CERTAIN CHARITABLE CONTRIBUTIONS.

(a) SUBSTANTIATION REQUIREMENT.—Section 170(f) (providing

special rules relating to the deduction of charitable contributions

and gifts) is amended by adding at the end the following new

paragraph:

‘‘(8) SUBSTANTIATION REQUIREMENT FOR CERTAIN CONTRIBUTIONS.—

‘‘(A) GENERAL RULE.—No deduction shall be allowed

under subsection (a) for any contribution of $250 or more

unless the taxpayer substantiates the contribution by a

contemporaneous written acknowledgment of the contribution by the donee organization that meets the requirements

of subparagraph (B).

‘‘(B) CONTENT OF ACKNOWLEDGEMENT.—An acknowledgement meets the requirements of this subparagraph

if it includes the following information:

‘‘(i) The amount of cash and a description (but

not value) of any property other than cash contributed.

‘‘(ii) Whether the donee organization provided any

goods or services in consideration, in whole or in part,

for any property described in clause (i).

‘‘(iii) A description and good faith estimate of the

value of any goods or services referred to in clause

(ii) or, if such goods or services consist solely of intangible religious benefits, a statement to that effect.

For purposes of this subparagraph, the term ‘intangible

religious benefit’ means any intangible religious benefit

which is provided by an organization organized exclusively

for religious purposes and which generally is not sold in

a commercial transaction outside the donative context.

‘‘(C) CONTEMPORANEOUS.—For purposes of subparagraph (A), an acknowledgment shall be considered to be

contemporaneous if the taxpayer obtains the acknowledgment on or before the earlier of—

‘‘(i) the date on which the taxpayer files a return

for the taxable year in which the contribution was

made, or

‘‘(ii) the due date (including extensions) for filing

such return.

‘‘(D) SUBSTANTIATION NOT REQUIRED FOR CONTRIBUTIONS REPORTED BY THE DONEE ORGANIZATION.—Subparagraph (A) shall not apply to a contribution if the donee

organization files a return, on such form and in accordance

with such regulations as the Secretary may prescribe,
H. R. 2264—145

which includes the information described in subparagraph

(B) with respect to the contribution. ‘‘(E) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry

out the purposes of this paragraph, including regulations

that may provide that some or all of the requirements

of this paragraph do not apply in appropriate cases.’’ (b) EFFECTIVE DATE.—The provisions of this section shall apply to contributions made on or after January 1, 1994.

SEC. 13173. DISCLOSURE RELATED TO QUID PRO QUO

CONTRIBUTIONS.

(a) DISCLOSURE REQUIREMENT.—Subchapter B of chapter 61 (relating to information and returns) is amended by redesignating

section 6115 as section 6116 and by inserting after section 6114

the following new section:

‘‘SEC. 6115. DISCLOSURE RELATED TO QUID PRO QUO CONTRIBUTIONS.

‘‘(a) DISCLOSURE REQUIREMENT.—If an organization described in section 170(c) (other than paragraph (1) thereof) receives a quid

pro quo contribution in excess of $75, the organization shall, in

connection with the solicitation or receipt of the contribution, provide a written statement which—

‘‘(1) informs the donor that the amount of the contribution

that is deductible for Federal income tax purposes is limited

to the excess of the amount of any money and the value of

any property other than money contributed by the donor over

the value of the goods or services provided by the organization,

and

‘‘(2) provides the donor with a good faith estimate of the

value of such goods or services.

‘‘(b) QUID PRO QUO CONTRIBUTION.—For purposes of this section, the term ‘quid pro quo contribution’ means a payment made

partly as a contribution and partly in consideration for goods or

services provided to the payor by the donee organization. A quid

pro quo contribution does not include any payment made to an

organization, organized exclusively for religious purposes, in return

for which the taxpayer receives solely an intangible religious benefit

that generally is not sold in a commercial transaction outside the

donative context.’’

(b) PENALTY FOR FAILURE TO DISCLOSE.—Part I of subchapter

B of chapter 68 (relating to assessable penalties) is amended by

inserting after section 6713 the following new section:

‘‘SEC. 6714. FAILURE TO MEET DISCLOSURE REQUIREMENTS

APPLICABLE TO QUID PRO QUO CONTRIBUTIONS.

‘‘(a) IMPOSITION OF PENALTY.—If an organization fails to meet

the disclosure requirement of section 6115 with respect to a quid

pro quo contribution, such organization shall pay a penalty of

$10 for each contribution in respect of which the organization

fails to make the required disclosure, except that the total penalty

imposed by this subsection with respect to a particular fundraising

event or mailing shall not exceed $5,000.

‘‘(b) REASONABLE CAUSE EXCEPTION.—No penalty shall be

imposed under this section with respect to any failure if it is

shown that such failure is due to reasonable cause.’’

(c) CLERICAL AMENDMENTS.—
H. R. 2264—146

(1) The table for subchapter B of chapter 61 is amended

by striking the item relating to section 6115 and inserting

the following new items:

‘‘Sec. 6115. Disclosure related to quid pro quo contributions.

‘‘Sec. 6116. Cross reference.’’

(2) The table for part I of subchapter B of chapter 68

is amended by inserting after the item for section 6713 the

following new item:

‘‘Sec. 6714. Failure to meet disclosure requirements applicable to quid pro

quo contributions.’’

(d) EFFECTIVE DATE.—The provisions of this section shall apply

to quid pro quo contributions made on or after January 1, 1994.

SEC. 13174. TEMPORARY EXTENSION OF DEDUCTION FOR HEALTH

INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.

(a) IN GENERAL.—

(1) EXTENSION.—Paragraph (6) of section 162(l) (relating

to special rules for health insurance costs of self-employed

individuals) is amended by striking ‘‘June 30, 1992’’ and inserting ‘‘December 31, 1993’’.

(2) CONFORMING AMENDMENT.—Paragraph (2) of section

110(a) of the Tax Extension Act of 1991 is hereby repealed.

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years ending after June 30,

1992.

(b) DETERMINATION OF ELIGIBILITY FOR EMPLOYER-SPONSORED

HEALTH PLAN.—

(1) IN GENERAL.—Paragraph (2)(B) of section 162(l) is

amended to read as follows:

‘‘(B) OTHER COVERAGE.—Paragraph (1) shall not apply

to any taxpayer for any calendar month for which the

taxpayer is eligible to participate in any subsidized health

plan maintained by any employer of the taxpayer or of

the spouse of the taxpayer.’’

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to taxable years beginning after December 31,

1992.

Subchapter B—Revenue Increases

PART I—PROVISIONS AFFECTING

INDIVIDUALS

Subpart A—Rate Increases

SEC. 13201. INCREASE IN TOP MARGINAL RATE UNDER SECTION 1.

(a) GENERAL RULE.—Section 1 (relating to tax imposed) is amended by striking subsections (a) through (e) and inserting the

following: ‘‘(a) MARRIED INDIVIDUALS FILING JOINT RETURNS AND SURVIVING SPOUSES.—There is hereby imposed on the taxable income

of—

‘‘(1) every married individual (as defined in section 7703)

who makes a single return jointly with his spouse under section

6013, and

‘‘(2) every surviving spouse (as defined in section 2(a)),
H. R. 2264—147

a tax determined in accordance with the following table:

‘‘If taxable income is: The tax is:

Not over $36,900 ................................ 15% of taxable income.

Over $36,900 but not over $89,150 ... $5,535, plus 28% of the excess over

$36,900.

Over $89,150 but not over $140,000 $20,165, plus 31% of the excess over

$89,150.

Over $140,000 .................................... $35,928.50, plus 36% of the excess over

$140,000.

‘‘(b) HEADS OF HOUSEHOLDS.—There is hereby imposed on the

taxable income of every head of a household (as defined in section

2(b)) a tax determined in accordance with the following table:

‘‘If taxable income is: The tax is:

Not over $29,600 ................................ 15% of taxable income.

Over $29,600 but not over $76,400 ... $4,440, plus 28% of the excess over

$29,600.

Over $76,400 but not over $127,500 $17,544, plus 31% of the excess over

$76,400.

Over $127,500 .................................... $33,385, plus 36% of the excess over

$127,500.

‘‘(c) UNMARRIED INDIVIDUALS (OTHER THAN SURVIVING SPOUSES

AND HEADS OF HOUSEHOLDS).—There is hereby imposed on the

taxable income of every individual (other than a surviving spouse

as defined in section 2(a) or the head of a household as defined

in section 2(b)) who is not a married individual (as defined in

section 7703) a tax determined in accordance with the following

table:

‘‘If taxable income is: The tax is:

Not over $22,100 ................................ 15% of taxable income.

Over $22,100 but not over $53,500 ... $3,315, plus 28% of the excess over

$22,100.

Over $53,500 but not over $115,000 $12,107, plus 31% of the excess over

$53,500.

Over $115,000 .................................... $31,172, plus 36% of the excess over

$115,000.

‘‘(d) MARRIED INDIVIDUALS FILING SEPARATE RETURNS.—There

is hereby imposed on the taxable income of every married individual

(as defined in section 7703) who does not make a single return

jointly with his spouse under section 6013, a tax determined in

accordance with the following table:

‘‘If taxable income is: The tax is:

Not over $18,450 ................................ 15% of taxable income.

Over $18,450 but not over $44,575 ... $2,767.50, plus 28% of the excess over

$18,450.

Over $44,575 but not over $70,000 ... $10,082.50, plus 31% of the excess over

$44,575.

Over $70,000 ...................................... $17,964.25, plus 36% of the excess over

$70,000.

‘‘(e) ESTATES AND TRUSTS.—There is hereby imposed on the

taxable income of—

‘‘(1) every estate, and

‘‘(2) every trust,

taxable under this subsection a tax determined in accordance with

the following table:

‘‘If taxable income is: The tax is:

Not over $1,500 .................................. 15% of taxable income.

Over $1,500 but not over $3,500 ....... $225, plus 28% of the excess over

$1,500.
H. R. 2264—148

‘‘If taxable income is: The tax is:

Over $3,500 but not over $5,500 ....... $785, plus 31% of the excess over

$3,500.

Over $5,500 ........................................ $1,405, plus 36% of the excess over

$5,500.’’

(b) CONFORMING AMENDMENTS.—

(1) Section 531 is amended by striking ‘‘28 percent’’ and

inserting ‘‘36 percent’’.

(2) Section 541 is amended by striking ‘‘28 percent’’ and

inserting ‘‘36 percent’’.

(3)(A) Subsection (f) of section 1 is amended—

(i) by striking ‘‘1990’’ in paragraph (1) and inserting

‘‘1993’’, and

(ii) by striking ‘‘1989’’ in paragraph (3)(B) and inserting

‘‘1992’’.

(B) Subsection (f) of section 1 is amended by adding at

the end thereof the following new paragraph:

‘‘(7) SPECIAL RULE FOR CERTAIN BRACKETS.—

‘‘(A) CALENDAR YEAR 1994.—In prescribing the tables

under paragraph (1) which apply with respect to taxable

years beginning in calendar year 1994, the Secretary shall

make no adjustment to the dollar amounts at which the

36 percent rate bracket begins or at which the 39.6 percent

rate begins under any table contained in subsection (a),

(b), (c), (d), or (e).

‘‘(B) LATER CALENDAR YEARS.—In prescribing tables

under paragraph (1) which apply with respect to taxable

years beginning in a calendar year after 1994, the costof-living adjustment used in making adjustments to the

dollar amounts referred to in subparagraph (A) shall be

determined under paragraph (3) by substituting ‘1993’ for

‘1992’.’’

(C) Subparagraph (C) of section 41(e)(5) is amended by

striking ‘‘1989’’ each place it appears and inserting ‘‘1992’’.

(D) Subparagraph (B) of section 63(c)(4) is amended by

striking ‘‘1989’’ and inserting ‘‘1992’’.

(E) Subparagraph (B) of section 68(b)(2) is amended by

striking ‘‘1989’’ and inserting ‘‘1992’’.

(F) Subparagraph (B) of section 132(f)(6) is amended by

striking ‘‘, determined by substituting’’ and all that follows

down through the period at the end thereof and inserting

a period.

(G) Subparagraphs (A)(ii) and (B)(ii) of section 151(d)(4)

are each amended by striking ‘‘1989’’ and inserting ‘‘1992’’.

(H) Clause (ii) of section 513(h)(2)(C) is amended by striking

‘‘1989’’ and inserting ‘‘1992’’.

(4) Paragraph (3) of section 453A(c) is amended by adding

at the end thereof the following new sentence:

‘‘For purposes of applying the preceding sentence with respect

to so much of the gain which, when recognized, will be treated

as long-term capital gain, the maximum rate on net capital

gain under section 1(h) or 1201 (whichever is appropriate)

shall be taken into account.’’

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

shall apply to taxable years beginning after December 31, 1992.

(d) ELECTION TO PAY ADDITIONAL 1993 TAXES IN INSTALLMENTS.—
H. R. 2264—149

(1) IN GENERAL.—At the election of the taxpayer, the additional 1993 taxes may be paid in 3 equal installments.

(2) DATES FOR PAYING INSTALLMENTS.—In the case of any

tax payable in installments by reason of paragraph (1)—

(A) the first installment shall be paid on or before

the due date for the taxpayer’s taxable year beginning

in calendar year 1993,

(B) the second installment shall be paid on or before

the date 1 year after the date determined under subparagraph (A), and

(C) the third installment shall be paid on or before

the date 2 years after the date determined under subparagraph (A).

For purposes of the preceding sentence, the term ‘‘due date’’

means the date prescribed for filing the taxpayer’s return determined without regard to extensions.

(3) EXTENSION WITHOUT INTEREST.—For purposes of section

6601 of the Internal Revenue Code of 1986, the date prescribed

for the payment of any tax payable in installments under

paragraph (1) shall be determined with regard to the extension

under paragraph (1).

(4) ADDITIONAL 1993 TAXES.—

(A) IN GENERAL.—For purposes of this subsection, the

term ‘‘additional 1993 taxes’’ means the excess of—

(i) the taxpayer’s net chapter 1 liability as shown

on the taxpayer’s return for the taxpayer’s taxable

year beginning in calendar year 1993, over

(ii) the amount which would have been the taxpayer’s net chapter 1 liability for such taxable year

if such liability had been determined using the rates

which would have been in effect under section 1 of

the Internal Revenue Code of 1986 for taxable years

beginning in calendar year 1993 but for the amendments made by this section and section 13202 and

such liability had otherwise been determined on the

basis of the amounts shown on the taxpayer’s return.

(B) NET CHAPTER 1 LIABILITY.—For purposes of

subparagraph (A), the term ‘‘net chapter 1 liability’’ means

the liability for tax under chapter 1 of the Internal Revenue

Code of 1986 determined—

(i) after the application of any credit against such

tax other than the credits under sections 31 and 34,

and

(ii) before crediting any payment of estimated tax

for the taxable year.

(5) ACCELERATION OF PAYMENTS.—If the taxpayer does not

pay any installment under this section on or before the date

prescribed for its payment or if the Secretary of the Treasury

or his delegate believes that the collection of any amount payable in installments under this section is in jeopardy, the

Secretary shall immediately terminate the extension under

paragraph (1) and the whole of the unpaid tax shall be paid

on notice and demand from the Secretary.

(6) ELECTION ON RETURN.—An election under paragraph

(1) shall be made on the taxpayer’s return for the taxpayer’s

taxable year beginning in calendar year 1993.
H. R. 2264—150

(7) EXCEPTION FOR ESTATES AND TRUSTS.—This subsection

shall not apply in the case of an estate or trust.

SEC. 13202. SURTAX ON HIGH-INCOME TAXPAYERS.

(a) GENERAL RULE.—

(1) Subsection (a) of section 1 (as amended by section

13201) is amended by striking the last item in the table contained therein and inserting the following:

‘‘Over $140,000 but not over

$250,000.

$35,928.50, plus 36% of the excess over

$140,000.

Over $250,000 .................................... $75,528.50, plus 39.6% of the excess

over $250,000.’’

(2) Subsection (b) of section 1 (as so amended) is amended

by striking the last item in the table contained therein and

inserting the following:

‘‘Over $127,500 but not over

$250,000.

$33,385, plus 36% of the excess over

$127,500.

Over $250,000 .................................... $77,485, plus 39.6% of the excess over

$250,000.’’

(3) Subsection (c) of section 1 (as so amended) is amended

by striking the last item in the table contained therein and

inserting the following:

‘‘Over $115,000 but not over

$250,000.

$31,172, plus 36% of the excess over

$115,000.

Over $250,000 .................................... $79,772, plus 39.6% of the excess over

$250,000.’’

(4) Subsection (d) of section 1 (as so amended) is amended

by striking the last item in the table contained therein and

inserting the following:

‘‘Over $70,000 but not over $125,000 $17,964.25, plus 36% of the excess over

$70,000.

Over $125,000 .................................... $37,764.25, plus 39.6% of the excess

over $125,000.’’

(5) Subsection (e) of section 1 (as so amended) is amended

by striking the last item in the table contained therein and

inserting the following:

‘‘Over $5,500 but not over $7,500 ..... $1,405, plus 36% of the excess over

$5,500.

Over $7,500 ........................................ $2,125, plus 39.6% of the excess over

$7,500.’’

(b) TECHNICAL AMENDMENT.—Sections 531 and 541 (as

amended by section 13201) are each amended by striking ‘‘36 percent’’ and inserting ‘‘39.6 percent’’. (c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 1992.

SEC. 13203. MODIFICATIONS TO ALTERNATIVE MINIMUM TAX RATES

AND EXEMPTION AMOUNTS.

(a) INCREASE IN RATE.—Paragraph (1) of section 55(b) (defining

tentative minimum tax) is amended to read as follows:

‘‘(1) AMOUNT OF TENTATIVE TAX.—

‘‘(A) NONCORPORATE TAXPAYERS.—

‘‘(i) IN GENERAL.—In the case of a taxpayer other

than a corporation, the tentative minimum tax for

the taxable year is the sum of—

‘‘(I) 26 percent of so much of the taxable excess

as does not exceed $175,000, plus
H. R. 2264—151

‘‘(II) 28 percent of so much of the taxable

excess as exceeds $175,000.

The amount determined under the preceding sentence

shall be reduced by the alternative minimum tax foreign tax credit for the taxable year.

‘‘(ii) TAXABLE EXCESS.—For purposes of clause (i),

the term ‘taxable excess’ means so much of the alternative minimum taxable income for the taxable year

as exceeds the exemption amount.

‘‘(iii) MARRIED INDIVIDUAL FILING SEPARATE

RETURN.—In the case of a married individual filing

a separate return, clause (i) shall be applied by

substituting ‘$87,500’ for ‘$175,000’ each place it

appears. For purposes of the preceding sentence, marital status shall be determined under section 7703.

‘‘(B) CORPORATIONS.—In the case of a corporation, the

tentative minimum tax for the taxable year is—

‘‘(i) 20 percent of so much of the alternative minimum taxable income for the taxable year as exceeds

the exemption amount, reduced by

‘‘(ii) the alternative minimum tax foreign tax credit

for the taxable year.’’

(b) INCREASE IN EXEMPTION AMOUNTS.—Paragraph (1) of section

55(d) (defining exemption amount) is amended—

(1) by striking ‘‘$40,000’’ in subparagraph (A) and inserting

‘‘$45,000’’,

(2) by striking ‘‘$30,000’’ in subparagraph (B) and inserting

‘‘$33,750’’, and

(3) by striking ‘‘$20,000’’ in subparagraph (C) and inserting

‘‘$22,500’’.

(c) CONFORMING AMENDMENTS.— (1) The last sentence of section 55(d)(3) is amended by striking ‘‘$155,000 or (ii) $20,000’’ and inserting ‘‘$165,000 or

(ii) $22,500’’.

(2)(A) Subparagraph (A) of section 897(a)(2) is amended by striking ‘‘the amount determined under section 55(b)(1)(A)

shall not be less than 21 percent of’’ and inserting ‘‘the taxable

excess for purposes of section 55(b)(1)(A) shall not be less

than’’.

(B) The heading for paragraph (2) of section 897(a) is

amended by striking ‘‘21-PERCENT’’.

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

shall apply to taxable years beginning after December 31, 1992.

SEC. 13204. OVERALL LIMITATION ON ITEMIZED DEDUCTIONS FOR

HIGH-INCOME TAXPAYERS MADE PERMANENT.

Subsection (f) of section 68 (relating to overall limitation on

itemized deductions) is hereby repealed.

SEC. 13205. PHASEOUT OF PERSONAL EXEMPTION OF HIGH-INCOME

TAXPAYERS MADE PERMANENT.

Section 151(d)(3) (relating to phaseout of personal exemption)

is amended by striking subparagraph (E).

SEC. 13206. PROVISIONS TO PREVENT CONVERSION OF ORDINARY

INCOME TO CAPITAL GAIN.

(a) INTEREST EMBEDDED IN FINANCIAL TRANSACTIONS.—
H. R. 2264—152

(1) IN GENERAL.—Part IV of subchapter P of chapter 1

(relating to special rules for determining capital gains and

losses) is amended by adding at the end the following new

section:

‘‘SEC. 1258. RECHARACTERIZATION OF GAIN FROM CERTAIN FINANCIAL TRANSACTIONS.

‘‘(a) GENERAL RULE.—In the case of any gain—

‘‘(1) which (but for this section) would be treated as gain

from the sale or exchange of a capital asset, and

‘‘(2) which is recognized on the disposition or other termination of any position which was held as part of a conversion

transaction,

such gain (to the extent such gain does not exceed the applicable

imputed income amount) shall be treated as ordinary income.

‘‘(b) APPLICABLE IMPUTED INCOME AMOUNT.—For purposes of

subsection (a), the term ‘applicable imputed income amount’ means,

with respect to any disposition or other termination referred to

in subsection (a), an amount equal to—

‘‘(1) the amount of interest which would have accrued on

the taxpayer’s net investment in the conversion transaction

for the period ending on the date of such disposition or other

termination (or, if earlier, the date on which the requirements

of subsection (c) ceased to be satisfied) at a rate equal to

120 percent of the applicable rate, reduced by

‘‘(2) the amount treated as ordinary income under subsection (a) with respect to any prior disposition or other termination of a position which was held as a part of such

transaction.

The Secretary shall by regulations provide for such reductions in

the applicable imputed income amount as may be appropriate by

reason of amounts capitalized under section 263(g), ordinary income

received, or otherwise.

‘‘(c) CONVERSION TRANSACTION.—For purposes of this section,

the term ‘conversion transaction’ means any transaction— ‘‘(1) substantially all of the taxpayer’s expected return from

which is attributable to the time value of the taxpayer’s net

investment in such transaction, and

‘‘(2) which is—

‘‘(A) the holding of any property (whether or not actively traded), and the entering into a contract to sell

such property (or substantially identical property) at a

price determined in accordance with such contract, but

only if such property was acquired and such contract was

entered into on a substantially contemporaneous basis,

‘‘(B) an applicable straddle,

‘‘(C) any other transaction which is marketed or sold

as producing capital gains from a transaction described

in paragraph (1), or

‘‘(D) any other transaction specified in regulations prescribed by the Secretary.

‘‘(d) DEFINITIONS AND SPECIAL RULES.—For purposes of this

section—

‘‘(1) APPLICABLE STRADDLE.—The term ‘applicable straddle’

means any straddle (within the meaning of section 1092(c));

except that the term ‘personal property’ shall include stock.

‘‘(2) APPLICABLE RATE.—The term ‘applicable rate’ means—
H. R. 2264—153

‘‘(A) the applicable Federal rate determined under

section 1274(d) (compounded semiannually) as if the

conversion transaction were a debt instrument, or

‘‘(B) if the term of the conversion transaction is indefinite, the Federal short-term rates in effect under section

6621(b) during the period of the conversion transaction

(compounded daily).

‘‘(3) TREATMENT OF BUILT-IN LOSSES.—

‘‘(A) IN GENERAL.—If any position with a built-in loss

becomes part of a conversion transaction—

‘‘(i) for purposes of applying this subtitle to such

position for periods after such position becomes part

of such transaction, such position shall be taken into

account at its fair market value as of the time it

became part of such transaction, except that

‘‘(ii) upon the disposition or other termination of

such position in a transaction in which gain or loss

is recognized, such built-in loss shall be recognized

and shall have a character determined without regard

to this section.

‘‘(B) BUILT-IN LOSS.—For purposes of subparagraph (A),

the term ‘built-in loss’ means the loss (if any) which would

have been realized if the position had been disposed of

or otherwise terminated at its fair market value as of

the time such position became part of the conversion transaction.

‘‘(4) POSITION TAKEN INTO ACCOUNT AT FAIR MARKET

VALUE.—In determining the taxpayer’s net investment in any

conversion transaction, there shall be included the fair market

value of any position which becomes part of such transaction

(determined as of the time such position became part of such

transaction).

‘‘(5) SPECIAL RULE FOR OPTIONS DEALERS AND COMMODITIES

TRADERS.—

‘‘(A) IN GENERAL.—Subsection (a) shall not apply to

transactions —

‘‘(i) of an options dealer in the normal course of

the dealer’s trade or business of dealing in options,

or

‘‘(ii) of a commodities trader in the normal course

of the trader’s trade or business of trading section

1256 contracts.

‘‘(B) DEFINITIONS.—For purposes of this paragraph—

‘‘(i) OPTIONS DEALER.—The term ‘options dealer’

has the meaning given such term by section 1256(g)(8).

‘‘(ii) COMMODITIES TRADER.— The term ‘commodities trader’ means any person who is a member (or,

except as otherwise provided in regulations, is entitled

to trade as a member) of a domestic board of trade

which is designated as a contract market by the

Commodity Futures Trading Commission.

‘‘(C) LIMITED PARTNERS AND LIMITED ENTREPRENEURS.—In the case of any gain from a transaction

recognized by an entity which is allocable to a limited

partner or limited entrepreneur (within the meaning of

section 464(e)(2)), subparagraph (A) shall not apply if—
H. R. 2264—154

‘‘(i) substantially all of the limited partner’s (or

limited entrepreneur’s) expected return from the entity

is attributable to the time value of the partner’s (or

entrepreneur’s) net investment in such entity,

‘‘(ii) the transaction (or the interest in the entity)

was marketed or sold as producing capital gains treatment from a transaction described in subsection (c)(1),

or

‘‘(iii) the transaction (or the interest in the entity)

is a transaction (or interest) specified in regulations

prescribed by the Secretary.’’

(2) CLERICAL AMENDMENT.—The table of sections for part

IV of subchapter P of chapter 1 is amended by adding at

the end thereof the following new item:

‘‘Sec. 1258. Recharacterization of gain from certain financial transactions.’’

(3) EFFECTIVE DATE.—The amendments made by this section shall apply to conversion transactions entered into after

April 30, 1993.

(b) REPEAL OF CERTAIN EXCEPTIONS TO MARKET DISCOUNT

RULES.—

(1) MARKET DISCOUNT BONDS ISSUED ON OR BEFORE JULY

18, 1984.—The following provisions are hereby repealed:

(A) Section 1276(e).

(B) Section 1277(d).

(2) TAX-EXEMPT OBLIGATIONS.—

(A) IN GENERAL.—Paragraph (1) of section 1278(a)

(defining market discount bond) is amended—

(i) by striking clause (ii) of subparagraph (B) and

redesignating clauses (iii) and (iv) of such subparagraph as clauses (ii) and (iii), respectively,

(ii) by redesignating subparagraph (C) as subparagraph (D), and

(iii) by inserting after subparagraph (B) the following new subparagraph:

‘‘(C) SECTION 1277 NOT APPLICABLE TO TAX-EXEMPT

OBLIGATIONS.—For purposes of section 1277, the term ‘market discount bond’ shall not include any tax-exempt obligation (as defined in section 1275(a)(3)).’’

(B) CONFORMING AMENDMENTS.—

(i) Sections 1276(a)(4) and 1278(b)(1) are each

amended by striking ‘‘sections 871(a)’’ and inserting

‘‘sections 103, 871(a),’’.

(ii) Subparagraph (B) of section 1278(a)(4) is

amended by inserting before the period at the end

thereof the following: ‘‘or, in the case of a tax-exempt

obligation, the aggregate amount of the original issue

discount which accrued in the manner provided by

section 1272(a) (determined without regard to paragraph (7) thereof) during periods before the acquisition

of the bond by the taxpayer’’.

(3) EFFECTIVE DATE.—The amendments made by this section shall apply to obligations purchased (within the meaning

of section 1272(d)(1) of the Internal Revenue Code of 1986)

after April 30, 1993.

(c) TREATMENT OF STRIPPED PREFERRED STOCK.—
H. R. 2264—155

(1) IN GENERAL.—Section 305 is amended by redesignating

subsection (e) as subsection (f) and by inserting after subsection

(d) the following new subsection:

‘‘(e) TREATMENT OF PURCHASER OF STRIPPED PREFERRED

STOCK.—

‘‘(1) IN GENERAL.—If any person purchases after April 30,

1993, any stripped preferred stock, then such person, while

holding such stock, shall include in gross income amounts equal

to the amounts which would have been so includible if such

stripped preferred stock were a bond issued on the purchase

date and having original issue discount equal to the excess,

if any, of—

‘‘(A) the redemption price for such stock, over

‘‘(B) the price at which such person purchased such

stock.

The preceding sentence shall also apply in the case of any

person whose basis in such stock is determined by reference

to the basis in the hands of such purchaser.

‘‘(2) BASIS ADJUSTMENTS.—Appropriate adjustments to

basis shall be made for amounts includible in gross income

under paragraph (1).

‘‘(3) TAX TREATMENT OF PERSON STRIPPING STOCK.—If any

person strips the rights to 1 or more dividends from any stock

described in paragraph (5)(B) and after April 30, 1993, disposes

of such dividend rights, for purposes of paragraph (1), such

person shall be treated as having purchased the stripped preferred stock on the date of such disposition for a purchase

price equal to such person’s adjusted basis in such stripped

preferred stock.

‘‘(4) AMOUNTS TREATED AS ORDINARY INCOME.—Any amount

included in gross income under paragraph (1) shall be treated

as ordinary income.

‘‘(5) STRIPPED PREFERRED STOCK.—For purposes of this

subsection—

‘‘(A) IN GENERAL.—The term ‘stripped preferred stock’

means any stock described in subparagraph (B) if there

has been a separation in ownership between such stock

and any dividend on such stock which has not become

payable.

‘‘(B) DESCRIPTION OF STOCK.—Stock is described in this

subsection if such stock—

‘‘(i) is limited and preferred as to dividends and

does not participate in corporate growth to any significant extent, and

‘‘(ii) has a fixed redemption price.

‘‘(6) PURCHASE.—For purposes of this subsection, the term

‘purchase’ means—

‘‘(A) any acquisition of stock, where

‘‘(B) the basis of such stock is not determined in whole

or in part by the reference to the adjusted basis of such

stock in the hands of the person from whom acquired.’’

(2) COORDINATION WITH SECTION 167(e).—Paragraph (2) of

section 167(e) is amended to read as follows:

‘‘(2) COORDINATION WITH OTHER PROVISIONS.—

‘‘(A) SECTION 273.—This subsection shall not apply to

any term interest to which section 273 applies.
H. R. 2264—156

‘‘(B) SECTION 305(e).—This subsection shall not apply to the holder of the dividend rights which were separated

from any stripped preferred stock to which section 305(e)(1)

applies.’’

(3) EFFECTIVE DATE.—The amendments made by this subsection shall take effect on April 30, 1993.

(d) TREATMENT OF CAPITAL GAIN UNDER LIMITATION ON INVESTMENT INTEREST.—

(1) IN GENERAL.—Subparagraph (B) of section 163(d)(4)

(defining investment income) is amended to read as follows:

‘‘(B) INVESTMENT INCOME.—The term ‘investment

income’ means the sum of—

‘‘(i) gross income from property held for investment

(other than any gain taken into account under clause

(ii)(I)),

‘‘(ii) the excess (if any) of—

‘‘(I) the net gain attributable to the disposition

of property held for investment, over

‘‘(II) the net capital gain determined by only

taking into account gains and losses from dispositions of property held for investment, plus

‘‘(iii) so much of the net capital gain referred to

in clause (ii)(II) (or, if lesser, the net gain referred

to in clause (ii)(I)) as the taxpayer elects to take into

account under this clause.’’

(2) COORDINATION WITH SPECIAL CAPITAL GAINS RATE.—

Subsection (h) of section 1 is amended by adding at the end

the following new sentence:

‘‘For purposes of the preceding sentence, the net capital gain for

any taxable year shall be reduced (but not below zero) by the

amount which the taxpayer elects to take into account as investment

income for the taxable year under section 163(d)(4)(B)(iii).’’

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply to taxable years beginning after December

31, 1992.

(e) TREATMENT OF CERTAIN APPRECIATED INVENTORY.—

(1) IN GENERAL.—Paragraph (1) of section 751(d) is

amended to read as follows:

‘‘(1) SUBSTANTIAL APPRECIATION.—

‘‘(A) IN GENERAL.—Inventory items of the partnership

shall be considered to have appreciated substantially in

value if their fair market value exceeds 120 percent of

the adjusted basis to the partnership of such property.

‘‘(B) CERTAIN PROPERTY EXCLUDED.—For purposes of

subparagraph (A), there shall be excluded any inventory

property if a principal purpose for acquiring such property

was to avoid the provisions of this section relating to inventory items.’’

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to sales, exchanges, and distributions after April

30, 1993.

Subpart B—Other Provisions

SEC. 13207. REPEAL OF LIMITATION ON AMOUNT OF WAGES SUBJECT

TO HEALTH INSURANCE EMPLOYMENT TAX.

(a) HOSPITAL INSURANCE TAX.—
H. R. 2264—157

(1) Paragraph (1) of section 3121(a) (defining wages) is

amended—

(A) by inserting ‘‘in the case of the taxes imposed

by sections 3101(a) and 3111(a)’’ after ‘‘(1)’’,

(B) by striking ‘‘applicable contribution base (as determined under subsection (x))’’ each place it appears and

inserting ‘‘contribution and benefit base (as determined

under section 230 of the Social Security Act)’’, and

(C) by striking ‘‘such applicable contribution base’’ and

inserting ‘‘such contribution and benefit base’’.

(2) Section 3121 is amended by striking subsection (x).

(b) SELF-EMPLOYMENT TAX.—

(1) Subsection (b) of section 1402 is amended—

(A) by striking ‘‘that part of the net’’ in paragraph

(1) and inserting ‘‘in the case of the tax imposed by section

1401(a), that part of the net’’,

(B) by striking ‘‘applicable contribution base (as determined under subsection (k))’’ in paragraph (1) and inserting

‘‘contribution and benefit base (as determined under section

230 of the Social Security Act)’’,

(C) by inserting ‘‘and’’ after ‘‘section 3121(b),’’, and

(D) by striking ‘‘and (C) includes’’ and all that follows

through ‘‘3111(b)’’.

(2) Section 1402 is amended by striking subsection (k).

(c) RAILROAD RETIREMENT TAX.—

(1) Subparagraph (A) of section 3231(e)(2) is amended by

adding at the end thereof the following new clause:

‘‘(iii) HOSPITAL INSURANCE TAXES.—Clause (i) shall

not apply to—

‘‘(I) so much of the rate applicable under section 3201(a) or 3221(a) as does not exceed the

rate of tax in effect under section 3101(b), and

‘‘(II) so much of the rate applicable under section 3211(a)(1) as does not exceed the rate of tax

in effect under section 1401(b).’’

(2) Clause (i) of section 3231(e)(2)(B) is amended to read

as follows:

‘‘(i) TIER 1 TAXES.—Except as provided in clause

(ii), the term ‘applicable base’ means for any calendar

year the contribution and benefit base determined

under section 230 of the Social Security Act for such

calendar year.’’

(d) TECHNICAL AMENDMENTS.—

(1) Paragraph (1) of section 6413(c) is amended by striking

‘‘section 3101 or section 3201’’ and inserting ‘‘section 3101(a)

or section 3201(a) (to the extent of so much of the rate

applicable under section 3201(a) as does not exceed the rate

of tax in effect under section 3101(a))’’.

(2) Subparagraphs (B) and (C) of section 6413(c)(2) are

each amended by striking ‘‘section 3101’’ each place it appears

and inserting ‘‘section 3101(a)’’.

(3) Subsection (c) of section 6413 is amended by striking

paragraph (3).

(4) Sections 3122 and 3125 are each amended by striking

‘‘applicable contribution base limitation’’ and inserting ‘‘contribution and benefit base limitation’’.
H. R. 2264—158

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

shall apply to 1994 and later calendar years.

SEC. 13208. TOP ESTATE AND GIFT TAX RATES MADE PERMANENT.

(a) GENERAL RULE.—The table contained in paragraph (1) of

section 2001(c) is amended by striking the last item and inserting

the following new items:

‘‘Over $2,500,000 but not over

$3,000,000.

$1,025,800, plus 53% of the excess over

$2,500,000.

Over $3,000,000 ................................. $1,290,800, plus 55% of the excess over

$3,000,000.’’

(b) CONFORMING AMENDMENTS.—

(1) Subsection (c) of section 2001 is amended by striking

paragraph (2) and by redesignating paragraph (3) as paragraph

(2).

(2) Paragraph (2) of section 2001(c), as redesignated by

paragraph (1), is amended by striking ‘‘($18,340,000 in the

case of decedents dying, and gifts made, after 1992)’’.

(3) The last sentence of section 2101(b) is amended by

striking ‘‘section 2001(c)(3)’’ and inserting ‘‘section 2001(c)(2)’’.

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

shall apply in the case of decedents dying and gifts made after

December 31, 1992.

SEC. 13209. REDUCTION IN DEDUCTIBLE PORTION OF BUSINESS

MEALS AND ENTERTAINMENT.

(a) GENERAL RULE.—Paragraph (1) of section 274(n) (relating

to only 80 percent of meal and entertainment expenses allowed

as deduction) is amended by striking ‘‘80 percent’’ and inserting

‘‘50 percent’’.

(b) CONFORMING AMENDMENT.—The subsection heading for sec- tion 274(n) is amended by striking ‘‘80’’ and inserting ‘‘50’’. (c) EFFECTIVE DATE.—The amendments made by this section

shall apply to taxable years beginning after December 31, 1993.

SEC. 13210. ELIMINATION OF DEDUCTION FOR CLUB MEMBERSHIP

FEES.

(a) IN GENERAL.—Subsection (a) of section 274 (relating to disallowance of certain entertainment, etc., expenses) is amended

by adding at the end thereof the following new paragraph: ‘‘(3) DENIAL OF DEDUCTION FOR CLUB DUES.—Notwithstanding the preceding provisions of this subsection, no deduction

shall be allowed under this chapter for amounts paid or

incurred for membership in any club organized for business,

pleasure, recreation, or other social purpose.’’

(b) EXCEPTION FOR EMPLOYEE RECREATIONAL EXPENSES NOT

TO APPLY.—Paragraph (4) of section 274(e) is amended by adding

at the end thereof the following: ‘‘This paragraph shall not apply

for purposes of subsection (a)(3).’’

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

shall apply to amounts paid or incurred after December 31, 1993.

SEC. 13211. DISALLOWANCE OF DEDUCTION FOR CERTAIN EMPLOYEE

REMUNERATION IN EXCESS OF $1,000,000.

(a) GENERAL RULE.—Section 162 (relating to trade or business

expenses) is amended by redesignating subsection (m) as subsection

(n) and by inserting after subsection (l) the following new subsection:
H. R. 2264—159

‘‘(m) CERTAIN EXCESSIVE EMPLOYEE REMUNERATION.—

‘‘(1) IN GENERAL.—In the case of any publicly held corporation, no deduction shall be allowed under this chapter for

applicable employee remuneration with respect to any covered

employee to the extent that the amount of such remuneration

for the taxable year with respect to such employee exceeds

$1,000,000.

‘‘(2) PUBLICLY HELD CORPORATION.—For purposes of this

subsection, the term ‘publicly held corporation’ means any corporation issuing any class of common equity securities required

to be registered under section 12 of the Securities Exchange

Act of 1934.

‘‘(3) COVERED EMPLOYEE.—For purposes of this subsection,

the term ‘covered employee’ means any employee of the taxpayer if—

‘‘(A) as of the close of the taxable year, such employee

is the chief executive officer of the taxpayer or is an individual acting in such a capacity, or

‘‘(B) the total compensation of such employee for the

taxable year is required to be reported to shareholders

under the Securities Exchange Act of 1934 by reason of

such employee being among the 4 highest compensated

officers for the taxable year (other than the chief executive

officer).

‘‘(4) APPLICABLE EMPLOYEE REMUNERATION.—For purposes

of this subsection—

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

this paragraph, the term ‘applicable employee remuneration’ means, with respect to any covered employee for any

taxable year, the aggregate amount allowable as a deduction under this chapter for such taxable year (determined

without regard to this subsection) for remuneration for

services performed by such employee (whether or not during the taxable year). ‘‘(B) EXCEPTION FOR REMUNERATION PAYABLE ON

COMMISSION BASIS.—The term ‘applicable employee remuneration’ shall not include any remuneration payable on

a commission basis solely on account of income generated

directly by the individual performance of the individual

to whom such remuneration is payable. ‘‘(C) OTHER PERFORMANCE-BASED COMPENSATION.—The

term ‘applicable employee remuneration’ shall not include

any remuneration payable solely on account of the attainment of one or more performance goals, but only if— ‘‘(i) the performance goals are determined by a

compensation committee of the board of directors of

the taxpayer which is comprised solely of 2 or more

outside directors,

‘‘(ii) the material terms under which the remuneration is to be paid, including the performance goals,

are disclosed to shareholders and approved by a majority of the vote in a separate shareholder vote before

the payment of such remuneration, and

‘‘(iii) before any payment of such remuneration,

the compensation committee referred to in clause (i)

certifies that the performance goals and any other

material terms were in fact satisfied.
H. R. 2264—160

‘‘(D) EXCEPTION FOR EXISTING BINDING CONTRACTS.—

The term ‘applicable employee remuneration’ shall not

include any remuneration payable under a written binding

contract which was in effect on February 17, 1993, and

which was not modified thereafter in any material respect

before such remuneration is paid.

‘‘(E) REMUNERATION.—For purposes of this paragraph,

the term ‘remuneration’ includes any remuneration (including benefits) in any medium other than cash, but shall

not include—

‘‘(i) any payment referred to in so much of section

3121(a)(5) as precedes subparagraph (E) thereof, and

‘‘(ii) any benefit provided to or on behalf of an

employee if at the time such benefit is provided it

is reasonable to believe that the employee will be able

to exclude such benefit from gross income under this

chapter.

For purposes of clause (i), section 3121(a)(5) shall be applied

without regard to section 3121(v)(1).

‘‘(F) COORDINATION WITH DISALLOWED GOLDEN PARACHUTE PAYMENTS.—The dollar limitation contained in paragraph (1) shall be reduced (but not below zero) by the

amount (if any) which would have been included in the

applicable employee remuneration of the covered employee

for the taxable year but for being disallowed under section

280G.’’

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

shall apply to amounts which would otherwise be deductible for

taxable years beginning on or after January 1, 1994.

SEC. 13212. REDUCTION IN COMPENSATION TAKEN INTO ACCOUNT IN

DETERMINING CONTRIBUTIONS AND BENEFITS UNDER

QUALIFIED RETIREMENT PLANS.

(a) QUALIFICATION REQUIREMENT.— (1) IN GENERAL.—Section 401(a)(17) is amended—

(A) by striking ‘‘$200,000’’ in the first sentence and

inserting ‘‘$150,000’’, (B) by striking the second sentence, and

(C) by adding at the end the following new subparagraph: ‘‘(B) COST-OF-LIVING ADJUSTMENT.— ‘‘(i) IN GENERAL.—If, for any calendar year after 1994, the excess (if any) of— ‘‘(I) $150,000, increased by the cost-of-living

adjustment for the calendar year, over

‘‘(II) the dollar amount in effect under

subparagraph (A) for taxable years beginning in

the calendar year,

is equal to or greater than $10,000, then the $150,000

amount under subparagraph (A) (as previously

adjusted under this subparagraph) for any taxable year

beginning in any subsequent calendar year shall be

increased by the amount of such excess, rounded to

the next lowest multiple of $10,000.

‘‘(ii) COST-OF-LIVING ADJUSTMENT.—The cost-of-living adjustment for any calendar year shall be the

adjustment made under section 415(d) for such cal-
H. R. 2264—161

endar year, except that the base period for purposes

of section 415(d)(1)(A) shall be the calendar quarter

beginning October 1, 1993.’’

(2) CONFORMING AMENDMENT.—Section 401(a)(17) is

amended by striking ‘‘(17) A trust’’ and inserting:

‘‘(17) COMPENSATION LIMIT.—

‘‘(A) IN GENERAL.—A trust’’.

(b) SIMPLIFIED EMPLOYEE PENSIONS.—

(1) IN GENERAL.—Paragraphs (3)(C) and (6)(D)(ii) of section

408(k) are each amended by striking ‘‘$200,000’’ and inserting

‘‘$150,000’’.

(2) COST-OF-LIVING.—Paragraph (8) of section 408(k) is

amended to read as follows:

‘‘(8) COST-OF-LIVING ADJUSTMENT.—The Secretary shall

adjust the $300 amount in paragraph (2)(C) at the same time

and in the same manner as under section 415(d) and shall

adjust the $150,000 amount in paragraphs (3)(C) and (6)(D)(ii)

at the same time, and by the same amount, as any adjustment

under section 401(a)(17)(B).’’

(c) OTHER RELATED PROVISIONS.—

(1) IN GENERAL.—Sections 404(l) and 505(b)(7) are each

amended—

(A) by striking ‘‘$200,000’’ in the first sentence and

inserting ‘‘$150,000’’, and

(B) by striking the second sentence and inserting ‘‘The

Secretary shall adjust the $150,000 amount at the same

time, and by the same amount, as any adjustment under

section 401(a)(17)(B).’’

(2) CONFORMING AMENDMENT.—The heading for section 505(b)(7) is amended by striking ‘‘$200,000’’.

(d) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in this subsection,

the amendments made by this section shall apply to benefits

accruing in plan years beginning after December 31, 1993. (2) COLLECTIVELY BARGAINED PLANS.—In the case of a plan

maintained pursuant to 1 or more collective bargaining agreements between employee representatives and 1 or more employers ratified before the date of the enactment of this Act, the

amendments made by this section shall not apply to contributions or benefits pursuant to such agreements for plan years

beginning before the earlier of— (A) the latest of—

(i) January 1, 1994,

(ii) the date on which the last of such collective

bargaining agreements terminates (without regard to

any extension, amendment, or modification of such

agreements on or after such date of enactment), or

(iii) in the case of a plan maintained pursuant

to collective bargaining under the Railway Labor Act,

the date of execution of an extension or replacement

of the last of such collective bargaining agreements

in effect on such date of enactment, or

(B) January 1, 1997.

(3) TRANSITION RULE FOR STATE AND LOCAL PLANS.—

(A) IN GENERAL.—In the case of an eligible participant

in a governmental plan (within the meaning of section

414(d) of the Internal Revenue Code of 1986), the dollar
H. R. 2264—162

limitation under section 401(a)(17) of such Code shall not

apply to the extent the amount of compensation which

is allowed to be taken into account under the plan would

be reduced below the amount which was allowed to be

taken into account under the plan as in effect on July

1, 1993.

(B) ELIGIBLE PARTICIPANT.—For purposes of subparagraph (A), an eligible participant is an individual who

first became a participant in the plan during a plan year

beginning before the 1st plan year beginning after the

earlier of—

(i) the plan year in which the plan is amended

to reflect the amendments made by this section, or

(ii) December 31, 1995.

(C) PLAN MUST BE AMENDED TO INCORPORATE LIMITS.—

This paragraph shall not apply to any eligible participant

of a plan unless the plan is amended so that the plan

incorporates by reference the dollar limitation under section

401(a)(17) of the Internal Revenue Code of 1986, effective

with respect to noneligible participants for plan years

beginning after December 31, 1995 (or earlier if the plan

amendment so provides).

SEC. 13213. MODIFICATIONS TO DEDUCTION FOR MOVING EXPENSES.

(a) DEFINITION OF DEDUCTIBLE EXPENSES.—

(1) IN GENERAL.—Subsection (b) of section 217 (defining

moving expenses) is amended to read as follows:

‘‘(b) DEFINITION OF MOVING EXPENSES.—

‘‘(1) IN GENERAL.—For purposes of this section, the term

‘moving expenses’ means only the reasonable expenses—

‘‘(A) of moving household goods and personal effects

from the former residence to the new residence, and

‘‘(B) of traveling (including lodging) from the former

residence to the new place of residence.

Such term shall not include any expenses for meals.

‘‘(2) INDIVIDUALS OTHER THAN TAXPAYER.—In the case of

any individual other than the taxpayer, expenses referred to

in paragraph (1) shall be taken into account only if such individual has both the former residence and the new residence as

his principal place of abode and is a member of the taxpayer’s

household.’’

(2) CONFORMING AMENDMENTS.—

(A) Section 217 is amended by striking subsection (e).

(B) Subsection (f) of section 217 is amended to read

as follows:

‘‘(f) SELF-EMPLOYED INDIVIDUAL.—For purposes of this section,

the term ‘self-employed individual’ means an individual who performs personal services—

‘‘(1) as the owner of the entire interest in an unincorporated

trade or business, or

‘‘(2) as a partner in a partnership carrying on a trade

or business.’’

(C) Paragraph (3) of section 217(g) is amended by

inserting ‘‘and’’ at the end of subparagraph (A), by striking

subparagraph (B), and by redesignating subparagraph (C)

as subparagraph (B).
H. R. 2264—163

(D) Subsection (h) of section 217 is amended by striking paragraph (1) and redesignating the following paragraphs

accordingly. (E) Section 1001 is amended by striking subsection (f).

(F) Subsection (e) of section 1016 is amended to read

as follows:

‘‘(e) CROSS REFERENCE.—

‘‘For treatment of separate mineral interests as one property, see

section 614.’’

(b) INCREASE IN MILEAGE REQUIREMENT.—Paragraph (1) of sec- tion 217(c) is amended by striking ‘‘35 miles’’ each place it appears

and inserting ‘‘50 miles’’. (c) DEDUCTION ALLOWED IN COMPUTING ADJUSTED GROSS

INCOME.—

(1) IN GENERAL.—Subsection (a) of section 62 (defining adjusted gross income) is amended by inserting after paragraph

(14) the following new paragraph: ‘‘(15) MOVING EXPENSES.—The deduction allowed by section

217.’’

(2) CONFORMING AMENDMENT.—Subsection (b) of section

67 is amended by striking paragraph (6) and redesignating

the following paragraphs accordingly.

(d) EXCLUSION OF EMPLOYER REIMBURSEMENT FOR DEDUCTIBLE

EXPENSES.—

(1) IN GENERAL.—Subsection (a) of section 132 (relating to certain fringe benefits) is amended by striking ‘‘or’’ at the

end of paragraph (4), by striking the period at the end of

paragraph (5) and inserting ‘‘, or’’, and by adding at the end

thereof the following new paragraph: ‘‘(6) qualified moving expense reimbursement.’’

(2) QUALIFIED MOVING EXPENSE REIMBURSEMENT

DEFINED.—Section 132 is amended by redesignating subsections (g), (h), (i), (j), (k), and (l), as subsections (h), (i), (j), (k),

(l), and (m), respectively, and by inserting after subsection

(f) the following new subsection:

‘‘(g) QUALIFIED MOVING EXPENSE REIMBURSEMENT.—For purposes of this section, the term ‘qualified moving expense reimbursement’ means any amount received (directly or indirectly) by an

individual from an employer as a payment for (or a reimbursement

of) expenses which would be deductible as moving expenses under

section 217 if directly paid or incurred by the individual. Such

term shall not include any payment for (or reimbursement of)

an expense actually deducted by the individual in a prior taxable

year.’’

(3) CONFORMING AMENDMENTS.—

(A) Section 82 is amended by striking ‘‘There shall’’

and inserting ‘‘Except as provided in section 132(a)(6), there

shall’’.

(B) Subsection (j) of section 132 (as redesignated by

paragraph (2)) is amended by striking ‘‘subsection (f)’’ in

paragraph (4)(B)(iii) thereof and inserting ‘‘subsection (h)’’.

(C) Subsection (l) of section 132 (as redesignated by

paragraph (2)) is amended by striking ‘‘subsection (e)’’ and

inserting ‘‘subsections (e) and (g)’’.

(D) Section 4977(c) is amended by striking ‘‘section 132(g)(2)’’ and inserting ‘‘section 132(i)(2)’’.
H. R. 2264—164

(e) EFFECTIVE DATE.—The amendments made by this section shall apply to expenses incurred after December 31, 1993; except

that the amendments made by subsection (d) shall apply to

reimbursements or other payments in respect of expenses incurred

after such date.

SEC. 13214. SIMPLIFICATION OF INDIVIDUAL ESTIMATED TAX SAFE

HARBOR BASED ON LAST YEAR’S TAX.

(a) IN GENERAL.—Paragraph (1) of section 6654(d) (relating to amount of required estimated tax installments) is amended by

striking subparagraphs (C), (D), (E), and (F) and by inserting the

following new subparagraph: ‘‘(C) LIMITATION ON USE OF PRECEDING YEAR’S TAX.— ‘‘(i) IN GENERAL.—If the adjusted gross income shown on the return of the individual for the preceding

taxable year exceeds $150,000, clause (ii) of subparagraph (B) shall be applied by substituting ‘110 percent’

for ‘100 percent’. ‘‘(ii) SEPARATE RETURNS.—In the case of a married

individual (within the meaning of section 7703) who

files a separate return for the taxable year for which

the amount of the installment is being determined,

clause (i) shall be applied by substituting ‘$75,000’

for ‘$150,000’.

‘‘(iii) SPECIAL RULE.—In the case of an estate or

trust, adjusted gross income shall be determined as

provided in section 67(e).’’ (b) CONFORMING AMENDMENTS.— (1) Subparagraph (A) of section 6654(j)(3) is amended by striking ‘‘and subsection (d)(1)(C)(iii) shall not apply’’. (2) Paragraph (4) of section 6654(l) is amended by striking ‘‘paragraphs (1)(C)(iv) and (2)(B)(i) of subsection (d)’’ and inserting ‘‘subsection (d)(2)(B)(i)’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years beginning after December 31, 1993.

SEC. 13215. SOCIAL SECURITY AND TIER 1 RAILROAD RETIREMENT

BENEFITS.

(a) ADDITIONAL INCLUSION FOR CERTAIN TAXPAYERS.— (1) IN GENERAL.—Subsection (a) of section 86 (relating to social security and tier 1 railroad retirement benefits) is

amended by adding at the end the following new paragraph: ‘‘(2) ADDITIONAL AMOUNT.—In the case of a taxpayer with respect to whom the amount determined under subsection

(b)(1)(A) exceeds the adjusted base amount, the amount

included in gross income under this section shall be equal

to the lesser of—

‘‘(A) the sum of—

‘‘(i) 85 percent of such excess, plus

‘‘(ii) the lesser of the amount determined under

paragraph (1) or an amount equal to one-half of the

difference between the adjusted base amount and the

base amount of the taxpayer, or

‘‘(B) 85 percent of the social security benefits received

during the taxable year.’’

(2) CONFORMING AMENDMENTS.—Subsection (a) of section

86 is amended—

(A) by striking ‘‘Gross’’ and inserting:
H. R. 2264—165

‘‘(1) IN GENERAL.—Except as provided in paragraph (2),

gross’’, and

(B) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively.

(b) ADJUSTED BASE AMOUNT.—Section 86(c) (defining base

amount) is amended to read as follows:

‘‘(c) BASE AMOUNT AND ADJUSTED BASE AMOUNT.—For purposes

of this section—

‘‘(1) BASE AMOUNT.—The term ‘base amount’ means—

‘‘(A) except as otherwise provided in this paragraph,

$25,000,

‘‘(B) $32,000 in the case of a joint return, and

‘‘(C) zero in the case of a taxpayer who—

‘‘(i) is married as of the close of the taxable year

(within the meaning of section 7703) but does not

file a joint return for such year, and

‘‘(ii) does not live apart from his spouse at all

times during the taxable year.

‘‘(2) ADJUSTED BASE AMOUNT.—The term ‘adjusted base

amount’ means—

‘‘(A) except as otherwise provided in this paragraph,

$34,000,

‘‘(B) $44,000 in the case of a joint return, and

‘‘(C) zero in the case of a taxpayer described in paragraph (1)(C).’’

(c) TRANSFERS TO THE HOSPITAL INSURANCE TRUST FUND.—

(1) IN GENERAL.—Paragraph (1) of section 121(e) of the

Social Security Amendments of 1983 (Public Law 92–21) is

amended by—

(A) striking ‘‘There’’ and inserting:

‘‘(A) There’’;

(B) inserting ‘‘(i)’’ immediately following ‘‘amounts

equivalent to’’; and

(C) striking the period and inserting the following:

‘‘, less (ii) the amounts equivalent to the aggregate increase

in tax liabilities under chapter 1 of the Internal Revenue

Code of 1986 which is attributable to the amendments

to section 86 of such Code made by section 13215 of the

Revenue Reconciliation Act of 1993.

‘‘(B) There are hereby appropriated to the hospital

insurance trust fund amounts equal to the increase in

tax liabilities described in subparagraph (A)(ii). Such appropriated amounts shall be transferred from the general fund

of the Treasury on the basis of estimates of such tax

liabilities made by the Secretary of the Treasury. Transfers

shall be made pursuant to a schedule made by the Secretary of the Treasury that takes into account estimated

timing of collection of such liabilities.’’

(2) DEFINITION.—Paragraph (3) of section 121(e) of such

Act is amended by redesignating subparagraph (B) as subparagraph (C), and by inserting after subparagraph (A) the following

new subparagraph:

‘‘(B) HOSPITAL INSURANCE TRUST FUND.—The term ‘hospital insurance trust fund’ means the fund established

pursuant to section 1817 of the Social Security Act.’’.
H. R. 2264—166

(3) CONFORMING AMENDMENT.—Paragraph (2) of section 121(e) of such Act is amended in the first sentence by striking

‘‘paragraph (1)’’ and inserting ‘‘paragraph (1)(A)’’. (4) TECHNICAL AMENDMENTS.—Paragraph (1)(A) of section 121(e) of such Act, as redesignated and amended by paragraph

(1), is amended by striking ‘‘1954’’ and inserting ‘‘1986’’.

(d) EFFECTIVE DATE.—The amendments made by subsections (a) and (b) shall apply to taxable years beginning after December

31, 1993.

PART II—PROVISIONS AFFECTING

BUSINESSES

SEC. 13221. INCREASE IN TOP MARGINAL RATE UNDER SECTION 11.

(a) GENERAL RULE.—Paragraph (1) of section 11(b) (relating to amount of tax) is amended—

(1) by striking ‘‘and’’ at the end of subparagraph (B),

(2) by striking subparagraph (C) and inserting the following: ‘‘(C) 34 percent of so much of the taxable income as

exceeds $75,000 but does not exceed $10,000,000, and

‘‘(D) 35 percent of so much of the taxable income as

exceeds $10,000,000.’’, and

(3) by adding at the end thereof the following new sentence:

‘‘In the case of a corporation which has taxable income in

excess of $15,000,000, the amount of the tax determined under

the foregoing provisions of this paragraph shall be increased

by an additional amount equal to the lesser of (i) 3 percent

of such excess, or (ii) $100,000.’’

(b) CERTAIN PERSONAL SERVICE CORPORATIONS.—Paragraph (2)

of section 11(b) is amended by striking ‘‘34 percent’’ and inserting

‘‘35 percent’’.

(c) CONFORMING AMENDMENTS.—

(1) Clause (iii) of section 852(b)(3)(D) is amended by striking ‘‘66 percent’’ and inserting ‘‘65 percent’’.

(2) Subsection (a) of section 1201 is amended by striking

‘‘34 percent’’ each place it appears and inserting ‘‘35 percent’’.

(3) Paragraphs (1) and (2) of section 1445(e) are each

amended by striking ‘‘34 percent’’ and inserting ‘‘35 percent’’.

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

shall apply to taxable years beginning on or after January 1, 1993;

except that the amendment made by subsection (c)(3) shall take

effect on the date of the enactment of this Act.

SEC. 13222. DENIAL OF DEDUCTION FOR LOBBYING EXPENSES.

(a) DISALLOWANCE OF DEDUCTION.—Section 162(e) (relating to appearances, etc., with respect to legislation) is amended to read

as follows:

‘‘(e) DENIAL OF DEDUCTION FOR CERTAIN LOBBYING AND POLITICAL EXPENDITURES.— ‘‘(1) IN GENERAL.—No deduction shall be allowed under

subsection (a) for any amount paid or incurred in connection

with—

‘‘(A) influencing legislation,

‘‘(B) participation in, or intervention in, any political

campaign on behalf of (or in opposition to) any candidate

for public office,
H. R. 2264—167

‘‘(C) any attempt to influence the general public, or

segments thereof, with respect to elections, legislative matters, or referendums, or

‘‘(D) any direct communication with a covered executive

branch official in an attempt to influence the official actions

or positions of such official.

‘‘(2) EXCEPTION FOR LOCAL LEGISLATION.—In the case of

any legislation of any local council or similar governing body—

‘‘(A) paragraph (1)(A) shall not apply, and

‘‘(B) the deduction allowed by subsection (a) shall

include all ordinary and necessary expenses (including,

but not limited to, traveling expenses described in subsection (a)(2) and the cost of preparing testimony) paid

or incurred during the taxable year in carrying on any

trade or business—

‘‘(i) in direct connection with appearances before,

submission of statements to, or sending communications to the committees, or individual members, of

such council or body with respect to legislation or

proposed legislation of direct interest to the taxpayer,

or

‘‘(ii) in direct connection with communication of

information between the taxpayer and an organization

of which the taxpayer is a member with respect to

any such legislation or proposed legislation which is

of direct interest to the taxpayer and to such organization,

and that portion of the dues so paid or incurred with

respect to any organization of which the taxpayer is a

member which is attributable to the expenses of the activities described in clauses (i) and (ii) carried on by such

organization.

‘‘(3) APPLICATION TO DUES OF TAX-EXEMPT ORGANIZATIONS.— No deduction shall be allowed under subsection (a) for the

portion of dues or other similar amounts paid by the taxpayer

to an organization which is exempt from tax under this subtitle

which the organization notifies the taxpayer under section

6033(e)(1)(A)(ii) is allocable to expenditures to which paragraph

(1) applies.

‘‘(4) INFLUENCING LEGISLATION.—For purposes of this

subsection—

‘‘(A) IN GENERAL.—The term ‘influencing legislation’

means any attempt to influence any legislation through

communication with any member or employee of a legislative body, or with any government official or employee

who may participate in the formulation of legislation.

‘‘(B) LEGISLATION.—The term ‘legislation’ has the

meaning given such term by section 4911(e)(2).

‘‘(5) OTHER SPECIAL RULES.—

‘‘(A) EXCEPTION FOR CERTAIN TAXPAYERS.—In the case

of any taxpayer engaged in the trade or business of conducting activities described in paragraph (1), paragraph (1)

shall not apply to expenditures of the taxpayer in conducting such activities directly on behalf of another person

(but shall apply to payments by such other person to the

taxpayer for conducting such activities).

‘‘(B) DE MINIMIS EXCEPTION.—
H. R. 2264—168

‘‘(i) IN GENERAL.—Paragraph (1) shall not apply to any in-house expenditures for any taxable year if

such expenditures do not exceed $2,000. In determining

whether a taxpayer exceeds the $2,000 limit under

this clause, there shall not be taken into account overhead costs otherwise allocable to activities described

in paragraphs (1)(A) and (D). ‘‘(ii) IN-HOUSE EXPENDITURES.—For purposes of clause (i), the term ‘in-house expenditures’ means

expenditures described in paragraphs (1)(A) and (D)

other than—

‘‘(I) payments by the taxpayer to a person engaged in the trade or business of conducting

activities described in paragraph (1) for the conduct of such activities on behalf of the taxpayer,

or

‘‘(II) dues or other similar amounts paid or

incurred by the taxpayer which are allocable to

activities described in paragraph (1). ‘‘(C) EXPENSES INCURRED IN CONNECTION WITH LOBBYING AND POLITICAL ACTIVITIES.—Any amount paid or incurred for research for, or preparation, planning, or

coordination of, any activity described in paragraph (1)

shall be treated as paid or incurred in connection with

such activity.

‘‘(6) COVERED EXECUTIVE BRANCH OFFICIAL.—For purposes

of this subsection, the term ‘covered executive branch official’

means—

‘‘(A) the President,

‘‘(B) the Vice President,

‘‘(C) any officer or employee of the White House Office of the Executive Office of the President, and the 2 most

senior level officers of each of the other agencies in such

Executive Office, and

‘‘(D)(i) any individual serving in a position in level

I of the Executive Schedule under section 5312 of title

5, United States Code, (ii) any other individual designated

by the President as having Cabinet level status, and (iii)

any immediate deputy of an individual described in clause

(i) or (ii).

‘‘(7) SPECIAL RULE FOR INDIAN TRIBAL GOVERNMENTS.—For

purposes of this subsection, an Indian tribal government shall

be treated in the same manner as a local council or similar

governing body.

‘‘(8) CROSS REFERENCE.—

‘‘For reporting requirements and alternative taxes related to this

subsection, see section 6033(e).’’

(b) DISALLOWANCE OF CHARITABLE DEDUCTION IN CERTAIN

CASES.—Section 170(f) (relating to disallowance of deduction in

certain cases and special rules), as amended by section 13172,

is amended by adding at the end the following new paragraph:

‘‘(9) DENIAL OF DEDUCTION WHERE CONTRIBUTION FOR

LOBBYING ACTIVITIES.—No deduction shall be allowed under

this section for a contribution to an organization which conducts

activities to which section 162(e)(1) applies on matters of direct

financial interest to the donor’s trade or business, if a principal

purpose of the contribution was to avoid Federal income tax
H. R. 2264—169

by securing a deduction for such activities under this section

which would be disallowed by reason of section 162(e) if the

donor had conducted such activities directly. No deduction shall

be allowed under section 162(a) for any amount for which

a deduction is disallowed under the preceding sentence.’’

(c) REPORTING REQUIREMENTS.—Section 6033 (relating to

returns by exempt organizations) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d)

the following new subsection:

‘‘(e) SPECIAL RULES RELATING TO LOBBYING ACTIVITIES.—

‘‘(1) REPORTING REQUIREMENTS.—

‘‘(A) IN GENERAL.—If this subsection applies to an

organization for any taxable year, such organization—

‘‘(i) shall include on any return required to be

filed under subsection (a) for such year information

setting forth the total expenditures of the organization

to which section 162(e)(1) applies and the total amount

of the dues or other similar amounts paid to the

organization to which such expenditures are allocable,

and

‘‘(ii) except as provided in paragraphs (2)(A)(i) and

(3), shall, at the time of assessment or payment of

such dues or other similar amounts, provide notice

to each person making such payment which contains

a reasonable estimate of the portion of such dues or

other similar amounts to which such expenditures are

so allocable.

‘‘(B) ORGANIZATIONS TO WHICH SUBSECTION APPLIES.—

‘‘(i) IN GENERAL.—This subsection shall apply to

any organization which is exempt from taxation under

this subtitle other than an organization described in

section 501(c)(3).

‘‘(ii) SPECIAL RULE FOR IN-HOUSE EXPENDITURES.—

This subsection shall not apply to the in-house expenditures (within the meaning of section 162(e)(5)(B)(ii))

of an organization for a taxable year if such expenditures do not exceed $2,000. In determining whether

a taxpayer exceeds the $2,000 limit under this clause,

there shall not be taken into account overhead costs

otherwise allocable to activities described in subparagraphs (A) and (D) of section 162(e)(1).

‘‘(C) ALLOCATION.—For purposes of this paragraph—

‘‘(i) IN GENERAL.—Expenditures to which section

162(e)(1) applies shall be treated as paid out of dues

or other similar amounts to the extent thereof.

‘‘(ii) CARRYOVER OF LOBBYING EXPENDITURES IN

EXCESS OF DUES.—If expenditures to which section

162(e)(1) applies exceed the dues or other similar

amounts for any taxable year, such excess shall be

treated as expenditures to which section 162(e)(1)

applies which are paid or incurred by the organization

during the following taxable year.

‘‘(2) TAX IMPOSED WHERE ORGANIZATION DOES NOT NOTIFY.—

‘‘(A) IN GENERAL.—If an organization—

‘‘(i) elects not to provide the notices described in

paragraph (1)(A) for any taxable year, or
H. R. 2264—170

‘‘(ii) fails to include in such notices the amount

allocable to expenditures to which section 162(e)(1)

applies (determined on the basis of actual amounts

rather than the reasonable estimates under paragraph

(1)(A)(ii)),

then there is hereby imposed on such organization for

such taxable year a tax in an amount equal to the product

of the highest rate of tax imposed by section 11 for the

taxable year and the aggregate amount not included in

such notices by reason of such election or failure. ‘‘(B) WAIVER WHERE FUTURE ADJUSTMENTS MADE.—The

Secretary may waive the tax imposed by subparagraph

(A)(ii) for any taxable year if the organization agrees to

adjust its estimates under paragraph (1)(A)(ii) for the following taxable year to correct any failures. ‘‘(C) TAX TREATED AS INCOME TAX.—For purposes of this title, the tax imposed by subparagraph (A) shall be

treated in the same manner as a tax imposed by chapter

1 (relating to income taxes).

‘‘(3) EXCEPTION WHERE DUES GENERALLY NONDEDUCTIBLE.— Paragraph (1)(A) shall not apply to an organization which establishes to the satisfaction of the Secretary that substantially

all of the dues or other similar amounts paid by persons to

such organization are not deductible without regard to section

162(e).’’

(d) CONFORMING AMENDMENT.—Section 7871(a)(6) is amended

by striking subparagraph (B) and by redesignating subparagraphs

(C) and (D) as subparagraphs (B) and (C), respectively. (e) EFFECTIVE DATE.—The amendments made by this section shall apply to amounts paid or incurred after December 31, 1993.

SEC. 13223. MARK TO MARKET ACCOUNTING METHOD FOR SECURITIES DEALERS.

(a) GENERAL RULE.—Subpart D of part II of subchapter E of chapter 1 (relating to inventories) is amended by adding at

the end thereof the following new section:

‘‘SEC. 475. MARK TO MARKET ACCOUNTING METHOD FOR DEALERS

IN SECURITIES.

‘‘(a) GENERAL RULE.—Notwithstanding any other provision of this subpart, the following rules shall apply to securities held by

a dealer in securities:

‘‘(1) Any security which is inventory in the hands of the dealer shall be included in inventory at its fair market value. ‘‘(2) In the case of any security which is not inventory in the hands of the dealer and which is held at the close

of any taxable year— ‘‘(A) the dealer shall recognize gain or loss as if such security were sold for its fair market value on the last

business day of such taxable year, and

‘‘(B) any gain or loss shall be taken into account for

such taxable year.

Proper adjustment shall be made in the amount of any gain

or loss subsequently realized for gain or loss taken into account

under the preceding sentence. The Secretary may provide by

regulations for the application of this paragraph at times other

than the times provided in this paragraph.

‘‘(b) EXCEPTIONS.—
H. R. 2264—171

‘‘(1) IN GENERAL.—Subsection (a) shall not apply to—

‘‘(A) any security held for investment,

‘‘(B)(i) any security described in subsection (c)(2)(C)

which is acquired (including originated) by the taxpayer

in the ordinary course of a trade or business of the taxpayer

and which is not held for sale, and (ii) any obligation

to acquire a security described in clause (i) if such obligation is entered into in the ordinary course of such trade

or business and is not held for sale, and

‘‘(C) any security which is a hedge with respect to—

‘‘(i) a security to which subsection (a) does not

apply, or

‘‘(ii) a position, right to income, or a liability which

is not a security in the hands of the taxpayer.

To the extent provided in regulations, subparagraph (C) shall

not apply to any security held by a person in its capacity

as a dealer in securities.

‘‘(2) IDENTIFICATION REQUIRED.—A security shall not be

treated as described in subparagraph (A), (B), or (C) of paragraph (1), as the case may be, unless such security is clearly

identified in the dealer’s records as being described in such

subparagraph before the close of the day on which it was

acquired, originated, or entered into (or such other time as

the Secretary may by regulations prescribe).

‘‘(3) SECURITIES SUBSEQUENTLY NOT EXEMPT.—If a security

ceases to be described in paragraph (1) at any time after

it was identified as such under paragraph (2), subsection (a)

shall apply to any changes in value of the security occurring

after the cessation.

‘‘(4) SPECIAL RULE FOR PROPERTY HELD FOR INVESTMENT.— To the extent provided in regulations, subparagraph (A) of

paragraph (1) shall not apply to any security described in

subparagraph (D) or (E) of subsection (c)(2) which is held by

a dealer in such securities.

‘‘(c) DEFINITIONS.—For purposes of this section—

‘‘(1) DEALER IN SECURITIES DEFINED.—The term ‘dealer in

securities’ means a taxpayer who— ‘‘(A) regularly purchases securities from or sells securities to customers in the ordinary course of a trade or

business; or

‘‘(B) regularly offers to enter into, assume, offset, assign

or otherwise terminate positions in securities with customers in the ordinary course of a trade or business.

‘‘(2) SECURITY DEFINED.—The term ‘security’ means any— ‘‘(A) share of stock in a corporation;

‘‘(B) partnership or beneficial ownership interest in

a widely held or publicly traded partnership or trust;

‘‘(C) note, bond, debenture, or other evidence of indebtedness;

‘‘(D) interest rate, currency, or equity notional principal

contract;

‘‘(E) evidence of an interest in, or a derivative financial

instrument in, any security described in subparagraph (A),

(B), (C), or (D), or any currency, including any option,

forward contract, short position, and any similar financial

instrument in such a security or currency; and

‘‘(F) position which—
H. R. 2264—172

‘‘(i) is not a security described in subparagraph

(A), (B), (C), (D), or (E),

‘‘(ii) is a hedge with respect to such a security,

and

‘‘(iii) is clearly identified in the dealer’s records

as being described in this subparagraph before the

close of the day on which it was acquired or entered

into (or such other time as the Secretary may by regulations prescribe).

Subparagraph (E) shall not include any contract to which section 1256(a) applies.

‘‘(3) HEDGE.—The term ‘hedge’ means any position which

reduces the dealer’s risk of interest rate or price changes or

currency fluctuations, including any position which is reasonably expected to become a hedge within 60 days after the

acquisition of the position.

‘‘(d) SPECIAL RULES.—For purposes of this section—

‘‘(1) COORDINATION WITH CERTAIN RULES.—The rules of sections 263(g), 263A, and 1256(a) shall not apply to securities

to which subsection (a) applies, and section 1091 shall not

apply (and section 1092 shall apply) to any loss recognized

under subsection (a).

‘‘(2) IMPROPER IDENTIFICATION.—If a taxpayer—

‘‘(A) identifies any security under subsection (b)(2) as

being described in subsection (b)(1) and such security is

not so described, or

‘‘(B) fails under subsection (c)(2)(F)(iii) to identify any

position which is described in subsection (c)(2)(F) (without

regard to clause (iii) thereof) at the time such identification

is required,

the provisions of subsection (a) shall apply to such security

or position, except that any loss under this section prior to

the disposition of the security or position shall be recognized

only to the extent of gain previously recognized under this

section (and not previously taken into account under this paragraph) with respect to such security or position.

‘‘(3) CHARACTER OF GAIN OR LOSS.—

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

(B) or section 1236(b)—

‘‘(i) IN GENERAL.—Any gain or loss with respect

to a security under subsection (a)(2) shall be treated

as ordinary income or loss.

‘‘(ii) SPECIAL RULE FOR DISPOSITIONS.—If—

‘‘(I) gain or loss is recognized with respect

to a security before the close of the taxable year,

and

‘‘(II) subsection (a)(2) would have applied if

the security were held as of the close of the taxable

year,

such gain or loss shall be treated as ordinary income

or loss.

‘‘(B) EXCEPTION.—Subparagraph (A) shall not apply

to any gain or loss which is allocable to a period during

which—

‘‘(i) the security is described in subsection (b)(1)(C)

(without regard to subsection (b)(2)),
H. R. 2264—173

‘‘(ii) the security is held by a person other than in connection with its activities as a dealer in securities, or

‘‘(iii) the security is improperly identified (within the meaning of subparagraph (A) or (B) of paragraph

(2)).

‘‘(e) REGULATORY AUTHORITY.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out

the purposes of this section, including rules— ‘‘(1) to prevent the use of year-end transfers, related parties, or other arrangements to avoid the provisions of this section,

and

‘‘(2) to provide for the application of this section to any security which is a hedge which cannot be identified with

a specific security, position, right to income, or liability.’’

(b) CONFORMING AMENDMENTS.— (1) Paragraph (1) of section 988(d) is amended— (A) by striking ‘‘section 1256’’ and inserting ‘‘section 475 or 1256’’, and

(B) by striking ‘‘1092 and 1256’’ and inserting ‘‘475, 1092, and 1256’’.

(2) The table of sections for subpart D of part II of subchapter E of chapter 1 is amended by adding at the end thereof

the following new item:

‘‘Sec. 475. Mark to market accounting method for dealers in securities.’’

(c) EFFECTIVE DATE.— (1) IN GENERAL.—The amendments made by this section shall apply to all taxable years ending on or after December

31, 1993.

(2) CHANGE IN METHOD OF ACCOUNTING.—In the case of

any taxpayer required by this section to change its method

of accounting for any taxable year— (A) such change shall be treated as initiated by the

taxpayer, (B) such change shall be treated as made with the consent of the Secretary, and (C) except as provided in paragraph (3), the net amount of the adjustments required to be taken into account by

the taxpayer under section 481 of the Internal Revenue

Code of 1986 shall be taken into account ratably over

the 5-taxable year period beginning with the first taxable

year ending on or after December 31, 1993.

(3) SPECIAL RULE FOR FLOOR SPECIALISTS AND MARKET MAKERS.— (A) IN GENERAL.—If—

(i) a taxpayer (or any predecessor) used the last- in first-out (LIFO) method of accounting with respect

to any qualified securities for the 5-taxable year period

ending with its last taxable year ending before December 31, 1993, and

(ii) any portion of the net amount described in paragraph (2)(C) is attributable to the use of such

method of accounting, then paragraph (2)(C) shall be applied by taking such portion into account ratably over the 15-taxable year period

beginning with the first taxable year ending on or after

December 31, 1993.
H. R. 2264—174

(B) QUALIFIED SECURITY.—For purposes of this paragraph, the term ‘‘qualified security’’ means any security

acquired—

(i) by a floor specialist (as defined in section

1236(d)(2) of the Internal Revenue Code of 1986) in

connection with the specialist’s duties as a specialist

on an exchange, but only if the security is one in

which the specialist is registered with the exchange,

or

(ii) by a taxpayer who is a market maker in connection with the taxpayer’s duties as a market maker,

but only if—

(I) the security is included on the National

Association of Security Dealers Automated Quotation System,

(II) the taxpayer is registered as a market

maker in such security with the National Association of Security Dealers, and

(III) as of the last day of the taxable year

preceding the taxpayer’s first taxable year ending

on or after December 31, 1993, the taxpayer (or

any predecessor) has been actively and regularly

engaged as a market maker in such security for

the 2-year period ending on such date (or, if

shorter, the period beginning 61 days after the

security was listed in such quotation system and

ending on such date).

SEC. 13224. CLARIFICATION OF TREATMENT OF CERTAIN FSLIC

FINANCIAL ASSISTANCE.

(a) GENERAL RULE.—For purposes of chapter 1 of the Internal

Revenue Code of 1986—

(1) any FSLIC assistance with respect to any loss of principal, capital, or similar amount upon the disposition of any

asset shall be taken into account as compensation for such

loss for purposes of section 165 of such Code, and

(2) any FSLIC assistance with respect to any debt shall

be taken into account for purposes of section 166, 585, or

593 of such Code in determining whether such debt is worthless

(or the extent to which such debt is worthless) and in determining the amount of any addition to a reserve for bad debts

arising from the worthlessness or partial worthlessness of such

debts.

(b) FSLIC ASSISTANCE.—For purposes of this section, the term

‘‘FSLIC assistance’’ means any assistance (or right to assistance)

with respect to a domestic building and loan association (as defined

in section 7701(a)(19) of such Code without regard to subparagraph

(C) thereof) under section 406(f) of the National Housing Act or

section 21A of the Federal Home Loan Bank Act (or under any

similar provision of law).

(c) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as otherwise provided in this

subsection—

(A) The provisions of this section shall apply to taxable

years ending on or after March 4, 1991, but only with

respect to FSLIC assistance not credited before March 4,

1991.
H. R. 2264—175

(B) If any FSLIC assistance not credited before

March 4, 1991, is with respect to a loss sustained or

charge-off in a taxable year ending before March 4, 1991,

for purposes of determining the amount of any net operating loss carryover to a taxable year ending on or after

March 4, 1991, the provisions of this section shall apply

to such assistance for purposes of determining the amount

of the net operating loss for the taxable year in which

such loss was sustained or debt written off. Except as

provided in the preceding sentence, this section shall not

apply to any FSLIC assistance with respect to a loss

sustained or charge-off in a taxable year ending before

March 4, 1991.

(2) EXCEPTIONS.—The provisions of this section shall not

apply to any assistance to which the amendments made by

section 1401(a)(3) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 apply.

SEC. 13225. MODIFICATION OF CORPORATE ESTIMATED TAX RULES.

(a) INCREASE IN REQUIRED INSTALLMENT BASED ON CURRENT

YEAR TAX.—

(1) IN GENERAL.—Clause (i) of section 6655(d)(1)(B) (relating to amount of required installment) is amended by striking

‘‘91 percent’’ each place it appears and inserting ‘‘100 percent’’.

(2) CONFORMING AMENDMENTS.—

(A) Subsection (d) of section 6655 is amended—

(i) by striking paragraph (3), and

(ii) by striking ‘‘91 PERCENT’’ in the paragraph heading of paragraph (2) and inserting ‘‘100 PERCENT’’.

(B) Clause (ii) of section 6655(e)(2)(B) is amended by

striking the table contained therein and inserting the following: The

‘‘In the case of the following applicable

required installments: percentage is:

1st .................................................................................. 25

2nd ................................................................................. 50

3rd .................................................................................. 75

4th .................................................................................. 100.’’

(C) Clause (i) of section 6655(e)(3)(A) is amended by

striking ‘‘91 percent’’ and inserting ‘‘100 percent’’. (b) MODIFICATION OF PERIODS FOR APPLYING ANNUALIZATION.— (1) Clause (i) of section 6655(e)(2)(A) is amended—

(A) by striking ‘‘or for the first 5 months’’ in subclause (II),

(B) by striking ‘‘or for the first 8 months’’ in subclause

(III), and

(C) by striking ‘‘or for the first 11 months’’ in subclause

(IV).

(2) Paragraph (2) of section 6655(e) is amended by adding

at the end thereof the following new subparagraph:

‘‘(C) ELECTION FOR DIFFERENT ANNUALIZATION PERIODS.—

‘‘(i) If the taxpayer makes an election under this

clause—

‘‘(I) subclause (I) of subparagraph (A)(i) shall

be applied by substituting ‘2 months’ for ‘3

months’,
H. R. 2264—176

‘‘(II) subclause (II) of subparagraph (A)(i) shall

be applied by substituting ‘4 months’ for ‘3

months’,

‘‘(III) subclause (III) of subparagraph (A)(i)

shall be applied by substituting ‘7 months’ for ‘6

months’, and

‘‘(IV) subclause (IV) of subparagraph (A)(i)

shall be applied by substituting ‘10 months’ for

‘9 months’.

‘‘(ii) If the taxpayer makes an election under this

clause—

‘‘(I) subclause (II) of subparagraph (A)(i) shall

be applied by substituting ‘5 months’ for ‘3

months’,

‘‘(II) subclause (III) of subparagraph (A)(i)

shall be applied by substituting ‘8 months’ for ‘6

months’, and

‘‘(III) subclause (IV) of subparagraph (A)(i)

shall be applied by substituting ‘11 months’ for

‘9 months’.

‘‘(iii) An election under clause (i) or (ii) shall apply

to the taxable year for which made and such an election

shall be effective only if made on or before the date

required for the payment of the first required installment for such taxable year.’’

(3) The last sentence of section 6655(g)(3) is amended by

striking ‘‘and subsection (e)(2)(A)’’ and inserting ‘‘and, except

in the case of an election under subsection (e)(2)(C), subsection

(e)(2)(A)’’.

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

shall apply to taxable years beginning after December 31, 1993.

SEC. 13226. MODIFICATIONS OF DISCHARGE OF INDEBTEDNESS

PROVISIONS.

(a) REPEAL OF STOCK FOR DEBT EXCEPTION IN DETERMINING

INCOME FROM DISCHARGE OF INDEBTEDNESS.—

(1) IN GENERAL.—Subsection (e) of section 108 is amended—

(A) by striking paragraph (10) and by redesignating

paragraph (11) as paragraph (10), and

(B) by amending paragraph (8) to read as follows:

‘‘(8) INDEBTEDNESS SATISFIED BY CORPORATION’S STOCK.—

For purposes of determining income of a debtor from discharge

of indebtedness, if a debtor corporation transfers stock to a

creditor in satisfaction of its indebtedness, such corporation

shall be treated as having satisfied the indebtedness with an

amount of money equal to the fair market value of the stock.’’

(2) CONFORMING AMENDMENTS.—

(A) Subparagraph (C) of section 382(l)(5) is amended

to read as follows:

‘‘(C) COORDINATION WITH SECTION 108.—In applying section 108(e)(8) to any case to which subparagraph (A)

applies, there shall not be taken into account any indebtedness for interest described in subparagraph (B).’’

(B) Section 108(e)(6) is amended by striking ‘‘For’’ and

inserting ‘‘Except as provided in regulations, for’’.

(3) EFFECTIVE DATE.—
H. R. 2264—177

(A) IN GENERAL.—Except as otherwise provided in this

paragraph, the amendments made by this subsection shall

apply to stock transferred after December 31, 1994, in

satisfaction of any indebtedness.

(B) EXCEPTION FOR TITLE 11 CASES.—The amendments

made by this subsection shall not apply to stock transferred

in satisfaction of any indebtedness if such transfer is in

a title 11 or similar case (as defined in section 368(a)(3)(A)

of the Internal Revenue Code of 1986) which was filed

on or before December 31, 1993.

(b) TAX ATTRIBUTES SUBJECT TO REDUCTION.—

(1) MINIMUM TAX CREDIT.—Section 108(b)(2) (relating to

tax attributes affected; order of reduction) is amended by

redesignating subparagraphs (C), (D), and (E) as subparagraphs

(D), (E), and (F) and by adding after subparagraph (B) the

following new subparagraph:

‘‘(C) MINIMUM TAX CREDIT.—The amount of the minimum tax credit available under section 53(b) as of the

beginning of the taxable year immediately following the

taxable year of the discharge.’’

(2) PASSIVE ACTIVITY LOSSES AND CREDITS.—Section

108(b)(2), as amended by paragraph (1), is amended by

redesignating subparagraph (F) as subparagraph (G) and by

adding after subparagraph (E) the following new subparagraph:

‘‘(F) PASSIVE ACTIVITY LOSS AND CREDIT CARRYOVERS.—

Any passive activity loss or credit carryover of the taxpayer

under section 469(b) from the taxable year of the discharge.’’

(3) CONFORMING AMENDMENTS.—

(A) Subparagraph (B) of section 108(b)(3) is amended

to read as follows:

‘‘(B) CREDIT CARRYOVER REDUCTION.—The reductions

described in subparagraphs (B), (C), and (G) shall be 331⁄3

cents for each dollar excluded by subsection (a). The reduction described in subparagraph (F) in any passive activity

credit carryover shall be 331⁄3 cents for each dollar excluded

by subsection (a).’’

(B) Subparagraph (B) of section 108(b)(4) is amended

by striking ‘‘(C)’’ in the text and heading thereof and inserting ‘‘(D)’’.

(C) Subparagraph (C) of section 108(b)(4) is amended

by striking ‘‘(E)’’ in the text and heading thereof and inserting ‘‘(G)’’.

(D) Subparagraph (B) of section 108(g)(3) is amended—

(i) by striking ‘‘subparagraphs (A), (B), (C), and

(E)’’ and inserting ‘‘subparagraphs (A), (B), (C), (D),

(F), and (G)’’,

(ii) by striking ‘‘subparagraphs (B) and (E)’’ and

inserting ‘‘subparagraphs (B), (C), and (G)’’, and

(iii) by inserting before the period at the end the

following: ‘‘and the attribute described in subparagraph

(F) of subsection (b)(2) to the extent attributable to

any passive activity credit carryover’’.

(4) EFFECTIVE DATE.—The amendments made by this subsection shall apply to discharges of indebtedness in taxable

years beginning after December 31, 1993.
H. R. 2264—178

SEC. 13227. LIMITATION ON SECTION 936 CREDIT.

(a) GENERAL RULE.—Subsection (a) of section 936 (relating

to Puerto Rico and possession tax credit) is amended—

(1) by striking ‘‘as provided in paragraph (3)’’ in paragraph

(1) and inserting ‘‘as otherwise provided in this section’’; and

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

‘‘(4) LIMITATIONS ON CREDIT FOR ACTIVE BUSINESS

INCOME.—

‘‘(A) IN GENERAL.—The amount of the credit determined

under paragraph (1) for any taxable year with respect

to income referred to in subparagraph (A) thereof shall

not exceed the sum of the following amounts:

‘‘(i) 60 percent of the sum of—

‘‘(I) the aggregate amount of the possession

corporation’s qualified possession wages for such

taxable year, plus

‘‘(II) the allocable employee fringe benefit

expenses of the possession corporation for the taxable year.

‘‘(ii) The sum of—

‘‘(I) 15 percent of the depreciation allowances

for the taxable year with respect to short-life qualified tangible property,

‘‘(II) 40 percent of the depreciation allowances

for the taxable year with respect to medium-life

qualified tangible property, and

‘‘(III) 65 percent of the depreciation allowances

for the taxable year with respect to long-life qualified tangible property.

‘‘(iii) If the possession corporation does not have

an election to use the method described in subsection

(h)(5)(C)(ii) (relating to profit split) in effect for the

taxable year, the amount of qualified possession income

taxes for the taxable year allocable to nonsheltered

income.

‘‘(B) ELECTION TO TAKE REDUCED CREDIT.—

‘‘(i) IN GENERAL.—If an election under this

subparagraph applies to a possession corporation for

any taxable year—

‘‘(I) subparagraph (A), and the provisions of

subsection (i), shall not apply to such possession

corporation for such taxable year, and

‘‘(II) the credit determined under paragraph

(1) for such taxable year with respect to income

referred to in subparagraph (A) thereof shall be

the applicable percentage of the credit which would

otherwise have been determined under such paragraph with respect to such income.

Notwithstanding subclause (I), a possession corporation

to which an election under this subparagraph applies

shall be entitled to the benefits of subsection (i)(3)(B)

for taxes allocable (on a pro rata basis) to taxable

income the tax on which is not offset by reason of

this subparagraph.
H. R. 2264—179

‘‘(ii) APPLICABLE PERCENTAGE.—The term

‘applicable percentage’ means the percentage determined in accordance with the following table:

‘‘In the case of taxable The

years beginning in: percentage is:

1994 ...................................................................... 60

1995 ...................................................................... 55

1996 ...................................................................... 50

1997 ...................................................................... 45

1998 and thereafter ............................................. 40.

‘‘(iii) ELECTION.—

‘‘(I) IN GENERAL.—An election under this

subparagraph by any possession corporation may

be made only for the corporation’s first taxable

year beginning after December 31, 1993, for which

it is a possession corporation.

‘‘(II) PERIOD OF ELECTION.—An election under

this subparagraph shall apply to the taxable year

for which made and all subsequent taxable years

unless revoked.

‘‘(III) AFFILIATED GROUPS.—If, for any taxable

year, an election is not in effect for any possession

corporation which is a member of an affiliated

group, any election under this subparagraph for

any other member of such group is revoked for

such taxable year and all subsequent taxable

years. For purposes of this subclause, members

of an affiliated group shall be determined without

regard to the exceptions contained in section

1504(b) and as if the constructive ownership rules

of section 1563(e) applied for purposes of section

1504(a). The Secretary may prescribe regulations

to prevent the avoidance of this subclause through

deconsolidation or otherwise.

‘‘(C) CROSS REFERENCE.—

‘‘For definitions and special rules applicable to this paragraph,

see subsection (i).’’

(b) DEFINITIONS AND SPECIAL RULES.—Section 936 is amended

by adding at the end thereof the following new subsection: ‘‘(i) DEFINITIONS AND SPECIAL RULES RELATING TO LIMITATIONS

OF SUBSECTION (a)(4).—

‘‘(1) QUALIFIED POSSESSION WAGES.—For purposes of this

section—

‘‘(A) IN GENERAL.—The term ‘qualified possession

wages’ means wages paid or incurred by the possession

corporation during the taxable year in connection with

the active conduct of a trade or business within a possession

of the United States to any employee for services performed

in such possession, but only if such services are performed

while the principal place of employment of such employee

is within such possession.

‘‘(B) LIMITATION ON AMOUNT OF WAGES TAKEN INTO

ACCOUNT.—

‘‘(i) IN GENERAL.—The amount of wages which may

be taken into account under subparagraph (A) with

respect to any employee for any taxable year shall

not exceed 85 percent of the contribution and benefit
H. R. 2264—180

base determined under section 230 of the Social Security Act for the calendar year in which such taxable

year begins.

‘‘(ii) TREATMENT OF PART-TIME EMPLOYEES, ETC.—

If—

‘‘(I) any employee is not employed by the

possession corporation on a substantially full-time

basis at all times during the taxable year, or

‘‘(II) the principal place of employment of any

employee with the possession corporation is not

within a possession at all times during the taxable

year,

the limitation applicable under clause (i) with respect

to such employee shall be the appropriate portion (as

determined by the Secretary) of the limitation which

would otherwise be in effect under clause (i).

‘‘(C) TREATMENT OF CERTAIN EMPLOYEES.—The term

‘qualified possession wages’ shall not include any wages

paid to employees who are assigned by the employer to

perform services for another person, unless the principal

trade or business of the employer is to make employees

available for temporary periods to other persons in return

for compensation. All possession corporations treated as

1 corporation under paragraph (5) shall be treated as 1

employer for purposes of the preceding sentence.

‘‘(D) WAGES.—

‘‘(i) IN GENERAL.—Except as provided in clause

(ii), the term ‘wages’ has the meaning given to such

term by subsection (b) of section 3306 (determined

without regard to any dollar limitation contained in

such section). For purposes of the preceding sentence,

such subsection (b) shall be applied as if the term

‘United States’ included all possessions of the United

States.

‘‘(ii) SPECIAL RULE FOR AGRICULTURAL LABOR AND

RAILWAY LABOR.—In any case to which subparagraph (A) or (B) of paragraph (1) of section 51(h) applies,

the term ‘wages’ has the meaning given to such term

by section 51(h)(2). ‘‘(2) ALLOCABLE EMPLOYEE FRINGE BENEFIT EXPENSES.— ‘‘(A) IN GENERAL.—The allocable employee fringe benefit expenses of any possession corporation for any taxable

year is an amount which bears the same ratio to the

amount determined under subparagraph (B) for such taxable year as—

‘‘(i) the aggregate amount of the possession corporation’s qualified possession wages for such taxable

year, bears to

‘‘(ii) the aggregate amount of the wages paid or

incurred by such possession corporation during such

taxable year.

In no event shall the amount determined under the preceding sentence exceed 15 percent of the amount referred

to in clause (i).

‘‘(B) EXPENSES TAKEN INTO ACCOUNT.—For purposes

of subparagraph (A), the amount determined under this

subparagraph for any taxable year is the aggregate amount
H. R. 2264—181

allowable as a deduction under this chapter to the possession corporation for such taxable year with respect to—

‘‘(i) employer contributions under a stock bonus,

pension, profit-sharing, or annuity plan,

‘‘(ii) employer-provided coverage under any

accident or health plan for employees, and

‘‘(iii) the cost of life or disability insurance provided

to employees.

Any amount treated as wages under paragraph (1)(D) shall

not be taken into account under this subparagraph.

‘‘(3) TREATMENT OF POSSESSION TAXES.—

‘‘(A) AMOUNT OF CREDIT FOR POSSESSION CORPORATIONS

NOT USING PROFIT SPLIT.—

‘‘(i) IN GENERAL.—For purposes of subsection

(a)(4)(A)(iii), the amount of the qualified possession

income taxes for any taxable year allocable to

nonsheltered income shall be an amount which bears

the same ratio to the possession income taxes for such

taxable year as—

‘‘(I) the increase in the tax liability of the

possession corporation under this chapter for the

taxable year by reason of subsection (a)(4)(A)

(without regard to clause (iii) thereof), bears to

‘‘(II) the tax liability of the possession corporation under this chapter for the taxable year determined without regard to the credit allowable under

this section.

‘‘(ii) LIMITATION ON AMOUNT OF TAXES TAKEN INTO

ACCOUNT.—Possession income taxes shall not be taken

into account under clause (i) for any taxable year to

the extent that the amount of such taxes exceeds 9

percent of the amount of the taxable income for such

taxable year.

‘‘(B) DEDUCTION FOR POSSESSION CORPORATIONS USING

PROFIT SPLIT.—Notwithstanding subsection (c), if a posses- sion corporation is not described in subsection (a)(4)(A)(iii)

for the taxable year, such possession corporation shall be

allowed a deduction for such taxable year in an amount

which bears the same ratio to the possession income taxes

for such taxable year as— ‘‘(i) the increase in the tax liability of the possession corporation under this chapter for the taxable

year by reason of subsection (a)(4)(A), bears to ‘‘(ii) the tax liability of the possession corporation

under this chapter for the taxable year determined

without regard to the credit allowable under this section.

In determining the credit under subsection (a) and in applying the preceding sentence, taxable income shall be determined without regard to the preceding sentence.

‘‘(C) POSSESSION INCOME TAXES.—For purposes of this

paragraph, the term ‘possession income taxes’ means any

taxes of a possession of the United States which are treated

as not being income, war profits, or excess profits taxes

paid or accrued to a possession of the United States by

reason of subsection (c).

‘‘(4) DEPRECIATION RULES.—For purposes of this section—
H. R. 2264—182

‘‘(A) DEPRECIATION ALLOWANCES.—The term ‘depreciation allowances’ means the depreciation deductions allowable under section 167 to the possession corporation.

‘‘(B) CATEGORIES OF PROPERTY.—

‘‘(i) QUALIFIED TANGIBLE PROPERTY.—The term

‘qualified tangible property’ means any tangible property used by the possession corporation in a possession

of the United States in the active conduct of a trade

or business within such possession.

‘‘(ii) SHORT-LIFE QUALIFIED TANGIBLE PROPERTY.—

The term ‘short-life qualified tangible property’ means

any qualified tangible property to which section 168

applies and which is 3-year property or 5-year property

for purposes of such section.

‘‘(iii) MEDIUM-LIFE QUALIFIED TANGIBLE PROPERTY.—The term ‘medium-life qualified tangible property’ means any qualified tangible property to which

section 168 applies and which is 7-year property or

10-year property for purposes of such section.

‘‘(iv) LONG-LIFE QUALIFIED TANGIBLE PROPERTY.—

The term ‘long-life qualified tangible property’ means

any qualified tangible property to which section 168

applies and which is not described in clause (ii) or

(iii).

‘‘(v) TRANSITIONAL RULE.—In the case of any qualified tangible property to which section 168 (as in effect

on the day before the date of the enactment of the

Tax Reform Act of 1986) applies, any reference in

this paragraph to section 168 shall be treated as a

reference to such section as so in effect.

‘‘(5) ELECTION TO COMPUTE CREDIT ON CONSOLIDATED

BASIS.— ‘‘(A) IN GENERAL.—Any affiliated group may elect to

treat all possession corporations which would be members

of such group but for section 1504(b) (3) or (4) as 1 corporation for purposes of this section. The credit determined

under this section with respect to such 1 corporation shall

be allocated among such possession corporations in such

manner as the Secretary may prescribe. ‘‘(B) ELECTION.—An election under subparagraph (A)

shall apply to the taxable year for which made and all

succeeding taxable years unless revoked with the consent

of the Secretary.

‘‘(6) POSSESSION CORPORATION.—The term ‘possession corporation’ means a domestic corporation for which the election

provided in subsection (a) is in effect.’’

(c) MINIMUM TAX TREATMENT.—

(1) IN GENERAL.—Subclause (I) of section 56(g)(4)(C)(ii)

(relating to special rule for certain dividends) is amended by

striking ‘‘sections 936 and 921’’ and inserting ‘‘sections 936

(including subsections (a)(4) and (i) thereof) and 921’’.

(2) TREATMENT OF FOREIGN TAXES.—Clause (iii) of section

56(g)(4)(C) is amended by adding at the end thereof the following subclauses:

‘‘(IV) SEPARATE APPLICATION OF FOREIGN TAX

CREDIT LIMITATIONS.—In determining the alternative minimum foreign tax credit, section 904(d)
H. R. 2264—183

shall be applied as if dividends from a corporation

eligible for the credit provided by section 936 were

a separate category of income referred to in a

subparagraph of section 904(d)(1).

‘‘(V) COORDINATION WITH LIMITATION ON 936

CREDIT.—Any reference in this clause to a dividend

received from a corporation eligible for the credit

provided by section 936 shall be treated as a reference to the portion of any such dividend for

which the dividends received deduction is disallowed under clause (i) after the application of

clause (ii)(I).’’

(d) CONFORMING AMENDMENT.—Paragraph (4) of section 904(b)

is amended by inserting before the period at the end thereof the

following: ‘‘(without regard to subsections (a)(4) and (i) thereof)’’.

(e) INCREASE IN LIMITATION ON COVER OVER.—Paragraph (1)

of section 7652(f) is amended to read as follows:

‘‘(1) $10.50 ($11.30 in the case of distilled spirits brought

into the United States during the 5-year period beginning on

October 1, 1993), or.’’

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

shall apply to taxable years beginning after December 31, 1993;

except that the amendment made by subsection (e) shall take effect

on October 1, 1993.

SEC. 13228. MODIFICATION TO LIMITATION ON DEDUCTION FOR CERTAIN INTEREST.

(a) GENERAL RULE.—Paragraph (3) of section 163(j) (defining

disqualified interest) is amended to read as follows:

‘‘(3) DISQUALIFIED INTEREST.—For purposes of this subsection, the term ‘disqualified interest’ means—

‘‘(A) any interest paid or accrued by the taxpayer

(directly or indirectly) to a related person if no tax is

imposed by this subtitle with respect to such interest,

and

‘‘(B) any interest paid or accrued by the taxpayer with

respect to any indebtedness to a person who is not a

related person if—

‘‘(i) there is a disqualified guarantee of such indebtedness, and

‘‘(ii) no gross basis tax is imposed by this subtitle

with respect to such interest.’’

(b) DEFINITIONS.—Paragraph (6) of section 163(j) is amended

by adding at the end thereof the following new subparagraphs:

‘‘(D) DISQUALIFIED GUARANTEE.—

‘‘(i) IN GENERAL.—Except as provided in clause

(ii), the term ‘disqualified guarantee’ means any

guarantee by a related person which is—

‘‘(I) an organization exempt from taxation

under this subtitle, or

‘‘(II) a foreign person.

‘‘(ii) EXCEPTIONS.—The term ‘disqualified guarantee’ shall not include a guarantee—

‘‘(I) in any circumstances identified by the Secretary by regulation, where the interest on the

indebtedness would have been subject to a net
H. R. 2264—184

basis tax if the interest had been paid to the

guarantor, or

‘‘(II) if the taxpayer owns a controlling interest

in the guarantor.

For purposes of subclause (II), except as provided in

regulations, the term ‘a controlling interest’ means

direct or indirect ownership of at least 80 percent

of the total voting power and value of all classes of

stock of a corporation, or 80 percent of the profit and

capital interests in any other entity. For purposes of

the preceding sentence, the rules of paragraphs (1)

and (5) of section 267(c) shall apply; except that such

rules shall also apply to interest in entities other than

corporations.

‘‘(iii) GUARANTEE.—Except as provided in regulations, the term ‘guarantee’ includes any arrangement

under which a person (directly or indirectly through

an entity or otherwise) assures, on a conditional or

unconditional basis, the payment of another person’s

obligation under any indebtedness.

‘‘(E) GROSS BASIS AND NET BASIS TAXATION.—

‘‘(i) GROSS BASIS TAX.—The term ‘gross basis tax’

means any tax imposed by this subtitle which is determined by reference to the gross amount of any item

of income without any reduction for any deduction

allowed by this subtitle.

‘‘(ii) NET BASIS TAX.—The term ‘net basis tax’

means any tax imposed by this subtitle which is not

a gross basis tax.’’ (c) CONFORMING AMENDMENTS.— (1) Subparagraph (B) of section 163(j)(5) is amended by

striking ‘‘to a related person’’. (2) The subsection heading for subsection (j) of section

163 is amended to read as follows:

‘‘(j) LIMITATION ON DEDUCTION FOR INTEREST ON CERTAIN

INDEBTEDNESS.—’’.

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

shall apply to interest paid or accrued in taxable years beginning

after December 31, 1993.

PART III—FOREIGN TAX PROVISIONS

Subpart A—Current Taxation of Certain Earnings

of Controlled Foreign Corporations

SEC. 13231. EARNINGS INVESTED IN EXCESS PASSIVE ASSETS.

(a) GENERAL RULE.—Paragraph (1) of section 951(a) (relating to amounts included in gross income of United States shareholders)

is amended by striking ‘‘and’’ at the end of subparagraph (A),

by striking the period at the end of subparagraph (B) and inserting

‘‘; and’’, and by adding at the end thereof the following new subparagraph:

‘‘(C) the amount determined under section 956A with

respect to such shareholder for such year (but only to

the extent not excluded from gross income under section

959(a)(3)).’’
H. R. 2264—185

(b) AMOUNT OF INCLUSION.—Subpart F of part III of subchapter

N of chapter 1 is amended by inserting after section 956 the

following new section:

‘‘SEC. 956A. EARNINGS INVESTED IN EXCESS PASSIVE ASSETS.

‘‘(a) GENERAL RULE.—In the case of any controlled foreign corporation, the amount determined under this section with respect

to any United States shareholder for any taxable year is the lesser

of—

‘‘(1) the excess (if any) of—

‘‘(A) such shareholder’s pro rata share of the amount

of the controlled foreign corporation’s excess passive assets

for such taxable year, over

‘‘(B) the amount of earnings and profits described in

section 959(c)(1)(B) with respect to such shareholder, or

‘‘(2) such shareholder’s pro rata share of the applicable

earnings of such controlled foreign corporation determined after

the application of section 951(a)(1)(B).

‘‘(b) APPLICABLE EARNINGS.—For purposes of this section, the

term ‘applicable earnings’ means, with respect to any controlled

foreign corporation, the sum of—

‘‘(1) the amount referred to in section 316(a)(1) to the

extent such amount was accumulated in taxable years beginning after September 30, 1993, and

‘‘(2) the amount referred to in section 316(a)(2),

but reduced by distributions made during the taxable year and

reduced by the earnings and profits described in section 959(c)(1)

to the extent that the earnings and profits so described were

accumulated in taxable years beginning after September 30, 1993. ‘‘(c) EXCESS PASSIVE ASSETS.—For purposes of this section—

‘‘(1) IN GENERAL.—The excess passive assets of any controlled foreign corporation for any taxable year is the excess

(if any) of—‘‘(A) the average of the amounts of passive assets held

by such corporation as of the close of each quarter of

such taxable year, over ‘‘(B) 25 percent of the average of the amounts of total

assets held by such corporation as of the close of each

quarter of such taxable year.

For purposes of the preceding sentence, the amount taken

into account with respect to any asset shall be its adjusted

basis as determined for purposes of computing earnings and

profits.

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

this section, the term ‘passive asset’ means any asset held

by the controlled foreign corporation which produces passive income (as defined in section 1296(b)) or is held for

the production of such income.

‘‘(B) COORDINATION WITH SECTION 956.—The term ‘passive asset’ shall not include any United States property

(as defined in section 956).

‘‘(3) CERTAIN RULES TO APPLY.—For purposes of this subsection, the rules of the following provisions shall apply:

‘‘(A) Section 1296(c) (relating to look-thru rules).

‘‘(B) Section 1297(d) (relating to leasing rules).

‘‘(C) Section 1297(e) (relating to intangible property).
H. R. 2264—186

‘‘(d) TREATMENT OF CERTAIN GROUPS OF CONTROLLED FOREIGN

CORPORATIONS.—

‘‘(1) IN GENERAL.—For purposes of applying subsection (c)—

‘‘(A) all controlled foreign corporations which are members of the same CFC group shall be treated as 1 controlled

foreign corporation, and

‘‘(B) the amount of the excess passive assets determined with respect to such 1 corporation shall be allocated

among the controlled foreign corporations which are members of such group in proportion to their respective amounts

of applicable earnings.

‘‘(2) CFC GROUP.—For purposes of paragraph (1), the term

‘CFC group’ means 1 or more chains of controlled foreign corporations connected through stock ownership with a top tier

corporation which is a controlled foreign corporation, but only

if—

‘‘(A) the top tier corporation owns directly more than

50 percent (by vote or value) of the stock of at least 1

of the other controlled foreign corporations, and

‘‘(B) more than 50 percent (by vote or value) of the

stock of each of the controlled foreign corporations (other

than the top tier corporation) is owned (directly or

indirectly) by one or more other members of the group.

‘‘(e) SPECIAL RULE WHERE CORPORATION CEASES TO BE CONTROLLED FOREIGN CORPORATION DURING TAXABLE YEAR.—If any

foreign corporation ceases to be a controlled foreign corporation

during any taxable year—

‘‘(1) the determination of any United States shareholder’s

pro rata share shall be made on the basis of stock owned

(within the meaning of section 958(a)) by such shareholder

on the last day during the taxable year on which the foreign

corporation is a controlled foreign corporation, ‘‘(2) the amount of such corporation’s excess passive assets

for such taxable year shall be determined by only taking into

account quarters ending on or before such last day, and ‘‘(3) in determining applicable earnings, the amount taken into account by reason of being described in paragraph (2)

of section 316(a) shall be the portion of the amount so described

which is allocable (on a pro rata basis) to the part of such

year during which the corporation is a controlled foreign corporation.

‘‘(f) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section,

including regulations to prevent the avoidance of the provisions

of this section through reorganizations or otherwise.’’

(c) PREVIOUSLY TAXED INCOME RULES.—

(1) IN GENERAL.—Subsection (a) of section 959 (relating

to exclusion from gross income of previously taxed earnings

and profits) is amended by striking ‘‘or’’ at the end of paragraph

(1), by adding ‘‘or’’ at the end of paragraph (2), and by inserting

after paragraph (2) the following new paragraph:

‘‘(3) such amounts would, but for this subsection, be

included under section 951(a)(1)(C) in the gross income of,’’.

(2) ALLOCATION RULES.—

(A) Subsection (a) of section 959 is amended by adding

at the end thereof the following new sentence: ‘‘The rules

of subsection (c) shall apply for purposes of paragraph
H. R. 2264—187

(1) of this subsection and the rules of subsection (f) shall

apply for purposes of paragraphs (2) and (3) of this subsection.’’.

(B) Section 959 is amended by adding at the end

thereof the following new subsection:

‘‘(f) ALLOCATION RULES FOR CERTAIN INCLUSIONS.—

‘‘(1) IN GENERAL.—For purposes of this section—

‘‘(A) amounts that would be included under subparagraph (B) of section 951(a)(1) (determined without regard

to this section) shall be treated as attributable first to

earnings described in subsection (c)(2), and then to earnings

described in subsection (c)(3), and

‘‘(B) amounts that would be included under subparagraph (C) of section 951(a)(1) (determined without regard

to this section) shall be treated as attributable first to

earnings described in subsection (c)(2) to the extent the

earnings so described were accumulated in taxable years

beginning after September 30, 1993, and then to earnings

described in subsection (c)(3).

‘‘(2) TREATMENT OF DISTRIBUTIONS.—In applying this section, actual distributions shall be taken into account before

amounts that would be included under subparagraphs (B) and

(C) of section 951(a)(1) (determined without regard to this

section).’’

(C) Paragraph (1) of section 959(c) is amended to read

as follows:

‘‘(1) first to the aggregate of—

‘‘(A) earnings and profits attributable to amounts included in gross income under section 951(a)(1)(B) (or

which would have been included except for subsection (a)(2)

of this section), and

‘‘(B) earnings and profits attributable to amounts included in gross income under section 951(a)(1)(C) (or

which would have been included except for subsection (a)(3)

of this section),

with any distribution being allocated between earnings and

profits described in subparagraph (A) and earnings and profits

described in subparagraph (B) proportionately on the basis

of the respective amounts of such earnings and profits,’’. (3) COORDINATION WITH PFIC INCLUSIONS.—Subsection (c)

of section 1293 is amended by adding at the end thereof the

following new sentence: ‘‘If the passive foreign investment company is a controlled foreign corporation (as defined in section

957(a)), the preceding sentence shall not apply to any United

States shareholder (as defined in section 951(b)) in such corporation, and, in applying section 959 to any such shareholder,

any inclusion under this section shall be treated as an inclusion

under section 951(a)(1)(A).’’.

(4) CONFORMING AMENDMENTS.—

(A) Subsections (a) and (b) of section 959 are each

amended by striking ‘‘earnings and profits for a taxable

year’’ and inserting ‘‘earnings and profits’’.

(B) Paragraph (2) of section 959(c) is amended to read

as follows:

‘‘(2) then to earnings and profits attributable to amounts

included in gross income under section 951(a)(1)(A) (but reduced

by amounts not included under subparagraph (B) or (C) of
H. R. 2264—188

section 951(a)(1) because of the exclusions in paragraphs (2)

and (3) of subsection (a) of this section), and’’

(C) Subsection (b) of section 989 is amended by striking

‘‘section 951(a)(1)(B)’’ and inserting ‘‘subparagraph (B) or

(C) of section 951(a)(1)’’.

(d) MODIFICATIONS TO PASSIVE FOREIGN INVESTMENT COMPANY

RULES.—

(1) ADJUSTED BASIS USED IN CERTAIN DETERMINATIONS.—

Subsection (a) of section 1296 is amended by striking the material following paragraph (2) and inserting the following:

‘‘In the case of a controlled foreign corporation (or any other foreign

corporation if such corporation so elects), the determination under

paragraph (2) shall be based on the adjusted bases (as determined

for purposes of computing earnings and profits) of its assets in

lieu of their value. Such an election, once made, may be revoked

only with the consent of the Secretary.’’

(2) TREATMENT OF CERTAIN SUBPART F INCLUSIONS.—Subsection (b) of section 1297 is amended by adding at the end

thereof the following new paragraph:

‘‘(9) TREATMENT OF CERTAIN SUBPART F INCLUSIONS.—Any

amount included in gross income under subparagraph (B) or

(C) of section 951(a)(1) shall be treated as a distribution

received with respect to the stock.’’

(3) TREATMENT OF CERTAIN DEALERS IN SECURITIES.—Subsection (b) of section 1296 is amended by adding at the end

thereof the following new paragraph:

‘‘(3) TREATMENT OF CERTAIN DEALERS IN SECURITIES.—

‘‘(A) IN GENERAL.—In the case of any foreign corporation which is a controlled foreign corporation (as defined

in section 957(a)), the term ‘passive income’ does not

include any income derived in the active conduct of a

securities business by such corporation if such corporation

is registered as a securities broker or dealer under section

15(a) of the Securities Exchange Act of 1934 or is registered

as a Government securities broker or dealer under section

15C(a) of such Act. To the extent provided in regulations,

such term shall not include any income derived in the

active conduct of a securities business by a controlled foreign corporation which is not so registered.

‘‘(B) APPLICATION OF LOOK-THRU RULES.—For purposes

of paragraph (2)(C), rules similar to the rules of subparagraph (A) of this paragraph shall apply in determining

whether any income of a related person (whether or not

a corporation) is passive income.

‘‘(C) LIMITATION.—The preceding provisions of this

paragraph shall only apply in the case of persons who

are United States shareholders (as defined in section

951(b)) in the controlled foreign corporation.’’

(4) LEASING AND INTANGIBLE ASSET RULES.—Section 1297

is amended by redesignating subsection (d) as subsection (f)

and by inserting after subsection (c) the following new subsections:

‘‘(d) TREATMENT OF CERTAIN LEASED PROPERTY.—For purposes

of this part—

‘‘(1) IN GENERAL.—Any tangible personal property with

respect to which a foreign corporation is the lessee under a
H. R. 2264—189

lease with a term of at least 12 months shall be treated as

an asset actually held by such corporation.

‘‘(2) DETERMINATION OF ADJUSTED BASIS.—

‘‘(A) IN GENERAL.—The adjusted basis of any asset

to which paragraph (1) applies shall be the unamortized

portion (as determined under regulations prescribed by

the Secretary) of the present value of the payments under

the lease for the use of such property.

‘‘(B) PRESENT VALUE.—For purposes of subparagraph

(A), the present value of payments described in subparagraph (A) shall be determined in the manner provided

in regulations prescribed by the Secretary—

‘‘(i) as of the beginning of the lease term, and

‘‘(ii) except as provided in such regulations, by

using a discount rate equal to the applicable Federal

rate determined under section 1274(d)—

‘‘(I) by substituting the lease term for the term

of the debt instrument, and

‘‘(II) without regard to paragraph (2) or (3)

thereof.

‘‘(3) EXCEPTIONS.—This subsection shall not apply in any

case where—

‘‘(A) the lessor is a related person (as defined in section

954(d)(3)) with respect to the foreign corporation, or

‘‘(B) a principal purpose of leasing the property was

to avoid the provisions of this part or section 956A.

‘‘(e) SPECIAL RULES FOR CERTAIN INTANGIBLES.—

‘‘(1) RESEARCH EXPENDITURES.—The adjusted basis of the

total assets of a controlled foreign corporation shall be increased

by the research or experimental expenditures (within the meaning of section 174) paid or incurred by such foreign corporation

during the taxable year and the preceding 2 taxable years.

Any expenditure otherwise taken into account under the preceding sentence shall be reduced by the amount of any reimbursement received by the controlled foreign corporation with respect

to such expenditure.

‘‘(2) CERTAIN LICENSED INTANGIBLES.—

‘‘(A) IN GENERAL.—In the case of any intangible property (as defined in section 936(h)(3)(B)) with respect to

which a controlled foreign corporation is a licensee and

which is used by such foreign corporation in the active

conduct of a trade or business, the adjusted basis of the

total assets of such foreign corporation shall be increased

by an amount equal to 300 percent of the payments made

during the taxable year by such foreign corporation for

the use of such intangible property.

‘‘(B) EXCEPTIONS.—Subparagraph (A) shall not apply

to—

‘‘(i) any payments to a foreign person if such foreign person is a related person (as defined in section

954(d)(3)) with respect to the controlled foreign corporation, and

‘‘(ii) any payments under a license if a principal

purpose of entering into such license was to avoid

the provisons of this part or section 956A.
H. R. 2264—190

‘‘(3) CONTROLLED FOREIGN CORPORATION.—For purposes of

this subsection, the term ‘controlled foreign corporation’ has

the meaning given such term by section 957(a).’’

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

shall apply to taxable years of foreign corporations beginning after

September 30, 1993, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end.

SEC. 13232. MODIFICATION TO TAXATION OF INVESTMENT IN UNITED

STATES PROPERTY.

(a) GENERAL RULE.—Section 956 (relating to investment of

earnings in United States property) is amended—

(1) by redesignating subsections (b) and (c) as subsections

(c) and (d), respectively, and

(2) by striking subsection (a) and inserting the following:

‘‘(a) GENERAL RULE.—In the case of any controlled foreign corporation, the amount determined under this section with respect

to any United States shareholder for any taxable year is the lesser

of—

‘‘(1) the excess (if any) of—

‘‘(A) such shareholder’s pro rata share of the average

of the amounts of United States property held (directly

or indirectly) by the controlled foreign corporation as of

the close of each quarter of such taxable year, over

‘‘(B) the amount of earnings and profits described in

section 959(c)(1)(A) with respect to such shareholder, or

‘‘(2) such shareholder’s pro rata share of the applicable

earnings of such controlled foreign corporation. The amount taken into account under paragraph (1) with respect

to any property shall be its adjusted basis as determined for purposes of computing earnings and profits, reduced by any liability

to which the property is subject. ‘‘(b) SPECIAL RULES.— ‘‘(1) APPLICABLE EARNINGS.—For purposes of this section,

the term ‘applicable earnings’ has the meaning given to such

term by section 956A(b), except that the provisions of such

section excluding earnings and profits accumulated in taxable

years beginning before October 1, 1993, shall be disregarded. ‘‘(2) SPECIAL RULE FOR U.S. PROPERTY ACQUIRED BEFORE

CORPORATION IS A CONTROLLED FOREIGN CORPORATION.—In

applying subsection (a) to any taxable year, there shall be

disregarded any item of United States property which was

acquired by the controlled foreign corporation before the first

day on which such corporation was treated as a controlled

foreign corporation. The aggregate amount of property disregarded under the preceding sentence shall not exceed the

portion of the applicable earnings of such controlled foreign

corporation which were accumulated during periods before such

first day.

‘‘(3) SPECIAL RULE WHERE CORPORATION CEASES TO BE CONTROLLED FOREIGN CORPORATION.—Rules similar to the rules

of section 956A(e) shall apply for purposes of this section.’’

(b) REGULATORY AUTHORITY.—Section 956 is amended by adding at the end thereof the following new subsection:

‘‘(e) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section,
H. R. 2264—191

including regulations to prevent the avoidance of the provisons

of this section through reorganizations or otherwise.’’

(c) CONFORMING AMENDMENTS.—

(1) Subparagraph (B) of section 951(a)(1) is amended to

read as follows:

‘‘(B) the amount determined under section 956 with

respect to such shareholder for such year (but only to

the extent not excluded from gross income under section

959(a)(2)); and’’

(2) Subsection (a) of section 951 is amended by striking

paragraph (4).

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

shall apply to taxable years of controlled foreign corporations beginning after September 30, 1993, and to taxable years of United

States shareholders in which or with which such taxable years

of controlled foreign corporations end.

SEC. 13233. OTHER MODIFICATIONS TO SUBPART F.

(a) SAME COUNTRY EXCEPTION NOT TO APPLY TO CERTAIN DIVIDENDS.—

(1) IN GENERAL.—Paragraph (3) of section 954(c) (relating

to certain income received from related persons) is amended

by adding at the end thereof the following new subparagraph:

‘‘(C) EXCEPTION FOR CERTAIN DIVIDENDS.—Subparagraph (A)(i) shall not apply to any dividend with respect

to any stock which is attributable to earnings and profits

of the distributing corporation accumulated during any

period during which the person receiving such dividend

did not hold such stock either directly, or indirectly through

a chain of one or more subsidiaries each of which meets

the requirements of subparagraph (A)(i).’’

(2) EFFECTIVE DATE.—The amendment made by paragraph

(1) shall apply to taxable years of controlled foreign corporations

beginning after September 30, 1993, and to taxable years of

United States shareholders in which or with which such taxable

years of controlled foreign corporations end.

(b) AMENDMENTS TO SECTION 960(b).—

(1) IN GENERAL.—Subsection (b) of section 960 is

amended—

(A) by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and

(B) by striking paragraphs (1) and (2) and inserting

the following new paragraphs:

‘‘(1) INCREASE IN SECTION 904 LIMITATION.—In the case of

any taxpayer who—

‘‘(A) either (i) chose to have the benefits of subpart

A of this part for a taxable year beginning after September

30, 1993, in which he was required under section 951(a)

to include any amount in his gross income, or (ii) did

not pay or accrue for such taxable year any income, war

profits, or excess profits taxes to any foreign country or

to any possession of the United States,

‘‘(B) chooses to have the benefits of subpart A of this

part for any taxable year in which he receives 1 or more

distributions or amounts which are excludable from gross

income under section 959(a) and which are attributable
H. R. 2264—192

to amounts included in his gross income for taxable years

referred to in subparagraph (A), and

‘‘(C) for the taxable year in which such distributions

or amounts are received, pays, or is deemed to have paid,

or accrues income, war profits, or excess profits taxes to

a foreign country or to any possession of the United States

with respect to such distributions or amounts,

the limitation under section 904 for the taxable year in which

such distributions or amounts are received shall be increased

by the lesser of the amount of such taxes paid, or deemed

paid, or accrued with respect to such distributions or amounts

or the amount in the excess limitation account as of the beginning of such taxable year.

‘‘(2) EXCESS LIMITATION ACCOUNT.—

‘‘(A) ESTABLISHMENT OF ACCOUNT.—Each taxpayer

meeting the requirements of paragraph (1)(A) shall establish an excess limitation account. The opening balance of

such account shall be zero.

‘‘(B) INCREASES IN ACCOUNT.—For each taxable year

beginning after September 30, 1993, the taxpayer shall

increase the amount in the excess limitation account by

the excess (if any) of—

‘‘(i) the amount by which the limitation under section 904(a) for such taxable year was increased by

reason of the total amount of the inclusions in gross

income under section 951(a) for such taxable year,

over

‘‘(ii) the amount of any income, war profits, and

excess profits taxes paid, or deemed paid, or accrued

to any foreign country or possession of the United

States which were allowable as a credit under section

901 for such taxable year and which would not have

been allowable but for the inclusions in gross income

described in clause (i).

Proper reductions in the amount added to the account

under the preceding sentence for any taxable year shall

be made for any increase in the credit allowable under

section 901 for such taxable year by reason of a carryback

if such increase would not have been allowable but for

the inclusions in gross income described in clause (i).

‘‘(C) DECREASES IN ACCOUNT.—For each taxable year

beginning after September 30, 1993, for which the limitation under section 904 was increased under paragraph

(1), the taxpayer shall reduce the amount in the excess

limitation account by the amount of such increase.

‘‘(3) DISTRIBUTIONS OF INCOME PREVIOUSLY TAXED IN YEARS

BEGINNING BEFORE OCTOBER 1, 1993.—If the taxpayer receives

a distribution or amount in a taxable year beginning after

September 30, 1993, which is excluded from gross income under

section 959(a) and is attributable to any amount included in

gross income under section 951(a) for a taxable year beginning

before October 1, 1993, the limitation under section 904 for

the taxable year in which such amount or distribution is

received shall be increased by the amount determined under

this subsection as in effect on the day before the date of the

enactment of the Revenue Reconcilation Act of 1993.’’
H. R. 2264—193

(2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to taxable years beginning after September

30, 1993.

Subpart B—Allocation of Research and

Experimental Expenditures

SEC. 13234. ALLOCATION OF RESEARCH AND EXPERIMENTAL

EXPENDITURES.

(a) GENERAL RULE.—Subparagraph (B) of section 864(f)(1) (relating to allocation of research and experimental expenditures)

is amended by striking ‘‘64 percent’’ each place it appears and

inserting ‘‘50 percent’’. (b) CONFORMING AMENDMENTS.— (1) Subsection (f) of section 864 is amended by striking paragraph (5) and inserting the following new paragraphs: ‘‘(5) REGULATIONS.—The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes

of this subsection, including regulations relating to the determination of whether any expenses are attributable to activities

conducted in the United States or outside the United States

and regulations providing such adjustments to the provisions

of this subsection as may be appropriate in the case of costsharing arrangements and contract research. ‘‘(6) APPLICABILITY.—This subsection shall apply to the tax- payer’s first taxable year (beginning on or before August 1,

1994) following the taxpayer’s last taxable year to which Revenue Procedure 92–56 applies or would apply if the taxpayer

elected the benefits of such Revenue Procedure.’’

(2) Subparagraph (D) of section 864(f)(4) is amended by striking ‘‘subparagraph (C)’’ and inserting ‘‘subparagraph (B)

or (C)’’.

Subpart C—Other Provisions

SEC. 13235. REPEAL OF CERTAIN EXCEPTIONS FOR WORKING CAPITAL.

(a) PROVISIONS RELATING TO OIL AND GAS INCOME.— (1) AMENDMENTS TO SECTION 907.— (A) Paragraph (1) of section 907(c) is amended by add- ing at the end thereof the following new flush sentence: ‘‘Such term does not include any dividend or interest income which

is passive income (as defined in section 904(d)(2)(A)).’’. (B) Paragraph (2) of section 907(c) is amended by add- ing at the end thereof the following new flush sentence: ‘‘Such term does not include any dividend or interest income which

is passive income (as defined in section 904(d)(2)(A)).’’. (2) SEPARATE APPLICATION OF FOREIGN TAX CREDIT.—Clause

(iii) of section 904(d)(2)(A) is amended by inserting ‘‘and’’ at

the end of subclause (II), by striking ‘‘, and’’ at the end of

subclause (III) and inserting a period, and by striking subclause

(IV).

(3) TREATMENT UNDER SUBPART F.— (A) Paragraph (1) of section 954(g) is amended by adding at the end thereof the following new flush sentence: ‘‘Such term shall not include any foreign personal holding company

income (as defined in subsection (c)).’’.
H. R. 2264—194

(B) Paragraph (8) of section 954(b) is amended by

striking ‘‘(1),’’.

(b) TREATMENT OF SHIPPING INCOME.—Subsection (f) of section

954 is amended by adding at the end thereof the following new

sentence: ‘‘Except as provided in paragraph (1), such term shall

not include any dividend or interest income which is foreign personal holding company income (as defined in subsection (c)).’’.

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

shall apply to taxable years beginning after December 31, 1992.

SEC. 13236. MODIFICATIONS OF ACCURACY-RELATED PENALTY.

(a) THRESHOLD REQUIREMENT.—Clause (ii) of section

6662(e)(1)(B) (relating to substantial valuation misstatement under

chapter 1) is amended to read as follows:

‘‘(ii) the net section 482 transfer price adjustment

for the taxable year exceeds the lesser of $5,000,000

or 10 percent of the taxpayer’s gross receipts.’’

(b) CERTAIN ADJUSTMENTS EXCLUDED IN DETERMINING THRESHOLD.—Subparagraph (B) of section 6662(e)(3) is amended to read

as follows:

‘‘(B) CERTAIN ADJUSTMENTS EXCLUDED IN DETERMINING

THRESHOLD.—For purposes of determining whether the

threshold requirements of paragraph (1)(B)(ii) are met, the

following shall be excluded:

‘‘(i) Any portion of the net increase in taxable

income referred to in subparagraph (A) which is attributable to any redetermination of a price if—

‘‘(I) it is established that the taxpayer determined such price in accordance with a specific

pricing method set forth in the regulations prescribed under section 482 and that the taxpayer’s

use of such method was reasonable,

‘‘(II) the taxpayer has documentation (which was in existence as of the time of filing the return)

which sets forth the determination of such price

in accordance with such a method and which establishes that the use of such method was reasonable,

and

‘‘(III) the taxpayer provides such documentation to the Secretary within 30 days of a request

for such documentation.

‘‘(ii) Any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to a redetermination of price where such price

was not determined in accordance with such a specific

pricing method if—

‘‘(I) the taxpayer establishes that none of such

pricing methods was likely to result in a price

that would clearly reflect income, the taxpayer

used another pricing method to determine such

price, and such other pricing method was likely

to result in a price that would clearly reflect

income,

‘‘(II) the taxpayer has documentation (which

was in existence as of the time of filing the return)

which sets forth the determination of such price

in accordance with such other method and which
H. R. 2264—195

establishes that the requirements of subclause (I)

were satisfied, and

‘‘(III) the taxpayer provides such documentation to the Secretary within 30 days of request

for such documentation.

‘‘(iii) Any portion of such net increase which is

attributable to any transaction solely between foreign

corporations unless, in the case of any such corporations, the treatment of such transaction affects the

determination of income from sources within the

United States or taxable income effectively connected

with the conduct of a trade or business within the

United States.’’

(c) COORDINATION WITH REASONABLE CAUSE EXCEPTION.—Paragraph (3) of section 6662(e) is amended by adding at the end

thereof the following new subparagraph:

‘‘(D) COORDINATION WITH REASONABLE CAUSE EXCEPTION.—For purposes of section 6664(c) the taxpayer shall

not be treated as having reasonable cause for any portion

of an underpayment attributable to a net section 482 transfer price adjustment unless such taxpayer meets the

requirements of clause (i), (ii), or (iii) of subparagraph

(B) with respect to such portion.’’

(d) CONFORMING AMENDMENT.—Clause (iii) of section

6662(h)(2)(A) is amended to read as follows:

‘‘(iii) in paragraph (1)(B)(ii)—

‘‘(I) ‘$20,000,000’ for ‘$5,000,000’, and

‘‘(II) ‘20 percent’ for ‘10 percent’.’’

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

shall apply to taxable years beginning after December 31, 1993.

SEC. 13237. DENIAL OF PORTFOLIO INTEREST EXEMPTION FOR

CONTINGENT INTEREST.

(a) GENERAL RULE.—

(1) Subsection (h) of section 871 (relating to repeal of tax

on interest of nonresident alien individuals received from certain portfolio debt investments) is amended by redesignating

paragraphs (4), (5), and (6) as paragraphs (5), (6), and (7),

respectively, and by inserting after paragraph (3) the following

new paragraph:

‘‘(4) PORTFOLIO INTEREST NOT TO INCLUDE CERTAIN CONTINGENT INTEREST.—For purposes of this subsection—

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

this paragraph, the term ‘portfolio interest’ shall not

include—

‘‘(i) any interest if the amount of such interest

is determined by reference to—

‘‘(I) any receipts, sales or other cash flow of

the debtor or a related person,

‘‘(II) any income or profits of the debtor or

a related person,

‘‘(III) any change in value of any property

of the debtor or a related person, or

‘‘(IV) any dividend, partnership distributions,

or similar payments made by the debtor or a

related person, or
H. R. 2264—196

‘‘(ii) any other type of contingent interest that is

identified by the Secretary by regulation, where a

denial of the portfolio interest exemption is necessary

or appropriate to prevent avoidance of Federal income

tax.

‘‘(B) RELATED PERSON.—The term ‘related person’

means any person who is related to the debtor within

the meaning of section 267(b) or 707(b)(1), or who is a

party to any arrangement undertaken for a purpose of

avoiding the application of this paragraph.

‘‘(C) EXCEPTIONS.—Subparagraph (A)(i) shall not apply

to—

‘‘(i) any amount of interest solely by reason of

the fact that the timing of any interest or principal

payment is subject to a contingency,

‘‘(ii) any amount of interest solely by reason of

the fact that the interest is paid with respect to

nonrecourse or limited recourse indebtedness,

‘‘(iii) any amount of interest all or substantially

all of which is determined by reference to any other

amount of interest not described in subparagraph (A)

(or by reference to the principal amount of indebtedness on which such other interest is paid),

‘‘(iv) any amount of interest solely by reason of

the fact that the debtor or a related person enters

into a hedging transaction to reduce the risk of interest

rate or currency fluctuations with respect to such

interest,

‘‘(v) any amount of interest determined by reference to—

‘‘(I) changes in the value of property (including

stock) that is actively traded (within the meaning

of section 1092(d)) other than property described

in section 897(c)(1) or (g),

‘‘(II) the yield on property described in

subclause (I), other than a debt instrument that

pays interest described in subparagraph (A), or

stock or other property that represents a beneficial

interest in the debtor or a related person, or

‘‘(III) changes in any index of the value of

property described in subclause (I) or of the yield

on property described in subclause (II), and

‘‘(vi) any other type of interest identified by the

Secretary by regulation.

‘‘(D) EXCEPTION FOR CERTAIN EXISTING INDEBTEDNESS.—Subparagraph (A) shall not apply to any interest

paid or accrued with respect to any indebtedness with

a fixed term—

‘‘(i) which was issued on or before April 7, 1993,

or

‘‘(ii) which was issued after such date pursuant

to a written binding contract in effect on such date

and at all times thereafter before such indebtedness

was issued.’’

(2) Subsection (c) of section 881 is amended by redesignating paragraphs (4), (5), and (6) as paragraphs (5), (6), and
H. R. 2264—197

(7), respectively, and by inserting after paragraph (3) the following new paragraph:

‘‘(4) PORTFOLIO INTEREST NOT TO INCLUDE CERTAIN CONTINGENT INTEREST.—For purposes of this subsection, the term ‘portfolio interest’ shall not include any interest which is treated

as not being portfolio interest under the rules of section

871(h)(4).’’

(b) ESTATE TAX TREATMENT.—Subsection (b) of section 2105

is amended—

(1) by striking ‘‘this subchapter’’ in the material preceding

paragraph (1) and inserting ‘‘this subchapter, the following

shall not be deemed property within the United States’’, and

(2) by striking paragraph (3) and all that follows down

through the period at the end thereof and inserting the following:

‘‘(3) debt obligations, if, without regard to whether a statement meeting the requirements of section 871(h)(5) has been

received, any interest thereon would be eligible for the exemption from tax under section 871(h)(1) were such interest

received by the decedent at the time of his death.

Notwithstanding the preceding sentence, if any portion of the

interest on an obligation referred to in paragraph (3) would not

be eligible for the exemption referred to in paragraph (3) by reason

of section 871(h)(4) if the interest were received by the decedent

at the time of his death, then an appropriate portion (as determined

in a manner prescribed by the Secretary) of the value (as determined

for purposes of this chapter) of such debt obligation shall be deemed

property within the United States.’’

(c) CONFORMING AMENDMENTS.—

(1) Clause (ii) of section 871(h)(2)(B) is amended by striking

‘‘paragraph (4)’’ and inserting ‘‘paragraph (5)’’.

(2) Clause (ii) of section 881(c)(2)(B) is amended by striking

‘‘section 871(h)(4)’’ and inserting ‘‘section 871(h)(5)’’.

(3) Paragraph (6) of section 881(c) (as redesignated by

subsection (a)) is amended by striking ‘‘section 871(h)(5)’’ each

place it appears and inserting ‘‘section 871(h)(6)’’.

(4) Paragraph (9) of section 1441(c) is amended by striking

‘‘section 871(h)(3)’’ and inserting ‘‘section 871(h)(3) or (4)’’.

(5) Subsection (a) of section 1442 is amended—

(A) by striking ‘‘871(h)(3)’’ and inserting ‘‘871(h)(3) or

(4)’’, and

(B) by striking ‘‘881(c)(3)’’ and inserting ‘‘881(c)(3) or

(4)’’.

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

shall apply to interest received after December 31, 1993; except

that the amendments made by subsection (b) shall apply to the

estates of decedents dying after December 31, 1993.

SEC. 13238. REGULATIONS DEALING WITH CONDUIT ARRANGEMENTS.

Section 7701 is amended by redesignating subsection (l) as

subsection (m) and by inserting after subsection (k) the following

new subsection:

‘‘(l) REGULATIONS RELATING TO CONDUIT ARRANGEMENTS.—The

Secretary may prescribe regulations recharacterizing any multipleparty financing transaction as a transaction directly among any

2 or more of such parties where the Secretary determines that
H. R. 2264—198

such recharacterization is appropriate to prevent avoidance of any

tax imposed by this title.’’

SEC. 13239. TREATMENT OF EXPORT OF CERTAIN SOFTWOOD LOGS.

(a) FOREIGN SALES CORPORATIONS.—Paragraph (2) of section

927(a) (relating to exclusion of certain property) is amended by

striking ‘‘or’’ at the end of subparagraph (C), by striking the period

at the end of subparagraph (D) and inserting ‘‘, or’’, and by adding

at the end the following:

‘‘(E) any unprocessed timber which is a softwood.

For purposes of subparagraph (E), the term ‘unprocessed timber’ means any log, cant, or similar form of timber.’’

(b) DOMESTIC INTERNATIONAL SALES CORPORATIONS.—Paragraph (2) of section 993(c) (relating to exclusion of certain property)

is amended—

(1) by striking ‘‘or’’ at the end of subparagraph (C), by

striking the period at the end of subparagraph (D) and inserting

‘‘, or’’, and by adding after subparagraph (D) the following

new subparagraph:

‘‘(E) any unprocessed timber which is a softwood.’’,

and

(2) by adding at the end the following new sentence: ‘‘For

purposes of subparagraph (E), the term ‘unprocessed timber’

means any log, cant, or similar form of timber.’’

(c) SOURCE RULE.—Subsection (b) of section 865 (relating to

source rules for personal property sales) is amended by adding

at the end the following: ‘‘Notwithstanding the preceding sentence,

any income from the sale of any unprocessed timber which is

a softwood and was cut from an area in the United States shall

be sourced in the United States and the rules of sections 862(a)(6)

and 863(b) shall not apply to any such income. For purposes of

the preceding sentence, the term ‘unprocessed timber’ means any

log, cant, or similar form of timber.’’

(d) ELIMINATION OF DEFERRAL.—Subsection (d) of section 954

is amended by adding at the end the following new paragraph:

‘‘(4) SPECIAL RULE FOR CERTAIN TIMBER PRODUCTS.—For

purposes of subsection (a)(2), the term ‘foreign base company

sales income’ includes any income (whether in the form of

profits, commissions, fees, or otherwise) derived in connection

with—

‘‘(A) the sale of any unprocessed timber referred to

in section 865(b), or

‘‘(B) the milling of any such timber outside the United

States.

Subpart G shall not apply to any amount treated as subpart

F income by reason of this paragraph.’’

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

shall apply to sales, exchanges, or other dispositions after the

date of the enactment of this Act.
H. R. 2264—199

PART IV—TRANSPORTATION FUELS

PROVISIONS

Subpart A—Transportation Fuels Tax

SEC. 13241. TRANSPORTATION FUELS TAX.

(a) GASOLINE.—Clause (iii) of section 4081(a)(2)(B) (relating

to rates of tax) is amended to read as follows:

‘‘(iii) the deficit reduction rate is 6.8 cents per

gallon.’’

(b) DIESEL FUEL AND NONCOMMERCIAL AVIATION FUEL.—

(1) DIESEL FUEL.—Paragraph (4) of section 4091(b) (relating

to rate of tax) is amended by striking ‘‘2.5 cents’’ and inserting

‘‘6.8 cents’’.

(2) AVIATION FUEL.—

(A) GASOLINE IN NONCOMMERCIAL AVIATION.—Paragraph (3) of section 4041(c) is amended to read as follows:

‘‘(3) RATE OF TAX.—The rate of tax imposed by paragraph

(2) on any gasoline is 1 cent per gallon.’’

(B) FUEL OTHER THAN GASOLINE.—

(i) Clause (ii) of section 4091(b)(1)(A) is amended

by inserting ‘‘and the aviation fuel deficit reduction

rate’’ after ‘‘financing rate’’.

(ii) Subsection (b) of section 4091 is amended by

redesignating paragraph (6) as paragraph (7) and by

inserting after paragraph (5) the following new paragraph:

‘‘(6) AVIATION FUEL DEFICIT REDUCTION RATE.—For purposes of paragraph (1), the aviation fuel deficit reduction rate

is 4.3 cents per gallon.’’

(iii) Paragraph (1) of section 4041(c) is amended—

(I) by striking ‘‘of 17.5 cents a gallon’’, and

(II) by inserting before the last sentence the

following new sentence:

‘‘The rate of the tax imposed by this paragraph shall be the

sum of the Airport and Airway Trust Fund financing rate

and the aviation fuel deficit reduction rate in effect under

section 4091 at the time of such sale or use.’’

(c) CERTAIN ALCOHOL FUELS.—Section 4041(m)(1)(A) is

amended to read as follows:

‘‘(A) under subsection (a)(2)—

‘‘(i) the Highway Trust Fund financing rate shall

be 5.75 cents per gallon, and

‘‘(ii) the deficit reduction rate shall be 5.55 cents

per gallon.’’

(d) FUEL USED IN COMMERCIAL TRANSPORTATION ON INLAND

WATERWAYS.—

(1) IN GENERAL.—Section 4042(b)(1) (relating to amount

of tax) is amended—

(A) by striking ‘‘and’’ at the end of subparagraph (A),

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

(B) and inserting ‘‘, and’’, and

(C) by adding at the end thereof the following new

subparagraph:

‘‘(C) the deficit reduction rate.’’
H. R. 2264—200

(2) RATE.—Section 4042(b)(2) (relating to rates) is amended

by adding at the end the following new subparagraph:

‘‘(C) The deficit reduction rate is 4.3 cents per gallon.’’

(e) COMPRESSED NATURAL GAS.—

(1) IN GENERAL.—Subsection (a) of section 4041 is amended

by adding at the end thereof the following new paragraph:

‘‘(3) COMPRESSED NATURAL GAS.—

‘‘(A) IN GENERAL.—There is hereby imposed a tax on

compressed natural gas—

‘‘(i) sold by any person to an owner, lessee, or

other operator of a motor vehicle or motorboat for

use as a fuel in such motor vehicle or motorboat, or

‘‘(ii) used by any person as a fuel in a motor

vehicle or motorboat unless there was a taxable sale

of such gas under clause (i).

The rate of the tax imposed by this paragraph shall be

48.54 cents per MCF (determined at standard temperature

and pressure).

‘‘(B) BUS USES.—No tax shall be imposed by this paragraph on any sale for use, or use, described in subparagraph (B) or (C) of section 6427(b)(2) (relating to school

bus and intracity transportation).

‘‘(C) ADMINISTRATIVE PROVISIONS.—For purposes of

applying this title with respect to the taxes imposed by

this subsection, references to any liquid subject to tax

under this subsection shall be treated as including references to compressed natural gas subject to tax under

this paragraph, and references to gallons shall be treated

as including references to MCF with respect to such gas.’’

(2) EXEMPTION FROM LEAKING UNDERGROUND STORAGE TANK

TRUST FUND TAX.—Paragraph (1) of section 4041(d) is amended by striking ‘‘subsection (a)’’ the second place it appears in

the text and inserting ‘‘subsection (a)(1) or (2)’’.

(f) CONFORMING AMENDMENTS.— (1) Paragraph (3) of section 4041(f) is hereby repealed.

(2) Subsection (g) of section 4041 is amended by striking

the last sentence.

(3) Subparagraphs (A) and (B) of section 4093(c)(2) are

amended to read as follows:

‘‘(A) NO EXEMPTION FROM CERTAIN TAXES ON FUEL USED

IN DIESEL-POWERED TRAINS.—In the case of fuel sold for

use in a diesel-powered train, paragraph (1) shall not apply

to so much of the tax imposed by section 4091 as is attributable to the Leaking Underground Storage Tank Trust

Fund financing rate and the diesel fuel deficit reduction

rate imposed under such section. The preceding sentence

shall not apply in the case of fuel sold for exclusive use

by a State or any political subdivision thereof.

‘‘(B) NO EXEMPTION FROM LEAKING UNDERGROUND

STORAGE TANK TRUST FUND TAXES ON FUEL USED IN

COMMERCIAL AVIATION.—In the case of fuel sold for use

in commercial aviation (other than supplies for vessels

or aircraft within the meaning of section 4221(d)(3)), paragraph (1) also shall not apply to so much of the tax imposed

by section 4091 as is attributable to the Leaking Underground Storage Tank Trust Fund financing rate imposed

by such section. For purposes of the preceding sentence,
H. R. 2264—201

the term ‘commercial aviation’ means any use of an aircraft

other than in noncommercial aviation (as defined in section

4041(c)(4)).’’

(4) Section 4093(d) is amended by inserting ‘‘and the aviation fuel deficit reduction rate’’ after ‘‘rate’’.

(5) Section 6420 is amended by striking subsection (h).

(6) Paragraph (3) of section 6421(f) is amended by inserting

‘‘and at the deficit reduction rate’’ after ‘‘financing rate’’, and

by inserting ‘‘AND DEFICIT REDUCTION TAX’’ after ‘‘TAX’’ in the

heading.

(7) Section 6421 is amended by striking subsection (i).

(8) Paragraph (2) of section 6427(b) is amended—

(A) by striking ‘‘3.1 cents’’ in subparagraph (A) and

inserting ‘‘7.4 cents’’, and

(B) by striking ‘‘3-CENT REDUCTION’’ in the paragraph

heading and inserting ‘‘REDUCTION’’.

(9) Section 6427(l) is amended by striking paragraphs (3)

and (4) and inserting the following new paragraphs:

‘‘(3) NO REFUND OF CERTAIN TAXES ON FUEL USED IN DIESELPOWERED TRAINS.—In the case of fuel used in a diesel-powered

train, paragraph (1) shall not apply to so much of the tax

imposed by section 4091 as is attributable to the Leaking

Underground Storage Tank Trust Fund financing rate and

the diesel fuel deficit reduction rate imposed by such section.

The preceding sentence shall not apply in the case of fuel

sold for exclusive use by a State or any political subdivision

thereof.

‘‘(4) NO REFUND OF LEAKING UNDERGROUND STORAGE TANK

TRUST FUND TAXES ON FUEL USED IN COMMERCIAL AVIATION.— In the case of fuel used in commercial aviation (as defined

in section 4093(c)(2)(B)) (other than supplies for vessels or

aircraft within the meaning of section 4221(d)(3)), paragraph

(1) shall not apply to so much of the tax imposed by section

4091 as is attributable to the Leaking Underground Storage

Tank Trust Fund financing rate imposed by such section.’’ (10) Section 6427 is amended by striking subsections (m) and (o).

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

shall take effect on October 1, 1993.

(h) FLOOR STOCKS TAXES.— (1) IMPOSITION OF TAX.—In the case of gasoline, diesel

fuel, and aviation fuel on which tax was imposed under section

4081 or 4091 of the Internal Revenue Code of 1986 before

October 1, 1993, and which is held on such date by any person,

there is hereby imposed a floor stocks tax of 4.3 cents per

gallon on such gasoline, diesel fuel, and aviation fuel.

(2) LIABILITY FOR TAX AND METHOD OF PAYMENT.—

(A) LIABILITY FOR TAX.—A person holding gasoline,

diesel fuel, or aviation fuel on October 1, 1993, to which

the tax imposed by paragraph (1) applies shall be liable

for such tax.

(B) METHOD OF PAYMENT.—The tax imposed by paragraph (1) shall be paid in such manner as the Secretary

shall prescribe.

(C) TIME FOR PAYMENT.—The tax imposed by paragraph (1) shall be paid on or before November 30, 1993.

(3) DEFINITIONS.—For purposes of this subsection—
H. R. 2264—202

(A) HELD BY A PERSON.—Gasoline, diesel fuel, and aviation fuel shall be considered as ‘‘held by a person’’ if title

thereto has passed to such person (whether or not delivery

to the person has been made).

(B) GASOLINE.—The term ‘‘gasoline’’ has the meaning

given such term by section 4082 of such Code.

(C) DIESEL FUEL.—The term ‘‘diesel fuel’’ has the meaning given such term by section 4092 of such Code.

(D) AVIATION FUEL.—The term ‘‘aviation fuel’’ has the

meaning given such term by section 4092 of such Code.

(E) SECRETARY.—The term ‘‘Secretary’’ means the Secretary of the Treasury or his delegate.

(4) EXCEPTION FOR EXEMPT USES.—The tax imposed by

paragraph (1) shall not apply to gasoline, diesel fuel, or aviation

fuel held by any person exclusively for any use to the extent

a credit or refund of the tax imposed by section 4081 or 4091

of such Code, as the case may be, is allowable for such use.

(5) EXCEPTION FOR FUEL HELD IN VEHICLE TANK.—No tax

shall be imposed by paragraph (1) on gasoline or diesel fuel

held in the tank of a motor vehicle or motorboat.

(6) EXCEPTION FOR CERTAIN AMOUNTS OF FUEL.—

(A) IN GENERAL.—No tax shall be imposed by paragraph (1)—

(i) on gasoline held on October 1, 1993, by any

person if the aggregate amount of gasoline held by

such person on such date does not exceed 4,000 gallons,

and

(ii) on diesel fuel or aviation fuel held on October

1, 1993, by any person if the aggregate amount of

diesel fuel or aviation fuel held by such person on

such date does not exceed 2,000 gallons.

The preceding sentence shall apply only if such person

submits to the Secretary (at the time and in the manner

required by the Secretary) such information as the Secretary shall require for purposes of this paragraph. (B) EXEMPT FUEL.—For purposes of subparagraph (A),

there shall not be taken into account fuel held by any

person which is exempt from the tax imposed by paragraph

(1) by reason of paragraph (4) or (5). (C) CONTROLLED GROUPS.—For purposes of this

paragraph—(i) CORPORATIONS.— (I) IN GENERAL.—All persons treated as a controlled group shall be treated as 1 person. (II) CONTROLLED GROUP.—The term ‘‘controlled group’’ has the meaning given to such term

by subsection (a) of section 1563 of such Code;

except that for such purposes the phrase ‘‘more

than 50 percent’’ shall be substituted for the

phrase ‘‘at least 80 percent’’ each place it appears

in such subsection.

(ii) NONINCORPORATED PERSONS UNDER COMMON

CONTROL.—Under regulations prescribed by the Secretary, principles similar to the principles of clause

(i) shall apply to a group of persons under common

control where 1 or more of such persons is not a

corporation.
H. R. 2264—203

(7) OTHER LAW APPLICABLE.—All provisions of law, including penalties, applicable with respect to the taxes imposed

by section 4081 of such Code in the case of gasoline and

section 4091 of such Code in the case of diesel fuel and aviation

fuel shall, insofar as applicable and not inconsistent with the

provisions of this subsection, apply with respect to the floor

stock taxes imposed by paragraph (1) to the same extent as

if such taxes were imposed by such section 4081 or 4091.

Subpart B—Modifications to Tax on Diesel Fuel

SEC. 13242. MODIFICATIONS TO TAX ON DIESEL FUEL.

(a) IN GENERAL.—Subparts A and B of part III of subchapter

A of chapter 32 (relating to manufacturers excise taxes), as amended

by subpart A, are amended to read as follows:

‘‘Subpart A—Gasoline and Diesel Fuel

‘‘Sec. 4081. Imposition of tax.

‘‘Sec. 4082. Exemptions for diesel fuel.

‘‘Sec. 4083. Definitions; special rule; administrative authority. ‘‘Sec. 4084. Cross references.

‘‘SEC. 4081. IMPOSITION OF TAX.

‘‘(a) TAX IMPOSED.—

‘‘(1) TAX ON REMOVAL, ENTRY, OR SALE.—

‘‘(A) IN GENERAL.—There is hereby imposed a tax at

the rate specified in paragraph (2) on—

‘‘(i) the removal of a taxable fuel from any refinery,

‘‘(ii) the removal of a taxable fuel from any terminal,

‘‘(iii) the entry into the United States of any taxable fuel for consumption, use, or warehousing, and

‘‘(iv) the sale of a taxable fuel to any person who

is not registered under section 4101 unless there was

a prior taxable removal or entry of such fuel under

clause (i), (ii), or (iii).

‘‘(B) EXEMPTION FOR BULK TRANSFERS TO REGISTERED

TERMINALS OR REFINERIES.—The tax imposed by this paragraph shall not apply to any removal or entry of a taxable

fuel transferred in bulk to a terminal or refinery if the

person removing or entering the taxable fuel and the operator of such terminal or refinery are registered under section

4101.

‘‘(2) RATES OF TAX.—

‘‘(A) IN GENERAL.—The rate of the tax imposed by

this section is—

‘‘(i) in the case of gasoline, 18.3 cents per gallon,

and

‘‘(ii) in the case of diesel fuel, 24.3 cents per gallon. ‘‘(B) LEAKING UNDERGROUND STORAGE TANK TRUST

FUND TAX.—The rates of tax specified in subparagraph (A) shall each be increased by 0.1 cent per gallon. The

increase in tax under this subparagraph shall in this title

be referred to as the Leaking Underground Storage Tank

Trust Fund financing rate.

‘‘(b) TREATMENT OF REMOVAL OR SUBSEQUENT SALE BY

BLENDER.—
H. R. 2264—204

‘‘(1) IN GENERAL.—There is hereby imposed a tax at the

rate determined under subsection (a) on taxable fuel removed

or sold by the blender thereof.

‘‘(2) CREDIT FOR TAX PREVIOUSLY PAID.—If—

‘‘(A) tax is imposed on the removal or sale of a taxable

fuel by reason of paragraph (1), and

‘‘(B) the blender establishes the amount of the tax

paid with respect to such fuel by reason of subsection

(a),

the amount of the tax so paid shall be allowed as a credit

against the tax imposed by reason of paragraph (1).

‘‘(c) TAXABLE FUELS MIXED WITH ALCOHOL.—Under regulations

prescribed by the Secretary—

‘‘(1) IN GENERAL.—The rate of tax under subsection (a)

shall be the alcohol mixture rate in the case of the removal

or entry of any qualified alcohol mixture.

‘‘(2) TAX PRIOR TO MIXING.—

‘‘(A) IN GENERAL.—In the case of the removal or entry

of any taxable fuel for use in producing at the time of

such removal or entry a qualified alcohol mixture, the

rate of tax under subsection (a) shall be the applicable

fraction of the alcohol mixture rate. Subject to such terms

and conditions as the Secretary may prescribe (including

the application of section 4101), the treatment under the

preceding sentence also shall apply to use in producing

a qualified alcohol mixture after the time of such removal

or entry.

‘‘(B) APPLICABLE FRACTION.—For purposes of subparagraph (A), the applicable fraction is—

‘‘(i) in the case of a qualified alcohol mixture which

contains gasoline, the fraction the numerator of which

is 10 and the denominator of which is—

‘‘(I) 9 in the case of 10 percent gasohol,

‘‘(II) 9.23 in the case of 7.7 percent gasohol,

and

‘‘(III) 9.43 in the case of 5.7 percent gasohol,

and

‘‘(ii) in the case of a qualified alcohol mixture which

does not contain gasoline, 10⁄9.

‘‘(3) ALCOHOL; QUALIFIED ALCOHOL MIXTURE.—For purposes

of this subsection—

‘‘(A) ALCOHOL.—The term ‘alcohol’ includes methanol

and ethanol but does not include alcohol produced from

petroleum, natural gas, or coal (including peat). Such term

does not include alcohol with a proof of less than 190

(determined without regard to any added denaturants).

‘‘(B) QUALIFIED ALCOHOL MIXTURE.—The term ‘qualified

alcohol mixture’ means—

‘‘(i) any mixture of gasoline with alcohol if at least

5.7 percent of such mixture is alcohol, and

‘‘(ii) any mixture of diesel fuel with alcohol if at

least 10 percent of such mixture is alcohol.

‘‘(4) ALCOHOL MIXTURE RATES FOR GASOLINE MIXTURES.—

For purposes of this subsection—

‘‘(A) IN GENERAL.—The alcohol mixture rate for a qualified alcohol mixture which contains gasoline is the excess
H. R. 2264—205

of the rate which would (but for this paragraph) be determined under subsection (a) over—

‘‘(i) 5.4 cents per gallon for 10 percent gasohol,

‘‘(ii) 4.158 cents per gallon for 7.7 percent gasohol,

and

‘‘(iii) 3.078 cents per gallon for 5.7 percent gasohol.

In the case of a mixture none of the alcohol in which

consists of ethanol, clauses (i), (ii), and (iii) shall be applied

by substituting ‘6 cents’ for ‘5.4 cents’, ‘4.62 cents’ for

‘4.158 cents’, and ‘3.42 cents’ for ‘3.078 cents’.

‘‘(B) 10 PERCENT GASOHOL.—The term ‘10 percent gasohol’ means any mixture of gasoline with alcohol if at

least 10 percent of such mixture is alcohol.

‘‘(C) 7.7 PERCENT GASOHOL.—The term ‘7.7 percent gasohol’ means any mixture of gasoline with alcohol if at

least 7.7 percent, but not 10 percent or more, of such

mixture is alcohol.

‘‘(D) 5.7 PERCENT GASOHOL.—The term ‘5.7 percent gasohol’ means any mixture of gasoline with alcohol if at

least 5.7 percent, but not 7.7 percent or more, of such

mixture is alcohol.

‘‘(5) ALCOHOL MIXTURE RATE FOR DIESEL FUEL MIXTURES.—

The alcohol mixture rate for a qualified alcohol mixture which

does not contain gasoline is the excess of the rate which would

(but for this paragraph) be determined under subsection (a)

over 5.4 cents per gallon (6 cents per gallon in the case of

a qualified alcohol mixture none of the alcohol in which consists

of ethanol).

‘‘(6) LIMITATION.—In no event shall any alcohol mixture

rate determined under this subsection be less than 4.3 cents

per gallon. ‘‘(7) LATER SEPARATION OF FUEL FROM QUALIFIED ALCOHOL

MIXTURE.—If any person separates the taxable fuel from a

qualified alcohol mixture on which tax was imposed under

subsection (a) at a rate determined under paragraph (1) or

(2) (or with respect to which a credit or payment was allowed

or made by reason of section 6427(f)(1)), such person shall

be treated as the refiner of such taxable fuel. The amount

of tax imposed on any removal of such fuel by such person

shall be reduced by the amount of tax imposed (and not credited

or refunded) on any prior removal or entry of such fuel. ‘‘(8) TERMINATION.—Paragraphs (1) and (2) shall not apply

to any removal, entry, or sale after September 30, 2000.

‘‘(d) TERMINATION.— ‘‘(1) IN GENERAL.—On and after October 1, 1999, each rate

of tax specified in subsection (a)(2)(A) shall be 4.3 cents per

gallon.

‘‘(2) LEAKING UNDERGROUND STORAGE TANK TRUST FUND

FINANCING RATE.—The Leaking Underground Storage Tank

Trust Fund financing rate under subsection (a)(2) shall not

apply after December 31, 1995.

‘‘(e) REFUNDS IN CERTAIN CASES.—Under regulations prescribed

by the Secretary, if any person who paid the tax imposed by

this section with respect to any taxable fuel establishes to the

satisfaction of the Secretary that a prior tax was paid (and not

credited or refunded) with respect to such taxable fuel, then an

amount equal to the tax paid by such person shall be allowed
H. R. 2264—206

as a refund (without interest) to such person in the same manner

as if it were an overpayment of tax imposed by this section.

‘‘SEC. 4082. EXEMPTIONS FOR DIESEL FUEL.

‘‘(a) IN GENERAL.—The tax imposed by section 4081 shall not

apply to diesel fuel—

‘‘(1) which the Secretary determines is destined for a nontaxable use,

‘‘(2) which is indelibly dyed in accordance with regulations

which the Secretary shall prescribe, and

‘‘(3) which meets such marking requirements (if any) as

may be prescribed by the Secretary in regulations.

Such regulations shall allow an individual choice of dye color

approved by the Secretary or chosen from any list of approved

dye colors that the Secretary may publish.

‘‘(b) NONTAXABLE USE.—For purposes of this section, the term

‘nontaxable use’ means—

‘‘(1) any use which is exempt from the tax imposed by section 4041(a)(1) other than by reason of a prior imposition

of tax,

‘‘(2) any use in a train, and

‘‘(3) any use described in section 6427(b)(1) (after the application of section 6427(b)(3)).

‘‘(c) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out this section, including

regulations requiring the conspicuous labeling of retail diesel fuel

pumps and other delivery facilities to assure that persons are

aware of which fuel is available only for nontaxable uses. ‘‘(d) CROSS REFERENCE.—

‘‘For tax on train and certain bus uses of fuel purchased tax-free,

see section 4041(a)(1).

‘‘SEC. 4083. DEFINITIONS; SPECIAL RULE; ADMINISTRATIVE AUTHORITY.

‘‘(a) TAXABLE FUEL.—For purposes of this subpart—

‘‘(1) IN GENERAL.—The term ‘taxable fuel’ means—

‘‘(A) gasoline, and

‘‘(B) diesel fuel.

‘‘(2) GASOLINE.—The term ‘gasoline’ includes, to the extent

prescribed in regulations—

‘‘(A) gasoline blend stocks, and

‘‘(B) products commonly used as additives in gasoline.

For purposes of subparagraph (A), the term ‘gasoline blend

stock’ means any petroleum product component of gasoline.

‘‘(3) DIESEL FUEL.—The term ‘diesel fuel’ means any liquid (other than gasoline) which is suitable for use as a fuel in

a diesel-powered highway vehicle, a diesel-powered train, or

a diesel-powered boat.

‘‘(b) CERTAIN USES DEFINED AS REMOVAL.—If any person uses taxable fuel (other than in the production of gasoline, diesel fuel,

or special fuels referred to in section 4041), such use shall for

the purposes of this chapter be considered a removal.

‘‘(c) ADMINISTRATIVE AUTHORITY.—

‘‘(1) IN GENERAL.—In addition to the authority otherwise

granted by this title, the Secretary may in administering

compliance with this subpart, section 4041, and penalties and

other administrative provisions related thereto—
H. R. 2264—207

‘‘(A) enter any place at which taxable fuel is produced

or is stored (or may be stored) for purposes of—

‘‘(i) examining the equipment used to determine

the amount or composition of such fuel and the equipment used to store such fuel, and

‘‘(ii) taking and removing samples of such fuel,

and

‘‘(B) detain, for the purposes referred in subparagraph

(A), any container which contains or may contain any taxable fuel.

‘‘(2) INSPECTION SITES.—The Secretary may establish

inspection sites for purposes of carrying out the Secretary’s

authority under paragraph (1)(B).

‘‘(3) PENALTY FOR REFUSAL OF ENTRY.—The penalty provided by section 7342 shall apply to any refusal to admit

entry or other refusal to permit an action by the Secretary

authorized by paragraph (1), except that section 7342 shall

be applied by substituting ‘$1,000’ for ‘$500’ for each such

refusal.

‘‘SEC. 4084. CROSS REFERENCES.

‘‘(1) For provisions to relieve farmers from excise tax in the case

of gasoline used on the farm for farming purposes, see section 6420.

‘‘(2) For provisions to relieve purchasers of gasoline from excise

tax in the case of gasoline used for certain nonhighway purposes,

used by local transit systems, or sold for certain exempt purposes,

see section 6421.

‘‘(3) For provisions to relieve purchasers from excise tax in the

case of taxable fuel not used for taxable purposes, see section 6427.

‘‘Subpart B—Aviation Fuel

‘‘Sec. 4091. Imposition of tax.

‘‘Sec. 4092. Exemptions.

‘‘Sec. 4093. Definitions.

‘‘SEC. 4091. IMPOSITION OF TAX.

‘‘(a) TAX ON SALE.— ‘‘(1) IN GENERAL.—There is hereby imposed a tax on the

sale of aviation fuel by the producer or the importer thereof

or by any producer of aviation fuel. ‘‘(2) USE TREATED AS SALE.—For purposes of paragraph (1), if any producer uses aviation fuel (other than for a nontaxable use as defined in section 6427(l)(2)(B)) on which no

tax has been imposed under such paragraph, then such use

shall be considered a sale.

‘‘(b) RATE OF TAX.— ‘‘(1) IN GENERAL.—The rate of the tax imposed by subsection (a) shall be 21.8 cents per gallon. ‘‘(2) LEAKING UNDERGROUND STORAGE TANK TRUST FUND

TAX.—The rate of tax specified in paragraph (1) shall be

increased by 0.1 cent per gallon. The increase in tax under

this paragraph shall in this title be referred to as the Leaking

Underground Storage Tank Trust Fund financing rate. ‘‘(3) TERMINATION.—

‘‘(A) On and after January 1, 1996, the rate of tax

specified in paragraph (1) shall be 4.3 cents per gallon.

‘‘(B) The Leaking Underground Storage Tank Fund

financing rate shall not apply during any period during
H. R. 2264—208

which the Leaking Underground Storage Tank Trust Fund

financing rate under section 4081 does not apply.

‘‘(c) REDUCED RATE OF TAX FOR AVIATION FUEL IN ALCOHOL

MIXTURE, ETC.—Under regulations prescribed by the Secretary—

‘‘(1) IN GENERAL.—The rate of tax under subsection (a)

shall be reduced by 13.4 cents per gallon in the case of the

sale of any mixture of aviation fuel if—

‘‘(A) at least 10 percent of such mixture consists of

alcohol (as defined in section 4081(c)(3)), and

‘‘(B) the aviation fuel in such mixture was not taxed

under paragraph (2).

In the case of such a mixture none of the alcohol in which

is ethanol, the preceding sentence shall be applied by substituting ‘14 cents’ for ‘13.4 cents’.

‘‘(2) TAX PRIOR TO MIXING.—In the case of the sale of

aviation fuel for use (at the time of such sale) in producing

a mixture described in paragraph (1), the rate of tax under

subsection (a) shall be 10⁄9 of the rate which would (but for

this paragraph) have been applicable to such mixture had such

mixture been created prior to such sale.

‘‘(3) LATER SEPARATION.—If any person separates the aviation fuel from a mixture of the aviation fuel and alcohol on

which tax was imposed under subsection (a) at a rate determined under paragraph (1) or (2) (or with respect to which

a credit or payment was allowed or made by reason of section

6427(f)(1)), such person shall be treated as the producer of

such aviation fuel. The amount of tax imposed on any sale

of such aviation fuel by such person shall be reduced by the

amount of tax imposed (and not credited or refunded) on any

prior sale of such fuel.

‘‘(4) LIMITATION.—In no event shall any rate determined

under paragraph (1) be less than 4.3 cents per gallon.

‘‘(5) TERMINATION.—Paragraphs (1) and (2) shall not apply

to any sale after September 30, 2000.

‘‘SEC. 4092. EXEMPTIONS.

‘‘(a) NONTAXABLE USES.—No tax shall be imposed by section

4091 on aviation fuel sold by a producer or importer for use by

the purchaser in a nontaxable use (as defined in section

6427(l)(2)(B)).

‘‘(b) NO EXEMPTION FROM CERTAIN TAXES ON FUEL USED IN

COMMERCIAL AVIATION.—In the case of fuel sold for use in commercial aviation (other than supplies for vessels or aircraft within

the meaning of section 4221(d)(3)), subsection (a) shall not apply

to so much of the tax imposed by section 4091 as is attributable

to—

‘‘(1) the Leaking Underground Storage Tank Trust Fund

financing rate imposed by such section, and

‘‘(2) in the case of fuel sold after September 30, 1995,

4.3 cents per gallon of the rate specified in section 4091(b)(1).

For purposes of the preceding sentence, the term ‘commercial aviation’ means any use of an aircraft other than in noncommercial

aviation (as defined in section 4041(c)(4)).

‘‘(c) SALES TO PRODUCER.—Under regulations prescribed by the

Secretary, the tax imposed by section 4091 shall not apply to

aviation fuel sold to a producer of such fuel.
H. R. 2264—209

‘‘SEC. 4093. DEFINITIONS.

‘‘(a) AVIATION FUEL.—For purposes of this subpart, the term

‘aviation fuel’ means any liquid (other than any product taxable

under section 4081) which is suitable for use as a fuel in an

aircraft.

‘‘(b) PRODUCER.—For purposes of this subpart—

‘‘(1) CERTAIN PERSONS TREATED AS PRODUCERS.— ‘‘(A) IN GENERAL.—The term ‘producer’ includes any person described in subparagraph (B) and registered under

section 4101 with respect to the tax imposed by section

4091.

‘‘(B) PERSONS DESCRIBED.—A person is described in

this subparagraph if such person is— ‘‘(i) a refiner, blender, or wholesale distributor of

aviation fuel, or

‘‘(ii) a dealer selling aviation fuel exclusively to

producers of aviation fuel.

‘‘(C) REDUCED RATE PURCHASERS TREATED AS PRODUCERS.—Any person to whom aviation fuel is sold at a reduced

rate under this subpart shall be treated as the producer

of such fuel.

‘‘(2) WHOLESALE DISTRIBUTOR.—For purposes of paragraph (1), the term ‘wholesale distributor’ includes any person who

sells aviation fuel to producers, retailers, or to users who purchase in bulk quantities and accept delivery into bulk storage

tanks. Such term does not include any person who (excluding

the term ‘wholesale distributor’ from paragraph (1)) is a producer or importer.’’

(b) CIVIL PENALTY FOR USING REDUCED-RATE FUEL FOR TAXABLE USE, ETC.—

(1) IN GENERAL.—Part I of subchapter B of chapter 68

(relating to assessable penalties) is amended by adding at the

end thereof the following new section:

‘‘SEC. 6714. DYED FUEL SOLD FOR USE OR USED IN TAXABLE USE,

ETC.

‘‘(a) IMPOSITION OF PENALTY.—If—

‘‘(1) any dyed fuel is sold or held for sale by any person

for any use which such person knows or has reason to know

is not a nontaxable use of such fuel,

‘‘(2) any dyed fuel is held for use or used by any person

for a use other than a nontaxable use and such person knew,

or had reason to know, that such fuel was so dyed, or ‘‘(3) any person willfully alters, or attempts to alter, the

strength or composition of any dye or marking done pursuant

to section 4082 in any dyed fuel,

then such person shall pay a penalty in addition to the tax (if

any).

‘‘(b) AMOUNT OF PENALTY.—

‘‘(1) IN GENERAL.—Except as provided in paragraph (2),

the amount of the penalty under subsection (a) on each act

shall be the greater of—

‘‘(A) $1,000, or

‘‘(B) $10 for each gallon of the dyed fuel involved.

‘‘(2) MULTIPLE VIOLATIONS.—In determining the penalty

under subsection (a) on any person, paragraph (1) shall be

applied by increasing the amount in paragraph (1)(A) by the
H. R. 2264—210

product of such amount and the number of prior penalties

(if any) imposed by this section on such person (or a related

person or any predecessor of such person or related person).

‘‘(c) DEFINITIONS.—For purposes of this section—

‘‘(1) DYED FUEL.—The term ‘dyed fuel’ means any dyed

diesel fuel, whether or not the fuel was dyed pursuant to

section 4082.

‘‘(2) NONTAXABLE USE.—The term ‘nontaxable use’ has the

meaning given such term by section 4082(b).

‘‘(d) JOINT AND SEVERAL LIABILITY OF CERTAIN OFFICERS AND

EMPLOYEES.—If a penalty is imposed under this section on any

business entity, each officer, employee, or agent of such entity

who willfully participated in any act giving rise to such penalty

shall be jointly and severally liable with such entity for such penalty.’’

(2) CLERICAL AMENDMENT.—The table of sections for such

part I is amended by adding at the end thereof the following

new item:

‘‘Sec. 6714. Dyed fuel sold for use or used in taxable use, etc.’’

(c) REGISTERED VENDORS TO ADMINISTER CLAIMS FOR CERTAIN

REFUNDS OF DIESEL FUEL.—

(1) IN GENERAL.—Section 6427(l) (relating to nontaxable

uses of diesel fuel and aviation fuel) is amended by adding

at the end the following new paragraph:

‘‘(5) REGISTERED VENDORS TO ADMINISTER CLAIMS FOR

REFUND OF DIESEL FUEL SOLD TO FARMERS AND STATE AND

LOCAL GOVERNMENTS.—

‘‘(A) IN GENERAL.—Paragraph (1) shall not apply to

diesel fuel used—

‘‘(i) on a farm for farming purposes (within the

meaning of section 6420(c)), or

‘‘(ii) by a State or local government.

‘‘(B) PAYMENT TO ULTIMATE, REGISTERED VENDOR.—The

amount which would (but for subparagraph (A)) have been

paid under paragraph (1) with respect to any fuel shall

be paid to the ultimate vendor of such fuel, if such vendor—

‘‘(i) is registered under section 4101, and

‘‘(ii) meets the requirements of subparagraph (A),

(B), or (D) of section 6416(a)(1).’’

(2) SPECIAL REFUND RULES.—

(A) Subsection (i) of section 6427 is amended by adding

at the end thereof the following new paragraph:

‘‘(5) SPECIAL RULE FOR VENDOR REFUNDS.—

‘‘(A) IN GENERAL.—A claim may be filed under subsection (l)(5) by any person with respect to fuel sold by

such person for any period—

‘‘(i) for which $200 or more is payable under subsection (l)(5), and

‘‘(ii) which is not less than 1 week.

Notwithstanding subsection (l)(1), paragraph (3)(B) shall

apply to claims filed under the preceding sentence.

‘‘(B) TIME FOR FILING CLAIM.—No claim filed under

this paragraph shall be allowed unless filed on or before

the last day of the first quarter following the earliest quarter included in the claim.’’
H. R. 2264—211

(B) Paragraph (1) of section 6427(i) is amended by

striking ‘‘provided in paragraphs (2), (3), and (4)’’ and

inserting ‘‘otherwise provided in this subsection’’.

(C) Paragraph (2) of section 6427(k) is amended by

striking ‘‘or (4)’’ and inserting ‘‘(4), or (5)’’.

(D) Paragraph (3) of section 6427(i) is amended by

adding at the end thereof the following new subparagraph:

‘‘(C) TIME FOR FILING CLAIM.—No claim filed under

this paragraph shall be allowed unless filed on or before

the last day of the first quarter following the earliest quarter included in the claim.’’

(d) TECHNICAL AND CONFORMING AMENDMENTS.—

(1) Sections 4101(a) and 4103 are each amended by striking

‘‘4081’’ and inserting ‘‘4041(a)(1), 4081,’’.

(2) Section 4102 is amended by striking ‘‘gasoline’’ and

inserting ‘‘any taxable fuel (as defined in section 4083)’’.

(3) Paragraph (1) of section 4041(a), as amended by subchapter A, is amended to read as follows:

‘‘(1) TAX ON DIESEL FUEL IN CERTAIN CASES.—

‘‘(A) IN GENERAL.—There is hereby imposed a tax on

any liquid other than gasoline (as defined in section 4083)—

‘‘(i) sold by any person to an owner, lessee, or

other operator of a diesel-powered highway vehicle,

a diesel-powered train, or a diesel-powered boat for

use as a fuel in such vehicle, train, or boat, or

‘‘(ii) used by any person as a fuel in a dieselpowered highway vehicle, a diesel-powered train, or

a diesel-powered boat unless there was a taxable sale

of such fuel under clause (i).

‘‘(B) EXEMPTION FOR PREVIOUSLY TAXED FUEL.—No tax

shall be imposed by this paragraph on the sale or use

of any liquid if tax was imposed on such liquid under

section 4081 and the tax thereon was not credited or

refunded.

‘‘(C) RATE OF TAX.— ‘‘(i) IN GENERAL.—Except as otherwise provided

in this subparagraph, the rate of the tax imposed by

this paragraph shall be the rate of tax specified in

section 4081(a)(2)(A) on diesel fuel which is in effect

at the time of such sale or use.

‘‘(ii) RATE OF TAX ON TRAINS.—In the case of any

sale for use, or use, of diesel fuel in a train, the

rate of tax imposed by this paragraph shall be— ‘‘(I) 6.8 cents per gallon after September 30,

1993, and before October 1, 1995,

‘‘(II) 5.55 cents per gallon after September 30,

1995, and before October 1, 1999, and

‘‘(III) 4.3 cents per gallon after September 30,

1999.

‘‘(iii) RATE OF TAX ON CERTAIN BUSES.—

‘‘(I) IN GENERAL.—Except as provided in

subclause (II), in the case of fuel sold for use

or used in a use described in section 6427(b)(1)

(after the application of section 6427(b)(3)), the

rate of tax imposed by this paragraph shall be

7.3 cents per gallon (4.3 cents per gallon after

September 30, 1999).
H. R. 2264—212

‘‘(II) SCHOOL BUS AND INTRACITY TRANSPORTATION.—No tax shall be imposed by this paragraph on any sale for use, or use, described in

subparagraph (B) or (C) of section 6427(b)(2).

‘‘(D) DIESEL FUEL USED IN MOTORBOATS.—In the case

of any sale for use, or use, of fuel in a diesel-powered

motorboat—

‘‘(i) effective during the period after September

30, 1999, and before January 1, 2000, the rate of

tax imposed by this paragraph is 24.3 cents per gallon,

and

‘‘(ii) the termination of the tax under subsection

(d) shall not occur before January 1, 2000.’’

(4) Paragraph (2) of section 4041(a) is amended—

(A) by striking ‘‘or paragraph (1) of this subsection’’,

and

(B) by striking the last sentence and inserting the

following new flush sentence:

‘‘The rate of the tax imposed by this paragraph shall be the

rate of tax specified in section 4081(a)(2)(A) on gasoline which

is in effect at the time of such sale or use.’’

(5)(A) Subparagraph (B) of section 4041(b)(1) is amended

by striking ‘‘paragraph (1)(B) or (2)(B)’’ and inserting ‘‘paragraph (1)(B), (2)(B), or (3)(A)(ii)’’ and by inserting before the

period ‘‘(if any)’’.

(B) Subparagraph (C) of section 4041(b)(1) is amended by

inserting before the period ‘‘; except that such term shall not,

for purposes of subsection (a)(1), include use in a diesel-powered

train’’.

(C) Clause (i) of section 4041(b)(2)(A) is amended by striking ‘‘Highway Trust Fund financing’’.

(6) Paragraph (1) of section 4041(c), as amended by subpart

A, is amended by striking the next to the last sentence and

inserting the following new flush sentence:

‘‘The rate of the tax imposed by this paragraph shall be the

rate of tax specified in section 4091(b)(1) which is in effect

at the time of such sale or use.’’

(7) Paragraph (2) of section 4041(c) is amended by striking

‘‘any product taxable under section 4081’’ and inserting ‘‘gasoline (as defined in section 4083)’’.

(8) Paragraph (5) of section 4041(c) is amended by adding

at the end thereof the following: ‘‘The termination under the

preceding sentence shall not apply to so much of the tax

imposed by paragraph (1) as does not exceed 4.3 cents per

gallon.’’.

(9) Subsection (d) of section 4041 is amended by striking

paragraph (2) and by redesignating paragraphs (3) and (4)

as paragraphs (2) and (3), respectively.

(10) Paragraph (2) of section 4041(d), as redesignated by

the preceding paragraph, is amended by striking ‘‘(other than

any product taxable under section 4081)’’ and inserting ‘‘(other

than gasoline (as defined in section 4083))’’.

(11) Subparagraph (A) of section 4041(k)(1) is amended—

(A) by striking ‘‘Highway Trust Fund financing’’, and

(B) by striking ‘‘sections 4081(c) and 4091(c), as the

case may be’’ and inserting ‘‘section 4081(c)’’.
H. R. 2264—213

(12) Subparagraph (B) of section 4041(k)(1) is amended

by striking ‘‘4091(d)’’ and inserting ‘‘4091(c)’’.

(13) Subparagraphs (A) and (B) of section 4041(m)(1) are

amended to read as follows:

‘‘(A) the rate of the tax imposed by subsection (a)(2)

shall be—

‘‘(i) 11.3 cents per gallon after September 30, 1993,

and before October 1, 1999, and

‘‘(ii) 4.3 cents per gallon after September 30, 1999,

and

‘‘(B) the rate of the tax imposed by subsection (c)(1)

shall be the comparable rate under section 4091(c)(1).’’

(14) Section 6206 is amended by striking ‘‘4041 or 4091’’

and inserting ‘‘4041, 4081, or 4091’’.

(15) The heading for subsection (f) of section 6302 is

amended by inserting ‘‘AND DIESEL FUEL’’ after ‘‘GASOLINE’’.

(16) Paragraph (1) of section 6412(a) is amended by striking

‘‘gasoline’’ each place it appears (including the heading) and

inserting ‘‘taxable fuel’’.

(17)(A) Subparagraph (A) of section 6416(a)(4) is amended

by striking ‘‘product’’ each place it appears and inserting ‘‘gasoline’’.

(B) Subparagraph (B) of section 6416(a)(4) is amended—

(i) by striking ‘‘section 4092(b)(2)’’ and inserting ‘‘section 4093(b)(2)’’, and

(ii) by striking all that follows ‘‘substituting’’ and

inserting ‘‘ ‘any gasoline taxable under section 4081’ for

‘aviation fuel’ therein).’’

(18) The material following the first sentence of section

6416(b)(2) is amended by inserting ‘‘any tax imposed under

section 4041(a)(1) or 4081 on diesel fuel and’’ after ‘‘This paragraph shall not apply in the case of’’.

(19)(A) Subparagraph (A) of section 6416(b)(3) is amended

by striking ‘‘gasoline taxable under section 4081 and other

than any fuel taxable under section 4091’’ and inserting ‘‘any

fuel taxable under section 4081 or 4091’’.

(B) Subparagraph (B) of section 6416(b)(3) is amended by

striking ‘‘gasoline taxable under section 4081 or any fuel taxable

under section 4091, such gasoline or fuel’’ and inserting ‘‘any

fuel taxable under section 4081 or 4091, such fuel’’.

(20) Sections 6420(c)(5) and 6421(e)(1) are each amended

by striking ‘‘section 4082(b)’’ and inserting ‘‘section 4083(a)’’.

(21) Subsections (a) and (c) of section 6427 are each amended by striking ‘‘section 4041(a) or (c)’’ and inserting ‘‘paragraph

(2) or (3) of section 4041(a) or section 4041(c)’’.

(22) Subsection (c) of section 6421 is amended by adding

at the end thereof the following: ‘‘The preceding sentence shall

apply notwithstanding paragraphs (2)(A) and (3) of subsection

(f).’’

(23) Subparagraph (B) of section 6421(f)(2) is amended

by inserting before the period ‘‘and, in the case of fuel purchased

after September 30, 1995, at so much of the rate specified

in section 4081(a)(2)(A) as does not exceed 4.3 cents per gallon’’.

(24) Paragraph (3) of section 6421(f), as amended by subpart A, is amended to read as follows:
H. R. 2264—214

‘‘(3) GASOLINE USED IN TRAINS.—In the case of gasoline

used as a fuel in a train, this section shall not apply with

respect to—

‘‘(A) the Leaking Underground Storage Tank Trust

Fund financing rate under section 4081, and

‘‘(B) so much of the rate specified in section

4081(a)(2)(A) as does not exceed—

‘‘(i) 6.8 cents per gallon after September 30, 1993,

and before October 1, 1995,

‘‘(ii) 5.55 cents per gallon after September 30, 1995,

and before October 1, 1999, and

‘‘(iii) 4.3 cents per gallon after September 30,

1999.’’

(25) Subsection (b) of section 6427 is amended—

(A) by striking ‘‘if any fuel’’ in paragraph (1) and inserting ‘‘if any fuel other than gasoline (as defined in section

4083(a))’’, and

(B) by striking ‘‘4091’’ each place it appears and inserting ‘‘4081’’.

(26)(A) Paragraph (1) of section 6427(f) is amended by

striking ‘‘, 4091(c)(1)(A), or 4091(d)(1)(A)’’ and inserting ‘‘or

4091(c)(1)(A)’’.

(B) Paragraph (2) of section 6427(f) is amended to read

as follows:

‘‘(2) DEFINITIONS.—For purposes of paragraph (1)—

‘‘(A) REGULAR TAX RATE.—The term ‘regular tax rate’

means—

‘‘(i) in the case of gasoline or diesel fuel, the aggregate rate of tax imposed by section 4081 determined

without regard to subsection (c) thereof, and ‘‘(ii) in the case of aviation fuel, the aggregate

rate of tax imposed by section 4091 determined without

regard to subsection (c) thereof.

‘‘(B) INCENTIVE TAX RATE.—The term ‘incentive tax

rate’ means—

‘‘(i) in the case of gasoline or diesel fuel, the aggregate rate of tax imposed by section 4081 with respect

to fuel described in subsection (c)(2) thereof, and

‘‘(ii) in the case of aviation fuel, the aggregate

rate of tax imposed by section 4091 with respect to

fuel described in subsection (c)(2) thereof.’’

(27) Subsection (h) of section 6427 is amended by striking ‘‘section 4082(b)’’ and inserting ‘‘section 4083(a)(2)’’. (28) Paragraph (3) of section 6427(i) is amended— (A) by striking ‘‘GASOHOL’’ in the heading and inserting

‘‘ALCOHOL MIXTURE’’, and

(B) by striking ‘‘gasoline used to produce gasohol (as

defined in section 4081(c)(1))’’ in subparagraph (A) and

inserting ‘‘gasoline or diesel fuel used to produce a qualified

alcohol mixture (as defined in section 4081(c)(3))’’.

(29) Paragraph (1) of section 6427(j) is amended by striking

‘‘section 4041’’ and inserting ‘‘sections 4041, 4081, and 4091’’.

(30) The heading of paragraph (4) of section 6427(i) is

amended by inserting ‘‘4081 OR’’ before ‘‘4091’’.

(31) So much of subsection (l) of section 6427, as previously

amended by this part, as precedes paragraph (5) is amended

to read as follows:
H. R. 2264—215

‘‘(l) NONTAXABLE USES OF DIESEL FUEL AND AVIATION FUEL.—

‘‘(1) IN GENERAL.—Except as otherwise provided in this

subsection and in subsection (k), if—

‘‘(A) any diesel fuel on which tax has been imposed

by section 4041 or 4081, or

‘‘(B) any aviation fuel on which tax has been imposed

by section 4091,

is used by any person in a nontaxable use, the Secretary

shall pay (without interest) to the ultimate purchaser of such

fuel an amount equal to the aggregate amount of tax imposed

on such fuel under section 4041, 4081, or 4091, as the case

may be.

‘‘(2) NONTAXABLE USE.—For purposes of this subsection,

the term ‘nontaxable use’ means—

‘‘(A) in the case of diesel fuel, any use which is exempt

from the tax imposed by section 4041(a)(1) other than

by reason of a prior imposition of tax, and

‘‘(B) in the case of aviation fuel, any use which is

exempt from the tax imposed by section 4041(c)(1) other

than by reason of a prior imposition of tax.

‘‘(3) REFUND OF CERTAIN TAXES ON FUEL USED IN DIESELPOWERED TRAINS.—For purposes of this subsection, the term

‘nontaxable use’ includes fuel used in a diesel-powered train.

The preceding sentence shall not apply with respect to—

‘‘(A) the Leaking Underground Storage Tank Trust

Fund financing rate under sections 4041 and 4081, and

‘‘(B) so much of the rate specified in section

4081(a)(2)(A) as does not exceed—

‘‘(i) 6.8 cents per gallon after September 30, 1993,

and before October 1, 1995,

‘‘(ii) 5.55 cents per gallon after September 30, 1995,

and before October 1, 1999, and

‘‘(iii) 4.3 cents per gallon after September 30, 1999.

The preceding sentence shall not apply in the case of fuel

sold for exclusive use by a State or any political subdivision

thereof.

‘‘(4) NO REFUND OF CERTAIN TAXES ON FUEL USED IN

COMMERCIAL AVIATION.—In the case of fuel used in commercial

aviation (as defined in section 4092(b)) (other than supplies

for vessels or aircraft within the meaning of section 4221(d)(3)),

paragraph (1) shall not apply to so much of the tax imposed

by section 4091 as is attributable to— ‘‘(A) the Leaking Underground Storage Tank Trust

Fund financing rate imposed by such section, and ‘‘(B) in the case of fuel purchased after September

30, 1995, so much of the rate of tax specified in section

4091(b)(1) as does not exceed 4.3 cents per gallon.’’

(32) Section 9502 is amended by adding at the end thereof

the following new subsection:

‘‘(f) DEFINITION OF AIRPORT AND AIRWAY TRUST FUND FINANCING RATE.—For purposes of this section—

‘‘(1) IN GENERAL.—Except as otherwise provided in this

subsection, the Airport and Airway Trust Fund financing rate

is—

‘‘(A) in the case of fuel used in an aircraft in noncommercial aviation (as defined in section 4041(c)(4)), 17.5

cents per gallon, and
H. R. 2264—216

‘‘(B) in the case of fuel used in an aircraft other than

in noncommercial aviation (as so defined), zero.

‘‘(2) ALCOHOL FUELS.—If the rate of tax on any fuel is

determined under section 4091(c), the Airport and Airway Trust

Fund financing rate is the excess (if any) of the rate of tax

determined under section 4091(c) over 4.4 cents per gallon

(10⁄9 of 4.4 cents per gallon in the case of a rate of tax determined under section 4091(c)(2)).

‘‘(3) TERMINATION.—Notwithstanding the preceding provisions of this subsection, the Airport and Airway Trust Fund

financing rate is zero with respect to tax received after December 31, 1995.’’

(33) Paragraph (2) of section 9502(b) is amended by striking

‘‘(to the extent attributable to the Highway Trust Fund financing rate and the deficit reduction rate)’’ and inserting ‘‘(to

the extent of 14 cents per gallon)’’.

(34) Paragraph (1) of section 9503(b) is amended—

(A) by striking ‘‘gasoline),’’ in subparagraph (E) and

inserting ‘‘gasoline and diesel fuel), and’’,

(B) by striking subparagraph (F), and

(C) by redesignating subparagraph (G) as subparagraph (F).

(35)(A) Subparagraph (B) of section 9503(b)(4) is amended

by striking ‘‘, 4081, and 4091’’ and inserting ‘‘and 4081’’ and

by striking ‘‘rates under such sections’’ and inserting ‘‘rate’’.

(B) Subparagraph (C) of section 9503(b)(4), as amended

by subchapter A, is amended by striking ‘‘4091’’ and inserting

‘‘4081’’.

(36) Paragraph (5) of section 9503(b) is amended by striking ‘‘, (E), and (F)’’ and inserting ‘‘and (E)’’. (37) Subparagraph (D) of section 9503(c)(6) is amended

by striking ‘‘, 4081, and 4091’’ and inserting ‘‘and 4081’’. (38) Subparagraph (D) of section 9503(c)(4) is amended

by striking ‘‘rates under such sections’’ and inserting ‘‘rate’’. (39) Subparagraph (B) of section 9503(c)(5) is amended

by striking ‘‘rate under such section’’ and inserting ‘‘rate’’. (40) Paragraph (2) of section 9503(e) is amended— (A) by striking ‘‘, 4081, and 4091’’ and inserting ‘‘and

4081’’, and

(B) by striking ‘‘, 4081, or 4091’’ and inserting ‘‘or

4081’’.

(41) Section 9503 is amended by adding at the end thereof

the following new subsection:

‘‘(f) DEFINITION OF HIGHWAY TRUST FUND FINANCING RATE.— For purposes of this section—

‘‘(1) IN GENERAL.—Except as otherwise provided in this

subsection, the Highway Trust Fund financing rate is—

‘‘(A) in the case of gasoline and special motor fuels,

11.5 cents per gallon (14 cents per gallon after September

30, 1995), and

‘‘(B) in the case of diesel fuel, 17.5 cents per gallon

(20 cents per gallon after September 30, 1995).

‘‘(2) CERTAIN USES.—

‘‘(A) TRAINS.—In the case of fuel used in a train, the

Highway Trust Fund financing rate is zero.

‘‘(B) CERTAIN BUSES.—In the case of diesel fuel used

in a use described in section 6427(b)(1) (after the applica-
H. R. 2264—217

tion of section 6427(b)(3)), the Highway Trust Fund financing rate is 3 cents per gallon.

‘‘(C) CERTAIN BOATS.—In the case of diesel fuel used

in a boat described in clause (iv) of section 6421(e)(2)(B),

the Highway Trust Fund financing rate is zero.

‘‘(D) COMPRESSED NATURAL GAS.—In the case of the

tax imposed by section 4041(a)(3), the Highway Trust Fund

financing rate is zero.

‘‘(E) CERTAIN OTHER NONHIGHWAY USES.—In the case

of gasoline and special motor fuels used as described in

paragraph (4)(D), (5)(B), or (6)(D) of subsection (c), the

Highway Trust Fund financing rate is 11.5 cents per gallon;

and, in the case of diesel fuel used as described in subsection (c)(6)(D), the Highway Trust Fund financing rate

is 17.5 cents per gallon.

‘‘(3) ALCOHOL FUELS.—

‘‘(A) IN GENERAL.—If the rate of tax on any fuel is

determined under section 4041(b)(2)(A), 4041(k), or 4081(c),

the Highway Trust Fund financing rate is the excess (if

any) of the rate so determined over—

‘‘(i) 6.8 cents per gallon after September 30, 1993,

and before October 1, 1999,

‘‘(ii) 4.3 cents per gallon after September 30, 1999.

In the case of a rate of tax determined under section

4081(c), the preceding sentence shall be applied by increasing the rates specified in clauses (i) and (ii) by 0.1 cent.

‘‘(B) FUELS USED TO PRODUCE MIXTURES.—In the case

of a rate of tax determined under section 4081(c)(2),

subparagraph (A) shall be applied by substituting rates

which are 10⁄9 of the rates otherwise applicable under

clauses (i) and (ii) of subparagraph (A).

‘‘(C) PARTIALLY EXEMPT METHANOL OR ETHANOL FUEL.—

In the case of a rate of tax determined under section

4041(m), the Highway Trust Fund financing rate is the

excess (if any) of the rate so determined over—

‘‘(i) 5.55 cents per gallon after September 30, 1993,

and before October 1, 1995, and

‘‘(ii) 4.3 cents per gallon after September 30, 1995.

‘‘(4) TERMINATION.—Notwithstanding the preceding provisions of this subsection, the Highway Trust Fund financing

rate is zero with respect to taxes received in the Treasury

after June 30, 2000.’’

(42) Subsection (b) of section 9508 is amended—

(A) by inserting ‘‘and diesel fuel’’ after ‘‘gasoline’’ in

paragraph (2),

(B) by striking ‘‘diesel fuel and’’ in paragraph (3), and

(C) by striking ‘‘4091’’ in the last sentence, as added

by subtitle A, and inserting ‘‘4081’’.

(43) The table of subparts for part III of subchapter A

of chapter 32 is amended by striking the items relating to

subparts A and B and inserting the following new items:

‘‘Subpart A. Gasoline and diesel fuel.

‘‘Subpart B. Aviation fuel.’’

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

shall take effect on January 1, 1994.
H. R. 2264—218

SEC. 13243. FLOOR STOCKS TAX.

(a) IN GENERAL.—There is hereby imposed a floor stocks tax

on diesel fuel held by any person on January 1, 1994, if— (1) no tax was imposed on such fuel under section 4041(a)

or 4091 of the Internal Revenue Code of 1986 as in effect

on December 31, 1993, and

(2) tax would have been imposed by section 4081 of such

Code, as amended by this Act, on any prior removal, entry,

or sale of such fuel had such section 4081 applied to such

fuel for periods before January 1, 1994.

(b) RATE OF TAX.—The rate of the tax imposed by subsection (a) shall be the amount of tax which would be imposed under

section 4081 of the Internal Revenue Code of 1986 if there were

a taxable sale of such fuel on such date.

(c) LIABILITY AND PAYMENT OF TAX.— (1) LIABILITY FOR TAX.—A person holding the diesel fuel

on January 1, 1994, to which the tax imposed by this section

applies shall be liable for such tax.

(2) METHOD OF PAYMENT.—The tax imposed by this section

shall be paid in such manner as the Secretary shall prescribe. (3) TIME FOR PAYMENT.—The tax imposed by this section

shall be paid on or before July 31, 1994.

(d) DEFINITIONS.—For purposes of this section—

(1) DIESEL FUEL.—The term ‘‘diesel fuel’’ has the meaning given such term by section 4083(a) of such Code. (2) SECRETARY.—The term ‘‘Secretary’’ means the Secretary

of the Treasury or his delegate.

(e) EXCEPTIONS.— (1) PERSONS ENTITLED TO CREDIT OR REFUND.—The tax

imposed by this section shall not apply to fuel held by any

person exclusively for any use to the extent a credit or refund

of the tax imposed by section 4081 is allowable for such use.

(2) COMPLIANCE WITH DYEING REQUIRED.—Paragraph (1)

shall not apply to the holder of any fuel if the holder of such

fuel fails to comply with any requirement imposed by the Secretary with respect to dyeing and marking such fuel.

(f) OTHER LAWS APPLICABLE.—All provisions of law, including

penalties, applicable with respect to the taxes imposed by section

4081 of such Code shall, insofar as applicable and not inconsistent

with the provisions of this section, apply with respect to the floor

stock taxes imposed by this section to the same extent as if such

taxes were imposed by such section 4081.

Subpart C—Other Provisions

SEC. 13244. INCREASED DEPOSITS INTO MASS TRANSIT ACCOUNT.

(a) IN GENERAL.—Paragraph (2) of section 9503(e) is amended

by striking ‘‘1.5 cents’’ and inserting ‘‘2 cents’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to amounts attributable to taxes imposed on or after

October 1, 1995.

SEC. 13245. FLOOR STOCKS TAX ON COMMERCIAL AVIATION FUEL

HELD ON OCTOBER 1, 1995.

(a) IMPOSITION OF TAX.—In the case of commercial aviation

fuel on which tax was imposed under section 4091 of the Internal

Revenue Code of 1986 before October 1, 1995, and which is held
H. R. 2264—219

on such date by any person, there is hereby imposed a floor stocks

tax of 4.3 cents per gallon.

(b) LIABILITY FOR TAX AND METHOD OF PAYMENT.—

(1) LIABILITY FOR TAX.—A person holding aviation fuel on

October 1, 1995, to which the tax imposed by subsection (a)

applies shall be liable for such tax.

(2) METHOD OF PAYMENT.—The tax imposed by subsection

(a) shall be paid in such manner as the Secretary shall prescribe.

(3) TIME FOR PAYMENT.—The tax imposed by subsection

(a) shall be paid on or before April 30, 1996.

(c) DEFINITIONS.—For purposes of this subsection—

(1) HELD BY A PERSON.—Aviation fuel shall be considered

as ‘‘held by a person’’ if title thereto has passed to such person

(whether or not delivery to the person has been made).

(2) COMMERCIAL AVIATION FUEL.—The term ‘‘commercial

aviation fuel’’ means aviation fuel (as defined in section 4093

of such Code) which is held on October 1, 1995, for sale or

use in commercial aviation (as defined in section 4092(b) of

such Code).

(3) SECRETARY.—The term ‘‘Secretary’’ means the Secretary

of the Treasury or his delegate.

(d) EXCEPTION FOR EXEMPT USES.—The tax imposed by subsection (a) shall not apply to aviation fuel held by any person

exclusively for any use for which a credit or refund of the entire

tax imposed by section 4091 of such Code is allowable for aviation

fuel purchased after September 30, 1995, for such use.

(e) EXCEPTION FOR CERTAIN AMOUNTS OF FUEL.—

(1) IN GENERAL.—No tax shall be imposed by subsection

(a) on aviation fuel held on October 1, 1995, by any person

if the aggregate amount of commercial aviation fuel held by

such person on such date does not exceed 2,000 gallons. The

preceding sentence shall apply only if such person submits

to the Secretary (at the time and in the manner required

by the Secretary) such information as the Secretary shall

require for purposes of this paragraph.

(2) EXEMPT FUEL.—For purposes of paragraph (1), there

shall not be taken into account fuel held by any person which

is exempt from the tax imposed by subsection (a) by reason

of subsection (d).

(3) CONTROLLED GROUPS.—For purposes of this

subsection—

(A) CORPORATIONS.—

(i) IN GENERAL.—All persons treated as a controlled

group shall be treated as 1 person.

(ii) CONTROLLED GROUP.—The term ‘‘controlled

group’’ has the meaning given to such term by subsection (a) of section 1563 of such Code; except that

for such purposes the phrase ‘‘more than 50 percent’’

shall be substituted for the phrase ‘‘at least 80 percent’’

each place it appears in such subsection.

(B) NONINCORPORATED PERSONS UNDER COMMON CONTROL.—Under regulations prescribed by the Secretary, principles similar to the principles of subparagraph (A) shall

apply to a group of persons under common control where

1 or more of such persons is not a corporation.
H. R. 2264—220

(f) OTHER LAW APPLICABLE.—All provisions of law, including penalties, applicable with respect to the taxes imposed by section

4091 of such Code shall, insofar as applicable and not inconsistent

with the provisions of this section, apply with respect to the floor

stock taxes imposed by subsection (a) to the same extent as if

such taxes were imposed by such section 4091.

PART V—COMPLIANCE PROVISIONS

SEC. 13251. MODIFICATIONS TO SUBSTANTIAL UNDERSTATEMENT

PENALTY.

(a) REASONABLE BASIS REQUIRED.—Clause (ii) of section

6662(d)(2)(B) (relating to reduction for understatement due to position of taxpayer or disclosed item) is amended to read as follows: ‘‘(ii) any item if— ‘‘(I) the relevant facts affecting the item’s tax treatment are adequately disclosed in the return

or in a statement attached to the return, and

‘‘(II) there is a reasonable basis for the tax

treatment of such item by the taxpayer.’’ (b) EFFECTIVE DATE.—The amendment made by this section shall apply to returns the due dates for which (determined without

regard to extensions) are after December 31, 1993.

SEC. 13252. RETURNS RELATING TO THE CANCELLATION OF INDEBTEDNESS BY CERTAIN FINANCIAL ENTITIES.

(a) IN GENERAL.—Subpart B of part III of subchapter A of chapter 61 (relating to information concerning transactions with

other persons) is amended by adding at the end thereof the following

new section:

‘‘SEC. 6050P. RETURNS RELATING TO THE CANCELLATION OF INDEBTEDNESS BY CERTAIN FINANCIAL ENTITIES.

‘‘(a) IN GENERAL.—Any applicable financial entity which dis- charges (in whole or in part) the indebtedness of any person during

any calendar year shall make a return (at such time and in such

form as the Secretary may by regulations prescribe) setting forth— ‘‘(1) the name, address, and TIN of each person whose

indebtedness was discharged during such calendar year, ‘‘(2) the date of the discharge and the amount of the indebt- edness discharged, and ‘‘(3) such other information as the Secretary may prescribe. ‘‘(b) EXCEPTION.—Subsection (a) shall not apply to any discharge of less than $600.

‘‘(c) DEFINITIONS AND SPECIAL RULES.—For purposes of this

section—

‘‘(1) APPLICABLE FINANCIAL ENTITY.—The term ‘applicable

financial entity’ means— ‘‘(A) any financial institution described in section 581 or 591(a) and any credit union, ‘‘(B) the Federal Deposit Insurance Corporation, the

Resolution Trust Corporation, the National Credit Union

Administration, and any other Federal executive agency

(as defined in section 6050M), and any successor or subunit

of any of the foregoing, and ‘‘(C) any other corporation which is a direct or indirect subsidiary of an entity referred to in subparagraph (A)

but only if, by virtue of being affiliated with such entity,
H. R. 2264—221

such other corporation is subject to supervision and examination by a Federal or State agency which regulates entities referred to in subparagraph (A).

‘‘(2) GOVERNMENTAL UNITS.—In the case of an entity

described in paragraph (1)(B), any return under this section

shall be made by the officer or employee appropriately designated for the purpose of making such return.

‘‘(d) STATEMENTS TO BE FURNISHED TO PERSONS WITH RESPECT

TO WHOM INFORMATION IS REQUIRED TO BE FURNISHED.—Every

applicable financial entity required to make a return under subsection (a) shall furnish to each person whose name is required

to be set forth in such return a written statement showing—

‘‘(1) the name and address of the entity required to make

such return, and

‘‘(2) the information required to be shown on the return

with respect to such person.

The written statement required under the preceding sentence shall

be furnished to the person on or before January 31 of the year

following the calendar year for which the return under subsection

(a) was made.’’

(b) PENALTIES.—

(1) RETURNS.—Subparagraph (B) of section 6724(d)(1) is

amended by inserting after clause (vii) the following new clause

(and by redesignating the following clauses accordingly):

‘‘(viii) section 6050P (relating to returns relating

to the cancellation of indebtedness by certain financial

entities),’’.

(2) STATEMENTS.—Paragraph (2) of section 6724(d) is amended by redesignating subparagraphs (P) through (S) as

subparagraphs (Q) through (T), respectively, and by inserting

after subparagraph (O) the following new subparagraph: ‘‘(P) section 6050P(d) (relating to returns relating to

the cancellation of indebtedness by certain financial entities),’’.

(c) CLERICAL AMENDMENT.—The table of sections for subpart

B of part III of subchapter A of chapter 61 is amended by adding

at the end thereof the following new item:

‘‘Sec. 6050P. Returns relating to the cancellation of indebtedness by certain

financial entities.’’

(d) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section shall apply to discharges

of indebtedness after December 31, 1993.

(2) GOVERNMENTAL ENTITIES.—In the case of an entity referred to in section 6050P(c)(1)(B) of the Internal Revenue

Code of 1986 (as added by this section), the amendments made

by this section shall apply to discharges of indebtedness after

the date of the enactment of this Act.

PART VI—TREATMENT OF INTANGIBLES

SEC. 13261. AMORTIZATION OF GOODWILL AND CERTAIN OTHER

INTANGIBLES.

(a) GENERAL RULE.—Part VI of subchapter B of chapter 1

(relating to itemized deductions for individuals and corporations)

is amended by adding at the end thereof the following new section:
H. R. 2264—222

‘‘SEC. 197. AMORTIZATION OF GOODWILL AND CERTAIN OTHER

INTANGIBLES.

‘‘(a) GENERAL RULE.—A taxpayer shall be entitled to an amortization deduction with respect to any amortizable section

197 intangible. The amount of such deduction shall be determined

by amortizing the adjusted basis (for purposes of determining gain)

of such intangible ratably over the 15-year period beginning with

the month in which such intangible was acquired. ‘‘(b) NO OTHER DEPRECIATION OR AMORTIZATION DEDUCTION

ALLOWABLE.—Except as provided in subsection (a), no depreciation

or amortization deduction shall be allowable with respect to any

amortizable section 197 intangible. ‘‘(c) AMORTIZABLE SECTION 197 INTANGIBLE.—For purposes of

this section—

‘‘(1) IN GENERAL.—Except as otherwise provided in this

section, the term ‘amortizable section 197 intangible’ means

any section 197 intangible— ‘‘(A) which is acquired by the taxpayer after the date of the enactment of this section, and

‘‘(B) which is held in connection with the conduct of

a trade or business or an activity described in section

212.

‘‘(2) EXCLUSION OF SELF-CREATED INTANGIBLES, ETC.—The

term ‘amortizable section 197 intangible’ shall not include any

section 197 intangible— ‘‘(A) which is not described in subparagraph (D), (E), or (F) of subsection (d)(1), and

‘‘(B) which is created by the taxpayer. This paragraph shall not apply if the intangible is created

in connection with a transaction (or series of related transactions) involving the acquisition of assets constituting a trade

or business or substantial portion thereof. ‘‘(3) ANTI-CHURNING RULES.—

‘‘For exclusion of intangibles acquired in certain transactions,

see subsection (f)(9).

‘‘(d) SECTION 197 INTANGIBLE.—For purposes of this section— ‘‘(1) IN GENERAL.—Except as otherwise provided in this

section, the term ‘section 197 intangible’ means— ‘‘(A) goodwill,

‘‘(B) going concern value,

‘‘(C) any of the following intangible items: ‘‘(i) workforce in place including its composition and terms and conditions (contractual or otherwise)

of its employment, ‘‘(ii) business books and records, operating systems, or any other information base (including lists or other

information with respect to current or prospective customers),

‘‘(iii) any patent, copyright, formula, process, design, pattern, knowhow, format, or other similar

item,

‘‘(iv) any customer-based intangible,

‘‘(v) any supplier-based intangible, and

‘‘(vi) any other similar item, ‘‘(D) any license, permit, or other right granted by

a governmental unit or an agency or instrumentality

thereof,
H. R. 2264—223

‘‘(E) any covenant not to compete (or other arrangement

to the extent such arrangement has substantially the same

effect as a covenant not to compete) entered into in connection with an acquisition (directly or indirectly) of an interest

in a trade or business or substantial portion thereof, and

‘‘(F) any franchise, trademark, or trade name.

‘‘(2) CUSTOMER-BASED INTANGIBLE.—

‘‘(A) IN GENERAL.—The term ‘customer-based intangible’ means—

‘‘(i) composition of market,

‘‘(ii) market share, and

‘‘(iii) any other value resulting from future provision of goods or services pursuant to relationships

(contractual or otherwise) in the ordinary course of

business with customers.

‘‘(B) SPECIAL RULE FOR FINANCIAL INSTITUTIONS.—In

the case of a financial institution, the term ‘customerbased intangible’ includes deposit base and similar items.

‘‘(3) SUPPLIER-BASED INTANGIBLE.—The term ‘supplierbased intangible’ means any value resulting from future

acquisitions of goods or services pursuant to relationships

(contractual or otherwise) in the ordinary course of business

with suppliers of goods or services to be used or sold by the

taxpayer.

‘‘(e) EXCEPTIONS.—For purposes of this section, the term ‘section

197 intangible’ shall not include any of the following:

‘‘(1) FINANCIAL INTERESTS.—Any interest—

‘‘(A) in a corporation, partnership, trust, or estate,

or

‘‘(B) under an existing futures contract, foreign currency contract, notional principal contract, or other similar

financial contract.

‘‘(2) LAND.—Any interest in land. ‘‘(3) COMPUTER SOFTWARE.— ‘‘(A) IN GENERAL.—Any— ‘‘(i) computer software which is readily available

for purchase by the general public, is subject to a

nonexclusive license, and has not been substantially

modified, and

‘‘(ii) other computer software which is not acquired

in a transaction (or series of related transactions)

involving the acquisition of assets constituting a trade

or business or substantial portion thereof.

‘‘(B) COMPUTER SOFTWARE DEFINED.—For purposes of

subparagraph (A), the term ‘computer software’ means any

program designed to cause a computer to perform a desired

function. Such term shall not include any data base or

similar item unless the data base or item is in the public

domain and is incidental to the operation of otherwise

qualifying computer software.

‘‘(4) CERTAIN INTERESTS OR RIGHTS ACQUIRED SEPARATELY.—Any of the following not acquired in a transaction

(or series of related transactions) involving the acquisition of

assets constituting a trade business or substantial portion

thereof:

‘‘(A) Any interest in a film, sound recording, video

tape, book, or similar property.
H. R. 2264—224

‘‘(B) Any right to receive tangible property or services

under a contract or granted by a governmental unit or

agency or instrumentality thereof.

‘‘(C) Any interest in a patent or copyright.

‘‘(D) To the extent provided in regulations, any right

under a contract (or granted by a governmental unit or

an agency or instrumentality thereof) if such right—

‘‘(i) has a fixed duration of less than 15 years,

or

‘‘(ii) is fixed as to amount and, without regard

to this section, would be recoverable under a method

similar to the unit-of-production method.

‘‘(5) INTERESTS UNDER LEASES AND DEBT INSTRUMENTS.—

Any interest under—

‘‘(A) an existing lease of tangible property, or

‘‘(B) except as provided in subsection (d)(2)(B), any

existing indebtedness.

‘‘(6) TREATMENT OF SPORTS FRANCHISES.—A franchise to

engage in professional football, basketball, baseball, or other

professional sport, and any item acquired in connection with

such a franchise.

‘‘(7) MORTGAGE SERVICING.—Any right to service indebtedness which is secured by residential real property unless such

right is acquired in a transaction (or series of related transactions) involving the acquisition of assets (other than rights

described in this paragraph) constituting a trade or business

or substantial portion thereof.

‘‘(8) CERTAIN TRANSACTION COSTS.—Any fees for professional services, and any transaction costs, incurred by parties

to a transaction with respect to which any portion of the gain

or loss is not recognized under part III of subchapter C.

‘‘(f) SPECIAL RULES.—

‘‘(1) TREATMENT OF CERTAIN DISPOSITIONS, ETC.—

‘‘(A) IN GENERAL.—If there is a disposition of any

amortizable section 197 intangible acquired in a transaction

or series of related transactions (or any such intangible

becomes worthless) and one or more other amortizable

section 197 intangibles acquired in such transaction or

series of related transactions are retained—

‘‘(i) no loss shall be recognized by reason of such

disposition (or such worthlessness), and

‘‘(ii) appropriate adjustments to the adjusted bases

of such retained intangibles shall be made for any

loss not recognized under clause (i).

‘‘(B) SPECIAL RULE FOR COVENANTS NOT TO COMPETE.—

In the case of any section 197 intangible which is a covenant not to compete (or other arrangement) described

in subsection (d)(1)(E), in no event shall such covenant

or other arrangement be treated as disposed of (or becoming

worthless) before the disposition of the entire interest

described in such subsection in connection with which such

covenant (or other arrangement) was entered into.

‘‘(C) SPECIAL RULE.—All persons treated as a single

taxpayer under section 41(f)(1) shall be so treated for purposes of this paragraph.

‘‘(2) TREATMENT OF CERTAIN TRANSFERS.—
H. R. 2264—225

‘‘(A) IN GENERAL.—In the case of any section 197 intangible transferred in a transaction described in subparagraph (B), the transferee shall be treated as the transferor

for purposes of applying this section with respect to so

much of the adjusted basis in the hands of the transferee

as does not exceed the adjusted basis in the hands of

the transferor.

‘‘(B) TRANSACTIONS COVERED.—The transactions

described in this subparagraph are—

‘‘(i) any transaction described in section 332, 351,

361, 721, 731, 1031, or 1033, and

‘‘(ii) any transaction between members of the same

affiliated group during any taxable year for which a

consolidated return is made by such group.

‘‘(3) TREATMENT OF AMOUNTS PAID PURSUANT TO COVENANTS

NOT TO COMPETE, ETC.—Any amount paid or incurred pursuant

to a covenant or arrangement referred to in subsection (d)(1)(E)

shall be treated as an amount chargeable to capital account.

‘‘(4) TREATMENT OF FRANCHISES, ETC.—

‘‘(A) FRANCHISE.—The term ‘franchise’ has the meaning

given to such term by section 1253(b)(1).

‘‘(B) TREATMENT OF RENEWALS.—Any renewal of a franchise, trademark, or trade name (or of a license, a permit,

or other right referred to in subsection (d)(1)(D)) shall

be treated as an acquisition. The preceding sentence shall

only apply with respect to costs incurred in connection

with such renewal.

‘‘(C) CERTAIN AMOUNTS NOT TAKEN INTO ACCOUNT.— Any amount to which section 1253(d)(1) applies shall not

be taken into account under this section.

‘‘(5) TREATMENT OF CERTAIN REINSURANCE TRANSACTIONS.— In the case of any amortizable section 197 intangible resulting

from an assumption reinsurance transaction, the amount taken

into account as the adjusted basis of such intangible under

this section shall be the excess of—

‘‘(A) the amount paid or incurred by the acquirer under

the assumption reinsurance transaction, over

‘‘(B) the amount required to be capitalized under section 848 in connection with such transaction.

Subsection (b) shall not apply to any amount required to be

capitalized under section 848.

‘‘(6) TREATMENT OF CERTAIN SUBLEASES.—For purposes of

this section, a sublease shall be treated in the same manner

as a lease of the underlying property involved. ‘‘(7) TREATMENT AS DEPRECIABLE.—For purposes of this

chapter, any amortizable section 197 intangible shall be treated

as property which is of a character subject to the allowance

for depreciation provided in section 167.

‘‘(8) TREATMENT OF CERTAIN INCREMENTS IN VALUE.—This

section shall not apply to any increment in value if, without

regard to this section, such increment is properly taken into

account in determining the cost of property which is not a

section 197 intangible.

‘‘(9) ANTI-CHURNING RULES.—For purposes of this section—

‘‘(A) IN GENERAL.—The term ‘amortizable section 197

intangible’ shall not include any section 197 intangible

which is described in subparagraph (A) or (B) of subsection
H. R. 2264—226

(d)(1) (or for which depreciation or amortization would not

have been allowable but for this section) and which is

acquired by the taxpayer after the date of the enactment

of this section, if—

‘‘(i) the intangible was held or used at any time

on or after July 25, 1991, and on or before such date

of enactment by the taxpayer or a related person,

‘‘(ii) the intangible was acquired from a person

who held such intangible at any time on or after July

25, 1991, and on or before such date of enactment,

and, as part of the transaction, the user of such intangible does not change, or

‘‘(iii) the taxpayer grants the right to use such

intangible to a person (or a person related to such

person) who held or used such intangible at any time

on or after July 25, 1991, and on or before such date

of enactment.

For purposes of this subparagraph, the determination of

whether the user of property changes as part of a transaction shall be determined in accordance with regulations

prescribed by the Secretary. For purposes of this subparagraph, deductions allowable under section 1253(d) shall

be treated as deductions allowable for amortization.

‘‘(B) EXCEPTION WHERE GAIN RECOGNIZED.—If—

‘‘(i) subparagraph (A) would not apply to an intangible acquired by the taxpayer but for the last sentence

of subparagraph (C)(i), and

‘‘(ii) the person from whom the taxpayer acquired

the intangible elects, notwithstanding any other provision of this title—

‘‘(I) to recognize gain on the disposition of the

intangible, and

‘‘(II) to pay a tax on such gain which, when

added to any other income tax on such gain under

this title, equals such gain multiplied by the highest rate of income tax applicable to such person

under this title,

then subparagraph (A) shall apply to the intangible

only to the extent that the taxpayer’s adjusted basis

in the intangible exceeds the gain recognized under

clause (ii)(I).

‘‘(C) RELATED PERSON DEFINED.—For purposes of this

paragraph—

‘‘(i) RELATED PERSON.—A person (hereinafter in

this paragraph referred to as the ‘related person’) is

related to any person if—

‘‘(I) the related person bears a relationship

to such person specified in section 267(b) or section

707(b)(1), or

‘‘(II) the related person and such person are

engaged in trades or businesses under common

control (within the meaning of subparagraphs (A)

and (B) of section 41(f)(1)).

For purposes of subclause (I), in applying section 267(b)

or 707(b)(1), ‘20 percent’ shall be substituted for ‘50

percent’.
H. R. 2264—227

‘‘(ii) TIME FOR MAKING DETERMINATION.—A person

shall be treated as related to another person if such

relationship exists immediately before or immediately

after the acquisition of the intangible involved.

‘‘(D) ACQUISITIONS BY REASON OF DEATH.—Subparagraph (A) shall not apply to the acquisition of any property

by the taxpayer if the basis of the property in the hands

of the taxpayer is determined under section 1014(a).

‘‘(E) SPECIAL RULE FOR PARTNERSHIPS.—With respect

to any increase in the basis of partnership property under

section 732, 734, or 743, determinations under this paragraph shall be made at the partner level and each partner

shall be treated as having owned and used such partner’s

proportionate share of the partnership assets.

‘‘(F) ANTI-ABUSE RULES.—The term ‘amortizable section

197 intangible’ does not include any section 197 intangible

acquired in a transaction, one of the principal purposes

of which is to avoid the requirement of subsection (c)(1)

that the intangible be acquired after the date of the enactment of this section or to avoid the provisions of subparagraph (A).

‘‘(g) REGULATIONS.—The Secretary shall prescribe such regulations as may be appropriate to carry out the purposes of this

section, including such regulations as may be appropriate to prevent

avoidance of the purposes of this section through related persons

or otherwise.’’

(b) MODIFICATIONS TO DEPRECIATION RULES.—

(1) TREATMENT OF CERTAIN PROPERTY EXCLUDED FROM SECTION 197.—Section 167 (relating to depreciation deduction) is amended by redesignating subsection (f) as subsection (g) and

by inserting after subsection (e) the following new subsection:

‘‘(f) TREATMENT OF CERTAIN PROPERTY EXCLUDED FROM SECTION 197.—

‘‘(1) COMPUTER SOFTWARE.— ‘‘(A) IN GENERAL.—If a depreciation deduction is allowable under subsection (a) with respect to any computer

software, such deduction shall be computed by using the

straight line method and a useful life of 36 months. ‘‘(B) COMPUTER SOFTWARE.—For purposes of this section, the term ‘computer software’ has the meaning given

to such term by section 197(e)(3)(B); except that such term

shall not include any such software which is an amortizable

section 197 intangible.

‘‘(2) CERTAIN INTERESTS OR RIGHTS ACQUIRED SEPARATELY.—If a depreciation deduction is allowable under subsection (a) with respect to any property described in subparagraph (B), (C), or (D) of section 197(e)(4), such deduction shall

be computed in accordance with regulations prescribed by the

Secretary.

‘‘(3) MORTGAGE SERVICING RIGHTS.—If a depreciation deduction is allowable under subsection (a) with respect to any right

described in section 197(e)(7), such deduction shall be computed

by using the straight line method and a useful life of 108

months.’’

(2) ALLOCATION OF BASIS IN CASE OF LEASED PROPERTY.—

Subsection (c) of section 167 is amended to read as follows:

‘‘(c) BASIS FOR DEPRECIATION.—
H. R. 2264—228

‘‘(1) IN GENERAL.—The basis on which exhaustion, wear

and tear, and obsolescence are to be allowed in respect of

any property shall be the adjusted basis provided in section

1011, for the purpose of determining the gain on the sale

or other disposition of such property.

‘‘(2) SPECIAL RULE FOR PROPERTY SUBJECT TO LEASE.—If

any property is acquired subject to a lease—

‘‘(A) no portion of the adjusted basis shall be allocated

to the leasehold interest, and

‘‘(B) the entire adjusted basis shall be taken into

account in determining the depreciation deduction (if any)

with respect to the property subject to the lease.’’

(c) AMENDMENTS TO SECTION 1253.—Subsection (d) of section

1253 is amended by striking paragraphs (2), (3), (4), and (5) and

inserting the following:

‘‘(2) OTHER PAYMENTS.—Any amount paid or incurred on

account of a transfer, sale, or other disposition of a franchise,

trademark, or trade name to which paragraph (1) does not

apply shall be treated as an amount chargeable to capital

account.

‘‘(3) RENEWALS, ETC.—For purposes of determining the term

of a transfer agreement under this section, there shall be taken

into account all renewal options (and any other period for

which the parties reasonably expect the agreement to be

renewed).’’

(d) AMENDMENT TO SECTION 848.—Subsection (g) of section

848 is amended by striking ‘‘this section’’ and inserting ‘‘this section

or section 197’’.

(e) AMENDMENTS TO SECTION 1060.—

(1) Paragraph (1) of section 1060(b) is amended by striking

‘‘goodwill or going concern value’’ and inserting ‘‘section 197

intangibles’’. (2) Paragraph (1) of section 1060(d) is amended by striking ‘‘goodwill or going concern value (or similar items)’’ and inserting ‘‘section 197 intangibles’’.

(f) TECHNICAL AND CONFORMING AMENDMENTS.— (1) Subsection (g) of section 167 (as redesignated by sub- section (b)) is amended to read as follows:

‘‘(g) CROSS REFERENCES.—

‘‘(1) For additional rule applicable to depreciation of improvements in the case of mines, oil and gas wells, other natural deposits,

and timber, see section 611.

‘‘(2) For amortization of goodwill and certain other intangibles,

see section 197.’’

(2) Subsection (f) of section 642 is amended by striking

‘‘section 169’’ and inserting ‘‘sections 169 and 197’’.

(3) Subsection (a) of section 1016 is amended by striking

paragraph (19) and by redesignating the following paragraphs

accordingly.

(4) Subparagraph (C) of section 1245(a)(2) is amended by

striking ‘‘193, or 1253(d) (2) or (3)’’ and inserting ‘‘or 193’’.

(5) Paragraph (3) of section 1245(a) is amended by striking

‘‘section 185 or 1253(d) (2) or (3)’’.

(6) The table of sections for part VI of subchapter B of

chapter 1 is amended by adding at the end thereof the following

new item:

‘‘Sec. 197. Amortization of goodwill and certain other intangibles.’’.
H. R. 2264—229

(g) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section shall apply with

respect to property acquired after the date of the enactment

of this Act.

(2) ELECTION TO HAVE AMENDMENTS APPLY TO PROPERTY

ACQUIRED AFTER JULY 25, 1991.—

(A) IN GENERAL.—If an election under this paragraph

applies to the taxpayer—

(i) the amendments made by this section shall

apply to property acquired by the taxpayer after July

25, 1991,

(ii) subsection (c)(1)(A) of section 197 of the

Internal Revenue Code of 1986 (as added by this section) (and so much of subsection (f)(9)(A) of such section

197 as precedes clause (i) thereof) shall be applied

with respect to the taxpayer by treating July 25, 1991,

as the date of the enactment of such section, and

(iii) in applying subsection (f)(9) of such section,

with respect to any property acquired by the taxpayer

on or before the date of the enactment of this Act,

only holding or use on July 25, 1991, shall be taken

into account.

(B) ELECTION.—An election under this paragraph shall

be made at such time and in such manner as the Secretary

of the Treasury or his delegate may prescribe. Such an

election by any taxpayer, once made—

(i) may be revoked only with the consent of the

Secretary, and

(ii) shall apply to the taxpayer making such election and any other taxpayer under common control

with the taxpayer (within the meaning of subparagraphs (A) and (B) of section 41(f)(1) of such Code)

at any time after August 2, 1993, and on or before

the date on which such election is made.

(3) ELECTIVE BINDING CONTRACT EXCEPTION.—

(A) IN GENERAL.—The amendments made by this section shall not apply to any acquisition of property by the

taxpayer if—

(i) such acquisition is pursuant to a written binding

contract in effect on the date of the enactment of

this Act and at all times thereafter before such acquisition,

(ii) an election under paragraph (2) does not apply

to the taxpayer, and

(iii) the taxpayer makes an election under this

paragraph with respect to such contract.

(B) ELECTION.—An election under this paragraph shall

be made at such time and in such manner as the Secretary

of the Treasury or his delegate shall prescribe. Such an

election, once made—

(i) may be revoked only with the consent of the

Secretary, and

(ii) shall apply to all property acquired pursuant

to the contract with respect to which such election

was made.
H. R. 2264—230

SEC. 13262. TREATMENT OF CERTAIN PAYMENTS TO RETIRED OR

DECEASED PARTNER.

(a) SECTION 736(b) NOT TO APPLY IN CERTAIN CASES.—Subsection (b) of section 736 (relating to payments for interest in

partnership) is amended by adding at the end thereof the following

new paragraph:

‘‘(3) LIMITATION ON APPLICATION OF PARAGRAPH (2).—Paragraph (2) shall apply only if—

‘‘(A) capital is not a material income-producing factor

for the partnership, and

‘‘(B) the retiring or deceased partner was a general

partner in the partnership.’’

(b) LIMITATION ON DEFINITION OF UNREALIZED RECEIVABLES.—

(1) IN GENERAL.—Subsection (c) of section 751 (defining

unrealized receivables) is amended—

(A) by striking ‘‘sections 731, 736, and 741’’ each place

they appear and inserting ‘‘, sections 731 and 741 (but

not for purposes of section 736)’’, and

(B) by striking ‘‘section 731, 736, or 741’’ each place

it appears and inserting ‘‘section 731 or 741’’.

(2) TECHNICAL AMENDMENTS.—

(A) Subsection (e) of section 751 is amended by striking

‘‘sections 731, 736, and 741’’ and inserting ‘‘sections 731

and 741’’.

(B) Section 736 is amended by striking subsection (c).

(c) EFFECTIVE DATE.—

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

shall apply in the case of partners retiring or dying on or

after January 5, 1993.

(2) BINDING CONTRACT EXCEPTION.—The amendments made

by this section shall not apply to any partner retiring on or

after January 5, 1993, if a written contract to purchase such

partner’s interest in the partnership was binding on January

4, 1993, and at all times thereafter before such purchase.

PART VII—MISCELLANEOUS PROVISIONS

SEC. 13271. DISALLOWANCE OF INTEREST ON CERTAIN OVERPAYMENTS OF TAX.

(a) GENERAL RULE.—Subsection (e) of section 6611 is amended

to read as follows:

‘‘(e) DISALLOWANCE OF INTEREST ON CERTAIN OVERPAYMENTS.—

‘‘(1) REFUNDS WITHIN 45 DAYS AFTER RETURN IS FILED.—

If any overpayment of tax imposed by this title is refunded

within 45 days after the last day prescribed for filing the

return of such tax (determined without regard to any extension

of time for filing the return) or, in the case of a return filed

after such last date, is refunded within 45 days after the

date the return is filed, no interest shall be allowed under

subsection (a) on such overpayment.

‘‘(2) REFUNDS AFTER CLAIM FOR CREDIT OR REFUND.—If—

‘‘(A) the taxpayer files a claim for a credit or refund

for any overpayment of tax imposed by this title, and

‘‘(B) such overpayment is refunded within 45 days after

such claim is filed,
H. R. 2264—231

no interest shall be allowed on such overpayment from the

date the claim is filed until the day the refund is made.

‘‘(3) IRS INITIATED ADJUSTMENTS.—If an adjustment initiated by the Secretary, results in a refund or credit of an

overpayment, interest on such overpayment shall be computed

by subtracting 45 days from the number of days interest would

otherwise be allowed with respect to such overpayment.’’

(b) EFFECTIVE DATES.—

(1) Paragraph (1) of section 6611(e) of the Internal Revenue

Code of 1986 (as amended by subsection (a)) shall apply in

the case of returns the due date for which (determined without

regard to extensions) is on or after January 1, 1994.

(2) Paragraph (2) of section 6611(e) of such Code (as so

amended) shall apply in the case of claims for credit or refund

of any overpayment filed on or after January 1, 1995, regardless

of the taxable period to which such refund relates.

(3) Paragraph (3) of section 6611(e) of such Code (as so

amended) shall apply in the case of any refund paid on or

after January 1, 1995, regardless of the taxable period to which

such refund relates.

SEC. 13272. DENIAL OF DEDUCTION RELATING TO TRAVEL EXPENSES.

(a) IN GENERAL.—Section 274(m) (relating to additional limitations on travel expenses) is amended by adding at the end thereof

the following new paragraph:

‘‘(3) TRAVEL EXPENSES OF SPOUSE, DEPENDENT, OR OTHERS.—No deduction shall be allowed under this chapter (other

than section 217) for travel expenses paid or incurred with

respect to a spouse, dependent, or other individual accompanying the taxpayer (or an officer or employee of the taxpayer)

on business travel, unless—

‘‘(A) the spouse, dependent, or other individual is an

employee of the taxpayer,

‘‘(B) the travel of the spouse, dependent, or other

individual is for a bona fide business purpose, and

‘‘(C) such expenses would otherwise be deductible by

the spouse, dependent, or other individual.’’

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to amounts paid or incurred after December 31, 1993.

SEC. 13273. INCREASE IN WITHHOLDING FROM SUPPLEMENTAL WAGE

PAYMENTS.

If an employer elects under Treasury Regulation 31.3402

(g)–1 to determine the amount to be deducted and withheld from

any supplemental wage payment by using a flat percentage rate,

the rate to be used in determining the amount to be so deducted

and withheld shall not be less than 28 percent. The preceding

sentence shall apply to payments made after December 31, 1993.
H. R. 2264—232

Subchapter C—Empowerment Zones, Enterprise

Communities, Rural Development Investment Areas, Etc.

PART I—EMPOWERMENT ZONES, ENTERPRISE

COMMUNITIES, AND RURAL DEVELOPMENT

INVESTMENT AREAS

SEC. 13301. DESIGNATION AND TREATMENT OF EMPOWERMENT

ZONES, ENTERPRISE COMMUNITIES, AND RURAL DEVELOPMENT INVESTMENT AREAS.

(a) IN GENERAL.—Chapter 1 (relating to normal taxes and

surtaxes) is amended by inserting after subchapter T the following

new subchapter:

‘‘Subchapter U—Designation and Treatment of Empowerment Zones, Enterprise Communities, and Rural Development Investment Areas

‘‘Part I. Designation. ‘‘Part II. Tax-exempt facility bonds for empowerment zones and enterprise

communities.

‘‘Part III. Additional incentives for empowerment zones.

‘‘Part IV. Regulations.

‘‘PART I—DESIGNATION

‘‘Sec. 1391. Designation procedure.

‘‘Sec. 1392. Eligibility criteria.

‘‘Sec. 1393. Definitions and special rules.

‘‘SEC. 1391. DESIGNATION PROCEDURE.

‘‘(a) IN GENERAL.—From among the areas nominated for designation under this section, the appropriate Secretaries may designate empowerment zones and enterprise communities.

‘‘(b) NUMBER OF DESIGNATIONS.—

‘‘(1) ENTERPRISE COMMUNITIES.—The appropriate Secretaries may designate in the aggregate 95 nominated areas as

enterprise communities under this section, subject to the availability of eligible nominated areas. Of that number, not more

than 65 may be designated in urban areas and not more than

30 may be designated in rural areas.

‘‘(2) EMPOWERMENT ZONES.—The appropriate Secretaries

may designate in the aggregate 9 nominated areas as

empowerment zones under this section, subject to the availability of eligible nominated areas. Of that number, not more

than 6 may be designated in urban areas and not more than

3 may be designated in rural areas. If 6 empowerment zones

are designated in urban areas, no less than 1 shall be designated in an urban area the most populous city of which

has a population of 500,000 or less and no less than 1 shall

be a nominated area which includes areas in 2 States and

which has a population of 50,000 or less. The Secretary of

Housing and Urban Development shall designate empowerment

zones located in urban areas in such a manner that the aggregate population of all such zones does not exceed 750,000.

‘‘(c) PERIOD DESIGNATIONS MAY BE MADE.—A designation may

be made under this section only after 1993 and before 1996.

‘‘(d) PERIOD FOR WHICH DESIGNATION IS IN EFFECT.—
H. R. 2264—233

‘‘(1) IN GENERAL.—Any designation under this section shall

remain in effect during the period beginning on the date of

the designation and ending on the earliest of—

‘‘(A) the close of the 10th calendar year beginning

on or after such date of designation,

‘‘(B) the termination date designated by the State and

local governments as provided for in their nomination,

or

‘‘(C) the date the appropriate Secretary revokes the

designation.

‘‘(2) REVOCATION OF DESIGNATION.—The appropriate Secretary may revoke the designation under this section of an

area if such Secretary determines that the local government

or the State in which it is located—

‘‘(A) has modified the boundaries of the area, or

‘‘(B) is not complying substantially with, or fails to

make progress in achieving the benchmarks set forth in,

the strategic plan under subsection (f)(2).

‘‘(e) LIMITATIONS ON DESIGNATIONS.—No area may be designated under subsection (a) unless—

‘‘(1) the area is nominated by 1 or more local governments

and the State or States in which it is located for designation

under this section,

‘‘(2) such State or States and the local governments have

the authority—

‘‘(A) to nominate the area for designation under this

section, and

‘‘(B) to provide the assurances described in paragraph (3),

‘‘(3) such State or States and the local governments provide

written assurances satisfactory to the appropriate Secretary

that the strategic plan described in the application under subsection (f)(2) for such area will be implemented,

‘‘(4) the appropriate Secretary determines that any information furnished is reasonably accurate, and ‘‘(5) such State or States and local governments certify

that no portion of the area nominated is already included

in an empowerment zone or in an enterprise community or

in an area otherwise nominated to be designated under this

section.

‘‘(f) APPLICATION.—No area may be designated under subsection (a) unless the application for such designation— ‘‘(1) demonstrates that the nominated area satisfies the

eligibility criteria described in section 1392, ‘‘(2) includes a strategic plan for accomplishing the purposes

of this subchapter that—

‘‘(A) describes the coordinated economic, human,

community, and physical development plan and related

activities proposed for the nominated area,

‘‘(B) describes the process by which the affected community is a full partner in the process of developing and

implementing the plan and the extent to which local

institutions and organizations have contributed to the planning process,

‘‘(C) identifies the amount of State, local, and private

resources that will be available in the nominated area

and the private/public partnerships to be used, which may
H. R. 2264—234

include participation by, and cooperation with, universities,

medical centers, and other private and public entities,

‘‘(D) identifies the funding requested under any Federal

program in support of the proposed economic, human,

community, and physical development and related

activities,

‘‘(E) identifies baselines, methods, and benchmarks for

measuring the success of carrying out the strategic plan,

including the extent to which poor persons and families

will be empowered to become economically self-sufficient,

and

‘‘(F) does not include any action to assist any establishment in relocating from one area outside the nominated

area to the nominated area, except that assistance for

the expansion of an existing business entity through the

establishment of a new branch, affiliate, or subsidiary is

permitted if—

‘‘(i) the establishment of the new branch, affiliate,

or subsidiary will not result in a decrease in employment in the area of original location or in any other

area where the existing business entity conducts business operations, and

‘‘(ii) there is no reason to believe that the new

branch, affiliate, or subsidiary is being established with

the intention of closing down the operations of the

existing business entity in the area of its original location or in any other area where the existing business

entity conducts business operation, and ‘‘(3) includes such other information as may be required

by the appropriate Secretary.

‘‘SEC. 1392. ELIGIBILITY CRITERIA.

‘‘(a) IN GENERAL.—A nominated area shall be eligible for designation under section 1391 only if it meets the following criteria: ‘‘(1) POPULATION.—The nominated area has a maximum

population of—

‘‘(A) in the case of an urban area, the lesser of—

‘‘(i) 200,000, or

‘‘(ii) the greater of 50,000 or 10 percent of the

population of the most populous city located within

the nominated area, and

‘‘(B) in the case of a rural area, 30,000.

‘‘(2) DISTRESS.—The nominated area is one of pervasive

poverty, unemployment, and general distress. ‘‘(3) SIZE.—The nominated area—

‘‘(A) does not exceed 20 square miles if an urban area

or 1,000 square miles if a rural area,

‘‘(B) has a boundary which is continuous, or, except

in the case of a rural area located in more than 1 State,

consists of not more than 3 noncontiguous parcels,

‘‘(C)(i) in the case of an urban area, is located entirely

within no more than 2 contiguous States, and

‘‘(ii) in the case of a rural area, is located entirely

within no more than 3 contiguous States, and

‘‘(D) does not include any portion of a central business

district (as such term is used for purposes of the most

recent Census of Retail Trade) unless the poverty rate
H. R. 2264—235

for each population census tract in such district is not

less than 35 percent (30 percent in the case of an enterprise

community).

‘‘(4) POVERTY RATE.—The poverty rate—

‘‘(A) for each population census tract within the nominated area is not less than 20 percent,

‘‘(B) for at least 90 percent of the population census

tracts within the nominated area is not less than 25 percent, and

‘‘(C) for at least 50 percent of the population census

tracts within the nominated area is not less than 35

percent.

‘‘(b) SPECIAL RULES RELATING TO DETERMINATION OF POVERTY

RATE.—For purposes of subsection (a)(4)—

‘‘(1) TREATMENT OF CENSUS TRACTS WITH SMALL POPULATIONS.—

‘‘(A) TRACTS WITH NO POPULATION.—In the case of a

population census tract with no population—

‘‘(i) such tract shall be treated as having a poverty

rate which meets the requirements of subparagraphs

(A) and (B) of subsection (a)(4), but

‘‘(ii) such tract shall be treated as having a zero

poverty rate for purposes of applying subparagraph

(C) thereof.

‘‘(B) TRACTS WITH POPULATIONS OF LESS THAN 2,000.—

A population census tract with a population of less than

2,000 shall be treated as having a poverty rate which

meets the requirements of subparagraphs (A) and (B) of

subsection (a)(4) if more than 75 percent of such tract

is zoned for commercial or industrial use.

‘‘(2) DISCRETION TO ADJUST REQUIREMENTS FOR ENTERPRISE

COMMUNITIES.—In determining whether a nominated area is

eligible for designation as an enterprise community, the appropriate Secretary may, where necessary to carry out the purposes

of this subchapter, reduce by 5 percentage points one of the

following thresholds for not more than 10 percent of the population census tracts (or, if fewer, 5 population census tracts)

in the nominated area:

‘‘(A) The 20 percent threshold in subsection (a)(4)(A).

‘‘(B) The 25 percent threshold in subsection (a)(4)(B).

‘‘(C) The 35 percent threshold in subsection (a)(4)(C).

If the appropriate Secretary elects to reduce the threshold

under subparagraph (C), such Secretary may (in lieu of applying

the preceding sentence) reduce by 10 percentage points the

threshold under subparagraph (C) for 3 population census

tracts.

‘‘(3) EACH NONCONTIGUOUS AREA MUST SATISFY POVERTY

RATE RULE.—A nominated area may not include a noncontiguous parcel unless such parcel separately meets (subject to

paragraphs (1) and (2)) the criteria set forth in subsection

(a)(4).

‘‘(4) AREAS NOT WITHIN CENSUS TRACTS.—In the case of

an area which is not tracted for population census tracts, the

equivalent county divisions (as defined by the Bureau of the

Census for purposes of defining poverty areas) shall be used

for purposes of determining poverty rates.
H. R. 2264—236

‘‘(c) FACTORS TO CONSIDER.—From among the nominated areas

eligible for designation under section 1391 by the appropriate Secretary, such appropriate Secretary shall make designations of

empowerment zones and enterprise communities on the basis of—

‘‘(1) the effectiveness of the strategic plan submitted pursuant to section 1391(f)(2) and the assurances made pursuant

to section 1391(e)(3), and

‘‘(2) criteria specified by the appropriate Secretary.

‘‘SEC. 1393. DEFINITIONS AND SPECIAL RULES.

‘‘(a) IN GENERAL.—For purposes of this subchapter—

‘‘(1) APPROPRIATE SECRETARY.—The term ‘appropriate Secretary’ means—

‘‘(A) the Secretary of Housing and Urban Development

in the case of any nominated area which is located in

an urban area, and

‘‘(B) the Secretary of Agriculture in the case of any

nominated area which is located in a rural area.

‘‘(2) RURAL AREA.—The term ‘rural area’ means any area

which is—

‘‘(A) outside of a metropolitan statistical area (within

the meaning of section 143(k)(2)(B)), or

‘‘(B) determined by the Secretary of Agriculture, after

consultation with the Secretary of Commerce, to be a rural

area.

‘‘(3) URBAN AREA.—The term ‘urban area’ means an area

which is not a rural area.

‘‘(4) SPECIAL RULES FOR INDIAN RESERVATIONS.—

‘‘(A) IN GENERAL.—No empowerment zone or enterprise community may include any area within an Indian

reservation.

‘‘(B) INDIAN RESERVATION DEFINED.—The term ‘Indian

reservation’ has the meaning given such term by section

168(j)(6).

‘‘(5) LOCAL GOVERNMENT.—The term ‘local government’

means—

‘‘(A) any county, city, town, township, parish, village,

or other general purpose political subdivision of a State,

and

‘‘(B) any combination of political subdivisions described

in subparagraph (A) recognized by the appropriate

Secretary.

‘‘(6) NOMINATED AREA.—The term ‘nominated area’ means

an area which is nominated by 1 or more local governments

and the State or States in which it is located for designation

under section 1391.

‘‘(7) GOVERNMENTS.—If more than 1 State or local government seeks to nominate an area under this part, any reference

to, or requirement of, this subchapter shall apply to all such

governments.

‘‘(8) SPECIAL RULE.—An area shall be treated as nominated

by a State and a local government if it is nominated by an

economic development corporation chartered by the State.

‘‘(9) USE OF CENSUS DATA.—Population and poverty rate

shall be determined by the most recent decennial census data

available.
H. R. 2264—237

‘‘(b) EMPOWERMENT ZONE; ENTERPRISE COMMUNITY.—For purposes of this title, the terms ‘empowerment zone’ and ‘enterprise

community’ mean areas designated as such under section 1391.

‘‘PART II—TAX-EXEMPT FACILITY BONDS FOR

EMPOWERMENT ZONES AND ENTERPRISE

COMMUNITIES

‘‘Sec. 1394. Tax-exempt enterprise zone facility bonds.

‘‘SEC. 1394. TAX-EXEMPT ENTERPRISE ZONE FACILITY BONDS.

‘‘(a) IN GENERAL.—For purposes of part IV of subchapter B of this chapter (relating to tax exemption requirements for State

and local bonds), the term ‘exempt facility bond’ includes any bond

issued as part of an issue 95 percent or more of the net proceeds

(as defined in section 150(a)(3)) of which are to be used to provide

any enterprise zone facility. ‘‘(b) ENTERPRISE ZONE FACILITY.—For purposes of this section— ‘‘(1) IN GENERAL.—The term ‘enterprise zone facility’ means any qualified zone property the principal user of which is

an enterprise zone business, and any land which is functionally

related and subordinate to such property. ‘‘(2) QUALIFIED ZONE PROPERTY.—The term ‘qualified zone

property’ has the meaning given such term by section 1397C;

except that the references to empowerment zones shall be treated as including references to enterprise communities.

‘‘(3) ENTERPRISE ZONE BUSINESS.—The term ‘enterprise

zone business’ has the meaning given to such term by section

1397B, except that—

‘‘(A) references to empowerment zones shall be treated

as including references to enterprise communities, and

‘‘(B) such term includes any trades or businesses which

would qualify as an enterprise zone business (determined

after the modification of subparagraph (A)) if such trades

or businesses were separately incorporated.

‘‘(c) LIMITATION ON AMOUNT OF BONDS.—

‘‘(1) IN GENERAL.—Subsection (a) shall not apply to any

issue if the aggregate amount of outstanding enterprise zone

facility bonds allocable to any person (taking into account such

issue) exceeds—

‘‘(A) $3,000,000 with respect to any 1 empowerment

zone or enterprise community, or

‘‘(B) $20,000,000 with respect to all empowerment

zones and enterprise communities.

‘‘(2) AGGREGATE ENTERPRISE ZONE FACILITY BOND BENEFIT.—For purposes of subparagraph (A), the aggregate amount

of outstanding enterprise zone facility bonds allocable to any

person shall be determined under rules similar to the rules

of section 144(a)(10), taking into account only bonds to which

subsection (a) applies.

‘‘(d) ACQUISITION OF LAND AND EXISTING PROPERTY PERMITTED.—The requirements of sections 147(c)(1)(A) and 147(d) shall

not apply to any bond described in subsection (a).

‘‘(e) PENALTY FOR CEASING TO MEET REQUIREMENTS.—

‘‘(1) FAILURES CORRECTED.—An issue which fails to meet

1 or more of the requirements of subsections (a) and (b) shall

be treated as meeting such requirements if—
H. R. 2264—238

‘‘(A) the issuer and any principal user in good faith

attempted to meet such requirements, and

‘‘(B) any failure to meet such requirements is corrected

within a reasonable period after such failure is first

discovered.

‘‘(2) LOSS OF DEDUCTIONS WHERE FACILITY CEASES TO BE

QUALIFIED.—No deduction shall be allowed under this chapter

for interest on any financing provided from any bond to which

subsection (a) applies with respect to any facility to the extent

such interest accrues during the period beginning on the first

day of the calendar year which includes the date on which—

‘‘(A) substantially all of the facility with respect to

which the financing was provided ceases to be used in

an empowerment zone or enterprise community, or

‘‘(B) the principal user of such facility ceases to be

an enterprise zone business (as defined in subsection (b)).

‘‘(3) EXCEPTION IF ZONE CEASES.—Paragraphs (1) and (2)

shall not apply solely by reason of the termination or revocation

of a designation as an empowerment zone or an enterprise

community.

‘‘(4) EXCEPTION FOR BANKRUPTCY.—Paragraphs (1) and (2)

shall not apply to any cessation resulting from bankruptcy.

‘‘PART III—ADDITIONAL INCENTIVES FOR

EMPOWERMENT ZONES

‘‘SUBPART A. Empowerment zone employment credit.

‘‘SUBPART B. Additional expensing.

‘‘SUBPART C. General provisions.

‘‘Subpart A—Empowerment Zone Employment

Credit

‘‘Sec. 1396. Empowerment zone employment credit.

‘‘Sec. 1397. Other definitions and special rules.

‘‘SEC. 1396. EMPOWERMENT ZONE EMPLOYMENT CREDIT.

‘‘(a) AMOUNT OF CREDIT.—For purposes of section 38, the

amount of the empowerment zone employment credit determined

under this section with respect to any employer for any taxable

year is the applicable percentage of the qualified zone wages paid

or incurred during the calendar year which ends with or within

such taxable year.

‘‘(b) APPLICABLE PERCENTAGE.—For purposes of this section,

the term ‘applicable percentage’ means the percentage determined

in accordance with the following table:

‘‘In the case of wages paid or The applicable

incurred during calendar year: percentage is:

1994 through 2001 .................................................................. 20

2002 .......................................................................................... 15

2003 .......................................................................................... 10

2004 .......................................................................................... 5

‘‘(c) QUALIFIED ZONE WAGES.—

‘‘(1) IN GENERAL.—For purposes of this section, the term

‘qualified zone wages’ means any wages paid or incurred by
H. R. 2264—239

an employer for services performed by an employee while such

employee is a qualified zone employee.

‘‘(2) ONLY FIRST $15,000 OF WAGES PER YEAR TAKEN INTO

ACCOUNT.—With respect to each qualified zone employee, the

amount of qualified zone wages which may be taken into

account for a calendar year shall not exceed $15,000.

‘‘(3) COORDINATION WITH TARGETED JOBS CREDIT.—

‘‘(A) IN GENERAL.—The term ‘qualified zone wages’

shall not include wages taken into account in determining

the credit under section 51.

‘‘(B) COORDINATION WITH PARAGRAPH (2).—The $15,000

amount in paragraph (2) shall be reduced for any calendar

year by the amount of wages paid or incurred during such

year which are taken into account in determining the credit

under section 51.

‘‘(d) QUALIFIED ZONE EMPLOYEE.—For purposes of this section—

‘‘(1) IN GENERAL.—Except as otherwise provided in this

subsection, the term ‘qualified zone employee’ means, with

respect to any period, any employee of an employer if—

‘‘(A) substantially all of the services performed during

such period by such employee for such employer are performed within an empowerment zone in a trade or business

of the employer, and

‘‘(B) the principal place of abode of such employee

while performing such services is within such

empowerment zone.

‘‘(2) CERTAIN INDIVIDUALS NOT ELIGIBLE.—The term ‘qualified zone employee’ shall not include— ‘‘(A) any individual described in subparagraph (A), (B), or (C) of section 51(i)(1),

‘‘(B) any 5-percent owner (as defined in section 416(i)(1)(B)),

‘‘(C) any individual employed by the employer for less

than 90 days, ‘‘(D) any individual employed by the employer at any facility described in section 144(c)(6)(B), and ‘‘(E) any individual employed by the employer in a

trade or business the principal activity of which is farming

(within the meaning of subparagraph (A) or (B) of section

2032A(e)(5)), but only if, as of the close of the taxable

year, the sum of— ‘‘(i) the aggregate unadjusted bases (or, if greater, the fair market value) of the assets owned by the

employer which are used in such a trade or business,

and

‘‘(ii) the aggregate value of assets leased by the

employer which are used in such a trade or business

(as determined under regulations prescribed by the

Secretary),

exceeds $500,000.

‘‘(3) SPECIAL RULES RELATED TO TERMINATION OF EMPLOYMENT.—

‘‘(A) IN GENERAL.—Paragraph (2)(C) shall not apply

to—

‘‘(i) a termination of employment of an individual

who before the close of the period referred to in paragraph (2)(C) becomes disabled to perform the services
H. R. 2264—240

of such employment unless such disability is removed

before the close of such period and the taxpayer fails

to offer reemployment to such individual, or

‘‘(ii) a termination of employment of an individual

if it is determined under the applicable State

unemployment compensation law that the termination

was due to the misconduct of such individual.

‘‘(B) CHANGES IN FORM OF BUSINESS.—For purposes

of paragraph (2)(C), the employment relationship between

the taxpayer and an employee shall not be treated as

terminated—

‘‘(i) by a transaction to which section 381(a) applies

if the employee continues to be employed by the acquiring corporation, or

‘‘(ii) by reason of a mere change in the form of

conducting the trade or business of the taxpayer if

the employee continues to be employed in such trade

or business and the taxpayer retains a substantial

interest in such trade or business.

‘‘SEC. 1397. OTHER DEFINITIONS AND SPECIAL RULES.

‘‘(a) WAGES.—For purposes of this subpart—

‘‘(1) IN GENERAL.—The term ‘wages’ has the same meaning

as when used in section 51.

‘‘(2) CERTAIN TRAINING AND EDUCATIONAL BENEFITS.—

‘‘(A) IN GENERAL.—The following amounts shall be

treated as wages paid to an employee:

‘‘(i) Any amount paid or incurred by an employer

which is excludable from the gross income of an

employee under section 127, but only to the extent

paid or incurred to a person not related to the

employer.

‘‘(ii) In the case of an employee who has not

attained the age of 19, any amount paid or incurred

by an employer for any youth training program operated by such employer in conjunction with local education officials.

‘‘(B) RELATED PERSON.—A person is related to any other

person if the person bears a relationship to such other

person specified in section 267(b) or 707(b)(1), or such

person and such other person are engaged in trades or

businesses under common control (within the meaning of

subsections (a) and (b) of section 52). For purposes of the

preceding sentence, in applying section 267(b) or 707(b)(1),

‘10 percent’ shall be substituted for ‘50 percent’.

‘‘(b) CONTROLLED GROUPS.—For purposes of this subpart—

‘‘(1) all employers treated as a single employer under subsection (a) or (b) of section 52 shall be treated as a single

employer for purposes of this subpart, and

‘‘(2) the credit (if any) determined under section 1396 with

respect to each such employer shall be its proportionate share

of the wages giving rise to such credit.

‘‘(c) CERTAIN OTHER RULES MADE APPLICABLE.—For purposes

of this subpart, rules similar to the rules of section 51(k) and

subsections (c), (d), and (e) of section 52 shall apply.
H. R. 2264—241

‘‘Subpart B—Additional Expensing

‘‘Sec. 1397A. Increase in expensing under section 179.

‘‘SEC. 1397A. INCREASE IN EXPENSING UNDER SECTION 179.

‘‘(a) GENERAL RULE.—In the case of an enterprise zone business,

for purposes of section 179—

‘‘(1) the limitation under section 179(b)(1) shall be increased

by the lesser of—

‘‘(A) $20,000, or

‘‘(B) the cost of section 179 property which is qualified

zone property placed in service during the taxable year,

and

‘‘(2) the amount taken into account under section 179(b)(2)

with respect to any section 179 property which is qualified

zone property shall be 50 percent of the cost thereof.

‘‘(b) RECAPTURE.—Rules similar to the rules under section

179(d)(10) shall apply with respect to any qualified zone property

which ceases to be used in an empowerment zone by an enterprise

zone business.

‘‘Subpart C—General Provisions

‘‘Sec. 1397B. Enterprise zone business defined.

‘‘Sec. 1397C. Qualified zone property defined.

‘‘SEC. 1397B. ENTERPRISE ZONE BUSINESS DEFINED.

‘‘(a) IN GENERAL.—For purposes of this part, the term ‘enterprise zone business’ means—

‘‘(1) any qualified business entity, and

‘‘(2) any qualified proprietorship.

‘‘(b) QUALIFIED BUSINESS ENTITY.—For purposes of this section,

the term ‘qualified business entity’ means, with respect to any

taxable year, any corporation or partnership if for such year—

‘‘(1) every trade or business of such entity is the active

conduct of a qualified business within an empowerment zone,

‘‘(2) at least 80 percent of the total gross income of such

entity is derived from the active conduct of such business,

‘‘(3) substantially all of the use of the tangible property

of such entity (whether owned or leased) is within an

empowerment zone,

‘‘(4) substantially all of the intangible property of such

entity is used in, and exclusively related to, the active conduct

of any such business,

‘‘(5) substantially all of the services performed for such

entity by its employees are performed in an empowerment

zone,

‘‘(6) at least 35 percent of its employees are residents

of an empowerment zone,

‘‘(7) less than 5 percent of the average of the aggregate

unadjusted bases of the property of such entity is attributable

to collectibles (as defined in section 408(m)(2)) other than

collectibles that are held primarily for sale to customers in

the ordinary course of such business, and

‘‘(8) less than 5 percent of the average of the aggregate

unadjusted bases of the property of such entity is attributable

to nonqualified financial property.
H. R. 2264—242

‘‘(c) QUALIFIED PROPRIETORSHIP.—For purposes of this section,

the term ‘qualified proprietorship’ means, with respect to any taxable year, any qualified business carried on by an individual as

a proprietorship if for such year—

‘‘(1) at least 80 percent of the total gross income of such

individual from such business is derived from the active conduct

of such business in an empowerment zone,

‘‘(2) substantially all of the use of the tangible property

of such individual in such business (whether owned or leased)

is within an empowerment zone,

‘‘(3) substantially all of the intangible property of such

business is used in, and exclusively related to, the active conduct of such business,

‘‘(4) substantially all of the services performed for such

individual in such business by employees of such business

are performed in an empowerment zone,

‘‘(5) at least 35 percent of such employees are residents

of an empowerment zone,

‘‘(6) less than 5 percent of the average of the aggregate

unadjusted bases of the property of such individual which is

used in such business is attributable to collectibles (as defined

in section 408(m)(2)) other than collectibles that are held primarily for sale to customers in the ordinary course of such

business, and

‘‘(7) less than 5 percent of the average of the aggregate

unadjusted bases of the property of such individual which is

used in such business is attributable to nonqualified financial

property.

For purposes of this subsection, the term ‘employee’ includes the

proprietor.

‘‘(d) QUALIFIED BUSINESS.—For purposes of this section—

‘‘(1) IN GENERAL.—Except as otherwise provided in this

subsection, the term ‘qualified business’ means any trade or

business.

‘‘(2) RENTAL OF REAL PROPERTY.—The rental to others of

real property located in an empowerment zone shall be treated

as a qualified business if and only if—

‘‘(A) the property is not residential rental property

(as defined in section 168(e)(2)), and

‘‘(B) at least 50 percent of the gross rental income

from the real property is from enterprise zone businesses.

‘‘(3) RENTAL OF TANGIBLE PERSONAL PROPERTY.—The rental

to others of tangible personal property shall be treated as

a qualified business if and only if substantially all of the

rental of such property is by enterprise zone businesses or

by residents of an empowerment zone.

‘‘(4) TREATMENT OF BUSINESS HOLDING INTANGIBLES.—The

term ‘qualified business’ shall not include any trade or business

consisting predominantly of the development or holding of

intangibles for sale or license.

‘‘(5) CERTAIN BUSINESSES EXCLUDED.—The term ‘qualified

business’ shall not include—

‘‘(A) any trade or business consisting of the operation

of any facility described in section 144(c)(6)(B), and

‘‘(B) any trade or business the principal activity of

which is farming (within the meaning of subparagraphs
H. R. 2264—243

(A) or (B) of section 2032A(e)(5)), but only if, as of the

close of the preceding taxable year, the sum of— ‘‘(i) the aggregate unadjusted bases (or, if greater, the fair market value) of the assets owned by the

taxpayer which are used in such a trade or business,

and

‘‘(ii) the aggregate value of assets leased by the taxpayer which are used in such a trade or business, exceeds $500,000.

For purposes of subparagraph (B), rules similar to the rules

of section 1397(b) shall apply.

‘‘(e) NONQUALIFIED FINANCIAL PROPERTY.—For purposes of this

section, the term ‘nonqualified financial property’ means debt, stock,

partnership interests, options, futures contracts, forward contracts,

warrants, notional principal contracts, annuities, and other similar

property specified in regulations; except that such term shall not

include—

‘‘(1) reasonable amounts of working capital held in cash, cash equivalents, or debt instruments with a term of 18 months

or less, or

‘‘(2) debt instruments described in section 1221(4).

‘‘SEC. 1397C. QUALIFED ZONE PROPERTY DEFINED.

‘‘(a) GENERAL RULE.—For purposes of this part— ‘‘(1) IN GENERAL.—The term ‘qualified zone property’ means any property to which section 168 applies (or would apply

but for section 179) if—

‘‘(A) such property was acquired by the taxpayer by purchase (as defined in section 179(d)(2)) after the date

on which the designation of the empowerment zone took

effect,

‘‘(B) the original use of which in an empowerment zone commences with the taxpayer, and ‘‘(C) substantially all of the use of which is in an empowerment zone and is in the active conduct of a qualified business by the taxpayer in such zone.

‘‘(2) SPECIAL RULE FOR SUBSTANTIAL RENOVATIONS.—In the

case of any property which is substantially renovated by the

taxpayer, the requirements of subparagraphs (A) and (B) of

paragraph (1) shall be treated as satisfied. For purposes of

the preceding sentence, property shall be treated as substantially renovated by the taxpayer if, during any 24-month period

beginning after the date on which the designation of the

empowerment zone took effect, additions to basis with respect

to such property in the hands of the taxpayer exceed the greater

of (i) an amount equal to the adjusted basis at the beginning

of such 24-month period in the hands of the taxpayer, or (ii)

$5,000.

‘‘(b) SPECIAL RULES FOR SALE-LEASEBACKS.—For purposes of

subsection (a)(1)(B), if property is sold and leased back by the

taxpayer within 3 months after the date such property was originally placed in service, such property shall be treated as originally

placed in service not earlier than the date on which such property

is used under the leaseback.

‘‘PART IV—REGULATIONS

‘‘Sec. 1397D. Regulations.
H. R. 2264—244

‘‘SEC. 1397D. REGULATIONS.

‘‘The Secretary shall prescribe such regulations as may be

necessary or appropriate to carry out the purposes of parts II

and III, including— ‘‘(1) regulations limiting the benefit of parts II and III

in circumstances where such benefits, in combination with benefits provided under other Federal programs, would result in

an activity being 100 percent or more subsidized by the Federal

Government,

‘‘(2) regulations preventing abuse of the provisions of parts

II and III, and

‘‘(3) regulations dealing with inadvertent failures of entities

to be enterprise zone businesses.’’

(b) CLERICAL AMENDMENT.—The table of subchapters for chapter 1 is amended by inserting after the item relating to subchapter

T the following new item:

‘‘Subchapter U. Designation and treatment of empowerment zones, enterprise communities, and rural development investment areas.’’

SEC. 13302. TECHNICAL AND CONFORMING AMENDMENTS.

(a) EMPOWERMENT ZONE EMPLOYMENT CREDIT PART OF GENERAL BUSINESS CREDIT.—

(1) Subsection (b) of section 38 (relating to current year

business credit) is amended by striking ‘‘plus’’ at the end of

paragraph (7), by striking the period at the end of paragraph

(8) and inserting ‘‘, and’’, and by adding at the end the following

new paragraph:

‘‘(9) the empowerment zone employment credit determined under section 1396(a).’’

(2) Subsection (d) of section 39 is amended by adding

at the end the following new paragraph: ‘‘(4) EMPOWERMENT ZONE EMPLOYMENT CREDIT.—No portion

of the unused business credit which is attributable to the credit

determined under section 1396 (relating to empowerment zone

employment credit) may be carried to any taxable year ending

before January 1, 1994.’’

(b) DENIAL OF DEDUCTION FOR PORTION OF WAGES EQUAL TO

EMPOWERMENT ZONE EMPLOYMENT CREDIT.— (1) Subsection (a) of section 280C (relating to rule for targeted jobs credit) is amended— (A) by striking ‘‘the amount of the credit determined for the taxable year under section 51(a)’’ and inserting

‘‘the sum of the credits determined for the taxable year

under sections 51(a) and 1396(a)’’, and

(B) by striking ‘‘TARGETED JOBS CREDIT’’ in the subsection heading and inserting ‘‘EMPLOYMENT CREDITS’’.

(2) Subsection (c) of section 196 (relating to deduction for

certain unused business credits) is amended by striking ‘‘and’’

at the end of paragraph (4), by striking the period at the

end of paragraph (5) and inserting ‘‘, and’’, and by adding

at the end the following new paragraph:

‘‘(6) the empowerment zone employment credit determined

under section 1396(a).’’

(c) EMPOWERMENT ZONE EMPLOYMENT CREDIT MAY OFFSET 25

PERCENT OF MINIMUM TAX.—

(1) IN GENERAL.—Section 38(c) (relating to limitation based

on amount of tax) is amended by redesignating paragraph
H. R. 2264—245

(2) as paragraph (3) and by inserting after paragraph (1) the

following new paragraph:

‘‘(2) EMPOWERMENT ZONE EMPLOYMENT CREDIT MAY OFFSET

25 PERCENT OF MINIMUM TAX.—

‘‘(A) IN GENERAL.—In the case of the empowerment

zone employment credit credit—

‘‘(i) this section and section 39 shall be applied

separately with respect to such credit, and

‘‘(ii) for purposes of applying paragraph (1) to such

credit—

‘‘(I) 75 percent of the tentative minimum tax

shall be substituted for the tentative minimum

tax under subparagraph (A) thereof, and

‘‘(II) the limitation under paragraph (1) (as

modified by subclause (I)) shall be reduced by the

credit allowed under subsection (a) for the taxable

year (other than the empowerment zone employment credit).

‘‘(B) EMPOWERMENT ZONE EMPLOYMENT CREDIT.—For

purposes of this paragraph, the term ‘empowerment zone

employment credit’ means the portion of the credit under

subsection (a) which is attributable to the credit determined

under section 1396 (relating to empowerment zone employment credit).’’

(d) AMENDMENT OF TARGETED JOBS CREDIT.—Subparagraph

(A) of section 51(i)(1) is amended by inserting ‘‘, or, if the taxpayer

is an entity other than a corporation, to any individual who owns,

directly or indirectly, more than 50 percent of the capital and

profits interests in the entity,’’ after ‘‘of the corporation’’. (e) CARRYOVERS.—Subsection (c) of section 381 (relating to carryovers in certain corporate acquisitions) is amended by adding

at the end the following new paragraph: ‘‘(26) ENTERPRISE ZONE PROVISIONS.—The acquiring cor- poration shall take into account (to the extent proper to carry

out the purposes of this section and subchapter U, and under

such regulations as may be prescribed by the Secretary) the

items required to be taken into account for purposes of

subchapter U in respect of the distributor or transferor corporation.’’

SEC. 13303. EFFECTIVE DATE.

The amendments made by this part shall take effect on the

date of the enactment of this Act.

PART II—CREDIT FOR CONTRIBUTIONS TO

CERTAIN COMMUNITY DEVELOPMENT CORPORATIONS

SEC. 13311. CREDIT FOR CONTRIBUTIONS TO CERTAIN COMMUNITY

DEVELOPMENT CORPORATIONS.

(a) IN GENERAL.—For purposes of section 38 of the Internal

Revenue Code of 1986, the current year business credit shall include

the credit determined under this section.

(b) DETERMINATION OF CREDIT.—The credit determined under

this section for each taxable year in the credit period with respect
H. R. 2264—246

to any qualified CDC contribution made by the taxpayer is an

amount equal to 5 percent of such contribution.

(c) CREDIT PERIOD.—For purposes of this section, the credit

period with respect to any qualified CDC contribution is the period

of 10 taxable years beginning with the taxable year during which

such contribution was made.

(d) QUALIFIED CDC CONTRIBUTION.—For purposes of this

section—

(1) IN GENERAL.—The term ‘‘qualified CDC contribution’’

means any transfer of cash—

(A) which is made to a selected community development corporation during the 5-year period beginning on

the date such corporation was selected for purposes of

this section,

(B) the amount of which is available for use by such

corporation for at least 10 years,

(C) which is to be used by such corporation for qualified

low-income assistance within its operational area, and

(D) which is designated by such corporation for purposes of this section.

(2) LIMITATIONS ON AMOUNT DESIGNATED.—The aggregate

amount of contributions to a selected community development

corporation which may be designated by such corporation shall

not exceed $2,000,000.

(e) SELECTED COMMUNITY DEVELOPMENT CORPORATIONS.—

(1) IN GENERAL.—For purposes of this section, the term

‘‘selected community development corporation’’ means any

corporation—

(A) which is described in section 501(c)(3) of such Code

and exempt from tax under section 501(a) of such Code,

(B) the principal purposes of which include promoting

employment of, and business opportunities for, low-income

individuals who are residents of the operational area, and

(C) which is selected by the Secretary of Housing and

Urban Development for purposes of this section.

(2) ONLY 20 CORPORATIONS MAY BE SELECTED.—The Secretary of Housing and Urban Development may select 20 corporations for purposes of this section, subject to the availability

of eligible corporations. Such selections may be made only

before July 1, 1994. At least 8 of the operational areas of

the corporations selected must be rural areas (as defined by

section 1393(a)(3) of such Code).

(3) OPERATIONAL AREAS MUST HAVE CERTAIN CHARACTERISTICS.—A corporation may be selected for purposes of this section

only if its operational area meets the following criteria:

(A) The area meets the size requirements under section

1392(a)(3).

(B) The unemployment rate (as determined by the

appropriate available data) is not less than the national

unemployment rate.

(C) The median family income of residents of such

area does not exceed 80 percent of the median gross income

of residents of the jurisdiction of the local government

which includes such area.

(f) QUALIFIED LOW-INCOME ASSISTANCE.—For purposes of this

section, the term ‘‘qualified low-income assistance’’ means

assistance—
H. R. 2264—247

(1) which is designed to provide employment of, and business opportunities for, low-income individuals who are residents

of the operational area of the community development corporation, and

(2) which is approved by the Secretary of Housing and

Urban Development.

Part III—Investment in Indian Reservations

SEC. 13321. ACCELERATED DEPRECIATION FOR PROPERTY ON INDIAN

RESERVATIONS.

(a) IN GENERAL.—Section 168 is amended by adding at the

end the following new subsection:

‘‘(j) PROPERTY ON INDIAN RESERVATIONS.—

‘‘(1) IN GENERAL.—For purposes of subsection (a), the

applicable recovery period for qualified Indian reservation property shall be determined in accordance with the table contained

in paragraph (2) in lieu of the table contained in subsection

(c).

‘‘(2) APPLICABLE RECOVERY PERIOD FOR INDIAN RESERVATION

PROPERTY.—For purposes of paragraph (1)— The

applicable

‘‘In the case of: recovery

period is:

3-year property .......................................................................... 2 years

5-year property .......................................................................... 3 years

7-year property .......................................................................... 4 years

10-year property ........................................................................ 6 years

15-year property ........................................................................ 9 years

20-year property ........................................................................ 12 years

Nonresidential real property .................................................... 22 years.

‘‘(3) DEDUCTION ALLOWED IN COMPUTING MINIMUM TAX.— For purposes of determining alternative minimum taxable

income under section 55, the deduction under subsection (a)

for property to which paragraph (1) applies shall be determined

under this section without regard to any adjustment under

section 56.

‘‘(4) QUALIFIED INDIAN RESERVATION PROPERTY DEFINED.— For purposes of this subsection—

‘‘(A) IN GENERAL.—The term ‘qualified Indian reservation property’ means property which is property described

in the table in paragraph (2) and which is— ‘‘(i) used by the taxpayer predominantly in the

active conduct of a trade or business within an Indian

reservation,

‘‘(ii) not used or located outside the Indian reservation on a regular basis,

‘‘(iii) not acquired (directly or indirectly) by the

taxpayer from a person who is related to the taxpayer

(within the meaning of section 465(b)(3)(C)), and

‘‘(iv) not property (or any portion thereof) placed

in service for purposes of conducting or housing class

I, II, or III gaming (as defined in section 4 of the

Indian Regulatory Act (25 U.S.C. 2703)).

‘‘(B) EXCEPTION FOR ALTERNATIVE DEPRECIATION PROPERTY.—The term ‘qualified Indian reservation property’

does not include any property to which the alternative
H. R. 2264—248

depreciation system under subsection (g) applies,

determined—

‘‘(i) without regard to subsection (g)(7) (relating

to election to use alternative depreciation system), and

‘‘(ii) after the application of section 280F(b) (relating to listed property with limited business use).

‘‘(C) SPECIAL RULE FOR RESERVATION INFRASTRUCTURE

INVESTMENT.—

‘‘(i) IN GENERAL.—Subparagraph (A)(ii) shall not

apply to qualified infrastructure property located outside of the Indian reservation if the purpose of such

property is to connect with qualified infrastructure

property located within the Indian reservation.

‘‘(ii) QUALIFIED INFRASTRUCTURE PROPERTY.—For

purposes of this subparagraph, the term ‘qualified

infrastructure property’ means qualified Indian reservation property (determined without regard to

subparagraph (A)(ii)) which—

‘‘(I) benefits the tribal infrastructure,

‘‘(II) is available to the general public, and

‘‘(III) is placed in service in connection with

the taxpayer’s active conduct of a trade or business

within an Indian reservation.

Such term includes, but is not limited to, roads, power

lines, water systems, railroad spurs, and communications facilities.

‘‘(5) REAL ESTATE RENTALS.—For purposes of this subsection, the rental to others of real property located within

an Indian reservation shall be treated as the active conduct

of a trade or business within an Indian reservation.

‘‘(6) INDIAN RESERVATION DEFINED.—For purposes of this

subsection, the term ‘Indian reservation’ means a reservation,

as defined in—

‘‘(A) section 3(d) of the Indian Financing Act of 1974 (25 U.S.C. 1452(d)), or

‘‘(B) section 4(10) of the Indian Child Welfare Act of

1978 (25 U.S.C. 1903(10)).

‘‘(7) COORDINATION WITH NONREVENUE LAWS.—Any reference in this subsection to a provision not contained in this

title shall be treated for purposes of this subsection as a reference to such provision as in effect on the date of the enactment of this paragraph. ‘‘(8) TERMINATION.—This subsection shall not apply to property placed in service after December 31, 2003.’’

(b) EFFECTIVE DATE.—The amendment made by this section

shall apply to property placed in service after December 31, 1993.

SEC. 13322. INDIAN EMPLOYMENT CREDIT.

(a) ALLOWANCE OF INDIAN EMPLOYMENT CREDIT.—Section 38(b)

(relating to general business credits) is amended by striking ‘‘plus’’

at the end of paragraph (8), by striking the period at the end

of paragraph (9) and inserting ‘‘, plus’’, and by adding after paragraph (9) the following new paragraph:

‘‘(10) the Indian employment credit as determined under

section 45A(a).’’

(b) AMOUNT OF INDIAN EMPLOYMENT CREDIT.—Subpart D of

part IV of subchapter A of chapter 1 (relating to business related
H. R. 2264—249

credits) is amended by adding at the end thereof the following

new section:

‘‘SEC. 45A. INDIAN EMPLOYMENT CREDIT.

‘‘(a) AMOUNT OF CREDIT.—For purposes of section 38, the

amount of the Indian employment credit determined under this

section with respect to any employer for any taxable year is an

amount equal to 20 percent of the excess (if any) of —

‘‘(1) the sum of—

‘‘(A) the qualified wages paid or incurred during such

taxable year, plus

‘‘(B) qualified employee health insurance costs paid

or incurred during such taxable year, over

‘‘(2) the sum of the qualified wages and qualified employee

health insurance costs (determined as if this section were in

effect) which were paid or incurred by the employer (or any

predecessor) during calendar year 1993.

‘‘(b) QUALIFIED WAGES; QUALIFIED EMPLOYEE HEALTH INSURANCE COSTS.—For purposes of this section—

‘‘(1) QUALIFIED WAGES.—

‘‘(A) IN GENERAL.—The term ‘qualified wages’ means

any wages paid or incurred by an employer for services

performed by an employee while such employee is a qualified employee.

‘‘(B) COORDINATION WITH TARGETED JOBS CREDIT.—The

term ‘qualified wages’ shall not include wages attributable

to service rendered during the 1-year period beginning

with the day the individual begins work for the employer

if any portion of such wages is taken into account in determining the credit under section 51.

‘‘(2) QUALIFIED EMPLOYEE HEALTH INSURANCE COSTS.—

‘‘(A) IN GENERAL.—The term ‘qualified employee health

insurance costs’ means any amount paid or incurred by

an employer for health insurance to the extent such amount

is attributable to coverage provided to any employee while

such employee is a qualified employee.

‘‘(B) EXCEPTION FOR AMOUNTS PAID UNDER SALARY

REDUCTION ARRANGEMENTS.—No amount paid or incurred

for health insurance pursuant to a salary reduction

arrangement shall be taken into account under subparagraph (A).

‘‘(3) LIMITATION.—The aggregate amount of qualified wages

and qualified employee health insurance costs taken into

account with respect to any employee for any taxable year

(and for the base period under subsection (a)(2)) shall not

exceed $20,000.

‘‘(c) QUALIFIED EMPLOYEE.—For purposes of this section—

‘‘(1) IN GENERAL.—Except as otherwise provided in this

subsection, the term ‘qualified employee’ means, with respect

to any period, any employee of an employer if—

‘‘(A) the employee is an enrolled member of an Indian

tribe or the spouse of an enrolled member of an Indian

tribe,

‘‘(B) substantially all of the services performed during

such period by such employee for such employer are performed within an Indian reservation, and
H. R. 2264—250

‘‘(C) the principal place of abode of such employee

while performing such services is on or near the reservation

in which the services are performed.

‘‘(2) INDIVIDUALS RECEIVING WAGES IN EXCESS OF $30,000

NOT ELIGIBLE.—An employee shall not be treated as a qualified

employee for any taxable year of the employer if the total

amount of the wages paid or incurred by such employer to

such employee during such taxable year (whether or not for

services within an Indian reservation) exceeds the amount

determined at an annual rate of $30,000.

‘‘(3) INFLATION ADJUSTMENT.—The Secretary shall adjust

the $30,000 amount under paragraph (2) for years beginning

after 1994 at the same time and in the same manner as

under section 415(d).

‘‘(4) EMPLOYMENT MUST BE TRADE OR BUSINESS EMPLOYMENT.—An employee shall be treated as a qualified employee

for any taxable year of the employer only if more than 50

percent of the wages paid or incurred by the employer to

such employee during such taxable year are for services performed in a trade or business of the employer. Any determination as to whether the preceding sentence applies with respect

to any employee for any taxable year shall be made without

regard to subsection (e)(2).

‘‘(5) CERTAIN EMPLOYEES NOT ELIGIBLE.—The term ‘qualified employee’ shall not include—

‘‘(A) any individual described in subparagraph (A), (B),

or (C) of section 51(i)(1),

‘‘(B) any 5-percent owner (as defined in section

416(i)(1)(B)), and

‘‘(C) any individual if the services performed by such

individual for the employer involve the conduct of class

I, II, or III gaming as defined in section 4 of the Indian

Gaming Regulatory Act (25 U.S.C. 2703), or are performed

in a building housing such gaming activity.

‘‘(6) INDIAN TRIBE DEFINED.—The term ‘Indian tribe’ means

any Indian tribe, band, nation, pueblo, or other organized group

or community, including any Alaska Native village, or regional

or village corporation, as defined in, or established pursuant

to, the Alaska Native Claims Settlement Act (43 U.S.C. 1601

et seq.) which is recognized as eligible for the special programs

and services provided by the United States to Indians because

of their status as Indians.

‘‘(7) INDIAN RESERVATION DEFINED.—The term ‘Indian reservation’ has the meaning given such term by section 168(j)(6).

‘‘(d) EARLY TERMINATION OF EMPLOYMENT BY EMPLOYER.—

‘‘(1) IN GENERAL.—If the employment of any employee is

terminated by the taxpayer before the day 1 year after the

day on which such employee began work for the employer—

‘‘(A) no wages (or qualified employee health insurance

costs) with respect to such employee shall be taken into

account under subsection (a) for the taxable year in which

such employment is terminated, and

‘‘(B) the tax under this chapter for the taxable year

in which such employment is terminated shall be increased

by the aggregate credits (if any) allowed under section

38(a) for prior taxable years by reason of wages (or qualified
H. R. 2264—251

employee health insurance costs) taken into account with

respect to such employee.

‘‘(2) CARRYBACKS AND CARRYOVERS ADJUSTED.—In the case

of any termination of employment to which paragraph (1)

applies, the carrybacks and carryovers under section 39 shall

be properly adjusted.

‘‘(3) SUBSECTION NOT TO APPLY IN CERTAIN CASES.—

‘‘(A) IN GENERAL.—Paragraph (1) shall not apply to—

‘‘(i) a termination of employment of an employee

who voluntarily leaves the employment of the taxpayer,

‘‘(ii) a termination of employment of an individual

who before the close of the period referred to in paragraph (1) becomes disabled to perform the services

of such employment unless such disability is removed

before the close of such period and the taxpayer fails

to offer reemployment to such individual, or

‘‘(iii) a termination of employment of an individual

if it is determined under the applicable State

unemployment compensation law that the termination

was due to the misconduct of such individual.

‘‘(B) CHANGES IN FORM OF BUSINESS.—For purposes

of paragraph (1), the employment relationship between the

taxpayer and an employee shall not be treated as

terminated—

‘‘(i) by a transaction to which section 381(a) applies

if the employee continues to be employed by the acquiring corporation, or

‘‘(ii) by reason of a mere change in the form of

conducting the trade or business of the taxpayer if

the employee continues to be employed in such trade

or business and the taxpayer retains a substantial

interest in such trade or business.

‘‘(4) SPECIAL RULE.—Any increase in tax under paragraph (1) shall not be treated as a tax imposed by this chapter

for purposes of—

‘‘(A) determining the amount of any credit allowable

under this chapter, and

‘‘(B) determining the amount of the tax imposed by

section 55.

‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.—For purposes

of this section—

‘‘(1) WAGES.—The term ‘wages’ has the same meaning given

to such term in section 51.

‘‘(2) CONTROLLED GROUPS.— ‘‘(A) All employers treated as a single employer under

section (a) or (b) of section 52 shall be treated as a single

employer for purposes of this section.

‘‘(B) The credit (if any) determined under this section

with respect to each such employer shall be its proportionate share of the wages and qualified employee health

insurance costs giving rise to such credit.

‘‘(3) CERTAIN OTHER RULES MADE APPLICABLE.—Rules similar to the rules of section 51(k) and subsections (c), (d), and

(e) of section 52 shall apply.

‘‘(4) COORDINATION WITH NONREVENUE LAWS.—Any reference in this section to a provision not contained in this

title shall be treated for purposes of this section as a reference
H. R. 2264—252

to such provision as in effect on the date of the enactment

of this paragraph.

‘‘(5) SPECIAL RULE FOR SHORT TAXABLE YEARS.—For any

taxable year having less than 12 months, the amount determined under subsection (a)(2) shall be multiplied by a fraction,

the numerator of which is the number of days in the taxable

year and the denominator of which is 365.

‘‘(f) TERMINATION.—This section shall not apply to taxable years

beginning after December 31, 2003.’’

(c) DENIAL OF DEDUCTION FOR PORTION OF WAGES EQUAL TO

INDIAN EMPLOYMENT CREDIT.—

(1) Subsection (a) of section 280C (relating to rule for

targeted jobs credit) is amended by striking ‘‘51(a)’’ and inserting ‘‘45A(a), 51(a), and’’.

(2) Subsection (c) of section 196 (relating to deduction for

certain unused business credits) is amended by striking ‘‘and’’

at the end of paragraph (5), by striking the period at the

end of paragraph (6) and inserting ‘‘, and’’, and by adding

at the end the following new paragraph:

‘‘(7) the Indian employment credit determined under section

45A(a).’’

(d) DENIAL OF CARRYBACKS TO PREENACTMENT YEARS.—Subsection (d) of section 39 is amended by adding at the end thereof

the following new paragraph:

‘‘(5) NO CARRYBACK OF SECTION 45 CREDIT BEFORE ENACTMENT.—No portion of the unused business credit for any taxable

year which is attributable to the Indian employment credit

determined under section 45A may be carried to a taxable

year ending before the date of the enactment of section 45A.’’

(e) CLERICAL AMENDMENT.—The table of sections for subpart

D of part IV of subchapter A of chapter 1 is amended by adding

at the end thereof the following:

‘‘Sec. 45A. Indian employment credit.’’

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

shall apply to wages paid or incurred after December 31, 1993.

Subchapter D—Other Provisions

PART I—DISCLOSURE PROVISIONS

SEC. 13401. DISCLOSURE OF RETURN INFORMATION FOR ADMINISTRATION OF CERTAIN VETERANS PROGRAMS.

(a) GENERAL RULE.—Subparagraph (D) of section 6103(l)(7)

(relating to disclosure of return information to Federal, State, and

local agencies administering certain programs) is amended by striking ‘‘September 30, 1997’’ in the second sentence following clause

(viii) and inserting ‘‘September 30, 1998’’.

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

shall take effect on the date of the enactment of this Act.

SEC. 13402. DISCLOSURE OF RETURN INFORMATION TO CARRY OUT

INCOME CONTINGENT REPAYMENT OF STUDENT LOANS.

(a) GENERAL RULE.—Subsection (l) of section 6103 (relating

to confidentiality and disclosure of returns and return information)

is amended by adding at the end thereof the following new

paragraph:
H. R. 2264—253

‘‘(13) DISCLOSURE OF RETURN INFORMATION TO CARRY OUT

INCOME CONTINGENT REPAYMENT OF STUDENT LOANS.—

‘‘(A) IN GENERAL.—The Secretary may, upon written

request from the Secretary of Education, disclose to officers

and employees of the Department of Education return

information with respect to a taxpayer who has received

an applicable student loan and whose loan repayment

amounts are based in whole or in part on the taxpayer’s

income. Such return information shall be limited to—

‘‘(i) taxpayer identity information with respect to

such taxpayer,

‘‘(ii) the filing status of such taxpayer, and

‘‘(iii) the adjusted gross income of such taxpayer.

‘‘(B) RESTRICTION ON USE OF DISCLOSED INFORMATION.—Return information disclosed under subparagraph

(A) may be used by officers and employees of the Department of Education only for the purposes of, and to the

extent necessary in, establishing the appropriate income

contingent repayment amount for an applicable student

loan.

‘‘(C) APPLICABLE STUDENT LOAN.—For purposes of this

paragraph, the term ‘applicable student loan’ means—

‘‘(i) any loan made under the program authorized

under part D of title IV of the Higher Education Act

of 1965, and

‘‘(ii) any loan made under part B or E of title

IV of the Higher Education Act of 1965 which is in

default and has been assigned to the Department of

Education.

‘‘(D) TERMINATION.—This paragraph shall not apply

to any request made after September 30, 1998.’’ (b) CONFORMING AMENDMENTS.— (1) So much of paragraph (4) of section 6103(m) as precedes subparagraph (B) thereof is amended to read as follows: ‘‘(4) INDIVIDUALS WHO OWE AN OVERPAYMENT OF FEDERAL

PELL GRANTS OR WHO HAVE DEFAULTED ON STUDENT LOANS

ADMINISTERED BY THE DEPARTMENT OF EDUCATION.— ‘‘(A) IN GENERAL.—Upon written request by the Secretary of Education, the Secretary may disclose the mailing

address of any taxpayer— ‘‘(i) who owes an overpayment of a grant awarded

to such taxpayer under subpart 1 of part A of title

IV of the Higher Education Act of 1965, or ‘‘(ii) who has defaulted on a loan—

‘‘(I) made under part B, D, or E of title IV

of the Higher Education Act of 1965, or

‘‘(II) made pursuant to section 3(a)(1) of the

Migration and Refugee Assistance Act of 1962 to

a student at an institution of higher education,

for use only by officers, employees, or agents of the Department of Education for purposes of locating such taxpayer

for purposes of collecting such overpayment or loan .’’

(2) Subparagraph (B) of section 6103(m)(4) is amended—

(A) in clause (i), by striking ‘‘under part B’’ and inserting ‘‘under part B or D’’; and

(B) in clause (ii), by striking ‘‘under part E’’ and inserting ‘‘under subpart 1 of part A, or part D or E,’’;
H. R. 2264—254

(3) Section 6103(p) is amended—

(A) in paragraph (3)(A), by striking ‘‘(11), or (12), (m)’’

and inserting ‘‘(11), (12), or (13), (m)’’;

(B) in paragraph (4)—

(i) in the matter preceding subparagraph (A), by

striking out ‘‘(10), or (11),’’ and inserting ‘‘(10), (11),

or (13),’’, and

(ii) in subparagraph (F)(ii), by striking ‘‘(11), or

(12),’’ and inserting ‘‘(11), (12), or (13),’’.

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

shall take effect on the date of the enactment of this Act.

SEC. 13403. USE OF RETURN INFORMATION FOR INCOME VERIFICATION UNDER CERTAIN HOUSING ASSISTANCE PROGRAMS.

(a) IN GENERAL.—Subparagraph (D) of section 6103(l)(7) (relating to the disclosure of return information to Federal, State, and

local agencies administering certain programs) is amended—

(1) in clause (vii), by striking ‘‘and’’ at the end;

(2) in clause (viii), by striking the period at the end and

inserting ‘‘; and’’;

(3) by inserting after clause (viii) the following new clause:

‘‘(ix) any housing assistance program administered by the

Department of Housing and Urban Development that involves

initial and periodic review of an applicant’s or participant’s

income, except that return information may be disclosed under

this clause only on written request by the Secretary of Housing

and Urban Development and only for use by officers and

employees of the Department of Housing and Urban Development with respect to applicants for and participants in such

programs.’’; and

(4) by adding at the end thereof the following: ‘‘Clause

(ix) shall not apply after September 30, 1998.’’

(b) CONFORMING AMENDMENT.—The heading of paragraph (7)

of section 6103(l) is amended by inserting after ‘‘CODE’’ the following:

‘‘, OR CERTAIN HOUSING ASSISTANCE PROGRAMS’’.

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

shall take effect on the date of the enactment of this Act.

PART II—PUBLIC DEBT LIMIT

SEC. 13411. INCREASE IN PUBLIC DEBT LIMIT.

(a) GENERAL RULE.—Subsection (b) of section 3101 of title

31, United States Code, is amended by striking out the dollar

limitation contained in such subsection and inserting in lieu thereof

‘‘$4,900,000,000,000’’.

(b) REPEAL OF TEMPORARY INCREASE.—Effective on and after

the date of the enactment of this Act, section 1 of Public Law

103–12 is hereby repealed.

PART III—VACCINE PROVISIONS

SEC. 13421. EXCISE TAX ON CERTAIN VACCINES MADE PERMANENT.

(a) TAX.—Subsection (c) of section 4131 (relating to tax on

certain vaccines) is amended to read as follows:

‘‘(c) APPLICATION OF SECTION.—The tax imposed by this section

shall apply—
H. R. 2264—255

‘‘(1) after December 31, 1987, and before January 1, 1993,

and

‘‘(2) during periods after the date of the enactment of

the Revenue Reconciliation Act of 1993.’’

(b) TRUST FUND.—Paragraph (1) of section 9510(c) (relating

to expenditures from Vaccine Injury Compensation Trust Fund)

is amended by striking ‘‘and before October 1, 1992,’’.

(c) FLOOR STOCKS TAX.—

(1) IMPOSITION OF TAX.—On any taxable vaccine—

(A) which was sold by the manufacturer, producer,

or importer on or before the date of the enactment of

this Act,

(B) on which no tax was imposed by section 4131

of the Internal Revenue Code of 1986 (or, if such tax

was imposed, was credited or refunded), and

(C) which is held on such date by any person for

sale or use,

there is hereby imposed a tax in the amount determined under

section 4131(b) of such Code.

(2) LIABILITY FOR TAX AND METHOD OF PAYMENT.—

(A) LIABILITY FOR TAX.—The person holding any taxable vaccine to which the tax imposed by paragraph (1)

applies shall be liable for such tax.

(B) METHOD OF PAYMENT.—The tax imposed by paragraph (1) shall be paid in such manner as the Secretary

shall prescribe by regulations.

(C) TIME FOR PAYMENT.—The tax imposed by paragraph (1) shall be paid on or before the last day of the

6th month beginning after the date of the enactment of

this Act.

(3) DEFINITIONS.—For purposes of this subsection, terms

used in this subsection which are also used in section 4131

of such Code shall have the respective meanings such terms

have in such section.

(4) OTHER LAWS APPLICABLE.—All provisions of law, including penalties, applicable with respect to the taxes imposed

by section 4131 of such Code shall, insofar as applicable and

not inconsistent with the provisions of this subsection, apply

to the floor stocks taxes imposed by paragraph (1), to the

same extent as if such taxes were imposed by such section

4131.

SEC. 13422. CONTINUATION COVERAGE UNDER GROUP HEALTH

PLANS OF COSTS OF PEDIATRIC VACCINES.

(a) IN GENERAL.—Paragraph (1) of section 4980B(f) is amended

by inserting ‘‘the coverage of the costs of pediatric vaccines (as

defined under section 2162 of the Public Health Service Act) is

not reduced below the coverage provided by the plan as of May

1, 1993, and only if’’ after ‘‘only if’’.

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

shall apply with respect to plan years beginning after the date

of the enactment of this Act.
H. R. 2264—256

PART IV—DISASTER RELIEF PROVISIONS

SEC. 13431. MODIFICATION OF INVOLUNTARY CONVERSION RULES

FOR CERTAIN DISASTER-RELATED CONVERSIONS.

(a) IN GENERAL.—Section 1033 (relating to involuntary conver- sions) is amended by redesignating subsection (h) as subsection

(i) and by inserting after subsection (g) the following new subsection: ‘‘(h) SPECIAL RULES FOR PRINCIPAL RESIDENCES DAMAGED BY

PRESIDENTIALLY DECLARED DISASTERS.— ‘‘(1) IN GENERAL.—If the taxpayer’s principal residence or any of its contents is compulsorily or involuntarily converted

as a result of a Presidentially declared disaster— ‘‘(A) TREATMENT OF INSURANCE PROCEEDS.— ‘‘(i) EXCLUSION FOR UNSCHEDULED PERSONAL PROPERTY.—No gain shall be recognized by reason of the receipt of any insurance proceeds for personal property

which was part of such contents and which was not

scheduled property for purposes of such insurance. ‘‘(ii) OTHER PROCEEDS TREATED AS COMMON

FUND.—In the case of any insurance proceeds (not described in clause (i)) for such residence or contents—

‘‘(I) such proceeds shall be treated as received

for the conversion of a single item of property,

and

‘‘(II) any property which is similar or related in service or use to the residence so converted

(or contents thereof) shall be treated for purposes

of subsection (a)(2) as property similar or related

in service or use to such single item of property. ‘‘(B) EXTENSION OF REPLACEMENT PERIOD.—Subsection

(a)(2)(B) shall be applied with respect to any property so

converted by substituting ‘4 years’ for ‘2 years’.

‘‘(2) PRESIDENTIALLY DECLARED DISASTER.—For purposes of

this subsection, the term ‘Presidentially declared disaster’

means any disaster which, with respect to the area in which

the residence is located, resulted in a subsequent determination

by the President that such area warrants assistance by the

Federal Government under the Disaster Relief and Emergency

Assistance Act.

‘‘(3) PRINCIPAL RESIDENCE.—For purposes of this subsection,

the term ‘principal residence’ has the same meaning as when

used in section 1034, except that such term shall include a

residence not treated as a principal residence solely because

the taxpayer does not own the residence.’’.

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

shall apply to property compulsorily or involuntarily converted as

a result of disasters for which the determination referred to in

section 1033(h)(2) of the Internal Revenue Code of 1986 (as added

by this section) is made on or after September 1, 1991, and to

taxable years ending on or after such date.

Part V—Miscellaneous Provisions

SEC. 13441. INCREASE IN PRESIDENTIAL ELECTION CAMPAIGN FUND

CHECK-OFF.

(a) IN GENERAL.—Section 6096(a) (relating to designation by

individuals) is amended—
H. R. 2264—257

(1) by striking ‘‘$1’’ each place it appears and inserting

‘‘$3’’, and

(2) by striking ‘‘$2’’ and inserting ‘‘$6’’.

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

(a) apply with respect to tax returns required to be filed after

December 31, 1993.

SEC. 13442. SPECIAL RULE FOR HOSPITAL SERVICES.

(a) IN GENERAL.—Section 162 (relating to trade or business

deductions), as amended by section 13211, is amended by

redesignating subsection (n) as subsection (o) and by inserting

after subsection (m) the following new subsection:

‘‘(n) SPECIAL RULE FOR CERTAIN GROUP HEALTH PLANS.—

‘‘(1) IN GENERAL.—No deduction shall be allowed under

this chapter to an employer for any amount paid or incurred

in connection with a group health plan if the plan does not

reimburse for inpatient hospital care services provided in the

State of New York—

‘‘(A) except as provided in subparagraphs (B) and (C),

at the same rate as licensed commercial insurers are

required to reimburse hospitals for such services when

such reimbursement is not through such a plan,

‘‘(B) in the case of any reimbursement through a health

maintenance organization, at the same rate as health

maintenance organizations are required to reimburse hospitals for such services for individuals not covered by such

a plan (determined without regard to any governmentsupported individuals exempt from such rate), or

‘‘(C) in the case of any reimbursement through any

corporation organized under Article 43 of the New York

State Insurance Law, at the same rate as any such corporation is required to reimburse hospitals for such services

for individuals not covered by such a plan.

‘‘(2) STATE LAW EXCEPTION.—Paragraph (1) shall not apply

to any group health plan which is not required under the

laws of the State of New York (determined without regard

to this subsection or other provisions of Federal law) to

reimburse at the rates provided in paragraph (1).

‘‘(3) GROUP HEALTH PLAN.—For purposes of this subsection,

the term ‘group health plan’ means a plan of, or contributed

to by, an employer or employee organization (including a selfinsured plan) to provide health care (directly or otherwise)

to any employee, any former employee, the employer, or any

other individual associated or formerly associated with the

employer in a business relationship, or any member of their

family.’’

(b) EFFECTIVE DATE.—The provisions of this section shall apply

to services provided after February 2, 1993, and on or before May

12, 1995.

SEC. 13443. CREDIT FOR PORTION OF EMPLOYER SOCIAL SECURITY

TAXES PAID WITH RESPECT TO EMPLOYEE CASH TIPS.

(a) IN GENERAL.—Subpart D of part IV of subchapter A of

chapter 1 (relating to business related credits) is amended by adding

at the end the following new section:
H. R. 2264—258

‘‘SEC. 45B. CREDIT FOR PORTION OF EMPLOYER SOCIAL SECURITY

TAXES PAID WITH RESPECT TO EMPLOYEE CASH TIPS.

‘‘(a) GENERAL RULE.—For purposes of section 38, the employer social security credit determined under this section for the taxable

year is an amount equal to the excess employer social security

tax paid or incurred by the taxpayer during the taxable year. ‘‘(b) EXCESS EMPLOYER SOCIAL SECURITY TAX.—For purposes

of this section—

‘‘(1) IN GENERAL.—The term ‘excess employer social security tax’ means any tax paid by an employer under section 3111

with respect to tips received by an employee during any month,

to the extent such tips— ‘‘(A) are deemed to have been paid by the employer to the employee pursuant to section 3121(q), and ‘‘(B) exceed the amount by which the wages (excluding tips) paid by the employer to the employee during such

month are less than the total amount which would be

payable (with respect to such employment) at the minimum

wage rate applicable to such individual under section

6(a)(1) of the Fair Labor Standards Act of 1938 (determined

without regard to section 3(m) of such Act).

‘‘(2) ONLY TIPS RECEIVED AT FOOD AND BEVERAGE

ESTABLISHMENTS TAKEN INTO ACCOUNT.—In applying paragraph (1), there shall be taken into account only tips received from

customers in connection with the provision of food or beverages

for consumption on the premises of an establishment with

respect to which the tipping of employees serving food or beverages by customers is customary.

‘‘(c) DENIAL OF DOUBLE BENEFIT.—No deduction shall be

allowed under this chapter for any amount taken into account

in determining the credit under this section. ‘‘(d) ELECTION NOT TO CLAIM CREDIT.—This section shall not

apply to a taxpayer for any taxable year if such taxpayer elects

to have this section not apply for such taxable year.’’ (b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT.— (1) IN GENERAL.—Subsection (b) of section 38 (relating to current year business credit) is amended by striking ‘‘plus’’

at the end of paragraph (9), by striking the period at the

end of paragraph (10) and inserting ‘‘, plus’’, and by adding

at the end the following new paragraph: ‘‘(11) the employer social security credit determined under section 45B(a).’’

(2) LIMITATION ON CARRYBACKS.—Subsection (d) of section

39 (relating to transitional rules) is amended by adding at

the end the following new paragraph: ‘‘(6) NO CARRYBACK OF SECTION 45 CREDIT BEFORE ENACTMENT.—No portion of the unused business credit for any taxable year which is attributable to the employer social security credit

determined under section 45B may be carried back to a taxable

year ending before the date of the enactment of section 45B.’’

(c) CLERICAL AMENDMENT.—The table of sections for subpart

D of part IV of subchapter A of chapter 1 is amended by adding

at the end the following new item:

‘‘Sec. 45B. Credit for portion of employer social security taxes paid with respect to employee cash tips.’’

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

shall apply with respect to taxes paid after December 31, 1993.
H. R. 2264—259

SEC. 13444. AVAILABILITY AND USE OF DEATH INFORMATION.

(a) RESTRICTION ON DISCLOSURE OF TAX RETURN INFORMATION.—Subsection (d) of section 6103 is amended by adding at

the end thereof the following new paragraph:

‘‘(4) AVAILABILITY AND USE OF DEATH INFORMATION.—

‘‘(A) IN GENERAL.—No returns or return information

may be disclosed under paragraph (1) to any agency, body,

or commission of any State (or any legal representative

thereof) during any period during which a contract meeting

the requirements of subparagraph (B) is not in effect

between such State and the Secretary of Health and

Human Services.

‘‘(B) CONTRACTUAL REQUIREMENTS.—A contract meets

the requirements of this subparagraph if—

‘‘(i) such contract requires the State to furnish

the Secretary of Health and Human Services information concerning individuals with respect to whom death

certificates (or equivalent documents maintained by

the State or any subdivision thereof) have been officially filed with it, and

‘‘(ii) such contract does not include any restriction

on the use of information obtained by such Secretary

pursuant to such contract, except that such contract

may provide that such information is only to be used

by the Secretary (or any other Federal agency) for

purposes of ensuring that Federal benefits or other

payments are not erroneously paid to deceased individuals.

Any information obtained by the Secretary of Health and

Human Services under such a contract shall be exempt

from disclosure under section 552 of title 5, United States

Code, and from the requirements of section 552a of such

title 5.

‘‘(C) SPECIAL EXCEPTION.—The provisions of subparagraph (A) shall not apply to any State which on July

1, 1993, was not, pursuant to a contract, furnishing the

Secretary of Health and Human Services information

concerning individuals with respect to whom death certificates (or equivalent documents maintained by the State

or any subdivision thereof) have been officially filed with

it.’’

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—Except as provided in paragraph (2), the

amendment made by subsection (a) shall take effect on the

date one year after the date of the enactment of this Act.

(2) SPECIAL RULE.—The amendment made by subsection

(a) shall take effect on the date 2 years after the date of

the enactment of this Act in the case of any State if it is

established to the satisfaction of the Secretary of the Treasury

that—

(A) under the law of such State as in effect on the

date of the enactment of this Act, it is impossible for

such State to enter into an agreement meeting the requirements of section 6103(d)(4)(B) of the Internal Revenue Code

of 1986 (as added by subsection (a)), and
H. R. 2264—260

(B) it is likely that such State will enter into such

an agreement during the extension period under this

paragraph.

CHAPTER 2—HEALTH CARE, HUMAN RESOURCES, INCOME SECURITY, AND CUSTOMS AND TRADE PROVISIONS

Subchapter A—Medicare

SEC. 13500. REFERENCES IN SUBCHAPTER; TABLE OF CONTENTS OF

SUBCHAPTER.

(a) AMENDMENTS TO SOCIAL SECURITY ACT.—Except as otherwise specifically provided, whenever in this subchapter an amendment is expressed in terms of an amendment to or repeal of a

section or other provision, the reference shall be considered to

be made to that section or other provision of the Social Security

Act.

(b) REFERENCES TO OBRA.—In this subchapter, the terms

‘‘OBRA–1986’’, ‘‘OBRA–1987’’, ‘‘OBRA–1989’’, and ‘‘OBRA–1990’’

refer to the Omnibus Budget Reconciliation Act of 1986 (Public

Law 99–509), the Omnibus Budget Reconciliation Act of 1987 (Public Law 100–203), the Omnibus Budget Reconciliation Act of 1989

(Public Law 101–239), and the Omnibus Budget Reconciliation Act

of 1990 (Public Law 101–508), respectively.

(c) TABLE OF CONTENTS OF SUBCHAPTER.—The table of contents

of this subchapter is as follows:

SUBCHAPTER A—MEDICARE

Sec. 13500. References in subchapter; table of contents of subchapter.

PART I—PROVISIONS RELATING TO PART A

Sec. 13501. Payments for PPS hospitals.

Sec. 13502. Reductions in payments for PPS-exempt hospitals. Sec. 13503. Reductions in payments for skilled nursing facility services.

Sec. 13504. Reductions in payments for hospice services. Sec. 13505. Hemophilia pass-through extension.

Sec. 13506. Graduate medical education payments in hospital-owned community

health centers.

Sec. 13507. Extension of rural hospital demonstration.

Sec. 13508. Reduction in part A premium for certain individuals with 30 or more

quarters of Social Security coverage.

PART II—PROVISIONS RELATING TO PART B

SUBPART A—PHYSICIANS’ SERVICES

Sec. 13511. Reduction in default update for conversion factor for 1994 and 1995.

Sec. 13512. Reduction in performance standard rate of increase and increase in

maximum reduction permitted in default update.

Sec. 13513. Practice expense relative value units.

Sec. 13514. Separate payment for interpretation of electrocardiograms. Sec. 13515. Payments for new physicians and practitioners.

Sec. 13516. Payments for anesthesia.

Sec. 13517. Extension of physician payment provisions to nonparticipating suppliers and other persons.

Sec. 13518. Antigens under physician fee schedule.

SUBPART B—OUTPATIENT HOSPITAL SERVICES

Sec. 13521. Extension of 10 percent reduction in payments for capital-related costs

of outpatient hospital services.

Sec. 13522. Extension of reduction in payments for other costs of outpatient hospital services.

SUBPART C—AMBULATORY SURGICAL CENTER SERVICES

Sec. 13531. Ambulatory surgical center services.
H. R. 2264—261

Sec. 13532. Designation of certain hospitals as eye or eye and ear hospitals. Sec. 13533. Reduction in payments for intraocular lenses.

SUBPART D—DURABLE MEDICAL EQUIPMENT

Sec. 13541. Payment for parenteral and enteral nutrients, supplies, and equipment

during 1994 and 1995. Sec. 13542. Revisions to payment rules for durable medical equipment. Sec. 13543. Treatment of nebulizers, aspirators, and certain ventilators. Sec. 13544. Payment for ostomy supplies and other supplies. Sec. 13545. Payments for TENS devices. Sec. 13546. Payments for orthotics, prosthetics, and prosthetic devices.

SUBPART E—OTHER PROVISIONS

Sec. 13551. Payments for clinical diagnostic laboratory tests. Sec. 13552. Extension of Alzheimer’s disease demonstration projects. Sec. 13553. Oral cancer drugs. Sec. 13554. Clarification of coverage of certified nurse-midwife services performed

outside the maternity cycle. Sec. 13555. Increase in annual cap on amount of medicare payment for outpatient

physical therapy and occupational therapy services. Sec. 13556. Rural health clinics and federally qualified health centers. Sec. 13557. Extension of municipal health service demonstration projects.

PART III—PROVISIONS RELATING TO PARTS A AND B

Sec. 13561. Medicare as secondary payer. Sec. 13562. Physician ownership and referral. Sec. 13563. Direct graduate medical education. Sec. 13564. Reduction in payments for home health services. Sec. 13565. Immunosuppressive drug therapy. Sec. 13566. Reduction in payments for erythropoientin. Sec. 13567. Extension of social health maintenance organization demonstrations. Sec. 13568. Timing of claims payment. Sec. 13569. Extension of waiver for Watts Health Foundation.

PART IV—PROVISION RELATING TO PART B PREMIUM

Sec. 13571. Part B premium.

PART V—PROVISION RELATING TO DATA BANK

Sec. 13581. Medicare and medicaid coverage data bank.

PART I—PROVISIONS RELATING TO PART A

SEC. 13501. PAYMENTS FOR PPS HOSPITALS.

(a) REDUCTIONS IN PAYMENTS.— (1) REDUCTIONS IN INFLATION UPDATES.—Section

1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is amended—

(A) in subclause (IX)—

(i) by inserting ‘‘minus 2.5 percentage points’’ after

‘‘market basket percentage increase’’ the first place

it appears, and

(ii) by striking ‘‘plus 1.5 percentage points’’ and

inserting ‘‘minus 1.0 percentage point’’;

(B) in subclause (X)—

(i) by inserting ‘‘minus 2.5 percentage points’’ after

‘‘market basket percentage increase’’, and

(ii) by striking ‘‘and’’ at the end;

(C) in subclause (XI)—

(i) by striking ‘‘and each subsequent fiscal year’’,

(ii) by inserting ‘‘minus 2.0 percentage points’’ after

‘‘market basket percentage increase’’, and

(iii) by striking the period at the end and inserting

a comma; and

(D) by adding at the end the following new subclauses:

‘‘(XII) for fiscal year 1997, the market basket percentage

increase minus 0.5 percentage point for hospitals in all areas,

and
H. R. 2264—262

‘‘(XIII) for fiscal year 1998 and each subsequent fiscal year,

the market basket percentage increase for hospitals in all

areas.’’.

(2) UPDATES FOR SOLE COMMUNITY HOSPITALS AND MEDICARE-DEPENDENT, SMALL RURAL HOSPITALS.—

(A) IN GENERAL.—Section 1886(b)(3)(B) (42 U.S.C.

1395ww(b)(3)(B)) is amended by adding at the end the

following new clause:

‘‘(iv) For purposes of subparagraphs (C) and (D), the ‘applicable

percentage increase’ is—

‘‘(I) for 12-month cost reporting periods beginning during

fiscal years 1986 through 1993, the applicable percentage

increase specified in clause (ii),

‘‘(II) for fiscal year 1994, the market basket percentage

increase minus 2.3 percentage points (taking into account any

portion of the 12-month cost reporting period beginning during

fiscal year 1993 that occurred during fiscal year 1994),

‘‘(III) for fiscal year 1995, the market basket percentage

increase minus 2.2 percentage points, and

‘‘(IV) for fiscal year 1996 and each subsequent fiscal year,

the applicable percentage increase under clause (i).’’.

(B) CONFORMING AMENDMENTS.—Section 1886(b)(3) (42

U.S.C. 1395ww(b)(3)) is amended—

(i) in subparagraph (B)(ii), by striking ‘‘, (C), (D),’’;

(ii) in subparagraph (C)(i)(II), by striking ‘‘or’’ at

the end;

(iii) in clause (ii) of subparagraph (C)—

(I) by striking ‘‘period, the target’’ and inserting ‘‘period beginning before fiscal year 1994, the

target’’,

(II) by striking ‘‘subparagraph (B)(ii)’’ and

inserting ‘‘subparagraph (B)(iv)’’, and

(III) by striking the period at the end of such

clause and inserting a comma;

(iv) in subparagraph (C), by inserting after clause

(ii) the following new clauses:

‘‘(iii) with respect to discharges occurring in fiscal year

1994, the target amount for the cost reporting period beginning

in fiscal year 1993 increased by the applicable percentage

increase under subparagraph (B)(iv), or

‘‘(iv) with respect to discharges occurring in fiscal year

1995 and each subsequent fiscal year, the target amount for

the preceding year increased by the applicable percentage

increase under subparagraph (B)(iv).’’;

(v) in clause (ii) of subparagraph (D)—

(I) by striking ‘‘period, the target’’ and inserting ‘‘period beginning before fiscal year 1994, the

target’’,

(II) by striking ‘‘(B)(ii)’’ and inserting ‘‘(B)(iv)’’,

and

(III) by striking the period at the end of such

clause and inserting ‘‘, and’’; and

(vi) in subparagraph (D), by inserting after clause

(ii) the following new clause:

‘‘(iii) with respect to discharges occurring in fiscal year

1994, the target amount for the cost reporting period beginning
H. R. 2264—263

in fiscal year 1993 increased by the applicable percentage

increase under subparagraph (B)(iv).’’.

(3) REDUCTION IN FEDERAL PORTION OF CAPITAL PAYMENT

RATE.—Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is

amended by adding at the end the following new sentence:

‘‘For discharges occurring after September 30, 1993, the Secretary shall reduce by 7.4 percent the unadjusted standard

Federal capital payment rate (as described in 42 CFR

412.308(c), as in effect on the date of the enactment of the

Omnibus Budget Reconciliation Act of 1993) and shall (for

hospital cost reporting periods beginning on or after October

1, 1993) redetermine which payment methodology is applied

to the hospital under such system to take into account such

reduction.’’.

(b) WAGE INDEX HOLD HARMLESS PROTECTION.—

(1) IN GENERAL.—Section 1886(d)(8)(C) (42 U.S.C.

1395ww(d)(8)(C)) is amended by adding at the end the following

new clause:

‘‘(iv) The application of subparagraph (B) or a decision of the

Medicare Geographic Classification Review Board or of the Secretary under paragraph (1) may not result in a reduction in an

urban area’s wage index if—

‘‘(I) the urban area has a wage index below the wage

index for rural areas in the State in which it is located; or

‘‘(II) the urban area is located in a State that is composed

of a single urban area.’’.

(2) NO STANDARDIZED AMOUNT ADJUSTMENT.—The Secretary of Health and Human Services shall not revise the

fiscal year 1992 or fiscal year 1993 standardized amounts

pursuant to subsections (d)(3)(B) and (d)(8)(D) of section 1886

of the Social Security Act to account for the amendment made

by paragraph (1). (3) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to discharges occurring on or after October

1, 1991.

(c) TRANSITION FOR HOSPITAL OUTLIER THRESHOLDS.—Section

1886(d)(5)(A) (42 U.S.C. 1395ww(d)(5)(A)) is amended—

(1) in clause (i), by striking ‘‘The Secretary’’ and inserting

‘‘For discharges occurring during fiscal years ending on or before

September 30, 1997, the Secretary’’; (2) in clause (ii), by striking the period at the end and

inserting the following: ‘‘, or, for discharges in fiscal years

beginning on or after October 1, 1994, exceed the applicable

DRG prospective payment rate plus a fixed dollar amount determined by the Secretary.’’;

(3) in clause (iii), by striking ‘‘shall approximate’’ and

inserting ‘‘shall (except as payments under clause (i) are

required to be reduced to take into account the requirements

of clause (v)) approximate’’; and

(4) by adding at the end the following new clauses:

‘‘(v) The Secretary shall provide that—

‘‘(I) the day outlier percentage for fiscal year 1995 shall

be 75 percent of the day outlier percentage for fiscal year

1994;

‘‘(II) the day outlier percentage for fiscal year 1996 shall

be 50 percent of the day outlier percentage for fiscal year

1994; and
H. R. 2264—264

‘‘(III) the day outlier percentage for fiscal year 1997 shall

be 25 percent of the day outlier percentage for fiscal year

1994.

‘‘(vi) For purposes of this subparagraph, the term ‘day outlier

percentage’ means, for a fiscal year, the percentage of the total

additional payments made by the Secretary under this subparagraph for discharges in that fiscal year which are additional payments under clause (i).’’.

(d) EXTENSION FOR REGIONAL REFERRAL CENTERS.—

(1) EXTENSION OF CLASSIFICATION THROUGH FISCAL YEAR

1994.—Any hospital that is classified as a regional referral

center under section 1886(d)(5)(C) of the Social Security Act

as of September 30, 1992, shall continue to be so classified

for cost reporting periods beginning during fiscal year 1993

or fiscal year 1994, unless the area in which the hospital

is located is redesignated as a Metropolitan Statistical Area

by the Office of Management and Budget for such a fiscal

year.

(2) PERMITTING HOSPITALS TO DECLINE RECLASSIFICATION.—

If any hospital fails to qualify as a rural referral center under

section 1886(d)(5)(C) of the Social Security Act as a result

of a decision by the Medicare Geographic Classification Review

Board under section 1886(d)(10) of such Act to reclassify the

hospital as being located in an urban area for fiscal year

1993 or fiscal year 1994, the Secretary of Health and Human

Services shall—

(A) notify such hospital of such failure to qualify,

(B) provide an opportunity for such hospital to decline

such reclassification, and

(C) if the hospital—

(i) declines such reclassification, administer the

Social Security Act (other than section 1886(d)(8)(D))

for such fiscal year as if the decision by the Review

Board had not occurred, or

(ii) fails to decline such reclassification, administer

the Social Security Act without regard to paragraph

(1).

(3) REQUIRING LUMP-SUM RETROACTIVE PAYMENT FOR HOSPITALS LOSING CLASSIFICATION.—

(A) IN GENERAL.—In the case of a hospital described

in paragraph (1), the Secretary of Health and Human Services shall make a lump-sum payment to the hospital equal

to the difference between the aggregate payment made

to the hospital under section 1886 of such Act (excluding

outlier payments under subsection (d)(5)(A) of such section)

during the period of applicability described in subparagraph

(B) and the aggregate payment that would have been made

to the hospital under such section if, during the period

of applicability, the hospital was classified a regional referral center under section 1886(d)(5)(C) of such Act.

(B) PERIOD OF APPLICABILITY.—In subparagraph (A),

the ‘‘period of applicability’’ is the period that begins on

October 1, 1992, and ends on the date of the enactment

of this Act.

(e) EXTENSION FOR MEDICARE-DEPENDENT, SMALL RURAL HOSPITALS.—
H. R. 2264—265

(1) EXTENSION OF ADDITIONAL PAYMENTS.—Section

1886(d)(5)(G) (42 U.S.C. 1395ww(d)(5)(G)) is amended—

(A) in clause (i) in the matter preceding subclause

(I), by striking ‘‘ending on or before March 31, 1993,’’ and

all that follows and inserting the following: ‘‘before October

1, 1994, in the case of a subsection (d) hospital which

is a medicare-dependent, small rural hospital, payment

under paragraph (1)(A) shall be equal to the sum of the

amount determined under clause (ii) and the amount determined under paragraph (1)(A)(iii).’’;

(B) by redesignating clauses (ii) and (iii) as clauses

(iii) and (iv); and

(C) by inserting after clause (i) the following new

clause:

‘‘(ii) The amount determined under this clause is—

‘‘(I) for discharges occurring during the first 3 12-month

cost reporting periods that begin on or after April 1, 1990,

the amount by which the hospital’s target amount for the

cost reporting period (as defined in subsection (b)(3)(D)) exceeds

the amount determined under paragraph (1)(A)(iii); and

‘‘(II) for discharges occurring during any subsequent cost

reporting period (or portion thereof) and before October 1, 1994,

50 percent of the amount by which the hospital’s target amount

for the cost reporting period (as defined in subsection (b)(3)(D))

exceeds the amount determined under paragraph (1)(A)(iii).’’.

(2) PERMITTING HOSPITALS TO DECLINE RECLASSIFICATION.—

If any hospital fails to qualify as a medicare-dependent, small

rural hospital under section 1886(d)(5)(G)(i) of the Social Security Act as a result of a decision by the Medicare Geographic

Classification Review Board under section 1886(d)(10) of such

Act to reclassify the hospital as being located in an urban

area for fiscal year 1993 or fiscal year 1994, the Secretary

of Health and Human Services shall—

(A) notify such hospital of such failure to qualify,

(B) provide an opportunity for such hospital to decline

such reclassification, and

(C) if the hospital declines such reclassification, administer the Social Security Act (other than section

1886(d)(8)(D)) for such fiscal year as if the decision by

the Review Board had not occurred.

(3) REQUIRING LUMP-SUM RETROACTIVE PAYMENT.— (A) IN GENERAL.—In the case of a hospital treated

as a medicare-dependent, small rural hospital under section

1886(d)(5)(G) of the Social Security Act, the Secretary of

Health and Human Services shall make a lump-sum payment to the hospital equal to the difference between the

aggregate payment made to the hospital under section

1886 of such Act (excluding outlier payments under subsection (d)(5)(A) of such section) during the period of

applicability described in subparagraph (B) and the aggregate payment that would have been made to the hospital

under such section if, during the period of applicability,

section 1886(d)(5)(G) of such Act had been applied as if

the amendments made by paragraph (1) had been in effect.

(B) PERIOD OF APPLICABILITY.—In subparagraph (A),

the ‘‘period of applicability’’ is, with respect to a hospital,

the period that begins on the first day of the hospital’s
H. R. 2264—266

first 12-month cost reporting period that begins after April

1, 1992, and ends on the date of the enactment of this

Act.

(f) EXTENSION OF REGIONAL FLOOR.—Section 1886(d)(1)(A)(iii)

(42 U.S.C. 1395ww(d)(1)(A)(iii)) is amended to read as follows:

‘‘(iii) beginning on or after April 1, 1988, is equal to—

‘‘(I) the national adjusted DRG prospective payment

rate determined under paragraph (3) for such discharges,

or

‘‘(II) for discharges occurring during a fiscal year ending on or before September 30, 1996, the sum of 85 percent

of the national adjusted DRG prospective payment rate

determined under paragraph (3) for such discharges and

15 percent of the regional adjusted DRG prospective payment rate determined under such paragraph, but only if

the average standardized amount (described in clause (i)(I)

or clause (ii)(I) of paragraph (3)(D)) for hospitals within

the region of, and in the same large urban or other area

(or, for discharges occurring during a fiscal year ending

on or before September 30, 1994, the same rural, large

urban, or other urban area) as, the hospital is greater

than the average standardized amount (described in the

respective clause) for hospitals within the United States

in that type of area for discharges occurring during such

fiscal year.’’.

SEC. 13502. REDUCTIONS IN PAYMENTS FOR PPS-EXEMPT HOSPITALS.

(a) IN GENERAL.—Section 1886(b)(3)(B) (42 U.S.C.

1395ww(b)(3)(B)), as amended by section 13501(a)(2)(B)(i), is

amended—

(1) in clause (ii)—

(A) by striking ‘‘and’’ at the end of subclause (III);

(B) in subclause (IV)—

(i) by striking ‘‘subsequent fiscal years’’ and inserting ‘‘a subsequent fiscal year ending on or before

September 30, 1993,’’, and

(ii) by striking the period at the end and inserting

a comma; and

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

‘‘(V) fiscal years 1994 through 1997, is the market basket

percentage increase minus the applicable reduction (as defined

in clause (v)(II)), or in the case of a hospital for a fiscal year

for which the hospital’s update adjustment percentage (as

defined in clause (v)(I)) is at least 10 percent, the market

basket percentage increase, and

‘‘(VI) subsequent fiscal years is the market basket percentage increase.’’; and

(2) by adding at the end the following new clause:

‘‘(v) For purposes of clause (ii)(V)—

‘‘(I) a hospital’s ‘update adjustment percentage’ for a fiscal

year is the percentage by which the hospital’s allowable operating costs of inpatient hospital services recognized under this

title for the cost reporting period beginning in fiscal year 1990

exceeds the hospital’s target amount (as determined under

subparagraph (A)) for such cost reporting period, increased

for each fiscal year (beginning with fiscal year 1994) by the
H. R. 2264—267

sum of any of the hospital’s applicable reductions under

subclause (V) for previous fiscal years; and

‘‘(II) the ‘applicable reduction’ with respect to a hospital

for a fiscal year is the lesser of 1 percentage point or the

percentage point difference between 10 percent and the hospital’s update adjustment percentage for the fiscal year.’’.

(b) EFFECT OF PAYMENT REDUCTION ON EXCEPTIONS AND

ADJUSTMENTS.—Section 1886(b)(4)(A) (42 U.S.C. 1395ww(b)(4)(A))

is amended—

(1) by inserting ‘‘(i)’’ after ‘‘(A)’’, and

(2) by adding at the end the following:

‘‘(ii) The payment reductions under paragraph (3)(B)(ii)(V) shall

not be considered by the Secretary in making adjustments pursuant

to clause (i).’’.

SEC. 13503. REDUCTIONS IN PAYMENTS FOR SKILLED NURSING

FACILITY SERVICES.

(a) PAYMENTS BASED ON COST LIMITS.—

(1) NO CHANGES IN COST LIMITS.—The Secretary of Health

and Human Services may not provide for any change in the

limits on per diem routine service costs for extended care services under section 1888 of the Social Security Act for cost

reporting periods beginning during fiscal years 1994 and 1995,

except as may be necessary to take into account the amendments made by paragraph (3)(A). The effect of the preceding

sentence shall not be considered by the Secretary in making

adjustments pursuant to section 1888(c) of such Act to the

payment limits for such services during such fiscal years. (2) DELAY IN UPDATES.—The last sentence of section 1888(a)

(42 U.S.C. 1395yy(a)) is amended by inserting after ‘‘October

1, 1992’’ the following: ‘‘, on or after October 1, 1995,’’. (3) REPEAL OF EXCESS OVERHEAD ALLOCATIONS FOR HOSPITAL-BASED FACILITIES.— (A) IN GENERAL.—Section 1888(b) (42 U.S.C. 1395yy(b))

is amended—

(i) by striking ‘‘shall recognize’’ and inserting ‘‘may

not recognize’’; and (ii) by striking ‘‘(as determined by’’ and all that

follows and inserting a period.

(B) EFFECTIVE DATE.—The amendments made by subparagraph (A) shall apply to cost reporting periods

beginning on or after October 1, 1993. (b) PAYMENTS DETERMINED ON PROSPECTIVE BASIS.—The Secretary of Health and Human Services may not change the amount

of any prospective payment paid to a skilled nursing facility under

section 1888(d) of the Social Security Act for services furnished

during cost reporting periods beginning during fiscal years 1994

and 1995, except as may be necessary to take into account the

amendment made by subsection (c)(1)(A).

(c) ELIMINATION OF RETURN ON EQUITY FOR PROPRIETARY

SKILLED NURSING FACILITIES.—

(1) REPEAL OF REQUIREMENT FOR RETURN ON EQUITY.—

(A) Section 1861(v)(1)(B) (42 U.S.C. 1395x(v)(1)(B)) is amended

to read as follows:

‘‘(B) In the case of extended care services, the regulations

under subparagraph (A) shall not include provision for specific

recognition of a return on equity capital.’’.
H. R. 2264—268

(B) Section 1878(f)(2) (42 U.S.C. 1395oo(f)(2)) is amended

by striking ‘‘the rate of return on equity capital established

by regulation pursuant to section 1861(v)(1)(B) and in effect

at the time’’ and inserting ‘‘the rate of interest on obligations

issued for purchase by the Federal Hospital Insurance Trust

Fund for the month in which’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect October 1, 1993.

SEC. 13504. REDUCTIONS IN PAYMENTS FOR HOSPICE SERVICES.

Section 1814(i)(1)(C) (42 U.S.C. 1395f(i)(1)(C)) is amended by

striking ‘‘increased by’’ and all that follows and inserting the following: ‘‘increased by—

‘‘(I) for a fiscal year ending on or before September 30,

1993, the market basket percentage increase (as defined in

section 1886(b)(3)(B)(iii)) for the fiscal year;

‘‘(II) for fiscal year 1994, the market basket percentage

increase for the fiscal year minus 2.0 percentage points;

‘‘(III) for fiscal year 1995, the market basket percentage

increase for the fiscal year minus 1.5 percentage points;

‘‘(IV) for fiscal year 1996, the market basket percentage

increase for the fiscal year minus 1.5 percentage points;

‘‘(V) for fiscal year 1997, the market basket percentage

increase for the fiscal year minus 0.5 percentage point; and

‘‘(VI) for a subsequent fiscal year, the market basket

percentage increase for the fiscal year.’’.

SEC. 13505. HEMOPHILIA PASS-THROUGH EXTENSION.

Effective as if included in the enactment of OBRA–1989, section

6011(d) of such Act is amended by striking ‘‘2 years after the

date of enactment of this Act’’ and inserting ‘‘September 30, 1994’’.

SEC. 13506. GRADUATE MEDICAL EDUCATION PAYMENTS IN HOSPITAL-OWNED COMMUNITY HEALTH CENTERS.

Section 1886(d)(5)(B)(iv) (42 U.S.C. 1395ww(d)(5)(B)(iv)) is

amended by inserting after ‘‘the hospital’’ the following: ‘‘or providing services at any entity receiving a grant under section 330

of the Public Health Service Act that is under the ownership or

control of the hospital (if the hospital incurs all, or substantially

all, of the costs of the services furnished by such interns and

residents)’’.

SEC. 13507. EXTENSION OF RURAL HOSPITAL DEMONSTRATION.

Section 4008(i)(1) of OBRA–1990 is amended by adding at

the end the following new sentence: ‘‘The Secretary shall continue

any such demonstration project until at least July 1, 1997.’’.

SEC. 13508. REDUCTION IN PART A PREMIUM FOR CERTAIN INDIVIDUALS WITH 30 OR MORE QUARTERS OF SOCIAL SECURITY

COVERAGE.

(a) IN GENERAL.—Section 1818(d) (42 U.S.C. 1395i–2(d)) is

amended—

(1) in the second sentence of paragraph (2), by striking

‘‘Such amount’’ and inserting ‘‘Subject to paragraph (4), the

amount of an individual’s monthly premium under this section’’;

and

(2) by adding at the end the following new paragraph:
H. R. 2264—269

‘‘(4)(A) In the case of an individual described in subparagraph

(B), the monthly premium for a month shall be reduced by the

applicable reduction percent specified in the following table:

The applicable

reduction

‘‘For a month in: percent is:

1994 ..................................................................................................... 25 percent

1995 ..................................................................................................... 30 percent

1996 ..................................................................................................... 35 percent

1997 ..................................................................................................... 40 percent

1998 or subsequent year .................................................................... 45 percent.

‘‘(B) An individual described in this subparagraph with respect

to a month is an individual who establishes to the satisfaction

of the Secretary that, as of the last day of the previous month,

the individual—

‘‘(i) had at least 30 quarters of coverage under title II;

‘‘(ii) was married (and had been married for the previous

1-year period) to an individual who had at least 30 quarters

of coverage under such title; ‘‘(iii) had been married to an individual for a period of

at least 1 year (at the time of such individual’s death) if

at such time the individual had at least 30 quarters of coverage

under such title; or

‘‘(iv) is divorced from an individual and had been married

to the individual for a period of at least 10 years (at the

time of the divorce) if at such time the individual had at

least 30 quarters of coverage under such title.’’.

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

shall apply to monthly premiums under section 1818 of the Social

Security Act for months beginning with January 1, 1994.

PART II—PROVISIONS RELATING TO PART B

Subpart A—Physicians’ Services

SEC. 13511. REDUCTION IN DEFAULT UPDATE FOR CONVERSION FACTOR FOR 1994 AND 1995.

(a) IN GENERAL.—Section 1848 (42 U.S.C. 1395w–4) is

amended—

(1) in subsection (d)(3)(A)—

(A) in clause (i), by striking ‘‘clause (iii)’’ and inserting ‘‘clauses (iii) through (v)’’, and (B) by adding at the end the following new clauses: ‘‘(iv) ADJUSTMENT IN PERCENTAGE INCREASE FOR

1994.—In applying clause (i) for services furnished in

1994, the percentage increase in the appropriate

update index shall be reduced by—

‘‘(I) 3.6 percentage points for services included

in the category of surgical services (as defined

for purposes of subsection (j)(1)), and

‘‘(II) 2.6 percentage points for other services.

‘‘(v) ADJUSTMENT IN PERCENTAGE INCREASE FOR

1995.—In applying clause (i) for services furnished in

1995, the percentage increase in the appropriate

update index shall be reduced by 2.7 percentage points.

‘‘(vi) EXCEPTION FOR CATEGORY OF PRIMARY CARE

SERVICES.—Clauses (iv) and (v) shall not apply to serv-
H. R. 2264—270

ices included in the category of primary care services

(as defined for purposes of subsection (j)(1)).’’; and (2) in subsection (j)(1), by striking ‘‘Secretary)’’ and insert- ing ‘‘Secretary and including anesthesia services), primary care

services (as defined in section 1842(i)(4)),’’.

(b) EFFECTIVE DATES.—The amendments made by this section shall apply to services furnished on or after January 1, 1994;

except that amendment made by subsection (a)(2) shall not apply— (1) to volume performance standard rates of increase estab- lished under section 1848(f) of the Social Security Act for fiscal

years before fiscal year 1994, and (2) to adjustment in updates in the conversion factors for physicians’ services under section 1848(d)(3)(B) of such Act

for physicians’ services to be furnished in calendar years before

1996.

SEC. 13512. REDUCTION IN PERFORMANCE STANDARD RATE OF

INCREASE AND INCREASE IN MAXIMUM REDUCTION

PERMITTED IN DEFAULT UPDATE.

(a) REDUCTION IN PERFORMANCE STANDARD FACTOR.—Section

1848(f)(2)(B) (42 U.S.C. 1395w–4(f)(2)(B)) is amended—

(1) by striking ‘‘and’’ at the end of clause (ii), and

(2) by striking clause (iii) and inserting the following: ‘‘(iii) for 1993 is 2 percentage points,

‘‘(iv) for 1994 is 31⁄2 percentage points, and ‘‘(v) for each succeeding year is 4 percentage

points.’’. (b) INCREASE IN MAXIMUM REDUCTION PERMITTED IN DEFAULT

UPDATE.—Section 1848(d)(3)(B)(ii) (42 U.S.C. 1395w–4(d)(3)(B)(ii))

is amended—

(1) in subclause (II), by striking ‘‘or 1995’’, and

(2) in subclause (III), by striking ‘‘3’’ and inserting ‘‘5’’.

SEC. 13513. PRACTICE EXPENSE RELATIVE VALUE UNITS.

Section 1848(c)(2) (42 U.S.C. 1395w–4(c)(2)) is amended by adding at the end the following new subparagraph: ‘‘(E) REDUCTION IN PRACTICE EXPENSE RELATIVE VALUE

UNITS FOR CERTAIN SERVICES.— ‘‘(i) IN GENERAL.—Subject to clause (ii), the Sec- retary shall reduce the practice expense relative value

units applied to services described in clause (iii) furnished in—

‘‘(I) 1994, by 25 percent of the number by which the number of practice expense relative

value units (determined for 1994 without regard

to this subparagraph) exceeds the number of work

relative value units determined for 1994,

‘‘(II) 1995, by an additional 25 percent of such excess, and

‘‘(III) 1996, by an additional 25 percent of such

excess.

‘‘(ii) FLOOR ON REDUCTIONS.—The practice expense

relative value units for a physician’s service shall not

be reduced under this subparagraph to a number less

than 128 percent of the number of work relative value

units.

‘‘(iii) SERVICES COVERED.—For purposes of clause

(i), the services described in this clause are physicians’
H. R. 2264—271

services that are not described in clause (iv) and for

which—

‘‘(I) there are work relative value units, and

‘‘(II) the number of practice expense relative

value units (determined for 1994) exceeds 128 percent of the number of work relative value units

(determined for such year).

‘‘(iv) EXCLUDED SERVICES.—For purposes of clause

(iii), the services described in this clause are services

which the Secretary determines at least 75 percent

of which are provided under this title in an office

setting.’’.

SEC. 13514. SEPARATE PAYMENT FOR INTERPRETATION OF ELECTROCARDIOGRAMS.

(a) IN GENERAL.—Paragraph (3) of section 1848(b) (42 U.S.C.

1395w–4(b)) is amended to read as follows:

‘‘(3) TREATMENT OF INTERPRETATION OF ELECTROCARDIOGRAMS.—The Secretary—

‘‘(A) shall make separate payment under this section

for the interpretation of electrocardiograms performed or

ordered to be performed as part of or in conjunction with

a visit to or a consultation with a physician, and

‘‘(B) shall adjust the relative values established for

visits and consultations under subsection (c) so as not

to include relative value units for interpretations of electrocardiograms in the relative value for visits and consultations.’’.

(b) ASSURING BUDGET NEUTRALITY.—Section 1848(c)(2) (42

U.S.C. 1395w–4(c)(2)), as amended by section 13513, is further

amended by adding at the end the following new subparagraph:

‘‘(F) BUDGET NEUTRALITY ADJUSTMENTS.—The

Secretary—

‘‘(i) shall reduce the relative values for all services

(other than anesthesia services) established under this

paragraph (and, in the case of anesthesia services,

the conversion factor established by the Secretary for

such services) by such percentage as the Secretary

determines to be necessary so that, beginning in 1996,

the amendment made by section 13514(a) of the Omnibus Budget Reconciliation Act of 1993 would not result

in expenditures under this section that exceed the

amount of such expenditures that would have been

made if such amendment had not been made, and

‘‘(ii) shall reduce the amounts determined under

subsection (a)(2)(B)(ii)(I) by such percentage as the

Secretary determines to be required to assure that,

taking into account the reductions made under clause

(i), the amendment made by section 13514(a) of the

Omnibus Budget Reconciliation Act of 1993 would not

result in expenditures under this section in 1994 that

exceed the amount of such expenditures that would

have been made if such amendment had not been

made.’’.

(c) CONFORMING AMENDMENTS.—Section 1848 (42 U.S.C.

1395w–4) is amended—
H. R. 2264—272

(1) in subsection (a)(2)(B)(ii)(I), by inserting ‘‘and as adjusted under subsection (c)(2)(F)(ii)’’ after ‘‘for 1994’’; (2) in subsection (c)(2)(A)(i), by adding at the end the following: ‘‘Such relative values are subject to adjustment under

subparagraph (F)(i).’’; and (3) in subsection (i)(1)(B), by adding at the end ‘‘including adjustments under subsection (c)(2)(F),’’.

(d) EFFECTIVE DATE.—The amendments made by this section shall apply to services furnished on or after January 1, 1994.

SEC. 13515. PAYMENTS FOR NEW PHYSICIANS AND PRACTITIONERS.

(a) EQUAL TREATMENT OF NEW PHYSICIANS AND PRACTITIONERS.—(1) Section 1848(a) (42 U.S.C. 1395w–4(a)) is amended by striking paragraph (4). (2) Section 1842(b)(4) (42 U.S.C. 1395u(b)(4)) is amended by striking subparagraph (F). (b) BUDGET NEUTRALITY ADJUSTMENT.—Notwithstanding any other provision of law, the Secretary of Health and Human Services

shall reduce the following values and amounts for 1994 (to be

applied for that year and subsequent years) by such uniform

percentage as the Secretary determines to be required to assure

that the amendments made by subsection (a) will not result in

expenditures under part B of title XVIII of the Social Security

Act in 1994 that exceed the amount of such expenditures that

would have been made if such amendments had not been made:

(1) The relative values established under section 1848(c)

of such Act for services (other than anesthesia services) and,

in the case of anesthesia services, the conversion factor established under section 1848 of such Act for such services.

(2) The amounts determined under section

1848(a)(2)(B)(ii)(I) of such Act.

(3) The prevailing charges or fee schedule amounts to be applied under such part for services of a health care practitioner

(as defined in section 1842(b)(4)(F)(ii)(I) of such Act, as in

effect before the date of the enactment of this Act).

(c) CONFORMING AMENDMENTS.—Section 1848 (42 U.S.C.

1395w–4), as amended by section 13514(c), is amended— (1) in subsection (a)(2)(B)(ii)(I), by inserting ‘‘and under section 13515(b) of the Omnibus Budget Reconciliation Act

of 1993’’ after ‘‘subsection (c)(2)(F)(ii)’’;

(2) in subsection (c)(2)(A)(i), by inserting ‘‘and section 13515(b) of the Omnibus Budget Reconciliation Act of 1993’’

after ‘‘under subparagraph (F)(i)’’; and (3) in subsection (i)(1)(B), by inserting ‘‘and section 13515(b) of the Omnibus Budget Reconciliation Act of 1993’’ after ‘‘under

subsection (c)(2)(F)’’.

(d) EFFECTIVE DATE.—The amendments made by subsection

(a) shall apply to services furnished on or after January 1, 1994.

SEC. 13516. PAYMENTS FOR ANESTHESIA.

(a) PAYMENT TO A PHYSICIAN FOR MEDICAL DIRECTION.—

(1) IN GENERAL.—Section 1848(a) (42 U.S.C. 1395w–4(a)),

as amended by section 13515(a)(1), is amended by adding at

the end the following new paragraph:

‘‘(4) SPECIAL RULE FOR MEDICAL DIRECTION.—

‘‘(A) IN GENERAL.—With respect to physicians’ services

furnished on or after January 1, 1994, and consisting of

medical direction of two, three, or four concurrent anesthe-
H. R. 2264—273

sia cases, the fee schedule amount to be applied shall

be equal to one-half of the amount described in subparagraph (B).

‘‘(B) AMOUNT.—The amount described in this subparagraph, for a physician’s medical direction of the performance of anesthesia services, is the following percentage

of the fee schedule amount otherwise applicable under

this section if the anesthesia services were personally performed by the physician alone:

‘‘(i) For services furnished during 1994, 120 percent.

‘‘(ii) For services furnished during 1995, 115 percent.

‘‘(iii) For services furnished during 1996, 110 percent.

‘‘(iv) For services furnished during 1997, 105 percent.

‘‘(v) For services furnished after 1997, 100 percent.’’.

(2) ELIMINATION OF REDUCTION FOR MEDICAL DIRECTION

OF MULTIPLE NURSE ANESTHETISTS AND ESTABLISHMENT OF

CONSISTENT BASE AND TIME UNITS.—Paragraph (13) of section

1842(b) (42 U.S.C. 1395u(b)) is amended—

(A) by striking subparagraphs (A) and (B) and inserting

the following:

‘‘(13)(A) In determining payments under section 1833(l) and

section 1848 for anesthesia services furnished on or after January

1, 1994, the methodology for determining the base and time units

used shall be the same for services furnished by physicians, for

medical direction by physicians of two, three, or four certified registered nurse anesthetists, or for services furnished by a certified

registered nurse anesthetist (whether or not medically directed)

and shall be based on the methodology in effect, for anesthesia

services furnished by physicians, as of the date of the enactment

of the Omnibus Budget Reconciliation Act of 1993.’’;

(B) by redesignating subparagraph (C) as subparagraph (B); and

(C) by striking ‘‘subparagraph (A) or (B)’’ in subparagraph (B) (as so redesignated) and inserting ‘‘subparagraph

(A)’’.

(b) PAYMENT TO A CERTIFIED REGISTERED NURSE ANESTHETIST

FOR MEDICALLY DIRECTED SERVICES.—Section 1833(l)(4)(B) (42

U.S.C. 1395l(l)(4)(B)) is amended—

(1) in clause (i), by inserting ‘‘and before January 1, 1994,’’

after ‘‘1991,’’;

(2) in clause (ii)—

(A) by adding ‘‘and’’ at the end of subclause (II),

(B) by striking the comma at the end of subclause

(III) and inserting a period, and

(C) by striking subclauses (IV) through (VII); and

(3) by adding at the end the following new clause:

‘‘(iii) In the case of services of a certified registered nurse

anesthetist who is medically directed or medically supervised by

a physician which are furnished on or after January 1, 1994, the

fee schedule amount shall be one-half of the amount described

in section 1848(a)(5)(B) with respect to the physician.’’.
H. R. 2264—274

SEC. 13517. EXTENSION OF PHYSICIAN PAYMENT PROVISIONS TO

NONPARTICIPATING SUPPLIERS AND OTHER PERSONS.

(a) IN GENERAL.—Section 1848 (42 U.S.C. 1395w–4) is

amended—

(1) in subsection (a)(3)—

(A) in the heading, by inserting ‘‘AND SUPPLIERS’’ after ‘‘PHYSICIANS’’,

(B) by inserting ‘‘or a nonparticipating supplier or other person’’ after ‘‘nonparticipating physician’’, and (C) by adding at the end the following: ‘‘In the case of physicians’ services (including services which the Secretary excludes pursuant to subsection (j)(3)) of a

nonparticipating physician, supplier, or other person for

which payment is made under this part on a basis other

than the fee schedule amount, the payment shall be based

on 95 percent of the payment basis for such services

furnished by a participating physician, supplier, or other

person.’’;

(2) in subsection (g)(1)— (A) by inserting ‘‘or nonparticipating supplier or other person (as defined in section 1842(i)(2))’’ after

‘‘nonparticipating physician’’, (B) by inserting ‘‘including services which the Secretary excludes pursuant to subsection (j)(3),’’ after ‘‘physician’s

services (’’,

(C) by inserting ‘‘, supplier, or other person’’ after

‘‘such physician’’, and (D) by adding at the end the following: ‘‘In applying

this subparagraph, any reference in such section to a physician is deemed also to include a reference to a supplier

or other person under this subparagraph.’’;

(3) in subsection (g)(2)(C), by inserting ‘‘or for

nonparticipating suppliers or other persons’’ after

‘‘nonparticipating physicians’’;

(4) in subsection (g)(2)(D), by inserting ‘‘(or, if payment

under this part is made on a basis other than the fee schedule

under this section, 95 percent of the other payment basis)’’

after ‘‘subsection (a)’’;

(5) in subsection (h)—

(A) by inserting ‘‘or nonparticipating supplier or other

person furnishing physicians’ services (as defined in section

1848(j)(3))’’ after ‘‘physician’’ the first place it appears,

(B) by inserting ‘‘, supplier, or other person’’ after

‘‘physician’’ the second place it appears, and

(C) by inserting ‘‘, suppliers, and other persons’’ after

‘‘physicians’’ the second place it appears; and

(6) in subsection (j)(3), by inserting ‘‘, except for purposes

of subsections (a)(3), (g), and (h)’’ after ‘‘tests and’’.

(b) CONFORMING DEFINITION.—Section 1842(i)(2) (42 U.S.C.

1395u(i)(2)) is amended—

(1) by striking ‘‘, and the term’’ and inserting ‘‘; the term’’,

and

(2) by inserting before the period at the end the following:

‘‘; and the term ‘nonparticipating supplier or other person’

means a supplier or other person (excluding a provider of

services) that is not a participating physician or supplier (as

defined in subsection (h)(1))’’.
H. R. 2264—275

(c) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to services furnished on or after January 1, 1994.

SEC. 13518. ANTIGENS UNDER PHYSICIAN FEE SCHEDULE.

(a) IN GENERAL.—Section 1848(j)(3) (42 U.S.C. 1395w–4(j)(3)) is amended by inserting ‘‘(2)(G),’’ after ‘‘(2)(D),’’. (b) BUDGET NEUTRALITY ADJUSTMENT IN 1995.—Notwithstanding any other provision of law, the Secretary of Health and Human

Services shall implement the amendment made by subsection (a)

in a manner to assure that such amendment will result in expenditures under part B of title XVIII of the Social Security Act in

1995 for services described in such amendment that shall be equal

to the amount of expenditures for such services that would have

been made if such amendment had not been made.

(c) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to services furnished on or after January 1, 1995.

Subpart B—Outpatient Hospital Services

SEC. 13521. EXTENSION OF 10 PERCENT REDUCTION IN PAYMENTS

FOR CAPITAL-RELATED COSTS OF OUTPATIENT HOSPITAL SERVICES.

Section 1861(v)(1)(S)(ii)(I) (42 U.S.C. 1395x(v)(1)(S)(ii)(I)) is

amended by striking ‘‘fiscal year 1992, 1993, 1994, or 1995’’ and

inserting ‘‘fiscal years 1992 through 1998’’.

SEC. 13522. EXTENSION OF REDUCTION IN PAYMENTS FOR OTHER

COSTS OF OUTPATIENT HOSPITAL SERVICES.

Section 1861(v)(1)(S)(ii)(II) (42 U.S.C. 1395x(v)(1)(S)(ii)(II)) is

amended by striking ‘‘, 1992, 1993, 1994, or 1995’’ and inserting

‘‘through 1998’’.

Subpart C—Ambulatory Surgical Center Services

SEC. 13531. AMBULATORY SURGICAL CENTER SERVICES.

The Secretary of Health and Human Services shall not provide for any inflation update in the payment amounts under subparagraphs (A) and (B) of section 1833(i)(2) of the Social Security Act

for fiscal year 1994 or for fiscal year 1995.

SEC. 13532. DESIGNATION OF CERTAIN HOSPITALS AS EYE OR EYE

AND EAR HOSPITALS.

(a) IN GENERAL.—Section 1833(i) (42 U.S.C. 1395l(i)) is

amended—

(1) in paragraph (3)(B)(ii)—

(A) in the matter preceding subclause (I), by striking

‘‘the last sentence of this clause’’ and inserting ‘‘paragraph

(4)’’, and

(B) by striking the last sentence; and

(2) by inserting after paragraph (3) the following new paragraph:

‘‘(4)(A) In the case of a hospital that—

‘‘(i) makes application to the Secretary and demonstrates

that it specializes in eye services or eye and ear services (as

determined by the Secretary),

‘‘(ii) receives more than 30 percent of its total revenues

from outpatient services, and

‘‘(iii) on October 1, 1987—
H. R. 2264—276

‘‘(I) was an eye specialty hospital or an eye and ear specialty hospital, or ‘‘(II) was operated as an eye or eye and ear unit (as defined in subparagraph (B)) of a general acute care hospital which, on the date of the application described in

clause (i), operates less than 20 percent of the beds that

the hospital operated on October 1, 1987, and has sold

or otherwise disposed of a substantial portion of the hospital’s other acute care operations,

the cost proportion and ASC proportion in effect under subclauses

(I) and (II) of paragraph (3)(B)(ii) for cost reporting periods beginning in fiscal year 1988 shall remain in effect for cost reporting

periods beginning on or after October 1, 1988, and before January

1, 1995.

‘‘(B) For purposes of this subparagraph (A)(iii)(II), the term ‘eye or eye and ear unit’ means a physically separate or distinct

unit containing separate surgical suites devoted solely to eye or

eye and ear services.’’. (b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to portions of cost reporting periods beginning on

or after January 1, 1994.

SEC. 13533. REDUCTION IN PAYMENTS FOR INTRAOCULAR LENSES.

Notwithstanding section 1833(i)(2)(A)(iii) of the Social Security Act, the amount of payment determined under such section for

an intraocular lens inserted subsequent to or during cataract surgery in an ambulatory surgical center on or after January 1, 1994,

and before January 1, 1999, shall be equal to $150.

Subpart D—Durable Medical Equipment

SEC. 13541. PAYMENT FOR PARENTERAL AND ENTERAL NUTRIENTS,

SUPPLIES, AND EQUIPMENT DURING 1994 AND 1995.

In determining the amount of payment under part B of title XVIII of the Social Security Act with respect to parenteral and

enteral nutrients, supplies, and equipment during 1994 and 1995,

the charges determined to be reasonable with respect to such nutrients, supplies, and equipment may not exceed the charges determined to be reasonable with respect to such nutrients, supplies,

and equipment during 1993.

SEC. 13542. REVISIONS TO PAYMENT RULES FOR DURABLE MEDICAL

EQUIPMENT.

(a) BASING NATIONAL PAYMENT LIMITS ON MEDIAN OF LOCAL

PAYMENT AMOUNTS.— (1) INEXPENSIVE AND ROUTINELY PURCHASED ITEMS; ITEMS

REQUIRING FREQUENT AND SUBSTANTIAL SERVICING.—(A) Paragraphs (2)(C)(i)(II) and (3)(C)(i)(II) of section 1834(a) (42 U.S.C.

1395m(a)) are each amended—

(i) by striking ‘‘1992’’ the first place it appears and inserting ‘‘1992, 1993, and 1994’’; and (ii) by striking ‘‘1992’’ the second place it appears and inserting ‘‘the year’’.

(B) Paragraphs (2)(C)(ii) and (3)(C)(ii) of section 1834(a) (42 U.S.C. 1395m(a)) are each amended—

(i) by striking ‘‘and’’ at the end of subclause (I);

(ii) by redesignating subclause (II) as subclause (IV);

and
H. R. 2264—277

(iii) by inserting after subclause (I) the following new

subclauses:

‘‘(II) for 1992 and 1993, the amount determined under this clause for the preceding year

increased by the covered item update for such

subsequent year,

‘‘(III) for 1994, the local payment amount

determined under clause (i) for such item or device

for that year, except that the national limited payment amount may not exceed 100 percent of the

median of all local payment amounts determined

under such clause for such item for that year and

may not be less than 85 percent of the median

of all local payment amounts determined under

such clause for such item or device for that year,

and’’.

(2) MISCELLANEOUS DEVICES AND ITEMS.—Section

1834(a)(8) (42 U.S.C. 1395m(a)(8)) is amended—

(A) in subparagraph (A)(ii)(III), by striking ‘‘1992’’ and

inserting ‘‘1992, 1993, and 1994’’; and

(B) in subparagraph (B)—

(i) by striking ‘‘and’’ at the end of clause (i),

(ii) by redesignating clause (ii) as (iv), and

(iii) by inserting after clause (i) the following new

clauses:

‘‘(ii) for 1992 and 1993, the amount determined

under this subparagraph for the preceding year

increased by the covered item update for such subsequent year; ‘‘(iii) for 1994, the local purchase price computed

under subparagraph (A)(ii) for the item for the year,

except that such national limited purchase price may

not exceed 100 percent of the median of all local purchase prices computed for the item under such

subparagraph for the year and may not be less than

85 percent of the median of all local purchase prices

computed under such subparagraph for the item for

the year; and’’. (3) OXYGEN AND OXYGEN EQUIPMENT.—Section 1834(a)(9)

(42 U.S.C. 1395m(a)(9)) is amended—

(A) in subparagraph (A)(ii)(II), by striking ‘‘1991 and

1992’’ and inserting ‘‘1991, 1992, 1993, and 1994’’; and (B) in subparagraph (B)— (i) by striking ‘‘and’’ at the end of clause (i),

(ii) by redesignating clause (ii) as (iv), and

(iii) by inserting after clause (i) the following new

clauses:

‘‘(ii) for 1992 and 1993, the amount determined

under this subparagraph for the preceding year

increased by the covered item update for such subsequent year;

‘‘(iii) for 1994, the local monthly payment rate

computed under subparagraph (A)(ii) for the item for

the year, except that such national limited monthly

payment rate may not exceed 100 percent of the

median of all local monthly payment rates computed

for the item under such subparagraph for the year
H. R. 2264—278

and may not be less than 85 percent of the median

of all local monthly payment rates computed for the

item under such subparagraph for the year; and’’. (b) EFFECTIVE DATE.—The amendments made by this section shall apply to items furnished on or after January 1, 1994.

SEC. 13543. TREATMENT OF NEBULIZERS, ASPIRATORS, AND CERTAIN

VENTILATORS.

(a) IN GENERAL.—Section 1834(a)(3)(A) (42 U.S.C.

1395m(a)(3)(A)) is amended by striking ‘‘ventilators, aspirators,

IPPB machines, and nebulizers’’ and inserting ‘‘IPPB machines

and ventilators, excluding ventilators that are either continuous

airway pressure devices or intermittent assist devices with continuous airway pressure devices’’. (b) PAYMENT FOR ACCESSORIES RELATING TO NEBULIZERS, ASPIRATORS, AND CERTAIN VENTILATORS.—Section 1834(a)(2)(A) (42

U.S.C. 1395m(a)) is amended—

(1) by striking ‘‘or’’ at the end of clause (i),

(2) by adding ‘‘or’’ at the end of clause (ii), and

(3) by inserting after clause (ii) the following new clause: ‘‘(iii) which is an accessory used in conjunction with a nebulizer, aspirator, or a ventilator excluded

under paragraph (3)(A),’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to items furnished on or after January 1, 1994.

SEC. 13544. PAYMENT FOR OSTOMY SUPPLIES AND OTHER SUPPLIES.

(a) OSTOMY SUPPLIES, TRACHEOSTOMY SUPPLIES, AND

UROLOGICALS.— (1) IN GENERAL.—Section 1834(h)(1) (42 U.S.C.

1395m(h)(1)) is amended by adding at the end the following

new subparagraph: ‘‘(E) EXCEPTION FOR CERTAIN ITEMS.—Payment for ostomy supplies, tracheostomy supplies, and urologicals

shall be made in accordance with subparagraphs (B) and

(C) of section 1834(a)(2).’’.

(2) CONFORMING AMENDMENT.—Section 1834(h)(1)(B) (42

U.S.C. 1395m(h)(1)(B)) is amended by striking ‘‘subparagraph

(C),’’ and inserting ‘‘subparagraphs (C) and (E),’’. (3) EFFECTIVE DATE.—The amendments made by this sub- section shall apply to items furnished on or after January

1, 1994.

(b) SURGICAL DRESSINGS.— (1) IN GENERAL.—Section 1834 (42 U.S.C. 1395m) is

amended by adding at the end the following new subsection:

‘‘(i) PAYMENT FOR SURGICAL DRESSINGS.— ‘‘(1) IN GENERAL.—Payment under this subsection for sur- gical dressings (described in section 1861(s)(5)) shall be made

in a lump sum amount for the purchase of the item in an

amount equal to 80 percent of the lesser of—

‘‘(A) the actual charge for the item; or

‘‘(B) a payment amount determined in accordance with

the methodology described in subparagraphs (B) and (C)

of subsection (a)(2) (except that in applying such methodology, the national limited payment amount referred to in

such subparagraphs shall be initially computed based on

local payment amounts using average reasonable charges

for the 12-month period ending December 31, 1992,
H. R. 2264—279

increased by the covered item updates described in such

subsection for 1993 and 1994).

‘‘(2) EXCEPTIONS.—Paragraph (1) shall not apply to surgical dressings that are— ‘‘(A) furnished as an incident to a physician’s profes- sional service; or

‘‘(B) furnished by a home health agency.’’. (2) CONFORMING AMENDMENT.—Section 1833(a)(1) (42

U.S.C. 1395l(a)(1)) is amended—

(A) by striking ‘‘and’’ before ‘‘(N)’’;

(B) with respect to the matter inserted by section 4155(b)(2)(B) of OBRA–1990—

(i) by striking ‘‘(M)’’ and inserting ‘‘, (O)’’, and

(ii) by transferring it and inserting it (as amended) immediately before the semicolon at the end; and

(C) by inserting before the semicolon at the end the following: ‘‘, and (P) with respect to surgical dressings,

the amounts paid shall be the amounts determined under

section 1834(i)’’.

(3) EFFECTIVE DATE.—The amendments made by this sub- section shall apply to items furnished on or after January

1, 1994.

SEC. 13545. PAYMENTS FOR TENS DEVICES.

(a) IN GENERAL.—Section 1834(a)(1)(D) (42 U.S.C.

1395m(a)(1)(D)) is amended by striking ‘‘15 percent’’ the second

place it appears and inserting ‘‘45 percent’’. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to items furnished on or after January 1, 1994.

SEC. 13546. PAYMENTS FOR ORTHOTICS, PROSTHETICS, AND PROSTHETIC DEVICES.

Section 1834(h)(4)(A) (42 U.S.C. 1395m(h)(4)(A)) is amended—

(1) in clause (i), by striking ‘‘and’’;

(2) in clause (ii), by striking ‘‘a subsequent year’’ and insert- ing ‘‘1992 and 1993’’; and (3) by adding at the end the following new clauses: ‘‘(iii) for 1994 and 1995, 0 percent, and

‘‘(iv) for a subsequent year, the percentage increase in the consumer price index for all urban consumers

(United States city average) for the 12-month period

ending with June of the previous year;’’.

Subpart E—Other Provisions

SEC. 13551. PAYMENTS FOR CLINICAL DIAGNOSTIC LABORATORY

TESTS.

(a) UPDATE FREEZE.—Section 1833(h)(2)(A)(ii) (42 U.S.C.

1395l(h)(2)(A)(ii)) is amended—

(1) by striking ‘‘and’’ at the end of subclause (II),

(2) by striking the period at the end of subclause (III) and inserting ‘‘, and’’, and (3) by adding at the end the following new subclause:

‘‘(IV) the annual adjustment in the fee schedules deter- mined under clause (i) for each of the years 1994 and 1995

shall be 0 percent.’’.

(b) LOWER CAP.—Section 1833(h)(4)(B) (42 U.S.C.

1395l(h)(4)(B)) is amended—
H. R. 2264—280

(1) by striking ‘‘and’’ at the end of clause (iii),

(2) by striking clause (iv) and inserting the following:

‘‘(iv) after December 31, 1990, and before January 1, 1994, is equal to 88 percent of such median, ‘‘(v) after December 31, 1993, and before January 1, 1995, is equal to 84 percent of such median, ‘‘(vi) after December 31, 1994, and before January 1, 1996, is equal to 80 percent of such median, and ‘‘(vii) after December 31, 1995, is equal to 76 percent of

such median.’’.

SEC. 13552. EXTENSION OF ALZHEIMER’S DISEASE DEMONSTRATION

PROJECTS.

Section 9342 of OBRA–1986, as amended by section 4164(a)(2) of OBRA–1990, is amended—

(1) in subsection (c)(1), by striking ‘‘4 years’’ and inserting ‘‘5 years’’; and (2) in subsection (f)—

(A) by striking ‘‘$55,000,000’’ and inserting ‘‘$58,000,000’’, and

(B) by striking ‘‘$3,000,000’’ and inserting ‘‘$5,000,000’’.

SEC. 13553. ORAL CANCER DRUGS.

(a) NEW COVERAGE OF CERTAIN SELF-ADMINISTERED

ANTICANCER DRUGS.—Section 1861(s)(2) (42 U.S.C. 1395(s)(2)) is

amended—

(1) by striking ‘‘and’’ at the end of subparagraph (O);

(2) by adding ‘‘and’’ at the end of subparagraph (P); and

(3) by adding at the end the following new subparagraph:

‘‘(Q) an oral drug (which is approved by the Federal Food and Drug Administration) prescribed for use as an anticancer

chemotherapeutic agent for a given indication, and containing

an active ingredient (or ingredients), which is the same indication and active ingredient (or ingredients) as a drug which

the carrier determines would be covered pursuant to subparagraph (A) or (B) if the drug could not be self-administered;’’.

(b) UNIFORM COVERAGE OF ‘‘OFF-LABEL’’ ANTICANCER DRUGS.— Section 1861(t) (42 U.S.C. 1395x(t)) is amended—

(1) by inserting ‘‘(1)’’ after ‘‘(t)’’;

(2) by striking ‘‘(m)(5) of this section’’ and inserting ‘‘(m)(5) and paragraph (2)’’; and (3) by adding at the end the following new paragraph: ‘‘(2)(A) For purposes of paragraph (1), the term ‘drugs’ also includes any drugs or biologicals used in an anticancer

chemotherapeutic regimen for a medically accepted indication (as

described in subparagraph (B)). ‘‘(B) In subparagraph (A), the term ‘medically accepted indica- tion’, with respect to the use of a drug, includes any use which

has been approved by the Food and Drug Administration for the

drug, and includes another use of the drug if— ‘‘(i) the drug has been approved by the Food and Drug

Administration; and

‘‘(ii)(I) such use is supported by one or more citations which are included (or approved for inclusion) in one or more of

the following compendia: the American Hospital Formulary

Service-Drug Information, the American Medical Association

Drug Evaluations, the United States Pharmacopoeia-Drug

Information, and other authoritative compendia as identified
H. R. 2264—281

by the Secretary, unless the Secretary has determined that

the use is not medically appropriate or the use is identified

as not indicated in one or more such compendia, or

‘‘(II) the carrier involved determines, based upon guidance

provided by the Secretary to carriers for determining accepted

uses of drugs, that such use is medically accepted based on

supportive clinical evidence in peer reviewed medical literature

appearing in publications which have been identified for purposes of this subclause by the Secretary.

The Secretary may revise the list of compendia in clause (ii)(I)

as is appropriate for identifying medically accepted indications for

drugs.’’.

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

(a) and (b) shall apply to items furnished on or after January

1, 1994.

SEC. 13554. CLARIFICATION OF COVERAGE OF CERTIFIED NURSE-MIDWIFE SERVICES PERFORMED OUTSIDE THE MATERNITY

CYCLE.

(a) IN GENERAL.—Section 1861(gg)(2) (42 U.S.C. 1395x(gg)(2))

is amended by striking ‘‘, and performs services’’ and all that

follows and inserting a period.

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

shall apply to services furnished on or after January 1, 1994.

SEC. 13555. INCREASE IN ANNUAL CAP ON AMOUNT OF MEDICARE

PAYMENT FOR OUTPATIENT PHYSICAL THERAPY AND

OCCUPATIONAL THERAPY SERVICES.

(a) INCREASE IN ANNUAL LIMITATION.—Section 1833(g) (42 U.S.C. 1395l(g)) is amended by striking ‘‘$750’’ and inserting ‘‘$900’’

each place it appears.

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

shall apply to services furnished on or after January 1, 1994.

SEC. 13556. RURAL HEALTH CLINICS AND FEDERALLY QUALIFIED

HEALTH CENTERS.

(a) IN GENERAL.—Paragraph (4) of section 1861(aa) (42 U.S.C. 1395x(aa)) is amended—

(1) by striking ‘‘or’’ at the end of subparagraph (B);

(2) by striking the period at the end of subparagraph (C)

and inserting ‘‘; or’’; and (3) by adding at the end the following new subparagraph:

‘‘(D) is an outpatient health program or facility operated

by a tribe or tribal organization under the Indian Self-Determination Act or by an urban Indian organization receiving

funds under title V of the Indian Health Care Improvement

Act.’’.

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

(a) shall take effect as if included in the enactment of section

4161(a)(2)(C) of OBRA–1990.

SEC. 13557. EXTENSION OF MUNICIPAL HEALTH SERVICE DEMONSTRATION PROJECTS.

Section 9215 of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended by section 6135 of OBRA–1989,

is amended—

(1) by striking ‘‘December 31, 1993’’ and inserting ‘‘December 31, 1997’’, and
H. R. 2264—282

(2) in the second sentence, by inserting after ‘‘beneficiary costs,’’ the following: ‘‘costs to the medicaid program and other

payers, access to care, outcomes, beneficiary satisfaction, utilization differences among the different populations served by

the projects,’’.

PART III—PROVISIONS RELATING TO PARTS A

AND B

SEC. 13561. MEDICARE AS SECONDARY PAYER.

(a) EXTENSION OF AND MODIFICATIONS TO DATA MATCH PROGRAM.— (1) Section 1862(b)(5)(C)(iii) (42 U.S.C. 1395y(b)(5)(C)(iii)) is amended by striking ‘‘1995’’ and inserting ‘‘1998’’. (2) Section 6103(l)(12) of the Internal Revenue Code of

1986 is amended—

(A) in subparagraph (B)(i), by inserting ‘‘, above an amount (if any) specified by the Secretary of Health and

Human Services,’’ after ‘‘section 3401(a))’’;

(B) in subparagraph (B)(ii), in the matter preceding subclause (I) by inserting ‘‘, above an amount (if any)

specified by the Secretary of Health and Human Services,’’

after ‘‘wages’’; and (C) in subparagraph (F)— (i) in clause (i), by striking ‘‘1995’’ and inserting

‘‘1998’’,

(ii) in clause (ii)(I), by striking ‘‘1994’’ and inserting ‘‘1997’’, and

(iii) in clause (ii)(II), by striking ‘‘1995’’ and inserting ‘‘1998’’. (b) EXTENSION OF MEDICARE SECONDARY PAYER TO DISABLED

BENEFICIARIES.—Section 1862(b)(1)(B)(iii) (42 U.S.C.

1395y(b)(1)(B)(iii)) is amended by striking ‘‘1995’’ and inserting

‘‘1998’’.

(c) EXTENSION OF 18-MONTH RULE FOR ESRD BENEFICIARIES.— Section 1862(b)(1) (42 U.S.C. 1395y(b)(1)) is amended— (1) in the second sentence of subparagraph (C), by striking ‘‘on or before January 1, 1996’’ and inserting ‘‘before October

1, 1998’’;

(2) in each of subparagraphs (A)(iv) and (B)(ii)— (A) by striking ‘‘Clause (i) shall not apply’’ and insert- ing ‘‘Subparagraph (C) shall apply instead of clause (i)’’,

and

(B) by inserting ‘‘(without regard to entitlement under section 226)’’ after ‘‘individual is, or’’; and

(3) in subparagraph (C), by striking ‘‘benefits under this title solely by reason of’’ and inserting ‘‘or eligible for benefits

under this title under’’ each place it appears.

(d) APPLICATION OF AGGREGATION RULES.— (1) IN GENERAL.—Section 1862(b)(1) (42 U.S.C. 1395y(b)(1))

is amended by adding at the end the following new subparagraph: ‘‘(E) GENERAL PROVISIONS.—For purposes of this subsection:

‘‘(i) AGGREGATION RULES.—

‘‘(I) All employers treated as a single employer under subsection (a) or (b) of section 52 of the
H. R. 2264—283

Internal Revenue Code of 1986 shall be treated

as a single employer.

‘‘(II) All employees of the members of an affiliated service group (as defined in section 414(m)

of such Code) shall be treated as employed by

a single employer.

‘‘(III) Leased employees (as defined in section

414(n)(2) of such Code) shall be treated as employees of the person for whom they perform services

to the extent they are so treated under section

414(n) of such Code.

In applying sections of the Internal Revenue Code of

1986 under this clause, the Secretary shall rely upon

regulations and decisions of the Secretary of the Treasury respecting such sections.’’.

(2) CONFORMING AMENDMENT.—Section 5000(b)(2) of the

Internal Revenue Code of 1986 (relating to large group health

plans) is amended by adding at the end the following: ‘‘For

purposes of the preceding sentence—

‘‘(A) all employers treated as a single employer under

subsection (a) or (b) of section 52 shall be treated as a

single employer,

‘‘(B) all employees of the members of an affiliated service group (as defined in section 414(m)) shall be treated

as employed by a single employer, and

‘‘(C) leased employees (as defined in section 414(n)(2))

shall be treated as employees of the person for whom

they perform services to the extent they are so treated

under section 414(n). ’’.

(3) The amendments made by this subsection shall take

effect 90 days after the date of the enactment of this Act.

(e) UNIFORM TREATMENT OF CURRENT EMPLOYMENT STATUS.— (1) IN GENERAL.—Section 1862(b)(1) (42 U.S.C. 1395y(b)(1))

is amended—

(A) in subparagraph (A)(i), by amending subclauses (I) and (II) to read as follows:

‘‘(I) may not take into account that an individ- ual (or the individual’s spouse) who is covered

under the plan by virtue of the individual’s current

employment status with an employer is entitled

to benefits under this title under section 226(a),

and

‘‘(II) shall provide that any individual age 65 or over (and the individual’s spouse age 65 or

older) who is covered under the plan by virtue

of the individual’s current employment status with

an employer shall be entitled to the same benefits

under the plan under the same conditions as any

such individual (or spouse) under age 65.’’;

(B) in subparagraph (A)(ii), by striking ‘‘unless the

plan’’ and all that follows through ‘‘employees’’ and inserting ‘‘unless the plan is a plan of, or contributed to by,

an employer or employee organization that has 20 or more

individuals in current employment status’’;

(C) in subparagraph (A)(iii), by striking ‘‘by virtue of

employment’’ and all that follows through ‘‘calendar year

or’’ and inserting ‘‘by virtue of current employment status
H. R. 2264—284

with an employer that does not have 20 or more individuals

in current employment status for each working day in

each of 20 or more calendar weeks in the current calendar

year and’’;

(D) in subparagraph (A)(v), by inserting ‘‘, without

regard to section 5000(d) of such Code’’ before the period

at the end of each subparagraph;

(E) in the heading of subparagraph (B), by striking

‘‘ACTIVE’’;

(F) in subparagraph (B)(i), by striking ‘‘clause (iv)(II))

may not take into account that an active individual (as

defined in clause (iv)(I))’’ and inserting ‘‘clause (iv)) may

not take into account that an individual (or a member

of the individual’s family) who is covered under the plan

by virtue of the individual’s current employment status

with an employer’’;

(G) by amending clause (iv) of subparagraph (B) to

read as follows:

‘‘(iv) LARGE GROUP HEALTH PLAN DEFINED.—In this

subparagraph, the term ‘large group health plan’ has

the meaning given such term in section 5000(b)(2)

of the Internal Revenue Code of 1986, without regard

to section 5000(d) of such Code.’’; and

(H) by adding at the end of subparagraph (E), as

added by subsection (d)(1), the following:

‘‘(ii) CURRENT EMPLOYMENT STATUS DEFINED.—An

individual has ‘current employment status’ with an

employer if the individual is an employee, is the

employer, or is associated with the employer in a business relationship.

‘‘(iii) TREATMENT OF SELF-EMPLOYED PERSONS AS

EMPLOYERS.—The term ‘employer’ includes a selfemployed person.’’. (2)(A) Section 5000 of the Internal Revenue Code of 1986

is amended—

(i) in subsection (a), by inserting ‘‘(including a self- employed person)’’ after ‘‘employer’’, (ii) by amending paragraph (1) of subsection (b) to

read as follows:

‘‘(1) GROUP HEALTH PLAN.—The term ‘group health plan’ means a plan (including a self-insured plan) of, or contributed

to by, an employer (including a self-employed person) or

employee organization to provide health care (directly or otherwise) to the employees, former employees, the employer, others

associated or formerly associated with the employer in a business relationship, or their families.’’, and

(iii) in subsection (c), by striking ‘‘of section 1862(b)(1)’’

and inserting ‘‘of paragraph (1), or with the requirements

of paragraph (2), of section 1862(b)’’.

(B) Section 6103(l)(12)(E)(ii) of such Code is amended to

read as follows:

‘‘(ii) GROUP HEALTH PLAN.—The term ‘group health

plan’ means any group health plan (as defined in section 5000(b)(1)).’’.

(f) RETROACTIVE EXEMPTION FOR CERTAIN SITUATIONS INVOLVING RELIGIOUS ORDERS.—Section 1862(b)(1)(D) of the Social Security

Act applies, with respect to items and services furnished before
H. R. 2264—285

October 1, 1989, to any claims that the Secretary of Health and

Human Services had not identified as of that date as subject to

the provisions of section 1862(b) of such Act.

SEC. 13562. PHYSICIAN OWNERSHIP AND REFERRAL.

(a) IN GENERAL.—Section 1877 (42 U.S.C. 1395nn) is

amended—

(1) by amending subsections (a) through (e) to read as

follows:

‘‘(a) PROHIBITION OF CERTAIN REFERRALS.—

‘‘(1) IN GENERAL.—Except as provided in subsection (b),

if a physician (or an immediate family member of such physician) has a financial relationship with an entity specified in

paragraph (2), then—

‘‘(A) the physician may not make a referral to the

entity for the furnishing of designated health services for

which payment otherwise may be made under this title,

and

‘‘(B) the entity may not present or cause to be presented

a claim under this title or bill to any individual, third

party payor, or other entity for designated health services

furnished pursuant to a referral prohibited under subparagraph (A).

‘‘(2) FINANCIAL RELATIONSHIP SPECIFIED.—For purposes of

this section, a financial relationship of a physician (or an immediate family member of such physician) with an entity specified

in this paragraph is—

‘‘(A) except as provided in subsections (c) and (d), an

ownership or investment interest in the entity, or

‘‘(B) except as provided in subsection (e), a compensation arrangement (as defined in subsection (h)(1)) between

the physician (or an immediate family member of such

physician) and the entity.

An ownership or investment interest described in subparagraph

(A) may be through equity, debt, or other means and includes

an interest in an entity that holds an ownership or investment

interest in any entity providing the designated health service.

‘‘(b) GENERAL EXCEPTIONS TO BOTH OWNERSHIP AND COMPENSATION ARRANGEMENT PROHIBITIONS.—Subsection (a)(1) shall not

apply in the following cases:

‘‘(1) PHYSICIANS’ SERVICES.—In the case of physicians’ services (as defined in section 1861(q)) provided personally by (or

under the personal supervision of) another physician in the

same group practice (as defined in subsection (h)(4)) as the

referring physician.

‘‘(2) IN-OFFICE ANCILLARY SERVICES.—In the case of services

(other than durable medical equipment (excluding infusion

pumps) and parenteral and enteral nutrients, equipment, and

supplies)—

‘‘(A) that are furnished—

‘‘(i) personally by the referring physician, personally by a physician who is a member of the same

group practice as the referring physician, or personally

by individuals who are directly supervised by the physician or by another physician in the group practice,

and
H. R. 2264—286

‘‘(ii)(I) in a building in which the referring physician (or another physician who is a member of the

same group practice) furnishes physicians’ services

unrelated to the furnishing of designated health services, or

‘‘(II) in the case of a referring physician who is

a member of a group practice, in another building

which is used by the group practice—

‘‘(aa) for the provision of some or all of the

group’s clinical laboratory services, or

‘‘(bb) for the centralized provision of the

group’s designated health services (other than

clinical laboratory services),

unless the Secretary determines other terms and conditions under which the provision of such services does

not present a risk of program or patient abuse, and

‘‘(B) that are billed by the physician performing or

supervising the services, by a group practice of which such

physician is a member under a billing number assigned

to the group practice, or by an entity that is wholly owned

by such physician or such group practice,

if the ownership or investment interest in such services meets

such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.

‘‘(3) PREPAID PLANS.—In the case of services furnished by

an organization—

‘‘(A) with a contract under section 1876 to an individual

enrolled with the organization,

‘‘(B) described in section 1833(a)(1)(A) to an individual

enrolled with the organization,

‘‘(C) receiving payments on a prepaid basis, under a

demonstration project under section 402(a) of the Social

Security Amendments of 1967 or under section 222(a) of

the Social Security Amendments of 1972, to an individual

enrolled with the organization, or

‘‘(D) that is a qualified health maintenance organization (within the meaning of section 1310(d) of the Public

Health Service Act) to an individual enrolled with the

organization.

‘‘(4) OTHER PERMISSIBLE EXCEPTIONS.—In the case of any

other financial relationship which the Secretary determines,

and specifies in regulations, does not pose a risk of program

or patient abuse.

‘‘(c) GENERAL EXCEPTION RELATED ONLY TO OWNERSHIP OR

INVESTMENT PROHIBITION FOR OWNERSHIP IN PUBLICLY TRADED

SECURITIES AND MUTUAL FUNDS.—Ownership of the following shall

not be considered to be an ownership or investment interest

described in subsection (a)(2)(A):

‘‘(1) Ownership of investment securities (including shares

or bonds, debentures, notes, or other debt instruments) which

may be purchased on terms generally available to the public

and which are—

‘‘(A)(i) securities listed on the New York Stock

Exchange, the American Stock Exchange, or any regional

exchange in which quotations are published on a daily

basis, or foreign securities listed on a recognized foreign,
H. R. 2264—287

national, or regional exchange in which quotations are

published on a daily basis, or

‘‘(ii) traded under an automated interdealer quotation

system operated by the National Association of Securities

Dealers, and

‘‘(B) in a corporation that had, at the end of the corporation’s most recent fiscal year, or on average during the

previous 3 fiscal years, stockholder equity exceeding

$75,000,000.

‘‘(2) Ownership of shares in a regulated investment company as defined in section 851(a) of the Internal Revenue

Code of 1986, if such company had, at the end of the company’s

most recent fiscal year, or on average during the previous

3 fiscal years, total assets exceeding $75,000,000.

‘‘(d) ADDITIONAL EXCEPTIONS RELATED ONLY TO OWNERSHIP

OR INVESTMENT PROHIBITION.—The following, if not otherwise

excepted under subsection (b), shall not be considered to be an

ownership or investment interest described in subsection (a)(2)(A):

‘‘(1) HOSPITALS IN PUERTO RICO.—In the case of designated

health services provided by a hospital located in Puerto Rico.

‘‘(2) RURAL PROVIDER.—In the case of designated health

services furnished in a rural area (as defined in section

1886(d)(2)(D)) by an entity, if substantially all of the designated

health services furnished by such entity are furnished to

individuals residing in such a rural area.

‘‘(3) HOSPITAL OWNERSHIP.—In the case of designated

health services provided by a hospital (other than a hospital

described in paragraph (1)) if— ‘‘(A) the referring physician is authorized to perform

services at the hospital, and

‘‘(B) the ownership or investment interest is in the

hospital itself (and not merely in a subdivision of the

hospital).

‘‘(e) EXCEPTIONS RELATING TO OTHER COMPENSATION ARRANGEMENTS.—The following shall not be considered to be a compensation arrangement described in subsection (a)(2)(B): ‘‘(1) RENTAL OF OFFICE SPACE; RENTAL OF EQUIPMENT.— ‘‘(A) OFFICE SPACE.—Payments made by a lessee to

a lessor for the use of premises if—

‘‘(i) the lease is set out in writing, signed by the

parties, and specifies the premises covered by the lease, ‘‘(ii) the space rented or leased does not exceed

that which is reasonable and necessary for the legitimate business purposes of the lease or rental and

is used exclusively by the lessee when being used by

the lessee, except that the lessee may make payments

for the use of space consisting of common areas if

such payments do not exceed the lessee’s pro rata

share of expenses for such space based upon the ratio

of the space used exclusively by the lessee to the total

amount of space (other than common areas) occupied

by all persons using such common areas,

‘‘(iii) the lease provides for a term of rental or

lease for at least 1 year,

‘‘(iv) the rental charges over the term of the lease

are set in advance, are consistent with fair market

value, and are not determined in a manner that takes
H. R. 2264—288

into account the volume or value of any referrals or

other business generated between the parties,

‘‘(v) the lease would be commercially reasonable

even if no referrals were made between the parties,

and

‘‘(vi) the lease meets such other requirements as

the Secretary may impose by regulation as needed

to protect against program or patient abuse.

‘‘(B) EQUIPMENT.—Payments made by a lessee of equipment to the lessor of the equipment for the use of the

equipment if—

‘‘(i) the lease is set out in writing, signed by the

parties, and specifies the equipment covered by the

lease,

‘‘(ii) the equipment rented or leased does not exceed

that which is reasonable and necessary for the legitimate business purposes of the lease or rental and

is used exclusively by the lessee when being used by

the lessee,

‘‘(iii) the lease provides for a term of rental or

lease of at least 1 year,

‘‘(iv) the rental charges over the term of the lease

are set in advance, are consistent with fair market

value, and are not determined in a manner that takes

into account the volume or value of any referrals or

other business generated between the parties,

‘‘(v) the lease would be commercially reasonable

even if no referrals were made between the parties,

and

‘‘(vi) the lease meets such other requirements as

the Secretary may impose by regulation as needed

to protect against program or patient abuse.

‘‘(2) BONA FIDE EMPLOYMENT RELATIONSHIPS.—Any amount

paid by an employer to a physician (or an immediate family

member of such physician) who has a bona fide employment

relationship with the employer for the provision of services

if—

‘‘(A) the employment is for identifiable services,

‘‘(B) the amount of the remuneration under the

employment—

‘‘(i) is consistent with the fair market value of

the services, and

‘‘(ii) is not determined in a manner that takes

into account (directly or indirectly) the volume or value

of any referrals by the referring physician,

‘‘(C) the remuneration is provided pursuant to an

agreement which would be commercially reasonable even

if no referrals were made to the employer, and

‘‘(D) the employment meets such other requirements

as the Secretary may impose by regulation as needed to

protect against program or patient abuse.

Subparagraph (B)(ii) shall not prohibit the payment of remuneration in the form of a productivity bonus based on services

performed personally by the physician (or an immediate family

member of such physician).

‘‘(3) PERSONAL SERVICE ARRANGEMENTS.—
H. R. 2264—289

‘‘(A) IN GENERAL.—Remuneration from an entity under

an arrangement (including remuneration for specific physicians’ services furnished to a nonprofit blood center) if—

‘‘(i) the arrangement is set out in writing, signed

by the parties, and specifies the services covered by

the arrangement,

‘‘(ii) the arrangement covers all of the services

to be provided by the physician (or an immediate family

member of such physician) to the entity,

‘‘(iii) the aggregate services contracted for do not

exceed those that are reasonable and necessary for

the legitimate business purposes of the arrangement,

‘‘(iv) the term of the arrangement is for at least

1 year,

‘‘(v) the compensation to be paid over the term

of the arrangement is set in advance, does not exceed

fair market value, and except in the case of a physician

incentive plan described in subparagraph (B), is not

determined in a manner that takes into account the

volume or value of any referrals or other business

generated between the parties,

‘‘(vi) the services to be performed under the

arrangement do not involve the counseling or promotion or a business arrangement or other activity

that violates any State or Federal law, and

‘‘(vii) the arrangement meets such other requirements as the Secretary may impose by regulation as

needed to protect against program or patient abuse.

‘‘(B) PHYSICIAN INCENTIVE PLAN EXCEPTION.— ‘‘(i) IN GENERAL.—In the case of a physician incen- tive plan (as defined in clause (ii)) between a physician

and an entity, the compensation may be determined

in a manner (through a withhold, capitation, bonus,

or otherwise) that takes into account directly or

indirectly the volume or value of any referrals or other

business generated between the parties, if the plan

meets the following requirements: ‘‘(I) No specific payment is made directly or

indirectly under the plan to a physician or a physician group as an inducement to reduce or limit

medically necessary services provided with respect

to a specific individual enrolled with the entity. ‘‘(II) In the case of a plan that places a physician or a physician group at substantial financial

risk as determined by the Secretary pursuant to

section 1876(i)(8)(A)(ii), the plan complies with any

requirements the Secretary may impose pursuant

to such section.

‘‘(III) Upon request by the Secretary, the entity

provides the Secretary with access to descriptive

information regarding the plan, in order to permit

the Secretary to determine whether the plan is

in compliance with the requirements of this clause.

‘‘(ii) PHYSICIAN INCENTIVE PLAN DEFINED.—For purposes of this subparagraph, the term ‘physician incentive plan’ means any compensation arrangement

between an entity and a physician or physician group
H. R. 2264—290

that may directly or indirectly have the effect of reducing or limiting services provided with respect to

individuals enrolled with the entity.

‘‘(4) REMUNERATION UNRELATED TO THE PROVISION OF DESIGNATED HEALTH SERVICES.—In the case of remuneration which

is provided by a hospital to a physician if such remuneration

does not relate to the provision of designated health services.

‘‘(5) PHYSICIAN RECRUITMENT.—In the case of remuneration

which is provided by a hospital to a physician to induce the

physician to relocate to the geographic area served by the

hospital in order to be a member of the medical staff of the

hospital, if—

‘‘(A) the physician is not required to refer patients

to the hospital,

‘‘(B) the amount of the remuneration under the

arrangement is not determined in a manner that takes

into account (directly or indirectly) the volume or value

of any referrals by the referring physician, and

‘‘(C) the arrangement meets such other requirements

as the Secretary may impose by regulation as needed to

protect against program or patient abuse.

‘‘(6) ISOLATED TRANSACTIONS.—In the case of an isolated

financial transaction, such as a one-time sale of property or

practice, if—

‘‘(A) the requirements described in subparagraphs (B)

and (C) of paragraph (2) are met with respect to the entity

in the same manner as they apply to an employer, and

‘‘(B) the transaction meets such other requirements

as the Secretary may impose by regulation as needed to

protect against program or patient abuse.

‘‘(7) CERTAIN GROUP PRACTICE ARRANGEMENTS WITH A HOSPITAL.—

‘‘(A) IN GENERAL.—An arrangement between a hospital

and a group under which designated health services are

provided by the group but are billed by the hospital if—

‘‘(i) with respect to services provided to an

inpatient of the hospital, the arrangement is pursuant

to the provision of inpatient hospital services under

section 1861(b)(3),

‘‘(ii) the arrangement began before December 19,

1989, and has continued in effect without interruption

since such date,

‘‘(iii) with respect to the designated health services

covered under the arrangement, substantially all of

such services furnished to patients of the hospital are

furnished by the group under the arrangement,

‘‘(iv) the arrangement is pursuant to an agreement

that is set out in writing and that specifies the services

to be provided by the parties and the compensation

for services provided under the agreement,

‘‘(v) the compensation paid over the term of the

agreement is consistent with fair market value and

the compensation per unit of services is fixed in

advance and is not determined in a manner that takes

into account the volume or value of any referrals or

other business generated between the parties,
H. R. 2264—291

‘‘(vi) the compensation is provided pursuant to an

agreement which would be commercially reasonable

even if no referrals were made to the entity, and

‘‘(vii) the arrangement between the parties meets

such other requirements as the Secretary may impose

by regulation as needed to protect against program

or patient abuse.

‘‘(8) PAYMENTS BY A PHYSICIAN FOR ITEMS AND SERVICES.—

Payments made by a physician—

‘‘(A) to a laboratory in exchange for the provision of

clinical laboratory services, or

‘‘(B) to an entity as compensation for other items or

services if the items or services are furnished at a price

that is consistent with fair market value.’’;

(2) by amending subsection (h) to read as follows:

‘‘(h) DEFINITIONS AND SPECIAL RULES.—For purposes of this

section:

‘‘(1) COMPENSATION ARRANGEMENT; REMUNERATION.—(A)

The term ‘compensation arrangement’ means any arrangement

involving any remuneration between a physician (or an immediate family member of such physician) and an entity other

than an arrangement involving only remuneration described

in subparagraph (C).

‘‘(B) The term ‘remuneration’ includes any remuneration,

directly or indirectly, overtly or covertly, in cash or in kind.

‘‘(C) Remuneration described in this subparagraph is any

remuneration consisting of any of the following:

‘‘(i) The forgiveness of amounts owed for inaccurate

tests or procedures, mistakenly performed tests or procedures, or the correction of minor billing errors.

‘‘(ii) The provision of items, devices, or supplies that

are used solely to—

‘‘(I) collect, transport, process, or store specimens

for the entity providing the item, device, or supply,

or

‘‘(II) order or communicate the results of tests or

procedures for such entity.

‘‘(iii) A payment made by an insurer or a self-insured

plan to a physician to satisfy a claim, submitted on a

fee for service basis, for the furnishing of health services

by that physician to an individual who is covered by a

policy with the insurer or by the self-insured plan, if—

‘‘(I) the health services are not furnished, and the

payment is not made, pursuant to a contract or other

arrangement between the insurer or the plan and the

physician,

‘‘(II) the payment is made to the physician on

behalf of the covered individual and would otherwise

be made directly to such individual,

‘‘(III) the amount of the payment is set in advance,

does not exceed fair market value, and is not determined in a manner that takes into account directly

or indirectly the volume or value of any referrals, and

‘‘(IV) the payment meets such other requirements

as the Secretary may impose by regulation as needed

to protect against program or patient abuse.
H. R. 2264—292

‘‘(2) EMPLOYEE.—An individual is considered to be

‘employed by’ or an ‘employee’ of an entity if the individual

would be considered to be an employee of the entity under

the usual common law rules applicable in determining the

employer-employee relationship (as applied for purposes of section 3121(d)(2) of the Internal Revenue Code of 1986).

‘‘(3) FAIR MARKET VALUE.—The term ‘fair market value’

means the value in arms length transactions, consistent with

the general market value, and, with respect to rentals or leases,

the value of rental property for general commercial purposes

(not taking into account its intended use) and, in the case

of a lease of space, not adjusted to reflect the additional value

the prospective lessee or lessor would attribute to the proximity

or convenience to the lessor where the lessor is a potential

source of patient referrals to the lessee.

‘‘(4) GROUP PRACTICE.—

‘‘(A) DEFINITION OF GROUP PRACTICE.—The term ‘group

practice’ means a group of 2 or more physicians legally

organized as a partnership, professional corporation,

foundation, not-for-profit corporation, faculty practice plan,

or similar association—

‘‘(i) in which each physician who is a member

of the group provides substantially the full range of

services which the physician routinely provides, including medical care, consultation, diagnosis, or treatment,

through the joint use of shared office space, facilities,

equipment and personnel,

‘‘(ii) for which substantially all of the services of

the physicians who are members of the group are provided through the group and are billed under a billing

number assigned to the group and amounts so received

are treated as receipts of the group, ‘‘(iii) in which the overhead expenses of and the

income from the practice are distributed in accordance

with methods previously determined, ‘‘(iv) except as provided in subparagraph (B)(i),

in which no physician who is a member of the group

directly or indirectly receives compensation based on

the volume or value of referrals by the physician, ‘‘(v) in which members of the group personally

conduct no less than 75 percent of the physician-patient

encounters of the group practice, and ‘‘(vi) which meets such other standards as the Secretary may impose by regulation.

‘‘(B) SPECIAL RULES.—

‘‘(i) PROFITS AND PRODUCTIVITY BONUSES.—A physician in a group practice may be paid a share of overall

profits of the group, or a productivity bonus based

on services personally performed or services incident

to such personally performed services, so long as the

share or bonus is not determined in any manner which

is directly related to the volume or value of referrals

by such physician.

‘‘(ii) FACULTY PRACTICE PLANS.—In the case of a

faculty practice plan associated with a hospital, institution of higher education, or medical school with an

approved medical residency training program in which
H. R. 2264—293

physician members may provide a variety of different

specialty services and provide professional services

both within and outside the group, as well as perform

other tasks such as research, subparagraph (A) shall

be applied only with respect to the services provided

within the faculty practice plan.

‘‘(5) REFERRAL; REFERRING PHYSICIAN.—

‘‘(A) PHYSICIANS’ SERVICES.—Except as provided in

subparagraph (C), in the case of an item or service for

which payment may be made under part B, the request

by a physician for the item or service, including the request

by a physician for a consultation with another physician

(and any test or procedure ordered by, or to be performed

by (or under the supervision of) that other physician),

constitutes a ‘referral’ by a ‘referring physician’.

‘‘(B) OTHER ITEMS.—Except as provided in subparagraph (C), the request or establishment of a plan of care

by a physician which includes the provision of the designated health service constitutes a ‘referral’ by a ‘referring

physician’.

‘‘(C) CLARIFICATION RESPECTING CERTAIN SERVICES

INTEGRAL TO A CONSULTATION BY CERTAIN SPECIALISTS.—

A request by a pathologist for clinical diagnostic laboratory

tests and pathological examination services, a request by

a radiologist for diagnostic radiology services, and a request

by a radiation oncologist for radiation therapy, if such

services are furnished by (or under the supervision of)

such pathologist, radiologist, or radiation oncologist pursuant to a consultation requested by another physician does

not constitute a ‘referral’ by a ‘referring physician’.

‘‘(6) DESIGNATED HEALTH SERVICES.—The term ‘designated

health services’ means any of the following items or services: ‘‘(A) Clinical laboratory services.

‘‘(B) Physical therapy services.

‘‘(C) Occupational therapy services.

‘‘(D) Radiology or other diagnostic services.

‘‘(E) Radiation therapy services.

‘‘(F) Durable medical equipment.

‘‘(G) Parenteral and enteral nutrients, equipment, and

supplies.

‘‘(H) Prosthetics, orthotics, and prosthetic devices.

‘‘(I) Home health services.

‘‘(J) Outpatient prescription drugs.

‘‘(K) Inpatient and outpatient hospital services.’’;

(3) in subsection (f), by striking ‘‘clinical laboratory services’’ and inserting ‘‘designated health services’’; and

(4) in paragraph (1) of subsection (g), by striking ‘‘clinical

laboratory service’’ and inserting ‘‘designated health service’’.

(b) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as provided in paragraph (2), the

amendments made by this section shall apply to referrals—

(A) made on or after January 1, 1992, in the case

of clinical laboratory services, and

(B) made after December 31, 1994, in the case of other

designated health services.

(2) EXCEPTIONS.—With respect to referrals made for clinical

laboratory services on or before December 31, 1994—
H. R. 2264—294

(A) the requirements of clauses (iv) and (v) of section

1877(h)(4)(A) of the Social Security Act, as amended by

this section, shall not apply; and

(B) the second sentence of subsection (a)(2), and subsections (b)(2)(B), (c), (d)(2), (e)(1), and (h)(4)(B) of section

1877 of such Act, as in effect on the day before the date

of the enactment of this Act, shall apply (instead of the

corresponding provision in such section as so amended).

SEC. 13563. DIRECT GRADUATE MEDICAL EDUCATION.

(a) ELIMINATION OF COST-OF-LIVING UPDATE IN PER RESIDENT

AMOUNTS FOR DIRECT MEDICAL EDUCATION.—Section 1886(h) (42

U.S.C. 1395ww(h)) is amended—

(1) in paragraph (2)(D)—

(A) by striking ‘‘For each’’ and inserting ‘‘(i) Except

as provided in clause (ii), for each’’, and

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

‘‘(ii) For cost reporting periods beginning during fiscal

year 1994 or fiscal year 1995, the approved FTE resident

amount for a hospital shall not be updated under clause

(i) for a resident who is not a primary care resident (as

defined in paragraph (5)(H)) or a resident enrolled in an

approved medical residency training program in obstetrics

and gynecology.’’; and

(2) in paragraph (5)—

(A) by redesignating subparagraph (H) as subparagraph (I); and

(B) by inserting after subparagraph (G) the following

new subparagraph: ‘‘(H) PRIMARY CARE RESIDENT.—The term ‘primary care

resident’ means a resident enrolled in an approved medical

residency training program in family medicine, general

internal medicine, general pediatrics, preventive medicine,

geriatric medicine, or osteopathic general practice.’’. (b) INITIAL RESIDENCY PERIOD.— (1) IN GENERAL.—Section 1886(h)(5)(F) (42 U.S.C.

1395ww(h)(5)(F)) is amended—

(A) by striking ‘‘plus one year’’, and

(B) in clause (ii), by inserting ‘‘or a preventive medicine

residency or fellowship program’’ after ‘‘fellowship program’’.

(2) EFFECTIVE DATES.—The amendments made by para- graphs (1)(A) and (1)(B) shall take effect on July 1, 1995,

and the date of the enactment of this Act, respectively.

(c) ADJUSTMENT FOR PUBLICLY-FUNDED FAMILY PRACTICE RESIDENCY PROGRAMS.—

(1) IN GENERAL.—Section 1886(h)(5) (42 U.S.C.

1395ww(h)(5)), as amended by subsection (a), is amended by

adding at the end the following new subparagraph:

‘‘(J) ADJUSTMENTS FOR CERTAIN FAMILY PRACTICE RESIDENCY PROGRAMS.—

‘‘(i) IN GENERAL.—In the case of an approved medical residency training program (meeting the requirements of clause (ii)) of a hospital which received funds

from the United States, a State, or a political subdivision of a State or an instrumentality of such a State

or political subdivision (other than payments under
H. R. 2264—295

this title or a State plan under title XIX) for the

program during the cost reporting period that began

during fiscal year 1984, the Secretary shall—

‘‘(I) provide for an average amount under paragraph (2)(A) that takes into account the Secretary’s

estimate of the amount that would have been recognized as reasonable under this title if the hospital had not received such funds, and

‘‘(II) reduce the payment amount otherwise

provided under this subsection in an amount equal

to the proportion of such program funds received

during the cost reporting period involved that is

allocable to this title.

‘‘(ii) ADDITIONAL REQUIREMENTS.—A hospital’s

approved medical residency program meets the requirements of this clause if—

‘‘(I) the program is limited to training for family and community medicine;

‘‘(II) the program is the only approved medical

residency program of the hospital; and

‘‘(III) the average amount determined under

paragraph (2)(A) for the hospital (as determined

without regard to the increase in such amount

described in clause (i)(I)) does not exceed $10,000.’’.

(2) EFFECTIVE DATE.—The amendment made by paragraph

(1) shall apply to payments under section 1886(h) of the Social

Security Act for cost reporting periods beginning on or after

October 1, 1992.

(d) ADJUSTMENT IN GME BASE-YEAR COSTS OF FEDERAL INSURANCE CONTRIBUTIONS ACT.— (1) IN GENERAL.—In determining the amount of payment to be made under section 1886(h) of the Social Security Act

in the case of a hospital described in paragraph (2) for cost

reporting periods beginning on or after October 1, 1992, the

Secretary of Health and Human Services shall redetermine

the approved FTE resident amount to reflect the amount that

would have been paid the hospital if, during the hospital’s

base cost reporting period, the hospital had been liable for

FICA taxes or for contributions to the retirement system of

a State, a political subdivision of a State, or an instrumentality

of such a State or political subdivision with respect to interns

and residents in its medical residency training program. (2) HOSPITALS AFFECTED.—A hospital described in this

paragraph is a hospital that did not pay FICA taxes with

respect to interns and residents in its medical residency training program during the hospital’s base cost reporting period,

but is required to pay FICA taxes or make contributions to

a retirement system described in paragraph (1) with respect

to such interns and residents because of the amendments made

by section 11332(b) of OBRA–1990.

(3) DEFINITIONS.—In this subsection:

(A) The ‘‘base cost reporting period’’ for a hospital

is the hospital’s cost reporting period that began during

fiscal year 1984.

(B) The term ‘‘FICA taxes’’ means, with respect to

a hospital, the taxes under section 3111 of the Internal

Revenue Code of 1986.
H. R. 2264—296

SEC. 13564. REDUCTION IN PAYMENTS FOR HOME HEALTH SERVICES.

(a) IN GENERAL.—

(1) NO CHANGES IN COST LIMITS.—The Secretary of Health

and Human Services shall not provide for any change in the

per visit cost limits for home health services under section

1861(v)(1)(L) of such Act for cost reporting periods beginning

on or after July 1, 1994, and before July 1, 1996, except as

may be necessary to take into account the amendment made

by subsection (b)(1). The effect of the preceding sentence shall

not be considered by the Secretary in making adjustments

pursuant to section 1861(v)(1)(L)(ii) of such Act to the payment

limits for such services during such cost reporting periods.

(2) DELAY IN UPDATES.—Section 1861(v)(1)(L)(iii) (42 U.S.C.

1395x(v)(1)(L)(iii)) is amended by striking ‘‘thereafter,’’ and

inserting ‘‘thereafter (but not for cost reporting periods beginning on or after July 1, 1994, and before July 1, 1996),’’.

(b) ELIMINATION OF ADD-ON FOR OVERHEAD OF HOSPITAL-BASED

HOME HEALTH AGENCIES.—

(1) GENERAL RULE.—The first sentence of section

1861(v)(1)(L)(ii) (42 U.S.C. 1395x(v)(1)(L)(ii)) is amended by

striking ‘‘, with appropriate adjustment for administrative and

general costs of hospital-based agencies’’.

(2) EFFECTIVE DATE.—The amendment made by paragraph

(1) shall apply to cost reporting periods beginning on or after

October 1, 1993.

SEC. 13565. IMMUNOSUPPRESSIVE DRUG THERAPY.

Section 1861(s)(2)(J) (42 U.S.C. 1395x(s)(2)(J)) is amended by

striking ‘‘title, within’’ and all that follows and inserting the following: ‘‘title, but only in the case of drugs furnished—

‘‘(i) before 1995, within 12 months after the date of

the transplant procedure,

‘‘(ii) during 1995, within 18 months after the date

of the transplant procedure,

‘‘(iii) during 1996, within 24 months after the date

of the transplant procedure,

‘‘(iv) during 1997, within 30 months after the date

of the transplant procedure, and

‘‘(v) during any year after 1997, within 36 months

after the date of the transplant procedure;’’.

SEC. 13566. REDUCTION IN PAYMENTS FOR ERYTHROPOIENTIN.

(a) IN GENERAL.—Section 1881(b) (42 U.S.C. 1395rr(b)) is

amended—

(1) in paragraph (1)(C), by striking ‘‘1861(s)(2)(Q)’’ and

inserting ‘‘1861(s)(2)(P)’’; and

(2) in paragraph (11)(B)(ii)(I)—

(A) by striking ‘‘1991’’ and inserting ‘‘1994’’, and

(B) by striking ‘‘$11’’ and inserting ‘‘$10’’.

(b) SELF-ADMINISTRATION OF ERYTHROPOIENTIN.—Subparagraph (P) of section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) is amended—

(1) by striking ‘‘home’’, and

(2) by moving such subparagraph two ems to the left.

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

shall apply to erythropoietin furnished on or after January 1, 1994.
H. R. 2264—297

SEC. 13567. EXTENSION OF SOCIAL HEALTH MAINTENANCE

ORGANIZATION DEMONSTRATIONS.

(a) EXTENSION OF CURRENT WAIVERS.—Section 4018(b) of

OBRA–1987, as amended by section 4207(b)(4)(B) of OBRA–1990,

is amended—

(1) in paragraph (1) by striking ‘‘December 31, 1995’’ and

inserting ‘‘December 31, 1997’’; and

(2) in paragraph (4) by striking ‘‘March 31, 1996’’ and

inserting ‘‘March 31, 1998’’.

(b) EXPANSION OF DEMONSTRATIONS.—Section 2355 of the Deficit Reduction Act of 1984 is amended—

(1) in the last sentence of subsection (a) by striking ‘‘12

months’’ and inserting ‘‘36 months’’; and

(2) in subsection (b)(1)(B)—

(A) by striking ‘‘or’’ at the end of clause (iii); and

(B) by redesignating clause (iv) as clause (v) and inserting after clause (iii) the following new clause:

‘‘(iv) integrating acute and chronic care management for patients with end-stage renal disease through

expanded community care case management services

(and for purposes of a demonstration project conducted

under this clause, any requirement under a waiver

granted under this section that a project disenroll

individuals who develop end-stage renal disease shall

not apply); or’’.

(c) EXPANSION OF NUMBER OF MEMBERS PER SITE.—The Secretary of Health and Human Services may not impose a limit

of less than 12,000 on the number of individuals that may participate in a project conducted under section 2355 of the Deficit Reduction Act of 1984.

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

shall take effect as if included in the enactment of OBRA–1990.

SEC. 13568. TIMING OF CLAIMS PAYMENT.

(a) IN GENERAL.—Sections 1816(c)(3)(B) (42 U.S.C.

1395h(c)(3)(B)) and 1842(c)(3)(B) (42 U.S.C. 1395u(c)(3)(B)) are each

amended by striking clauses (i) and (ii) and inserting the following:

‘‘(i) with respect to claims submitted electronically as prescribed by the Secretary, 13 days, and

‘‘(ii) with respect to claims submitted otherwise, 26 days.’’.

(b) TIME LIMIT OF 30 DAYS FOR CLEAN CLAIMS.—Sections

1816(c)(2)(B)(ii) (42 U.S.C. 1395h(c)(2)(B)(ii)) and 1842(c)(2)(B)(ii)

(42 U.S.C. 1395u(c)(2)(B)(ii)) are each amended—

(1) in subclause (IV), by striking ‘‘period,’’ and inserting

‘‘period ending on or before September 30, 1993,’’, and

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

‘‘(V) with respect to claims received in the 12-month

period beginning October 1, 1993, and claims received in

any succeeding 12-month period, 30 calendar days.’’.

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

shall apply to claims received on or after October 1, 1993.

SEC. 13569. EXTENSION OF WAIVER FOR WATTS HEALTH FOUNDATION.

Section 9312(c)(3)(D) of OBRA–1986, as added by section

4018(d) of OBRA–1987 and as amended by section 6212(a)(1) of

OBRA–1989, is amended by striking ‘‘1994’’ and inserting ‘‘1996’’.
H. R. 2264—298

PART IV—PROVISION RELATING TO PART B

PREMIUM

SEC. 13571. PART B PREMIUM.

Section 1839 (42 U.S.C. 1395r) is amended—

(1) in subsection (e)(1)(A), by striking ‘‘December 1983 and

prior to January 1991 shall be an amount equal to 50 percent’’

and inserting ‘‘after December 1995 and prior to January 1999

shall be an amount equal to 50 percent’’, and

(2) in subsection (e)(2), by striking ‘‘1991’’ and inserting

‘‘1998’’.

PART V—PROVISION RELATING TO DATA

BANK

SEC. 13581. MEDICARE AND MEDICAID COVERAGE DATA BANK.

(a) ESTABLISHMENT OF MEDICARE AND MEDICAID COVERAGE

DATA BANK.—Part A of title XI (42 U.S.C. 1301 et seq.) is amended

by adding at the end the following new section:

‘‘MEDICARE AND MEDICAID COVERAGE DATA BANK

‘‘SEC. 1144. (a) ESTABLISHMENT OF DATA BANK.—The Secretary

shall establish a Medicare and Medicaid Coverage Data Bank

(hereafter in this section referred to as the ‘Data Bank’) to—

‘‘(1) further the purposes of section 1862(b) in the identification of, and collection from, third parties responsible for

payment for health care items and services furnished to medicare beneficiaries, and

‘‘(2) assist in the identification of, and the collection from,

third parties responsible for the reimbursement of costs

incurred by any State plan under title XIX with respect to

medicaid beneficiaries, upon request by the State agency

described in section 1902(a)(5) administering such plan.

‘‘(b) INFORMATION IN DATA BANK.— ‘‘(1) IN GENERAL.—The Data Bank shall contain information

obtained pursuant to section 6103(l)(12) of the Internal Revenue

Code of 1986 and subsection (c).

‘‘(2) DISCLOSURE OF INFORMATION IN DATA BANK.—The Secretary is authorized until September 30, 1998— ‘‘(A) (subject to the restriction in subparagraph (D)(i) of section 6103(l)(12) of the Internal Revenue Code of 1986)

to disclose any information in the Data Bank obtained

pursuant to such section solely for the purposes of such

section, and

‘‘(B) (subject to the restriction in subsection (c)(7)) to

disclose any other information in the Data Bank to any

State agency described in section 1902(a)(5), employer, or

group health plan solely for the purposes described in

subsection (a).

‘‘(c) REQUIREMENT THAT EMPLOYERS REPORT INFORMATION.—

‘‘(1) REPORTING REQUIREMENT.—

‘‘(A) IN GENERAL.—Any employer described in paragraph (2) shall report to the Secretary (in such form and

manner as the Secretary determines will minimize the

burden of such reporting) with respect to each electing
H. R. 2264—299

individual the information required under paragraph (5)

for each calendar year beginning on or after January 1,

1994, and before January 1, 1998.

‘‘(B) SPECIAL RULE.—To the extent a group health plan

provides information required under paragraph (5) in a

form and manner specified by the Secretary (in consultation

with the Secretary of Labor) on behalf of an employer

in accordance with section 101(f) of the Employee Retirement Income Security Act of 1974, the employer has complied with the reporting requirement under subparagraph

(A) with respect to the reporting of such information.

‘‘(2) EMPLOYER DESCRIBED.—An employer is described in

this paragraph if such employer has, or contributes to, a group

health plan, with respect to which at least 1 employee of

such employer is an electing individual.

‘‘(3) ELECTING INDIVIDUAL.—For purposes of this subsection,

the term ‘electing individual’ means an individual associated

or formerly associated with the employer in a business relationship who elects coverage under the employer’s group health

plan.

‘‘(4) CERTAIN INDIVIDUALS EXCLUDED.—For purposes of this

subsection, an individual providing service referred to in section

3121(a)(7)(B) of the Internal Revenue Code of 1986 shall not

be considered an employee or electing individual with respect

to an employer.

‘‘(5) INFORMATION REQUIRED.—For purposes of paragraph

(1), each employer shall provide the following information:

‘‘(A) The name and TIN of the electing individual.

‘‘(B) The type of group health plan coverage (single or family) elected by the electing individual. ‘‘(C) The name, address, and identifying number of

the group health plan elected by such electing individual. ‘‘(D) The name and TIN of each other individual covered under the group health plan pursuant to such election. ‘‘(E) The period during which such coverage is elected.

‘‘(F) The name, address, and TIN of the employer. ‘‘(6) TIME OF FILING.—For purposes of determining the date for filing the report under paragraph (1), such report shall

be treated as a statement described in section 6051(d) of the

Internal Revenue Code of 1986.

‘‘(7) LIMITS ON DISCLOSURE OF INFORMATION REPORTED.— ‘‘(A) IN GENERAL.—The disclosure of the information

reported under paragraph (1) shall be restricted by the

Secretary under rules similar to the rules of subsections

(a) and (p) of section 6103 of the Internal Revenue Code

of 1986.

‘‘(B) PENALTY FOR UNAUTHORIZED WILLFUL DISCLOSURE

OF INFORMATION.—The unauthorized disclosure of any

information reported under paragraph (1) shall be subject

to the penalty described in paragraph (1), (2), (3), or (4)

of section 7213(a) of such Code.

‘‘(9) PENALTY FOR FAILURE TO REPORT.—In the case of the

failure of an employer (other than a Federal or other governmental entity) to report under paragraph (1)(A) with respect

to each electing individual, the Secretary shall impose a penalty

as described in part II of subchapter B of chapter 68 of the

Internal Revenue Code of 1986.
H. R. 2264—300

‘‘(d) FEES FOR DATA BANK SERVICES.—The Secretary shall establish fees for services provided under this section which shall

remain available, without fiscal year limitation, to the Secretary

to cover the administrative costs to the Data Bank of providing

such services.

‘‘(f) DEFINITIONS.—In this section:

‘‘(1) MEDICARE BENEFICIARY.—The term ‘medicare beneficiary’ means an individual entitled to benefits under part

A, or enrolled under part B, of title XVIII, but does not include

such an individual enrolled in part A under section 1818.

‘‘(2) MEDICAID BENEFICIARY.—The term ‘medicaid beneficiary’ means an individual entitled to benefits under a State

plan for medical assistance under title XIX (including a State

plan operating under a statewide waiver under section 1115).

‘‘(3) GROUP HEALTH PLAN.—The term ‘group health plan’

shall have the meaning given to such term by section 5000(b)(1)

of the Internal Revenue Code of 1986.

‘‘(4) TIN.—The term ‘TIN’ shall have the meaning given

to such term by section 7701(a)(41) of such Code.’’.

(b) CONFORMING AMENDMENTS.—

(1) MEDICARE.—Section 1862(b)(5) (42 U.S.C. 1395y(b)(5))

is amended—

(A) in subparagraph (B), by striking ‘‘under subparagraph (A)’’ and all that follows and inserting ‘‘under—

‘‘(i) subparagraph (A), and

‘‘(ii) section 1144,

for purposes of carrying out this subsection.’’, and

(B) in subparagraph (C)(i), by striking ‘‘subparagraph

(B)’’ and inserting ‘‘subparagraph (B)(i)’’.

(2) MEDICAID.—Section 1902(a)(25)(A)(i) (42 U.S.C.

1396a(a)(25)(A)(i)) is amended by striking ‘‘(as specified’’ and

inserting ‘‘(including the use of information collected by the

Medicare and Medicaid Coverage Data Bank under section

1144 and any additional measures as specified’’.

(c) CONFORMING AMENDMENT RELATING TO DATA MATCHES.—

Subsection (a)(8)(B) of section 552a of title 5, United States Code,

is amended—

(1) in clause (v), by striking ‘‘; or’’ at the end;

(2) in clause (vi), by striking the semicolon at the end

and inserting ‘‘; or’’; and

(3) by adding at the end the following new clause: ‘‘(vii) matches performed pursuant to section

6103(l)(12) of the Internal Revenue Code of 1986 and

section 1144 of the Social Security Act;’’. (d) EFFECTIVE DATE.—The amendments made by this section

shall take effect on January 1, 1994.

Subchapter B—Medicaid

SEC. 13600. REFERENCES IN SUBCHAPTER; TABLE OF CONTENTS OF

SUBCHAPTER.

(a) AMENDMENTS TO SOCIAL SECURITY ACT.—Except as otherwise specifically provided, whenever in this subchapter an amendment is expressed in terms of an amendment to or repeal of a

section or other provision, the reference shall be considered to

be made to that section or other provision of the Social Security

Act.
H. R. 2264—301

(b) REFERENCES TO OBRA.—In this subchapter, the terms

‘‘OBRA–1986’’, ‘‘OBRA–1987’’, ‘‘OBRA–1989’’, and ‘‘OBRA–1990’’

refer to the Omnibus Budget Reconciliation Act of 1986 (Public

Law 99–509), the Omnibus Budget Reconciliation Act of 1987 (Public Law 100–203), the Omnibus Budget Reconciliation Act of 1989

(Public Law 101–239), and the Omnibus Budget Reconciliation Act

of 1990 (Public Law 101–508), respectively.

(c) TABLE OF CONTENTS OF SUBCHAPTER.—The table of contents

of this subchapter is as follows:

Sec. 13600. References in subchapter; table of contents of subchapter.

PART I—SERVICES

Sec. 13601. Personal care services furnished outside the home as optional benefit. Sec. 13602. Additional Federal savings through modifications to drug rebate program. Sec. 13603. Optional medicaid coverage of TB-related services for certain TB-infected individuals.

Sec. 13604. Limiting Federal medicaid matching payment to bona fide emergency

services for undocumented aliens.

Sec. 13605. Coverage of nurse-midwife services performed outside the maternity

cycle. Sec. 13606. Treatment of certain clinics as Federally-qualified health centers.

PART II—ELIGIBILITY

Sec. 13611. Transfers of assets; treatment of certain trusts.

Sec. 13612. Medicaid estate recoveries.

PART III—PAYMENTS

Sec. 13621. Assuring proper payments to disproportionate share hospitals. Sec. 13622. Liability of third parties to pay for care and services. Sec. 13623. Medical child support. Sec. 13624. Application of medicare rules limiting certain physician referrals. Sec. 13625. State medicaid fraud control.

PART IV—IMMUNIZATIONS

Sec. 13631. Medicaid pediatric immunization provisions. Sec. 13632. National Vaccine Injury Compensation Program amendments.

PART V—MISCELLANEOUS

Sec. 13641. Increase in limit on Federal medicaid matching payments to Puerto

Rico and other territories.

Sec. 13642. Extension of moratorium on treatment of certain facilities as institutions for mental diseases.

Sec. 13643. Demonstration projects. Sec. 13644. Extension of period of applicability of enrollment mix requirement to

certain health maintenance organizations providing services under

Dayton Area Health Plan.

PART I—SERVICES

SEC. 13601. PERSONAL CARE SERVICES FURNISHED OUTSIDE THE

HOME AS OPTIONAL BENEFIT.

(a) IN GENERAL.—Section 1905(a) (42 U.S.C. 1396d(a)) is

amended—

(1) in paragraph (7), by striking ‘‘including personal care

services’’ and all that follows through ‘‘nursing facility’’; (2) by striking ‘‘and’’ at the end of paragraph (21);

(3) in paragraph (24), by striking the comma at the end

and inserting a semicolon; (4) by redesignating paragraphs (22), (23), and (24) as

paragraphs (25), (22), and (23), respectively, by striking the

semicolon at the end of paragraph (25), as so redesignated,

and inserting a period, and by transferring and inserting paragraph (25) after paragraph (23), as so redesignated; and
H. R. 2264—302

(5) by inserting after paragraph (23), as so redesignated,

the following new paragraph:

‘‘(24) personal care services furnished to an individual who

is not an inpatient or resident of a hospital, nursing facility,

intermediate care facility for the mentally retarded, or institution for mental disease that are (A) authorized for the individual

by a physician in accordance with a plan of treatment or

(at the option of the State) otherwise authorized for the individual in accordance with a service plan approved by the State,

(B) provided by an individual who is qualified to provide such

services and who is not a member of the individual’s family,

and (C) furnished in a home or other location; and’’.

(b) CONFORMING AMENDMENTS.—(1) Section 1902(a)(10)(C)(iv)

(42 U.S.C. 1396a(a)(10)(C)(iv)) is amended by striking ‘‘through

(21)’’ and inserting ‘‘through (24)’’.

(2) Section 1902(j) (42 U.S.C. 1396a(j)) is amended by striking

‘‘through (22)’’ and inserting ‘‘through (25)’’.

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

(a) and (b) shall take effect as if included in the enactment of

section 4721(a) of OBRA–1990.

SEC. 13602. ADDITIONAL FEDERAL SAVINGS THROUGH MODIFICATIONS TO DRUG REBATE PROGRAM.

(a) CHANGES IN REBATE PROGRAM.—

(1) IN GENERAL.—Section 1927 (42 U.S.C. 1396r–8) is

amended by striking subsection (c) and all that follows through

‘‘(2)’’ in subsection (f)(2) and inserting the following:

‘‘(c) DETERMINATION OF AMOUNT OF REBATE.— ‘‘(1) BASIC REBATE FOR SINGLE SOURCE DRUGS AND INNOVATOR MULTIPLE SOURCE DRUGS.— ‘‘(A) IN GENERAL.—Except as provided in paragraph (2), the amount of the rebate specified in this subsection

for a rebate period (as defined in subsection (k)(8)) with

respect to each dosage form and strength of a single source

drug or an innovator multiple source drug shall be equal

to the product of—

‘‘(i) the total number of units of each dosage form

and strength paid for under the State plan in the

rebate period (as reported by the State); and ‘‘(ii) subject to subparagraph (B)(ii), the greater

of—

‘‘(I) the difference between the average manu- facturer price and the best price (as defined in

subparagraph (C)) for the dosage form and

strength of the drug, or

‘‘(II) the minimum rebate percentage (specified

in subparagraph (B)(i)) of such average manufacturer price,

for the rebate period.

‘‘(B) RANGE OF REBATES REQUIRED.—

‘‘(i) MINIMUM REBATE PERCENTAGE.—For purposes

of subparagraph (A)(ii)(II), the ‘minimum rebate

percentage’ for rebate periods beginning—

‘‘(I) after December 31, 1990, and before October 1, 1992, is 12.5 percent;

‘‘(II) after September 30, 1992, and before

January 1, 1994, is 15.7 percent;
H. R. 2264—303

‘‘(III) after December 31, 1993, and before

January 1, 1995, is 15.4 percent;

‘‘(IV) after December 31, 1994, and before

January 1, 1996, is 15.2 percent; and

‘‘(V) after December 31, 1995, is 15.1 percent.

‘‘(ii) TEMPORARY LIMITATION ON MAXIMUM REBATE

AMOUNT.—In no case shall the amount applied under

subparagraph (A)(ii) for a rebate period beginning—

‘‘(I) before January 1, 1992, exceed 25 percent

of the average manufacturer price; or

‘‘(II) after December 31, 1991, and before January 1, 1993, exceed 50 percent of the average

manufacturer price.

‘‘(C) BEST PRICE DEFINED.—For purposes of this

section—

‘‘(i) IN GENERAL.—The term ‘best price’ means, with

respect to a single source drug or innovator multiple

source drug of a manufacturer, the lowest price available from the manufacturer during the rebate period

to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental

entity within the United States, excluding—

‘‘(I) any prices charged on or after October

1, 1992, to the Indian Health Service, the Department of Veterans Affairs, a State home receiving

funds under section 1741 of title 38, United States

Code, the Department of Defense, the Public

Health Service, or a covered entity described in

subsection (a)(5)(B);

‘‘(II) any prices charged under the Federal

Supply Schedule of the General Services Administration;

‘‘(III) any prices used under a State pharmaceutical assistance program; and

‘‘(IV) any depot prices and single award contract prices, as defined by the Secretary, of any

agency of the Federal Government.

‘‘(ii) SPECIAL RULES.—The term ‘best price’—

‘‘(I) shall be inclusive of cash discounts, free

goods that are contingent on any purchase requirement, volume discounts, and rebates (other than

rebates under this section);

‘‘(II) shall be determined without regard to

special packaging, labeling, or identifiers on the

dosage form or product or package; and

‘‘(III) shall not take into account prices that

are merely nominal in amount.

‘‘(2) ADDITIONAL REBATE FOR SINGLE SOURCE AND INNOVATOR MULTIPLE SOURCE DRUGS.—

‘‘(A) IN GENERAL.—The amount of the rebate specified

in this subsection for a rebate period, with respect to each

dosage form and strength of a single source drug or an

innovator multiple source drug, shall be increased by an

amount equal to the product of—

‘‘(i) the total number of units of such dosage form

and strength dispensed after December 31, 1990, for
H. R. 2264—304

which payment was made under the State plan for

the rebate period; and

‘‘(ii) the amount (if any) by which—

‘‘(I) the average manufacturer price for the

dosage form and strength of the drug for the

period, exceeds

‘‘(II) the average manufacturer price for such

dosage form and strength for the calendar quarter

beginning July 1, 1990 (without regard to whether

or not the drug has been sold or transferred to

an entity, including a division or subsidiary of

the manufacturer, after the first day of such quarter), increased by the percentage by which the

consumer price index for all urban consumers

(United States city average) for the month before

the month in which the rebate period begins

exceeds such index for September 1990.

‘‘(B) TREATMENT OF SUBSEQUENTLY APPROVED DRUGS.—

In the case of a covered outpatient drug approved by the

Food and Drug Administration after October 1, 1990, clause

(ii)(II) of subparagraph (A) shall be applied by substituting

‘the first full calendar quarter after the day on which

the drug was first marketed’ for ‘the calendar quarter

beginning July 1, 1990’ and ‘the month prior to the first

month of the first full calendar quarter after the day on

which the drug was first marketed’ for ‘September 1990’.

‘‘(3) REBATE FOR OTHER DRUGS.—

‘‘(A) IN GENERAL.—The amount of the rebate paid to

a State for a rebate period with respect to each dosage

form and strength of covered outpatient drugs (other than

single source drugs and innovator multiple source drugs)

shall be equal to the product of—

‘‘(i) the applicable percentage (as described in

subparagraph (B)) of the average manufacturer price

for the dosage form and strength for the rebate period,

and

‘‘(ii) the total number of units of such dosage form

and strength dispensed after December 31, 1990, for

which payment was made under the State plan for

the rebate period.

‘‘(B) APPLICABLE PERCENTAGE DEFINED.—For purposes

of subparagraph (A)(i), the ‘applicable percentage’ for rebate

periods beginning—

‘‘(i) before January 1, 1994, is 10 percent, and

‘‘(ii) after December 31, 1993, is 11 percent.

‘‘(d) LIMITATIONS ON COVERAGE OF DRUGS.—

‘‘(1) PERMISSIBLE RESTRICTIONS.—(A) A State may subject

to prior authorization any covered outpatient drug. Any such

prior authorization program shall comply with the requirements

of paragraph (5).

‘‘(B) A State may exclude or otherwise restrict coverage

of a covered outpatient drug if—

‘‘(i) the prescribed use is not for a medically accepted

indication (as defined in subsection (k)(6));

‘‘(ii) the drug is contained in the list referred to in

paragraph (2);
H. R. 2264—305

‘‘(iii) the drug is subject to such restrictions pursuant

to an agreement between a manufacturer and a State

authorized by the Secretary under subsection (a)(1) or in

effect pursuant to subsection (a)(4); or

‘‘(iv) the State has excluded coverage of the drug from

its formulary established in accordance with paragraph

(4).

‘‘(2) LIST OF DRUGS SUBJECT TO RESTRICTION.—The following drugs or classes of drugs, or their medical uses, may be

excluded from coverage or otherwise restricted:

‘‘(A) Agents when used for anorexia, weight loss, or

weight gain.

‘‘(B) Agents when used to promote fertility.

‘‘(C) Agents when used for cosmetic purposes or hair

growth.

‘‘(D) Agents when used for the symptomatic relief of

cough and colds.

‘‘(E) Agents when used to promote smoking cessation.

‘‘(F) Prescription vitamins and mineral products, except

prenatal vitamins and fluoride preparations.

‘‘(G) Nonprescription drugs.

‘‘(H) Covered outpatient drugs which the manufacturer

seeks to require as a condition of sale that associated

tests or monitoring services be purchased exclusively from

the manufacturer or its designee.

‘‘(I) Barbiturates.

‘‘(J) Benzodiazepines.

‘‘(3) UPDATE OF DRUG LISTINGS.—The Secretary shall, by

regulation, periodically update the list of drugs or classes of

drugs described in paragraph (2) or their medical uses, which

the Secretary has determined, based on data collected by

surveillance and utilization review programs of State medical

assistance programs, to be subject to clinical abuse or inappropriate use.

‘‘(4) REQUIREMENTS FOR FORMULARIES.—A State may establish a formulary if the formulary meets the following

requirements:

‘‘(A) The formulary is developed by a committee consisting of physicians, pharmacists, and other appropriate

individuals appointed by the Governor of the State (or,

at the option of the State, the State’s drug use review

board established under subsection (g)(3)). ‘‘(B) Except as provided in subparagraph (C), the formulary includes the covered outpatient drugs of any

manufacturer which has entered into and complies with

an agreement under subsection (a) (other than any drug

excluded from coverage or otherwise restricted under paragraph (2)).

‘‘(C) A covered outpatient drug may be excluded with

respect to the treatment of a specific disease or condition

for an identified population (if any) only if, based on the

drug’s labeling (or, in the case of a drug the prescribed

use of which is not approved under the Federal Food,

Drug, and Cosmetic Act but is a medically accepted indication, based on information from the appropriate compendia

described in subsection (k)(6)), the excluded drug does not

have a significant, clinically meaningful therapeutic advan-
H. R. 2264—306

tage in terms of safety, effectiveness, or clinical outcome

of such treatment for such population over other drugs

included in the formulary and there is a written explanation (available to the public) of the basis for the exclusion.

‘‘(D) The State plan permits coverage of a drug

excluded from the formulary (other than any drug excluded

from coverage or otherwise restricted under paragraph (2))

pursuant to a prior authorization program that is consistent

with paragraph (5).

‘‘(E) The formulary meets such other requirements as

the Secretary may impose in order to achieve program

savings consistent with protecting the health of program

beneficiaries.

A prior authorization program established by a State under

paragraph (5) is not a formulary subject to the requirements

of this paragraph.

‘‘(5) REQUIREMENTS OF PRIOR AUTHORIZATION PROGRAMS.—

A State plan under this title may require, as a condition of

coverage or payment for a covered outpatient drug for which

Federal financial participation is available in accordance with

this section, with respect to drugs dispensed on or after July

1, 1991, the approval of the drug before its dispensing for

any medically accepted indication (as defined in subsection

(k)(6)) only if the system providing for such approval—

‘‘(A) provides response by telephone or other telecommunication device within 24 hours of a request for

prior authorization; and

‘‘(B) except with respect to the drugs on the list referred to in paragraph (2), provides for the dispensing of at least

72-hour supply of a covered outpatient prescription drug

in an emergency situation (as defined by the Secretary).

‘‘(6) OTHER PERMISSIBLE RESTRICTIONS.—A State may

impose limitations, with respect to all such drugs in a therapeutic class, on the minimum or maximum quantities per

prescription or on the number of refills, if such limitations

are necessary to discourage waste, and may address instances

of fraud or abuse by individuals in any manner authorized

under this Act.

‘‘(e) TREATMENT OF PHARMACY REIMBURSEMENT LIMITS.— ‘‘(1) IN GENERAL.—During the period beginning on January

1, 1991, and ending on December 31, 1994— ‘‘(A) a State may not reduce the payment limits established by regulation under this title or any limitation

described in paragraph (3) with respect to the ingredient

cost of a covered outpatient drug or the dispensing fee

for such a drug below the limits in effect as of January

1, 1991, and

‘‘(B) except as provided in paragraph (2), the Secretary

may not modify by regulation the formula established

under sections 447.331 through 447.334 of title 42, Code

of Federal Regulations, in effect on November 5, 1990,

to reduce the limits described in subparagraph (A).

‘‘(2) SPECIAL RULE.—If a State is not in compliance with

the regulations described in paragraph (1)(B), paragraph (1)(A)

shall not apply to such State until such State is in compliance

with such regulations.
H. R. 2264—307

‘‘(3) EFFECT ON STATE MAXIMUM ALLOWABLE COST LIMITATIONS.—This section shall not supersede or affect provisions

in effect prior to January 1, 1991, or after December 31, 1994,

relating to any maximum allowable cost limitation established

by a State for payment by the State for covered outpatient

drugs, and rebates shall be made under this section without

regard to whether or not payment by the State for such drugs

is subject to such a limitation or the amount of such a limitation.’’.

(2) CONFORMING AMENDMENTS.—Section 1927 (42 U.S.C.

1396r–8) is amended as follows:

(A) In subsection (b)—

(i) in paragraph (1)(A)—

(I) by striking ‘‘each calendar quarter (or

periodically in accordance with a schedule specified

by the Secretary)’’ and inserting ‘‘for a rebate

period’’, and

(II) by striking ‘‘dispensed under the plan during the quarter (or other period as the Secretary

may specify)’’ and inserting ‘‘dispensed after

December 31, 1990, for which payment was made

under the State plan for such period’’;

(ii) in paragraph (2)(A)—

(I) by striking ‘‘calendar quarter’’ and ‘‘the

quarter’’ and inserting ‘‘rebate period’’ and ‘‘the

period’’, respectively,

(II) by striking ‘‘dosage units’’ and inserting

‘‘units of each dosage form and strength and package size’’, and

(III) by inserting ‘‘after December 31, 1990,

for which payment was made’’ after ‘‘dispensed’’;

and

(iii) in paragraph (3)(A)(i), by striking ‘‘quarter’’

each place it appears and inserting ‘‘rebate period

under the agreement’’.

(B) In subsection (k)—

(i) in paragraph (1)—

(I) by striking ‘‘calendar quarter’’ and inserting

‘‘rebate period’’, and

(II) by inserting before the period at the end

the following: ‘‘, after deducting customary prompt

pay discounts’’;

(ii) in paragraph (3)—

(I) in subparagraph (E), by striking ‘‘* * * *

emergency room visits’’,

(II) in subparagraph (F), by striking ‘‘services’’

and inserting ‘‘services and services provided by

an intermediate care facility for the mentally

retarded’’, and

(III) in the matter following subparagraph

(H)—

(aa) by striking ‘‘which is used’’ and inserting ‘‘for which a National Drug Code number

is not required by the Food and Drug Administration or a drug or biological used’’; and
H. R. 2264—308

(bb) by adding at the end the following:

‘‘Any drug, biological product, or insulin

excluded from the definition of such term as

a result of this paragraph shall be treated

as a covered outpatient drug for purposes of

determining the best price (as defined in subsection (c)(1)(C)) for such drug, biological product, or insulin.’’;

(iii) in paragraph (6), by striking ‘‘, which appears’’

and all that follows and inserting ‘‘or the use of which

is supported by one or more citations included or

approved for inclusion in any of the compendia

described in subsection (g)(1)(B)(i).’’;

(iv) in paragraph (7)(A)(i), by striking ‘‘calendar

quarter’’ and inserting ‘‘rebate period’’; and

(v) by redesignating paragraph (8) as paragraph

(9) and by inserting after paragraph (7) the following

new paragraph:

‘‘(8) REBATE PERIOD.—The term ‘rebate period’ means, with

respect to an agreement under subsection (a), a calendar quarter or other period specified by the Secretary with respect

to the payment of rebates under such agreement.’’.

(b) LIMITING FEDERAL PAYMENTS FOR CERTAIN DRUGS.—Paragraph (10) of section 1903(i) (42 U.S.C. 1396b(i)) (as inserted by

section 4401(a)(1)(B) of OBRA–1990) is amended to read as follows:

‘‘(10)(A) with respect to covered outpatient drugs unless

there is a rebate agreement in effect under section 1927 with

respect to such drugs or unless section 1927(a)(3) applies, and ‘‘(B) with respect to any amount expended for an innovator multiple source drug (as defined in section 1927(k)) dispensed

on or after July 1, 1991, if, under applicable State law, a

less expensive multiple source drug could have been dispensed,

but only to the extent that such amount exceeds the upper

payment limit for such multiple source drug;’’.

(c) ELIMINATION OF PROHIBITION AGAINST STATE USE OF

FORMULARIES TO ACHIEVE FEDERAL SAVINGS.—Paragraph (54) of section 1902(a) (42 U.S.C. 1396a(a)) is amended to read as follows:

‘‘(54) in the case of a State plan that provides medical

assistance for covered outpatient drugs (as defined in section

1927(k)), comply with the applicable requirements of section

1927;’’.

(d) EFFECTIVE DATES.—(1) Except as provided in paragraph (2), the amendments made by this section shall take effect as

if included in the enactment of OBRA–1990.

(2) The amendment made by subsection (a)(1) (insofar as such

subsection amends section 1927(d) of the Social Security Act) and

the amendment made by subsection (c) shall apply to calendar

quarters beginning on or after October 1, 1993, without regard

to whether or not regulations to carry out such amendments have

been promulgated by such date.

SEC. 13603. OPTIONAL MEDICAID COVERAGE OF TB-RELATED SERVICES FOR CERTAIN TB-INFECTED INDIVIDUALS.

(a) COVERAGE AS OPTIONAL, CATEGORICALLY NEEDY GROUP.—

Section 1902(a)(10)(A)(ii) (42 U.S.C. 1396a(a)(10)(A)(ii)) is

amended—

(1) by striking ‘‘or’’ at the end of subclause (X),
H. R. 2264—309

(2) by adding ‘‘or’’ at the end of subclause (XI), and

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

‘‘(XII) who are described in subsection (z)(1)

(relating to certain TB-infected individuals);’’.

(b) GROUP AND BENEFIT DESCRIBED.—Section 1902 is amended

by adding at the end the following new subsection:

‘‘(z)(1) Individuals described in this paragraph are individuals

not described in subsection (a)(10)(A)(i)—

‘‘(A) who are infected with tuberculosis;

‘‘(B) whose income (as determined under the State plan

under this title with respect to disabled individuals) does not

exceed the maximum amount of income a disabled individual

described in subsection (a)(10)(A)(i) may have and obtain medical assistance under the plan; and

‘‘(C) whose resources (as determined under the State plan

under this title with respect to disabled individuals) do not

exceed the maximum amount of resources a disabled individual

described in subsection (a)(10)(A)(i) may have and obtain medical assistance under the plan.

‘‘(2) For purposes of subsection (a)(10), the term ‘TB-related

services’ means each of the following services relating to treatment

of infection with tuberculosis:

‘‘(A) Prescribed drugs.

‘‘(B) Physicians’ services and services described in section

1905(a)(2).

‘‘(C) Laboratory and X-ray services (including services to

confirm the presence of infection).

‘‘(D) Clinic services and Federally-qualified health center

services.

‘‘(E) Case management services (as defined in section 1915(g)(2)). ‘‘(F) Services (other than room and board) designed to

encourage completion of regimens of prescribed drugs by outpatients, including services to observe directly the intake of

prescribed drugs.’’.

(c) LIMITATION ON BENEFITS.—Section 1902(a)(10) (42 U.S.C.

1396a(a)(10)) is amended in the matter following subparagraph

(F)—

(1) by striking ‘‘; and (XI)’’ and inserting ‘‘, (XI)’’,

(2) by striking ‘‘individuals, and (XI)’’ and inserting ‘‘individuals, (XII)’’, and

(3) by inserting before the semicolon at the end the follow- ing: ‘‘, and (XIII) the medical assistance made available to

an individual described in subsection (z)(1) who is eligible for

medical assistance only because of subparagraph (A)(ii)(XII)

shall be limited to medical assistance for TB-related services

(described in subsection (z)(2))’’.

(d) CONFORMING EXPANSION OF CASE MANAGEMENT SERVICES

OPTION.—Section 1915(g)(1) (42 U.S.C. 1396n(g)(1)) is amended by

inserting ‘‘or to individuals described in section 1902(z)(1)(A)’’ after

‘‘or with either,’’.

(e) CONFORMING AMENDMENT.—Section 1905(a) (42 U.S.C.

1396d(a)) is amended—

(1) by striking ‘‘or’’ at the end of clause (ix),

(2) by adding ‘‘or’’ at the end of clause (x),

(3) by inserting after clause (x) the following new clause:

‘‘(xi) individuals described in section 1902(z)(1),’’, and
H. R. 2264—310

(4) by amending paragraph (19) to read as follows:

‘‘(19) case management services (as defined in section

1915(g)(2)) and TB-related services described in section

1902(z)(2)(F);’’.

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

shall apply to medical assistance furnished on or after January

1, 1994, without regard to whether or not final regulations to

carry out such amendments have been promulgated by such date.

SEC. 13604. LIMITING FEDERAL MEDICAID MATCHING PAYMENT TO

BONA FIDE EMERGENCY SERVICES FOR UNDOCUMENTED ALIENS.

(a) IN GENERAL.—Section 1903(v)(2) (42 U.S.C. 1396b(v)(2))

is amended—

(1) by striking ‘‘and’’ at the end of subparagraph (A),

(2) by striking the period at the end of subparagraph (B)

and inserting ‘‘, and’’, and

(3) by adding at the end the following new subparagraph:

‘‘(C) such care and services are not related to an organ

transplant procedure.’’.

(b) EFFECTIVE DATES.—(1) Subject to paragraph (2), the amendments made by subsection (a) shall apply as if included in the

enactment of OBRA–1986.

(2) The Secretary of Health and Human Services shall not

disallow expenditures made for the care and services described

in section 1903(v)(2)(C) of the Social Security Act, as added by

subsection (a), furnished before the date of the enactment of this

Act.

SEC. 13605. COVERAGE OF NURSE-MIDWIFE SERVICES PERFORMED

OUTSIDE THE MATERNITY CYCLE.

(a) IN GENERAL.—Section 1905(a)(17) (42 U.S.C. 1396d(a)(17))

is amended by inserting before the semicolon at the end the following: ‘‘, and without regard to whether or not the services are

performed in the area of management of the care of mothers and

babies throughout the maternity cycle’’.

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

shall apply to services furnished on or after October 1, 1993.

SEC. 13606. TREATMENT OF CERTAIN CLINICS AS FEDERALLY-QUALIFIED HEALTH CENTERS.

(a) IN GENERAL.—Section 1905(l)(2)(B) (42 U.S.C.

1396d(l)(2)(B)) is amended—

(1) by striking ‘‘or’’ at the end of clause (i),

(2) by striking the semicolon at the end of clause (ii)(II)

and inserting a comma,

(3) by moving clause (ii) 4 ems to the left,

(4) by adding ‘‘or’’ at the end of clause (iii), and

(5) by inserting after clause (iii) the following new clause:

‘‘(iv) was treated by the Secretary, for purposes of part

B of title XVIII, as a comprehensive Federally funded health

center as of January 1, 1990;’’.

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

(a) shall apply to calendar quarters beginning on or after July

1, 1993.
H. R. 2264—311

PART II—ELIGIBILITY

SEC. 13611. TRANSFERS OF ASSETS; TREATMENT OF CERTAIN TRUSTS.

(a) PERIODS OF INELIGIBILITY FOR TRANSFERS OF ASSETS.—

(1) IN GENERAL.—Section 1917(c)(1) (42 U.S.C. 1396p(c)(1))

is amended to read as follows:

‘‘(1)(A) In order to meet the requirements of this subsection

for purposes of section 1902(a)(18), the State plan must provide

that if an institutionalized individual or the spouse of such an

individual (or, at the option of a State, a noninstitutionalized

individual or the spouse of such an individual) disposes of assets

for less than fair market value on or after the look-back date

specified in subparagraph (B)(i), the individual is ineligible for

medical assistance for services described in subparagraph (C)(i)

(or, in the case of a noninstitutionalized individual, for the services

described in subparagraph (C)(ii)) during the period beginning on

the date specified in subparagraph (D) and equal to the number

of months specified in subparagraph (E).

‘‘(B)(i) The look-back date specified in this subparagraph is

a date that is 36 months (or, in the case of payments from a

trust or portions of a trust that are treated as assets disposed

of by the individual pursuant to paragraph (3)(A)(iii) or (3)(B)(ii)

of subsection (d), 60 months) before the date specified in clause

(ii).

‘‘(ii) The date specified in this clause, with respect to—

‘‘(I) an institutionalized individual is the first date as of

which the individual both is an institutionalized individual

and has applied for medical assistance under the State plan,

or

‘‘(II) a noninstitutionalized individual is the date on which

the individual applies for medical assistance under the State

plan or, if later, the date on which the individual disposes

of assets for less than fair market value.

‘‘(C)(i) The services described in this subparagraph with respect

to an institutionalized individual are the following:

‘‘(I) Nursing facility services.

‘‘(II) A level of care in any institution equivalent to that

of nursing facility services.

‘‘(III) Home or community-based services furnished under

a waiver granted under subsection (c) or (d) of section 1915.

‘‘(ii) The services described in this subparagraph with respect

to a noninstitutionalized individual are services (not including any

services described in clause (i)) that are described in paragraph

(7), (22), or (24) of section 1905(a), and, at the option of a State,

other long-term care services for which medical assistance is otherwise available under the State plan to individuals requiring longterm care.

‘‘(D) The date specified in this subparagraph is the first day

of the first month during or after which assets have been transferred

for less than fair market value and which does not occur in any

other periods of ineligibility under this subsection. ‘‘(E)(i) With respect to an institutionalized individual, the number of months of ineligibility under this subparagraph for an individual shall be equal to—

‘‘(I) the total, cumulative uncompensated value of all assets

transferred by the individual (or individual’s spouse) on or
H. R. 2264—312

after the look-back date specified in subparagraph (B)(i), divided

by

‘‘(II) the average monthly cost to a private patient of nursing facility services in the State (or, at the option of the State,

in the community in which the individual is institutionalized)

at the time of application.

‘‘(ii) With respect to a noninstitutionalized individual, the number of months of ineligibility under this subparagraph for an individual shall not be greater than a number equal to—

‘‘(I) the total, cumulative uncompensated value of all assets

transferred by the individual (or individual’s spouse) on or

after the look-back date specified in subparagraph (B)(i), divided

by

‘‘(II) the average monthly cost to a private patient of nursing facility services in the State (or, at the option of the State,

in the community in which the individual is institutionalized)

at the time of application.

‘‘(iii) The number of months of ineligibility otherwise determined under clause (i) or (ii) with respect to the disposal of an

asset shall be reduced—

‘‘(I) in the case of periods of ineligibility determined under

clause (i), by the number of months of ineligibility applicable

to the individual under clause (ii) as a result of such disposal,

and

‘‘(II) in the case of periods of ineligibility determined under

clause (ii), by the number of months of ineligibility applicable

to the individual under clause (i) as a result of such disposal.

(2) EXCEPTIONS.—Section 1917(c) is amended—

(A) in paragraph (2)(A), by striking ‘‘resources’’ and

inserting ‘‘assets’’;

(B) by amending paragraph (2)(B) to read as follows:

‘‘(B) the assets—

‘‘(i) were transferred to the individual’s spouse or to

another for the sole benefit of the individual’s spouse,

‘‘(ii) were transferred from the individual’s spouse to

another for the sole benefit of the individual’s spouse,

‘‘(iii) were transferred to, or to a trust (including a

trust described in subsection (d)(4)) established solely for

the benefit of, the individual’s child described in subparagraph (A)(ii)(II), or

‘‘(iv) were transferred to a trust (including a trust

described in subsection (d)(4)) established solely for the

benefit of an individual under 65 years of age who is

disabled (as defined in section 1614(a)(3));’’;

(C) in paragraph (2)(C)—

(i) by striking ‘‘resources’’ each place it appears

and inserting ‘‘assets’’,

(ii) by striking ‘‘any’’,

(iii) by striking ‘‘or (ii)’’ and inserting ‘‘(ii)’’, and

(iv) by striking ‘‘; or’’ and inserting ‘‘, or (iii) all

assets transferred for less than fair market value have

been returned to the individual; or’’;

(D) by amending paragraph (2)(D) to read as follows:

‘‘(D) the State determines, under procedures established

by the State (in accordance with standards specified by the

Secretary), that the denial of eligibility would work an undue
H. R. 2264—313

hardship as determined on the basis of criteria established

by the Secretary;’’;

(E) by striking paragraph (3) and inserting the

following:

‘‘(3) For purposes of this subsection, in the case of an asset

held by an individual in common with another person or persons

in a joint tenancy, tenancy in common, or similar arrangement,

the asset (or the affected portion of such asset) shall be considered

to be transferred by such individual when any action is taken,

either by such individual or by any other person, that reduces

or eliminates such individual’s ownership or control of such asset.’’;

and

(F) by adding at the end of paragraph (4) the following:

‘‘In the case of a transfer by the spouse of an individual

which results in a period of ineligibility for medical assistance under a State plan for such individual, a State shall,

using a reasonable methodology (as specified by the Secretary), apportion such period of ineligibility (or any portion

of such period) among the individual and the individual’s

spouse if the spouse otherwise becomes eligible for medical

assistance under the State plan.’’.

(b) TREATMENT OF TRUST AMOUNTS.—Section 1917 (42 U.S.C.

1396p) is amended by adding at the end the following:

‘‘(d)(1) For purposes of determining an individual’s eligibility

for, or amount of, benefits under a State plan under this title,

subject to paragraph (4), the rules specified in paragraph (3) shall

apply to a trust established by such individual.

‘‘(2)(A) For purposes of this subsection, an individual shall

be considered to have established a trust if assets of the individual

were used to form all or part of the corpus of the trust and

if any of the following individuals established such trust other

than by will: ‘‘(i) The individual.

‘‘(ii) The individual’s spouse.

‘‘(iii) A person, including a court or administrative body,

with legal authority to act in place of or on behalf of the

individual or the individual’s spouse.

‘‘(iv) A person, including any court or administrative body,

acting at the direction or upon the request of the individual

or the individual’s spouse.

‘‘(B) In the case of a trust the corpus of which includes assets

of an individual (as determined under subparagraph (A)) and assets

of any other person or persons, the provisions of this subsection

shall apply to the portion of the trust attributable to the assets

of the individual.

‘‘(C) Subject to paragraph (4), this subsection shall apply without regard to—

‘‘(i) the purposes for which a trust is established,

‘‘(ii) whether the trustees have or exercise any discretion

under the trust,

‘‘(iii) any restrictions on when or whether distributions

may be made from the trust, or

‘‘(iv) any restrictions on the use of distributions from the

trust.

‘‘(3)(A) In the case of a revocable trust—

‘‘(i) the corpus of the trust shall be considered resources

available to the individual,
H. R. 2264—314

‘‘(ii) payments from the trust to or for the benefit of the

individual shall be considered income of the individual, and

‘‘(iii) any other payments from the trust shall be considered

assets disposed of by the individual for purposes of subsection (c).

‘‘(B) In the case of an irrevocable trust—

‘‘(i) if there are any circumstances under which payment

from the trust could be made to or for the benefit of the

individual, the portion of the corpus from which, or the income

on the corpus from which, payment to the individual could

be made shall be considered resources available to the individual, and payments from that portion of the corpus or income—

‘‘(I) to or for the benefit of the individual, shall be

considered income of the individual, and

‘‘(II) for any other purpose, shall be considered a transfer of assets by the individual subject to subsection (c);

and

‘‘(ii) any portion of the trust from which, or any income

on the corpus from which, no payment could under any circumstances be made to the individual shall be considered,

as of the date of establishment of the trust (or, if later, the

date on which payment to the individual was foreclosed) to

be assets disposed by the individual for purposes of subsection

(c), and the value of the trust shall be determined for purposes

of such subsection by including the amount of any payments

made from such portion of the trust after such date.

‘‘(4) This subsection shall not apply to any of the following

trusts:

‘‘(A) A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1614(a)(3)) and

which is established for the benefit of such individual by a

parent, grandparent, legal guardian of the individual, or a

court if the State will receive all amounts remaining in the

trust upon the death of such individual up to an amount equal

to the total medical assistance paid on behalf of the individual

under a State plan under this title.

‘‘(B) A trust established in a State for the benefit of an

individual if—

‘‘(i) the trust is composed only of pension, Social Secu- rity, and other income to the individual (and accumulated

income in the trust),

‘‘(ii) the State will receive all amounts remaining in

the trust upon the death of such individual up to an amount

equal to the total medical assistance paid on behalf of

the individual under a State plan under this title, and

‘‘(iii) the State makes medical assistance available to

individuals described in section 1902(a)(10)(A)(ii)(V), but

does not make such assistance available to individuals

for nursing facility services under section 1902(a)(10)(C).

‘‘(C) A trust containing the assets of an individual who

is disabled (as defined in section 1614(a)(3)) that meets the

following conditions:

‘‘(i) The trust is established and managed by a nonprofit association.

‘‘(ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and

management of funds, the trust pools these accounts.
H. R. 2264—315

‘‘(iii) Accounts in the trust are established solely for

the benefit of individuals who are disabled (as defined

in section 1614(a)(3)) by the parent, grandparent, or legal

guardian of such individuals, by such individuals, or by

a court.

‘‘(iv) To the extent that amounts remaining in the

beneficiary’s account upon the death of the beneficiary

are not retained by the trust, the trust pays to the State

from such remaining amounts in the account an amount

equal to the total amount of medical assistance paid on

behalf of the beneficiary under the State plan under this

title.

‘‘(5) The State agency shall establish procedures (in accordance

with standards specified by the Secretary) under which the agency

waives the application of this subsection with respect to an individual if the individual establishes that such application would work

an undue hardship on the individual as determined on the basis

of criteria established by the Secretary.’’.

‘‘(6) The term ‘trust’ includes any legal instrument or device

that is similar to a trust but includes an annuity only to such

extent and in such manner as the Secretary specifies.’’.

(c) DEFINITIONS.—Section 1917 (42 U.S.C. 1396p), as amended

by subsection (b), is further amended by adding at the end the

following new subsection:

‘‘(e) In this section, the following definitions shall apply:

‘‘(1) The term ‘assets’, with respect to an individual,

includes all income and resources of the individual and of

the individual’s spouse, including any income or resources

which the individual or such individual’s spouse is entitled

to but does not receive because of action—

‘‘(A) by the individual or such individual’s spouse,

‘‘(B) by a person, including a court or administrative

body, with legal authority to act in place of or on behalf

of the individual or such individual’s spouse, or

‘‘(C) by any person, including any court or administrative body, acting at the direction or upon the request of

the individual or such individual’s spouse.

‘‘(2) The term ‘income’ has the meaning given such term

in section 1612.

‘‘(3) The term ‘institutionalized individual’ means an

individual who is an inpatient in a nursing facility, who is

an inpatient in a medical institution and with respect to whom

payment is made based on a level of care provided in a nursing

facility, or who is described in section 1902(a)(10)(A)(ii)(VI). ‘‘(4) The term ‘noninstitutionalized individual’ means an

individual receiving any of the services specified in subsection

(c)(1)(C)(ii).

‘‘(5) The term ‘resources’ has the meaning given such term

in section 1613, without regard (in the case of an institutionalized individual) to the exclusion described in subsection (a)(1)

of such section.’’.

(d) CONFORMING AMENDMENTS.—

(1) Section 1902 (42 U.S.C. 1396a) is amended—

(A) in subsection (a)(18), by striking ‘‘and transfers

of assets’’ and inserting ‘‘, transfers of assets, and treatment

of certain trusts’’;

(B) in subsection (a)(51)—
H. R. 2264—316

(i) by striking ‘‘(A)’’; and

(ii) by striking ‘‘, and (B)’’ and all that follows

and inserting a semicolon; and

(C) by striking subsection (k).

(2) Section 1924(b)(2)(B)(i) (42 U.S.C. 1396r–5(b)(2)(B)(i))

is amended by striking ‘‘1902(k)’’ and inserting ‘‘1917(d)’’.

(e) EFFECTIVE DATES.—(1) The amendments made by this section shall apply, except as provided in this subsection, to payments

under title XIX of the Social Security Act for calendar quarters

beginning on or after October 1, 1993, without regard to whether

or not final regulations to carry out such amendments have been

promulgated by such date.

(2) The amendments made by this section shall not apply—

(A) to medical assistance provided for services furnished

before October 1, 1993,

(B) with respect to assets disposed of on or before the

date of the enactment of this Act, or

(C) with respect to trusts established on or before the

date of the enactment of this Act.

(3) In the case of a State plan for medical assistance under

title XIX of the Social Security Act which the Secretary of Health

and Human Services determines requires State legislation (other

than legislation appropriating funds) in order for the plan to meet

the additional requirements imposed by the amendment made by

subsection (b), the State plan shall not be regarded as failing

to comply with the requirements imposed by such amendment solely

on the basis of its failure to meet these additional requirements

before the first day of the first calendar quarter beginning after

the close of the first regular session of the State legislature that

begins after the date of the enactment of this Act. For purposes

of the preceding sentence, in the case of a State that has a 2-

year legislative session, each year of such session shall be deemed

to be a separate regular session of the State legislature.

SEC. 13612. MEDICAID ESTATE RECOVERIES.

(a) MANDATE TO SEEK RECOVERY.—Section 1917(b)(1) (42

U.S.C. 1396p(b)(1)) is amended by striking ‘‘except—’’ and all that

follows and inserting the following: ‘‘except that the State shall

seek adjustment or recovery of any medical assistance correctly

paid on behalf of an individual under the State plan in the case

of the following individuals:

‘‘(A) In the case of an individual described in subsection

(a)(1)(B), the State shall seek adjustment or recovery from

the individual’s estate or upon sale of the property subject

to a lien imposed on account of medical assistance paid on

behalf of the individual.

‘‘(B) In the case of an individual who was 55 years of

age or older when the individual received such medical assistance, the State shall seek adjustment or recovery from the

individual’s estate, but only for medical assistance consisting

of—

‘‘(i) nursing facility services, home and communitybased services, and related hospital and prescription drug

services, or

‘‘(ii) at the option of the State, any items or services

under the State plan.
H. R. 2264—317

‘‘(C)(i) In the case of an individual who has received (or

is entitled to receive) benefits under a long-term care insurance

policy in connection with which assets or resources are disregarded in the manner described in clause (ii), except as

provided in such clause, the State shall seek adjustment or

recovery from the individual’s estate on account of medical

assistance paid on behalf of the individual for nursing facility

and other long-term care services.

‘‘(ii) Clause (i) shall not apply in the case of an individual

who received medical assistance under a State plan of a State

which had a State plan amendment approved as of May 14,

1993, which provided for the disregard of any assets or

resources—

‘‘(I) to the extent that payments are made under a

long-term care insurance policy; or

‘‘(II) because an individual has received (or is entitled

to receive) benefits under a long-term care insurance

policy.’’.

(b) HARDSHIP WAIVER.—Section 1917(b) (42 U.S.C. 1396p(b))

is amended by adding at the end the following new paragraph:

‘‘(3) The State agency shall establish procedures (in accordance

with standards specified by the Secretary) under which the agency

shall waive the application of this subsection (other than paragraph

(1)(C)) if such application would work an undue hardship as determined on the basis of criteria established by the Secretary.’’.

(c) DEFINITION OF ESTATE.—Section 1917(b) (42 U.S.C.

1396p(b)), as amended by subsection (b), is amended by adding

at the end the following new paragraph: ‘‘(4) For purposes of this subsection, the term ‘estate’, with

respect to a deceased individual—

‘‘(A) shall include all real and personal property and other

assets included within the individual’s estate, as defined for

purposes of State probate law; and

‘‘(B) may include, at the option of the State (and shall include, in the case of an individual to whom paragraph (1)(C)(i)

applies), any other real and personal property and other assets

in which the individual had any legal title or interest at the

time of death (to the extent of such interest), including such

assets conveyed to a survivor, heir, or assign of the deceased

individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement.’’.

(d) EFFECTIVE DATES.—(1)(A) Except as provided in subparagraph (B), the amendments made by this section shall apply to

payments under title XIX of the Social Security Act for calendar

quarters beginning on or after October 1, 1993, without regard

to whether or not final regulations to carry out such amendments

have been promulgated by such date.

(B) In the case of a State plan for medical assistance under

title XIX of the Social Security Act which the Secretary of Health

and Human Services determines requires State legislation (other

than legislation appropriating funds) in order for the plan to meet

the additional requirements imposed by the amendments made

by this section, the State plan shall not be regarded as failing

to comply with the requirements imposed by such amendments

solely on the basis of its failure to meet these additional requirements before the first day of the first calendar quarter beginning

after the close of the first regular session of the State legislature
H. R. 2264—318

that begins after the date of the enactment of this Act. For purposes

of the preceding sentence, in the case of a State that has a 2-

year legislative session, each year of such session shall be deemed

to be a separate regular session of the State legislature.

(2) The amendments made by this section shall not apply

to individuals who died before October 1, 1993.

PART III—PAYMENTS

SEC. 13621. ASSURING PROPER PAYMENTS TO DISPROPORTIONATE

SHARE HOSPITALS.

(a) DISPROPORTIONATE SHARE HOSPITALS REQUIRED TO PROVIDE

MINIMUM LEVEL OF SERVICES TO MEDICAID PATIENTS.—

(1) IN GENERAL.—Section 1923 (42 U.S.C. 1396r–4) is

amended—

(A) in subsection (a)(1)(A), by striking ‘‘requirement’’

and inserting ‘‘requirements’’;

(B) in subsection (b)(1), by striking ‘‘requirement’’ and

inserting ‘‘requirements’’;

(C) in the heading to subsection (d), by striking

‘‘REQUIREMENT’’ and inserting ‘‘REQUIREMENTS’’;

(D) by adding at the end of subsection (d) the following

new paragraph:

‘‘(3) No hospital may be defined or deemed as a disproportionate share hospital under a State plan under this title or

under subsection (b) or (e) of this section unless the hospital

has a medicaid inpatient utilization rate (as defined in subsection (b)(2)) of not less than 1 percent.’’;

(E) in subsection (e)(1)—

(i) by striking ‘‘and’’ before ‘‘(B)’’, and

(ii) by inserting before the period at the end the

following: ‘‘, and (C) the plan meets the requirement

of subsection (d)(3) and such payment adjustments are

made consistent with the last sentence of subsection

(c)’’; and

(F) in subsection (e)(2)—

(i) in subparagraph (A), by inserting ‘‘(other than

the last sentence of subsection (c))’’ after ‘‘(c)’’,

(ii) by striking ‘‘and’’ at the end of subparagraph

(A),

(iii) by striking the period at the end of subparagraph (B) and inserting ‘‘, and’’, and

(iv) by adding at the end the following new

subparagraph:

‘‘(C) subsection (d)(3) shall apply.’’.

(2) EFFECTIVE DATE.—The amendments made by this subsection shall apply to payments to States under section 1903(a)

of the Social Security Act for payments to hospitals made

under State plans after—

(A) the end of the State fiscal year that ends during

1994, or

(B) in the case of a State with a State legislature

which is not scheduled to have a regular legislative session

in 1994, the end of the State fiscal year that ends during

1995;
H. R. 2264—319

without regard to whether or not final regulations to carry

out such amendments have been promulgated by either such

date.

(b) LIMITING AMOUNT OF HOSPITAL PAYMENT ADJUSTMENT TO

UNCOVERED COSTS.—

(1) IN GENERAL.—Section 1923 (42 U.S.C. 1396r–4) is

amended by adding at the end the following new subsection:

‘‘(g) LIMIT ON AMOUNT OF PAYMENT TO HOSPITAL.—

‘‘(1) AMOUNT OF ADJUSTMENT SUBJECT TO UNCOMPENSATED

COSTS.—

‘‘(A) IN GENERAL.—A payment adjustment during a

fiscal year shall not be considered to be consistent with

subsection (c) with respect to a hospital if the payment

adjustment exceeds the costs incurred during the year of

furnishing hospital services (as determined by the Secretary and net of payments under this title, other than

under this section, and by uninsured patients) by the hospital to individuals who either are eligible for medical

assistance under the State plan or have no health insurance

(or other source of third party coverage) for services provided during the year. For purposes of the preceding sentence, payments made to a hospital for services provided

to indigent patients made by a State or a unit of local

government within a State shall not be considered to be

a source of third party payment.

‘‘(B) LIMIT TO PUBLIC HOSPITALS DURING TRANSITION

PERIOD.—With respect to payment adjustments during a

State fiscal year that begins before January 1, 1995,

subparagraph (A) shall apply only to hospitals owned or

operated by a State (or by an instrumentality or a unit

of government within a State).

‘‘(C) MODIFICATIONS FOR PRIVATE HOSPITALS.—With

respect to hospitals that are not owned or operated by

a State (or by an instrumentality or a unit of government

within a State), the Secretary may make such modifications

to the manner in which the limitation on payment adjustments is applied to such hospitals as the Secretary considers appropriate.

‘‘(2) ADDITIONAL AMOUNT DURING TRANSITION PERIOD FOR

CERTAIN HOSPITALS WITH HIGH DISPROPORTIONATE SHARE.—

‘‘(A) IN GENERAL.—In the case of a hospital with high

disproportionate share (as defined in subparagraph (B)),

a payment adjustment during a State fiscal year that

begins before January 1, 1995, shall be considered consistent with subsection (c) if the payment adjustment does

not exceed 200 percent of the costs of furnishing hospital

services described in paragraph (1)(A) during the year,

but only if the Governor of the State certifies to the satisfaction of the Secretary that the hospital’s applicable minimum amount is used for health services during the year.

In determining the amount that is used for such services

during a year, there shall be excluded any amounts received

under the Public Health Service Act, title V, title XVIII,

or from third party payors (not including the State plan

under this title) that are used for providing such services

during the year.
H. R. 2264—320

‘‘(B) HOSPITALS WITH HIGH DISPROPORTIONATE SHARE

DEFINED.—In subparagraph (A), a hospital is a ‘hospital

with high disproportionate share’ if—

‘‘(i) the hospital is owned or operated by a State

(or by an instrumentality or a unit of government

within a State); and

‘‘(ii) the hospital—

‘‘(I) meets the requirement described in subsection (b)(1)(A), or

‘‘(II) has the largest number of inpatient days

attributable to individuals entitled to benefits

under the State plan of any hospital in such State

for the previous State fiscal year.

‘‘(C) APPLICABLE MINIMUM AMOUNT DEFINED.—In

subparagraph (A), the ‘applicable minimum amount’ for

a hospital for a fiscal year is equal to the difference between

the amount of the hospital’s payment adjustment for the

fiscal year and the costs to the hospital of furnishing hospital services described in paragraph (1)(A) during the fiscal

year.’’.

(2) CONFORMING AMENDMENTS.—Section 1923 is amended—

(A) in subsection (c) in the matter preceding paragraph

(1), by striking ‘‘subsection (f)’’ and inserting ‘‘subsections

(f) and (g)’’; and

(B) in subsection (e)(2) (as amended by subsection

(a)(1)(F))—

(i) by striking ‘‘and’’ at the end of subparagraph

(B);

(ii) by striking the period at the end of subparagraph (C) and inserting ‘‘, and’’; and

(iii) by adding at the end the following new

subparagraph:

‘‘(D) subsection (g) shall apply.’’.

(3) EFFECTIVE DATE.—

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

(B), the amendments made by this subsection shall apply

to payments to States under section 1903(a) of the Social

Security Act for payments to hospitals made under State

plans after—

(i) the end of the State fiscal year that ends during

1994, or

(ii) in the case of a State with a State legislature

which is not scheduled to have a regular legislative

session in 1994, the end of the State fiscal year that

ends during 1995;

without regard to whether or not final regulations to carry

out such amendments have been promulgated by either

such date.

(B) DELAY IN IMPLEMENTATION FOR PRIVATE HOSPITALS.—With respect to a hospital that is not owned or

operated by a State (or by an instrumentality or a unit

of government within a State), the amendments made by

this subsection shall apply to payments to States under

section 1903(a) for payments to hospitals made under State

plans for State fiscal years that begin during or after

1995, without regard to whether or not final regulations
H. R. 2264—321

to carry out such amendments have been promulgated

by such date.

SEC. 13622. LIABILITY OF THIRD PARTIES TO PAY FOR CARE AND

SERVICES.

(a) LIABILITY OF ERISA PLANS.—(1) Section 1902(a)(25)(A) (42

U.S.C. 1396a(a)(25)(A)) is amended by striking ‘‘insurers)’’ and

inserting ‘‘insurers, group health plans (as defined in section 607(1)

of the Employee Retirement Income Security Act of 1974), service

benefit plans, and health maintenance organizations)’’.

(2) Section 1903(o) (42 U.S.C. 1396b(o)) is amended by striking

‘‘regulation)’’ and inserting ‘‘regulation and including a group health

plan (as defined in section 607(1) of the Employee Retirement

Income Security Act of 1974)), a service benefit plan, and a health

maintenance organization)’’.

(b) REQUIRING STATE TO PROHIBIT INSURERS FROM TAKING

MEDICAID STATUS INTO ACCOUNT.—Section 1902(a)(25) (42 U.S.C.

1396a(a)(25)) is amended—

(1) by striking ‘‘and’’ at the end of subparagraph (F);

(2) by adding ‘‘and’’ at the end of subparagraph (G); and

(3) by adding after subparagraph (G) the following new

subparagraph:

‘‘(H) that the State prohibits any health insurer (including a group health plan, as defined in section 607(1) of

the Employee Retirement Income Security Act of 1974,

a service benefit plan, and a health maintenance organization), in enrolling an individual or in making any payments

for benefits to the individual or on the individual’s behalf,

from taking into account that the individual is eligible

for or is provided medical assistance under a plan under

this title for such State, or any other State;’’. (c) STATE RIGHT TO THIRD PARTY PAYMENTS.—Section

1902(a)(25) (42 U.S.C. 1396a(a)(25)), as amended by subsection

(b), is amended—

(1) by striking ‘‘and’’ at the end of subparagraph (G);

(2) by adding ‘‘and’’ at the end of subparagraph (H); and

(3) by adding after subparagraph (H) the following new

subparagraph: ‘‘(I) that to the extent that payment has been made

under the State plan for medical assistance in any case

where a third party has a legal liability to make payment

for such assistance, the State has in effect laws under

which, to the extent that payment has been made under

the State plan for medical assistance for health care items

or services furnished to an individual, the State is considered to have acquired the rights of such individual to

payment by any other party for such health care items

or services;’’.

(d) EFFECTIVE DATE.—(1) Except as provided in paragraph (2),

the amendments made by subsections (a)(1), (b), and (c) shall apply

to calendar quarters beginning on or after October 1, 1993, without

regard to whether or not final regulations to carry out such amendments have been promulgated by such date.

(2) In the case of a State plan for medical assistance under

title XIX of the Social Security Act which the Secretary of Health

and Human Services determines requires State legislation (other

than legislation appropriating funds) in order for the plan to meet
H. R. 2264—322

the additional requirements imposed by the amendments made

by subsections (a) and (b), the State plan shall not be regarded

as failing to comply with the requirements of such title solely

on the basis of its failure to meet these additional requirements

before the first day of the first calendar quarter beginning after

the close of the first regular session of the State legislature that

begins after the date of the enactment of this Act. For purposes

of the preceding sentence, in the case of a State that has a 2-

year legislative session, each year of such session shall be deemed

to be a separate regular session of the State legislature.

(3) The amendment made by subsection (a)(2) shall apply to

items and services furnished on or after October 1, 1993.

SEC. 13623. MEDICAL CHILD SUPPORT.

(a) STATE PLAN REQUIREMENT.—Section 1902(a) (42 U.S.C.

1396a(a)) is amended—

(1) by striking ‘‘and’’ at the end of paragraph (54);

(2) in the paragraph (55) inserted by section 4602(a)(3)

of OBRA–1990, by striking the period at the end and inserting

a semicolon;

(3) by redesignating the paragraph (55) inserted by section

4604(b)(3) of OBRA–1990 as paragraph (56), by transferring

and inserting it after the paragraph (55) inserted by section

4602(a)(3) of such Act, and by striking the period at the end

and inserting a semicolon;

(4) by placing paragraphs (57) and (58), inserted by section

4751(a)(1)(C) of OBRA–1990, immediately after paragraph (56),

as redesignated by paragraph (3);

(5) in the paragraph (58) inserted by section 4751(a)(1)(C)

of OBRA–1990, by striking the period at the end and inserting

a semicolon;

(6) by redesignating the paragraph (58) inserted by section

4752(c)(1)(C) of OBRA–1990 as paragraph (59) and by transferring and inserting it after the paragraph (58) inserted by section

4751(a)(1)(C) of such Act, and by striking the period at the

end and inserting ‘‘; and’’; and

(7) by inserting after paragraph (59) the following new

paragraph:

‘‘(60) provide that the State agency shall provide assurances

satisfactory to the Secretary that the State has in effect the

laws relating to medical child support required under section

1908.’’.

(b) MEDICAL CHILD SUPPORT LAWS.—Title XIX (42 U.S.C 1936

et seq.) is amended by inserting after section 1907 the following

new section:

‘‘REQUIRED LAWS RELATING TO MEDICAL CHILD SUPPORT

‘‘SEC. 1908. (a) IN GENERAL.—The laws relating to medical

child support, which a State is required to have in effect under

section 1902(a)(60), are as follows:

‘‘(1) A law that prohibits an insurer from denying enrollment of a child under the health coverage of the child’s parent

on the ground that—

‘‘(A) the child was born out of wedlock,

‘‘(B) the child is not claimed as a dependent on the

parent’s Federal income tax return, or
H. R. 2264—323

‘‘(C) the child does not reside with the parent or in

the insurer’s service area.

‘‘(2) In any case in which a parent is required by a court

or administrative order to provide health coverage for a child

and the parent is eligible for family health coverage through

an insurer, a law that requires such insurer—

‘‘(A) to permit such parent to enroll under such family

coverage any such child who is otherwise eligible for such

coverage (without regard to any enrollment season restrictions);

‘‘(B) if such a parent is enrolled but fails to make

application to obtain coverage of such child, to enroll such

child under such family coverage upon application by the

child’s other parent or by the State agency administering

the program under this title or part D of title IV; and

‘‘(C) not to disenroll (or eliminate coverage of) such

a child unless the insurer is provided satisfactory written

evidence that—

‘‘(i) such court or administrative order is no longer

in effect, or

‘‘(ii) the child is or will be enrolled in comparable

health coverage through another insurer which will

take effect not later than the effective date of such

disenrollment.

‘‘(3) In any case in which a parent is required by a court

or administrative order to provide health coverage for a child

and the parent is eligible for family health coverage through

an employer doing business in the State, a law that requires

such employer— ‘‘(A) to permit such parent to enroll under such family

coverage any such child who is otherwise eligible for such

coverage (without regard to any enrollment season restrictions);

‘‘(B) if such a parent is enrolled but fails to make

application to obtain coverage of such child, to enroll such

child under such family coverage upon application by the

child’s other parent or by the State agency administering

the program under this title or part D of title IV; and ‘‘(C) not to disenroll (or eliminate coverage of) any

such child unless—

‘‘(i) the employer is provided satisfactory written

evidence that—

‘‘(I) such court or administrative order is no

longer in effect, or ‘‘(II) the child is or will be enrolled in comparable health coverage which will take effect not

later than the effective date of such disenrollment,

or

‘‘(ii) the employer has eliminated family health

coverage for all of its employees; and

‘‘(D) to withhold from such employee’s compensation

the employee’s share (if any) of premiums for health coverage (except that the amount so withheld may not exceed

the maximum amount permitted to be withheld under section 303(b) of the Consumer Credit Protection Act), and

to pay such share of premiums to the insurer, except that

the Secretary may provide by regulation for appropriate
H. R. 2264—324

circumstances under which an employer may withhold less

than such employee’s share of such premiums.

‘‘(4) A law that prohibits an insurer from imposing requirements on a State agency, which has been assigned the rights

of an individual eligible for medical assistance under this title

and covered for health benefits from the insurer, that are

different from requirements applicable to an agent or assignee

of any other individual so covered.

‘‘(5) A law that requires an insurer, in any case in which

a child has health coverage through the insurer of a

noncustodial parent—

‘‘(A) to provide such information to the custodial parent

as may be necessary for the child to obtain benefits through

such coverage;

‘‘(B) to permit the custodial parent (or provider, with

the custodial parent’s approval) to submit claims for covered services without the approval of the noncustodial

parent; and

‘‘(C) to make payment on claims submitted in accordance with subparagraph (B) directly to such custodial

parent, the provider, or the State agency.

‘‘(6) A law that permits the State agency under this title

to garnish the wages, salary, or other employment income

of, and requires withholding amounts from State tax refunds

to, any person who—

‘‘(A) is required by court or administrative order to

provide coverage of the costs of health services to a child

who is eligible for medical assistance under this title, ‘‘(B) has received payment from a third party for the

costs of such services to such child, but

‘‘(C) has not used such payments to reimburse, as

appropriate, either the other parent or guardian of such

child or the provider of such services,

to the extent necessary to reimburse the State agency for

expenditures for such costs under its plan under this title,

but any claims for current or past-due child support shall

take priority over any such claims for the costs of such services.

‘‘(b) DEFINITION.—For purposes of this section, the term ‘insurer’

includes a group health plan, as defined in section 607(1) of the

Employee Retirement Income Security Act of 1974, a health maintenance organization, and an entity offering a service benefit plan.’’. (c) EFFECTIVE DATE.—(1) Except as provided in paragraph (2),

the amendments made by this section apply to calendar quarters

beginning on or after April 1, 1994, without regard to whether

or not final regulations to carry out such amendments have been

promulgated by such date.

(2) In the case of a State plan under title XIX of the Social

Security Act which the Secretary of Health and Human Services

determines requires State legislation in order for the plan to meet

the additional requirements imposed by the amendments made

by this section, the State plan shall not be regarded as failing

to comply with the requirements of such title solely on the basis

of its failure to meet these additional requirements before the

first day of the first calendar quarter beginning after the close

of the first regular session of the State legislature that begins

after the date of enactment of this Act. For purposes of the preceding

sentence, in the case of a State that has a 2-year legislative session,
H. R. 2264—325

each year of such session shall be deemed to be a separate regular

session of the State legislature.

SEC. 13624. APPLICATION OF MEDICARE RULES LIMITING CERTAIN

PHYSICIAN REFERRALS.

(a) IN GENERAL.—Section 1903 (42 U.S.C.1396b) is amended

by inserting after subsection (r) the following new subsection: ‘‘(s) Notwithstanding the preceding provisions of this section, no payment shall be made to a State under this section for expenditures for medical assistance under the State plan consisting of

a designated health service (as defined in subsection (h)(6) of section

1877) furnished to an individual on the basis of a referral that

would result in the denial of payment for the service under title

XVIII if such title provided for coverage of such service to the

same extent and under the same terms and conditions as under

the State plan, and subsections (f) and (g)(5) of such section shall

apply to a provider of such a designated health service for which

payment may be made under this title in the same manner as

such subsections apply to a provider of such a service for which

payment may be made under such title.’’. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to referrals made on or after December 31, 1994.

SEC. 13625. STATE MEDICAID FRAUD CONTROL.

(a) IN GENERAL.—Section 1902(a) (42 U.S.C. 1396a(a)), as

amended by section 13623(a), is amended— (1) by striking ‘‘and’’ at the end of paragraph (59);

(2) by striking the period at the end of paragraph (60) and inserting ‘‘; and’’; and (3) by inserting after paragraph (60) the following new paragraph: ‘‘(61) provide that the State must demonstrate that it operates a medicaid fraud and abuse control unit described in

section 1903(q) that effectively carries out the functions and

requirements described in such section, as determined in

accordance with standards established by the Secretary, unless

the State demonstrates to the satisfaction of the Secretary

that the effective operation of such a unit in the State would

not be cost-effective because minimal fraud exists in connection

with the provision of covered services to eligible individuals

under the State plan, and that beneficiaries under the plan

will be protected from abuse and neglect in connection with

the provision of medical assistance under the plan without

the existence of such a unit.’’.

(b) EFFECTIVE DATE.—Section 1902(a)(61) of the Social Security Act (as added by subsection (a)) shall take effect January 1, 1995,

and the standards referred to in such section shall be established

not later than March 31, 1994.

PART IV—IMMUNIZATIONS

SEC. 13631. MEDICAID PEDIATRIC IMMUNIZATION PROVISIONS.

(a) STATE PLAN REQUIREMENT FOR PEDIATRIC IMMUNIZATION

DISTRIBUTION PROGRAM.—Section 1902(a) (42 U.S.C. 1396a(a)), as

amended by sections 13623(a) and 13625(a), is amended— (1) by striking ‘‘and’’ at the end of paragraph (60);

(2) by striking the period at the end of paragraph (61)

and inserting ‘‘; and’’; and
H. R. 2264—326

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

‘‘(62) provide for a program for the distribution of pediatric vaccines to program-registered providers for the immunization

of vaccine-eligible children in accordance with section 1928.’’.

(b) DESCRIPTION OF REQUIRED PROGRAM.—Title XIX is

amended—

(1) by redesignating section 1928 as section 1931 and by moving such section to the end of such title, and (2) by inserting after section 1927 the following new section:

‘‘PROGRAM FOR DISTRIBUTION OF PEDIATRIC VACCINES

‘‘SEC. 1928. (a) ESTABLISHMENT OF PROGRAM.— ‘‘(1) IN GENERAL.—In order to meet the requirement of section 1902(a)(62), each State shall establish a pediatric vaccine distribution program (which may be administered by the

State department of health), consistent with the requirements

of this section, under which—

‘‘(A) each vaccine-eligible child (as defined in subsection (b)), in receiving an immunization with a qualified pediatric

vaccine (as defined in subsection (h)(8)) from a programregistered provider (as defined in subsection (c)) on or

after October 1, 1994, is entitled to receive the immunization without charge for the cost of such vaccine; and ‘‘(B)(i) each program-registered provider who admin- isters such a pediatric vaccine to a vaccine-eligible child

on or after such date is entitled to receive such vaccine

under the program without charge either for the vaccine

or its delivery to the provider, and (ii) no vaccine is distributed under the program to a provider unless the provider

is a program-registered provider.

‘‘(2) DELIVERY OF SUFFICIENT QUANTITIES OF PEDIATRIC VACCINES TO IMMUNIZE FEDERALLY VACCINE-ELIGIBLE CHILDREN.— ‘‘(A) IN GENERAL.—The Secretary shall provide under subsection (d) for the purchase and delivery on behalf of

each State meeting the requirement of section 1902(a)(62)

(or, with respect to vaccines administered by an Indian

tribe or tribal organization to Indian children, directly to

the tribe or organization), without charge to the State,

of such quantities of qualified pediatric vaccines as may

be necessary for the administration of such vaccines to

all federally vaccine-eligible children in the State on or

after October 1, 1994. This paragraph constitutes budget

authority in advance of appropriations Acts, and represents

the obligation of the Federal Government to provide for

the purchase and delivery to States of the vaccines (or

payment under subparagraph (C)) in accordance with this

paragraph. ‘‘(B) SPECIAL RULES WHERE VACCINE IS UNAVAILABLE.— To the extent that a sufficient quantity of a vaccine is

not available for purchase or delivery under subsection

(d), the Secretary shall provide for the purchase and delivery of the available vaccine in accordance with priorities

established by the Secretary, with priority given to federally vaccine-eligible children unless the Secretary finds

there are other public health considerations.

‘‘(C) SPECIAL RULES WHERE STATE IS A MANUFACTURER.—
H. R. 2264—327

‘‘(i) PAYMENTS IN LIEU OF VACCINES.—In the case

of a State that manufactures a pediatric vaccine the

Secretary, instead of providing the vaccine on behalf

of a State under subparagraph (A), shall provide to

the State an amount equal to the value of the quantity

of such vaccine that otherwise would have been delivered on behalf of the State under such subparagraph,

but only if the State agrees that such payments will

only be used for purposes relating to pediatric

immunizations.

‘‘(ii) DETERMINATION OF VALUE.—In determining

the amount to pay a State under clause (i) with respect

to a pediatric vaccine, the value of the quantity of

vaccine shall be determined on the basis of the price

in effect for the qualified pediatric vaccine under contracts under subsection (d). If more than 1 such contract is in effect, the Secretary shall determine such

value on the basis of the average of the prices under

the contracts, after weighting each such price in relation to the quantity of vaccine under the contract

involved.

‘‘(b) VACCINE-ELIGIBLE CHILDREN.—For purposes of this section:

‘‘(1) IN GENERAL.—The term ‘vaccine-eligible child’ means

a child who is a federally vaccine-eligible child (as defined

in paragraph (2)) or a State vaccine-eligible child (as defined

in paragraph (3)).

‘‘(2) FEDERALLY VACCINE-ELIGIBLE CHILD.—

‘‘(A) IN GENERAL.—The term ‘federally vaccine-eligible

child’ means any of the following children:

‘‘(i) A medicaid-eligible child.

‘‘(ii) A child who is not insured.

‘‘(iii) A child who (I) is administered a qualified

pediatric vaccine by a federally-qualified health center

(as defined in section 1905(l)(2)(B)) or a rural health

clinic (as defined in section 1905(l)(1)), and (II) is not

insured with respect to the vaccine.

‘‘(iv) A child who is an Indian (as defined in subsection (h)(3)).

‘‘(B) DEFINITIONS.—In subparagraph (A):

‘‘(i) The term ‘medicaid-eligible’ means, with

respect to a child, a child who is entitled to medical

assistance under a state plan approved under this

title.

‘‘(ii) The term ‘insured’ means, with respect to

a child—

‘‘(I) for purposes of subparagraph (A)(ii), that

the child is enrolled under, and entitled to benefits

under, a health insurance policy or plan, including

a group health plan, a prepaid health plan, or

an employee welfare benefit plan under the

Employee Retirement Income Security Act of 1974;

and

‘‘(II) for purposes of subparagraph (A)(iii)(II)

with respect to a pediatric vaccine, that the child

is entitled to benefits under such a health insurance policy or plan, but such benefits are not
H. R. 2264—328

available with respect to the cost of the pediatric

vaccine.

‘‘(3) STATE VACCINE-ELIGIBLE CHILD.—The term ‘State vaccine-eligible child’ means, with respect to a State and a qualified

pediatric vaccine, a child who is within a class of children

for which the State is purchasing the vaccine pursuant to

subsection (d)(4)(B).

‘‘(c) PROGRAM-REGISTERED PROVIDERS.—

‘‘(1) DEFINED.—In this section, except as otherwise provided, the term ‘program-registered provider’ means, with

respect to a State, any health care provider that—

‘‘(A) is licensed or otherwise authorized for administration of pediatric vaccines under the law of the State in

which the administration occurs (subject to section 333(e)

of the Public Health Service Act), without regard to

whether or not the provider participates in the plan under

this title;

‘‘(B) submits to the State an executed provider agreement described in paragraph (2); and

‘‘(C) has not been found, by the Secretary or the State,

to have violated such agreement or other applicable

requirements established by the Secretary or the State

consistent with this section.

‘‘(2) PROVIDER AGREEMENT.—A provider agreement for a

provider under this paragraph is an agreement (in such form

and manner as the Secretary may require) that the provider

agrees as follows:

‘‘(A)(i) Before administering a qualified pediatric vaccine to a child, the provider will ask a parent of the child

such questions as are necessary to determine whether the

child is a vaccine-eligible child, but the provider need not

independently verify the answers to such questions. ‘‘(ii) The provider will, for a period of time specified

by the Secretary, maintain records of responses made to

the questions.

‘‘(iii) The provider will, upon request, make such

records available to the State and to the Secretary, subject

to section 1902(a)(7).

‘‘(B)(i) Subject to clause (ii), the provider will comply

with the schedule, regarding the appropriate periodicity,

dosage, and contraindications applicable to pediatric vaccines, that is established and periodically reviewed and,

as appropriate, revised by the advisory committee referred

to in subsection (e), except in such cases as, in the provider’s medical judgment subject to accepted medical practice,

such compliance is medically inappropriate.

‘‘(ii) The provider will provide pediatric vaccines in

compliance with applicable State law, including any such

law relating to any religious or other exemption.

‘‘(C)(i) In administering a qualified pediatric vaccine

to a vaccine-eligible child, the provider will not impose

a charge for the cost of the vaccine. A program-registered

provider is not required under this section to administer

such a vaccine to each child for whom an immunization

with the vaccine is sought from the provider.

‘‘(ii) The provider may impose a fee for the administration of a qualified pediatric vaccine so long as the fee
H. R. 2264—329

in the case of a federally vaccine-eligible child does not

exceed the costs of such administration (as determined

by the Secretary based on actual regional costs for such

administration).

‘‘(iii) The provider will not deny administration of a

qualified pediatric vaccine to a vaccine-eligible child due

to the inability of the child’s parent to pay an administration fee.

‘‘(3) ENCOURAGING INVOLVEMENT OF PROVIDERS.—Each program under this section shall provide, in accordance with criteria established by the Secretary—

‘‘(A) for encouraging the following to become programregistered providers: private health care providers, the

Indian Health Service, health care providers that receive

funds under title V of the Indian Health Care Improvement

Act, and health programs or facilities operated by Indian

tribes or tribal organizations; and

‘‘(B) for identifying, with respect to any population

of vaccine-eligible children a substantial portion of whose

parents have a limited ability to speak the English language, those program-registered providers who are able

to communicate with the population involved in the language and cultural context that is most appropriate.

‘‘(4) STATE REQUIREMENTS.—Except as the Secretary may

permit in order to prevent fraud and abuse and for related

purposes, a State may not impose additional qualifications or

conditions, in addition to the requirements of paragraph (1),

in order that a provider qualify as a program-registered provider under this section. This subsection does not limit the

exercise of State authority under section 1915(b).

‘‘(d) NEGOTIATION OF CONTRACTS WITH MANUFACTURERS.— ‘‘(1) IN GENERAL.—For the purpose of meeting obligations

under this section, the Secretary shall negotiate and enter

into contracts with manufacturers of pediatric vaccines consistent with the requirements of this subsection and, to the maximum extent practicable, consolidate such contracting with any

other contracting activities conducted by the Secretary to purchase vaccines. The Secretary may enter into such contracts

under which the Federal Government is obligated to make

outlays, the budget authority for which is not provided for

in advance in appropriations Acts, for the purchase and delivery

of pediatric vaccines under subsection (a)(2)(A).

‘‘(2) AUTHORITY TO DECLINE CONTRACTS.—The Secretary

may decline to enter into such contracts and may modify or

extend such contracts.

‘‘(3) CONTRACT PRICE.—

‘‘(A) IN GENERAL.—The Secretary, in negotiating the

prices at which pediatric vaccines will be purchased and

delivered from a manufacturer under this subsection, shall

take into account quantities of vaccines to be purchased

by States under the option under paragraph (4)(B).

‘‘(B) NEGOTIATION OF DISCOUNTED PRICE FOR CURRENT

VACCINES.—With respect to contracts entered into under

this subsection for a pediatric vaccine for which the Centers

for Disease Control and Prevention has a contract in effect

under section 317(j)(1) of the Public Health Service Act

as of May 1, 1993, no price for the purchase of such
H. R. 2264—330

vaccine for vaccine-eligible children shall be agreed to by

the Secretary under this subsection if the price per dose

of such vaccine (including delivery costs and any applicable

excise tax established under section 4131 of the Internal

Revenue Code of 1986) exceeds the price per dose for the

vaccine in effect under such a contract as of such date

increased by the percentage increase in the consumer price

index for all urban consumers (all items; United States

city average) from May 1993 to the month before the month

in which such contract is entered into.

‘‘(C) NEGOTIATION OF DISCOUNTED PRICE FOR NEW VACCINES.—With respect to contracts entered into for a pediatric vaccine not described in subparagraph (B), the price

for the purchase of such vaccine shall be a discounted

price negotiated by the Secretary that may be established

without regard to such subparagraph.

‘‘(4) QUANTITIES AND TERMS OF DELIVERY.—Under such

contracts—

‘‘(A) the Secretary shall provide, consistent with paragraph (6), for the purchase and delivery on behalf of States

(and tribes and tribal organizations) of quantities of pediatric vaccines for federally vaccine-eligible children; and

‘‘(B) each State, at the option of the State, shall be

permitted to obtain additional quantities of pediatric vaccines (subject to amounts specified to the Secretary by

the State in advance of negotiations) through purchasing

the vaccines from the manufacturers at the applicable price

negotiated by the Secretary consistent with paragraph (3),

if (i) the State agrees that the vaccines will be used to

provide immunizations only for children who are not federally vaccine-eligible children and (ii) the State provides

to the Secretary such information (at a time and manner

specified by the Secretary, including in advance of negotiations under paragraph (1)) as the Secretary determines

to be necessary, to provide for quantities of pediatric vaccines for the State to purchase pursuant to this subsection

and to determine annually the percentage of the vaccine

market that is purchased pursuant to this section and

this subparagraph.

The Secretary shall enter into the initial negotiations under

the preceding sentence not later than 180 days after the date

of the enactment of the Omnibus Budget Reconciliation Act

of 1993.

‘‘(5) CHARGES FOR SHIPPING AND HANDLING.—The Secretary may enter into a contract referred to in paragraph (1) only

if the manufacturer involved agrees to submit to the Secretary

such reports as the Secretary determines to be appropriate

to assure compliance with the contract and if, with respect

to a State program under this section that does not provide

for the direct delivery of qualified pediatric vaccines, the manufacturer involved agrees that the manufacturer will provide

for the delivery of the vaccines on behalf of the State in accordance with such program and will not impose any charges for

the costs of such delivery (except to the extent such costs

are provided for in the price established under paragraph (3)).

‘‘(6) ASSURING ADEQUATE SUPPLY OF VACCINES.—The Secretary, in negotiations under paragraph (1), shall negotiate
H. R. 2264—331

for quantities of pediatric vaccines such that an adequate supply of such vaccines will be maintained to meet unanticipated

needs for the vaccines. For purposes of the preceding sentence,

the Secretary shall negotiate for a 6-month supply of vaccines

in addition to the quantity that the Secretary otherwise would

provide for in such negotiations. In carrying out this paragraph,

the Secretary shall consider the potential for outbreaks of the

diseases with respect to which the vaccines have been developed.

‘‘(7) MULTIPLE SUPPLIERS.—In the case of the pediatric

vaccine involved, the Secretary shall, as appropriate, enter

into a contract referred to in paragraph (1) with each manufacturer of the vaccine that meets the terms and conditions of

the Secretary for an award of such a contract (including terms

and conditions regarding safety and quality). With respect to

multiple contracts entered into pursuant to this paragraph,

the Secretary may have in effect different prices under each

of such contracts and, with respect to a purchase by States

pursuant to paragraph (4)(B), the Secretary shall determine

which of such contracts will be applicable to the purchase.

‘‘(e) USE OF PEDIATRIC VACCINES LIST.—The Secretary shall

use, for the purpose of the purchase, delivery, and administration

of pediatric vaccines under this section, the list established (and

periodically reviewed and as appropriate revised) by the Advisory

Committee on Immunization Practices (an advisory committee

established by the Secretary, acting through the Director of the

Centers for Disease Control and Prevention).

‘‘(f) REQUIREMENT OF STATE MAINTENANCE OF IMMUNIZATION

LAWS.—In the case of a State that had in effect as of May 1,

1993, a law that requires some or all health insurance policies

or plans to provide some coverage with respect to a pediatric vaccine, a State program under this section does not comply with

the requirements of this section unless the State certifies to the

Secretary that the State has not modified or repealed such law

in a manner that reduces the amount of coverage so required. ‘‘(g) TERMINATION.—This section, and the requirement of section

1902(a)(62), shall cease to be in effect beginning on such date

as may be prescribed in Federal law providing for immunization

services for all children as part of a broad-based reform of the

national health care system. ‘‘(h) DEFINITIONS.—For purposes of this section:

‘‘(1) The term ‘child’ means an individual 18 years of age

or younger. ‘‘(2) The term ‘immunization’ means an immunization

against a vaccine-preventable disease.

‘‘(3) The terms ‘Indian’, ‘Indian tribe’ and ‘tribal organization’ have the meanings given such terms in section 4 of the

Indian Health Care Improvement Act.

‘‘(4) The term ‘manufacturer’ means any corporation,

organization, or institution, whether public or private (including

Federal, State, and local departments, agencies, and instrumentalities), which manufactures, imports, processes, or distributes

under its label any pediatric vaccine. The term ‘manufacture’

means to manufacture, import, process, or distribute a vaccine.

‘‘(5) The term ‘parent’ includes, with respect to a child,

an individual who qualifies as a legal guardian under State

law.
H. R. 2264—332

‘‘(6) The term ‘pediatric vaccine’ means a vaccine included

on the list under subsection (e).

‘‘(7) The term ‘program-registered provider’ has the meaning given such term in subsection (c).

‘‘(8) The term ‘qualified pediatric vaccine’ means a pediatric

vaccine with respect to which a contract is in effect under

subsection (d).

‘‘(9) The terms ‘vaccine-eligible child’, ‘federally vaccineeligible child’, and ‘State vaccine-eligible child’ have the meaning given such terms in subsection (b).’’.

(c) LIMITATION ON MEDICAID PAYMENTS.—Section 1903(i) (42

U.S.C. 1396b(i)), as amended by section 2(b)(2) of the Medicaid

Voluntary Contribution and Provider-Specific Tax Amendments of

1991, is amended—

(1) in the paragraph (10) inserted by section 4401(a)(1)(B)

of OBRA–1990, by striking all that follows ‘‘1927(g)’’ and inserting a semicolon;

(2) by redesignating the paragraph (12) inserted by section

4752(a)(2) of OBRA–1990 as paragraph (11), by transferring

and inserting it after the paragraph (10) inserted by section

4401(a)(1)(B) of OBRA–1990, and by striking the period at

the end and inserting a semicolon;

(3) by redesignating the paragraph (14) inserted by section

4752(e) of OBRA–1990 as paragraph (12), by transferring and

inserting it after paragraph (11), as redesignated by paragraph

(2), and by striking the period at the end and inserting a

semicolon;

(4) by redesignating the paragraph (11) inserted by section

4801(e)(16)(A) of OBRA–1990 as paragraph (13), by transferring

and inserting it after paragraph (12), as redesignated by paragraph (3), and by striking the period at the end and inserting

‘‘; or’’; and

(5) by inserting after paragraph (13), as so redesignated,

the following new paragraph:

‘‘(14) with respect to any amount expended on administrative costs to carry out the program under section 1928.’’.

(d) CONTINUED COVERAGE OF COSTS OF A PEDIATRIC VACCINE

UNDER CERTAIN GROUP HEALTH PLANS.—

(1) REQUIREMENT.—The requirement of this paragraph,

with respect to a group health plan for plan years beginning

after the date of the enactment of this Act, is that the group

health plan not reduce its coverage of the costs of pediatric

vaccines (as defined under section 1928(h)(6) of the Social Security Act) below the coverage it provided as of May 1, 1993.

(2) ENFORCEMENT.—For purposes of section 2207 of the

Public Health Service Act, the requirement of paragraph (1)

is deemed a requirement of title XXII of such Act.

(e) AVAILABILITY OF MEDICAID PAYMENTS FOR CHILDHOOD VACCINE REPLACEMENT PROGRAMS.—

(1) IN GENERAL.—Section 1902(a)(32) (42 U.S.C.

1396a(a)(32)) is amended—

(A) by striking ‘‘and’’ at the end of subparagraph (B),

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

(C) and inserting ‘‘; and’’, and

(C) by adding at the end the following new subparagraph:
H. R. 2264—333

‘‘(D) in the case of payment for a childhood vaccine

administered before October 1, 1994, to individuals entitled

to medical assistance under the State plan, the State plan

may make payment directly to the manufacturer of the

vaccine under a voluntary replacement program agreed

to by the State pursuant to which the manufacturer (i)

supplies doses of the vaccine to providers administering

the vaccine, (ii) periodically replaces the supply of the

vaccine, and (iii) charges the State the manufacturer’s price

to the Centers for Disease Control and Prevention for the

vaccine so administered (which price includes a reasonable

amount to cover shipping and the handling of returns);’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on the date of the enactment of this Act.

(f) OUTREACH AND EDUCATION.—

(1) IN GENERAL.—Section 1902(a) (42 U.S.C. 1396a(a)) is

amended—

(A) in paragraph (11)(B)—

(i) by striking ‘‘effective July 1, 1969,’’,

(ii) by striking ‘‘and’’ before ‘‘(ii)’’, and

(iii) by striking ‘‘to him under section 1903’’ and

inserting ‘‘to the individual under section 1903, and

(iii) providing for coordination of information and education on pediatric vaccinations and delivery of

immunization services’’;

(B) in paragraph (11)(C), by inserting ‘‘, including the

provision of information and education on pediatric vaccinations and the delivery of immunization services,’’ after

‘‘operations under this title’’; and

(C) in paragraph (43)(A), by inserting before the comma

at the end the following: ‘‘and the need for age-appropriate

immunizations against vaccine-preventable diseases’’.

(2) COVERAGE OF PUBLIC HOUSING HEALTH CENTERS AND

CERTAIN INDIAN HEALTH CARE PROVIDERS AS FEDERALLY-QUALIFIED HEALTH CENTERS.—Section 1905(l)(2)(B) (42 U.S.C.

1396d(l)(2)(B)) is amended—

(A) by striking ‘‘or 340’’ each place it appears and

inserting ‘‘340, or 340A’’, and (B) by inserting ‘‘or by an urban Indian organization

receiving funds under title V of the Indian Health Care

Improvement Act for the provision of primary health services’’ after ‘‘93–638)’’.

(3) EFFECTIVE DATES.—(A) Except as provided in subparagraph (B), the amendments made by this subsection shall apply

to calendar quarters beginning on or after October 1, 1993,

without regard to whether or not final regulations to carry

out such amendments have been promulgated by such date.

(B) In the case of a State plan for medical assistance

under title XIX of the Social Security Act which the Secretary

of Health and Human Services determines requires State legislation (other than legislation appropriating funds) in order for

the plan to meet the additional requirements imposed by the

amendments made by this subsection, the State plan shall

not be regarded as failing to comply with the requirements

of such title solely on the basis of its failure to meet these

additional requirements before the first day of the first calendar

quarter beginning after the close of the first regular session
H. R. 2264—334

of the State legislature that begins after the date of the enactment of this Act. For purposes of the previous sentence, in

the case of a State that has a 2-year legislative session, each

year of such session shall be deemed to be a separate regular

session of the State legislature.

(g) SCHEDULE OF IMMUNIZATIONS UNDER EPSDT.—

(1) IN GENERAL.—Section 1905(r)(1) (42 U.S.C. 1396d(r)(1))

is amended—

(A) in subparagraph (A)(i), by inserting ‘‘and, with

respect to immunizations under subparagraph (B)(iii), in

accordance with the schedule referred to in section

1928(c)(2)(B)(i) for pediatric vaccines’’ after ‘‘child health

care’’; and

(B) in subparagraph (B)(iii), by inserting ‘‘(according

to the schedule referred to in section 1928(c)(2)(B)(i) for

pediatric vaccines)’’ after ‘‘appropriate immunizations’’.

(2) EFFECTIVE DATE.—The amendments made by subparagraphs (A) and (B) of paragraph (1) shall first apply 90 days

after the date the schedule referred to in subparagraphs (A)(i)

and subparagraph (B)(iii) of section 1905(r)(1) of the Social

Security Act (as amended by such respective subparagraphs)

is first established.

(h) DENIAL OF FEDERAL FINANCIAL PARTICIPATION FOR INAPPROPRIATE ADMINISTRATION OF SINGLE-ANTIGEN VACCINE.—

(1) IN GENERAL.—Section 1903(i) (42 U.S.C. 1396b(i)), as

amended by subsection (c), is amended—

(A) in paragraph (13), by striking ‘‘or’’ at the end,

(B) in paragraph (14), by striking the period at the

end and inserting ‘‘; or’’, and

(C) by inserting after paragraph (14) the following

new paragraph:

‘‘(15) with respect to any amount expended for a singleantigen vaccine and its administration in any case in which

the administration of a combined-antigen vaccine was medically

appropriate (as determined by the Secretary).’’.

(2) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall apply to amounts expended for vaccines administered

on or after October 1, 1993.

(i) EFFECTIVE DATE.—Except as otherwise provided in this section, the amendments made by this section shall apply to payments

under State plans approved under title XIX of the Social Security

Act for calendar quarters beginning on or after October 1, 1994.

SEC. 13632. NATIONAL VACCINE INJURY COMPENSATION PROGRAM

AMENDMENTS.

(a) AMENDMENT OF VACCINE INJURY TABLE.—

(1) FILING.—Section 2116(b) of the Public Health Service

Act (42 U.S.C. 300aa–16(b)) is amended by striking ‘‘such person may file’’ and inserting ‘‘or to significantly increase the

likelihood of obtaining compensation, such person may, notwithstanding section 2111(b)(2), file’’.

(2) ADDITIONAL VACCINES.—Section 2114(e) of the Public

Health Service Act (42 U.S.C. 300aa–14) is amended to read

as follows:

‘‘(e) ADDITIONAL VACCINES.—
H. R. 2264—335

‘‘(1) VACCINES RECOMMENDED BEFORE AUGUST 1, 1993.—

By August 1, 1995, the Secretary shall revise the Vaccine

Injury Table included in subsection (a) to include—

‘‘(A) vaccines which are recommended to the Secretary

by the Centers for Disease Control and Prevention before

August 1, 1993, for routine administration to children,

‘‘(B) the injuries, disabilities, illnesses, conditions, and

deaths associated with such vaccines, and

‘‘(C) the time period in which the first symptoms or

manifestations of onset or other significant aggravation

of such injuries, disabilities, illnesses, conditions, and

deaths associated with such vaccines may occur.

‘‘(2) VACCINES RECOMMENDED AFTER AUGUST 1, 1993.—When

after August 1, 1993, the Centers for Disease Control and

Prevention recommends a vaccine to the Secretary for routine

administration to children, the Secretary shall, within 2 years

of such recommendation, amend the Vaccine Injury Table

included in subsection (a) to include—

‘‘(A) vaccines which were recommended for routine

administration to children,

‘‘(B) the injuries, disabilities, illnesses, conditions, and

deaths associated with such vaccines, and

‘‘(C) the time period in which the first symptoms or

manifestations of onset or other significant aggravation

of such injuries, disabilities, illnesses, conditions, and

deaths associated with such vaccines may occur.’’.

(3) EFFECTIVE DATE.—A revision by the Secretary under section 2114(e) of the Public Health Service Act (42 U.S.C.

300aa–14(e)) (as amended by paragraph (2)) shall take effect

upon the effective date of a tax enacted to provide funds for

compensation paid with respect to the vaccine to be added

to the vaccine injury table in section 2114(a) of the Public

Health Service Act (42 U.S.C. 300aa–14(a)).

(b) INCREASED SPENDING.—Section 2115(j) of the Public Health

Service Act (42 U.S.C. 300aa–15(j)) is amended by striking

‘‘$80,000,000 for each succeeding fiscal year’’ and inserting in lieu

thereof ‘‘$110,000,000 for each succeeding fiscal year’’.

(c) EXTENSION OF TIME FOR DECISION.—Section 2112(d)(3)(D)

of the Public Health Service Act (42 U.S.C. 300aa–12(d)(3)(D)) is

amended by striking ‘‘540 days’’ and inserting ‘‘30 months (but

for not more than 6 months at a time)’’.

PART V—MISCELLANEOUS

SEC. 13641. INCREASE IN LIMIT ON FEDERAL MEDICAID MATCHING

PAYMENTS TO PUERTO RICO AND OTHER TERRITORIES.

(a) IN GENERAL.—Paragraphs (1) through (5) of section 1108(c)

(42 U.S.C. 1308(c)) are amended to read as follows:

‘‘(1) Puerto Rico shall not exceed (A) $116,500,000 for fiscal

year 1994 and (B) for each succeeding fiscal year the amount

provided in this paragraph for the preceding fiscal year

increased by the percentage increase in the medical care component of the consumer price index for all urban consumers

(as published by the Bureau of Labor Statistics) for the twelvemonth period ending in March preceding the beginning of the

fiscal year, rounded to the nearest $100,000;
H. R. 2264—336

‘‘(2) the Virgin Islands shall not exceed (A) $3,837,500 for fiscal year 1994, and (B) for each succeeding fiscal year

the amount provided in this paragraph for the preceding fiscal

year increased by the percentage increase referred to in paragraph (1)(B), rounded to the nearest $10,000; ‘‘(3) Guam shall not exceed (A) $3,685,000 for fiscal year 1994, and (B) for each succeeding fiscal year the amount provided in this paragraph for the preceding fiscal year increased

by the percentage increase referred to in paragraph (1)(B),

rounded to the nearest $10,000;

‘‘(4) Northern Mariana Islands shall not exceed (A)

$1,110,000 for fiscal year 1994, and (B) for each succeeding

fiscal year the amount provided in this paragraph for the

preceding fiscal year increased by the percentage increase

referred to in paragraph (1)(B), rounded to the nearest $10,000;

and

‘‘(5) American Samoa shall not exceed (A) $2,140,000 for

fiscal year 1994, and (B) for each succeeding fiscal year the

amount provided in this paragraph for the preceding fiscal

year increased by the percentage increase referred to in paragraph (1)(B), rounded to the nearest $10,000.’’.

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply beginning with fiscal year 1994.

SEC. 13642. EXTENSION OF MORATORIUM ON TREATMENT OF CERTAIN FACILITIES AS INSTITUTIONS FOR MENTAL DISEASES.

Effective as if included in the enactment of OBRA–1989, section

6408(a)(3) of such Act is amended by striking ‘‘180 days’’ and

all that follows and inserting ‘‘December 31, 1995.’’.

SEC. 13643. DEMONSTRATION PROJECTS.

(a) EXTENSION OF DEMONSTRATION PROJECT ON THE EFFECT

OF ALLOWING STATES TO EXTEND MEDICAID COVERAGE TO CERTAIN

LOW-INCOME FAMILIES.—Effective as if included in the enactment

of OBRA–1990, section 4745 of such Act is amended—

(1) in paragraph (1) of subsection (e), by striking ‘‘$12,000,000 in each of fiscal years 1991, 1992, and 1993,

and to no more than $4,000,000 in fiscal year 1994’’ and inserting ‘‘$40,000,000’’; and (2) in paragraph (2) of subsection (f) by striking ‘‘January 1, 1995’’ and inserting ‘‘one year after the termination of the

projects’’.

(b) RENEWAL OF UNFUNDED DEMONSTRATION PROJECT FOR LOW- INCOME PREGNANT WOMEN AND CHILDREN.—Effective as if included

in the enactment of OBRA–1989, section 6407 of such Act is

amended—

(1) in subsection (f), by striking ‘‘$10,000,000 in each of fiscal years 1990, 1991, and 1992’’ and inserting ‘‘$30,000,000’’;

and

(2) in subsection (g)(2), by striking ‘‘January 1, 1994’’ and

inserting ‘‘one year after the termination of the demonstration

projects’’.

(c) APPLICATION OF SPOUSAL IMPOVERISHMENT RULES TO THE

ON LOK FRAIL ELDERLY DEMONSTRATION PROJECT.—(1) Section

1924(a)(5), as added by section 4744(b)(1) of OBRA–1990, is amended by striking ‘‘1986.’’ and inserting ‘‘1986 or a waiver under section

603(c) of the Social Security Amendments of 1983.’’.
H. R. 2264—337

(2) Section 603(c) of the Social Security Amendments of 1983

is amended—

(A) by striking ‘‘(c)’’ and inserting ‘‘(c)(1)’’;

(B) by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B); and

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

‘‘(2) Section 1924 of the Social Security Act shall apply to

any individual receiving services from an organization receiving

a waiver under this subsection.’’.

SEC. 13644. EXTENSION OF PERIOD OF APPLICABILITY OF ENROLLMENT MIX REQUIREMENT TO CERTAIN HEALTH MAINTENANCE ORGANIZATIONS PROVIDING SERVICES UNDER

DAYTON AREA HEALTH PLAN.

Section 2 of Public Law 102–276 is amended by striking ‘‘January 31, 1994’’ and inserting ‘‘December 31, 1995’’.

Subchapter C—Human Resources and Income Security

Amendments

SEC. 13701. TABLE OF CONTENTS.

The table of contents of this subchapter is as follows:

Subchapter C—Human Resources and Income Security Amendments

Sec. 13701. Table of contents.

Sec. 13702. References.

PART I—CHILD WELFARE SERVICES, FOSTER CARE, AND ADOPTION ASSISTANCE

Sec. 13711. Entitlement funding for services designed to strengthen and preserve

families.

Sec. 13712. Entitlement funding for State courts to assess and improve handling of

proceedings relating to foster care and adoption. Sec. 13713. Enhanced match for automated data systems. Sec. 13714. Permanent extension of independent living program. Sec. 13715. Training of agency staff and foster and adoptive parents. Sec. 13716. Moratorium on collection of disallowances.

PART II—CHILD SUPPORT ENFORCEMENT

Sec. 13721. State paternity establishment programs.

PART III—SUPPLEMENTAL SECURITY INCOME

Sec. 13731. Fees for Federal administration of State supplementary payments. Sec. 13732. Exclusion from income and resources of State relocation assistance.

Sec. 13733. Prevention of adverse effects on eligibility for, and amount of, benefits

when spouse or parent of beneficiary is absent from the household

due to active military service. Sec. 13734. Eligibility for children of Armed Forces personnel residing outside the

United States other than in foreign countries. Sec. 13735. Valuation of certain in-kind support and maintenance when there is a

cost of living adjustment in benefits. Sec. 13736. Exclusion from income of certain amounts received by Indians from interests held in trust.

PART IV—AID TO FAMILIES WITH DEPENDENT CHILDREN

Sec. 13741. 50 percent Federal match of State administrative costs. Sec. 13742. Increase in stepparent income disregard.

PART V—UNEMPLOYMENT INSURANCE

Sec. 13751. Extension of current Federal unemployment rate.

PART VI—SOCIAL SERVICES IN EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES

Sec. 13761. Increase in block grants to States for social services.

SEC. 13702. REFERENCES.

Except as otherwise expressly provided, wherever in this subchapter an amendment or repeal is expressed in terms of an amend-
H. R. 2264—338

ment to, or repeal of, a section or other provision, the reference

shall be considered to be made to a section or other provision

of the Social Security Act.

PART I—CHILD WELFARE SERVICES, FOSTER

CARE, AND ADOPTION ASSISTANCE

SEC. 13711. ENTITLEMENT FUNDING FOR SERVICES DESIGNED TO

STRENGTHEN AND PRESERVE FAMILIES.

(a) IN GENERAL.—Part B of title IV (42 U.S.C. 620–628) is

amended—

(1) by striking the heading and inserting the following:

‘‘PART B—CHILD AND FAMILY SERVICES

‘‘Subpart 1—Child Welfare Services’’; and

(2) by adding at the end the following:

‘‘Subpart 2—Family Preservation and Support

Services

‘‘SEC. 430. PURPOSES; LIMITATIONS ON AUTHORIZATIONS OF APPROPRIATIONS; RESERVATION OF CERTAIN AMOUNTS.

‘‘(a) PURPOSES; LIMITATIONS ON AUTHORIZATION OF APPROPRIATIONS.—For the purpose of encouraging and enabling each State

to develop and establish, or expand, and to operate a program

of family preservation services and community-based family support

services, there are authorized to be appropriated to the Secretary

the amounts described in subsection (b) for the fiscal years specified

in subsection (b).

‘‘(b) DESCRIPTION OF AMOUNTS.—The amount described in this

subsection is—

‘‘(1) for fiscal year 1994, $60,000,000;

‘‘(2) for fiscal year 1995, $150,000,000;

‘‘(3) for fiscal year 1996, $225,000,000;

‘‘(4) for fiscal year 1997, $240,000,000; or

‘‘(5) for fiscal year 1998, the greater of— ‘‘(A) $255,000,000; or

‘‘(B) the amount described in this subsection for fiscal

year 1997, increased by the inflation percentage applicable

to fiscal year 1998. ‘‘(c) INFLATION PERCENTAGE.—For purposes of subsection

(b)(5)(B) of this section, the inflation percentage applicable to any

fiscal year is the percentage (if any) by which—

‘‘(1) the average of the Consumer Price Index (as defined

in section 1(f)(5) of the Internal Revenue Code of 1986) for

the 12-month period ending on December 31 of the immediately

preceding fiscal year; exceeds

‘‘(2) the average of the Consumer Price Index (as so defined)

for the 12-month period ending on December 31 of the 2nd

preceding fiscal year.

‘‘(d) RESERVATION OF CERTAIN AMOUNTS.—

‘‘(1) EVALUATION, RESEARCH, TRAINING, AND TECHNICAL

ASSISTANCE.—The Secretary shall reserve $2,000,000 of the

amount described in subsection (b) for fiscal year 1994, and
H. R. 2264—339

$6,000,000 of the amounts so described for each of fiscal years

1995, 1996, 1997, and 1998, for expenditure by the Secretary—

‘‘(A) for research, training, and technical assistance

related to the program under this subpart; and

‘‘(B) for evaluation of State programs funded under

this subpart and any other Federal, State, or local program,

regardless of whether federally assisted, that is designed

to achieve the same purposes as the program under this

subpart.

‘‘(2) STATE COURT ASSESSMENTS.—The Secretary shall

reserve $5,000,000 of the amount described in subsection (b)

for fiscal year 1995, and $10,000,000 of the amounts so

described for each of fiscal years 1996, 1997, and 1998, for

grants under section 13712 of the Omnibus Budget Reconciliation Act of 1993.

‘‘(3) INDIAN TRIBES.—The Secretary shall reserve 1 percent

of the amounts described in subsection (b) for each fiscal year,

for allotment to Indian tribes in accordance with section 433(a).

‘‘SEC. 431. DEFINITIONS.

‘‘(a) IN GENERAL.—As used in this subpart:

‘‘(1) FAMILY PRESERVATION SERVICES.—The term ‘family

preservation services’ means services for children and families

designed to help families (including adoptive and extended

families) at risk or in crisis, including—

‘‘(A) service programs designed to help children—

‘‘(i) where appropriate, return to families from

which they have been removed; or

‘‘(ii) be placed for adoption, with a legal guardian,

or, if adoption or legal guardianship is determined

not to be appropriate for a child, in some other planned,

permanent living arrangement;

‘‘(B) preplacement preventive services programs, such

as intensive family preservation programs, designed to help

children at risk of foster care placement remain with their

families;

‘‘(C) service programs designed to provide followup care

to families to whom a child has been returned after a

foster care placement;

‘‘(D) respite care of children to provide temporary relief

for parents and other caregivers (including foster parents);

and

‘‘(E) services designed to improve parenting skills (by

reinforcing parents’ confidence in their strengths, and helping them to identify where improvement is needed and

to obtain assistance in improving those skills) with respect

to matters such as child development, family budgeting,

coping with stress, health, and nutrition.

‘‘(2) FAMILY SUPPORT SERVICES.—The term ‘family support

services’ means community-based services to promote the wellbeing of children and families designed to increase the strength

and stability of families (including adoptive, foster, and

extended families), to increase parents’ confidence and competence in their parenting abilities, to afford children a stable

and supportive family environment, and otherwise to enhance

child development.
H. R. 2264—340

‘‘(3) STATE AGENCY.—The term ‘State agency’ means the

State agency responsible for administering the program under

subpart 1.

‘‘(4) STATE.—The term ‘State’ includes an Indian tribe or

tribal organization, in addition to the meaning given such term

for purposes of subpart 1.

‘‘(5) TRIBAL ORGANIZATION.—The term ‘tribal organization’

means the recognized governing body of any Indian tribe.

‘‘(6) INDIAN TRIBE.—The term ‘Indian tribe’ means any

Indian tribe (as defined in section 482(i)(5)) and any Alaska

Native organization (as defined in section 482(i)(7)(A)).

‘‘(b) OTHER TERMS.—For other definitions of other terms used

in this subpart, see section 475.

‘‘SEC. 432. STATE PLANS.

‘‘(a) PLAN REQUIREMENTS.—A State plan meets the requirements of this subsection if the plan—

‘‘(1) provides that the State agency shall administer, or

supervise the administration of, the State program under this

subpart;

‘‘(2)(A)(i) sets forth the goals intended to be accomplished

under the plan by the end of the 5th fiscal year in which

the plan is in operation in the State, and (ii) is updated periodically to set forth the goals intended to be accomplished under

the plan by the end of each 5th fiscal year thereafter;

‘‘(B) describes the methods to be used in measuring

progress toward accomplishment of the goals;

‘‘(C) contains assurances that the State—

‘‘(i) after the end of each of the 1st 4 fiscal years

covered by a set of goals, will perform an interim review

of progress toward accomplishment of the goals, and on

the basis of the interim review will revise the statement

of goals in the plan, if necessary, to reflect changed circumstances; and

‘‘(ii) after the end of the last fiscal year covered by

a set of goals, will perform a final review of progress

toward accomplishment of the goals, and on the basis of

the final review (I) will prepare, transmit to the Secretary,

and make available to the public a final report on progress

toward accomplishment of the goals, and (II) will develop

(in consultation with the entities required to be consulted

pursuant to subsection (b)) and add to the plan a statement

of the goals intended to be accomplished by the end of

the 5th succeeding fiscal year;

‘‘(3) provides for coordination, to the extent feasible and

appropriate, of the provision of services under the plan and

the provision of services or benefits under other Federal or

federally assisted programs serving the same populations;

‘‘(4) contains assurances that not more than 10 percent

of expenditures under the plan for any fiscal year with respect

to which the State is eligible for payment under section 434

for the fiscal year shall be for administrative costs, and that

the remaining expenditures shall be for programs of family

preservation services and community-based family support

services with significant portions of such expenditures for each

such program;

‘‘(5) contains assurances that the State will—
H. R. 2264—341

‘‘(A) annually prepare, furnish to the Secretary, and

make available to the public a description (including separate descriptions with respect to family preservation services and community-based family support services) of—

‘‘(i) the service programs to be made available

under the plan in the immediately succeeding fiscal

year;

‘‘(ii) the populations which the programs will serve;

and

‘‘(iii) the geographic areas in the State in which

the services will be available; and

‘‘(B) perform the activities described in subparagraph

(A)—

‘‘(i) in the case of the 1st fiscal year under the

plan, at the time the State submits its initial plan;

and

‘‘(ii) in the case of each succeeding fiscal year,

by the end of the 3rd quarter of the immediately

preceding fiscal year;

‘‘(6) provides for such methods of administration as the

Secretary finds to be necessary for the proper and efficient

operation of the plan;

‘‘(7)(A) contains assurances that Federal funds provided

to the State under this subpart will not be used to supplant

Federal or non-Federal funds for existing services and activities

which promote the purposes of this subpart; and

‘‘(B) provides that the State will furnish reports to the

Secretary, at such times, in such format, and containing such

information as the Secretary may require, that demonstrate

the State’s compliance with the prohibition contained in

subparagraph (A); and

‘‘(8) provides that the State agency will furnish such

reports, containing such information, and participate in such

evaluations, as the Secretary may require.

‘‘(b) APPROVAL OF PLANS.—

‘‘(1) IN GENERAL.—The Secretary shall approve a plan that

meets the requirements of subsection (a) only if the plan was

developed jointly by the Secretary and the State, after consultation by the State agency with appropriate public and nonprofit

private agencies and community-based organizations with

experience in administering programs of services for children

and families (including family preservation and family support

services).

‘‘(2) PLANS OF INDIAN TRIBES.—

‘‘(A) EXEMPTION FROM INAPPROPRIATE REQUIREMENTS.—The Secretary may exempt a plan submitted by

an Indian tribe from any requirement of this section that

the Secretary determines would be inappropriate to apply

to the Indian tribe, taking into account the resources,

needs, and other circumstances of the Indian tribe.

‘‘(B) SPECIAL RULE.—Notwithstanding subparagraph

(A) of this paragraph, the Secretary may not approve a

plan of an Indian tribe under this subpart to which (but

for this subparagraph) an allotment of less than $10,000

would be made under section 433(a) if allotments were

made under section 433(a) to all Indian tribes with plans
H. R. 2264—342

approved under this subpart with the same or larger numbers of children.

‘‘SEC. 433. ALLOTMENTS TO STATES.

‘‘(a) INDIAN TRIBES.—From the amount reserved pursuant to section 430(d)(3) for any fiscal year, the Secretary shall allot to

each Indian tribe with a plan approved under this subpart an

amount that bears the same ratio to such reserved amount as

the number of children in the Indian tribe bears to the total number

of children in all Indian tribes with State plans so approved, as

determined by the Secretary on the basis of the most current

and reliable information available to the Secretary. ‘‘(b) TERRITORIES.—From the amount described in section 430(b)

for any fiscal year that remains after applying section 430(d) for

the fiscal year, the Secretary shall allot to each of the jurisdictions

of Puerto Rico, Guam, the Virgin Islands, the Northern Mariana

Islands, and American Samoa an amount determined in the same

manner as the allotment to each of such jurisdictions is determined

under section 421.

‘‘(c) OTHER STATES.— ‘‘(1) IN GENERAL.—From the amount described in section

430(b) for any fiscal year that remains after applying section

430(d) and subsection (b) of this section for the fiscal year,

the Secretary shall allot to each State (other than an Indian

tribe) which is not specified in subsection (b) of this section

an amount equal to such remaining amount multiplied by the

food stamp percentage of the State for the fiscal year. ‘‘(2) FOOD STAMP PERCENTAGE DEFINED.— ‘‘(A) IN GENERAL.—As used in paragraph (1) of this subsection, the term ‘food stamp percentage’ means, with

respect to a State and a fiscal year, the average monthly

number of children receiving food stamp benefits in the

State for months in the 3 fiscal years referred to in subparagraph (B) of this paragraph, as determined from sample

surveys made under section 16(c) of the Food Stamp Act

of 1977, expressed as a percentage of the average monthly

number of children receiving food stamp benefits in the

States described in such paragraph (1) for months in such

3 fiscal years, as so determined. ‘‘(B) FISCAL YEARS USED IN CALCULATION.—For pur- poses of the calculation pursuant to subparagraph (A),

the Secretary shall use data for the 3 most recent fiscal

years, preceding the fiscal year for which the State’s allotment is calculated under this subsection, for which such

data are available to the Secretary.

‘‘SEC. 434. PAYMENTS TO STATES.

‘‘(a) ENTITLEMENT.— ‘‘(1) GENERAL RULE.—Except as provided in paragraph (2)

of this subsection, each State which has a plan approved under

this subpart shall be entitled to payment of the lesser of— ‘‘(A) 75 percent of the total expenditures by the State

for activities under the plan during the fiscal year or the

immediately succeeding fiscal year; or ‘‘(B) the allotment of the State under section 433 for

the fiscal year.

‘‘(2) SPECIAL RULE.—Upon submission by a State to the

Secretary during fiscal year 1994 of an application in such
H. R. 2264—343

form and containing such information as the Secretary may

require (including, if the State is seeking payment of an amount

pursuant to subparagraph (B) of this paragraph, a description

of the services to be provided with the amount), the State

shall be entitled to payment of an amount equal to the sum

of—

‘‘(A) such amount, not exceeding $1,000,000, from the

allotment of the State under section 433 for fiscal year

1994, as the State may require to develop and submit

a plan for approval under section 432; and

‘‘(B) an amount equal to the lesser of—

‘‘(i) 75 percent of the expenditures by the State

for services to children and families in accordance with

the application and the expenditure rules of section

432(a)(4); or

‘‘(ii) the allotment of the State under section 433

for fiscal year 1994, reduced by any amount paid to

the State pursuant to subparagraph (A) of this paragraph.

‘‘(b) PROHIBITIONS.—

‘‘(1) NO USE OF OTHER FEDERAL FUNDS FOR STATE MATCH.—

Each State receiving an amount paid under paragraph (1)

or (2)(B) of subsection (a) may not expend any Federal funds

to meet the costs of services described in this subpart not

covered by the amount so paid.

‘‘(2) AVAILABILITY OF FUNDS.—A State may not expend any

amount paid under subsection (a)(1) for any fiscal year after

the end of the immediately succeeding fiscal year.

‘‘(c) DIRECT PAYMENTS TO TRIBAL ORGANIZATIONS OF INDIAN

TRIBES.—The Secretary shall pay any amount to which an Indian

tribe is entitled under this section directly to the tribal organization

of the Indian tribe.

‘‘SEC. 435. EVALUATIONS.

‘‘(a) EVALUATIONS.—

‘‘(1) IN GENERAL.—The Secretary shall evaluate the

effectiveness of the programs carried out pursuant to this subpart in accomplishing the purposes of this subpart, and may

evaluate any other Federal, State, or local program, regardless

of whether federally assisted, that is designed to achieve the

same purposes as the program under this subpart, in accordance with criteria established in accordance with paragraph

(2).

‘‘(2) CRITERIA TO BE USED.—In developing the criteria to

be used in evaluations under paragraph (1), the Secretary shall

consult with appropriate parties, such as—

‘‘(A) State agencies administering programs under this

part and part E;

‘‘(B) persons administering child and family services

programs (including family preservation and family support

programs) for private, nonprofit organizations with an

interest in child welfare; and

‘‘(C) other persons with recognized expertise in the

evaluation of child and family services programs (including

family preservation and family support programs) or other

related programs.
H. R. 2264—344

‘‘(b) COORDINATION OF EVALUATIONS.—The Secretary shall

develop procedures to coordinate evaluations under this section,

to the extent feasible, with evaluations by the States of the effectiveness of programs under this subpart.’’.

(b) CONFORMING AMENDMENTS.—

(1) Section 422 (42 U.S.C. 622) is amended—

(A) in subsection (a), by striking ‘‘this part’’ and inserting ‘‘this subpart’’;

(B) in subsection (b), by striking ‘‘this part’’ each place

such term appears and inserting ‘‘this subpart’’; and

(C) in subsection (b)(2), by inserting ‘‘under the State

plan approved under subpart 2 of this part,’’ after ‘‘part

A of this title,’’.

(2) Section 423(a) (42 U.S.C. 623(a)) is amended by striking

‘‘this part’’ and inserting ‘‘this subpart’’.

(3) Section 428(a) (42 U.S.C. 628(a)) is amended by striking

‘‘this part’’ each place such term appears and inserting ‘‘this

subpart’’.

(4) Section 471(a)(2) (42 U.S.C. 671(a)(2)) is amended by

inserting ‘‘subpart 1 of’’ before ‘‘part B’’.

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

shall be effective with respect to calendar quarters beginning on

or after October 1, 1993.

SEC. 13712. ENTITLEMENT FUNDING FOR STATE COURTS TO ASSESS

AND IMPROVE HANDLING OF PROCEEDINGS RELATING

TO FOSTER CARE AND ADOPTION.

(a) IN GENERAL.—The Secretary shall make grants, in accordance with this section, to the highest State courts in States participating in the program under part E of title IV of the Social Security

Act, for the purpose of enabling such courts— (1) to conduct assessments, in accordance with such

requirements as the Secretary shall publish, of the role, responsibilities, and effectiveness of State courts in carrying out State

laws requiring proceedings (conducted by or under the supervision of the courts)—

(A) that implement parts B and E of title IV of such

Act;

(B) that determine the advisability or appropriateness

of foster care placement;

(C) that determine whether to terminate parental

rights; and (D) that determine whether to approve the adoption

or other permanent placement of a child; and

(2) to implement changes deemed necessary as a result

of the assessments.

(b) APPLICATIONS.—In order to be eligible for a grant under

this section, a highest State court shall submit to the Secretary

an application at such time, in such form, and including such

information and assurances as the Secretary shall require.

(c) ALLOTMENTS.—

(1) IN GENERAL.—Each highest State court which has an

application approved under subsection (b), and is conducting

assessment activities in accordance with this section, shall be

entitled to payment, for each of fiscal years 1995 through

1998, from amounts reserved pursuant to section 430(d)(2) of

the Social Security Act, of an amount equal to the sum of—
H. R. 2264—345

(A) for fiscal year 1995, $75,000 plus the amount

described in paragraph (2) for fiscal year 1995; and

(B) for each of fiscal years 1996 through 1998, $85,000

plus the amount described in paragraph (2) for each of

such fiscal years.

(2) FORMULA.—The amount described in this paragraph

for any fiscal year is the amount that bears the same ratio

to the amount reserved pursuant to section 430(d)(2) of the

Social Security Act for the fiscal year (reduced by the dollar

amount specified in paragraph (1) of this subsection for the

fiscal year) as the number of individuals in the State who

have not attained 21 years of age bears to the total number

of such individuals in all States the highest State courts of

which have approved applications under subsection (b).

(d) USE OF GRANT FUNDS.—Each highest State court which

receives funds paid under this section may use such funds to

pay—

(1) any or all costs of activities under this section in fiscal

year 1995; and

(2) not more than 75 percent of the cost of activities under

this section in each of fiscal years 1996, 1997, and 1998.

SEC. 13713. ENHANCED MATCH FOR AUTOMATED DATA SYSTEMS.

(a) PAYMENTS TO STATES.—

(1) IN GENERAL.—Section 474(a)(3) (42 U.S.C. 674(a)(3))

is amended—

(A) by striking ‘‘and’’ at the end of subparagraph (B);

(B) by redesignating subparagraph (C) as subparagraph (E); and

(C) by inserting after subparagraph (B) the following:

‘‘(C) 75 percent of so much of such expenditures as

are for the planning, design, development, or installation

of statewide mechanized data collection and information

retrieval systems (including 75 percent of the full amount

of expenditures for hardware components for such systems)

but only to the extent that such systems—

‘‘(i) meet the requirements imposed by regulations

promulgated pursuant to section 479(b)(2);

‘‘(ii) to the extent practicable, are capable of interfacing with the State data collection system that collects information relating to child abuse and neglect;

‘‘(iii) to the extent practicable, have the capability

of interfacing with, and retrieving information from,

the State data collection system that collects information relating to the eligibility of individuals under part

A (for the purposes of facilitating verification of eligibility of foster children); and

‘‘(iv) are determined by the Secretary to be likely

to provide more efficient, economical, and effective

administration of the programs carried out under a

State plan approved under part B or this part; and

‘‘(D) 50 percent of so much of such expenditures as

are for the operation of the statewide mechanized data

collection and information retrieval systems referred to

in subparagraph (C); and’’.
H. R. 2264—346

(2) TREATMENT OF STATE EXPENDITURES FOR DATA COLLECTION AND INFORMATION RETRIEVAL SYSTEMS.—Section 474 (42

U.S.C. 674) is amended by adding at the end the following:

‘‘(e) AUTOMATED DATA COLLECTION EXPENDITURES.—The Secretary shall treat as necessary for the proper and efficient administration of the State plan all expenditures of a State necessary

in order for the State to plan, design, develop, install, and operate

data collection and information retrieval systems described in subsection (a)(3)(C), without regard to whether the systems may be

used with respect to foster or adoptive children other than those

on behalf of whom foster care maintenance payments or adoption

assistance payments may be made under this part.’’. (3) EFFECTIVE DATE.—The amendments made by this sub- section shall take effect on October 1, 1993.

(b) TERMINATION OF ENHANCED MATCH.— (1) IN GENERAL.—Section 474(a)(3)(C) (42 U.S.C.

674(a)(3)(C)), as amended by subsection (a) of this section,

is amended by striking ‘‘75 percent’’ each place such term

appears and inserting ‘‘50 percent’’. (2) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply to expenditures during fiscal years beginning

on or after October 1, 1996.

SEC. 13714. PERMANENT EXTENSION OF INDEPENDENT LIVING PROGRAM.

(a) IN GENERAL.—Section 477 (42 U.S.C. 677) is amended—

(1) in subsection (a)(1), by striking the 3rd sentence;

(2) in subsection (c), by striking ‘‘of the fiscal years 1988

through 1992’’ and inserting ‘‘succeeding fiscal year’’;

(3) in subsection (e)(1)(A), by striking ‘‘each of the fiscal

years 1987 through 1992’’ and inserting ‘‘fiscal year 1987 and

any succeeding fiscal year’’;

(4) in subsection (e)(1)(B), by striking ‘‘fiscal years 1991

and 1992’’ and inserting ‘‘fiscal year 1991 and any succeeding

fiscal year’’; and

(5) in subsection (e)(1)(C)(ii), by striking ‘‘fiscal year 1992’’

and inserting ‘‘any succeeding fiscal year’’.

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

(a) shall apply to activities engaged in, on, or after October 1,

1992.

SEC. 13715. TRAINING OF AGENCY STAFF AND FOSTER AND ADOPTIVE

PARENTS.

Section 8006(b) of the Omnibus Budget Reconciliation Act of

1989 (42 U.S.C. 674 note) is amended by inserting ‘‘, and to expenditures made on or after October 1, 1993’’ before the period.

SEC. 13716. MORATORIUM ON COLLECTION OF DISALLOWANCES.

The Secretary of Health and Human Services shall not, before

October 1, 1994—

(1) reduce any payment to, withhold any payment from,

or seek any repayment from any State under part B or E

of title IV of the Social Security Act by reason of a determination made in connection with a review of State compliance

with section 427 of such Act for any Federal fiscal year before

fiscal year 1995; or

(2) reduce any payment to, withhold any payment from,

or seek any repayment from any State under such part E
H. R. 2264—347

by reason of a determination made in connection with any

on-site Federal financial review, or any audit conducted by

the Inspector General using similar methodologies.

PART II—CHILD SUPPORT ENFORCEMENT

SEC. 13721. STATE PATERNITY ESTABLISHMENT PROGRAMS.

(a) PERFORMANCE STANDARDS.—Section 452(g) (42 U.S.C. 652(g)) is amended— (1) in paragraph (1)—

(A) by striking ‘‘1991’’ and inserting ‘‘1994’’;

(B) by inserting ‘‘is based on reliable data and’’ before

‘‘equals or exceeds’’;

(C) by inserting ‘‘(rounded to the nearest whole percentage point)’’ before ‘‘equals’’; and

(D) by striking subparagraphs (A), (B), and (C) and

inserting the following:

‘‘(A) 75 percent;

‘‘(B) for a State with a paternity establishment percentage

of not less than 50 percent but less than 75 percent for such

fiscal year, the paternity establishment percentage of the State

for the immediately preceding fiscal year plus 3 percentage

points;

‘‘(C) for a State with a paternity establishment percentage

of not less than 45 percent but less than 50 percent for such

fiscal year, the paternity establishment percentage of the State

for the immediately preceding fiscal year plus 4 percentage

points;

‘‘(D) for a State with a paternity establishment percentage

of not less than 40 percent but less than 45 percent for such

fiscal year, the paternity establishment percentage of the State

for the immediately preceding fiscal year plus 5 percentage

points; or

‘‘(E) for a State with a paternity establishment percentage

of less than 40 percent for such fiscal year, the paternity

establishment percentage of the State for the immediately

preceding fiscal year plus 6 percentage points.’’; and

(2) in paragraph (2)—

(A) in subparagraph (A)—

(i) by striking ‘‘(or under all such plans)’’ each

place such term appears and inserting ‘‘or E’’;

(ii) in clause (i), by inserting ‘‘during the fiscal

year’’ before the comma;

(iii) in clause (ii)—

(I) in subclause (I), by striking ‘‘for such’’ and

inserting ‘‘as of the end of the’’; and

(II) in subclause (II), by striking ‘‘for the’’ and

inserting ‘‘as of the end of the’’;

(iv) in clause (iii), by inserting ‘‘or acknowledged

during the fiscal year’’ before the comma; and

(v) in the matter following clause (iii)—

(I) by striking ‘‘have been’’ and inserting

‘‘were’’;

(II) by inserting ‘‘during the immediately

preceding fiscal year’’ after ‘‘wedlock’’;

(III) by striking ‘‘is being’’ and inserting ‘‘was

being’’;
H. R. 2264—348

(IV) by striking ‘‘for such’’ and inserting ‘‘as

of the end of such preceding’’;

(V) by striking ‘‘are being’’ and inserting ‘‘were

being’’; and

(VI) by striking ‘‘for the’’ and inserting ‘‘as

of the end of such preceding’’;

(B) by striking subparagraph (B) and inserting the

following:

‘‘(B) the term ‘reliable data’ means the most recent

data available which are found by the Secretary to be

reliable for purposes of this section.’’;

(C) by inserting ‘‘unless paternity is established for

such child’’ after ‘‘the death of a parent’’; and

(D) by inserting ‘‘or any child with respect to whom

the State agency administering the plan under part E

determines (as provided in section 454(4)(B)) that it is

against the best interests of such child to do so’’ after

‘‘cooperate under section 402(a)(26)’’.

(b) STATE PLAN REQUIREMENTS FOR THE ESTABLISHMENT OF

PATERNITY.—Section 466(a) (42 U.S.C. 666(a)) is amended—

(1) in paragraph (2)—

(A) by striking ‘‘at the option of the State,’’; and

(B) by inserting ‘‘or paternity establishment’’ after

‘‘support order issuance and enforcement’’;

(2) in paragraph (5), by adding at the end the following:

‘‘(C) Procedures for a simple civil process for voluntarily

acknowledging paternity under which the State must provide that the rights and responsibilities of acknowledging

paternity are explained and ensure that due process safeguards are afforded. Such procedures must include a hospital-based program for the voluntary acknowledgment of

paternity during the period immediately before or after

the birth of a child.

‘‘(D) Procedures under which the voluntary acknowledgment of paternity creates a rebuttable, or at the option

of the State, conclusive presumption of paternity, and under

which such voluntary acknowledgment is admissible as

evidence of paternity. ‘‘(E) Procedures under which the voluntary acknowledgment of paternity must be recognized as a basis for

seeking a support order without requiring any further

proceedings to establish paternity. ‘‘(F) Procedures which provide that (i) any objection

to genetic testing results must be made in writing within

a specified number of days before any hearing at which

such results may be introduced into evidence, and (ii) if

no objection is made, the test results are admissible as

evidence of paternity without the need for foundation testimony or other proof of authenticity or accuracy.

‘‘(G) Procedures which create a rebuttable or, at the

option of the State, conclusive presumption of paternity

upon genetic testing results indicating a threshold probability that the alleged father is the father of the child.

‘‘(H) Procedures requiring a default order to be entered

in a paternity case upon a showing of service of process

on the defendent and any additional showing required by

State law.’’; and
H. R. 2264—349

(3) by inserting after paragraph (10) the following new paragraph: ‘‘(11) Procedures under which a State must give full faith and credit to a determination of paternity made by any other

State, whether established through voluntary acknowledgment

or through administrative or judicial processes.’’.

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

shall become effective with respect to a State on the later of—

(1) October 1, 1993 or,

(2) the date of enactment by the legislature of such State

of all laws required by such amendments,

but in no event later than the first day of the first calendar

quarter beginning after the close of the first regular session of

the State legislature that begins after the date of enactment of

this Act. For purposes of the previous sentence, in the case of

a State that has a 2-year legislative session, each year of such

session shall be deemed to be a separate regular session of the

State legislature.

PART III—SUPPLEMENTAL SECURITY INCOME

SEC. 13731. FEES FOR FEDERAL ADMINISTRATION OF STATE SUPPLEMENTARY PAYMENTS.

(a) IN GENERAL.—

(1) OPTIONAL STATE SUPPLEMENTARY PAYMENTS.—Section

1616(d) (42 U.S.C. 1382e(d)) is amended—

(A) by inserting ‘‘(1)’’ after ‘‘(d)’’;

(B) by inserting ‘‘, plus an administration fee assessed

in accordance with paragraph (2) and any additional services fee charged in accordance with paragraph (3)’’ before

the period; and

(C) by adding after and below the end the following:

‘‘(2)(A) The Secretary shall assess each State an administration

fee in an amount equal to—

‘‘(i) the number of supplementary payments made by the

Secretary on behalf of the State under this section for any

month in a fiscal year; multiplied by

‘‘(ii) the applicable rate for the fiscal year.

‘‘(B) As used in subparagraph (A), the term ‘applicable rate’

means—

‘‘(i) for fiscal year 1994, $1.67;

‘‘(ii) for fiscal year 1995, $3.33;

‘‘(iii) for fiscal year 1996, $5.00; and

‘‘(iv) for fiscal year 1997 and each succeeding fiscal year,

$5.00, or such different rate as the Secretary determines is

appropriate for the State.

‘‘(C) Upon making a determination under subparagraph (B)(iv),

the Secretary shall promulgate the determination in regulations,

which may take into account the complexity of administering the

State’s supplementary payment program.

‘‘(D) All fees assessed pursuant to this paragraph shall be

transferred to the Secretary at the same time that amounts for

such supplementary payments are required to be so transferred.

‘‘(3)(A) The Secretary may charge a State an additional services

fee if, at the request of the State, the Secretary provides additional

services beyond the level customarily provided, in the administration of State supplementary payments pursuant to this section.
H. R. 2264—350

‘‘(B) The additional services fee shall be in an amount that

the Secretary determines is necessary to cover all costs (including

indirect costs) incurred by the Federal Government in furnishing

the additional services referred to in subparagraph (A).

‘‘(4) All administration fees and additional services fees collected

pursuant to this subsection shall be deposited in the general fund

of the Treasury of the United States as miscellaneous receipts.’’.

(2) MANDATORY STATE SUPPLEMENTARY PAYMENTS.—Section

212(b)(3) of Public Law 93–66 (42 U.S.C. 1382 note) is

amended—

(A) by inserting ‘‘(A)’’ after ‘‘(3)’’;

(B) by inserting ‘‘, plus an administration fee assessed

in accordance with subparagraph (B) and any additional

services fee charged in accordance with subparagraph (C)’’

before the period; and

(C) by adding after and below the end the following:

‘‘(B)(i) The Secretary shall assess each State an administration

fee in an amount equal to—

‘‘(I) the number of supplementary payments made by the

Secretary on behalf of the State under this subsection for

any month in a fiscal year; multiplied by

‘‘(II) the applicable rate for the fiscal year.

‘‘(ii) As used in clause (i), the term ‘applicable rate’ means—

‘‘(I) for fiscal year 1994, $1.67;

‘‘(II) for fiscal year 1995, $3.33;

‘‘(III) for fiscal year 1996, $5.00; and

‘‘(IV) for fiscal year 1997 and each succeeding fiscal year,

$5.00, or such different rate as the Secretary determines is

appropriate for the State, taking into account the complexity

of administering the State’s supplementary payment program.

‘‘(iii) Upon making a determination under clause (ii)(IV), the

Secretary shall promulgate the determination in regulations, which

may take into account the complexity of administering the State’s

supplementary payment program. ‘‘(iv) All fees assessed pursuant to this subparagraph shall

be transferred to the Secretary at the same time that amounts

for such supplementary payments are required to be so transferred. ‘‘(C)(i) The Secretary may charge a State an additional services

fee if, at the request of the State, the Secretary provides additional

services beyond the level customarily provided, in the administration of State supplementary payments pursuant to this subsection. ‘‘(ii) The additional services fee shall be in an amount that

the Secretary determines is necessary to cover all costs (including

indirect costs) incurred by the Federal Government in furnishing

the additional services referred to in clause (i).

‘‘(D) All administration fees and additional services fees collected pursuant to this paragraph shall be deposited in the general

fund of the Treasury of the United States as miscellaneous

receipts.’’.

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

shall apply to supplementary payments made pursuant to section

1616(a) of the Social Security Act or section 212(a) of Public Law

93–66 for any calendar month beginning after September 30, 1993,

and to services furnished after such date, regardless of whether

regulations to implement such amendments have been promulgated

by such date, or whether any agreement entered into under such

section 1616(a) or such section 212(a) has been modified.
H. R. 2264—351

SEC. 13732. EXCLUSION FROM INCOME AND RESOURCES OF STATE

RELOCATION ASSISTANCE.

Section 5035(c) of the Omnibus Budget Reconciliation Act of 1990 (42 U.S.C. 1382a note; 104 Stat. 1388–225) is amended by

striking ‘‘in the 3-year period that begins on’’ and inserting ‘‘on

or after’’.

SEC. 13733. PREVENTION OF ADVERSE EFFECTS ON ELIGIBILITY FOR,

AND AMOUNT OF, BENEFITS WHEN SPOUSE OR PARENT

OF BENEFICIARY IS ABSENT FROM THE HOUSEHOLD

DUE TO ACTIVE MILITARY SERVICE.

(a) ABSENT PERSON GENERALLY DEEMED TO BE LIVING IN THE

HOUSEHOLD.—Section 1614(f) (42 U.S.C. 1382c(f)) is amended by adding at the end the following: ‘‘(4) For purposes of paragraphs (1) and (2), a spouse or parent (or spouse of such a parent) who is absent from the household

in which the individual lives due solely to a duty assignment

as a member of the Armed Forces on active duty shall, in the

absence of evidence to the contrary, be deemed to be living in

the same household as the individual.’’.

(b) EXCLUSION FROM INCOME OF HOSTILE FIRE PAY RECEIVED

WHILE IN ACTIVE MILITARY SERVICE.—Section 1612(b) (42 U.S.C.

1382a(b)) is amended—

(1) in paragraph (18), by striking ‘‘and’’ the 2nd place such term appears; (2) in paragraph (19), by striking the period and inserting ‘‘; and’’; and

(3) by adding at the end the following:

‘‘(20) special pay received pursuant to section 310 of title 37, United States Code.’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall take effect on the 1st day of the 2nd month that begins

after the date of the enactment of this Act.

SEC. 13734. ELIGIBILITY FOR CHILDREN OF ARMED FORCES PERSONNEL RESIDING OUTSIDE THE UNITED STATES OTHER

THAN IN FOREIGN COUNTRIES.

(a) IN GENERAL.—Section 1614(a)(1)(B)(ii) (42 U.S.C.

1382c(a)(1)(B)(ii)) is amended by striking ‘‘the District of Columbia’’

and all that follows to the period and inserting ‘‘and who, for

the month before the parent reported for such assignment, received

a benefit under this title’’.

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

shall take effect on the 1st day of the 3rd month that begins

after the date of the enactment of this Act.

SEC. 13735. VALUATION OF CERTAIN IN-KIND SUPPORT AND MAINTENANCE WHEN THERE IS A COST OF LIVING ADJUSTMENT

IN BENEFITS.

(a) IN GENERAL.—Section 1611(c) (42 U.S.C. 1382(c)) is

amended—

(1) in paragraph (1), by striking ‘‘and (5)’’ and inserting

‘‘(5), and (6)’’; and

(2) by redesignating paragraphs (6) and (7) as paragraphs

(7) and (8), respectively; and

(3) by inserting after paragraph (5) the following:

‘‘(6) The dollar amount in effect under subsection (b) as a

result of any increase in benefits under this title by reason of
H. R. 2264—352

section 1617 shall be used to determine the value of any in-kind

support and maintenance required to be taken into account in

determining the benefit payable under this title to an individual

(and the eligible spouse, if any, of the individual) for the 1st 2

months for which the increase in benefits applies.’’.

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

(a) shall apply to benefits paid for months after the calendar year

1994.

SEC. 13736. EXCLUSION FROM INCOME OF CERTAIN AMOUNTS

RECEIVED BY INDIANS FROM INTERESTS HELD IN

TRUST.

(a) IN GENERAL.—Section 8 of the Act of October 19, 1973,

(25 U.S.C. 1408) is amended by inserting ‘‘, and up to $2,000

per year of income received by individual Indians that is derived

from such interests shall not be considered income,’’ after ‘‘resource’’.

(b) EFFECTIVE DATE.—The amendment made by this section

shall take effect on January 1, 1994.

PART IV—AID TO FAMILIES WITH DEPENDENT

CHILDREN

SEC. 13741. 50 PERCENT FEDERAL MATCH OF STATE ADMINISTRATIVE

COSTS.

(a) AFDC MATCHING.—Section 403(a)(3) (42 U.S.C. 603(a)(3))

is amended to read as follows:

‘‘(3) in the case of any State, 50 percent of the total amounts

expended during such quarter as found necessary by the Secretary for the proper and efficient administration of the State

plan, except that no payment shall be made with respect to

amounts expended in connection with the provision of any

service described in section 2002(a) other than services furnished pursuant to section 402(g); and’’.

(b) TERRITORIAL PROGRAMS FOR AGED, BLIND, AND DISABLED.— Sections 3(a)(4), 1003(a)(3), 1403(a)(3), and 1603(a)(4) (42 U.S.C.

303(a)(3), 1203(a)(3), 1353(a)(3), and 1383 note) (as in effect as

provided by section 303 of the Social Security Amendments of

1972) are each amended by striking ‘‘the sum of’’ and all that

follows and inserting ‘‘50 percent of the total amounts expended

during such quarter as found necessary by the Secretary for the

proper and efficient administration of the State plan.’’.

(c) EFFECTIVE DATES.— (1) IN GENERAL.—Except as provided in paragraph (2) of this subsection, the amendments made by subsections (a) and

(b) shall be effective with respect to calendar quarters beginning

on or after April 1, 1994.

(2) SPECIAL RULE.—In the case of a State whose legislature

meets biennially, and does not have a regular session scheduled

in calendar year 1994, the amendments made by subsections

(a) and (b) shall be effective no later than the first day of

the first calendar quarter beginning after the close of the first

regular session of the State legislature that begins after the

date of enactment of this Act.

SEC. 13742. INCREASE IN STEPPARENT INCOME DISREGARD.

(a) IN GENERAL.—Section 402(a)(31) (42 U.S.C. 602(a)(31)) is

amended by striking ‘‘$75’’ and inserting ‘‘$90’’.
H. R. 2264—353

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

shall take effect on October 1, 1993, and shall apply to payments

under part A of title IV of the Social Security Act for fiscal year

1994 and such payments for succeeding fiscal years.

PART V—UNEMPLOYMENT INSURANCE

SEC. 13751. EXTENSION OF CURRENT FEDERAL UNEMPLOYMENT

RATE.

Section 3301 of the Internal Revenue Code of 1986 is

amended—

(1) by striking ‘‘1996’’ in paragraph (1) and inserting ‘‘1998’’,

and

(2) by striking ‘‘1997’’ in paragraph (2) and inserting ‘‘1999’’.

PART VI—SOCIAL SERVICES IN EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES

SEC. 13761. INCREASE IN BLOCK GRANTS TO STATES FOR SOCIAL

SERVICES.

Title XX (42 U.S.C. 1397–1397e) is amended by adding at

the end the following:

‘‘SEC. 2007. ADDITIONAL GRANTS.

‘‘(a) ENTITLEMENT.—

‘‘(1) IN GENERAL.—In addition to any payment under section

2002, each State shall be entitled to—

‘‘(A) 2 grants under this section for each qualified

empowerment zone in the State; and

‘‘(B) 1 grant under this section for each qualified enterprise community in the State.

‘‘(2) AMOUNT OF GRANTS.— ‘‘(A) EMPOWERMENT GRANTS.—The amount of each

grant to a State under this section for a qualified

empowerment zone shall be—

‘‘(i) if the zone is designated in an urban area,

$50,000,000, multiplied by that proportion of the population of the zone that resides in the State; or

‘‘(ii) if the zone is designated in a rural area,

$20,000,000, multiplied by such proportion.

‘‘(B) ENTERPRISE GRANTS.—The amount of the grant

to a State under this section for a qualified enterprise

community shall be 1⁄95 of $280,000,000, multiplied by that

proportion of the population of the community that resides

in the State.

‘‘(C) POPULATION DETERMINATIONS.—The Secretary

shall make population determinations for purposes of this

paragraph based on the most recent decennial census data

available.

‘‘(3) TIMING OF GRANTS.—

‘‘(A) QUALIFIED EMPOWERMENT ZONES.—With respect

to each qualified empowerment zone, the Secretary shall

make—

‘‘(i) 1 grant under this section to each State in

which the zone lies, on the date of the designation
H. R. 2264—354

of the zone under part I of subchapter U of chapter

1 of the Internal Revenue Code of 1986; and

‘‘(ii) 1 grant under this section to each such State,

on the 1st day of the 1st fiscal year that begins after

the date of the designation.

‘‘(B) QUALIFIED ENTERPRISE COMMUNITIES.—With

respect to each qualified enterprise community, the Secretary shall make 1 grant under this section to each State

in which the community lies, on the date of the designation

of the community under part I of subchapter U of chapter

1 of the Internal Revenue Code of 1986.

‘‘(4) FUNDING.—$1,000,000,000 shall be made available to

the Secretary for grants under this section.

‘‘(b) PROGRAM OPTIONS.—Notwithstanding section 2005(a):

‘‘(1) In order to prevent and remedy the neglect and abuse

of children, a State may use amounts paid under this section

to make grants to, or enter into contracts with, entities to

provide residential or nonresidential drug and alcohol prevention and treatment programs that offer comprehensive services

for pregnant women and mothers, and their children.

‘‘(2) In order to assist disadvantaged adults and youths

in achieving and maintaining self-sufficiency, a State may use

amounts paid under this section to make grants to, or enter

into contracts with—

‘‘(A) organizations operated for profit or not for profit,

for the purpose of training and employing disadvantaged

adults and youths in construction, rehabilitation, or

improvement of affordable housing, public infrastructure,

and community facilities; and

‘‘(B) nonprofit organizations and community or junior

colleges, for the purpose of enabling such entities to provide

short-term training courses in entrepreneurism and selfemployment, and other training that will promote individual self-sufficiency and the interests of the community.

‘‘(3) A State may use amounts paid under this section

to make grants to, or enter into contracts with, nonprofit

community-based organizations to enable such organizations

to provide activities designed to promote and protect the

interests of children and families, outside of school hours,

including keeping schools open during evenings and weekends

for mentoring and study.

‘‘(4) In order to assist disadvantaged adults and youths

in achieving and maintaining economic self-support, a State

may use amounts paid under this section to—

‘‘(A) fund services designed to promote community and

economic development in qualified empowerment zones and

qualified enterprise communities, such as skills training,

job counseling, transportation services, housing counseling,

financial management, and business counseling;

‘‘(B) assist in emergency and transitional shelter for

disadvantaged families and individuals; or

‘‘(C) support programs that promote home ownership,

education, or other routes to economic independence for

low-income families and individuals.

‘‘(c) USE OF GRANTS.—
H. R. 2264—355

‘‘(1) IN GENERAL.—Subject to subsection (d) of this section,

each State that receives a grant under this section with respect

to an area shall use the grant—

‘‘(A) for services directed only at the goals set forth

in paragraphs (1), (2), and (3) of section 2001;

‘‘(B) in accordance with the strategic plan for the area;

and

‘‘(C) for activities that benefit residents of the area

for which the grant is made.

‘‘(2) TECHNICAL ASSISTANCE.—A State may use a portion

of any grant made under this section in the manner described

in section 2002(e).

‘‘(d) REMITTANCE OF CERTAIN AMOUNTS.—

‘‘(1) PORTION OF GRANT UPON TERMINATION OF DESIGNATION.—Each State to which an amount is paid under this

subsection during a fiscal year with respect to an area the

designation of which under part I of subchapter U of chapter

1 of the Internal Revenue Code of 1986 ends before the end

of the fiscal year shall remit to the Secretary an amount equal

to the total of the amounts so paid with respect to the area,

multiplied by that proportion of the fiscal year remaining after

the designation ends.

‘‘(2) AMOUNTS PAID TO THE STATES AND NOT OBLIGATED

WITHIN 2 YEARS.—Each State shall remit to the Secretary any

amount paid to the State under this section that is not obligated

by the end of the 2-year period that begins with the date

of the payment.

‘‘(e) DEFINITIONS.—As used in this section:

‘‘(1) QUALIFIED EMPOWERMENT ZONE.—The term ‘qualified

empowerment zone’ means, with respect to a State, an area—

‘‘(A) which has been designated (other than by the

Secretary of the Interior) as an empowerment zone under

part I of subchapter U of chapter 1 of the Internal Revenue

Code of 1986;

‘‘(B) with respect to which the designation is in effect;

‘‘(C) the strategic plan for which is a qualified plan;

and

‘‘(D) part or all of which is in the State.

‘‘(2) QUALIFIED ENTERPRISE COMMUNITY.—The term ‘qualified enterprise community’ means, with respect to a State,

an area—

‘‘(A) which has been designated (other than by the

Secretary of the Interior) as an enterprise community under

part I of subchapter U of chapter 1 of the Internal Revenue

Code of 1986;

‘‘(B) with respect to which the designation is in effect;

‘‘(C) the strategic plan for which is a qualified plan;

and

‘‘(D) part or all of which is in the State.

‘‘(3) STRATEGIC PLAN.—The term ‘strategic plan’ means,

with respect to an area, the plan contained in the application

for designation of the area under part I of subchapter U of

chapter 1 of the Internal Revenue Code of 1986.

‘‘(4) QUALIFIED PLAN.—The term ‘qualified plan’ means,

with respect to an area, a plan that—
H. R. 2264—356

‘‘(A) includes a detailed description of the activities

proposed for the area that are to be funded with amounts

provided under this section;

‘‘(B) contains a commitment that the amounts provided

under this section to any State for the area will not be

used to supplant Federal or non-Federal funds for services

and activities which promote the purposes of this section;

‘‘(C) was developed in cooperation with the local government or governments with jurisdiction over the area; and

‘‘(D) to the extent that any State will not use the

amounts provided under this section for the area in the

manner described in subsection (b), explains the reasons

why not.

‘‘(5) RURAL AREA.—The term ‘rural area’ has the meaning

given such term in section 1393(a)(2) of the Internal Revenue

Code of 1986.

‘‘(6) URBAN AREA.—The term ‘urban area’ has the meaning

given such term in section 1393(a)(3) of the Internal Revenue

Code of 1986.’’.

Subchapter D—Customs and Trade Provisions

SEC. 13800. TABLE OF CONTENTS.

SUBCHAPTER D—CUSTOMS AND TRADE PROVISIONS

Sec. 13800. Table of contents.

PART I—EXTENSION OF CUSTOMS USER FEE, GSP, AND TRADE ADJUSTMENT

ASSISTANCE PROGRAMS

Sec. 13801. Extension of authority to levy customs user fees. Sec. 13802. Generalized system of preferences. Sec. 13803. Extension of trade adjustment assistance program.

PART II—CUSTOMS OFFICER PAY REFORM

Sec. 13811. Overtime and premium pay for customs officers. Sec. 13812. Additional benefits for customs officers.

Sec. 13813. Reimbursements from the customs user fee account.

PART I—EXTENSION OF CUSTOMS USER FEE,

GSP, AND TRADE ADJUSTMENT ASSISTANCE

PROGRAMS

SEC. 13801. EXTENSION OF AUTHORITY TO LEVY CUSTOMS USER FEES.

Section 13031(j)(3) of the Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended by striking

out ‘‘1995’’ and inserting ‘‘1998’’.

SEC. 13802. GENERALIZED SYSTEM OF PREFERENCES.

(a) TREATMENT OF COUNTRIES FORMERLY WITHIN THE UNION

OF SOVIET SOCIALIST REPUBLICS.—The table in section 502(b) of

the Trade Act of 1974 (19 U.S.C. 2462(b)) is amended by striking

out ‘‘Union of Soviet Socialist Republics’’.

(b) EXTENSION OF DUTY-FREE TREATMENT UNDER SYSTEM.— (1) IN GENERAL.—Section 505(a) of the Trade Act of 1974

(19 U.S.C. 2465(a)) is amended by striking out ‘‘July 4, 1993’’

and inserting ‘‘September 30, 1994’’.

(2) RETROACTIVE APPLICATION FOR CERTAIN LIQUIDATIONS

AND RELIQUIDATIONS.—Notwithstanding section 514 of the Tar-
H. R. 2264—357

iff Act of 1930 or any other provision of law, upon proper

request filed with the appropriate customs officer within 180

days after the date of the enactment of this Act, the entry— (A) of any article to which duty-free treatment under title V of the Trade Act of 1974 would have applied if

the entry had been made on July 4, 1993, and (B) that was made after July 4, 1993, and before such date of enactment,

shall be liquidated or reliquidated as free of duty, and the

Secretary of the Treasury shall refund any duty paid with

respect to such entry. As used in this paragraph, the term

‘‘entry’’ includes a withdrawal from warehouse for consumption.

SEC. 13803. EXTENSION OF TRADE ADJUSTMENT ASSISTANCE PROGRAM.

(a) EXTENSION.— (1) Section 285 of the Trade Act of 1974 (19 U.S.C. 2271,

preceding note) is amended— (A) by striking ‘‘No’’ and all that follows through ‘‘and no duty’’ in subsection (b) and inserting ‘‘No duty’’; and (B) by adding at the end the following new subsection: ‘‘(c) No assistance, vouchers, allowances, or other payments may be provided under chapter 2, and no technical assistance

may be provided under chapter 3, after September 30, 1998.’’. (2) Sections 245 and 256(b) of the Trade Act of 1974 (19

U.S.C. 2317 and 2346(b)) are each amended by striking ‘‘1988,

1989, 1990, 1991, 1992, and 1993’’ and inserting ‘‘1993, 1994,

1995, 1996, 1997, and 1998’’.

(b) TRAINING.—Section 236(a)(2)(A) of the Trade Act of 1974

(19 U.S.C. 2296(a)(2)(A)) is amended by inserting before the end

period ‘‘, except that for fiscal year 1997, the total amount of

payments made under paragraph (1) shall not exceed $70,000,000’’.

PART II—CUSTOMS OFFICER PAY REFORM

SEC. 13811. OVERTIME AND PREMIUM PAY FOR CUSTOMS OFFICERS.

(a) IN GENERAL.—Section 5 of the Act of February 13, 1911 (19 U.S.C. 261 and 267) is amended to read as follows:

‘‘SEC. 5. OVERTIME AND PREMIUM PAY FOR CUSTOMS OFFICERS.

‘‘(a) OVERTIME PAY.— ‘‘(1) IN GENERAL.—Subject to paragraph (2) and subsection (c), a customs officer who is officially assigned to perform work

in excess of 40 hours in the administrative workweek of the

officer or in excess of 8 hours in a day shall be compensated

for that work at an hourly rate of pay that is equal to 2

times the hourly rate of the basic pay of the officer. For purposes

of this paragraph, the hourly rate of basic pay for a customs

officer does not include any premium pay provided for under

subsection (b).

‘‘(2) SPECIAL PROVISIONS RELATING TO OVERTIME WORK ON

CALLBACK BASIS.— ‘‘(A) MINIMUM DURATION.—Any work for which com- pensation is authorized under paragraph (1) and for which

the customs officer is required to return to the officer’s

place of work shall be treated as being not less than 2

hours in duration; but only if such work begins at least

1 hour after the end of any previous regularly scheduled
H. R. 2264—358

work assignment and ends at least 1 hour before the beginning of the following regularly scheduled work assignment.

‘‘(B) COMPENSATION FOR COMMUTING TIME.—

‘‘(i) IN GENERAL.—Except as provided in clause

(ii), in addition to the compensation authorized under

paragraph (1) for work to which subparagraph (A)

applies, the customs officer is entitled to be paid, as

compensation for commuting time, an amount equal

to 3 times the hourly rate of basic pay of the officer.

‘‘(ii) EXCEPTION.—Compensation for commuting

time is not payable under clause (i) if the work for

which compensation is authorized under paragraph

(1)—

‘‘(I) does not commence within 16 hours of

the customs officer’s last regularly scheduled work

assignment, or

‘‘(II) commences within 2 hours of the next

regularly scheduled work assignment of the customs officer.

‘‘(b) PREMIUM PAY FOR CUSTOMS OFFICERS.—

‘‘(1) NIGHT WORK DIFFERENTIAL.—

‘‘(A) 3 P.M. TO MIDNIGHT SHIFTWORK.—If the majority

of the hours of regularly scheduled work of a customs

officer occurs during the period beginning at 3 p.m. and

ending at 12 a.m., the officer is entitled to pay for work

during such period (except for work to which paragraph

(2) or (3) applies) at the officer’s hourly rate of basic pay

plus premium pay amounting to 15 percent of that basic

rate.

‘‘(B) 11 P.M. TO 8 A.M. SHIFTWORK.—If the majority

of the hours of regularly scheduled work of a customs

officer occurs during the period beginning at 11 p.m. and

ending at 8 a.m., the officer is entitled to pay for work

during such period (except for work to which paragraph

(2) or (3) applies) at the officer’s hourly rate of basic pay

plus premium pay amounting to 20 percent of that basic

rate.

‘‘(C) 7:30 P.M. TO 3:30 A.M. SHIFTWORK.—If the regularly

scheduled work assignment of a customs officer is 7:30

p.m. to 3:30 a.m., the officer is entitled to pay for work

during such period (except for work to which paragraph

(2) or (3) applies) at the officer’s hourly rate of basic pay

plus premium pay amounting to 15 percent of that basic

rate for the period from 7:30 p.m. to 11:30 p.m. and at

the officer’s hourly rate of basic pay plus premium pay

amounting to 20 percent of that basic rate for the period

from 11:30 p.m. to 3:30 a.m.

‘‘(2) SUNDAY DIFFERENTIAL.—A customs officer who performs any regularly scheduled work on a Sunday that is not

a holiday is entitled to pay for that work at the officer’s hourly

rate of basic pay plus premium pay amounting to 50 percent

of that basic rate.

‘‘(3) HOLIDAY DIFFERENTIAL.—A customs officer who performs any regularly scheduled work on a holiday is entitled

to pay for that work at the officer’s hourly rate of basic pay

plus premium pay amounting to 100 percent of that basic

rate.
H. R. 2264—359

‘‘(4) TREATMENT OF PREMIUM PAY.—Premium pay provided

for under this subsection may not be treated as being overtime

pay or compensation for any purpose.

‘‘(c) LIMITATIONS.—

‘‘(1) FISCAL YEAR CAP.—The aggregate of overtime pay

under subsection (a) (including commuting compensation under

subsection (a)(2)(B)) and premium pay under subsection (b)

that a customs officer may be paid in any fiscal year may

not exceed $25,000; except that the Commissioner of Customs

or his designee may waive this limitation in individual cases

in order to prevent excessive costs or to meet emergency

requirements of the Customs Service.

‘‘(2) EXCLUSIVITY OF PAY UNDER THIS SECTION.—A customs

officer who receives overtime pay under subsection (a) or premium pay under subsection (b) for time worked may not receive

pay or other compensation for that work under any other provision of law.

‘‘(d) REGULATIONS.—The Secretary of the Treasury shall

promulgate regulations to prevent—

‘‘(1) abuse of callback work assignments and commuting

time compensation authorized under subsection (a)(2); and

‘‘(2) the disproportionately more frequent assignment of

overtime work to customs officers who are near to retirement.

‘‘(e) DEFINITIONS.—As used in this section:

‘‘(1) The term ‘customs officer’ means an individual performing those functions specified by regulation by the Secretary

of the Treasury for a customs inspector or canine enforcement

officer. Such functions shall be consistent with such applicable

standards as may be promulgated by the Office of Personnel

Management. ‘‘(2) The term ‘holiday’ means any day designated as a

holiday under a Federal statute or Executive order.’’.

(b) NECESSARY CONFORMING AMENDMENTS.— (1) Section 2 of the Act of June 3, 1944 (19 U.S.C. 1451a),

is repealed.

(2) Section 450 of the Tariff Act of 1930 (19 U.S.C. 1450)

is amended—

(A) by striking out ‘‘at night’’ in the section heading

and inserting ‘‘during overtime hours’’; (B) by striking out ‘‘at night’’ and inserting ‘‘during

overtime hours’’; and

(C) by inserting ‘‘aircraft,’’ immediately before ‘‘vessel’’. (c) EFFECTIVE DATE.—The amendments made by subsections (a) and (b) apply to customs inspectional services provided on or

after January 1, 1994.

SEC. 13812. ADDITIONAL BENEFITS FOR CUSTOMS OFFICERS.

(a) TREATMENT OF CERTAIN PAY FOR RETIREMENT PURPOSES.—

Section 8331(3) of title 5, United States Code, is amended—

(1) by striking out ‘‘and’’ at the end of subparagraph (C);

(2) by striking out the semicolon at the end of subparagraph

(D) and inserting ‘‘; and’’;

(3) by adding after subparagraph (D) the following:

‘‘(E) with respect to a customs officer (referred to in

subsection (e)(1) of section 5 of the Act of February 13,

1911), compensation for overtime inspectional services provided for under subsection (a) of such section 5, but not
H. R. 2264—360

to exceed 50 percent of any statutory maximum in overtime

pay for customs officers which is in effect for the year

involved;’’; and

(4) by striking out ‘‘subparagraphs (B), (C), and (D) of

this paragraph,’’ and inserting ‘‘subparagraphs (B), (C), (D),

and (E) of this paragraph’’.

(b) FOREIGN LANGUAGE PROFICIENCY AWARDS.—Cash awards

for foreign language proficiency may, under regulations prescribed

by the Secretary of the Treasury, be paid to customs officers (as

referred to in section 5(e)(1) of the Act of February 13, 1911)

to the same extent and in the same manner as would be allowable

under subchapter III of chapter 45 of title 5, United States Code,

with respect to law enforcement officers (as defined by section

4521 of such title).

(c) EFFECTIVE DATES.—

(1) SUBSECTION (a) AMENDMENTS.—The amendments made

by subsection (a) take effect on January 1, 1994, and apply

only with respect to service performed on or after such date.

(2) SUBSECTION (b).—Subsection (b) takes effect on January

1, 1994.

SEC. 13813. REIMBURSEMENTS FROM THE CUSTOMS USER FEE

ACCOUNT.

Section 13031(f)(3) of the Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c(f)(3)) is amended—

(1) by amending clause (i) of subparagraph (A) to read

as follows: ‘‘(i) in—

‘‘(I) paying overtime compensation under section 5(a)

of the Act of February 13, 1911,

‘‘(II) paying premium pay under section 5(b) of the

Act of February 13, 1911, but the amount for which

reimbursement may be made under this subclause may

not, for any fiscal year, exceed the difference between the

cost of the premium pay for that year calculated under

such section 5(b) as amended by section 13811 of the Omnibus Budget Reconciliation Act of 1993 and the cost of

such pay calculated under subchapter V of chapter 55

of title 5, United States Code,

‘‘(III) paying agency contributions to the Civil Service

Retirement and Disability Fund to match deductions from

the overtime compensation paid under subclause (I),

‘‘(IV) providing all preclearance services for which the

recipients of such services are not required to reimburse

the Secretary of the Treasury, and

‘‘(V) paying foreign language proficiency awards under

section 13812(b) of the Omnibus Budget Reconciliation Act

of 1993, and’’;

(2) by inserting before the flush sentence appearing after

clause (ii) of subparagraph (A) the following sentence: ‘‘The

transfer of funds required under subparagraph (C)(iii) has priority over reimbursements under this subparagraph to carry out

subclauses (II), (III), (IV), and (V) of clause (i).’’;

(3) by striking out ‘‘except for costs described in subparagraph (A)(i) (I) and (II),’’ in subparagraph (B)(i); and

(4) by amending subparagraph (C)—
H. R. 2264—361

(A) by striking out ‘‘to fully reimburse inspectional

overtime and preclearance costs’’ in clause (i) and inserting

‘‘to reimburse costs described in subparagraph (A)(i)’’; and

(B) by inserting after clause (ii) of subparagraph (C)

the following:

‘‘(iii) For each fiscal year, the Secretary of the Treasury

shall calculate the difference between—

‘‘(I) the estimated cost for overtime compensation that

would have been incurred during that fiscal year for

inspectional services if section 5 of the Act of February

13, 1911 (19 U.S.C. 261 and 267), as in effect before the

enactment of section 13811 of the Omnibus Budget Reconciliation Act of 1993, had governed such costs, and

‘‘(II) the actual cost for overtime compensation, premium pay, and agency retirement contributions that is

incurred during that fiscal year in regard to inspectional

services under section 5 of the Act of February 13, 1911,

as amended by section 13811 of the Omnibus Budget Reconciliation Act of 1993, and under section 8331(3) of title

5, United States Code, as amended by section 13812(a)(1)

of such Act of 1993, plus the actual cost that is incurred

during that fiscal year for foreign language proficiency

awards under section 13812(b) of such Act of 1993,

and shall transfer from the Customs User Fee Account to

the General Fund of the Treasury an amount equal to the

difference calculated under this clause, or $18,000,000, whichever amount is less. Transfers shall be made under this clause

at least quarterly and on the basis of estimates to the same

extent as are reimbursements under subparagraph (B)(iii).’’.

CHAPTER 3—FOOD STAMP PROGRAM

SEC. 13901. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE.—This chapter may be cited as the ‘‘Mickey

Leland Childhood Hunger Relief Act’’.

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

is as follows:

CHAPTER 3—FOOD STAMP PROGRAM

Sec. 13901. Short title; table of contents.

Sec. 13902. References to Act.

SUBCHAPTER A—ENSURING ADEQUATE FOOD ASSISTANCE

Sec. 13911. Helping low-income high school students.

Sec. 13912. Families with high shelter expenses.

Sec. 13913. Resource exclusion for earned income tax credits.

Sec. 13914. Homeless families in transitional housing.

Sec. 13915. Households benefiting from general assistance vendor payments.

Sec. 13916. Continuing benefits to eligible households.

Sec. 13917. Improving the nutritional status of children in Puerto Rico.

SUBCHAPTER B—PROMOTING SELF-SUFFICIENCY

Sec. 13921. Child support payments to nonhousehold members.

Sec. 13922. Improving access to employment and training activities.

Sec. 13923. Vehicles needed to seek and continue employment and for household

transportation.

Sec. 13924. Vehicles necessary to carry fuel or water.

Sec. 13925. Testing resource accumulation.

SUBCHAPTER C—SIMPLIFYING THE PROVISION OF FOOD ASSISTANCE

Sec. 13931. Simplifying the household definition for households with children and

others.
H. R. 2264—362

Sec. 13932. Eligibility of children of parents participating in drug or alcohol treatment programs.

SUBCHAPTER D—IMPROVING PROGRAM INTEGRITY

Sec. 13941. Additional means of claims collection.

Sec. 13942. Disqualification of recipients for trading firearms, ammunition, explosives, or controlled substances for coupons. Sec. 13943. Increased cap for civil money penalty for trafficking in coupons. Sec. 13944. Increased cap for civil money penalty for selling firearms, ammunition,

explosives, or controlled substances for coupons.

SUBCHAPTER E—IMPROVING FOOD STAMP PROGRAM MANAGEMENT

Sec. 13951. Expedited claim collection; adjustments to error rate calculations.

SUBCHAPTER F—UNIFORM REIMBURSEMENT RATES

Sec. 13961. Uniform reimbursement rates.

Sec. 13962. Mandatory funding for nutrition programs.

SUBCHAPTER G—IMPLEMENTATION AND EFFECTIVE DATES

Sec. 13971. Implementation and effective dates.

SEC. 13902. REFERENCES TO THE ACT.

Except as otherwise provided in this chapter, references in

this chapter to ‘‘the Act’’ and sections of the Act shall be deemed

to be references to the Food Stamp Act of 1977 (7 U.S.C. 2011

et seq.) and the sections of such Act.

Subchapter A—Ensuring Adequate Food Assistance

SEC. 13911. HELPING LOW-INCOME HIGH SCHOOL STUDENTS.

Section 5(d)(7) of the Act (7 U.S.C. 2014(d)(7)) is amended

by striking ‘‘who is a student, and who has not attained his eighteenth birthday’’ and inserting ‘‘who is an elementary or secondary

school student, and who is 21 years of age or younger’’.

SEC. 13912. FAMILIES WITH HIGH SHELTER EXPENSES.

(a) COMPUTATION.—Section 5(e) of the Act (7 U.S.C. 2014(e))

is amended—

(1) in the fourth sentence by striking ‘‘: Provided, That

the amount’’ and all that follows through ‘‘June 30’’; and (2) in the fifth sentence by striking ‘‘under clause (2) of the preceding sentence’’.

(b) LIMITATIONS.— (1) INTERIM CAPS.—Section 5(e) of the Act (7 U.S.C. 2014(e))

is amended by inserting after the fourth sentence the following: ‘‘In the 15-month period ending September 30, 1995, such excess

shelter expense deduction shall not exceed $231 a month in the

48 contiguous States and the District of Columbia, and shall not

exceed, in Alaska, Hawaii, Guam, and the Virgin Islands of the

United States, $402, $330, $280, and $171 a month, respectively.

In the 15-month period ending December 31, 1996, such excess

shelter expense deduction shall not exceed $247 a month in the

48 contiguous States and the District of Columbia, and shall not

exceed, in Alaska, Hawaii, Guam, and the Virgin Islands of the

United States, $429, $353, $300, and $182 a month, respectively.’’.

(2) SUBSEQUENT REMOVAL OF CAP.—Section 5(e) of the Act

(7 U.S.C. 2014(e)), as amended by paragraph (1), is amended

by striking the fifth and sixth sentences.

SEC. 13913. RESOURCE EXCLUSION FOR EARNED INCOME TAX CREDITS.

Section 5(g)(3) of the Act (7 U.S.C. 2014(g)(3)) is amended

by adding at the end the following:
H. R. 2264—363

‘‘The Secretary shall also exclude from financial resources any

earned income tax credits received by any member of the household

for a period of 12 months from receipt if such member was participating in the food stamp program at the time the credits were

received and participated in such program continuously during

the 12-month period.’’.

SEC. 13914. HOMELESS FAMILIES IN TRANSITIONAL HOUSING.

Section 5(k)(2)(F) of the Act (7 U.S.C. 2014(k)(2)(F)) is amended

to read as follows:

‘‘(F) housing assistance payments made to a third party

on behalf of the household residing in transitional housing

for the homeless;’’.

SEC. 13915. HOUSEHOLDS BENEFITING FROM GENERAL ASSISTANCE

VENDOR PAYMENTS.

Section 5(k)(1)(B) of the Act (7 U.S.C. 2014(k)(1)(B)) is amended

by striking ‘‘living expenses’’ and inserting ‘‘housing expenses, not

including energy or utility-cost assistance,’’.

SEC. 13916. CONTINUING BENEFITS TO ELIGIBLE HOUSEHOLDS.

Section 8(c)(2)(B) of the Act (7 U.S.C. 2017(c)(2)(B)) is amended

by inserting ‘‘of more than one month in’’ after ‘‘following any

period’’.

SEC. 13917. IMPROVING THE NUTRITIONAL STATUS OF CHILDREN IN

PUERTO RICO.

Section 19(a)(1)(A) of the Act (7 U.S.C. 2028(a)(1)(A)) is

amended—

(1) by striking ‘‘$1,091,000,000’’ and inserting

‘‘$1,097,000,000’’; and

(2) by striking ‘‘$1,133,000,000’’ and inserting

‘‘$1,143,000,000’’.

Subchapter B—Promoting Self-Sufficiency

SEC. 13921. CHILD SUPPORT PAYMENTS TO NON-HOUSEHOLD MEMBERS.

Section 5(e) of the Act (7 U.S.C. 2014(e)) is amended by adding

at the end the following:

‘‘Before determining the excess shelter expense deduction, all households shall be entitled to a deduction for child support payments

made by a household member to or for an individual who is not

a member of the household if such household member was legally

obligated to make such payments, except that the Secretary is

authorized to prescribe by regulation the methods, including calculation on a retrospective basis, that State agencies shall use to determine the amount of the deduction for child support payments.’’.

SEC. 13922. IMPROVING ACCESS TO EMPLOYMENT AND TRAINING

ACTIVITIES.

(a) DEPENDENT CARE DEDUCTION.—Section 5(e) of the Act (7

U.S.C. 2014(e)) is amended in clause (1) of the fourth sentence—

(1) by striking ‘‘$160 a month for each dependent’’ and

inserting ‘‘$200 a month for each dependent child under 2

years of age and $175 a month for each other dependent’’;

and

(2) by striking ‘‘, regardless of the dependent’s age,’’.
H. R. 2264—364

(b) REIMBURSEMENTS TO PARTICIPANTS IN EMPLOYMENT AND

TRAINING PROGRAMS.—Section 6(d)(4)(I)(i)(II) of the Act (7 U.S.C.

2015(d)(4)(I)(i)(II)) is amended to read as follows:

‘‘(II) the actual costs of such dependent care expenses that

are determined by the State agency to be necessary for the

participation of an individual in the program (other than an

individual who is the caretaker relative of a dependent in

a family receiving benefits under part A of title IV of the

Social Security Act (42 U.S.C. 601 et seq.) in a local area

where an employment, training, or education program under

title IV of such Act is in operation, or was in operation, on

the date of enactment of the Hunger Prevention Act of 1988)

up to any limit set by the State agency (which limit shall

not be less than the limit for the dependent care deduction

under section 5(e)), but in no event shall such payment or

reimbursements exceed the applicable local market rate as

determined by procedures consistent with any such determination under the Social Security Act. Individuals subject to the

program under this paragraph may not be required to participate if dependent costs exceed the limit established by the

State agency under this subclause or other actual costs exceed

any limit established under subclause (I).’’.

(c) CONFORMING AMENDMENT.—Section 16(h)(3) of the Act (7

U.S.C. 2025(h)(3)) is amended by striking ‘‘representing $160 per

month per dependent’’ and inserting ‘‘equal to the payment made

under section 6(d)(4)(I)(i)(II) but not more than the applicable local

market rate,’’.

SEC. 13923. VEHICLES NEEDED TO SEEK AND CONTINUE EMPLOYMENT AND FOR HOUSEHOLD TRANSPORTATION.

Section 5(g)(2) of the Act (7 U.S.C. 2014(g)(2)) is amended

by striking ‘‘$4,500’’ and inserting the following:

‘‘a level set by the Secretary, which shall be $4,500 through August

31, 1994, $4,550 beginning September 1, 1994, through September

30, 1995, $4,600 beginning October 1, 1995, through September

30, 1996, and $5,000 beginning October 1, 1996, as adjusted on

such date and on each October 1 thereafter to reflect changes

in the new car component of the Consumer Price Index for All

Urban Consumers published by the Bureau of Labor Statistics

for the 12-month period ending on June 30 preceding the date

of such adjustment and rounded to the nearest $50’’.

SEC. 13924. VEHICLES NECESSARY TO CARRY FUEL OR WATER.

Section 5(g)(2) of the Act (7 U.S.C. 2014(g)(2)) is amended

by adding at the end the following:

‘‘The Secretary shall exclude from financial resources the value

of a vehicle that a household depends upon to carry fuel for heating

or water for home use when such transported fuel or water is

the primary source of fuel or water for the household.’’.

SEC. 13925. TESTING RESOURCE ACCUMULATION.

Section 17 of the Act (7 U.S.C. 2026) is amended by adding

at the end the following: ‘‘(k) The Secretary shall conduct, under such terms and conditions as the Secretary shall prescribe, for a period not to exceed

4 years, projects to test allowing not more than 11,000 eligible

households, in the aggregate, to accumulate resources up to $10,000

each (which shall be excluded from consideration as a resource)
H. R. 2264—365

for later expenditure for a purpose directly related to improving

the education, training, or employability (including self-employment) of household members, for the purchase of a home for the

household, for a change of the household’s residence, or for making

major repairs to the household’s home.’’.

Subchapter C—Simplifying the Provision of Food Assistance

SEC. 13931. SIMPLIFYING THE HOUSEHOLD DEFINITION FOR HOUSEHOLDS WITH CHILDREN AND OTHERS.

Section 3(i) of the Act (7 U.S.C. 2012(i)) is amended—

(1) in the first sentence—

(A) by striking ‘‘(2)’’ and inserting ‘‘or (2)’’;

(B) by striking ‘‘, or (3) a parent of minor children

and that parent’s children’’ and all that follows through

‘‘parents and children, or siblings, who live together’’, and

inserting the following:

‘‘. Spouses who live together, parents and their children 21

years of age or younger (who are not themselves parents living

with their children or married and living with their spouses)

who live together, and children (excluding foster children) under

18 years of age who live with and are under the parental

control of a person other than their parent together with the

person exercising parental control’’; and

(C) striking ‘‘, unless one of ’’ and all that follows

through ‘‘disabled member’’; and

(2) in the second sentence by striking ‘‘clause (1) of the

preceding sentence’’ and inserting ‘‘the preceding sentences’’.

SEC. 13932. ELIGIBILITY OF CHILDREN OF PARENTS PARTICIPATING

IN DRUG OR ALCOHOL ABUSE TREATMENT PROGRAMS.

Section 3 of the Act (7 U.S.C. 2012) is amended—

(1) in the last sentence of subsection (i) by inserting ‘‘,

together with their children,’’ after ‘‘narcotics addicts or alcoholics’’; and

(2) in subsection (g)(5) by inserting ‘‘, and their children,’’

after ‘‘or alcoholics’’.

Subchapter D—Improving Program Integrity

SEC. 13941. ADDITIONAL MEANS OF CLAIMS COLLECTION.

(a) SAFEGUARDS.—Section 11(e)(8) of the Act (7 U.S.C.

2020(e)(8)) is amended—

(1) by striking ‘‘and (B)’’ and inserting ‘‘(B)’’; and

(2) by striking the semicolon at the end and inserting

the following:

‘‘, and (C) such safeguards shall not prevent the use by, or

disclosure of such information, to agencies of the Federal

Government (including the United States Postal Service) for

purposes of collecting the amount of an overissuance of coupons,

as determined under section 13(b) of this Act and excluding

claims arising from an error of the State agency, that has

not been recovered pursuant to such section, from Federal

pay (including salaries and pensions) as authorized pursuant

to section 5514 of title 5 of the United States Code;’’.

(b) RECOVERY.—Section 13 of the Act (7 U.S.C. 2022) is

amended by adding at the end the following:
H. R. 2264—366

‘‘(d) The amount of an overissuance of coupons as determined

under subsection (b) and except for claims arising from an error

of the State agency, that has not been recovered pursuant to such

subsection may be recovered from Federal pay (including salaries

and pensions) as authorized by section 5514 of title 5 of the United

States Code.’’.

SEC. 13942. DISQUALIFICATION OF RECIPIENTS FOR TRADING FIREARMS, AMMUNITION, EXPLOSIVES, OR CONTROLLED

SUBSTANCES FOR COUPONS.

Section 6(b)(1) of the Act (7 U.S.C. 2015(b)(1)) is amended

by striking subdivisions (ii) and (iii) and inserting the following: ‘‘(ii) for a period of 1 year upon— ‘‘(I) the second occasion of any such determination;

or

‘‘(II) the first occasion of a finding by a Federal, State, or local court of the trading of a controlled substance (as

defined in section 102 of the Controlled Substances Act

(21 U.S.C. 802)) for coupons; and

‘‘(iii) permanently upon— ‘‘(I) the third occasion of any such determination;

‘‘(II) the second occasion of a finding by a Federal,

State, or local court of the trading of a controlled substance

(as defined in section 102 of the Controlled Substances

Act (21 U.S.C. 802)) for coupons; or

‘‘(III) the first occasion of a finding by a Federal, State,

or local court of the trading of firearms, ammunition, or

explosives for coupons.’’.

SEC. 13943. INCREASED CAP FOR CIVIL MONEY PENALTY FOR

TRAFFICKING IN COUPONS.

Section 12(b)(3)(B) of the Act (7 U.S.C. 2021(b)(3)(B)) is

amended by striking ‘‘during a 2-year period’’ and inserting ‘‘for

violations occurring during a single investigation’’.

SEC. 13944. INCREASED CAP FOR CIVIL MONEY PENALTY FOR SELLING FIREARMS, AMMUNITION, EXPLOSIVES, OR CONTROLLED SUBSTANCES FOR COUPONS.

Section 12(b)(3)(C) of the Act (7 U.S.C. 2021(b)(3)(C)) is

amended—

(1) by striking ‘‘substances (as the term is’’ and inserting

‘‘substance (as’’; and

(2) by striking ‘‘during a 2-year period’’ and inserting ‘‘for

violations occurring during a single investigation’’.

Subchapter E—Improving Food Stamp Program

Management

SEC. 13951. EXPEDITED CLAIM COLLECTION; ADJUSTMENTS TO

ERROR RATE CALCULATIONS.

(a) COLLECTION AND DISPOSITION OF CLAIMS.—Section 13(a)(1)

of the Act (7 U.S.C. 2022(a)(1)) is amended—

(1) in the fifth sentence by striking ‘‘(after a determination

on any request for a waiver for good cause related to the

claim has been made by the Secretary)’’; and

(2) in the sixth sentence by striking ‘‘2 years’’ and inserting

‘‘1 year’’.
H. R. 2264—367

(b) ADMINISTRATIVE AND JUDICIAL REVIEW.—Section 14(a) of

the Act (7 U.S.C. 2023(a)) is amended—

(1) in the sixth sentence by inserting after ‘‘pursuant to

section 16(c)’’ the following: ‘‘(including determinations as to

whether there is good cause for not imposing all or a portion

of the penalty)’’; and

(2) by striking the last sentence.

(c) QUALITY CONTROL SYSTEM.—Section 16(c) of the Act (7

U.S.C. 2025(c)) is amended—

(1) in paragraph (1)(C)—

(A) by striking ‘‘payment error tolerance level’’ and

inserting ‘‘national performance measure’’; and

(B) by striking ‘‘equal to’’ and all that follows through

the first period and inserting the following: ‘‘equal to—

‘‘(i) the product of—

‘‘(I) the value of all allotments issued by the State

agency in the fiscal year; times

‘‘(II) the lesser of—

‘‘(aa) the ratio of—

‘‘(aaa) the amount by which the payment

error rate of the State agency for the fiscal

year exceeds the national performance measure for the fiscal year; to

‘‘(bbb) the national performance measure

for the fiscal year, or

‘‘(bb) 1; times

‘‘(III) the amount by which the payment error rate

of the State agency for the fiscal year exceeds the

national performance measure for the fiscal year.’’; (2) in paragraph (3)(A) by striking ‘‘60 days (or 90 days at the discretion of the Secretary)’’ and inserting ‘‘120 days’’; (3) in paragraph (6) by striking ‘‘shall be used to establish’’

and all that follows through ‘‘level’’ the last place it appears;

and

(4) by adding at the end the following: ‘‘(8)(A) This paragraph applies to the determination of whether

a payment is due by a State agency for a fiscal year under paragraph (1)(C). ‘‘(B) Not later than 180 days after the end of the fiscal year,

the case review and all arbitrations of State-Federal difference

cases shall be completed.

‘‘(C) Not later than 30 days thereafter, the Secretary shall— ‘‘(i) determine final error rates, the national average payment error rate, and the amounts of payment claimed against

State agencies; and

‘‘(ii) notify State agencies of the payment claims.

‘‘(D) A State agency desiring to appeal a payment claim determined under subparagraph (C) shall submit to an administrative

law judge—

‘‘(i) a notice of appeal, not later than 10 days after receiving

a notice of the claim; and

‘‘(ii) evidence in support of the appeal of the State agency,

not later than 60 days after receiving a notice of the claim.

‘‘(E) Not later than 60 days after a State agency submits

evidence in support of the appeal, the Secretary shall submit responsive evidence to the administrative law judge to the extent such

evidence exists.
H. R. 2264—368

‘‘(F) Not later than 30 days after the Secretary submits responsive evidence, the State agency shall submit rebuttal evidence to

the administrative law judge to the extent such evidence exists.

‘‘(G) The administrative law judge, after an evidentiary hearing,

shall decide the appeal—

‘‘(i) not later than 60 days after receipt of rebuttal evidence

submitted by the State agency; or

‘‘(ii) if the State agency does not submit rebuttal evidence,

not later than 90 days after the State agency submits the

notice of appeal and evidence in support of the appeal.

‘‘(H) In considering a claim under this paragraph, the administrative law judge shall consider all grounds for denying the claim,

in whole or in part, including the contention of a State agency

that the claim should be waived, in whole or in part, for good

cause.

‘‘(I) The deadlines in subparagraphs (D), (E), (F), and (G) shall

be extended by the administrative law judge for cause shown.

‘‘(9) As used in this subsection, the term ‘good cause’ includes—

‘‘(A) a natural disaster or civil disorder that adversely

affects food stamp program operations;

‘‘(B) a strike by employees of a State agency who are

necessary for the determination of eligibility and processing

of case changes under the food stamp program;

‘‘(C) a significant growth in food stamp caseload in a State

prior to or during a fiscal year, such as a 15 percent growth

in caseload;

‘‘(D) a change in the food stamp program or other Federal

or State program that has a substantial adverse impact on

the management of the food stamp program of a State; and

‘‘(E) a significant circumstance beyond the control of the

State agency.’’.

Subchapter F—Uniform Reimbursement Rates

SEC. 13961. UNIFORM REIMBURSEMENT RATES.

Section 16 of the Act (7 U.S.C. 2025) is amended—

(1) in the first sentence of subsection (a)—

(A) by striking ‘‘and (5)’’ and inserting ‘‘(5)’’;

(B) by inserting before ‘‘: Provided,’’ the following: ‘‘,

(6) automated data processing and information retrieval

systems subject to the conditions set forth in subsection

(g), (7) food stamp program investigations and prosecutions,

and (8) implementing and operating the immigration status

verification system established under section 1137(d) of

the Social Security Act (42 U.S.C. 1320b–7(d))’’; and

(C) in the proviso, by striking ‘‘authorized to pay each

State agency an amount not less than 75 per centum of

the costs of State food stamp program investigations and

prosecutions, and is further’’;

(2) in subsection (g) by striking ‘‘an amount equal to 63

percent effective on October 1, 1991, of’’ and inserting ‘‘the

amount provided under subsection (a)(6) for’’;

(3) by striking subsection (j); and

(4) by redesignating subsection (k) as subsection (j).
H. R. 2264—369

SEC. 13962. MANDATORY FUNDING FOR NUTRITION PROGRAMS.

Out of any funds in the Treasury not otherwise appropriated, the Secretary of the Treasury shall pay to the Secretary of Agriculture $230,000 for each of the fiscal years 1994, 1995, and 1996

for the purchase, processing, and distribution of additional commodities which are relatively lower in saturated fats, are a good source

of calcium, are relatively low in sodium and sugars, or are high

in iron, and which are a good source of protein or other valuable

nutrients. Such commodities shall be easy for low-income families

to use, be not easily spoilable, and be easy to handle. Such commodities shall include low-sodium peanut butters, low-fat or low-sodium

cheeses, lower fat canned meats, fruits and vegetables, or other

similar foods. The Secretary shall select 2 States to carry out

this 3-year required effort to improve the health of low-income

individuals and to test the acceptability by, ease of storage and

preparation by, and impact on low-income participants in the emergency food assistance program established under the Emergency

Food Assistance Act of 1983 (7 U.S.C. 612 note). These additional

commodities shall be provided to each such State and such State

shall be entitled to receive such commodities during each such

fiscal year 1994, 1995, and 1996 and in addition to any commodities

provided under other Federal programs. Out of $230,000 required

to be provided each year to the Secretary of Agriculture by the

Secretary of the Treasury, $220,000 ($110,000 per State) shall

be used by the Secretary of Agriculture to purchase, process and

distribute the commodities to such States and $10,000 ($5,000

per State) shall be provided to such States for State and local

payments for costs associated with the distribution of commodities

by emergency feeding organizations in such States.

Subchapter G—Implementation and Effective Dates

SEC. 13971. IMPLEMENTATION AND EFFECTIVE DATES.

(a) GENERAL EFFECTIVE DATE AND IMPLEMENTATION.—Except

as provided in subsection (b), this chapter and the amendments

made by this chapter shall take effect, and shall be implemented

beginning on, October 1, 1993.

(b) SPECIAL EFFECTIVE DATES AND IMPLEMENTATION.—(1)(A)

Except as provided in subparagraph (B), section 13951 shall take

effect on October 1, 1991.

(B) The amendment made by section 13951(c)(2) shall take

effect on October 1, 1992.

(2)(A) Except as provided in subparagraph (B), the amendments

made by section 13961 shall be effective with respect to calendar

quarters beginning on or after April 1, 1994. (B) In the case of a State whose legislature meets biennially,

and does not have a regular session scheduled in calendar year

1994, and that demonstrates to the satisfaction of the Secretary

of Agriculture that there is no mechanism, under the constitution

and laws of the State, for appropriating the additional funds

required by the amendments made by this section before the next

such regular legislative session, the Secretary may delay the effective date of all or part of the amendments made by section 13961

until the beginning date of a calendar quarter that is not later

than the first calendar quarter beginning after the close of the

first regular session of the State legislature after the date of enactment of this Act.
H. R. 2264—370

(3) Sections 13912(a) and 13912(b)(1) shall take effect, and

shall be implemented beginning on, July 1, 1994.

(4) Sections 13911, 13913, 13914, 13915, 13916, 13922, 13924,

13931, 13932, and 13942 shall take effect, and shall be implemented

beginning on, September 1, 1994.

(5)(A) Except as provided in subparagraph (B), section 13921

shall take effect, and shall be implemented beginning on, September

1, 1994.

(B) State agencies shall implement the amendment made by

section 13921 not later than October 1, 1995.

(6) Section 13912(b)(2) shall take effect, and shall be implemented beginning on, January 1, 1997.

CHAPTER 4—TIMBER SALES

SEC. 13981. TABLE OF CONTENTS.

The table of contents of this chapter is as follows:

CHAPTER 4—TIMBER SALES

Sec. 13981. Table of contents.

Sec. 13982. Sharing of Forest Service timber sale receipts. Sec. 13983. Sharing of Bureau of Land Management timber sale receipts.

SEC. 13982. SHARING OF FOREST SERVICE TIMBER SALE RECEIPTS.

(a) DEFINITIONS.—As used in this section:

(1) APPLICABLE PERCENTAGE.—The term ‘‘applicable

percentage’’ means—

(A) for fiscal year 1994, 85 percent; and

(B) for each of fiscal years 1995 through 2003, 3

percentage points less than the applicable percentage for

the preceding fiscal year.

(2) 25-PERCENT PAYMENTS TO STATES.—The term ‘‘25-percent payments to States’’ means the 25 percent payments

authorized by the Act of May 23, 1908 (35 Stat. 260, chapter

192; 16 U.S.C. 500) for the States of Washington, Oregon,

and California for the benefit of counties in which national

forests are situated and that are affected by decisions related

to the northern spotted owl.

(3) SPECIAL PAYMENT AMOUNT.—The term ‘‘special payment

amount’’ means the amount determined by multiplying—

(A) the applicable percentage; by

(B) the annual average of the 25-percent payments

to States made to a county pursuant to such Acts during

the 5-year period consisting of fiscal years 1986 through

1990.

(b) PAYMENTS.— (1) IN GENERAL.—In lieu of making the 25-percent payments to States, the Secretary of the Treasury shall make

payments to States, for the benefit of counties, that are eligible

to receive the 25-percent payments to States as of the date

of enactment of this Act in accordance with paragraph (2). (2) AMOUNT OF PAYMENTS.— (A) FISCAL YEARS 1994 THROUGH 1998.—For each of fiscal

years 1994 through 1998, the payment to each State for

the benefit of each county in the State referred to in paragraph (1) shall be equal to the sum of the special payment

amounts for each county in the State. (B) FISCAL YEARS 1999 THROUGH 2003.—
H. R. 2264—371

(i) IN GENERAL.—For each of fiscal years 1999

through 2003, the payment to each State for the benefit

of each county in the State referred to in paragraph

(1) shall be equal to the sum of the payments for

each county in the State as calculated under clause

(ii).

(ii) PAYMENTS FOR COUNTIES.—The payment for

each county referred to in clause (i) shall be equal

to the greater of—

(I) the special payment amount for the county;

or

(II) the share of the 25-percent payments to

States allocable to the county.

SEC. 13983. SHARING OF BUREAU OF LAND MANAGEMENT TIMBER

SALE RECEIPTS.

(a) DEFINITIONS.—As used in this section:

(1) APPLICABLE PERCENTAGE.—The term ‘‘applicable

percentage’’ means—

(A) for fiscal year 1994, 85 percent; and

(B) for each of fiscal years 1995 through 2003, 3

percentage points less than the applicable percentage for

the preceding fiscal year.

(2) 50-PERCENT PAYMENTS TO COUNTIES.—The term ‘‘50-

percent payments to counties’’ means the 50-percent share paid

to counties in the States of Oregon and California pursuant

to title II of the Act of August 28, 1937 (50 Stat. 875, chapter

876; 43 U.S.C. 1181f), and the payments made to counties

pursuant to the Act of May 24, 1939 (53 Stat. 753, chapter

144; 43 U.S.C. 1181f–1 et seq.).

(3) SPECIAL PAYMENT AMOUNT.—The term ‘‘special payment

amount’’ means the amount determined by multiplying—

(A) the applicable percentage; by

(B) the annual average of the 50-percent payments

to counties made to a county pursuant to such Acts during

the 5-year period consisting of fiscal years 1986 through

1990.

(b) PAYMENTS.—

(1) IN GENERAL.—In lieu of making the 50-percent payments to counties, the Secretary of the Treasury shall make

payments to counties that are eligible to receive the 50-percent

payments as of the date of enactment of this Act in accordance

with paragraph (2).

(2) AMOUNT OF PAYMENTS.—

(A) FISCAL YEARS 1994 THROUGH 1998.—For each of fiscal

years 1994 through 1998, the Secretary of the Treasury

shall pay to each county referred to in paragraph (1) the

special payment amount.

(B) FISCAL YEARS 1999 THROUGH 2003.—For each of fiscal

years 1999 through 2003, the Secretary of the Treasury

shall pay to each county referred to in paragraph (1) the

greater of—

(i) the special payment amount; or

(ii) the share of the 50-percent payments to counties allocable to the county.
H. R. 2264—372

TITLE XIV—BUDGET PROCESS

PROVISIONS

SEC. 14001. PURPOSE.

The Congress declares that it is essential to— (1) preserve the deficit reduction achieved by this Act;

(2) extend the system of discretionary spending limits for the single discretionary category set forth in section 601 of

the Congressional Budget Act of 1974; (3) extend the pay-as-you-go enforcement system; and

(4) prohibit the consideration of direct spending or receipts legislation that would decrease the pay-as-you-go surplus

achieved by this Act and created under section 252 of the

Balanced Budget and Emergency Deficit Control Act of 1985.

SEC. 14002. DISCRETIONARY SPENDING LIMITS.

(a) DEFINITION OF ‘‘DISCRETIONARY SPENDING LIMIT’’.—Section

601(a)(2) of the Congressional Budget Act of 1974 is amended— (1) in subparagraph (D) by striking the word ‘‘and’’; and

(2) by inserting after subparagraph (E) the following:

‘‘and

‘‘(F) with respect to fiscal years 1996, 1997, and 1998, for the discretionary category, the amounts set forth for

those years in section 12(b)(1) of House Concurrent Resolution 64 (One Hundred Third Congress);’’. (b) POINT OF ORDER IN THE SENATE.—Section 601(b)(1) of the

Congressional Budget Act of 1974 is amended to read as follows: ‘‘(1) Except as otherwise provided in this subsection, it

shall not be in order in the Senate to consider any concurrent

resolution on the budget for fiscal year 1995, 1996, 1997, or

1998 (or amendment, motion, or conference report on such

a resolution) that would exceed any of the discretionary spending limits in this section.’’.

(c) CONFORMING AMENDMENTS.—(1) Section 251 of the Balanced

Budget and Emergency Deficit Control Act of 1985 is amended—

(A) in subsection (a) by striking ‘‘FISCAL YEARS 1991–1995

ENFORCEMENT.—’’ and inserting ‘‘FISCAL YEARS 1991–1998

ENFORCEMENT.—’’;

(B) in subsection (b)(1)—

(i) in the matter before subparagraph (A), by—

(I) striking ‘‘When the President submits the

budget under section 1105(a) of title 31, United States

Code, for budget year 1992, 1993, 1994, or 1995’’ and

inserting ‘‘When the President submits the budget

under section 1105(a) of title 31, United States Code,

for budget year 1992, 1993, 1994, 1995, 1996, 1997,

or 1998’’; and

(II) striking ‘‘the budget shall include, adjustments to discretionary spending limits (and those limits as

cumulatively adjusted) for the budget year and each

outyear through 1995’’ and inserting ‘‘the budget shall

include, adjustments to discretionary spending limits

(and those limits as cumulatively adjusted) for the

budget year and each outyear through 1998’’;

(ii) in paragraph (1)(B), by inserting at the end thereof

the following new clause:
H. R. 2264—373

‘‘(iii) For a budget submitted for budget year 1996,

1997, or 1998, the adjustments shall be those necessary

to reflect changes in inflation estimates since those

of March 31, 1993, set forth on page 46 of House

Conference Report 103–48.’’;

(iii) in the matter before subparagraph (A) in paragraph (2) by—

(I) striking ‘‘When OMB submits a sequestration

report under section 254 (g) or (h) for fiscal year 1991,

1992, 1993, 1994, or 1995’’ and inserting ‘‘When OMB

submits a sequestration report under section 254 (g)

or (h) for fiscal year 1991, 1992, 1993, 1994, 1995,

1996, 1997, or 1998’’; and

(II) striking ‘‘for the fiscal year and each succeeding year through 1995,’’ and inserting ‘‘for the fiscal

year and each succeeding year through 1998,’’;

(iv) in paragraph (2)(D)(i), by striking ‘‘for fiscal year

1991, 1992, 1993, 1994, or 1995,’’ and inserting ‘‘for any

fiscal year,’’;

(v) in paragraph (2)(E), by—

(I) striking the final word ‘‘and’’ in subparagraph

(ii); and

(II) inserting before the final period the following:

‘‘; and

‘‘(iv) if, for fiscal years 1994, 1995, 1996, 1997,

and 1998, the amount of new budget authority provided

in appropriation Acts exceeds the discretionary spending limit on new budget authority due to technical

estimates made by the director of the Office of Management and Budget, the adjustment is the amount of

the excess, but not to exceed an amount (for any one

fiscal year) equal to 0.1 percent of the adjusted

descretionary spending limit on new budget authority

for that fiscal year’’; and

(vi) in paragraph (2)(F), by inserting immediately

before the final period the following: ‘‘, and not to exceed

0.5 percent of the adjusted descretionary spending limit

on outlays for the fiscal year in fiscal year 1996, 1997,

or 1998’’.

(2) REPORTS.—Sections 254(d)(2) and 254(g)(2)(A) of the Balanced Budget and Emergency Deficit Control Act of 1985 are each

amended by striking ‘‘1995’’ and inserting ‘‘1998’’.

(3) EXPIRATION.—(A) Notwithstanding section 275(b) of the Balanced Budget and Emergency Deficit Control Act of 1985, sections

250, 251, 252, and 254 through 258C of that Act shall expire

on September 30, 1998.

(B) Section 607 of the Congressional Budget Act of 1974 is

amended by striking ‘‘shall apply to fiscal years 1991 to 1995’’

and inserting ‘‘shall apply to fiscal years 1991 to 1998’’.

SEC. 14003. ENFORCING PAY-AS-YOU-GO.

(a) Section 252 of the Balanced Budget and Emergency Deficit

Control Act of 1985 is amended—

(1) in subsection (a), by striking ‘‘FISCAL YEAR 1992–1995

ENFORCEMENT.’’ and inserting ‘‘FISCAL YEAR 1992–1998

ENFORCEMENT.’’;
H. R. 2264—374

(2) in subsection (d), by striking ‘‘estimate of the amount

of change in outlays or receipts, as the case may be, in each

fiscal year through fiscal year 1995’’ both places that it appears

and inserting ‘‘estimate of the amount of change in outlays

or receipts, as the case may be, in each fiscal year through

fiscal year 1998’’ both places; and

(3) in subsection (e), by striking ‘‘for fiscal year 1991, 1992,

1993, 1994, or 1995,’’ and inserting ‘‘for any fiscal year from

1991 through 1998,’’.

(b) Section 254(g)(3) of the Balanced Budget and Emergency

Deficit Control Act of 1985 is amended by striking ‘‘1995’’ and

inserting ‘‘1998’’.

(c) Upon enactment of this Act, the director of the Office of

Management and Budget shall reduce the balances of direct spending and receipts legislation applicable to each fiscal year under

section 252 of the Balanced Budget and Emergency Deficit Control

Act of 1985 by an amount equal to the net deficit reduction achieved

through the enactment in this Act of direct spending and receipts

legislation for that year.

SEC. 14004. EXERCISE OF RULE-MAKING POWERS.

The Congress enacts the provisions of this part—

(1) as an exercise of the rule-making power of the Senate

and the House of Representatives, respectively, and as such

these provisions shall be considered as part of the rules of

each House, respectively, or of that House to which they specifically apply, and such rules shall supersede other rules only

to the extent that they are inconsistent therewith; and

(2) with full recognition of the constitutional right of either

House to change such rules (so far as relating to such House)

at any time, in the same manner, and to the same extent

as in the case of any other rule of such House.

Speaker of the House of Representatives.

Vice President of the United States and President of the Senate.