I
107TH CONGRESS
1ST SESSION
H. R. 2762
To provide incentives to encourage private sector efforts to reduce earthquake
losses, to establish a national disaster mitigation program, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
AUGUST 2, 2001
Ms. HOOLEY of Oregon introduced the following bill; which was referred to
the Committee on Ways and Means, and in addition to the Committees
of Financial Services, and Science, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To provide incentives to encourage private sector efforts to
reduce earthquake losses, to establish a national disaster
mitigation program, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Earthquake Loss Re-
duction Act of 2001’’.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—Congress finds the following:
(1) After 23 years of research funded by the
National Earthquake Hazards Reduction Program,
a substantial body of knowledge exists about earth
sciences, geotechnical, and structural engineering
and human behavior relating earthquakes.
(2) The foremost challenge as we enter the 21st
century is putting this knowledge to work by reduc-
ing future losses to improve the safety of Americans
and the performance of State and local government
facilities and private buildings and facilities.
(3) Earthquakes and tsunamis cause great dan-
ger to human life and property throughout the
United States and continue to threaten Americans
significantly in over 40 States and territories.
(4) Too few States and local communities have
sufficiently identified and assessed their risk and im-
plemented adequate measures to reduce losses from
such disasters and to ensure that their critical public
infrastructure and facilities will continue to function
after the disaster.
(5) Too much of the Nation’s stocks of housing
and commercial buildings remain inherently vulner-
able to earthquake shaking. Future losses in these
facilities can be lessened using currently feasible
technology.
(6) Too much of local government infrastruc-
ture remain at risk and are likely to be non-func-
tional in the aftermath of foreseeable earthquake
events at the time when the services they provide are
critically necessary.
(7) Federal, State and local government ex-
penditures for disaster assistance and recovery have
increased without commensurate reduction in the
likelihood of future losses from such earthquakes.
(8) Feasible techniques for reducing future
earthquake losses are readily available.
(9) Without economic incentives, it is unlikely
that States and local communities and the public
will be able to implement available measures to re-
duce losses and ensure continued functionality of
their infrastructure.
(10) With moderate to strong seismic activity
many historic buildings would sustain extensive
damage and the cost to repair these structures will
be prohibitive. Private insurance companies are be-
coming increasingly reluctant to issue seismic cov-
erage. Without assistance, these historic, national
treasures will be lost forever.
(b) PURPOSE.—It is the purpose of this Act to estab-
lish a national disaster mitigation program that—
(1) reduces the loss of life and property, human
suffering, economic disruption, and disaster assist-
ance costs resulting from earthquakes;
(2) offers financial incentives to encourage pri-
vate sector efforts to reduce earthquake losses;
(3) provides matching funds to encourage and
assist States and local governments and the private
sector in their efforts to implement measures de-
signed to ensure the continued functionality of pub-
lic infrastructure, historic buildings, commerce, and
habitation after earthquakes;
(4) creates Federal, State and local government
partnerships to reduce the vulnerability of public in-
frastructure, commercial enterprises, historic build-
ings, and residential buildings to earthquakes;
(5) creates a national seismic insurance pool to
protect national historic buildings;
(6) reduces risk of public and private invest-
ment in historic buildings; and
(7) increases protection of our national historic
legacy.
SEC. 3. NONREFUNDABLE CREDIT FOR EXPENSES RE-
LATED TO SEISMIC RETROFIT OF PRINCIPAL
RESIDENCE.
(a) GENERAL RULE.—Subpart A of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to nonrefundable personal credits) is
amended by inserting after section 25A the following:
‘‘SEC. 25B. EXPENSES RELATED TO SEISMIC RETROFIT OF
PRINCIPAL RESIDENCE.
‘‘(a) GENERAL RULE.—In the case of an individual,
there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to
50 percent of so much of the qualified seismic retrofit ex-
penses of the taxpayer for the taxable year as do not ex-
ceed $6,000.
‘‘(b) QUALIFIED SEISMIC RETROFIT EXPENSES.—
For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified seismic
retrofit expenses’ means amounts paid or incurred
by the taxpayer during the taxable year in relation
to any seismic retrofit construction of the principal
residence of the taxpayer.
‘‘(2) SEISMIC RETROFIT CONSTRUCTION.—The
term ‘seismic retrofit construction’ means any addi-
tion or improvement—
‘‘(A) which is certified by the State dis-
aster agency or other applicable agency—
‘‘(i) as resulting in the mitigation of
the risk of damage to existing property
from an earthquake, and
‘‘(ii) as being in addition to any addi-
tion or improvement required by any State
or local law with respect to such property,
and
‘‘(B) which is placed in service at least 5
years after the date the building is first placed
in service.
Such term does not include the cost of acquiring
such property (or any interest therein).
‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin-
cipal residence’ has the same meaning as when used
in section 121.
‘‘(c) DENIAL OF DOUBLE BENEFIT.—No deduction
shall be allowed under any other provision of this chapter
with respect to any amount of qualified seismic retrofit
expenses taken into account under subsection (a).
‘‘(d) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section with respect
to any residence, the basis of such residence shall be re-
duced by the amount of the credit so allowed.’’.
(b) CONFORMING AMENDMENTS.—
(1) The table of sections for subpart A of part
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by inserting after the
item relating to section 25A the following new item:
‘‘Sec. 25B. Expenses related to seismic retrofit of principal resi-
dence.’’.
(2) Subsection (a) of section 1016 of such Code
is amended by striking ‘‘and’’ at the end of para-
graph (26), by striking the period at the end of
paragraph (27) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph:
‘‘(28) in the case of a residence with respect to
which a credit was allowed under section 25B, to the
extent provided in section 25B(d).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenses paid or incurred in
taxable years beginning after December 31, 2000.
SEC. 4. RECOVERY PERIOD FOR DEPRECIATION OF CER-
TAIN SEISMIC RETROFIT EXPENSES.
(a) TREATMENT
AS 5-YEAR PROPERTY.—Section
168(e)(3)(B) of the Internal Revenue Code of 1986 (relat-
ing to 5-year property) is amended by striking ‘‘and’’ at
the end of clause (v), by striking the period and inserting
‘‘, and’’ at the end of clause (vi), and by inserting after
clause (vi) the following new clause:
‘‘(vii) any qualified seismic retrofit
property.’’.
(b) DEFINITION OF QUALIFIED SEISMIC RETROFIT
PROPERTY.—Section 168(i) of the Internal Revenue Code
of 1986 (relating to definitions and special rules) is
amended by adding at the end the following new para-
graph:
‘‘(15) QUALIFIED
SEISMIC
RETROFIT
PROP-
ERTY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
seismic retrofit property’ means any addition or
improvement to real property for which depre-
ciation is allowable under this section—
‘‘(i) for which the expenditure is prop-
erly chargeable to the capital account, and
‘‘(ii) which is a seismic retrofit.
‘‘(B) SEISMIC RETROFIT.—For purposes of
subparagraph (A)(i), the term ‘seismic retrofit’
means any addition or improvement—
‘‘(i) which is certified by the State
disaster 
agency 
or 
other 
applicable
agency—
‘‘(I) as resulting in the mitiga-
tion of the risk of damage to existing
property from an earthquake, and
‘‘(II) as being in addition to any
addition or improvement required by
any State or local law with respect to
such property, and
‘‘(ii) which is placed in service at least
5 years after the date the building is first
placed in service.
Such term does not include the cost of acquir-
ing such property (or any interest therein).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to qualified seismic retrofit prop-
erty placed in service after December 31, 2000.
SEC. 5. QUALIFIED SEISMIC RETROFITTING BONDS.
(a) IN GENERAL.— Section 144 of the Internal Rev-
enue Code of 1986 (relating to qualified small issue bond;
qualified student loan bond; qualified redevelopment bond)
is amended by adding at the end the following new sub-
section:
‘‘(d) QUALIFIED SEISMIC RETROFITTING BOND.—
For purposes of this part—
‘‘(1) IN GENERAL.—The term ‘qualified seismic
retrofitting bond’ means any bond issued as part of
an issue 95 percent or more of the net proceeds of
which are to be used—
‘‘(A) for seismic retrofitting expenditures,
and
‘‘(B) in a manner which meets the require-
ments of paragraph (3).
‘‘(2) SEISMIC RETROFITTING EXPENDITURE.—
For purposes of paragraph (1), the term ‘seismic
retrofitting expenditure’ means any amount properly
chargeable to capital account—
‘‘(A) which is certified by the State dis-
aster agency or other applicable agency—
‘‘(i) as resulting in the mitigation of
the risk of damage to existing property
from an earthquake, and
‘‘(ii) as being in addition to any addi-
tion or improvement required by any State
or local law with respect to such property,
and
‘‘(B) which is placed in service at least 5
years after the date the building is first placed
in service.
Such term does not include the cost of acquiring
such property (or any interest therein).
‘‘(3) USE OF PROCEEDS REQUIREMENTS.—The
use of the proceeds of an issue meets the require-
ments of this paragraph if within the 26-month pe-
riod beginning with the date of issue—
‘‘(A) at least 95 percent of the net pro-
ceeds of such issue are used for seismic retro-
fitting expenditures or are used to finance 1 or
more loans to ultimate borrowers for such ex-
penditures, or
‘‘(B) to the extent not so used under sub-
paragraph (A), such proceeds in excess of
$10,000 are used to redeem bonds which are
part of such issue.’’.
(b) BONDS TREATED AS QUALIFIED BONDS.—Para-
graph (1) of section 141(e) of the Internal Revenue Code
of 1986 (defining qualified bond) is amended by striking
‘‘or’’ at the end of subparagraph (F), by redesignating
subparagraph (G) as subparagraph (H), and by inserting
after subparagraph (F) the following new subparagraph:
‘‘(G) a qualified seismic retrofitting bond,
or’’.
(c) BONDS INCLUDED FOR PURPOSES OF SMALL
ISSUER EXEMPTION STATUS.—Subclause (I) of section
265(b)(3)(C)(ii) of the Internal Revenue Code of 1986 (re-
lating to obligations not taken into account in determining
status as qualified small issuer) is amended by inserting
‘‘, or a qualified seismic retrofitting bond, as defined in
section 144(d)(1)’’ after ‘‘section 145’’.
(d) EXCEPTION
FROM
VOLUME
CAP.—Section
146(g) of the Internal Revenue Code of 1986 (relating to
exception for certain bonds) is amended by striking ‘‘and’’
at the end of paragraph (3), by striking the period at the
end of paragraph (4) and inserting a comma, and by add-
ing after paragraph (4) the following new paragraphs:
‘‘(5) any qualified mortgage bond if 95 percent
or more of the net proceeds of the bond are to be
used to provide home improvement loans in connec-
tion with seismic retrofitting expenditures (as de-
fined in section 144(d)(2) without regard to the cap-
ital account requirement), and
‘‘(6) any qualified seismic retrofitting bond.’’.
(e) PROCEEDS
OF MORTGAGE REVENUE BONDS
USED IN CONNECTION WITH SEISMIC RETROFITTING.—
(1) IN
GENERAL.—Paragraph (4) of section
143(k) of the Internal Revenue Code of 1986 (relat-
ing to other definitions and special rules for quali-
fied mortgage bonds) is amended to read as follows:
‘‘(4) QUALIFIED HOME IMPROVEMENT LOAN.—
The term ‘qualified home improvement loan’
means—
‘‘(A) the financing (in an amount which
does not exceed $15,000)—
‘‘(i) of alterations, repairs, and im-
provements on or in connection with an ex-
isting residence by the owner thereof, but
‘‘(ii) only for such items as substan-
tially protect or improve the basic livability
or energy efficiency of the property, and
‘‘(B) the financing (in an amount which
does not exceed $20,000) of seismic retrofitting
expenditures (as defined in section 144(d)(2)
without regard to the capital account require-
ment) in connection with an existing residence
by the owner thereof.’’.
(2) 
EXCEPTION
FROM
INCOME
REQUIRE-
MENTS.—Section 143(f) of such Code (relating to
income requirements) is amended by adding at the
end the following new paragraph:
‘‘(7) EXCEPTION
FOR
CERTAIN
QUALIFIED
HOME IMPROVEMENT LOANS.—Paragraph (1) shall
not apply with respect to any qualified home im-
provement 
loan 
(as 
defined 
in 
subsection
(k)(4)(B).’’.
(f) CLERICAL AMENDMENTS.—
(1) The heading of section 144 of the Internal
Revenue Code of 1986 is amended by striking
‘‘BOND.’’ and inserting ‘‘BOND; QUALIFIED SEIS-
MIC RETROFITTING BOND.’’.
(2) The item relating to section 144 in the table
of sections for subpart A of part IV of subchapter
B of chapter 1 of such Code is amended by striking
‘‘bond.’’ and inserting ‘‘bond; qualified seismic retro-
fitting bond.’’
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to bonds issued after the date of
the enactment of this Act.
SEC. 6. TREATMENT OF PASSIVE LOSSES OF CERTAIN
PARTNERSHIPS ENGAGED IN SEISMIC RET-
ROFITTING.
(a) IN GENERAL.—Section 469 of the Internal Rev-
enue Code of 1986 (relating to passive activity losses and
credits limited) is amended by adding at the end the fol-
lowing new subsection:
‘‘(n) EXEMPTION
FOR
SEISMIC
RETROFITTING
TRADE OR BUSINESS.—
‘‘(1) IN GENERAL.—In the case of any natural
person, subsection (a) shall not apply to that portion
of the passive activity loss or the deduction equiva-
lent (within the meaning of subsection (j)(5)) of the
passive activity credit for any taxable year which is
attributable to any seismic retrofitting activity which
such person engages in during the taxable year,
whether or not the taxpayer materially participates
in such activity.
‘‘(2) SEISMIC
RETROFITTING
ACTIVITY.—For
purposes of this subsection, the term ‘seismic retro-
fitting activity’ means any activity which involves the
trade or business of seismic retrofit construction (as
defined in section 25B(b)(2)) for residential prop-
erty.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 2000.
SEC. 7. MORTGAGE INSURANCE INCENTIVE.
Section 203(b)(2) of the National Housing Act (12
U.S.C. 1709(b)(2)), is amended, in the second undesig-
nated paragraph, by inserting ‘‘or due to seismic retro-
fitting of the residence (within the meaning of the term
‘seismic retrofit construction’ under section 25B(b)(2) of
the Internal Revenue Code of 1986)’’ after ‘‘Act) therein’’.
SEC. 8. EARTHQUAKE DISASTER MITIGATION AND RECOV-
ERY PLANNING GRANT PROGRAM.
(a) DEFINITIONS.—
(1) IN GENERAL.—Section 4 of the Earthquake
Hazards Reduction Act of 1977 (42 U.S.C. 7703) is
amended by adding at the end the following:
‘‘(8) AGENCY.—The term ‘Agency’ means the
Federal Emergency Management Agency.
‘‘(9) CRITICAL
FACILITY.—The term ‘critical
facility’ means—
‘‘(A) a public structure (including a police
station, fire station, city or town hall, school, or
other public building) or a public or nonprofit
private hospital that is—
‘‘(i) owned by an entity; and
‘‘(ii) critical to the continuity of the
entity or to the conduct of the disaster re-
sponse activities of the entity; or
‘‘(B) a facility that—
‘‘(i) provides medical services to a spe-
cific occupational or industry segment of
the general public; and
‘‘(ii) is operated by an organization
described in subsection (c) or (d) of section
501 of the Internal Revenue Code of 1986
and exempt from taxation under subsection
(a) of such section.
‘‘(10) CRITICAL
PUBLIC
INFRASTRUCTURE.—
The term ‘critical public infrastructure’ means a
utility or transportation system (including a bridge,
energy system, water or sewer system, or commu-
nication system) that is—
‘‘(A) owned by an entity; and
‘‘(B) critical to the conduct of the disaster
response activities of the entity.
‘‘(11) EARTHQUAKE DISASTER.—
‘‘(A) IN GENERAL.—The term ‘earthquake
disaster’ means a disaster that results from a
movement of the earth.
‘‘(B) INCLUSIONS.—The term ‘earthquake
disaster’ includes a disaster that results from a
tsunami or an earthquake-caused landslide or
liquefaction (as determined by the Director of
the Agency).
‘‘(12) GRANT PROGRAM.—The term ‘grant pro-
gram’ means the earthquake disaster mitigation and
recovery planning grant program established under
section 6.
‘‘(13) INDIAN TRIBE.—The term ‘Indian tribe’
has the meaning given the term in section 4 of the
Indian Self-Determination and Education Assistance
Act (25 U.S.C. 450b).
‘‘(14) INSTITUTION OF HIGHER EDUCATION.—
The term ‘institution of higher education’ has the
meaning given the term in section 101 of the Higher
Education Act of 1965 (20 U.S.C. 1001).
‘‘(15) LOCAL GOVERNMENT.—The term ‘local
government’ means—
‘‘(A) a city, town, township, county, parish,
village, or other general-purpose political sub-
division of a State;
‘‘(B) an Indian tribe; and
‘‘(C) a geologic hazard abatement or simi-
lar special purpose district formed to carry out
or fund projects to reduce the vulnerability of
infrastructure and buildings to earthquake dis-
asters.
‘‘(16) LOSS
REDUCTION
TRUST
FUND.—The
term ‘Loss Reduction Trust Fund’ means the Loss
Reduction Trust Fund established by section 7.’’.
(2) 
CONFORMING
AMENDMENT.—Section
5(b)(1) of the Earthquake Hazards Reduction Act of
1977 (42 U.S.C. 7704(b)(1)) is amended by striking
‘‘(hereafter in this Act referred to as the ‘Agency’)’’.
(b) GRANT PROGRAM.—The Earthquake Hazards
Reduction Act of 1977 is amended by inserting after sec-
tion 5 (42 U.S.C. 7704) the following:
‘‘SEC. 6. EARTHQUAKE DISASTER MITIGATION AND RECOV-
ERY PLANNING GRANT PROGRAM.
‘‘(a) ESTABLISHMENT.—The Director of the Agency
may establish a grant program to provide financial assist-
ance to eligible recipients described in subsection (b) to
pay the Federal share of the cost of carrying out earth-
quake disaster mitigation and recovery planning measures
with respect to the critical facilities and critical public in-
frastructure under the jurisdiction of the recipients.
‘‘(b) ELIGIBLE RECIPIENTS.—
‘‘(1) IN GENERAL.—To be eligible for a grant
under the grant program, an entity shall be a local
government, public or nonprofit private hospital, or
public institution of higher education that—
‘‘(A) has jurisdiction over, or is located in,
an area that is subject to earthquake disasters;
‘‘(B) submits to the Director of the Agency
for approval an application for the grant in
such form as the Director shall require;
‘‘(C) has completed an earthquake disaster
risk analysis;
‘‘(D) has adopted a long-term strategic
earthquake disaster loss reduction plan that
identifies high priority earthquake disaster loss
reduction projects; and
‘‘(E) meets criteria established by the Di-
rector under paragraph (2).
‘‘(2) CRITERIA.—
‘‘(A) ESTABLISHMENT.—The Director of
the Agency shall establish, by regulation, cri-
teria that local governments, public and non-
profit private hospitals, and public institutions
of higher education shall meet to qualify for
grants under the grant program.
‘‘(B) 
REQUIREMENT
APPLICABLE
TO
LOCAL
GOVERNMENTS.—The criteria under
subparagraph (A) applicable to local govern-
ments shall include the requirement that a local
government adopt and enforce comprehensive
ordinances, building codes, land use measures,
and other measures for earthquake disaster loss
reduction that—
‘‘(i) take into consideration the identi-
fied earthquake hazards applicable to the
area over which the local government has
jurisdiction; and
‘‘(ii) reflect current, cost-effective
techniques designed to reduce losses from
earthquake disasters and ensure the con-
tinued functionality of critical facilities and
critical public infrastructure.
‘‘(C) CONSULTATION.—The criteria under
subparagraph (A) shall be adopted after con-
sultation with—
‘‘(i) Federal, State, and local govern-
ment officials and agencies; and
‘‘(ii) other persons knowledgeable in
the fields of natural disasters and hazard
mitigation.
‘‘(c) COST SHARING.—
‘‘(1) FEDERAL SHARE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the Federal share of the cost of
measures carried out using a grant under the
grant program shall be 75 percent.
‘‘(B) 
INSUFFICIENCY
OF
FEDERAL
FUNDS.—In paying the Federal share under
subparagraph (A) in a case in which there are
insufficient funds in the Loss Reduction Trust
Fund to fund all applications that are eligible
for approval, the Director of the Agency may
consider—
‘‘(i) the desirability of geographical
dispersal of available funds;
‘‘(ii) the extent to which any applicant
faces a greater risk of earthquake disas-
ters, in number or severity, than other ap-
plicants;
‘‘(iii) the extent to which each appli-
cant is expending resources on addressing
urgent problems concerning critical facili-
ties or critical public infrastructure; and
‘‘(iv) the extent to which the measures
proposed to be funded using the grant are
expected to result in cost savings to the
Federal Government under the Robert T.
Stafford Disaster Relief and Emergency
Assistance Act (42 U.S.C. 5121 et seq.).
‘‘(2) NON-FEDERAL SHARE.—
‘‘(A) GRANTS
TO
LOCAL
GOVERNMENTS
(OTHER THAN INDIAN TRIBES).—In the case of
a grant to a local government (other than an
Indian tribe) under the grant program, the non-
Federal share of the cost of measures carried
out using the grant shall be provided as follows:
‘‘(i) 1⁄2 by the State.
‘‘(ii) 1⁄2 by the local government.
‘‘(B) GRANTS TO INDIAN TRIBES.—In the
case of a grant to an Indian tribe under the
grant program, the non-Federal share of the
cost of measures carried out using the grant
shall be provided as follows:
‘‘(i) 1⁄2 by the Bureau of Indian Af-
fairs.
‘‘(ii) 1⁄2 by the Indian tribe.
‘‘(C) GRANTS TO PUBLIC HOSPITALS.—In
the case of a grant to a public hospital under
the grant program, the non-Federal share of
the cost of measures carried out using the
grant shall be provided as follows:
‘‘(i) 1⁄2 by the State, from funds other
than general State appropriations to the
hospital.
‘‘(ii) 1⁄2 by the public hospital, from
general State appropriations to the hos-
pital or from funds donated to the hos-
pital.
‘‘(D) GRANTS
TO
NONPROFIT
PRIVATE
HOSPITALS.—In the case of a grant to a non-
profit private hospital under the grant program,
the non-Federal share of the cost of measures
carried out using the grant shall be provided by
the nonprofit private hospital.
‘‘(E) GRANTS TO PUBLIC INSTITUTIONS OF
HIGHER EDUCATION.—In the case of a grant to
a public institution of higher education under
the grant program, the non-Federal share of
the cost of measures carried out using the
grant shall be provided as follows:
‘‘(i) 1⁄2 by the State, from funds other
than general State appropriations to the
institution of higher education.
‘‘(ii) 1⁄2 by the public institution of
higher education, from general State ap-
propriations to the institution of higher
education or from funds donated to the in-
stitution of higher education.
‘‘(d) USE OF GRANT FUNDS.—
‘‘(1) IN GENERAL.—A grant under the grant
program may be used—
‘‘(A) to retrofit critical facilities and crit-
ical public infrastructure in accordance with
paragraph (2);
‘‘(B) to implement earthquake disaster
mitigation measures in accordance with para-
graph (3); or
‘‘(C) to develop earthquake disaster recov-
ery plans in accordance with paragraph (4).
‘‘(2) RETROFIT OF CRITICAL FACILITIES AND
CRITICAL PUBLIC INFRASTRUCTURE.—
‘‘(A) IN
GENERAL.—A grant under the
grant program may be used to retrofit a critical
facility or critical public infrastructure with
parts or equipment that meets current stand-
ards for withstanding earthquake disasters (as
determined by the Director of the Agency).
‘‘(B) SELECTION OF CRITICAL FACILITIES
AND
CRITICAL
PUBLIC
INFRASTRUCTURE.—A
critical facility or critical public infrastructure
shall be selected for a grant under subpara-
graph (A) if the critical facility or critical public
infrastructure is identified in a long-term stra-
tegic earthquake disaster loss reduction plan
adopted under subsection (b)(1)(D) as having
high priority for retrofit because of the effect
that damage to the critical facility or critical
public infrastructure from an earthquake dis-
aster would have on the quality of human life
in the region and on recovery from the earth-
quake disaster.
‘‘(3) IMPLEMENTATION OF EARTHQUAKE DIS-
ASTER MITIGATION MEASURES.—A grant under the
grant program may be used to implement an earth-
quake disaster mitigation measure designed to en-
sure the continued functionality of a critical facility
or critical public infrastructure.
‘‘(4) DEVELOPMENT
OF
EARTHQUAKE
DIS-
ASTER RECOVERY PLANS.—
‘‘(A) IN
GENERAL.—A grant under the
grant program may be used to develop an
earthquake 
disaster 
recovery 
plan 
that
includes—
‘‘(i) a plan for reestablishing govern-
ment operations and community services
after an earthquake disaster; and
‘‘(ii) a plan for long-term recovery
after an earthquake disaster.
‘‘(B) SCHEDULE FOR PAYMENT OF GRANT
FUNDS.—Of a grant for measures described in
subparagraph (A)—
‘‘(i) 50 percent shall be paid upon ap-
proval by the Director of the Agency of the
application for the grant; and
‘‘(ii) 50 percent shall be paid upon
adoption of the earthquake disaster recov-
ery plan by the local government, public
hospital, or public institution of higher
education.
‘‘SEC. 7. LOSS REDUCTION TRUST FUND.
‘‘(a) ESTABLISHMENT.—There is established in the
Treasury of the United States a fund to be known as the
‘Loss Reduction Trust Fund’, consisting of—
‘‘(1) such amounts as are appropriated to the
Loss Reduction Trust Fund under subsection (b);
‘‘(2) such amounts as are appropriated to the
Loss Reduction Trust Fund under section 12(e);
and
‘‘(3) any interest earned on investment of
amounts in the Loss Reduction Trust Fund under
subsection (d).
‘‘(b) TRANSFERS
TO
LOSS
REDUCTION
TRUST
FUND.—There are appropriated to the Loss Reduction
Trust Fund amounts equivalent to—
‘‘(1) such amounts as the Director of the Agen-
cy determines are remaining after the close-out of
any active disaster declaration account under the
Robert T. Stafford Disaster Relief and Emergency
Assistance Act (42 U.S.C. 5121 et seq.);
‘‘(2) such amounts as—
‘‘(A) were allocated for hazard mitigation
assistance with respect to a major disaster
under section 404 of that Act (42 U.S.C.
5170c); and
‘‘(B) the Director of the Agency deter-
mines are remaining after expiration of the
time limits established under subsection (c) of
that section; and
‘‘(3) amounts received as gifts under subsection
(f).
‘‘(c) EXPENDITURES FROM LOSS REDUCTION TRUST
FUND.—Upon request by the Director of the Agency, the
Secretary of the Treasury shall transfer from the Loss Re-
duction Trust Fund to the Director of the Agency such
amounts as the Director of the Agency determines are nec-
essary to carry out section 6.
‘‘(d) INVESTMENT OF AMOUNTS.—
‘‘(1) IN
GENERAL.—The Secretary of the
Treasury shall invest such portion of the Loss Re-
duction Trust Fund as is not, in the judgment of
the Secretary of the Treasury, required to meet cur-
rent withdrawals. Investments may be made only in
interest-bearing obligations of the United States.
‘‘(2) ACQUISITION OF OBLIGATIONS.—For the
purpose of investments under paragraph (1), obliga-
tions may be acquired—
‘‘(A) on original issue at the issue price; or
‘‘(B) by purchase of outstanding obliga-
tions at the market price.
‘‘(3) SALE
OF
OBLIGATIONS.—Any obligation
acquired by the Loss Reduction Trust Fund may be
sold by the Secretary of the Treasury at the market
price.
‘‘(4) CREDITS TO FUND.—The interest on, and
the proceeds from the sale or redemption of, any ob-
ligations held in the Loss Reduction Trust Fund
shall be credited to and form a part of the Loss Re-
duction Trust Fund.
‘‘(e) TRANSFERS OF AMOUNTS.—
‘‘(1) IN GENERAL.—The amounts required to
be transferred to the Loss Reduction Trust Fund
under this section shall be transferred at least
monthly from the general fund of the Treasury to
the Loss Reduction Trust Fund on the basis of esti-
mates made by the Secretary of the Treasury.
‘‘(2) ADJUSTMENTS.—Proper adjustment shall
be made in amounts subsequently transferred to the
extent prior estimates were in excess of or less than
the amounts required to be transferred.
‘‘(f) GIFTS.—The Secretary of the Treasury may ac-
cept gifts of cash for transfer to the Loss Reduction Trust
Fund.’’.
(c) AUTHORIZATION OF APPROPRIATIONS.—Section
12 of the Earthquake Hazards Reduction Act of 1977 (42
U.S.C. 7706) is amended by inserting after subsection (d)
the following:
‘‘(e) LOSS REDUCTION TRUST FUND.—There is au-
thorized to be appropriated to the Loss Reduction Trust
Fund $1,000,000,000.’’.
Æ