H. R. 2491—520
‘‘(i) the amount of gifts determined under sub-
section (b)(3), plus
‘‘(ii) the amount (if more than de minimis) of other
transfers from the decedent to the decedent’s spouse
(at the time of the transfer) within 10 years of the
date of the decedent’s death, plus
‘‘(iii) the amount of other gifts (not included under
clause (i) or (ii)) from the decedent within 3 years
of such date, other than gifts to members of the
decedent’s family otherwise excluded under section
2503(b), over
‘‘(B) the sum of the amounts described in clauses (i),
(ii), and (iii) of subparagraph (A) which are otherwise
includible in the gross estate.
For purposes of the preceding sentence, the Secretary may provide
that de minimis gifts to persons other than members of the
decedent’s family shall not be taken into account.
‘‘(d) ADJUSTED VALUE OF THE QUALIFIED FAMILY-OWNED BUSI-
NESS INTERESTS.—For purposes of this section, the adjusted value
of any qualified family-owned business interest is the value of
such interest for purposes of this chapter (determined without
regard to this section), reduced by the excess of—
‘‘(1) any amount deductible under paragraph (3) or (4)
of section 2053(a), over
‘‘(2) the sum of—
‘‘(A) any indebtedness on any qualified residence of
the decedent the interest on which is deductible under
section 163(h)(3), plus
‘‘(B) any indebtedness to the extent the taxpayer estab-
lishes that the proceeds of such indebtedness were used
for the payment of educational and medical expenses of
the decedent, the decedent’s spouse, or the decedent’s
dependents (within the meaning of section 152), plus
‘‘(C) any indebtedness not described in clause (i) or
(ii), to the extent such indebtedness does not exceed
$10,000.
‘‘(e) QUALIFIED FAMILY-OWNED BUSINESS INTEREST.—
‘‘(1) IN GENERAL.—For purposes of this section, the term
‘qualified family-owned business interest’ means—
‘‘(A) an interest as a proprietor in a trade or business
carried on as a proprietorship, or
‘‘(B) an interest in an entity carrying on a trade or
business, if—
‘‘(i) at least—
‘‘(I) 50 percent of such entity is owned (directly
or indirectly) by the decedent and members of
the decedent’s family,
‘‘(II) 70 percent of such entity is so owned
by members of 2 families, or
‘‘(III) 90 percent of such entity is so owned
by members of 3 families, and
‘‘(ii) for purposes of subclause (II) or (III) of clause
(i), at least 30 percent of such entity is so owned
by the decedent and members of the decedent’s family.
‘‘(2) LIMITATION.—Such term shall not include—
H. R. 2491—541
(1) by striking ‘‘If the taxpayer is the head of a family,
so’’ and inserting ‘‘So’’,
(2) by striking ‘‘his household’’ and inserting ‘‘the taxpayer’s
household’’, and
(3) by striking ‘‘$1,650 ($1,550 in the case of levies issued
during 1989)’’ and inserting ‘‘$2,500’’.
(b) BOOKS, ETC.—Paragraph (3) of section 6334(a) (relating
to books and tools of a trade, business, or profession) is amended
by striking ‘‘$1,100 ($1,050 in the case of levies issued during
1989)’’ and inserting ‘‘$1,250’’.
(c) INFLATION ADJUSTMENT.—Section 6334 (relating to property
exempt from levy) is amended by adding at the end the following
new subsection:
‘‘(f) INFLATION ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of any calendar year begin-
ning after 1996, each dollar amount referred to in paragraphs
(2) and (3) of subsection (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 such calendar year, by substituting ‘cal-
endar year 1995’ for ‘calendar year 1992’ in subparagraph
(B) thereof.
‘‘(2) ROUNDING.—If any dollar amount after being increased
under paragraph (1) is not a multiple of $10, such dollar amount
shall be rounded to the nearest multiple of $10.’’.
(d) EFFECTIVE DATE.—The amendments made by this section
shall take effect with respect to levies issued after December 31,
1995.
SEC. 11205. OFFERS-IN-COMPROMISE.
(a) REVIEW REQUIREMENTS.—Subsection (b) of section 7122
(relating to records) is amended by striking ‘‘$500.’’ and inserting
‘‘$50,000. However, such compromise shall be subject to continuing
quality review by the Secretary.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall take effect on the date of the enactment of this Act.
SEC. 11206. INCREASED LIMIT ON ATTORNEY FEES.
(a) IN GENERAL.—Paragraph (1) of section 7430(c) (defining
reasonable litigation costs) is amended—
(1) by striking ‘‘$75’’ in clause (iii) of subparagraph (B)
and inserting ‘‘$110’’,
(2) by striking ‘‘an increase in the cost of living or’’ in
clause (iii) of subparagraph (B), and
(3) by adding after clause (iii) the following:
‘‘In the case of any calendar year beginning after 1996, the
dollar amount referred to in clause (iii) shall be increased
by an amount equal to such dollar amount multiplied by the
cost-of-living adjustment determined under section 1(f)(3) for
such calendar year, by substituting ‘calendar year 1995’ for
‘calendar year 1992’ in subparagraph (B) thereof. If any dollar
amount after being increased under the preceding sentence
is not a multiple of $10, such dollar amount shall be rounded
to the nearest multiple of $10.’’
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply in the case of proceedings commenced after the date
of the enactment of this Act.
H. R. 2491—542
SEC. 11207. AWARD OF LITIGATION COSTS PERMITTED IN DECLARA-
TORY JUDGMENT PROCEEDINGS.
(a) IN GENERAL.—Subsection (b) of section 7430 is amended
by striking paragraph (3) and by redesignating paragraph (4) as
paragraph (3).
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply in the case of proceedings commenced after the date
of the enactment of this Act.
SEC. 11208. INCREASE IN LIMIT ON RECOVERY OF CIVIL DAMAGES
FOR UNAUTHORIZED COLLECTION ACTIONS.
(a) GENERAL RULE.—Subsection (b) of section 7433 (relating
to damages) is amended by striking ‘‘$100,000’’ and inserting
‘‘$1,000,000’’.
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to actions by officers or employees of the Internal
Revenue Service after the date of the enactment of this Act.
SEC. 11209. ENROLLED AGENTS INCLUDED AS THIRD-PARTY RECORD-
KEEPERS.
(a) IN GENERAL.—Paragraph (3) of section 7609(a) (relating
to third-party recordkeeper defined) is amended by striking ‘‘and’’
at the end of subparagraph (G), by striking the period at the
end of subparagraph (H) and inserting ‘‘; and’’, and by adding
at the end the following the subparagraph:
‘‘(I) any enrolled agent.’’
(b) EFFECTIVE DATE.—The amendment made by subsection (a)
shall apply to summonses issued after the date of the enactment
of this Act.
SEC. 11210. ANNUAL REMINDERS TO TAXPAYERS WITH OUTSTANDING
DELINQUENT ACCOUNTS.
(a) IN GENERAL.—Chapter 77 (relating to miscellaneous provi-
sions) is amended by adding at the end the following new section:
‘‘SEC. 7524. ANNUAL NOTICE OF TAX DELINQUENCY.
‘‘Not less often than annually, the Secretary shall send a writ-
ten notice to each taxpayer who has a tax delinquent account
of the amount of the tax delinquency as of the date of the notice.’’
(b) CLERICAL AMENDMENT.—The table of sections for chapter
77 is amended by adding at the end the following new item:
‘‘Sec. 7524. Annual notice of tax delinquency.’’
(c) EFFECTIVE DATE.—The amendments made by this section
shall apply to calendar years after 1995.
Subtitle G—Casualty and Involuntary
Conversion Provisions
SEC. 11251. BASIS ADJUSTMENT TO PROPERTY HELD BY CORPORATION
WHERE STOCK IN CORPORATION IS REPLACEMENT
PROPERTY UNDER INVOLUNTARY CONVERSION RULES.
(a) IN GENERAL.—Subsection (b) of section 1033 is amended
to read as follows:
‘‘(b) BASIS
OF PROPERTY ACQUIRED THROUGH INVOLUNTARY
CONVERSION.—
H. R. 2491—568
‘‘(5) EXCLUSION OF TAXPAYERS IN BANKRUPTCY.—No quali-
fied transfer or qualified employee benefit transfer may be
made under this section by a taxpayer if—
‘‘(A) the taxpayer has filed, or has had filed against
it, a petition in a title 11 or similar case (within the
meaning of section 368(a)(3)), and
‘‘(B) such case is still pending.’’
(d) CONFORMING AMENDMENTS TO ERISA.—
(1) NOTICE.—Section 101(e) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1021(e)) is amended—
(A) by inserting ‘‘or a qualified employee benefit trans-
fer,’’ after ‘‘to a health benefits account,’’ in paragraphs
(1) and (2)(A),
(B) by inserting ‘‘or qualified employee benefits’’ after
‘‘the amount of health benefits liabilities’’ in paragraph
(1),
(C) in paragraph (3)—
(i) by striking ‘‘January 1, 1995’’ and inserting
‘‘the date of the enactment of the Revenue Reconcili-
ation Act of 1995’’, and
(ii) by striking ‘‘paragraph (1)’’ and inserting ‘‘this
subsection’’, and
(D) by striking ‘‘TO HEALTH BENEFITS ACCOUNTS’’ in
the heading.
(2) EXCLUSIVE BENEFIT.—Paragraph (1) of section 403(c)
of such Act (29 U.S.C. 1103(c)(1)) is amended by striking ‘‘Janu-
ary 1, 1995’’ and inserting ‘‘the date of the enactment of the
Revenue Reconciliation Act of 1995’’.
(3) EXEMPTION
FROM
PROHIBITED
TRANSACTION.—Para-
graph (13) of section 408(b) of such Act (29 U.S.C. 1108(b)(13))
is amended—
(A) by striking ‘‘retiree health account’’ and inserting
‘‘health benefits account’’,
(B) by inserting before the period at the end ‘‘, or
any transfer of such assets in a taxable year beginning
before January 1, 2002, in a qualified employee benefit
transfer permitted under such section 420’’, and
(C) by striking ‘‘January 1, 1995’’ and inserting ‘‘the
date of the enactment of the Revenue Reconciliation Act
of 1995’’.
(e) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by this section
shall apply to transfers on and after the date of the enactment
of this Act.
(2) QUALIFIED TRANSFERS.—To the extent the amendments
made by subsections (b), (c), and (d) apply to qualified transfers
under section 420 of the Internal Revenue Code of 1986 (as
in effect on the day before the date of the enactment of this
Act), such amendments shall apply to transfers occurring after
December 31, 1995.
SEC. 11308. REPEAL OF EXCLUSION FOR INTEREST ON LOANS USED
TO ACQUIRE EMPLOYER SECURITIES.
(a) IN GENERAL.—Section 133 (relating to interest on certain
loans used to acquire employer securities) is hereby repealed.
(b) CONFORMING AMENDMENTS.—
H. R. 2491—569
(1) Subparagraph (B) of section 291(e)(1) is amended by
striking clause (iv) and by redesignating clause (v) as clause
(iv).
(2) Section 812 is amended by striking subsection (g).
(3) Paragraph (5) of section 852(b) is amended by striking
subparagraph (C).
(4) Paragraph (2) of section 4978(b) is amended by striking
subparagraph (A) and all that follows and inserting the follow-
ing:
‘‘(A) first from qualified securities to which section
1042 applied acquired during the 3-year period ending
on the date of the disposition, beginning with the securities
first so acquired, and
‘‘(B) then from any other employer securities.
If subsection (d) applies to a disposition, the disposition shall
be treated as made from employer securities in the opposite
order of the preceding sentence.’’.
(5)(A) Section 4978B (relating to tax on disposition of
employer securities to which section 133 applied) is hereby
repealed.
(B) The table of sections for chapter 43 is amended by
striking the item relating to section 4978B.
(6) Subsection (e) of section 6047 is amended by striking
paragraphs (1), (2), and (3) and inserting the following new
paragraphs:
‘‘(1) any employer maintaining, or the plan administrator
(within the meaning of section 414(g)) of, an employee stock
ownership plan which holds stock with respect to which section
404(k) applies to dividends paid on such stock, or
‘‘(2) both such employer or plan administrator,’’.
(7) Subsection (f) of section 7872 is amended by striking
paragraph (12).
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section
shall apply to loans made after October 13, 1995.
(2) REFINANCINGS.—The amendments made by this section
shall not apply to loans made after October 13, 1995, to
refinance securities acquisition loans (determined without
regard to section 133(b)(1)(B) of the Internal Revenue Code
of 1986, as in effect on the day before the date of the enactment
of this Act) made on or before such date or to refinance loans
described in this paragraph if—
(A) the refinancing loans meet the requirements of
section 133 of such Code (as so in effect),
(B) immediately after the refinancing the principal
amount of the loan resulting from the refinancing does
not exceed the principal amount of the refinanced loan
(immediately before the refinancing), and
(C) the term of such refinancing loan does not extend
beyond the last day of the term of the original securities
acquisition loan.
For purposes of this paragraph, the term ‘‘securities acquisition
loan’’ includes a loan from a corporation to an employee stock
ownership plan described in section 133(b)(3) of such Code
(as so in effect).
H. R. 2491—575
‘‘(3) REPORTABLE EVENT.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘reportable event’ means—
‘‘(i) the creation of any foreign trust by a United
States person,
‘‘(ii) the transfer of any money or property (directly
or indirectly) to a foreign trust by a United States
person, including a transfer by reason of death, and
‘‘(iii) the death of a citizen or resident of the United
States if—
‘‘(I) the decedent was treated as the owner
of any portion of a foreign trust under the rules
of subpart E of part I of subchapter J of chapter
1, or
‘‘(II) any portion of a foreign trust was included
in the gross estate of the decedent.
‘‘(B) EXCEPTIONS.—
‘‘(i) FAIR
MARKET
VALUE
SALES.—Subparagraph
(A)(ii) shall not apply to any transfer of property to
a trust in exchange for consideration of at least the
fair market value of the transferred property. For pur-
poses of the preceding sentence, consideration other
than cash shall be taken into account at its fair market
value and the rules of section 679(a)(3) shall apply.
‘‘(ii) DEFERRED
COMPENSATION
AND
CHARITABLE
TRUSTS.—Subparagraph (A) shall not apply with
respect to a trust which is—
‘‘(I) described in section 402(b), 404(a)(4), or
404A, or
‘‘(II) determined by the Secretary to be
described in section 501(c)(3).
‘‘(4) RESPONSIBLE PARTY.—For purposes of this subsection,
the term ‘responsible party’ means—
‘‘(A) the grantor in the case of the creation of an
inter vivos trust,
‘‘(B) the transferor in the case of a reportable event
described in paragraph (3)(A)(ii) other than a transfer by
reason of death, and
‘‘(C) the executor of the decedent’s estate in any other
case.
‘‘(b) UNITED STATES GRANTOR OF FOREIGN TRUST.—
‘‘(1) IN GENERAL.—If, at any time during any taxable year
of a United States person, such person is treated as the owner
of any portion of a foreign trust under the rules of subpart
E of part I of subchapter J of chapter 1, such person shall
be responsible to ensure that—
‘‘(A) such trust makes a return for such year which
sets forth a full and complete accounting of all trust activi-
ties and operations for the year, the name of the United
States agent for such trust, and such other information
as the Secretary may prescribe, and
‘‘(B) such trust furnishes such information as the Sec-
retary may prescribe to each United States person (i) who
is treated as the owner of any portion of such trust or
(ii) who receives (directly or indirectly) any distribution
from the trust.
‘‘(2) TRUSTS NOT HAVING UNITED STATES AGENT.—
H. R. 2491—627
SEC. 11443. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR
DEFERRED ARRANGEMENTS AND MATCHING CONTRIBU-
TIONS.
(a) ALTERNATIVE METHODS OF SATISFYING SECTION 401(k) NON-
DISCRIMINATION TESTS.—Section 401(k) (relating to cash or deferred
arrangements), as amended by this Act, is amended by adding
at the end the following new paragraph:
‘‘(12) ALTERNATIVE METHODS OF MEETING NONDISCRIMINA-
TION REQUIREMENTS.—
‘‘(A) IN
GENERAL.—A cash or deferred arrangement
shall be treated as meeting the requirements of paragraph
(3)(A)(ii) if such arrangement—
‘‘(i) 
meets 
the 
contribution 
requirements 
of
subparagraph (B) or (C), and
‘‘(ii) meets the notice requirements of subpara-
graph (D).
‘‘(B) MATCHING CONTRIBUTIONS.—
‘‘(i) IN
GENERAL.—The requirements of this
subparagraph are met if, under the arrangement, the
employer makes matching contributions on behalf of
each employee who is not a highly compensated
employee in an amount equal to—
‘‘(I) 100 percent of the elective contributions
of the employee to the extent such elective con-
tributions do not exceed 3 percent of the employee’s
compensation, and
‘‘(II) 50 percent of the elective contributions
of the employee to the extent that such elective
contributions exceed 3 percent but do not exceed
5 percent of the employee’s compensation.
‘‘(ii) RATE FOR HIGHLY COMPENSATED EMPLOYEES.—
The requirements of this subparagraph are not met
if, under the arrangement, the matching contribution
with respect to any elective contribution of a highly
compensated employee at any level of compensation
is greater than that with respect to an employee who
is not a highly compensated employee.
‘‘(iii) ALTERNATIVE PLAN DESIGNS.—If the matching
contribution with respect to any elective contribution
at any specific level of compensation is not equal to
the percentage required under clause (i), an arrange-
ment shall not be treated as failing to meet the require-
ments of clause (i) if—
‘‘(I) the level of an employer’s matching con-
tribution does not increase as an employee’s elec-
tive contributions increase, and
‘‘(II) the aggregate amount of matching con-
tributions with respect to elective contributions
not in excess of such level of compensation is at
least equal to the amount of matching contribu-
tions which would be made if matching contribu-
tions were made on the basis of the percentages
described in clause (i).
‘‘(C) NONELECTIVE CONTRIBUTIONS.—The requirements
of this subparagraph are met if, under the arrangement,
the employer is required, without regard to whether the
employee makes an elective contribution or employee con-
H. R. 2491—628
tribution, to make a contribution to a defined contribution
plan on behalf of each employee who is not a highly com-
pensated employee and who is eligible to participate in
the arrangement in an amount equal to at least 3 percent
of the employee’s compensation.
‘‘(D) NOTICE
REQUIREMENT.—An arrangement meets
the requirements of this paragraph if, under the arrange-
ment, each employee eligible to participate is, within a
reasonable period before any year, given written notice
of the employee’s rights and obligations under the arrange-
ment which—
‘‘(i) is sufficiently accurate and comprehensive to
appraise the employee of such rights and obligations,
and
‘‘(ii) is written in a manner calculated to be under-
stood by the average employee eligible to participate.
‘‘(E) OTHER REQUIREMENTS.—
‘‘(i) WITHDRAWAL AND VESTING RESTRICTIONS.—An
arrangement shall not be treated as meeting the
requirements of subparagraph (B) or (C) unless the
requirements of subparagraphs (B) and (C) of para-
graph (2) are met with respect to all employer contribu-
tions (including matching contributions).
‘‘(ii) SOCIAL SECURITY AND SIMILAR CONTRIBUTIONS
NOT TAKEN INTO ACCOUNT.—An arrangement shall not
be treated as meeting the requirements of subpara-
graph (B) or (C) unless such requirements are met
without regard to subsection (l), and, for purposes of
subsection (l), employer contributions under subpara-
graph (B) or (C) shall not be taken into account.
‘‘(F) OTHER PLANS.—An arrangement shall be treated
as meeting the requirements under subparagraph (A)(i)
if any other plan maintained by the employer meets such
requirements with respect to employees eligible under the
arrangement.’’.
(b) ALTERNATIVE METHODS OF SATISFYING SECTION 401(m) NON-
DISCRIMINATION TESTS.—Section 401(m) (relating to nondiscrimina-
tion test for matching contributions and employee contributions),
as amended by this Act, is amended by redesignating paragraph
(10) as paragraph (11) and by adding after paragraph (9) the
following new paragraph:
‘‘(11) ALTERNATIVE METHOD OF SATISFYING TESTS.—
‘‘(A) IN GENERAL.—A defined contribution plan shall
be treated as meeting the requirements of paragraph (2)
with respect to matching contributions if the plan—
‘‘(i) 
meets 
the 
contribution 
requirements 
of
subparagraph (B) or (C) of subsection (k)(12),
‘‘(ii) meets the notice requirements of subsection
(k)(12)(D), and
‘‘(iii) meets the requirements of subparagraph (B).
‘‘(B) LIMITATION ON MATCHING CONTRIBUTIONS.—The
requirements of this subparagraph are met if—
‘‘(i) matching contributions on behalf of any
employee may not be made with respect to an employ-
ee’s contributions or elective deferrals in excess of 6
percent of the employee’s compensation,
H. R. 2491—629
‘‘(ii) the level of an employer’s matching contribu-
tion does not increase as an employee’s contributions
or elective deferrals increase, and
‘‘(iii) the matching contribution with respect to
any highly compensated employee at a specific level
of compensation is not greater than that with respect
to an employee who is not a highly compensated
employee.’’.
(c) YEAR FOR COMPUTING NONHIGHLY COMPENSATED EMPLOYEE
PERCENTAGE.—
(1) CASH OR DEFERRED ARRANGEMENTS.—Clause (ii) of sec-
tion 401(k)(3)(A) is amended—
(A) by striking ‘‘such year’’ and inserting ‘‘the plan
year’’,
(B) by striking ‘‘for such plan year’’ and inserting ‘‘the
preceding plan year’’, and
(C) by adding at the end the following new sentence:
‘‘An arrangement may apply this clause by using the plan
year rather than the preceding plan year if the employer
so elects, except that if such an election is made, it may
not be changed except as provided by the Secretary.’’.
(2) MATCHING
AND
EMPLOYEE
CONTRIBUTIONS.—Section
401(m)(2)(A) is amended—
(A) by inserting ‘‘for such plan year’’ after ‘‘highly
compensated employee’’,
(B) by inserting ‘‘for the preceding plan year’’ after
‘‘eligible employees’’ each place it appears in clause (i)
and clause (ii), and
(C) by adding at the end the following flush sentence:
‘‘This subparagraph may be applied by using the plan
year rather than the preceding plan year if the employer
so elects, except that if such an election is made, it may
not be changed except as provided by the Secretary.’’.
(d) SPECIAL
RULE
FOR
DETERMINING
AVERAGE
DEFERRAL
PERCENTAGE FOR FIRST PLAN YEAR, ETC.—
(1) Paragraph (3) of section 401(k) is amended by adding
at the end the following new subparagraph:
‘‘(E) For purposes of this paragraph, in the case of
the first plan year of any plan, the amount taken into
account as the actual deferral percentage of nonhighly com-
pensated employees for the preceding plan year shall be—
‘‘(i) 3 percent, or
‘‘(ii) if the employer makes an election under this
subclause, the actual deferral percentage of nonhighly
compensated employees determined for such first plan
year.’’.
(2) Paragraph (3) of section 401(m) is amended by adding
at the end the following: ‘‘Rules similar to the rules of sub-
section (k)(3)(E) shall apply for purposes of this subsection.’’.
(e) DISTRIBUTION OF EXCESS CONTRIBUTIONS.—
(1) Subparagraph (C) of section 401(k)(8) (relating to
arrangement not disqualified if excess contributions distributed)
is amended by striking ‘‘on the basis of the respective portions
of the excess contributions attributable to each of such employ-
ees’’ and inserting ‘‘on the basis of the amount of contributions
by, or on behalf of, each of such employees’’.
H. R. 2491—660
SEC. 11505. RULES RELATING TO INADVERTENT TERMINATIONS AND
INVALID ELECTIONS.
(a) GENERAL RULE.—Subsection (f) of section 1362 (relating
to inadvertent terminations) is amended to read as follows:
‘‘(f) INADVERTENT INVALID ELECTIONS OR TERMINATIONS.—If—
‘‘(1) an election under subsection (a) by any corporation—
‘‘(A) was not effective for the taxable year for which
made (determined without regard to subsection (b)(2)) by
reason of a failure to meet the requirements of section
1361(b) or to obtain shareholder consents, or
‘‘(B) was terminated under paragraph (2) or (3) of
subsection (d),
‘‘(2) the Secretary determines that the circumstances result-
ing in such ineffectiveness or termination were inadvertent,
‘‘(3) no later than a reasonable period of time after discovery
of the circumstances resulting in such ineffectiveness or termi-
nation, steps were taken—
‘‘(A) so that the corporation is a small business corpora-
tion, or
‘‘(B) to acquire the required shareholder consents, and
‘‘(4) the corporation, and each person who was a share-
holder in the corporation at any time during the period specified
pursuant to this subsection, agrees to make such adjustments
(consistent with the treatment of the corporation as an S cor-
poration) as may be required by the Secretary with respect
to such period,
then, notwithstanding the circumstances resulting in such ineffec-
tiveness or termination, such corporation shall be treated as an
S corporation during the period specified by the Secretary.’’
(b) LATE ELECTIONS.—Subsection (b) of section 1362 is amended
by adding at the end the following new paragraph:
‘‘(5) AUTHORITY TO TREAT LATE ELECTIONS AS TIMELY.—
If—
‘‘(A) an election under subsection (a) is made for any
taxable year (determined without regard to paragraph (3))
after the date prescribed by this subsection for making
such election for such taxable year, and
‘‘(B) the Secretary determines that there was reason-
able cause for the failure to timely make such election,
the Secretary may treat such election as timely made for such
taxable year (and paragraph (3) shall not apply).’’
(c) EFFECTIVE DATE.—The amendments made by subsection
(a) and (b) shall apply with respect to elections for taxable years
beginning after December 31, 1982.
SEC. 11506. AGREEMENT TO TERMINATE YEAR.
Paragraph (2) of section 1377(a) (relating to pro rata share)
is amended to read as follows:
‘‘(2) ELECTION TO TERMINATE YEAR.—
‘‘(A) IN GENERAL.—If any shareholder terminates the
shareholder’s interest in the corporation during the taxable
year and all affected shareholders and the corporation
agree to the application of this paragraph, paragraph (1)
shall be applied to the affected shareholders as if the
taxable year consisted of 2 taxable years the first of which
ends on the date of the termination.
H. R. 2491—694
of the total imports of that article into the United
States during any calendar year,
the President shall, not later than July 1 of the next
calendar year, terminate the duty-free treatment for
that article from that beneficiary developing country.
‘‘(ii) 
ANNUAL
ADJUSTMENT
OF
APPLICABLE
AMOUNT.—For purposes of applying clause (i), the
applicable amount is—
‘‘(I) for 1996, $75,000,000, and
‘‘(II) for each calendar year thereafter, an
amount equal to the applicable amount in effect
for the preceding calendar year plus $5,000,000.
‘‘(B) COUNTRY DEFINED.—For purposes of this para-
graph, the term ‘country’ does not include an association
of countries which is treated as one country under section
507(2), but does include a country which is a member
of any such association.
‘‘(C) REDESIGNATIONS.—A country which is no longer
treated as a beneficiary developing country with respect
to an eligible article by reason of subparagraph (A) may,
subject to the considerations set forth in sections 501 and
502, be redesignated a beneficiary developing country with
respect to such article if imports of such article from such
country did not exceed the limitations in subparagraph
(A) during the preceding calendar year.
‘‘(D) LEAST-DEVELOPED BENEFICIARY DEVELOPING COUN-
TRIES.—Subparagraph (A) shall not apply to any least-
developed beneficiary developing country.
‘‘(E) ARTICLES NOT PRODUCED IN THE UNITED STATES
EXCLUDED.—Subparagraph (A)(i)(II) shall not apply with
respect to any eligible article if a like or directly competitive
article was not produced in the United States on January
1, 1995.
‘‘(F) DE MINIMIS WAIVERS.—
‘‘(i) IN
GENERAL.—The President may disregard
subparagraph (A)(i)(II) with respect to any eligible arti-
cle from any beneficiary developing country if the
aggregate appraised value of the imports of such article
into the United States during the preceding calendar
year does not exceed the applicable amount for such
preceding calendar year.
‘‘(ii) APPLICABLE AMOUNT.—For purposes applying
clause (i), the applicable amount is—
‘‘(I) for calendar year 1995, $13,000,000, and
‘‘(II) for each calendar year thereafter, an
amount equal to the applicable amount in effect
for the preceding calendar year plus $500,000.
‘‘(d) WAIVER OF COMPETITIVE NEED LIMITATION.—
‘‘(1) IN GENERAL.—The President may waive the application
of subsection (c)(2) with respect to any eligible article of any
beneficiary developing country if, before July 1 of the calendar
year beginning after the calendar year for which a determina-
tion described in subsection (c)(2)(A) was made with respect
to such eligible article, the President—
‘‘(A) receives the advice of the International Trade
Commission under section 332 of the Tariff Act of 1930
H. R. 2491—737
(ii) by striking ‘‘403,’’;
(iii) by striking the period at the end and inserting
‘‘, and’’; and
(iv) by adding at the end the following new
subparagraph:
‘‘(B) costs of such project which would not otherwise be
a permissible use of funds under part A of title IV and which
are not included as part of the costs of projects under section
1110, shall to the extent and for the period prescribed by
the Secretary, be regarded as a permissible use of funds under
such part.’’; and
(B) in subsection (c)(3), by striking ‘‘under the program
of aid to families with dependent children’’ and inserting
‘‘part A of such title’’.
(4) Section 1116 (42 U.S.C. 1316) is amended—
(A) in each of subsections (a)(1), (b), and (d), by striking
‘‘or part A of title IV,’’; and
(B) in subsection (a)(3), by striking ‘‘404,’’.
(5) Section 1118 (42 U.S.C. 1318) is amended—
(A) by striking ‘‘403(a),’’;
(B) by striking ‘‘and part A of title IV,’’; and
(C) by striking ‘‘, and shall, in the case of American
Samoa, mean 75 per centum with respect to part A of
title IV’’.
(6) Section 1119 (42 U.S.C. 1319) is amended—
(A) by striking ‘‘or part A of title IV’’; and
(B) by striking ‘‘403(a),’’.
(7) Section 1133(a) (42 U.S.C. 1320b–3(a)) is amended by
striking ‘‘or part A of title IV,’’.
(8) Section 1136 (42 U.S.C. 1320b–6) is repealed.
(9) Section 1137 (42 U.S.C. 1320b–7) is amended—
(A) in subsection (b), by striking paragraph (1) and
inserting the following:
‘‘(1) any State program funded under part A of title IV
of this Act;’’; and
(B) in subsection (d)(1)(B)—
(i) by striking ‘‘In this subsection—’’ and all that
follows through ‘‘(ii) in’’ and inserting ‘‘In this sub-
section, in’’;
(ii) by redesignating subclauses (I), (II), and (III)
as clauses (i), (ii), and (iii); and
(iii) by moving such redesignated material 2 ems
to the left.
(f) AMENDMENT TO TITLE XIV.—Section 1402(a)(7) (42 U.S.C.
1352(a)(7)) is amended by striking ‘‘aid to families with dependent
children under the State plan approved under section 402 of this
Act’’ and inserting ‘‘assistance under a State program funded under
part A of title IV’’.
(g) AMENDMENT TO TITLE XVI AS IN EFFECT WITH RESPECT
TO
THE TERRITORIES.—Section 1602(a)(11), as in effect without
regard to the amendment made by section 301 of the Social Security
Amendments of 1972 (42 U.S.C. 1382 note), is amended by striking
‘‘aid under the State plan approved’’ and inserting ‘‘assistance under
a State program funded’’.
(h) AMENDMENT TO TITLE XVI AS IN EFFECT WITH RESPECT
TO THE STATES.—Section 1611(c)(5)(A) (42 U.S.C. 1382(c)(5)(A)) is
H. R. 2491—738
amended to read as follows: ‘‘(A) a State program funded under
part A of title IV,’’.
SEC. 12104. CONFORMING AMENDMENTS TO THE FOOD STAMP ACT
OF 1977 AND RELATED PROVISIONS.
(a) Section 5 of the Food Stamp Act of 1977 (7 U.S.C. 2014)
is amended—
(1) in the second sentence of subsection (a), by striking
‘‘plan approved’’ and all that follows through ‘‘title IV of the
Social Security Act’’ and inserting ‘‘program funded under part
A of title IV of the Social Security Act (42 U.S.C. 601 et
seq.) that the Secretary determines complies with standards
established by the Secretary that ensure that the standards
under the State program are comparable to or more restrictive
than those in effect on June 1, 1995’’;
(2) in subsection (d)—
(A) in paragraph (5), by striking ‘‘assistance to families
with dependent children’’ and inserting ‘‘assistance under
a State program funded’’; and
(B) by striking paragraph (13) and redesignating para-
graphs (14), (15), and (16) as paragraphs (13), (14), and
(15), respectively;
(3) in subsection (j), by striking ‘‘plan approved under part
A of title IV of such Act (42 U.S.C. 601 et seq.)’’ and inserting
‘‘program funded under part A of title IV of the Act (42 U.S.C.
601 et seq.) that the Secretary determines complies with stand-
ards established by the Secretary that ensure that the stand-
ards under the State program are comparable to or more restric-
tive than those in effect on June 1, 1995’’.
(b) Section 6 of such Act (7 U.S.C. 2015) is amended—
(1) in subsection (c)(5), by striking ‘‘the State plan
approved’’ and inserting ‘‘the State program funded’’;
(2) in subsection (e)—
(A) by striking ‘‘aid to families with dependent chil-
dren’’ and inserting ‘‘benefits under a State program
funded’’; and
(B) by inserting before the semicolon the following:
‘‘that the Secretary determines complies with standards
established by the Secretary that ensure that the standards
under the State program are comparable to or more restric-
tive than those in effect on June 1, 1995’’; and
(3) by adding at the end the following new subsection:
‘‘(i) ELIGIBILITY UNDER OTHER LAW.—Notwithstanding any
other provision of this Act, a household may not receive benefits
under this Act as a result of the household’s eligibility under
a State program funded under part A of title IV of the Social
Security Act (42 U.S.C. 601 et seq.), unless the Secretary determines
that any household with income above 130 percent of the poverty
guidelines is not eligible for the program.’’.
(c) Section 16(g)(4) of such Act (7 U.S.C. 2025(g)(4)) is amended
by striking ‘‘State plans under the Aid to Families with Dependent
Children Program under’’ and inserting ‘‘State programs funded
under part A of’’.
(d) Section 17 of such Act (7 U.S.C. 2026) is amended—
(1) in the first sentence of subsection (b)(1)(A), by striking
‘‘to aid to families with dependent children under part A of
title IV of the Social Security Act’’ and inserting ‘‘or are receiv-
H. R. 2491—739
ing assistance under a State program funded under part A
of title IV of the Social Security Act (42 U.S.C. 601 et seq.)’’;
and
(2) in subsection (b)(3), by adding at the end the following
new subparagraph:
‘‘(I) The Secretary may not grant a waiver under this
paragraph on or after October 1, 1995. Any reference in this
paragraph to a provision of title IV of the Social Security
Act shall be deemed to be a reference to such provision as
in effect on September 30, 1995.’’;
(e) Section 20 of such Act (7 U.S.C. 2029) is amended—
(1) in subsection (a)(2)(B) by striking ‘‘operating—’’ and
all that follows through ‘‘(ii) any other’’ and inserting ‘‘operating
any’’; and
(2) in subsection (b)—
(A) in paragraph (1)—
(i) by striking ‘‘(b)(1) A household’’ and inserting
‘‘(b) A household’’; and
(ii) in subparagraph (B), by striking ‘‘training pro-
gram’’ and inserting ‘‘activity’’;
(B) by striking paragraph (2); and
(C) by redesignating subparagraphs (A) through (F)
as paragraphs (1) through (6), respectively.
(f) Section 5(h)(1) of the Agriculture and Consumer Protection
Act of 1973 (Public Law 93–186; 7 U.S.C. 612c note) is amended
by striking ‘‘the program for aid to families with dependent children’’
and inserting ‘‘the State program funded’’.
(g) Section 9 of the National School Lunch Act (42 U.S.C.
1758) is amended—
(1) in subsection (b)—
(A) in paragraph (2)(C)(ii)(II)—
(i) by striking ‘‘program for aid to families with
dependent children’’ and inserting ‘‘State program
funded’’; and
(ii) by inserting before the period at the end the
following: ‘‘that the Secretary determines complies with
standards established by the Secretary that ensure
that the standards under the State program are com-
parable to or more restrictive than those in effect on
June 1, 1995’’; and
(B) in paragraph (6)—
(i) in subparagraph (A)(ii)—
(I) by striking ‘‘an AFDC assistance unit
(under the aid to families with dependent children
program authorized’’ and inserting ‘‘a family
(under the State program funded’’; and
(II) by striking ‘‘, in a State’’ and all that
follows through ‘‘9902(2)))’’ and inserting ‘‘that the
Secretary determines complies with standards
established by the Secretary that ensure that the
standards under the State program are comparable
to or more restrictive than those in effect on June
1, 1995’’; and
(ii) in subparagraph (B), by striking ‘‘aid to families
with dependent children’’ and inserting ‘‘assistance
under the State program funded under part A of title
IV of the Social Security Act (42 U.S.C. 601 et seq.)
H. R. 2491—765
‘‘(iv) AMOUNTS COLLECTED PURSUANT TO SECTION
464.—Notwithstanding any other provision of this sec-
tion, any amount of support collected pursuant to sec-
tion 464 shall be retained by the State to the extent
necessary to reimburse amounts paid to the family
as assistance by the State. The State shall pay to
the Federal Government the Federal share of the
amounts so retained. To the extent the amount col-
lected pursuant to section 464 exceeds the amount
so retained, the State shall distribute the excess to
the family.
‘‘(v) ORDERING
RULES
FOR
DISTRIBUTIONS.—For
purposes of this subparagraph, the State shall treat
any support arrearages collected as accruing in the
following order:
‘‘(I) to the period after the family ceased to
receive assistance;
‘‘(II) to the period before the family received
assistance; and
‘‘(III) to the period while the family was receiv-
ing assistance.
‘‘(3) FAMILIES THAT NEVER RECEIVED ASSISTANCE.—In the
case of any other family, the State shall distribute the amount
so collected to the family.
‘‘(4) STUDY AND REPORT.—Not later than October 1, 1998,
the Secretary shall report to the Congress the Secretary’s find-
ings with respect to—
‘‘(A) whether the distribution of post-assistance arrear-
ages to families has been effective in moving people off
of welfare and keeping them off of welfare;
‘‘(B) whether early implementation of a pre-assistance
arrearage program by some States has been effective in
moving people off of welfare and keeping them off of wel-
fare;
‘‘(C) what the overall impact has been of the amend-
ments made by the Personal Responsibility and Work
Opportunity Act of 1995 with respect to child support
enforcement in moving people off of welfare and keeping
them off of welfare; and
‘‘(D) based on the information and data the Secretary
has obtained, what changes, if any, should be made in
the policies related to the distribution of child support
arrearages.
‘‘(b) CONTINUATION OF ASSIGNMENTS.—Any rights to support
obligations, which were assigned to a State as a condition of receiv-
ing assistance from the State under part A and which were in
effect on the day before the date of the enactment of the Personal
Responsibility and Work Opportunity Act of 1995, shall remain
assigned after such date.
‘‘(c) DEFINITIONS.—As used in subsection (a):
‘‘(1) ASSISTANCE.—The term ‘assistance from the State’
means—
‘‘(A) assistance under the State program funded under
part A or under the State plan approved under part A
of this title (as in effect on the day before the date of
the enactment of the Personal Responsibility and Work
Opportunity Act of 1995); or
H. R. 2491—836
percentages determined under subparagraph (B) for each
fiscal year of the applicable period (as defined in section
2231(b)(2)(B)), adjusted by the Secretary (upward or down-
ward, as the case may be) on a pro rata basis to the
extent necessary to ensure that the sum of the percentages
determined under this subparagraph for all teaching hos-
pitals is equal to 100 percent. The preceding sentence is
subject to section 2242.
‘‘(B) RESPECTIVE DETERMINATIONS FOR FISCAL YEARS
OF APPLICABLE PERIOD.—For purposes of subparagraph (A),
the percentage determined under this subparagraph for
a teaching hospital for a fiscal year of the applicable period
is the percentage constituted by the ratio of—
‘‘(i) the total amount of payments received by the
hospital under section 1886(h) for cost reporting peri-
ods beginning during the fiscal year involved; to
‘‘(ii) the sum of the respective amounts determined
under clause (i) for the fiscal year for all teaching
hospitals.
‘‘(3) AVAILABILITY OF DATA.—If a teaching hospital received
the payments specified in paragraph (2)(B)(i) during the
applicable period but a complete set of the relevant data is
not available to the Secretary for purposes of determining an
amount under such paragraph for the fiscal year involved,
the Secretary shall for purposes of such paragraph make an
estimate on the basis of such data as are available to the
Secretary for the applicable period.
‘‘(c) PAYMENT FROM MEDICARE ACCOUNT.—For purposes of sub-
section (a)(2), the amount determined under this subsection for
a teaching hospital for a fiscal year is an amount determined
in accordance with the methodology in effect under section 1886(h)
for such year. Payments made under section 2211 pursuant to
the preceding sentence shall be made from the Medicare Direct-
Costs Medical Education Account.
‘‘SEC. 2242. DIRECT COSTS; SPECIAL RULES REGARDING PAYMENTS
FROM GENERAL ACCOUNT.
‘‘(a) SPECIAL RULE REGARDING FISCAL YEARS 1995 AND 1996.—
‘‘(1) IN GENERAL.—In the case of a teaching hospital whose
first payments under section 1886(h) were for the cost reporting
period beginning in fiscal year 1995 or in fiscal year 1996
(referred to in this subsection individually as a ‘first payment
year’), the percentage determined under paragraph (2) for the
hospital is deemed to be the percentage applicable under section
2241(b)(2) to the hospital, subject to paragraph (3).
‘‘(2) DETERMINATION OF FIXED PERCENTAGE.—For purposes
of paragraph (1), the percentage determined under this para-
graph for a teaching hospital is the percentage constituted
by the ratio of the amount determined under subparagraph
(A) to the amount determined under subparagraph (B), as
follows:
‘‘(A)(i) If the first payment year for the hospital is
fiscal year 1995, the amount determined under this
subparagraph is the total amount of payments received
by the hospital under section 1886(h) for cost reporting
periods beginning in fiscal year 1995.
H. R. 2491—837
‘‘(ii) If the first payment year for the hospital is fiscal
year 1996, the amount determined under this subpara-
graph is an amount equal to an estimate by the Secretary
of the total amount of payments that would have been
paid to the hospital under section 1886(h) for cost reporting
periods beginning in fiscal year 1995 if such section, as
in effect for fiscal year 1996, had applied to the hospital
for fiscal year 1995.
‘‘(B)(i) If the first payment year for the hospital is
fiscal year 1995, the amount determined under this
subparagraph is the aggregate total of the payments
received by teaching hospitals under section 1886(h) for
cost reporting periods beginning in fiscal year 1995.
‘‘(ii) If the first payment year for the hospital is fiscal
year 1996—
‘‘(I) the Secretary shall make an estimate in accord-
ance with subparagraph (A)(ii) for all teaching hos-
pitals; and
‘‘(II) the amount determined under this subpara-
graph is the sum of the estimates made by the Sec-
retary under subclause (I).
‘‘(3) ADJUSTMENT OF PERCENTAGE.—The percentage deter-
mined under paragraph (2) shall be adjusted by the Secretary
in accordance with section 2241(b)(2)(A) to the extent deter-
mined by the Secretary to be necessary with respect to a
sum that equals 100 percent.
‘‘(b) NEW TEACHING HOSPITALS.—
‘‘(1) IN GENERAL.—In the case of a teaching hospital that
did not receive payments under section 1886(h) for any of
the fiscal years 1992 through 1996, the percentage determined
under paragraph (3) for the hospital is deemed to be the
percentage applicable under section 2241(b)(2) to the hospital,
subject to paragraphs (4) and (5).
‘‘(2) DESIGNATED FISCAL YEAR REGARDING DATA.—The deter-
mination under paragraph (3) of a percentage for a teaching
hospital described in paragraph (1) shall be made for the most
recent fiscal year for which the Secretary has sufficient data
to make the determination (referred to in this subsection as
the ‘designated fiscal year’).
‘‘(3) DETERMINATION OF FIXED PERCENTAGE.—For purposes
of paragraph (1), the percentage determined under this para-
graph for the teaching hospital involved is the percentage con-
stituted by the ratio of the amount determined under subpara-
graph (A) to the amount determined under subparagraph (B),
as follows:
‘‘(A) The amount determined under this subparagraph
is an amount equal to an estimate by the Secretary of
the total amount of payments that would have been paid
to the hospital under section 1886(h) for the designated
fiscal year if such section, as in effect for the first fiscal
year for which payments pursuant to this subsection are
to be made to the hospital, had applied to the hospital
for cost reporting periods beginning in the designated fiscal
year.
‘‘(B) The Secretary shall make an estimate in accord-
ance with subparagraph (A) for all teaching hospitals. The
amount determined under this subparagraph is the sum
H. R. 2491—865
to constitute the State’s acceptance of the grant reductions
under paragraph (1). If amounts are provided to a State under
this section prior to the submission of such a State plan, the
acceptance of such amounts by the State shall constitute the
State’s acceptance of such reductions.’’.
SEC. 12803. LEAD AGENCY.
Section 658D(b) (42 U.S.C. 9858b(b)) is amended—
(1) in paragraph (1)—
(A) in subparagraph (A), by striking ‘‘State’’ the first
place that such appears and inserting ‘‘governmental or
nongovernmental’’; and
(B) in subparagraph (C), by inserting ‘‘with sufficient
time and Statewide distribution of the notice of such hear-
ing,’’ after ‘‘hearing in the State’’; and
(2) in paragraph (2), by striking the second sentence.
SEC. 12804. APPLICATION AND PLAN.
Section 658E (42 U.S.C. 9858c) is amended—
(1) in subsection (b)—
(A) by striking ‘‘implemented—’’ and all that follows
through ‘‘(2)’’ and inserting ‘‘implemented’’; and
(B) by striking ‘‘for subsequent State plans’’;
(2) in subsection (c)—
(A) in paragraph (2)—
(i) in subparagraph (A)—
(I) in clause (i) by striking ‘‘, other than
through assistance provided under paragraph
(3)(C),’’; and
(II) by striking ‘‘except’’ and all that follows
through ‘‘1992’’, and inserting ‘‘and provide a
detailed description of the procedures the State
will implement to carry out the requirements of
this subparagraph’’;
(ii) in subparagraph (B)—
(I) by striking ‘‘Provide assurances’’ and insert-
ing ‘‘Certify’’; and
(II) by inserting before the period at the end
‘‘and provide a detailed description of such proce-
dures’’;
(iii) in subparagraph (C)—
(I) by striking ‘‘Provide assurances’’ and insert-
ing ‘‘Certify’’; and
(II) by inserting before the period at the end
‘‘and provide a detailed description of how such
record is maintained and is made available’’;
(iv) by amending subparagraph (D) to read as fol-
lows:
‘‘(D) CONSUMER EDUCATION INFORMATION.—Certify that
the State will collect and disseminate to parents of eligible
children and the general public, consumer education
information that will promote informed child care choices.’’;
(v) in subparagraph (E), to read as follows:
‘‘(E) COMPLIANCE
WITH
STATE
LICENSING
REQUIRE-
MENTS.—
‘‘(i) IN GENERAL.—Certify that the State has in
effect licensing requirements applicable to child care
services provided within the State, and provide a
H. R. 2491—871
Subtitle I—Child Nutrition Programs
CHAPTER 1—NATIONAL SCHOOL LUNCH ACT
SEC. 12901. TERMINATION OF ADDITIONAL PAYMENT FOR LUNCHES
SERVED IN HIGH FREE AND REDUCED PRICE PARTICIPA-
TION SCHOOLS.
Section 4(b)(2) of the National School Lunch Act (42 U.S.C.
1753(b)(2)) is amended by inserting before the period at the end
the following: ‘‘for the 1995 school year and 1 cent more for each
of the 1996 and 1997 school years’’.
SEC. 12902. DIRECT FEDERAL EXPENDITURES.
(a) ADMINISTRATIVE EXPENSES.—Section 6(a) of the National
School Lunch Act (42 U.S.C. 1755(a)) is amended by striking the
second and fourth sentences.
(b) AMOUNT OF COMMODITY ASSISTANCE.—Section 6(e) of the
Act is amended—
(1) in paragraph (1), by striking subparagraph (E); and
(2) in paragraph (2), by striking the second sentence and
inserting the following: ‘‘Each State agency shall offer and
equitably distribute commodities among schools participating
in the school lunch program.’’.
(c) BREAKFAST COMMODITY ASSISTANCE.—Section 6 of the Act
is amended—
(1) by striking subsection (f); and
(2) by redesignating subsection (g) as subsection (f).
(d) COMMODITY ASSISTANCE.—
(1) IN GENERAL.—Section 6(f) of the Act (as redesignated
by subsection (c)) is amended by striking ‘‘12 percent’’ and
inserting ‘‘8 percent’’.
(2) EFFECTIVE DATE.—The amendment made by paragraph
(1) shall become effective on July 1, 1996.
SEC. 12903. VALUE OF FOOD ASSISTANCE.
(a) IN GENERAL.—Section 6(e)(1) of the National School Lunch
Act (42 U.S.C. 1755(e)(1)) is amended—
(1) in subparagraph (A)—
(A) in the first sentence—
(i) by inserting ‘‘for free and reduced price meals’’
after ‘‘thereof,’’;
(ii) by striking ‘‘11 cents’’ and inserting ‘‘14.5
cents’’; and
(iii) by striking ‘‘1982’’ and inserting ‘‘1998’’; and
(B) by inserting after the first sentence the following:
‘‘The national average value of donated foods, or cash pay-
ments in lieu thereof, for paid meals, shall be 12 cents,
adjusted on July 1, 2001, and each July 1 thereafter to
reflect changes in the Price Index for Food Used in Schools
and Institutions.’’; and
(2) by striking subparagraph (B) and inserting the follow-
ing:
‘‘(B) ADJUSTMENTS.—
‘‘(i) IN GENERAL.—Except as provided in subpara-
graph (A), the value of food assistance for each meal
shall be adjusted each July 1 by the annual percentage
change in a 3-month average value of the Price Index