305
(B) by striking ‘‘paid to the State. A reduction’’
and inserting ‘‘paid to the State.
‘‘(2) Priorities for offset. A reduction’’;
(C) by striking ‘‘shall be applied first’’and in-
serting ‘‘shall be applied (after any reduction under
subsection (d) on account of a debt owed to the De-
partment of Education or Department of Health and
Human Services with respect to a student loan)
first’’;
(D) by striking ‘‘has been assigned’’ and insert-
ing ‘‘has not been assigned’’; and
(E) by striking ‘‘and shall be applied’’ and all
that follows and inserting ‘‘and shall thereafter be
applied to satisfy any past-due support that has
been so assigned.’’.
(2) Section 6402(d)(2) of such Code is amended by
striking ‘‘after such overpayment’’ and all that follows
through ‘‘Social Security Act and’’ and inserting ‘‘(A) be-
fore such overpayment is reduced pursuant to subsection
(c), in the case of a debt owed to the Department of Edu-
cation or Department of Health and Human Services with
respect to a student loan, (B) after such overpayment is
reduced pursuant to subsection (c), in the case of any
other debt, and (C) in either case,’’.
306
(b) ELIMINATION OF DISPARITIES IN TREATMENT
OF ASSIGNED
AND NON-ASSIGNED ARREARAGES.—(1)
Section 464(a) is amended—
(A) by striking ‘‘(a)’’ and inserting ‘‘(a) Offset
Authorized.—’’;
(B) in paragraph (1)—
(i) in the first sentence, by striking ‘‘which
has been assigned to such State pursuant to
section 402(a)(26) or section 471(a)(17)’’; and
(ii) in the second sentence, by striking ‘‘in
accordance with section 457(b)(4) or (d)(3)’’
and inserting ‘‘as provided in paragraph (2)’’;
(C) in paragraph (2), to read as follows:
‘‘(2) The State agency shall distribute amounts
paid by the Secretary of the Treasury pursuant to
paragraph (1)—
‘‘(A) in accordance with section 457(a)(4)
or (d)(3), in the case of past-due support as-
signed 
to 
a 
State 
pursuant 
to 
section
402(a)(26) or section 471(a)(17); and
‘‘(B) to or on behalf of the child to whom
the support was owed, in the case of past-due
support not so assigned.’’;
(C) in paragraph (3)—
307
(i) by striking ‘‘or (2)’’ each place it
appears; and
(ii) in subparagraph (B), by striking
‘‘under paragraph (2)’’ and inserting ‘‘on
account of past-due support described in
paragraph (2)(B)’’;
(2) Section 464(b) is amended—
(A) by striking ‘‘(b)(1)’’ and inserting ‘‘(b)
REGULATIONS.—’’; and
(B) by striking paragraph (2).
(3) Section 464(c) is amended—
(A) by striking ‘‘(c)(1) Except as provided
in paragraph (2), as’’ and inserting ‘‘(c) DEFI-
NITION.—As’’; and
(B) by striking paragraphs (2) and (3).
(c) EFFECTIVE DATE.—The amendments made by
this section shall become effective October 1, 1996.
SEC. 663. INTERNAL REVENUE SERVICE COLLECTION OF
ARREARS.
(a) AMENDMENT TO INTERNAL REVENUE CODE.—
Section 6305(a) of the Internal Revenue Code of 1986 is
amended—
(1) in paragraph (1), by inserting ‘‘except as
provided in paragraph (5)’’ after ‘‘collected’’;
308
(2) by striking ‘‘and’’ at the end of paragraph
(3);
(3) by striking the period at the end of para-
graph (4) and inserting a comma;
(4) by adding after paragraph (4) the following
new paragraph:
‘‘(5) no additional fee may be assessed for ad-
justments to an amount previously certified pursu-
ant to such section 452(b) with respect to the same
obligor.’’; and
(5) by striking ‘‘Secretary of Health, Edu-
cation, and Welfare’’ each place it appears and in-
serting ‘‘Secretary of Health and Human Services’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall become effective October 1, 1996.
SEC. 664. AUTHORITY TO COLLECT SUPPORT FROM EM-
PLOYMENT-RELATED PAYMENTS BY UNITED
STATES.
(a) CONSOLIDATION
AND STREAMLINING
OF AU-
THORITIES.—
(1) Section 459 is amended in the caption by
inserting ‘‘INCOME WITHHOLDING,’’ before
‘‘GARNISHMENT’’.
(2) Section 459(a) is amended—
309
(A) by striking ‘‘(a)’’ and inserting ‘‘(a)
CONSENT TO SUPPORT ENFORCEMENT.—
(B) by striking ‘‘section 207’’ and insert-
ing ‘‘section 207 of this Act and 38 U.S.C.
5301’’; and
(C) by striking all that follows ‘‘a private
person,’’ and inserting ‘‘to withholding in ac-
cordance with State law pursuant to subsections
(a)(1) and (b) of section 466 and regulations of
the Secretary thereunder, and to any other legal
process brought, by a State agency administer-
ing a program under this part or by an individ-
ual obligee, to enforce the legal obligation of
such individual to provide child support or ali-
mony.’’.
(3) Section 459(b) is amended to read as fol-
lows:
‘‘(b) CONSENT TO REQUIREMENTS APPLICABLE TO
PRIVATE PERSON.— Except as otherwise provided herein,
each entity specified in subsection (a) shall be subject,
with respect to notice to withhold income pursuant to sec-
tion 466(a)(1) or (b), or to any other order or process
to enforce support obligations against an individual (if
such order or process contains or is accompanied by suffi-
cient data to permit prompt identification of the individual
310
and the moneys involved), to the same requirements as
would apply if such entity were a private person.’’.
(4) Section 459(c) is redesignated and relocated
as paragraph (2) of subsection (f), and is amend-
ed—
(A) by striking ‘‘responding to interrog-
atories pursuant to requirements imposed by
section 461(b)(3)’’ and inserting ‘‘taking ac-
tions necessary to comply with the requirements
of subsection (A) with regard to any individ-
ual’’; and
(B) by striking ‘‘any of his duties’’ and all
that follows and inserting ‘‘such duties.’’.
(5) Section 461(b) is relocated and redesignated
as section 459(c)(1), and is amended to read as fol-
lows:
‘‘(c) DESIGNATION OF AGENT; RESPONSE TO NOTICE
OR PROCESS.—(1) The head of each agency subject to the
requirements of this section shall—
‘‘(A) designate an agent or agents to receive or-
ders and accept service of process; and
‘‘(B) publish (i) in the appendix of such regula-
tions, (ii) in each subsequent republication of such
regulations, and (iii) annually in the Federal Reg-
ister, the designation of such agent or agents, identi-
311
fied by title of position, mailing address, and tele-
phone number.’’.
(6) Section 459(d) is redesignated as paragraph
(2) of section 459(c), and is amended to read as fol-
lows:
‘‘(2) Whenever an agent designated pursuant to
paragraph (1) receives notice pursuant to section
466(a)(1) or (b), or is effectively served with any
order, process, or interrogatories, with respect to an
individual’s child support or alimony payment obli-
gations, such agent shall—
‘‘(A) as soon as possible (but not later
than fifteen days) thereafter, send written no-
tice of such notice or service (together with a
copy thereof) to such individual at his duty sta-
tion or last-known home address;
‘‘(B) within 30 days (or such longer period
as may be prescribed by applicable State law)
after receipt of a notice pursuant to section
466(a)(1) or (b), comply with all applicable pro-
visions of such section 466; and
‘‘(C) within 30 days (or such longer period
as may be prescribed by applicable State law)
after effective service of any other such order,
process, or interrogatories, respond thereto.’’.
312
(7) Section 461(c) is relocated and redesignated
as section 459(d), and is amended to read as fol-
lows:
‘‘(d) PRIORITY OF CLAIMS.—In the event that a gov-
ernmental entity receives notice or is served with process,
as provided in this section, concerning amounts owed by
an individual to more than one person—
‘‘(A) support collection under section 466(b)
must be given priority over any other process, as
provided in section 466(b)(7);
‘‘(B) allocation of moneys due or payable to an
individual among claimants under section 466(b)
shall be governed by the provisions of such section
466(b) and regulations thereunder; and
‘‘(C) such moneys as remain after compliance
with subparagraphs (A) and (B) shall be available to
satisfy any other such processes on a first-come,
first-served basis, with any such process being satis-
fied out of such moneys as remain after the satisfac-
tion of all such processes which have been previously
served.’’.
(8) Section 459(e) is amended by striking ‘‘(e)’’
and inserting ‘‘(e) NO REQUIREMENT TO VARY PAY
CYCLES.—’’.
313
(9) Section 459(f) is amended by striking ‘‘(f)’’
and inserting ‘‘(f) RELIEF FROM LIABILITY.—(1)’’.
(10) Section 461(a) is redesignated and relo-
cated as section 459(g), and is amended—
(A) by striking ‘‘(g)’’ and inserting ‘‘(g)
REGULATIONS.—’’; and
(B) by striking ‘‘section 459’’ and insert-
ing ‘‘this section’’.
(11) Section 462(f) is relocated and redesig-
nated as section 459(h), and is amended to read as
follows:
‘‘(h) MONEYS SUBJECT TO PROCESS.—(1) Subject to
subsection (i), moneys paid or payable to an individual
which are considered to be based upon remuneration for
employment, for purposes of this section—
‘‘(A) consist of—
‘‘(i) compensation paid or payable for per-
sonal services of such individual, whether such
compensation is denominated as wages, salary,
commission, bonus, pay, allowances, or other-
wise (including severance pay, sick pay, and in-
centive pay); and
‘‘(ii) periodic benefits (including a periodic
benefit as defined in section 228(h)(3)) or other
payments—
314
‘‘(I) under the insurance system es-
tablished by title II; and
‘‘(II) under any other system or fund
established by the United States which
provides for the payment of pensions, re-
tirement or retired pay, annuities, depend-
ents’ or survivors’ benefits, or similar
amounts payable on account of personal
services performed by the individual or any
other individual;
‘‘(B) do not include any payment—
‘‘(i) as compensation for death under any
Federal program;
‘‘(ii) under any Federal program estab-
lished to provide ‘black lung’ benefits;
‘‘(iii) by the Secretary of Veterans Affairs
as pension, or as compensation for a service-
connected disability or death (except any com-
pensation paid by such Secretary to a former
member of the Armed Forces who is in receipt
of retired or retainer pay if such former mem-
ber has waived a portion of his retired pay in
order to receive such compensation);
‘‘(iv) by way of reimbursement or other-
wise, to defray expenses incurred by such indi-
315
vidual in carrying out duties associated with his
employment; or
‘‘(v) as allowances for members of the uni-
formed services payable pursuant to chapter 7
of 37 U.S.C., as prescribed by the Secretaries
concerned (defined by 37 U.S.C. 101(5)) as
necessary for the efficient performance of
duty.’’.
(12) Section 462(g) is redesignated and relo-
cated as section 459(i).
(13)(A) Section 462 is amended—
(i) in subsection (e)(1), by redesignating
subparagraphs (A), (B), and (C) as clauses (i),
(ii), and (iii); and
(ii) in subsection (e), by redesignating
paragraphs (1) and (2) as subparagraphs (A)
and (B).
(B) Section 459 is amended by adding at the
end the following:
‘‘(j) 
DEFINITIONS.—For 
purposes 
of 
this
section—’’.
(C) Subsections (a) through (e) of section 462,
as amended by subparagraph (A), are relocated and
redesignated as paragraphs (1) through (4) of sec-
tion 459(j), and are indented accordingly.
316
(b) CONFORMING AMENDMENTS.—
(1) TO TITLE IV–D.—Sections 461 and 462 are
repealed.
(2) TO 5 U.S.C.—5 U.S.C. 5520a is amended,
in subsections (h)(2) and (i), by striking ‘‘sections
459, 461, and 462 of the Social Security Act (42
U.S.C. 659, 661, and 662)’’ and inserting ‘‘section
459 of the Social Security Act (42 U.S.C. 659)’’.
(d) MILITARY RETIRED AND RETAINER PAY.—(1)
DEFINITION OF COURT.—10 U.S.C. 1408(a)(1) is amend-
ed—
(A) by striking ‘‘and’’ at the end of subpara-
graph (B);
(B) by striking the period at the end of sub-
paragraph (C) and inserting ‘‘; and’’; and
(C) by adding after subparagraph (C) the fol-
lowing new paragraph:
‘‘(D) any administrative or judicial tribu-
nal of a State competent to enter orders for
support or maintenance (including a State
agency administering a State program under
part D of title IV of the Social Security Act).’’;
(2) DEFINITION
OF
COURT
ORDER.—10 U.S.C.
1408(a)(2) is amended by inserting ‘‘or a court order for
the payment of child support not included in or accom-
317
panied by such a decree or settlement,’’ before
‘‘which—’’.
(3) PUBLIC PAYEE.—10 U.S.C. 1408(d) is amend-
ed—
(A) in the heading, by striking ‘‘to spouse’’ and
inserting ‘‘to (or for benefit of)’’; and
(B) in paragraph (1), in the first sentence, by
inserting ‘‘(or for the benefit of such spouse or
former spouse to a State central collections unit or
other public payee designated by a State, in accord-
ance with part D of title IV of the Social Security
Act, as directed by court order, or as otherwise di-
rected in accordance with such part D)’’ before ‘‘in
an amount sufficient’’.
(4) RELATIONSHIP TO TITLE IV–D.—10 U.S.C. 1408
is amended by adding at the end the following new sub-
section:
‘‘(j) RELATIONSHIP TO OTHER LAWS.—In any case
involving a child support order against a member who has
never been married to the other parent of the child, the
provisions of this section shall not apply, and the case
shall be subject to the provisions of section 459 of the
Social Security Act.’’.
318
(e) EFFECTIVE DATE.—The amendments made by
this section shall become effective on the date six months
after enactment of this Act.
SEC. 665. MOTOR VEHICLE LIENS.
Section 466(a)(4) is amended—
(1) by striking ‘‘(4) PROCEDURES’’ and insert-
ing ‘‘(4) LIENS.—(A) IN GENERAL.—’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(B) MOTOR VEHICLE LIENS.—Procedures
for placing liens for arrears of child support on
motor vehicle titles of individuals owing such
arrears equal to or exceeding two months of
support, under which—
‘‘(i) any person owed such arrears
may place such a lien;
‘‘(ii) the State agency administering
the program under this part shall system-
atically place such liens;
‘‘(iii) expedited methods are provided
for—
‘‘(I) ascertaining the amount of
arrears;
‘‘(II) affording the person owing
the arrears or other titleholder to con-
319
test the amount of arrears or to ob-
tain a release upon fulfilling the sup-
port obligation;
‘‘(iv) such a lien has precedence over
all other encumbrances on a vehicle title
other than a purchase money security in-
terest; and
‘‘(v) the individual or State agency
owed the arrears may execute on, seize,
and sell the property in accordance with
State law.’’.
SEC. 666. VOIDING OF FRAUDULENT TRANSFERS.
Section 466(a) is amended by adding at the end the
following new paragraph:
‘‘(15) FRAUDULENT
TRANSFERS.—Procedures
under which—
‘‘(A) the State has in effect—
‘‘(i) the Uniform Fraudulent Convey-
ance Act of 1981,
‘‘(ii) the Uniform Fraudulent Trans-
fer Act of 1984, or
‘‘(iii) another law, specifying indicia of
fraud which create a prima facie case that
a debtor transferred income or property to
avoid payment to a child support creditor,
320
which the Secretary finds affords com-
parable rights to child support creditors;
and
‘‘(B) in any case in which the State knows
of a transfer by a child support debtor with re-
spect to which such a prima facie case is estab-
lished, the State must—
‘‘(i) seek to void such transfer; or
‘‘(ii) obtain a settlement in the best
interests of the child support creditor.’’.
SEC. 667. STATE LAW AUTHORIZING SUSPENSION OF
LICENSES.
Section 466(a) is amended by adding at the end the
following new paragraph:
‘‘(16) AUTHORITY TO WITHHOLD OR SUSPEND
LICENSES.—Procedures under which the State has
(and uses in appropriate cases) authority (subject to
appropriate due process safeguards) to withhold or
suspend, or to restrict the use of driver’s licenses,
professional and occupational licenses, and rec-
reational licenses of individuals owing overdue child
support or failing, after receiving appropriate notice,
to comply with subpoenas or warrants relating to
paternity or child support proceedings.’’.
321
SEC. 668. REPORTING ARREARAGES TO CREDIT BUREAUS.
Section 466(a)(7) is amended to read as follows:
‘‘(7) REPORTING ARREARAGES TO CREDIT BU-
REAUS.—(A) Procedures (subject to safeguards pur-
suant to subparagraph (B)) requiring the State to
report periodically to consumer reporting agencies
(as defined in section 603(f) of the Fair Credit Re-
porting Act (15 U.S.C. 1681a(f)) the name of any
absent parent who is delinquent by one month or
more in the payment of support, and the amount of
overdue support owed by such parent.
‘‘(B) Procedures ensuring that, in carrying out
subparagraph (A), information with respect to an
absent parent is reported—
‘‘(i) only after such parent has been af-
forded all due process required under State law,
including notice and a reasonable opportunity
to contest the accuracy of such information;
and
‘‘(ii) only to an entity that has furnished
evidence satisfactory to the State that the en-
tity is a consumer reporting agency.’’.
SEC. 669. EXTENDED STATUTE OF LIMITATION FOR COL-
LECTION OF ARREARAGES.
(a) AMENDMENTS.—Section 466(a)(9) is amended—
322
(1) by striking ‘‘(9) PROCEDURES’’ and insert-
ing ‘‘(9) LEGAL TREATMENT OF ARREARS.—(A) FI-
NALITY.—’’;
(2) by redesignating indented subparagraphs
(A), (B), and (C) as clauses (i), (ii), and (iii), re-
spectively; and
(3) by adding after and below subparagraph
(A), as redesignated, the following new subpara-
graph:
‘‘(B) STATUTE
OF
LIMITATIONS.—Proce-
dures under which the statute of limitations on
any arrearages of child support extends at least
until the child owed such support is 30 years of
age.’’.
(b) APPLICATION OF REQUIREMENT.—The amend-
ment made by this section shall not be read to require
any State law to revive any payment obligation which had
lapsed prior to the effective date of such State law.
SEC. 670. CHARGES FOR ARREARAGES.
(a) STATE LAW REQUIREMENT.—Section 466(a) is
amended by adding at the end the following new para-
graph:
‘‘(17) CHARGES
FOR
ARREARAGES.—Proce-
dures providing for the calculation and collection of
interest or penalties for arrearages of child support,
323
and for distribution of such interest or penalties col-
lected for the benefit of the child (except where the
right to support has been assigned to the State).’’.
(b) REGULATIONS.—The Secretary of Health and
Human Services shall establish by regulation a rule to re-
solve choice of law conflicts arising in the implementation
of the amendment made by subsection (a).
(c) CONFORMING AMENDMENT.—Section 454(21) is
repealed.
(d) EFFECTIVE DATE.—The amendments made by
this section shall be effective with respect to arrearages
accruing on or after October 1, 1997.
SEC. 671. VISITATION ISSUES BARRED.
Section 466(a) is amended by adding at the end the
following new paragraph:
‘‘(18) VISITATION ISSUE BARRED.—Procedures
under which failure to pay child support is not a de-
fense to denial of visitation rights, and denial of visi-
tation rights is not a defense to failure to pay child
support.’’.
SEC. 672. TREATMENT OF SUPPORT OBLIGATIONS UNDER
BANKRUPTCY CODE.
(a) NO STAY OF PROCEEDINGS.—Section 362(b)(2)
of title 11, United States Code, is amended to read as
follows:
324
‘‘(2) under subsection (a) of this section—
‘‘(A) of the commencement or continuation
of a judicial or administrative proceeding, or
other action under State or territorial law by a
governmental unit, against the debtor to estab-
lish paternity, to establish or modify an obliga-
tion to pay for the support of a spouse, former
spouse, or child of the debtor, or to establish a
schedule for payment of such support (including
any arrearages); or
‘‘(B) of the collection of alimony, mainte-
nance, or support from property that is not
property of the estate;’’.
(b) STREAMLINED FILING PROCEDURE FOR SUP-
PORT CREDITOR.—Section 501 of title 11, United States
Code, is amended by adding at the end the following new
subsection:
‘‘(e)(1) The creditor of a claim that is excepted from
discharge under section 523(a)(5) may file such claim by
delivering to the clerk of the bankruptcy court in which
a petition under this title is pending, in person or by reg-
istered mail, the claim form promulgated under paragraph
(2). Such a creditor, filing a claim in such a manner, shall
not be required to make a personal appearance before the
court, to be represented by counsel admitted to practice
325
in the jurisdiction in which such court is located, to comply
with any local rules not specified pursuant to paragraph
(2), or to pay any filing fees or other charges in connection
with the filing of such claim.
‘‘(2) The Judicial Conference of the United States
shall promulgate, not later than June 30, 1995—
‘‘(A) a standardized, simplified form for filing
claims described in paragraph (1); and
‘‘(B) procedural guidelines for the use of such
form, which rules shall be designed to minimize the
burden on support creditors of filing such claims.’’.
(c) TREATMENT AS PREFERRED UNSECURED CREDI-
TOR.—Section 507(a) of title 11, United States Code, is
amended—
(1) by striking ‘‘(8) Eighth,’’ and inserting ‘‘(9)
Ninth,’’; and
(2) by inserting after paragraph (7) the follow-
ing new paragraph:
‘‘(8) Eighth, unsecured claims for alimony,
maintenance, or support of a spouse, former spouse,
or child of the debtor allowed under section 502 of
this title, to the full extent of such claims, and in
accordance with any payment schedule established
as described in section 362(b)(2).’’.
326
(d) PAYMENT SCHEDULE IN CHAPTER 13 PLANS.—
Section 1322(a)(2) of title 11, United States Code, is
amended by inserting before the semicolon ‘‘(except that
the plan shall provide, in the case of a debt not subject
to discharge under section 523(a)(5), for payment in ac-
cordance with any payment schedule included in the order
providing for alimony, maintenance, or support)’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall become effective October 1, 1995.
SEC. 673. DENIAL OF PASSPORTS FOR NONPAYMENT OF
CHILD SUPPORT.
(a) HHS CERTIFICATION PROCEDURE.—(1) SEC-
RETARIAL RESPONSIBILITY.—Section 452 is amended by
adding at the end the following new subsection:
‘‘(k) CERTIFICATIONS FOR PURPOSES OF PASSPORT
RESTRICTIONS.—(1) IN GENERAL.—Where the Secretary
receives a certification by a State agency in accordance
with the requirements of section 454(29) that an individ-
ual owes arrearages of child support in excess of $5,000,
the Secretary shall transmit such certification to the Sec-
retary of State for action (with respect to denial, revoca-
tion, or limitation of passports) pursuant to section 219
of title 22, United States Code.
327
‘‘(2) LIMIT ON LIABILITY.—The Secretary shall not
be liable to an individual for any action with respect to
a certification by a State agency under this section.’’.
(2) STATE CSE AGENCY RESPONSIBILITY.—Section
454, as previously amended by sections 601, 605, 615,
and 622, is further amended—
(A) by striking ‘‘and’’ at the end of paragraph
(27);
(B) by striking the period at the end of para-
graph (28) and inserting ‘‘; and’’; and
(C) by adding after paragraph (28) the follow-
ing new paragraph:
‘‘(29) provide that the State agency will have in effect
a procedure (which may be combined with the procedure
for tax refund offset under section 464) for certifying to
the Secretary, for purposes of the procedure under section
452(k) (concerning denial of passports) determinations
that individuals owe child support arrearages of $5,000
or more, under which procedure—
‘‘(A) each individual concerned is afforded no-
tice of such determination and the consequences
thereof, and an opportunity to contest the deter-
mination; and
‘‘(B) the certification by the State agency is
furnished to the Secretary in such format, and ac-
328
companied by such supporting documentation, as the
Secretary may require.’’.
(b) STATE DEPARTMENT PROCEDURE FOR DENIAL
OF PASSPORTS.—Chapter 4 of title 22, United States
Code, is amended by adding at the end the following new
section:
‘‘§ 219. Denial of passport for nonpayment of child
support.
‘‘(a) IN GENERAL.—The Secretary, upon certification
by the Secretary of Health and Human Services, in ac-
cordance with section 452(k) of the Social Security Act,
that an individual owes arrearages of child support in ex-
cess of $5,000, shall refuse to issue a passport to such
individual, and may revoke, restrict, or limit a passport
issued previously to such individual.
‘‘(b) LIMIT ON LIABILITY.—The Secretary shall not
be liable to an individual for any action with respect to
a certification by a State agency under this section.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall become effective October 1, 1995.
PART H—DEMONSTRATIONS
SEC. 681. CHILD SUPPORT ENFORCEMENT AND ASSURANCE
DEMONSTRATIONS.
(a) DEMONSTRATIONS AUTHORIZED.—(1) INITIAL
PROJECTS.—The Secretary shall make grants to three
329
States for demonstrations under this section to determine
the effectiveness of programs to provide assured levels of
child support to custodial parents of children for whom
paternity and support obligations have been established.
(b) DURATION OF PROJECTS.—(1) TOTAL PROJECT
PERIOD.—The Secretary shall make grants to States for
demonstrations under this section beginning in fiscal year
1997, for periods of from 7 to 10 years.
(2) PHASEDOWN PERIOD.—Each State implementing
a demonstration project under this section shall—
(A) phase out activities under such demonstra-
tion during the final two years of the project; and
(B) obtain the Secretary’s approval, before the
beginning of such phasedown period, of a plan for
accomplishing such phasedown.
(c) CONSIDERATIONS IN SELECTION OF PROJECTS.—
(1) SCOPE.—Projects under this section may, but need
not, be statewide in scope.
(2) STATE
ADMINISTRATION.—(A) RESPONSIBLE
STATE AGENCY.—A State demonstration project under
this section shall be administered either by the State agen-
cy administering the program under title IV–D of the So-
cial Security Act or the State department of revenue and
taxation.
330
(B) AUTOMATION.—The State agency described in
subparagraph (A) shall operate (or have automated access
to) the automated data system required under section
454(16) of the Social Security Act, and shall have ade-
quate automated capacity to carry out the project under
this section (including the timely distribution of child sup-
port assurance benefits).
(3) CONTROLS.—At least one demonstration project
under this section shall include randomly assigned control
groups.
(d) ELIGIBILITY.—(1) IN GENERAL.—Child support
assurance payments under projects under this section
shall be available only to children for whom paternity and
support obligations have been established (or with respect
to whom a determination has been made that efforts to
establish paternity or support would not be in the best
interests of the child).
(2) FAMILIES WITH SHARED CUSTODY.—In cases
where both parents share custody of a child, a parent and
child shall not be eligible for benefits under a demonstra-
tion under this section unless—
(A) a support order is in effect entitling such
parent to support payments in excess of the mini-
mum benefit; or
331
(B) the agency or tribunal which issued the
order certifies that the child support award would be
below such minimum benefit if either parent was
awarded sole custody and the guidelines under sec-
tion 467 were applied.
(3) STATE
OPTION
TO
BASE
ELIGIBILITY
ON
NEED.—At State option, eligibility for benefits under a
demonstration under this section may be limited to fami-
lies with incomes and resources below a standard of need
established by the State.
(f) BENEFIT AMOUNTS.—(1) RANGE OF BENEFIT
LEVELS.—States shall have flexibility to set annual bene-
fit levels under demonstrations under this section, pro-
vided that (subject to the remaining provisions of this sub-
section) such levels—
(A) are not lower than $1,500 for a family with
one child or $3,000 for a family with four or more
children; and
(B) are not higher than $3,000 for a family
with one child or $4,500 for a family with four or
more children;
(2) INDEXING.—Annual benefit levels for each fiscal
year after fiscal year 1996 shall be indexed to reflect the
change in the Consumer Price Index.
332
(3) UNMATCHED EXCESS BENEFITS.—The Secretary
may permit States to pay benefits higher than a maximum
specified in paragraphs (1) and (2), but Federal matching
of such payments shall not be available for benefits in ex-
cess of the amounts specified in paragraph (1) (as ad-
justed in accordance with paragraph (2)) by more than
$25 per month.
(g) TREATMENT OF BENEFITS.—(1) FOR PURPOSES
OF AFDC.—The amount of aid otherwise payable to a
family under title IV–A of the Social Security Act shall
be reduced by an amount equal to the amount of child
support assurance paid to such family (or, at the Sec-
retary’s discretion, by a percentage of such amount paid
specified by the Secretary).
(2) FOR PURPOSES
OF OTHER BENEFIT PRO-
GRAMS.—(A) IN GENERAL.—Except as provided in sub-
paragraph (B), child support assurance paid to a family
shall be considered ordinary income for purposes of deter-
mining eligibility for and benefits under any Federal or
State program.
(B) DEEMED AFDC ELIGIBILITY.—At State option,
a child (or family) that is ineligible for aid under title IV–
A of the Social Security Act because of payments under
a demonstration under this section may be deemed to be
333
receiving such aid for purposes of determining eligibility
for other Federal and State programs.
(3) FOR TAX PURPOSES.—Child support assurance
which is paid to a family under this section and is not
reimbursed from a child support collection from a
noncustodial parent shall be considered ordinary income
for purposes of Federal and State tax liability.
(h) WORK PROGRAM OPTION.—At the option of the
State grantee, a demonstration under this section may in-
clude a work program for unemployed noncustodial par-
ents of eligible children.
(i) AVAILABILITY
OF APPROPRIATIONS
FOR PAY-
MENTS TO STATES.—(1) STATE ENTITLEMENT TO IV–D
FUNDING.—A State administering an approved dem-
onstration under this section in a calendar quarter shall
be entitled to payments for such quarter, pursuant to sec-
tion 455 of the Social Security Act for the Federal share
of reasonable and necessary expenditures (including ex-
penditures for benefit payments and for associated admin-
istrative costs) under such project, in an amount (subject
to paragraphs (2) and (3)) equal to—
(A) with respect to that portion of such expend-
itures equal to the reduction of expenditures under
title IV–A of the Social Security Act pursuant to
subsection (g)(1), a percentage equal to the percent-
334
age that would have been paid if such expenditures
had been made under such title IV–A; and
(B) 90 percent of the remainder of such ex-
penditures.
(2) STATES WITH LOW AFDC BENEFITS.—In the
case of a State in which benefit levels under title IV–A
of the Act are below the national median for such pay-
ments, the Secretary may elect to provide 90 percent Fed-
eral matching of a portion of expenditures under a project
under this section that would otherwise be matched at the
rate specified in paragraph (1)(A).
(3) FUNDING LIMITS; PRO RATA REDUCTIONS OF
STATE
MATCHING.—(A) FUNDS
AVAILABLE.—There
shall be available to the Secretary, from amounts appro-
priated to carry our part D of title IV of the Social Secu-
rity Act, for purposes of carrying out demonstrations
under this section, amounts not to exceed—
(i) $27,000,000 for fiscal year 1997;
(ii) $55,000,000 for fiscal year 1998;
(iii) $70,000,000 for each of fiscal years 1999
through 2002; and
(iv) $55,000,000 for fiscal year 2003.
(B) PRO RATA REDUCTIONS.—The Secretary shall
make pro rata reductions in the amounts otherwise pay-
336
(k) EVALUATIONS AND REPORTS.—(1) STATE EVAL-
UATIONS.—Each State administering a demonstration
project under this section shall—
(A) provide for ongoing and retrospective eval-
uation of the project, meeting such conditions and
standards as the Secretary may require; and
(B) submit to the Secretary such reports (at
such times, in such format, and containing such in-
formation) as the Secretary may require, including
at least an interim report not later than 90 days
after the end of the fourth year of the project, and
a final report not later than one year after the com-
pletion of the project, which shall include informa-
tion on and analysis of the effect of the project with
respect to—
(i) the economic circumstances of both
noncustodial and custodial parents;
(ii) the rate of compliance by noncustodial
parents with support orders;
(iii) work-force participation by both custo-
dial and noncustodial parents;
(iv) need for or amount of aid to families
with dependent children under title IV–A of the
Social Security Act;
(v) paternity establishment rates; and
337
(vi) any other matters the Secretary may
specify.
(2) REPORTS TO CONGRESS.—The Secretary shall,
on the basis of reports received from States administering
projects under this section, make the following reports,
containing an assessment of the effectiveness of the
projects and any recommendations the Secretary considers
appropriate:
(A) an interim report, not later than six months
following receipt of the interim State reports re-
quired by subsection (c); and
(B) a final report, not later than six months
following receipt of the final State reports required
under subsection (i).
(3) FUNDING FOR COSTS TO SECRETARY.—There
are authorized to be appropriated $10,000,000 for fiscal
year 1997, to remain available under expended for pay-
ment of the cost of evaluations by the Secretary of dem-
onstrations under this section.
SEC. 682. SOCIAL SECURITY ACT DEMONSTRATIONS.
Section 1115(c)(3) is amended by striking ‘‘increased
cost’’ and all that follows and inserting ‘‘an increase in
total costs to the Federal Government.’’.
338
Part I—Access and Visitation Grants
SEC. 691. GRANTS TO STATES FOR ACCESS AND VISITATION
PROGRAMS.
(a) IN GENERAL.—Part D of title IV is amended by
adding at the end the following new section:
‘‘GRANTS TO STATES FOR ACCESS AND VISITATION
PROGRAMS
‘‘SEC. 469A. (a) PURPOSES; AUTHORIZATION OF AP-
PROPRIATIONS.—For the purposes of enabling States to
establish and administer programs to support and facili-
tate absent parents’ access to and visitation of their chil-
dren, by means of activities including mediation (both vol-
untary and mandatory), counseling, education, develop-
ment of parenting plans, visitation enforcement (including
monitoring, supervision and neutral drop-off and pickup),
and development of guidelines for visitation and alter-
native custody arrangements, there are authorized to be
appropriated $5,000,000 for each of fiscal years 1996 and
1997, and $10,000,000 for each succeeding fiscal year.
‘‘(b) PAYMENTS TO STATES.—(1) Each State shall
be entitled to payment under this section for each fiscal
year in an amount equal to its allotment under subsection
(c) for such fiscal year, to be used for payment of 90 per-
cent of State expenditures for the purposes specified in
subsection (a).
339
‘‘(2) Payments under this section shall be used by
a State to supplement (and not to substitute for) expendi-
tures by the State, for activities specified in subsection
(a), at a level at least equal to the level of such expendi-
tures for fiscal year 1994.
‘‘(c) ALLOTMENTS TO STATES.—(1) IN GENERAL.—
For purposes of subsection (b), each State shall be entitled
(subject to paragraph (1)) to an amount for each fiscal
year bearing the same ratio to the amount authorized to
be appropriated pursuant to subsection (a) for such fiscal
year as the number of children in the State living with
only one biological parent bears to the total number of
such children in all States.
‘‘(2) MINIMUM ALLOTMENT.—Allotments to States
under subparagraph (A) shall be adjusted as necessary to
ensure that no State is allotted less than $50,000 for fiscal
year 1996 or 1997, or $100,000 for any succeeding fiscal
year.
‘‘(d) FEDERAL
ADMINISTRATION.—The program
under this section shall be administered by the Adminis-
tration for Children and Families.
‘‘(e) STATE PROGRAM ADMINISTRATION.—(1) Each
State may administer the program under this section di-
rectly or through grants to or contracts with courts, local
public agencies, or non-profit private entities.
340
‘‘(2) State programs under this section may, but need
not, be Statewide.
‘‘(3) States administering programs under this sec-
tion shall monitor, evaluate, and report on such programs
in accordance with requirements established by the Sec-
retary.
Part J—Effect of Enactment
SEC. 695. EFFECTIVE DATES.
(a) IN GENERAL.—Except as otherwise specifically
provided (but subject to subsections (b) and (c))—
(1) provisions of this title requiring enactment
or amendment of State laws under section 466 of
the Act, or revision of State plans under section 454
of the Act, shall be effective with respect to periods
beginning on and after October 1, 1995; and
(2) all other provisions of this title shall become
effective upon enactment.
(b) GRACE PERIOD FOR STATE LAW CHANGES.—The
provisions of this title shall become effective with respect
to a State on the later of—
(1) the date specified in this title, or
(2) the effective date of laws enacted by the leg-
islature of such State implementing such provisions,
but in no event later than the first day of the first cal-
endar quarter beginning after the close of the first regular
341
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 legisla-
tive session, each year of such session shall be deemed to
be a separate regular session of the State legislature.
(c) GRACE PERIOD
FOR STATE CONSTITUTIONAL
AMENDMENT.—A State shall not be found out of compli-
ance with any requirement enacted by this title if it is
unable to comply without amending the State constitution
until the earlier of—
(1) the date one year after the effective date of
the necessary State constitutional amendment, or
(2) the date five years after enactment of this
title.
SEC. 696. SEVERABILITY.
If any provision of this title or the application thereof
to any person or circumstance is held invalid, the invalid-
ity shall not affect other provisions or applications of this
title which can be given effect without regard to the invalid
provision or application, and to this end the provisions of
this title shall be severable.
342
TITLE VII—IMPROVING GOVERNMENT
ASSISTANCE AND PREVENTING FRAUD
Part A—AFDC Amendments
SEC. 701. PERMANENT REQUIREMENT FOR UNEMPLOYED
PARENT PROGRAM.
(a) IN GENERAL.—Section 401(h) of the Family
Support Act of 1988 (terminating the requirement that
States provide benefits to two-parent families based on the
unemployment of the principal earner) is repealed.
(b) APPLICABILITY
TO PUERTO RICO, AMERICAN
SAMOA, GUAM, AND
THE VIRGIN ISLANDS.—Section
401(g)(2) of the Family Support Act of 1988 is amended,
effective on the date of enactment of such Act, to read
as follows:
‘‘(2) The amendments made by this section
(other than those made by subsection (c)) shall not
become effective with respect to Puerto Rico, Amer-
ican Samoa, Guam, or the Virgin Islands unless the
jurisdiction involved notifies the Secretary of Health
and Human Services that it chooses to have such
amendments apply and submits the necessary plan
amendment.’’.
343
SEC. 702. STATE OPTIONS REGARDING UNEMPLOYED PAR-
ENT PROGRAM.
(a) DURATION OF UNEMPLOYMENT AND RECENCY-
OF-WORK TESTS.—(1) Section 407(b)(1)(A) of the Act
(in the matter preceding clause (i)) is amended to read
as follows:
‘‘(A) subject to paragraph (2), shall provide for
the payment of aid to families with dependent chil-
dren with respect to a dependent child within the
meaning of subsection (a)—’’.
(2) Such section is further amended—
(A) by striking out ‘‘whichever’’ in clause (i)
and inserting in lieu thereof ‘‘when, if the State
chooses to so require (and specifies in its State
plan), whichever’’,
(B) by inserting ‘‘when’’ before such parent in
clause (ii), and
(C) by striking out ‘‘(iii)(I)’’ and inserting in
lieu thereof ‘‘(iii) when, if the State chooses to so re-
quire (and specifies in its State plan) (I)’’.
(b) STATE
OPTION
TO
DEFINE
‘‘UNEMPLOY-
MENT’’.—At its option, a State may provide aid under
part A to children of employed parents and may apply,
for purposes of section 407 of the Act, a definition of un-
employment that includes some or all of the individuals
who, solely by reasons of the standards prescribed by the
344
Secretary of Health and Human Services under subsection
(a) of such section and in effect on the date of enactment
of this Act, would not have been eligible for aid to families
with dependent children, and shall include such definition
in its State plan approved under part A of title IV of the
Act.
(c) EFFECTIVE DATE.—The amendments made by
this section and the provisions of this section shall become
effective October 1, 1996.
SEC. 703. DEFINITION OF ESSENTIAL PERSON.
(1) GENERAL REQUIREMENT.—Section 402 of the
Act is amended by adding immediately after and below
subsection (c) the following new subsection:
‘‘(d) In order that the State may include the needs
of an individual in determining the needs of the dependent
child and relative with whom the child is living, such indi-
vidual must be living in the same home as such child and
relative and—
‘‘(1) furnishing personal services required be-
cause of the relative’s physical or mental inability to
provide care necessary for herself or himself or for
the dependent child (which, for purposes of this sub-
section only, includes a child receiving supplemental
security income benefits under title XVI), or
345
‘‘(2) furnishing child care services, or care for
an incapacitated member of the family, that is nec-
essary to permit the caretaker relative—
‘‘(A) to engage in full or part-time employ-
ment outside the home, or
‘‘(B) to attend a course of education de-
signed to lead to a high school diploma (or its
equivalent) or a course of training on a full or
part-time basis, or to participate in the pro-
gram under part F on a full or part-time
basis.’’.
SEC. 704. EXPANDED STATE OPTION FOR RETROSPECTIVE
BUDGETING.
Section 402(a)(13) of the Act is amended—
(1) by striking out in the matter that precedes
subparagraph (A) ‘‘but only with respect to any one
or more categories of families required to report
monthly to the State agency pursuant to paragraph
(14),’’; and
(2) by striking out in each of subparagraphs
(A) and (B) ‘‘(but only where the Secretary deter-
mines it to be appropriate, in the case of families
who are required to report monthly to the State
agency pursuant to paragraph (14),’’.
346
SEC. 705. DISREGARDS OF INCOME.
‘‘(a) STUDENT EARNINGS.—(1) IN GENERAL.—Sec-
tion 402(a)(8)(A)(i) of the Act is amended by striking out
‘‘dependent child’’ and all that follows and inserting in lieu
thereof ‘‘individual under age 19 who is an elementary or
secondary school student’’.
‘‘(2) CONFORMING AMENDMENTS.—Section 402(a)
of the Act is amended—
(A)(i) by striking out ‘‘a dependent child who is
a full-time student’’ in paragraph (8)(A)(vii) and in-
serting in lieu thereof ‘‘an individual under age 19
who is an elementary or secondary school student’’,
and
(ii) by striking out ‘‘such child’’ in such para-
graph and inserting in lieu thereof ‘‘such individ-
ual’’, and
(B) by striking out in paragraph (18) ‘‘of a de-
pendent child’’ and inserting in lieu thereof ‘‘of an
individual under age 19’’.
(b) 
STANDARD
EARNED
INCOME
DISREGARD
AMOUNT.—(1) Section 402(a)(8)(a)(ii) of the Act is
amended by striking out ‘‘$90’’ and inserting in lieu there-
of ‘‘$120, or if greater, $120 adjusted by the CPI (as pre-
scribed in section 406(i))’’.
(2) The amendment made by this subsection shall be-
come effective October 1, 1996.
347
(c) STATE OPTION TO DISREGARD EARNED IN-
COME.—(1) IN GENERAL.—Section 402(a)(8)(A)(iv) of
the Act is amended to read as follows:
‘‘(iv) may, at its option, disregard amounts
of earned income in addition to those required
or permitted to be disregarded under this para-
graph, and shall specify in its State plan any
such additional amounts and the circumstances
(including whether they will be disregarded for
applicants as well as for recipients) under which
they will be disregarded;’’
(2) CONFORMING AMENDMENTS.—
(A) Clause (ii) of section 402(a)(8)(B) of the
Act is repealed.
(B)(i) Section 402(a)(37) of the Act is amended
by 
striking 
out 
‘‘or 
because 
of 
paragraph
(8)(B)(ii)(II)’’.
(ii) Section 1925(a) of the Act is amended by
striking 
out 
‘‘or 
because 
of 
section
402(a)(8)(B)(ii)(II) (providing for a time-limited
earned income disregard)’’.
(C) Section 402(g)(1)(A)(ii) of the Act is
amended by striking out ‘‘increased income’’ and all
that follows down to the period and inserting in lieu
348
thereof ‘‘amount of earnings from such employ-
ment’’.
(3) EFFECTIVE DATE.—The amendments made by
this subsection shall become effective October 1, 1996.
(d) DISREGARD OF TRAINING STIPENDS.—Section
402(a)(8)(A)(v) of the Act is amended to read as follows:
‘‘(v) shall disregard from the income of
any individual applying for or receiving aid to
families with dependent children any amount
received as a stipend or allowance under the
Job Training Partnership Act or under any
other training or similar program;’’.
(e) MANDATORY CHILD SUPPORT PASS-THROUGH.—
(1) Section 402(a)(8)(A)(vi) of the Act is amended—
(A) by striking out ‘‘$50’’ (in two places) and
inserting in lieu thereof ‘‘$50, or, if greater, $50 ad-
justed by the CPI (as prescribed in section 406(i));’’,
and
(B) by striking out the semicolon at the end
and inserting in lieu thereof ‘‘or, in lieu of the
amount specified in two places in this clause, such
greater amount as the State many choose (and pro-
vide for in its State plan);’’.
349
(2) CPI ADJUSTMENT.—Section 406 of the Act is
amended by adding at the end thereof the following new
subsection:
‘‘(i) For purposes of this part, an amount is ‘adjusted
by the CPI’ for any month in a calendar year by multiply-
ing the amount involved by the ratio of—
‘‘(1) the Consumer Price Index (as prepared by
the Department of Labor) for the third quarter of
the preceding calendar year, to
‘‘(2) such Consumer Price Index for the third
quarter of calendar year 1996,
and rounding the product, if not a multiple of $10, to the
nearer multiple of $10.’’.
(f) LUMP-SUM INCOME.—(1) IN GENERAL.—Section
402(a)(8)(A) of the Act is amended—
(A) by striking out ‘‘and’’ after clause (viii),
and
(B) by adding after and below clause (viii) the
following new clause:
‘‘(ix) shall disregard from the income of
any family member any amounts of income re-
ceived in the form of nonrecurring lump-sum
payments;’’.
(2) REPEAL.—Section 402(a)(17) of the Act is re-
pealed.
350
(g) 
EDUCATIONAL
ASSISTANCE.—Section
402(a)(8)(A) of the Act is further amended by adding
after and below clause (ix) the following new clause:
‘‘(x) shall disregard all educational assist-
ance provided to a family member;’’.
(h) IN-KIND
INCOME.—Such section is further
amended by adding after and below clause (x) the follow-
ing new clause:
‘‘(xi) shall disregard all in-kind income
provided to a family member;’’
(i) BENEFITS UNDER THE NATIONAL AND COMMU-
NITY SERVICE ACT.—Such section is further amended by
adding after and below clause (xi) the following new
clause:
‘‘(xii) shall disregard any living allowance,
child care allowance, stipend, or educational
award paid under section 140 of the National
and Community Service Act of 1990 to a family
member participating in a national service pro-
gram carried out with assistance from the Cor-
poration for National and Community Serv-
ice;’’.
(j) ‘‘FILL-THE-GAP’’ DISREGARDS.—(1) Such section
is further amended by adding after and below clauses (xii)
the following new clause:
351
‘‘(xiii) may disregard, in addition to any
other amounts required or permitted by this
paragraph, income described in the State plan
by type or source and by amount, but no
amount in excess of the difference between the
State’s standard of need applicable to the fam-
ily involved and the State’s payment amount for
a family of the same size with no other in-
come;’’.
(2) The amendment made by this subsection shall be-
come effective October 1, 1996.
SEC. 706. STEPPARENT INCOME.
(a) Section 402(a)(31) of the Act is amended by
striking out ‘‘$90’’ and inserting in lieu thereof ‘‘$120’’
and by striking out the semicolon at the end and inserting
in lieu thereof ‘‘, or, at the option of the State, so much
of such income as exceeds any greater amount or amounts
as the State agency finds appropriate to strengthen family
life and provide incentives to increase earnings;’’.
(b) The amendment made by this section shall be-
come effective October 1, 1996.
SEC. 707. INCREASE IN RESOURCE LIMIT.
Section 402(a)(7)(B) of the Act is amended (in the
matter preceding clause (i)) by striking out ‘‘$1000 or
such lower amount as the State may determine’’ and in-
352
serting in lieu thereof ‘‘$2000 or, in the case of a family
with a member who is 60 years of age or older, $3000’’.
SEC. 708. EXCLUSIONS FROM RESOURCES.
(a) LIFE INSURANCE.—Section 402(a)(7)(B)(ii) of
the Act is amended by striking out the semicolon at the
end and inserting in lieu thereof ‘‘, and the cash value
of life insurance policies;’’.
(b) REAL PROPERTY WHICH MUST BE DISPOSED
OF.—Section 402(a)(7)(B)(iii) of the Act is amended to
read as follows: ‘‘real property which the family is making
a good faith effort to dispose of at a reasonable price;’’.
(c) EXCLUSION OF PAYMENTS OF THE EITC.—Sec-
tion 402(a)(7)(B) of the Act is amended—
(1) by striking out ‘‘or’’ after clause (iii), and
(2) by amending clause (iv) (pertaining to pay-
ments by reason of the Earned Income Tax Credit)
by striking out ‘‘the following month’’ and inserting
in lieu thereof ‘‘the following eleven-month period’’,
and by striking out the semicolon at the end and in-
serting in lieu thereof ‘‘and any lump-sum payment
of State earned income tax credits and any pay-
ments described in this clause shall be deemed to be
expended prior to other resources that are not ex-
cluded;’’.
353
(d) LUMP-SUM PAYMENTS FOR MEDICAL EXPENSES
OR
REPLACEMENT
OF
LOST
RESOURCES.—Section
402(a)(7)(B) of the Act is amended—
(1) by striking out ‘‘and’’ after clause (iv), and
(2) by adding after clause (iv) the following new
clause: ‘‘(v) for the month of receipt and the follow-
ing eleven-month period, amounts that have been
paid as reimbursement (or payment in advance) for
medical expenses or for the cost of repairing or re-
placing resources of the family;’’.
(e) INDIVIDUAL DEVELOPMENT ACCOUNTS.—Section
402(a)(7)(B) of the Act is amended by adding after clause
(v) the following new clause: ‘‘(vi) amounts, not to exceed
$10,000 (including interest) in total, in one or more Indi-
vidual Development Accounts established in accordance
with (I) section 529 of the Internal Revenue Code of 1986
by any member of a family receiving aid to families with
dependent children, or (II) under a demonstration project
conducted under the Individual Development Account
Demonstration Act of 1994, but only such amounts (in-
cluding interest) that were credited to such account in a
month for which such aid was paid, or food stamps pro-
vided, with respect to such individual or in any month
after such a month;’’.
354
(f) RESOURCES FOR SELF-EMPLOYMENT.—Section
402(a)(7)(B) of the Act is amended by adding after clause
(vi) the following new clause: ‘‘(vii) liquid and nonliquid
resources that are or will be used for the self-employment
of a family member, to the extent and under the cir-
cumstances allowed by the State agency in accordance
with regulations issued by the Secretary after consultation
with the Secretary of Agriculture;’’.
SEC. 710. TRANSFER OF RESOURCES.
Section 402(a)(7) of the Act is amended—
(1) by adding ‘‘and’’ after subparagraph (C),
and
(2) by adding after and below subparagraph (C)
the following new subparagraph:
‘‘(D) shall determine ineligible for aid any
family member who knowingly transfers re-
sources for the purpose of qualifying or at-
tempting to qualify for such aid for such period,
not in excess of one year from the date of dis-
covery of the transfer, determined in accordance
with regulations of the Secretary;’’.
SEC. 711. LIMITATION ON UNDERPAYMENTS.
Section 402(a)(22)(C) of the Act is amended by strik-
ing out ‘‘an underpayment’’ and inserting in lieu thereof
‘‘an underpayment, the corrective payment shall be made
355
regardless of whether the family is, at the time payment
is made, receiving current payment of aid under the State
plan but such payment shall not exceed the amount nec-
essary to correct for the underpayment of aid during the
twelve-month period immediately preceding the month in
which the State agency first learned of the underpayment,
and’’.
SEC. 712. COLLECTION OF AFDC OVERPAYMENTS FROM
FEDERAL TAX REFUNDS.
(a) AUTHORITY TO INTERCEPT TAX REFUND.—(1)
Part A of title IV of the Act is amended by adding at
the end thereof the following new section:
‘‘COLLECTION OF OVERPAYMENTS FROM FEDERAL TAX
REFUNDS
‘‘Sec. 418.(a). Upon receiving notice from a State
agency administering a plan approved under this part that
a named individual has been overpaid under the State plan
approved under this part, the Secretary of the Treasury
shall determine whether any amounts as refunds of Fed-
eral taxes paid are payable to such individual, regardless
of whether such individual filed a tax return as a married
or unmarried individual. If the Secretary of the Treasury
finds that any such amount is payable, he shall withhold
from such refunds an amount equal to the overpayment
sought to be collected by the State and pay such amount
to the State agency.
356
‘‘(b) The Secretary of the Treasury shall issue regula-
tions, approved by the Secretary of Health and Human
Services, that provide—
‘‘(1) that a State may only submit under sub-
section (a) requests for collection of overpayments
with respect to individuals (A) who are no longer re-
ceiving aid under the State plan approved under this
part, (B) with respect to whom the State has al-
ready taken appropriate action under State law
against the income or resources of the individuals or
families 
involved 
as 
required 
under 
section
402(a)(22) (B), and (C) to whom the State agency
has given notice of its intent to request withholding
by the Secretary of the Treasury from their income
tax refunds;
‘‘(2) that the Secretary of the Treasury will
give a timely and appropriate notice to any other
person filing a joint return with the individual whose
refund is subject to withholding under subsection
(a); and
‘‘(3) the procedures that the State and the Sec-
retary of the Treasury will follow in carrying out
this section which, to the maximum extent feasible
and consistent with the specific provisions of this
section, will be the same as those issued pursuant to
357
section 464(b) applicable to collection of past-due
child support.’’.
(2) Section 6402 of the Internal Revenue Code of
1986 (as previously amended by section 662 of this Act)
is further amended—
(A) in subsection (a), by striking ‘‘(c) and (d)’’
and inserting ‘‘(c), (d), and (e)’’;
(B) by redesignating subsections (e) through (i)
as subsections (f) through (j), respectively; and
(C) by inserting after subsection (d) the follow-
ing new subsection:
‘‘(g) COLLECTION OF OVERPAYMENTS UNDER TITLE
IV–A OF SOCIAL SECURITY ACT.—The amount of any
overpayment to be refunded to the person making the
overpayment shall be reduced (after reductions pursuant
to subsections (c) and (d), but before a credit against fu-
ture liability for an internal revenue tax) in accordance
with section 418 of the Social Security Act (concerning
recovery of overpayments to individuals under State plans
approved under part A of title IV of such Act).’’.
(b) 
CONFORMING
AMENDMENT.—Section
552a(a)(8)(B)(iv)(III) of title 5 of the United States Code
is amended by striking out ‘‘section 464 or 1137 of the
Social Security Act’’ and inserting in lieu thereof ‘‘section
419, 464, or 1137 of the Social Security Act.’’
358
SEC. 713. VERIFICATION OF STATUS OF CITIZENS AND
ALIENS.
(a) IN GENERAL.—Section 1137(d) of the Act is
amended by adding at the end thereof the following:
‘‘(6) A State shall be deemed to meet the re-
quirements of paragraph (1) with respect to the eli-
gibility of each member of a family applying for aid
under the State plan approved under part A of title
IV, if the State requires, as a condition for such eli-
gibility, a declaration in writing by an adult member
of the family, under penalty of perjury, that each
family member is a citizen of the United States or
an alien eligible for aid under such State plan (and,
with respect to a child born into a family receiving
such aid, such declaration must be made no later
than the time of the next redetermination of such
family’s eligibility following the birth of such
child).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall become effective upon enactment.
SEC. 714. REPEAL OF REQUIREMENT TO MAKE CERTAIN
SUPPLEMENTAL PAYMENTS IN STATES PAY-
ING LESS THAN THEIR NEEDS STANDARDS.
Section 402(a)(28) of the Act is repealed.
359
SEC. 715. CALCULATION OF 185 PERCENT OF NEED STAND-
ARD.
Section 402(a)(18) of the Act is amended by striking
out ‘‘without application of paragraph (8)(A)(viii),’’ and
inserting in lieu thereof ‘‘applying only the disregard pro-
visions of paragraph (8)(A) that appear in clauses (v) (in-
come from a program under the Job Training Partnership
Act and similar programs), (viii) (payments related to the
Earned Income Tax Credit), (ix) (certain lump-sum pay-
ments), (x) (educational assistance), (xi) (in-kind income),
and (xii) (certain payments under the National and Com-
munity Service Act of 1990),’’.
SEC. 716. TERRITORIES.
(a) Section 1108(a) of the Act is amended by amend-
ing paragraphs (1), (2), and (3) to read as follows:
‘‘(1) for payment to Puerto Rico shall not ex-
ceed—
‘‘(A) $82,000,000 with respect to fiscal
years 1994, 1995, and 1996, and
‘‘(B) $102,500,000 or, if greater, such
amount adjusted by the CPI (as prescribed in
subsection (f)) for fiscal year 1997 and each
fiscal year thereafter;
‘‘(2) for payment to the Virgin Islands shall not
exceed—
360
‘‘(A) $2,800,000 with respect to fiscal
years 1994, 1995, and 1996, and
‘‘(B) $3,500,000 or, if greater, such
amount adjusted by the CPI (as prescribed in
subsection (f)) for fiscal year 1997 and each
fiscal year thereafter; and
‘‘(3) for payment to Guam shall not exceed—
‘‘(A) $3,800,000 with respect to fiscal year
1994, 1995, and 1996, and
‘‘(B) $4,750,000 or, if greater, such
amount adjusted by the CPI (as prescribed in
subsection (f)), for fiscal year 1997 and each
fiscal year thereafter.’’.
(b) CPI ADJUSTMENT.—Section 1108 of the Act is
amended by adding at the end thereof the following new
subsection:
‘‘(f) For purposes of subsection (a), an amount is ‘ad-
justed by the CPI’ for months in calendar year by mul-
tiplying that amount by the ratio of the Consumer Price
Index as prepared by the Department of Labor for—
‘‘(1) the third quarter of the preceding calendar
year, to
‘‘(2) the third quarter of calendar year 1996,
and rounding the product, if not a multiple of
$10,000, to the nearer multiple of $10,000.’’.
361
PART B—FOOD STAMP ACT AMENDMENTS
SEC. 721. INCONSEQUENTIAL INCOME.
Section 5(d)(2) of the Food Stamp Act of 1977 (7
U.S.C. 2014(d)(2)) is amended to read as follows—
‘‘(2) any inconsequential payments, as defined by the
Secretary, received during the certification period, but not
to exceed a total of such payments of $30 per household
member in any quarter, whether the household’s income
is calculated on a prospective or retrospective basis,’’.
SEC. 722. EDUCATIONAL ASSISTANCE.
Section 5 of the Food Stamp Act of 1977 (7 U.S.C.
2014) is amended by—
(1) striking clause (3) of subsection (d) and in-
serting in lieu thereof the following—
‘‘(3) all educational assistance provided to a
household member,’’;
(2) in the proviso of clause (5) of subsection
(d), striking ‘‘and no portion of any educational
loan’’ and all that follows through ‘‘provided for liv-
ing expenses,’’; and
(3) striking clause (3) of subsection (k).
SEC. 723. EARNINGS OF STUDENTS.
Effective on and after September 1, 1994, section
5(d)(7) of the Food Stamp Act of 1977 (7 U.S.C.
2014(d)(7)) is amended by—
362
(1) striking ‘‘a child who is a member of the
household, who is’’; and
(2) striking ‘‘, and who is 21’’ and inserting in
lieu thereof ‘‘who is 18’’.
SEC. 724. TRAINING STIPENDS AND ALLOWANCES; INCOME
FROM ON-THE-JOB TRAINING PROGRAMS.
Section 5 of the Food Stamp Act of 1977 (7 U.S.C.
2014) is amended by—
(1) striking ‘‘and (16)’’ in subsection (d) and
inserting in lieu thereof ‘‘(16)’’;
(2) inserting before the period at the end of
subsection (d) ‘‘, and (17) any amount received by
any member of a household as a stipend or allow-
ance under the Job training Partnership Act (29
U.S.C. 1501 et seq.) or under any other training or
similar program’’; and
(3) striking in subsection (1) the language be-
ginning with ‘‘under section 204(b)(1)(C)’’ and all
that follows through ‘‘19 years of age.’’ and insert-
ing in lieu thereof ‘‘shall be considered earned in-
come for purposes of the Food Stamp program.’’.
SEC. 725. EARNED INCOME TAX CREDITS.
Effective on and after September 1, 1994, the second
sentence of section (5)(g)(3) of the Food Stamp Act of
1977 (7 U.S.C. 2014(g)(3)) is amended by—
363
(1) inserting ‘‘Federal or State lump-sum’’ im-
mediately preceding ‘‘earned income tax credits’’;
and
(2) striking the language beginning with ‘‘if
such member was participating’’ and all that follows
through ‘‘the 12-month period’’.
SEC. 726. RESOURCES NECESSARY FOR SELF-EMPLOY-
MENT.
Section 5(g)(3) of the Food Stamp Act of 1977 (7
U.S.C. 2014(g)(3)) is amended by adding the following
new third and fourth sentences: ‘‘The Secretary shall also
exclude from financial resources loans obtained for the
purposes of starting or operating a business. The Sec-
retary may exclude from financial resources liquid or
nonliquid resources that are or will be used for the self-
employment of any member of a household to the extent
and under the circumstances allowed in regulations issued
by the Secretary after consultation with and the Secretary
of Health and Human Services.’’.
SEC. 727. LUMP-SUM PAYMENTS FOR MEDICAL EXPENSES
OR REPLACEMENT OF LOST RESOURCES.
Section 5(g)(3) of the Food Stamp Act of 1977 (7
U.S.C. 2014(g)(3)) as amended by this Act is further
amended by adding the following new fifth sentence: ‘‘The
Secretary shall also exclude from financial resources, for
364
a period of one year from their receipt, amounts that have
been paid as reimbursements (or payment in advance) for
medical expenses or for the cost of repairing or replacing
resources of the family.’’.
SEC. 728. INDIVIDUAL DEVELOPMENT ACCOUNTS.
Section 5(g)(3) of the Food Stamp Act of 1977 (7
U.S.C. 2014(g)(3)) as amended by this Act is further
amended by adding the following new sixth and seventh
sentences: ‘‘The Secretary shall also exclude from financial
resources amounts, not to exceed $10,000 (including inter-
est) in total, in one or more Individual Development Ac-
counts established in accordance with (A) section 529 of
the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.)
by any member of a household applying for or receiving
assistance under this Act or (B) a demonstration project
conducted under the Individual Development Account
Demonstration Act of 1994, but only such amounts (in-
cluding interest) that were credited to such account in a
month for which assistance was provided under this Act
or aid to families with dependent children was provided
pursuant to part A of title IV of the Social Security Act,
with respect to such individual, or in any month after such
a month. The Secretary shall also exclude from financial
resources, for the month of its receipt and the following
month, a nonrecurring lump-sum payment received by any
365
household member if the household member represents
that the payment will be deposited in an Individual Devel-
opment Account established as described in the preceding
sentence.’’.
SEC. 729. CONFORMING AMENDMENT.
Section 5(d)(8) of the Food Stamp Act of 1977 (7
U.S.C 2014(d)(8)) is amended in the proviso by inserting
‘‘paragraph (3) of subsection (g) of this section or’’ imme-
diately preceding ‘‘other laws’’.
PART C—ECONOMIC INDEPENDENCE
SEC. 731. SHORT TITLE.
This title may be cited as the ‘‘Individual Develop-
ment Account Demonstration Act of 1994’’.
SEC. 732. DECLARATION OF POLICY AND STATEMENT OF
PURPOSE.
(a) DECLARATION OF POLICY.—It is the policy of the
United States—
(1) to eliminate barriers that prevent recipients
of Aid to Families with Dependent Children (AFDC)
from becoming self-sufficient through self-employ-
ment and asset accumulation;
(2) to identify and implement cost-effective
strategies to encourage saving and entrepreneurship
among the broadest possible range of low-income
families, particularly families eligible for AFDC, and
366
that have the potential to reduce Federal spending
on transfers and services to the disadvantaged;
(3) to enhance private-sector opportunities for
low-income families by enabling them to use their
own human and financial resources through expan-
sion of business investment, job creation, home own-
ership, and human capital investment; and
(4) to expand the capacity of local organizations
to provide asset-related services that help people to
help themselves such as savings mechanisms, loan
funds, technical assistance, and entrepreneurial
training.
(b) STATEMENT OF PURPOSE.—The purpose of the
demonstration projects authorized under this title is to
provide for a means of determining—
(1) the social, psychological, and economic ef-
fects of providing low-income individuals the oppor-
tunity to accumulate assets and develop and utilize
entrepreneurial skills; and
(2) the extent to which an asset-based assist-
ance policy may be used to enable individuals with
low-income to achieve economic self-sufficiency.
367
SEC. 733. INDIVIDUAL DEVELOPMENT ACCOUNT DEM-
ONSTRATION PROJECTS.
(a) IN GENERAL.—Not later than one year after the
date of enactment of this Act, any State or local govern-
ment, or any qualified organization may apply to the Ad-
ministrator/Chairperson of the Community Development
Bank and Financial Institutions Fund (hereinafter the
Administrator/Chairperson) for a grant to conduct individ-
ual development account demonstration projects for eligi-
ble persons.
(b) CONTENTS.—Each application shall—
(1) describe the demonstration project;
(2) describe the persons who will participate in
the project;
(3) demonstrate the ability of the applicant—
(A) to assist project participants in achiev-
ing 
economic 
self-sufficiency 
through 
the
project; and
(B) to assist project participants in devel-
oping greater knowledge about savings, invest-
ments, and other financial matters;
(C) to oversee the use of grant funds, in-
cluding the documentation and verification of
start-up expenses in the case of entrepreneurial
assistance; and
(D) to effectively administer the project;
368
(4) in the case of a qualified organization, docu-
ment a commitment by the State in which the
project is to be conducted to provide a specified
amount of funds to the qualified organization for the
project, and any similar commitment made to the
qualified organization by any other non-Federal pub-
lic entity or any private entity;
(5) contain a plan for maintaining data and
other information concerning assistance provided to
project participants sufficient to evaluate the project
and a certification that the applicant will fully co-
operate and provide access to all information con-
cerning the project in connection with any evaluation
of the project conducted pursuant to subsection (1);
and
(6) contain such other information as the Ad-
ministrator/Chair may prescribe.
(c) CRITERIA.—In considering whether to approve an
application, the Administrator/Chairperson shall assess
the following:
(1) The degree to which the project described in
the application is likely to aid project participants in
achieving economic self-sufficiency through activities
requiring qualified expenses. In making such assess-
ment, the Administrator/Chairperson shall consider
369
the overall quality of project activities and shall not
consider any particular kind or combination of such
qualified expenses to be an essential feature of any
project.
(2) The ability of the applicant to responsibly
administer the project.
(3) The amount of funds from non-Federal
sources that are committed to the project.
(4) The adequacy of the plan for maintaining
information necessary to evaluate the project.
(d) APPROVAL.—
(1) The Administrator/Chairperson shall, on a
competitive basis, approve such applications to con-
duct demonstration projects under this section as
the Administrator/Chairperson deems appropriate on
the basis of the criteria described in subsection (c).
(2) No court shall have jurisdiction to review
the approval or nonapproval of any application by
the Administrator/Chairperson.
(e) 
DEMONSTRATION
AUTHORITY; 
ANNUAL
GRANTS.—
(1) DEMONSTRATION
AUTHORITY.—The ap-
proval by the Administrator of an application shall
authorize the applicant (hereinafter the grantee) to
conduct the project for five project years in accord-
370
ance with the approved application and the require-
ments of this section.
(2) ANNUAL
GRANTS.—The Administrator/
Chairperson shall make a grant to each grantee on
the first day of each project year.
(f) RESERVE FUND.—
(1) ESTABLISHMENT.—Each grantee shall es-
tablish a reserve fund that shall be used in accord-
ance with this subsection.
(2) DEPOSITS.—
(A) As soon after receipt as is practicable,
a grantee shall deposit into the reserve fund—
(i) all annual grants made by the Ad-
ministrator/Chairperson;
(ii) all funds provided to the grantee
by any non-Federal public or private entity
to conduct the demonstration project;
(iii) all proceeds from any investments
made pursuant to paragraph (4); and
(iv) all amounts title to which vests in
the grantee pursuant to subsection (h)(5).
(3) EXPENDITURES.—A grantee shall use
amounts in the reserve fund only—
(A) to assist project participants in obtain-
ing the skills and information necessary to
371
achieve economic self-sufficiency through activi-
ties requiring the payment of qualified ex-
penses;
(B) to provide financial assistance in ac-
cordance with subsection (h) to project partici-
pants;
(C) to administer the project; and
(D) to maintain and provide information
necessary for the evaluation of the project pur-
suant to subsection (1).
(4) ACCOUNTING
STANDARDS.—The Adminis-
trator/Chairperson shall prescribe regulations gov-
erning the accounting of amounts deposited in and
withdrawn from reserve funds.
(5) TERMINATION OF PROJECT.—Notwithstand-
ing paragraph (3), upon the termination of any dem-
onstration project approved under this section, re-
maining amounts in the reserve fund established
with respect to such project and remaining invest-
ments made from amounts in the reserve fund shall
be distributed to the Administrator/Chairperson and
each non-Federal public or private entity that con-
tributed to the project in proportion to their con-
tributions.
372
(g) SELECTION OF ELIGIBLE PERSONS TO RECEIVE
ASSISTANCE.—A grantee shall provide individual develop-
ment account assistance to eligible persons whom the
grantee deems to be best situated to benefit from such
assistance, taking into account the amount of grants made
by the Administrator/Chairperson and other funds avail-
able to the grantee for such assistance.
(h) FINANCIAL ASSISTANCE FOR INDIVIDUAL DE-
VELOPMENT ACCOUNTS.—
(1) IN GENERAL.—A grantee shall provide ini-
tial financial assistance to a project participant who
establishes an individual development account, not to
exceed $500 per participant. Such financial assist-
ance shall be deposited in the individual development
account established by a project participant.
(2) MATCHING CONTRIBUTIONS.—The Adminis-
trator/Chairperson or a grantee may make matching
contributions of not less than 50 cents and not more
than $4 for every $1 deposited into an individual de-
velopment account by a project participant, not to
exceed $2,500 for any project participant.
(3) LIMITATION ON USE.—
(A) Financial assistance provided pursuant
to paragraph (1) shall not be available for use
by a project participant until—
374
tion 529(e)(3) of the Internal Revenue Code of 1986
(26 U.S.C. 529(e)(3)), title to all amounts in such
an account, or such portion of an account, attrib-
utable to financial assistance provided pursuant to
paragraph (1) or (2) shall vest in the grantee pro-
viding financial assistance pursuant to paragraph
(1) and such amounts shall be paid to such grantee.
(i) LOCAL CONTROL OVER DEMONSTRATION.—
(1) Each grantee shall, subject to the provisions
of subsection (k), have sole responsibility for the ad-
ministration of demonstration projects approved by
the Administrator/Chairperson.
(2) The Administrator/Chairperson may pre-
scribe such regulations as may be necessary to en-
sure that grantees comply with the terms of ap-
proved applications and the requirements of this sec-
tion.
(j) ANNUAL REPORTS.—
(1) IN GENERAL.—Each grantee shall annually
report to the Administrator/Chairperson concerning
the progress of each approved demonstration project
administered by such grantee. The report shall, at a
minimum—
(A) describe project participants;
375
(B) contain an audited financial statement
for the reserve fund established with respect to
the project;
(C) provide information on amounts depos-
ited in individual development accounts of
project participants to whom such assistance is
provided under the project; and
(D) such other information as the Admin-
istrator/Chairperson may require with respect
to the evaluation of the project pursuant to sub-
section (1).
(2) SUBMISSION.—Reports required by para-
graph (1) shall be submitted annually not later than
the anniversary of the date the Administrator/Chair-
person approved the application for the demonstra-
tion project.
(3) COORDINATION
WITH
STATE
GOVERN-
MENT.—A grantee shall transmit a copy of each re-
port required by paragraph (1) to the Treasurer (or
equivalent official) of the State in which the project
is conducted at the time prescribed by paragraph
(2).
(k) SANCTIONS.—
(1) REVOCATION OF DEMONSTRATION AUTHOR-
ITY.—If the Administrator/Chairperson determines a
376
grantee is not conducting a demonstration project in
accordance with the approved application and the re-
quirements of this section, and has failed to under-
take corrective action satisfactory to the Adminis-
trator/Chairperson, the Administrator/Chairperson
may revoke the approval to conduct the project. A
determination by the Administrator/Chairperson to
revoke the approval for a demonstration project shall
not be subject to review by any court.
(2) ACTIONS REQUIRED UPON REVOCATION.—
(A) If the Administrator/Chairperson re-
vokes approval to conduct a demonstration
project pursuant to paragraph (1), the Adminis-
trator/Chairperson—
(i) shall suspend the project;
(ii) shall take control of the reserve
fund established pursuant to subsection (f)
with respect to such project; and
(iii) shall solicit applications from en-
tities described in subsection (a) to con-
duct the suspended project in accordance
with the approved application (or under
such terms and conditions as the Adminis-
trator may prescribe) and the requirements
of this section.
377
(B) If the Administrator/Chairperson ap-
proves an application to conduct the suspended
project, the Administrator/Chairperson shall
transfer to the new grantee control of the re-
serve fund established pursuant to subsection
(f) for the project, and such grantee shall be
considered to be the original grantee for pur-
poses of this section. The date the Adminis-
trator/Chairperson approved the application of
the new grantee to conduct the suspended
project shall apply for purposes of the annual
reports required by subsection (j).
(C) If the Administrator/Chairperson has
not approved an application to conduct a
project by the date that is one year after ap-
proval to conduct the project was revoked, the
Administrator/Chairperson shall—
(i) terminate the project; and
(ii) distribute remaining amounts in
the reserve fund for such project and in-
vestments made from amounts in the re-
serve fund in accordance with the provi-
sions of subsection (f)(6).
(l) PROJECT EVALUATIONS.—
378
(1) IN GENERAL.—Not later than six months
after the date of enactment of this Act, the Adminis-
trator/Chairperson, in consultation with the Sec-
retary of the Treasury and the Secretary of the De-
partment of Health and Human Services, shall enter
into a contract with an independent organization
(hereinafter ‘‘evaluator’’) for the evaluation of indi-
vidual demonstration projects conducted pursuant to
this section and the effectiveness of assistance pro-
vided to eligible persons pursuant to this section.
(2) EVALUATIONS.—In entering into the con-
tract provided for in paragraph (1), the Adminis-
trator/Chairperson should consider providing for
evaluation of—
(A) the types of information and public
education efforts that attract project partici-
pants;
(B) the accessibility of the demonstration
project by participants and the ease of partici-
pation;
(C) the level of financial assistance re-
quired to stimulate participation in the dem-
onstration project, and whether such level var-
ies among different demographic populations;
379
(D) whether project features utilized in
conjunction with individual development ac-
counts (such as peer support, structured plan-
ning exercises, mentoring, and case manage-
ment) contribute to participation in the project;
(E) the level of self-sufficiency achieved by
project participants as measured by employ-
ment or self-employment rates, earned and in-
vestment income, exit rates, poverty rates, and
recidivism rates, particularly for program par-
ticipants eligible for food stamp benefits and
AFDC;
(F) the reduction in the level of public ex-
penditure on project participants as measured
by changes in overall support payments includ-
ing AFDC, food stamp benefits, Federal child
care assistance, Federal housing assistance,
JOBS, and other benefits, taking into account
costs incurred by the Federal Government in
support of demonstration projects;
(G) the level of asset accumulation by
project participants as measured by savings
rates, net worth, business start-ups, human
capital investments, new homes, number of
loans to low-income and AFDC eligible families,
380
and whether asset accumulation continued after
a subsidy or other assistance;
(H) the economic, psychological, and social
effects of asset accumulation; and
(I) the circumstances concerning and the
extent to which asset accumulation by project
participants contributes to—
(i) a greater sense of security and
control and positive outlook;
(ii) greater household stability;
(iii) increased long-term planning;
(iv) increased efforts to maintain and
develop assets;
(v) greater knowledge about savings,
investments, and other financial matters;
(vi) increased effort and success in
educational achievement within the house-
hold;
(vii) increased specialization in career
development;
(viii) improved social status;
(ix) increased political participation;
(x) increased community involvement;
(xi) increased earned income;
381
(xii) decreased reliance on traditional
forms of public assistance, with particular
emphasis on food stamp benefits and
AFDC; and
(xiii) increased tendency to save dur-
ing and after the period of project partici-
pation.
(3) 
METHODOLOGICAL
REQUIREMENT.—In
evaluating any demonstration project conducted
under this section, the evaluator should obtain such
quantitative data before, during, and after the
project, as is necessary to evaluate the project and
include randomly assigned control groups.
(m) DEFINITIONS.—As used in this section:
(1) 
HOUSEHOLD.—The 
term 
‘‘household’’
means all individuals who share use of a dwelling
unit as primary quarters for living and eating sepa-
rately from other individuals in the living quarters.
(2) NET WORTH.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘‘net worth’’
means, with respect to a household, the aggre-
gate fair market value of all assets that are
owned in whole or in part by any member of the
382
household, less the obligations or debts of any
member of the household.
(B) ASSETS EXCLUDED.—Net worth shall
be determined without taking into account the
fair market value and the obligations or debts
of—
(i) the primary dwelling unit of the
household;
(ii) the motor vehicle having the
greatest equity value; and
(iii) items essential for daily living,
such as clothes, furniture, and similar
items of limited value.
(3) INDIVIDUAL
DEVELOPMENT
ACCOUNT.—
The term ‘‘individual development account’’ shall
have the same meaning given such term in section
529 of the Internal Revenue Code of 1986 (26
U.S.C. 529).
(4) PROJECT YEAR.—The term ‘‘project year’’
means with respect to a demonstration project, any
of the six consecutive 12-month periods beginning on
the date the project is approved by the Adminis-
trator.
(5) 
QUALIFIED
ORGANIZATION.—The 
term
‘‘qualified organization’’ means a community devel-
383
opment financial institution as defined in section of
the Community Development Banking and Financial
Institutions Act of 1994.
(6) ELIGIBLE
PERSON
DEFINED.—The term
‘‘eligible person’’ means any person who is a member
of a household that meets all of the following re-
quirements:
(A) EITC TEST.—The household has at
least one individual who is an eligible individual
within the meaning of section 32(c)(1) of the
Internal Revenue Code of 1986 for purposes of
the earned income tax credit.
(B) INCOME TEST.—The household did not
have adjusted gross income (as determined pur-
suant to the Internal Revenue Code of 1986) in
the immediately preceding calendar year in ex-
cess of $18,000.
(C) NET WORTH TEST.—The net worth of
the household, as of the close of the imme-
diately preceding calendar year, did not exceed
$20,000.
(7) QUALIFIED EXPENSES.—The term ‘‘quali-
fied expenses’’ shall have the same meaning as pro-
vided in section 529(c)(1) of the Internal Revenue
Code of 1986 (26 U.S.C. 529(C)(1)).
384
(n) AUTHORIZATION OF APPROPRIATIONS.—To carry
out the purposes of this section there are authorized to
be appropriated to the Administrator/Chairperson—
(1) $10,000,000 for fiscal year 1997,
(2) $20,000,000 for each of fiscal years 1998,
1999, 2000, and 2001, and
(3) $10,000,000 for fiscal year 2002.
SEC. 734. INDIVIDUAL DEVELOPMENT ACCOUNTS.
(a) IN GENERAL.—Subchapter F of chapter 1 of the
Internal Revenue Code of 1986 (relating to additional
itemized deductions for individuals) is amended by adding
at the end of the following new part:
‘‘PART VIII—INDIVIDUAL DEVELOPMENT ACCOUNTS
‘‘SEC. 529. INDIVIDUAL DEVELOPMENT ACCOUNTS.
‘‘(a) ESTABLISHMENT OF ACCOUNTS.—
‘‘(1) IN GENERAL.—An individual development
account may be established by or on behalf of an eli-
gible individual for the purpose of accumulating
funds to pay the qualified expenses of such individ-
ual.
‘‘(2) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ means an individual—
‘‘(A) for whom assistance is provided
under section 733(h) of the Individual Develop-
ment Account Demonstration Act;
385
‘‘(B) receiving assistance under 42 U.S.C.
601 et seq.; or
‘‘(C) receiving assistance under 7 U.S.C.
2011 et seq.
‘‘(b) LIMITATIONS.—
‘‘(1) ACCOUNT TO BENEFIT ONE INDIVIDUAL.—
An individual development account may not be es-
tablished for the benefit of more than one individual.
‘‘(2) MULTIPLE
ACCOUNTS.—If, at any time
during a calendar year, two or more individual devel-
opment accounts are maintained for the benefit of
an eligible individual, such individual shall be treat-
ed as an eligible individual for such year only with
respect to the account first established.
‘‘(3) WHO MAY CONTRIBUTE.—Contributions to
an individual development account, other than con-
tributions made pursuant to section 733(h) of the
Individual Development Account Demonstration Act,
may be made only by an eligible individual and in
the case of an eligible individual described in sub-
section (e)(2)(A), by another eligible individual who
is a member of the same household as the eligible
individual.
‘‘(4) ANNUAL LIMIT.—Contributions to an indi-
vidual development account by or on behalf of an eli-
386
gible individual for any taxable year shall not exceed
the lesser of $1,000 or 100 percent of the earned in-
come, within the meaning of section 32(c)(2), of the
eligible individual making such contribution. No con-
tribution to the account under section 733(h) of the
Individual Development Account Demonstration Act
shall be taken into account for the purposes of this
limitation. No contribution may be made to an indi-
vidual development account by or on behalf of any
individual after such individual has ceased to be an
eligible individual.
‘‘(5) LIMIT ON TOTAL CONTRIBUTIONS.—Total
contributions to an individual development account
for all years may not exceed $10,000.
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For the
purposes of this section—
‘‘(1) QUALIFIED EXPENSES.—In the case of an
eligible individual described in subsection (a)(2)(A),
the term ‘qualified expenses’ means one or more of
the expenses described in subparagraphs (A), (B),
(C), and (D), as provided by the entity providing as-
sistance to the eligible individual under section
733(h) of the Individual Development Account Dem-
onstration Act. In the case of any other eligible indi-
vidual, the term ‘qualified expenses’ means one or
387
more of the expenses described in subparagraphs
(A), (B), (C), and (D).
‘‘(A) POST-SECONDARY
EDUCATION
EX-
PENSES.—Post-secondary educational expenses
paid from an individual development account di-
rectly to an eligible educational institution. For
the purposes of this subparagraph—
‘‘(i) the term ‘post-secondary edu-
cational expenses’ means—
‘‘(I) tuition and fees required for
the enrollment or attendance of a stu-
dent at an eligible educational institu-
tion;
‘‘(II) fees, books, supplies, and
equipment required for courses of in-
struction at an eligible educational in-
stitution; and
‘‘(III) a reasonable allowance for
meals, lodging, transportation, and
child care, while attending an eligible
educational institution; and
‘‘(ii) the term ‘eligible educational in-
stitution’ means—
‘‘(I) an institution described in
section 481(a)(1) or 1201(a) of the
388
Higher Education Act of 1965 (20
U.S.C. 1088(a)(1) or 1141(a)), as
such sections are in effect on the date
of the enactment of this section; and
‘‘(II) an area vocational edu-
cation school (as defined in subpara-
graph (C) or (D) of section 521(4) of
the Carl D. Perkins Vocational and
Applied Technology Education Act
Amendments of 1990 (20 U.S.C.
2471(4))) in any State (as defined in
section 521(33) of such Act), as such
section is in effect on the date of the
enactment of this section.
‘‘(B) FIRST-HOME
PURCHASE.—Qualified
acquisition costs with respect to a qualified
principal residence for a qualified first-time
homebuyer, if paid from an individual develop-
ment account directly to the persons to whom
the amounts are due. For purposes of this sub-
paragraph—
‘‘(i) the term ‘qualified acquisition
costs’ means the costs of acquiring, con-
structing, or reconstructing a residence,
389
and includes any usual or reasonable set-
tlement, financing, or other closing costs;
‘‘(ii) the term ‘qualified principal resi-
dence’ means a principal residence (within
the meaning of section 1034), the qualified
acquisition costs of which do not exceed 80
percent of the average area purchase price
applicable to such residence (determined in
accordance with paragraphs (2) and (3) of
section 143(e));
‘‘(iii) the term ‘qualified first-time
home-buyer’ means a taxpayer (and, if
married, the taxpayer’s spouse) who has no
present ownership interest in a principal
residence during the three-year period end-
ing on the date on which a binding con-
tract was entered into to acquire, con-
struct, or reconstruct the principal resi-
dence to which this subparagraph applies.
‘‘(C) 
BUSINESS
CAPITALIZATION.—
Amounts paid from an individual development
account directly into a business capitalization
account which is established in a federally in-
sured financial institution and is restricted to
390
use solely for qualified business capitalization
expenses. For purposes of this subparagraph—
‘‘(i) the term ‘qualified business cap-
italization expenses’ means qualified ex-
penditures for the capitalization of a quali-
fied business pursuant to a qualified plan;
‘‘(ii) the term ‘qualified expenditures’
means expenditures included in a qualified
plan, including capital, plant, equipment,
working capital, and inventory expenses;
‘‘(iii) the term ‘qualified business’
means any business that does not con-
travene any law or public policy (as deter-
mined by the Administrator of the Com-
munity Development Bank and Financial
Institutions Fund);
‘‘(iv) the term ‘qualified plan’ means
a business plan
‘‘(I) that is approved by a finan-
cial institution, or any other institu-
tion designated as a community devel-
opment financial institution, having
demonstrated fiduciary integrity;
‘‘(II) that includes a description
of services or goods to be sold, a mar-
391
keting plan, and projected financial
statements; and
‘‘(III) that may require the eligi-
ble individual to obtain assistance of
an experienced entrepreneurial advi-
sor.
‘‘(D) TRANSFERS
TO
IDAS
OF
FAMILY
MEMBERS.—Amounts in an individual develop-
ment account may be paid or transferred di-
rectly into another such account established for
the benefit of an eligible individual who is—
‘‘(i) the taxpayer’s spouse; or
‘‘(ii) any dependent of the taxpayer
with respect to whom the taxpayer is al-
lowed a deduction under section 151.
‘‘(2) INDIVIDUAL
DEVELOPMENT
ACCOUNT.—
The term ‘individual development account’ means a
trust created or organized in the United States ex-
clusively for the purpose of paying the qualified ex-
penses of an individual who was an eligible individ-
ual at the time when contributions were made to
such trust, but only if the written instrument creat-
ing the trust meets the following requirements:
‘‘(A) No contribution will be accepted un-
less it is in cash or check.
394
and is made not later than the time prescribed by
law for filing the return for such taxable year (not
including extensions thereof).
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this subsection, any amount paid or distrib-
uted out of an individual development account shall
be included in gross income of the payee or distribu-
tee for the taxable year in the manner provided in
section 72.
‘‘(2) TREATMENT
OF
ASSISTANCE
CONTRIBU-
TIONS.—
‘‘(A) DISTRIBUTIONS USED TO PAY QUALI-
FIED EXPENSES.—If a distribution or payment
from an individual development account is used
exclusively to pay the qualified expenses in-
curred by the individual for whose benefit the
account is established, then, for purposes of
section 72, assistance contributions made to
such individual development account under sec-
tion 733(h) of the Individual Development Ac-
count Demonstration Act shall be treated in the
same manner as contributions made by the in-
dividual.
395
‘‘(B) DISTRIBUTIONS NOT USED TO PAY
QUALIFIED
EXPENSES.—If a distribution or
payment from an individual development ac-
count is not used exclusively to pay the quali-
fied expenses incurred by the individual for
whose benefit the account is established, then,
for purposes of section 72, assistance contribu-
tions made to such individual development ac-
count under section 733(h) of the Individual
Development Account Demonstration Act shall
be treated in the same manner as earnings on
the account.
‘‘(e) TAX TREATMENT OF ACCOUNTS.—
‘‘(1) EXEMPTION
FROM
TAX.—An individual
development account is exempt from taxation under
this subtitle unless such account has ceased to be an
individual development account by reason of para-
graph (2). Notwithstanding the preceding sentence,
any such account is subject to the taxes imposed by
section 511 (relating to imposition of tax on unre-
lated business income of charitable, etc. organiza-
tions).
‘‘(2) LOSS OF EXEMPTION OF ACCOUNT WHERE
INDIVIDUAL
ENGAGES
IN
PROHIBITED
TRANS-
ACTION.—
396
‘‘(A) IN GENERAL.—If the individual for
whose benefit an individual development ac-
count is established or any individual who con-
tributes to such account engages in any trans-
action prohibited by section 4975 with respect
to the account, the account shall cease to be an
individual development account as of the first
day of the taxable year (of the individual so en-
gaging in such transaction) during which such
transaction occurs.
‘‘(B) ACCOUNT TREATED AS DISTRIBUTING
ALL ITS ASSETS.—In any case in which any ac-
count ceases to be an individual development
account by reason of subparagraph (A) as of
the first day of any taxable year—
‘‘(i) all assets in the account on such
first day that are attributable to assistance
provided under section 733(h)(1) and (2)
of the Individual Development Account
Demonstration Act shall be paid as pro-
vided in section 733(h)(5) of such Act; and
‘‘(ii) the provisions of subsection
(d)(1) shall apply as if there was a dis-
tribution on such first day in an amount
397
equal to the fair market value of all other
assets in the account on such first day.
‘‘(3) EFFECT OF PLEDGING ACCOUNT AS SECU-
RITY.—If, during any taxable year, the individual for
whose benefit an individual development account is
established, or any individual who contributes to
such account, uses the account or any portion there-
of as security for a loan—
‘‘(A) an amount equal to the part of the
portion so used which is attributable to assist-
ance provided under section 733(h)(1) and (2)
of the Individual Account Demonstration Act
shall be paid as provided in section 733(h)(5)
of such Act; and
‘‘(B) the remaining part of the portion so
used shall be treated as distributed under the
provisions of subsection (d)(1) to the individual
so using such portion.
‘‘(f) ADDITIONAL TAX ON CERTAIN AMOUNTS IN-
CLUDED IN GROSS INCOME.—
‘‘(1) DISTRIBUTION NOT USED FOR QUALIFIED
EXPENSES.—In the case of any payment or distribu-
tion that is not used exclusively to pay qualified ex-
penses incurred by the eligible individual for whose
benefit the account is established, the tax liability of
398
each payee or distributee under this chapter for the
taxable year in which the payment or distribution is
received shall be increased by an amount equal to 10
percent of the amount of the distribution that is in-
cluded in the gross income of such payee or distribu-
tee for such taxable year.
‘‘(2) 
DISQUALIFICATION
CASES.—If 
any
amount includible in the gross income of an individ-
ual for a taxable year because such amount is re-
quired to be treated as a distribution under para-
graph (2) or (3) of subsection (e), the tax liability
of such individual under this chapter for such tax-
able year shall be increased by an amount equal to
10 percent of such amount required to be treated as
a distribution and included in the gross income of
such individual.
‘‘(3) DISABILITY
OR
DEATH
CASES.—Para-
graphs (1) and (2) shall not apply if the payment
or distribution is made after the individual for whose
benefit the individual development account becomes
disabled within the meaning of section 72(m)(7) or
dies.
‘‘(g) COMMUNITY PROPERTY LAWS.—This section
shall be applied without regard to any community property
laws.
399
‘‘(h) CUSTODIAL ACCOUNTS.—For purposes of this
section, a custodial account shall be treated as a trust if
the assets of such account are held by a bank (as defined
in section 408(n)) or another person who demonstrates,
to the satisfaction of the Administrator of the Community
Development Bank and Financial Institutions Fund, that
the manner in which he will administer the account will
be consistent with the requirements of this section, and
if the custodial account would, except for the fact that it
is not a trust, constitute an individual development ac-
count described in subsection (c)(2). For purposes of this
title, in the case of a custodial account treated as a trust
by reason of the preceding sentence, the custodian of such
account shall be treated as the trustee thereof.
‘‘(i) REPORTS.—
‘‘(1) The trustee of an individual development
account established by or on behalf of an eligible in-
dividual described in subsection (a)(2)(A) shall—
‘‘(A) prepare reports regarding the account
with respect to contributions, distributions, and
any other matter required by the Administrator
of the Community Development Bank and Fi-
nancial Institutions Fund under regulations;
and
400
‘‘(B) submit such reports, at the time and
in the manner prescribed by the Administrator
of the Community Development Bank and Fi-
nancial Institutions Fund in regulations to—
‘‘(i) the individual for whose benefit
the account is maintained;
‘‘(ii) the organization providing assist-
ance to the individual under section 733(h)
of the Individual Development Account
Demonstration Act; and
‘‘(iii) the Administrator of the Com-
munity Development Bank and Financial
Institutions Fund.
‘‘(2) The trustee of any individual development
account shall make such reports regarding such ac-
count to the Secretary and to the individual for
whom the account is, or is to be, maintained with re-
spect to contributions (and the years to which they
relate), distributions, and such other matters as the
Secretary may require under forms or regulations.
The reports required by this subsection—
‘‘(A) shall be filed at such time and in
such manner as the Secretary prescribes in
such forms or regulations, and
‘‘(B) shall be furnished to individuals—
401
‘‘(i) not later than January 31 of the
calendar year following the calendar year
to which such reports relate, and
‘‘(ii) in such manner as the Secretary
prescribes in such forms or regulations.’’.
(b) CONTRIBUTION NOT SUBJECT
TO
THE GIFT
TAX.—Section 2503 of the Internal Revenue Code of 1986
(26 U.S.C. 2503) (relating to taxable gifts) is amended
by adding at the end thereof the following new subsection:
‘‘(h) INDIVIDUAL DEVELOPMENT ACCOUNTS.—Any
contribution made by an individual to an individual devel-
opment account described in section 529(c)(2) shall not
be treated as a transfer of property by gift for purposes
of this chapter.’’.
(c) TAX ON PROHIBITED TRANSACTIONS.—Section
4975 of the Internal Revenue Code of 1986 (26 U.S.C.
4975) (relating to prohibited transactions) is amended—
(1) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) SPECIAL RULE FOR INDIVIDUAL DEVELOP-
MENT ACCOUNTS.—An individual for whose benefit
an individual development account is established and
any contributor to such account shall be exempt
from tax imposed by this section with respect to any
transaction concerning such account (which would
402
otherwise be taxable under this section) if, with re-
spect to such transaction, the account ceases to be
an individual development account by reason of sec-
tion 529(e)(2)(A) to such account.’’; and
(2) in subsection (e)(1), by inserting ‘‘, an indi-
vidual development account described in section
529(c)(2)’’ after ‘‘section 408(a)’’.
(d) INFORMATION REPORTING.—Section 6047 of the
Internal Revenue Code of 1986 (26 U.S.C. 6693) (relating
to information returns) is amended by adding at the end
of subsection (c) the following new sentence: ‘‘To the ex-
tent provided by forms or regulations prescribed by the
Secretary, the provisions of this section shall apply to any
transaction of any trust described in section 529.’’.
(e) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL
DEVELOPMENT ACCOUNTS.—Section 6693 of the Internal
Revenue Code of 1986 (26 U.S.C. 6693) (relating to fail-
ure to provide reports on individual retirement accounts
or annuities) is amended—
(1) in the heading of such section, by inserting
‘‘OR
ON
INDIVIDUAL
DEVELOPMENT
ACCOUNTS’’
after ‘‘ANNUITIES’’; and
(2) by adding at the end of subsection (a) the
following new sentence: ‘‘The person required by sec-
tion 529(i) to file a report regarding an individual
403
development account at the time and in the manner
required by such section shall pay a penalty of $50
for each failure, unless it is shown that such failure
is due to reasonable cause.’’.
(f) SPECIAL RULE FOR DETERMINING AMOUNTS OF
SUPPORT FOR DEPENDENT.—Section 152(b) of the Inter-
nal Revenue Code of 1986 (26 U.S.C. 152(b)) (relating
to definition of dependent) is amended by adding at the
end the following new paragraph:
‘‘(6) A distribution from an individual develop-
ment account described in section 529(c)(2) used ex-
clusively to pay qualified expenses described in sec-
tion 529(c)(1) of the individual for whose benefit the
account is established shall not be taken into ac-
count in determining support for such individual for
purposes of this section.’’.
(g) CLERICAL AMENDMENTS.—
(1) The table of parts for subchapter F of
chapter 1 of such Code is amended by inserting at
the end the following new item:
‘‘PART VIII. INDIVIDUAL DEVELOPMENT ACCOUNTS.’’.
(2) The table of sections for subchapter B of
chapter 68 of such Code is amended by amending
the item relating to section 6693 to read as follows:
‘‘Sec. 6693. Failure to provide reports on individual development accounts or an-
nuities or on individual development accounts.’’.
404
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to contributions made after the en-
actment of the Act.
PART D—ADVANCE EITC STATE
DEMONSTRATIONS
SEC. 741. ADVANCE PAYMENT OF EARNED INCOME TAX
CREDIT THROUGH STATE DEMONSTRATION
PROGRAMS.
(A) IN GENERAL.—Section 3507 (relating to the ad-
vance payment of the earned income tax credit) of the In-
ternal Revenue Code of 1986 is amended by adding at the
end the following subsection (g);
‘‘(g) STATE DEMONSTRATIONS.—
‘‘(1) IN GENERAL.—In lieu of receiving earned
income advance amounts from an employer under
subsection (a), a participating resident shall receive
advance earned income payments from a responsible
State agency pursuant to a State Advance Payment
Program that is designated pursuant to paragraph
(2).
‘‘(2) DESIGNATIONS.—
‘‘(A) IN
GENERAL.—From among the
States submitting proposals satisfying the re-
quirements of subsection (g)(3), the Secretary
(in consultation with the Secretary of Health
405
and Human Services) may designate not more
than 4 State Advance Payment Demonstra-
tions. States selected for the demonstrations
may have, in the aggregate, no more than 5
percent of the total number of household par-
ticipating in the program under the Food
Stamp program in the immediately preceding
fiscal year, Administrative costs of a State in
conducting a demonstration under this section
may be included for matching under section
403(a) of the Social Security Act and section
16(a) of the Food Stamp Act of 1977.
‘‘(B) 
WHEN
DESIGNATION
MAY
BE
MADE.—Any designation under this paragraph
shall be made no later than December 31,
1995.
‘‘(C) PERIOD FOR WHICH DESIGNATION IS
IN EFFECT.—
‘‘(i) 
IN
GENERAL.—Designations
made under this paragraph shall be effec-
tive for advance earned income payments
made after December 31, 1995, and before
January 1, 1999.
‘‘(ii) SPECIAL RULES.—
406
‘‘(I) REVOCATION
OF
DESIGNA-
TIONS.—The Secretary may revoke
the designation under this paragraph
if the Secretary determines that the
State is not complying substantially
with the proposal described in para-
graph (3) submitted by the State.
‘‘(II) AUTOMATIC
TERMINATION
OF DESIGNATIONS.—Any failure by a
State to comply with the reporting re-
quirements described in paragraphs
(3)(F) and (3)(G) has the effect of
immediately terminating the designa-
tion under this paragraph (2) and
rendering paragraph (5)(A)(ii) inap-
plicable to subsequent payments.
‘‘(3) PROPOSALS.—No State may be designated
under subsection (g)(2) unless the State’s proposal
for such designation—
‘‘(A) identifies the responsible State agen-
cy,
‘‘(B) describes how and when the advance
earned income payments will be made by that
agency, including a description of any other
407
State or Federal benefits with which such pay-
ments will be coordinated,
‘‘(C) describes how the State will obtain
the information on which the amount of ad-
vance earned income payments made to each
participating resident will be determined in ac-
cordance with paragraph (4),
‘‘(D) describes how State residents who
will be eligible to receive advance earned income
payments will be selected, notified of the oppor-
tunity to receive advance earned income pay-
ments from the responsible State agency, and
given the opportunity to elect to participate in
the program,
‘‘(E) describes how the State will verify, in
addition to receiving the certifications and
statement described in paragraph (7)(D)(iv),
the eligibility of participating residents for the
earned tax credit,
‘‘(F) commits the State to furnishing to
each participating resident to the Secretary by
January 31 of each year a written statement
showing—
408
‘‘(i) the name and taxpayer identifica-
tion number of the participating resident,
and
‘‘(ii) the total amount of advance
earned income payments made to the par-
ticipating resident during the prior cal-
endar year,
‘‘(G) commits the State to furnishing to
the Secretary by December 1 of each year a
written statement showing the name and tax-
payer identification number of each participat-
ing resident,
‘‘(H) commits the State to treat the ad-
vanced earned income payments as described in
subsection (g)(5) and any repayments of exces-
sive advance earned income payments as de-
scribed in subsection (g)(6),
‘‘(I) commits the State to assess the devel-
opment and implementation of its State Ad-
vance Payment Program, including an agree-
ment to share its findings and lessons with
other interested States in a manner to be de-
scribed by the Secretary, and
‘‘(J) is submitted to the Secretary on or
before June 30, 1995.
409
‘‘(4) AMOUNT
AND
TIMING
OF
ADVANCE
EARNED INCOME PAYMENTS.—
‘‘(A) AMOUNT.—
‘‘(i) IN
GENERAL.—The method for
determining the amount of advance earned
income payments made to each participat-
ing resident is to conform to the full extent
possible with the provisions of subsection
(c).
‘‘(ii) SPECIAL RULE.—A State may,
at its election, apply the rules of subsection
(c)(2)(B) by substituting ‘between 60 per-
cent and 75 percent of the credit percent-
age in effect under section 32(b)(1) for an
individual with the corresponding number
of qualifying children’ for ‘60 percent of
the credit percentage in effect under sec-
tion 32(b)(1) for such an eligible individual
with 1 qualifying child’ in clause (i) and
‘the same percentage (as applied in clause
(i))’ for ‘60 percent’ in clause (ii).
‘‘(B) TIMING.—The frequency of advance
earned income payments may be made on the
basis of the payroll periods of participating resi-
dents, on a single statewide schedule, or on any
410
other reasonable basis prescribed by the State
in its proposal; however, in no event may ad-
vance earned income payments be made to any
participating resident less frequently than on a
calendar-quarter basis.
‘‘(5) PAYMENTS TO BE TREATED AS PAYMENTS
OF WITHHOLDING AND FICA TAXES.—
‘‘(A) IN GENERAL.—For purposes of this
title, advance earned income payments during
any calendar quarter—
‘‘(i) shall neither be treated as a pay-
ment of compensation nor be included in
gross income, and
‘‘(ii) shall be treated as made out of—
‘‘(I) amounts required to be de-
ducted by the State and withheld for
the calendar quarter by the State
under section 3401 (relating to wage
withholding), and
‘‘(II) amounts required to be de-
ducted for the calendar quarter under
section 3102 (relating to FICA em-
ployee taxes), and
‘‘(III) amounts of the taxes im-
posed on the State for the calendar
411
quarter under section 3111 (relating
to FICA employer taxes),
as if the State had paid to the Secretary,
on the day on which payments are made to
participating residents, an amount equal to
such payments.
‘‘(B) ADVANCE PAYMENTS EXCEED TAXES
DUE.—If for any calendar quarter the aggre-
gate amount of advance earned income pay-
ments made by the responsible State agency
under a State Advance Payment Program ex-
ceeds the sum of the amounts referred to in
subparagraph (A)(ii) (without regard to para-
graph (6)(A)), each such advance earned in-
come payment shall be reduced by an amount
which bears the same ratio to such excess as
such advance earned income payment bears to
the aggregate amount of all such advance
earned income payments.
‘‘(6) STATE
REPAYMENT
OF
EXCESSIVE
AD-
VANCE EARNED INCOME PAYMENTS.—
‘‘(A) IN GENERAL.—Notwithstanding any
other provision of law, in the case of an exces-
sive advance earned income payment a State
shall be treated as having deducted and with-
412
held under section 3401 (relating to wage with-
holding), and therefore is required to pay to the
United States, the repayment amount during
the repayment calendar quarter.
‘‘(B) EXCESSIVE
ADVANCE
EARNED
IN-
COME PAYMENT.—For purposes of this section,
an excessive advance income payment is that
portion of any advance earned income payment
that, when combined with other advance earned
income payments previously made to the same
participating resident during the same calendar
year, exceeds the amount of earned income tax
credit to which that participating resident is en-
titled under section 32 for that year.
‘‘(C) REPAYMENT
AMOUNT.—The repay-
ment amount is equal to 50 percent of the ex-
cess of—
‘‘(i) excessive advance earned income
payments made by a State during a par-
ticular calendar year, over
‘‘(ii) the sum of—
‘‘(I) 4 percent of all advance
earned income payments made by the
State during that calendar year, and
413
‘‘(II) 
the 
excessive 
advance
earned income payments made by the
State during that calendar year that
have been collected from participating
residents by the Secretary.
‘‘(D) REPAYMENT CALENDAR QUARTER.—
The repayment calendar quarter is the second
calendar quarter of the third calendar year
after the calendar year in which an excessive
earned income payment is made.
‘‘(7) DEFINITIONS.—For purposes of this sec-
tion—
‘‘(A) STATE
ADVANCE
PAYMENT
PRO-
GRAM.—The term ‘State Advance Payment
Program’ means the program described in a
proposal submitted for designation under para-
graph (1) and designated by the Secretary
under paragraph (2).
‘‘(B) RESPONSIBLE STATE AGENCY.—The
term ‘responsible State agency’ means the sin-
gle State agency that will be making the ad-
vance earned income payments to residents of
the State who elect to participate in a State Ad-
vance Payment Program.
414
‘‘(C) ADVANCE
EARNED
INCOME
PAY-
MENTS.—The term ‘advance earned income
payments’ means an amount paid by a respon-
sible State agency to residents of the State pur-
suant to a State Advance Payment Program.
‘‘(D) 
PARTICIPATING
RESIDENT.—The
term ‘participating resident’ means an individ-
ual who—
‘‘(i) is a resident of a State that has
in effect a designated State Advance Pay-
ment Program,
‘‘(ii) makes the election described in
paragraph (3)(C) pursuant to guidelines
prescribed by the State,
‘‘(iii) certifies to the State the number
of qualifying children the individual has,
and
‘‘(iv) provides to the State the certifi-
cations and statement set forth in sub-
sections (b)(1), (b)(2), (b)(3), and (b)(4)
(except that for purposes of this clause
(iv), the term ‘any employer’ shall be sub-
stituted for ‘another employer’ in sub-
section (b)(3)), along with any other infor-
mation required by the State.’’.
415
(b) TECHNICAL ASSISTANCE.—The Secretaries of
Treasury and Health and Human Services shall jointly en-
sure that technical assistance is provided to State Advance
Payment Programs and that these programs are rigor-
ously evaluated.
(c) ANNUAL REPORTS.—The Secretary shall issue
annual reports detailing the extent to which—
(1) residents participate in the State Advance
Payment Programs,
(2) participating residents file Federal and
State tax returns,
(3) participating residents report accurately the
amount of the advance earned income payments
made to them by the responsible State agency dur-
ing the year, and
(4) recipients of excessive advance earned in-
come payments repaid those amounts.
The report shall also contain an estimate of the amount
of advance earned income payments made by each respon-
sible State agency but not reported on the tax returns of
a participating resident and the amount of excessive ad-
vance earned income payments.
(d) AUTHORIZATION OF APPROPRIATIONS.—For pur-
poses of providing technical assistance described in sub-
section (b), preparing the reports described in subsection
416
(c), and providing grants to States in support of des-
ignated State Advance Payment Programs, there are au-
thorized to be appropriated in advance to the Secretary
of the Treasury and the Secretary of Health and Human
Services a total of $1,400,000 for fiscal years 1996
through 1999.
TITLE VIII—SELF EMPLOYMENT/
MICROENTERPRISE DEMONSTRATIONS
SEC. 801. DEMONSTRATION PROGRAM TO PROVIDE SELF-
EMPLOYMENT OPPORTUNITIES TO WELFARE
RECIPIENTS AND LOW-INCOME INDIVIDUALS.
(a) IN GENERAL.—The Secretary of Health and
Human Services (hereinafter in this section referred to as
the ‘‘Secretary’’) and the Administrator of the Small Busi-
ness Administration (hereinafter in this section referred
to as the ‘‘Administrator’’), shall, subject to the availabil-
ity of appropriations in advance for this purpose, jointly
develop a self-employment/microenterprise demonstration
program for at least five years in length that will build
on the experience of microenterprise and self-employment
programs previously carried out by the Federal Govern-
ment and other entities. The program shall be designed—
(1) to identify regulatory and other barriers
that prevent welfare recipients and low-income indi-
viduals from increasing self-sufficiency through self-
417
employment and microenterprise development, and
to identify and test effective means to eliminate such
barriers;
(2) to develop and evaluate promising program
models, based upon existing effective practices,
which have the potential to (A) increase the number
of welfare recipients and low-income individuals who
become self-sufficient or increase self-sufficiency
through self-employment and microenterprise devel-
opment and (B) reduce Federal spending on transfer
payments and services to welfare recipients and low-
income individuals; and
(3) to demonstrate the potential for expanding
the capacity of local organizations to provide serv-
ices, technical assistance and loans which help wel-
fare recipients and low-income individuals start or
expand self-employment or microenterprises.
(b) USE OF INTERMEDIARIES.—To carry out such
program, the Secretary and Administrator shall jointly
enter into agreements with local intermediaries that—
(1) apply to participate in such program, and
(2) demonstrate that they are capable of imple-
menting the provisions of the agreement.
(c) PROGRAM DESIGN.—In order to facilitate a ran-
domized evaluation, as provided for in subsection (i)(1)
418
below, the Secretary and Administrator shall identify
those predominant and effective program models currently
used by existing intermediaries to provide self-employment
and related services to low-income individuals, and shall
design the demonstration program in order to evaluate at
least two distinct types of program models with contrast-
ing levels of technical assistance. In designing the dem-
onstration program, the Secretary and Administrator shall
consult with appropriate parties, such as—
(1) State and local agencies and private, non-
profit organizations with experience in administering
self-employment programs that serve low-income in-
dividuals; and
(2) other persons with recognized expertise in
conducting randomized evaluations of self-employ-
ment programs or other related programs.
(d) ASSISTANCE TO INTERMEDIARIES.—
(1) IN GENERAL.—To carry out the program,
the Secretary and Administrator may provide the
following assistance to intermediaries selected to
participate in the program—
(A) grants for providing technical assist-
ance to eligible individuals, for operating costs
and for costs associated with participating in
419
the evaluation provided for in subsection (i)(1)
below;
(B) loan guarantees; and
(C) loans.
(2) 
TECHNICAL
ASSISTANCE
TO
INTER-
MEDIARIES.—The Secretary and Administrator may
provide grants to intermediaries or third-party tech-
nical assistance providers for the provision of tech-
nical assistance to intermediaries selected to partici-
pate in this program.
(3) TERMINATION OF ASSISTANCE.—Assistance
awarded pursuant to this section may fully fund
project periods of up to five years. The Secretary
and Administrator may revoke, terminate or reduce
assistance to an intermediary if the intermediary
fails to comply with the terms of any agreement it
enters into with the Secretary and Administrator.
(e) SELECTION OF INTERMEDIARIES.—
(1) IN GENERAL.—In determining whether to
enter into an agreement with an intermediary under
this section, the Secretary and Administrator shall
take into consideration—
(A) the intermediary’s record of success in
serving low-income individuals;
420
(B) the intermediary’s record of success in
providing technical assistance or loans to low-
income individuals for the purpose of self-em-
ployment;
(C) the nature, types, and costs of tech-
nical assistance and/or lending methods the
intermediary will employ in serving the target
population;
(D) the intermediary’s ability to obtain
matching funds from private sources; and
(E) such other matters as the Secretary
and Administrator deem appropriate.
(2) ADDITIONAL
PROGRAMS.—In addition to
the demonstration program provided for in sub-
section (c) above, the Secretary and Administrator
may select up to five intermediaries that would em-
ploy program models that would operate independ-
ently of the randomized evaluation provided for in
subsection (i)(1) below, where such program models
demonstrate promising, innovative strategies that
could not readily be evaluated by a randomized ex-
perimental design.
(f) ELIGIBLE INDIVIDUALS.—An individual eligible to
participate in a program conducted under this section is
any low-income individual or welfare recipient. The Sec-
421
retary and Administrator shall ensure that an appropriate
minimum percentage of welfare recipients will participate
in each demonstration program funded under this section.
(g) PROVISIONS OF AGREEMENTS.—Any agreement
entered into with an intermediary under this section shall
provide that—
(1) the intermediary has or will have an agree-
ment with the State agency responsible for admin-
istering the job opportunities and basic skills train-
ing program (as provided for under part F of title
IV of the Social Security Act) (hereinafter in this
section referred to as the ‘‘JOBS’’ programs) and
the Work Program (as provided under part G of
title IV of such Act) such that JOBS and Work Pro-
gram funds will be used to provide support services,
including training and technical assistance, to wel-
fare recipients who are participating in the dem-
onstration programs funded under this section;
(2) the intermediary will implement a program
that is approved by the Secretary and Adminis-
trator;
(3) the intermediary will cooperate with any
independent evaluator(s) selected pursuant to sub-
section (i) below; and
422
(4) the intermediary will meet any other obliga-
tions required by the Secretary and Administrator,
including any fund matching requirements.
(h) PROGRAM ADMINISTRATION.—
(1) IN GENERAL.—The Secretary and Adminis-
trator shall enter into a memorandum of under-
standing for the joint administration of the dem-
onstration programs provided for by this section.
The designation of intermediaries to participate in
the program shall be completed no later than 12
months after the date of appropriation of funds for
this Act.
(2) COORDINATION WITH OTHER AGENCIES.—
The Secretary and Administrator shall also coordi-
nate and consult with the Secretaries of the Depart-
ment of Agriculture, the Department of Housing
and Urban Development, and the Department of
Labor, on regulatory or other reforms or coordinated
efforts by such agencies that may further eliminate
barriers 
to 
self-employment 
and 
legitimize
microenterprise development by low-income individ-
uals and welfare recipients.
(i) EVALUATION AND REPORT.—
(1) IN GENERAL.—The Secretary, in consulta-
tion with the Administrator, shall conduct or provide
423
for an evaluation of the effectiveness of the dem-
onstration program provided for in subsection (c)
above and shall prepare and submit to the President
and Congress a preliminary report of the evaluation
no later than three years following the designation
of intermediaries and a final report no later than
seven years following such designation, together with
such recommendations, including recommendations
for legislation, as the Secretary and Administrator
deem appropriate. Such evaluation shall be based on
an experimental design with random assignment be-
tween a treatment group and a control group. In de-
signing the evaluation, the Secretary shall consider
testing for—
(A) greater self-sufficiency as measured by
employment and self-employment rates, amount
of earned income, poverty rates, and exit and
recidivism rates for Aid to Families With De-
pendent Children (hereinafter in this section re-
ferred to as ‘‘AFDC’’), Food Stamps and other
public assistance programs;
(B) reduced costs of public support as
measured by changes in overall support pay-
ments for items such as income maintenance,
424
food, child care, health care, housing, job train-
ing and other benefits;
(C) number of businesses and jobs created,
number of loans to welfare recipients and low-
income individuals, repayment rates for loans,
and business performance after welfare or other
public assistance ends;
(D) the relative effectiveness, cost-to-bene-
fit ratio, and degree of financial self-sufficiency
of the different program models employed by
the intermediaries participating in the dem-
onstration program; and
(E) the program’s impact and effectiveness
in serving participants in a time-limited welfare
system, as compared to other low-income indi-
viduals.
(2) EVALUATION OF ADDITIONAL PROGRAMS.—
The Secretary, in consultation with the Adminis-
trator, shall also conduct or provide for an independ-
ent evaluation of the effectiveness of any program
models selected pursuant to subsection (e)(2) above
and shall prepare and submit to the President and
Congress a preliminary report of the evaluation no
later than three years following the designation of
intermediaries, and a final report no later than five
425
years following such designation, together with such
recommendations, including recommendations for
legislation, as the Secretary and Administrator deem
appropriate.
(3) PRELIMINARY
REPORTS
TO
CONGRESS.—
The preliminary reports provided for in paragraphs
(1) and (2) of this subsection shall include an analy-
sis of any regulatory or other barriers that prevent
welfare recipients and low-income individuals from
becoming self-sufficient through self-employment
and microenterprise development.
(4) REQUIRED
INFORMATION.—The Secretary
may require each intermediary selected pursuant to
this section to provide the Secretary with such infor-
mation as the Secretary determines is necessary to
carrying out the duties of this subsection.
(5) EARLY AND REGULAR INFORMATION SHAR-
ING WITH INTERMEDIARIES.—The Secretary, in con-
sultation with the Administrator, shall provide early
and 
regular 
feedback 
and 
summaries 
to
intermediaries selected to participate pursuant to
this section of the progress of the evaluation, the
data collected during the evaluation, preliminary
findings and such other information as the Secretary
deems appropriate. The Secretary shall provide such
426
feedback and summaries at least once a year for the
life of the demonstration.
(j) AUTHORIZATION OF APPROPRIATIONS.—To carry
out the purposes of this section there are authorized to
be appropriated to the Secretary and Administrator—
(1) $4,000,000 for fiscal year 1997,
(2) $8,000,000 for each of fiscal years 1998,
1999, 2000, and 2001, and
(3) $4,000,000 for fiscal year 2002.
(k) DEFINITIONS.—For the purposes of this sec-
tion—
(1) the term ‘‘intermediary’’ means an organi-
zation, partnership, or consortium of organizations
that acts as a lender and/or as a technical assistance
provider to individuals who wish to start or expand
a microenterprise;
(2) the term ‘‘low-income individual’’ means an
individual whose income level does not exceed 130
percent of the official poverty line as defined by the
Office of Management and Budget;
(3) the term ‘‘microenterprise’’ generally means
a business that has a net worth of less than
$15,000;
(4) the term ‘‘technical assistance’’ as it relates
to assisting a welfare recipient or low-income indi-
427
vidual to become self-employed includes business
technical assistance, entrepreneurial training, and/or
personal development services; and
(5) the term ‘‘welfare recipient’’ means a par-
ticipant in a time-limited welfare program who is eli-
gible for the JOBS or Work program or a person
who is receiving assistance from AFDC.
TITLE IX—FINANCING
SEC. 901. LIMITATION ON FEDERAL PAYMENTS FOR EMER-
GENCY ASSISTANCE.
Section 403(a)(5) of the Act is amended to read as
follows:
‘‘(5)(A) Each State shall be entitled to payment
from the Secretary in an amount equal to 50 percent
of the total amounts expended under the State plan
in a fiscal year as emergency assistance to needy
families with children, but such payment may not
exceed the greater of—
‘‘(i) such State’s share of the limitation in
subparagraph (B) for such fiscal year, or
‘‘(ii) the amount paid by the Secretary
with respect to such State’s expenditures for
emergency assistance to needy families with
children for fiscal year 1991.
428
‘‘(B) The limitation referred to in subparagraph
(A) is $418,000,000 for fiscal year 1995, and for
fiscal year 1996 and for each fiscal year thereafter,
$418,000,000 multiplied by the ratio of the
Consumer Price Index (prepared by the Department
of Labor) for the third quarter of the preceding fis-
cal year to such Index for the third quarter of fiscal
year 1994.
‘‘(C) For purposes of this paragraph, a ‘State’s
share of the limitation in subparagraph (B)’ for a
fiscal year means—
‘‘(i) such State’s share of the EA portion
of the limitation (as defined in subparagraph
(D)), plus
‘‘(ii) such State’s share of the AFDC por-
tion of the limitation (as defined in subpara-
graph (E)) for the fiscal year involved.
‘‘(D) For the purposes of this paragraph, the
EA portion of the limitation is—
‘‘(i) for fiscal year 1995 and each fiscal
year thereafter, the limitation for such year,
multiplied by—
‘‘(I) 90 percent, minus
‘‘(II) 10 percentage points for each
year after 1995.
429
but never less than zero.
‘‘(E) For purposes of this paragraph, the
AFDC portion of the limitation is—
‘‘(i) for fiscal year 1995, the limitation for
such year, multiplied by 10 percent, and
‘‘(ii) for fiscal year 1996 and each fiscal
year thereafter, the limitation for such year
multiplied by—
‘‘(I) 10 percent, plus
‘‘(II) 10 percentage points for each
year after 1995,
but never more than 100.
‘‘(F) For purposes of this paragraph—
‘‘(i) a State’s share of the EA portion of
the limitation for a fiscal year is the limitation
for such year multiplied by the ratio of the esti-
mated expenditures in such State for emergency
assistance to needy families with children for
quarters in fiscal year 1994 to the sum of such
estimated expenditures in all the States for
quarters in such year, and
‘‘(ii) a State’s share of the AFDC portion
of the limitation for a fiscal year is the limita-
tion for such year multiplied by the ratio of the
estimated expenditures in such State for aid to
430
families with dependent children for quarters in
the preceding fiscal year to the sum of such ex-
penditures in all the States for quarters in such
preceding fiscal year.’’.
SEC. 902. UNIFORM ALIEN ELIGIBILITY CRITERIA FOR PUB-
LIC ASSISTANCE PROGRAMS.
(a) FEDERAL
AND
FEDERALLY-ASSISTED
PRO-
GRAMS.—
(1) PROGRAM ELIGIBILITY CRITERIA.—
(A) AID TO FAMILIES WITH DEPENDENT
CHILDREN.—Section 402(a)(33) of the Social
Security Act is amended by striking ‘‘(A) a citi-
zen’’ and all that follows and inserting the fol-
lowing:
‘‘(A) a citizen or national of the United
States, or
‘‘(B) a qualified alien (as defined in section
1101(a)(10)), provided that such alien is not
disqualified from receiving aid under a State
plan approved under a State plan approved
under this part by or pursuant to section 210(f)
or 245A(h) of the Immigration and Nationality
Act or any other provision of law;’’.
431
(B) SUPPLEMENTAL SECURITY INCOME.—
Section 1614(a)(1)(B)(i) of such Act is amend-
ed to read as follows:
‘‘(B)(i) is a resident of the United States,
and is either (I) a citizen or national of the
United States, or (II) a qualified alien (as de-
fined in section 1101(a)(10)), or’’.
(C) MEDICAID—
(i) Section 1903(v)(1) of such Act is
amended to read as follows:
‘‘(v)(1) Notwithstanding the preceding provisions of
this section, (A) no payment may be made to a State
under this section for medical assistance furnished to an
individual who is disqualified from receiving such assist-
ance by or pursuant to section 210(f) or 245A(h) of the
Immigration and Nationality Act or any other provision
of law, and (B) except as provided in paragraph (2), no
such payment may be made for medical assistance fur-
nished to an individual who is not a (i) citizen or national
of the United States, or (ii) qualified alien (as defined in
section 1101(a)(10)).’’.
(ii) Section 1903(v)(2) of such Act is
amended by—
(I) striking ‘‘paragraph (1)’’ and
inserting ‘‘paragraph (1)(B)’’; and
432
(II) striking ‘‘alien’’ each place it
appears and inserting ‘‘individual’’.
(iii) Section 1902(a) of such Act is
amended in the last sentence by striking
‘‘alien’’ and all that follows and inserting
‘‘individual who is not (A) a citizen or na-
tional of the United States, or (B) a quali-
fied 
alien 
(as 
defined 
in 
section
1101(a)(10)) only in accordance with sec-
tion 1903(v).’’.
(iv) Section 1902(b)(3) of such Act is
amended by inserting ‘‘or national’’ after
‘‘citizen’’.
(2) DEFINITION OF TERM ‘‘QUALIFIED ALIEN’’.—
Section 1101(a) of such Act is amended by adding at the
end the following new paragraph:
‘‘(10) The term ‘qualified alien’ means an
alien—
‘‘(A) who is lawfully admitted for perma-
nent residence within the meaning of section
101(a)(20) of the Immigration and Nationality
Act;
‘‘(B) who is admitted as a refugee pursu-
ant to section 207 of such Act;
433
‘‘(C) who is granted asylum pursuant to
section 208 of such Act;
‘‘(D) whose deportation is withheld pursu-
ant to section 243(h) of such Act;
‘‘(E) whose deportation is suspended pur-
suant to section 244 of such Act;
‘‘(F) who is granted conditional entry pur-
suant to section 203(a)(7) of such Act as in ef-
fect prior to April 1, 1980;
‘‘(G) who is lawfully admitted for tem-
porary residence pursuant to section 210 or
245A of such Act;
‘‘(H) who is within a class of aliens law-
fully present within the United States pursuant
to any other provision of such Act, provided
that—
‘‘(i) the Attorney General determines
that the continued presence of such class
of aliens serves a humanitarian or other
compelling public interest, and
‘‘(ii) the Secretary of Health and
Human Services determines that such in-
terest would be further served by treating
each alien within such class as a ‘qualified
alien’ for purposes of this Act; or
434
‘‘(I) who is the spouse or unmarried child
under 21 years of age of a citizen of the United
States, or the parent of such a citizen if the cit-
izen is 21 years of age or older, and with re-
spect to whom an application for adjustment to
lawful permanent residence is pending;
such status not having changed.’’.
(3) 
CONFORMING
AMENDMENT.—Section
244A(f)(1) of the Immigration and Nationality Act
is amended by inserting ‘‘and shall not be considered
to be a ‘qualified alien’ within the meaning of sec-
tion 1101(a)(10) of the Social Security Act’’ imme-
diately before the semicolon.
(b) STATE AND LOCAL PROGRAMS.—A State or polit-
ical subdivision therein may provide that an alien is not
eligible for any program of assistance based on need that
is furnished by such State or political subdivision unless
such alien is a ‘‘qualified alien’’ within the meaning of sec-
tion 1101(a)(10) of the Social Security Act (as added by
subsection (a)(2) of this section).
(c) EFFECTIVE DATE.—
(1) The amendments made by subsection (a)
are effective with respect to benefits payable on the
basis of any application filed after the date of enact-
ment of this Act.
435
(2) Subsection (b) is effective upon the date of
enactment of this Act.
SEC. 903. ELIGIBILITY OF SPONSORED ALIENS FOR CER-
TAIN PROGRAMS.
(a) DEEMING
OF SPONSOR’S INCOME
AND RE-
SOURCES TO AN ALIEN UNDER THE SUPPLEMENTAL SE-
CURITY INCOME, AID TO FAMILIES WITH DEPENDENT
CHILDREN, AND FOOD STAMP PROGRAMS.—
(1) LENGTH OF DEEMING PERIOD.—
(A) MAKING THE SSI 5-YEAR PERIOD PER-
MANENT.—Subsection (b) of section 7 of the
Unemployment Compensation Amendments of
1993 (Public Law 103–152) is repealed.
(B) INCREASING THE AFDC PERIOD FROM
3 TO 5 YEARS.—Section 415 of the Social Secu-
rity Act is amended by striking ‘‘three years’’
each place such phrase appears and inserting
‘‘5 years’’.
(C) INCREASING THE FOOD STAMP PERIOD
FROM 3 TO 5 YEARS.—Section 5(i) of the Food
Stamp Act of 1977 is amended by striking
‘‘three years’’ each place such phase appears
and inserting ‘‘5 years’’.
436
(2) INAPPLICABILITY
IN
THE
CASE
OF
ANY
ALIEN
WHOSE
SPONSOR
RECEIVES
SSI
OR
AFDC
BENEFITS.—
(A) SSI.—Section 1621(f) of the Social
Security Act is amended by adding at the end
the following new paragraph:
‘‘(3) The provisions of this section shall not
apply to any alien for any month for which such
alien’s sponsor receives a benefit under this title
(which includes, for purposes of this paragraph, the
program of federally administered State supple-
mentary payments made pursuant to section
1616(a) of this Act or section 212(b) of Public Law
93–66) or the program of aid to families with de-
pendent children authorized by part A of title IV of
this Act.’’.
(B) AFDC.—Section 415(f) of the Social
Security Act is amended—
(i) by redesignating paragraphs (1)
through (5) as subparagraphs (A) through
(E), respectively;
(ii) by striking ‘‘(f)’’ and inserting
‘‘(f)(1)’’; and
(iii) by adding at the end the follow-
ing new paragraph:
437
‘‘(2) The provisions of this section shall not
apply to any alien for any month for which such
alien’s sponsor receives a benefit under the program
authorized by this part, or the program of supple-
mental security income authorized by title XVI of
this Act (which includes, for purposes of this para-
graph, the program of federally administered State
supplementary payments made pursuant to section
1616(a) of this Act or section 212(b) of Public Law
93–66).’’.
(C) FOOD STAMPS.—Section 5(i)(2)(E) of
the Food Stamp Act of 1977 is amended—
(i) by striking ‘‘(E)’’ and inserting
‘‘(E)(i)’’; and
(ii) by adding at the end the follow-
ing:
‘‘(ii) The provisions of this subsection shall not
apply to any alien for any month for which such
alien’s sponsor receives a benefit under the program
of aid to families with dependent children authorized
by part A of title IV of the Social Security Act or
the program of supplemental security income author-
ized by title XVI of such Act (which includes, for
purposes of this paragraph, the program of federally
administered State supplementary payments made
438
pursuant to section 1616(a) of such Act or section
212(b) of Public Law 93–66).’’.
(3) INEQUITABLE CIRCUMSTANCES.—
(A) SSI.—Section 1621 of the Social Secu-
rity Act is amended by adding at the end the
following new subsection:
‘‘(g) The Secretary may, pursuant to regulations pro-
mulgated after consultation with the Secretary of Agri-
culture, alter or suspend the application of this section in
any case in which the Secretary determines that such ap-
plication would be inequitable under the circumstances.’’
(B) AFDC.—Section 415 of the Social Se-
curity Act is amended by adding at the end the
following new subsection:
‘‘(g) The Secretary may, pursuant to regulations pro-
mulgated after consultation with the Secretary of Agri-
culture, alter or suspend the application of this section in
any case in which the Secretary determines that such ap-
plication would be inequitable under the circumstances.’’
(C) FOOD STAMPS.—Section 5(i)(2) of the
Food Stamp Act of 1977 is amended by adding
at the end the following new subparagraph:
‘‘(F) The Secretary may, pursuant to regulations pro-
mulgated after consultation with the Secretary of Health
and Human Services, alter or suspend the application of
439
this section in any case in which the Secretary determines
that such application would be inequitable under the cir-
cumstances.’’
(4) FOOD STAMPS EXEMPTION FOR BLIND OR
DISABLED ALIENS.—Section 5(i)(2)(E) of the Food
Stamp Act of 1977 (as previously amended by sub-
section (a)(2)(C)) is further amended by adding at
the end the following:
‘‘(iii) The provisions of this subsection shall not
apply with respect to any individual for any month
for which such individual receives a benefit under
the program of supplemental security income author-
ized by title XVI of the Social Security Act by rea-
son of blindness (as determined under section
1614(a)(2) of such Act) or disability (as determined
under section 1614(a)(3) of such Act), provided that
such blindness or disability commenced after the
date of such individual’s admission into the United
States for permanent residence.’’.
(5) INCREASE IN FOOD STAMP RESOURCE LIMI-
TATION.—Section 5(i)(2)(B)(ii) of the Food Stamp
Act of 1977 is amended by striking ‘‘$1,500’’ and
inserting ‘‘$2,000’’.
(b) DISQUALIFICATION
OF CERTAIN SPONSORED
ALIENS AFTER THE 60TH MONTH AFTER ENTRY INTO
440
THE UNITED STATES UNDER THE SUPPLEMENTAL SECU-
RITY INCOME, AID
TO FAMILIES WITH DEPENDENT
CHILDREN, AND FOOD STAMP PROGRAMS.—
(1) IN GENERAL.—
(A) SSI.—Section 1611(e) of the Social
Security Act is amended by inserting between
paragraphs (3) and (5) a new paragraph (4) as
follows:
‘‘(4)(A) No individual (other than an individual
described in section 1621(f)(1)) who is an alien shall
be an eligible individual or eligible spouse for pur-
poses of this title with respect to any month begin-
ning after the 60th month after such individual’s
entry into the United States if the adjusted gross in-
come (as defined in section 62 of the Internal Reve-
nue Code of 1986) of any person who (as a sponsor
of such individual’s entry into the United States) ex-
ecuted an affidavit of support with respect to such
individual plus the adjusted gross income of such
person’s spouse and dependent children (if any) for
the most recently completed year for which—
‘‘(i)(I) a return has been filed in connec-
tion with the taxes imposed by subtitle A of the
Internal Revenue Code of 1986 by or on behalf
441
of such person (and such person’s spouse and
dependent children, if any), or
‘‘(II) no such return is required by such
Code to be so filed, and
‘‘(ii) the Secretary has published the
United States median income for all families
pursuant to subparagraph (B)(i)(I),
exceeds the applicable measure of United States me-
dian income for all families (determined in accord-
ance with subparagraph (B)(i)(II)) for such year.
‘‘(B)(i) The Secretary shall publish twice yearly
in the Federal Register a notice—
‘‘(I) setting out the United States median
income for all families for not fewer than five
of the years immediately preceding the year in
which such notice is published, and
‘‘(II) identifying the months for which each
such figure shall be deemed to be the applicable
measure for the purpose of making the deter-
mination required by subparagraph (A).
‘‘(ii) The United States median income for all
families for any year published by the Secretary pur-
suant to clause (i) shall be the amount reported for
such year by the Census Bureau pursuant to its
Current Population Survey, except that if such
442
amount has not been so reported for such year at
the time such notice is published, then the measure
of the United States median income for all families
for such year shall be derived by increasing the
amount reported by the Census Bureau for the im-
mediately preceding year by a percentage equal to
the percentage (rounded to the nearest one-tenth of
one percent), if any, by which the Consumer Price
Index (as prepared by the Department of Labor) for
such year has increased over such immediately pre-
ceding year.’’.
(B) AFDC.—Section 402(a) of the Social
Security Act is amended by—
(i) striking ‘‘and’’ at the end of para-
graph (44);
(ii) striking the period at the end of
paragraph (45) and inserting ‘‘; and’’; and
(iii) adding at the end a new para-
graph as follows:
‘‘(46) provide that an individual who is an alien
may not be considered a dependent child, a care-
taker relative whose needs are to be taken into ac-
count in making the determination under paragraph
(7), or any other person whose needs should be
taken into account in making such a determination
443
with respect to the child or relative, with respect to
any month beginning after the 60th month after
such individual’s entry into the United States if the
adjusted gross income (as defined in section 62 of
the Internal Revenue Code of 1986) of any person
who (as a sponsor of such individual’s entry into the
United States) executed an affidavit of support with
respect to such individual plus the adjusted gross in-
come of such person’s spouse and dependent chil-
dren (if any) for the most recently completed year
for which—
‘‘(A)(i) a return has been filed in connec-
tion with the taxes imposed by subtitle A of the
Internal Revenue Code of 1986 by or on behalf
of such person (and such person’s spouse and
dependent children, if any), or
‘‘(ii) no such return is required by such
Code to be so filed, and
‘‘(B) the United States median income for
all families has been published, exceeds the ap-
plicable measure of United States median in-
come for all families for such year. For pur-
poses of the preceding sentence, the require-
ment for the publication of the United States
median income for all families for any year
444
shall be satisfied by the publication of such
data for such year pursuant to section
1611(e)(4)(B)(i)(I), and the ‘applicable meas-
ure of United States median income for all fam-
ilies’ for any year shall be the measure applica-
ble 
for 
such 
year 
pursuant 
to 
section
1611(e)(4)(B)(i)(II).’’.
(C) FOOD STAMPS.—Section 6 of the Food
Stamp Act of 1977 is amended by adding at
the end a new subsection as follows:
‘‘(i) No alien who is a member of a household other-
wise eligible to participate in the food stamp program
under this section shall be eligible to participate in such
program as a member of that or any other household with
respect to any month beginning after the 60th month after
such alien’s entry into the United States if the adjusted
gross income (as defined in section 62 of the Internal Rev-
enue Code of 1986) of any person who (as a sponsor of
such alien’s entry into the United States) executed an affi-
davit of support with respect to such alien plus the ad-
justed gross income of such person’s spouse and depend-
ent children (if any) for the most recently completed year
for which—
‘‘(1)(A) a return has been filed in connection
with the taxes imposed by subtitle A of the Internal
445
Revenue Code of 1986 by or on behalf of such per-
son (and such person’s spouse and dependent chil-
dren, if any), or
‘‘(B) no such return is required by such Code
to be so filed, and
‘‘(2) the United States median income for all
families has been published,
exceeds the applicable measure of United States median
income for all families for such year. For purposes of the
preceding sentence, the requirement for the publication of
the United States median income for all families for any
year shall be satisfied by the publication of such data for
such year pursuant to section 1611(e)(4)(B)(i)(I) of the
Social Security Act, and the ‘applicable measure of United
States median income for all families’ for any year shall
be the measure applicable for such year pursuant to sec-
tion 1611(e)(4)(B)(i)(II) of such Act.’’.
(2) CONFORMING AMENDMENTS.—
(A) COOPERATION REQUIREMENT.—
(i) SSI.—Section 1621(d)(1) of the
Social Security Act is amended in the first
sentence by—
(I) striking ‘‘during the period of
5 years after entry into the United
States,’’; and
446
(II) 
inserting 
‘‘or 
section
1611(e)(4)’’ after ‘‘this section’’.
(ii) AFDC.—The second sentence of
section 415(c)(1) of the Social Security
Act (as previously amended by subsection
(a)(1)(B) of this section) is further amend-
ed by—
(I) striking ‘‘during the period of
5 years after his or her entry into the
United States’’; and
(II) 
inserting 
‘‘or 
section
402(a)(46)’’ after ‘‘this section’’.
(iii) FOOD
STAMPS.—The first sen-
tence of section 5(i)(2)(C)(i) of the Food
Stamp Act of 1977 (as previously amended
by subsection (a)(1)(C) of this section) is
further amended by—
(I) striking ‘‘during the period of
5 years after entry into the United
States,’’; and
(II) inserting ‘‘or section 6(i)’’
after ‘‘this section’’.
(B) LIABILITY FOR OVERPAYMENTS.—
(i) SSI.—Section 1621(e) of the So-
cial Security Act is amended by—
447
(I) striking ‘‘during the period of
5 years after such alien’s entry into
the United States,’’;
(II) 
inserting 
‘‘or 
section
1611(e)(4)’’ after ‘‘this section’’; and
(III) adding at the end the fol-
lowing sentence: ‘‘If an individual who
is an alien subject to this subsection
is naturalized as a citizen of the Unit-
ed States, such naturalization shall
have no effect upon the continued ap-
plication of this subsection to such in-
dividual or to such individual’s spon-
sor.’’.
(ii) AFDC.—Section 415(d) of the
Social Security Act (as previously amended
by subsection (a)(1)(B)) is further amend-
ed by—
(I) striking ‘‘during the period of
5 years after such alien’s entry into
the United States,’’;
(II) 
inserting 
‘‘or 
section
402(a)(46)’’ after ‘‘this section’’; and
(III) adding at the end the fol-
lowing sentence: ‘‘If an individual who
448
is an alien subject to this subsection
is naturalized as a citizen of the Unit-
ed States, such naturalization shall
have no effect upon the continued ap-
plication of this subsection to such in-
dividual or to such individual’s spon-
sor.’’.
(iii) 
FOOD
STAMPS.—Section
5(i)(2)(D) of the Food Stamp Act of 1977
(as previously amended by subsection
(a)(1)(C)) is further amended by—
(I) striking ‘‘during the period of
5 years after such alien’s entry into
the United States,’’;
(II) inserting ‘‘or section 6(i)’’
after ‘‘this section’’; and
(III) adding at the end the fol-
lowing sentence: ‘‘If an individual who
is an alien subject to this subpara-
graph is naturalized as a citizen of
the United States, such naturalization
shall have no effect upon the contin-
ued application of this subparagraph
to such individual or to such individ-
ual’s sponsor.’’.
449
(3) DISCLOSURE
OF
TAX
RETURN
INFORMA-
TION.—Section 6103(l)(7)(B) of the Internal Reve-
nue Code of 1986 is amended by designating the ex-
isting matter as clause (i) and adding at the end the
following:
‘‘(ii) The Secretary shall disclose, upon request, re-
turn information with respect to adjusted gross income (as
defined in section 62) from returns filed by, or with re-
spect to, any individual (and such individual’s spouse and
dependent children, if any) who (as a sponsor of an alien’s
entry into the United States) executed an affidavit of sup-
port with respect to such alien and whose income is consid-
ered in connection with determining such alien’s eligibility
for a program described in clause (i), (iii), or (vi) of sub-
paragraph (D) to any Federal, State, or local agency ad-
ministering such program, but only for the purpose of, and
to the extent necessary, in determining the eligibility of
such alien for benefits under such program.
‘‘(iii) Information regarding any determination made
pursuant to section 402(a)(46) of 415 of the Social Secu-
rity Act (relating to the aid to families with dependent
children program), section 1611(e)(4) or 1621 of such Act
(relating to the supplemental security income program),
or section 5(i) or 6(i) of the Food Stamp Act of 1977
(relating to the program of assistance under that Act) in
450
connection with determining an alien’s eligibility for bene-
fits under any such program shall not be considered to
be return information subject to the limitations on disclo-
sure or redisclosure imposed by this section.’’.
(c) STATE AND LOCAL PROGRAMS.—A State or polit-
ical subdivision therein may provide that an alien is not
eligible for any program of assistance based on need that
is furnished by such State or political subdivision for any
month if such alien has been determined to be ineligible
for such month for benefits under—
(A) the program of aid to families with depend-
ent children authorized by part A of title IV of the
Social Security Act, as a result of the application of
section 402(a)(46) or 415 of such Act;
(B) the program of supplemental security in-
come authorized by title XVI of the Social Security
Act, as a result of the application of section
1611(e)(4) or 1621 of such Act; or
(C) the Food Stamp Act of 1977, as a result
of the application of section 5(i) or 6(i) of such Act.
(d) EFFECTIVE DATE.—
(1) Except as otherwise provided in paragraph
(2), the amendments made by subsections (a) and
(b) are effective with respect to benefits under the
program of aid to families with dependent children
451
authorized by part A of title IV of the Social Secu-
rity Act, the program of supplemental security in-
come authorized by title XVI of the Social Security
Act, and the program authorized by the Food Stamp
Act of 1977, payable for months beginning after
September 30, 1994, on the basis of—
(A) an application filed after such date, or
(B) an application filed on or before such
date by or on behalf of an individual subject to
the provisions of section 1621(a) or section
415(a) of the Social Security Act or section
5(i)(1) of the Food Stamp Act of 1977 (as the
case may be) on such date.
(2) The amendments made by clauses (i)(III),
(ii)(III), and (iii)(III) of subsection (b)(2)(B) are ef-
fective upon the date of enactment of this Act.
(3) Subsection (c) is effective on October 1,
1994.
SEC. 904. FAMILY DAY CARE HOMES.
(a) Section 17(c) of the National School Lunch Act
(42 U.S.C. 1766(c)) is amended—
(1) in paragraph (1), by inserting ‘‘except as
provided in paragraphs (4) and (5) of this sub-
section,’’ after ‘‘For purposes of this section,’’;
458
duced price meals and supplements set forth in
section 9(b) of this Act.
‘‘(I) For purposes of this section, ‘low-in-
come areas’ is defined to mean ‘areas in which
poor economic conditions exist’ as defined in
section 13(a)(1)(C) of this Act.
‘‘(J) For purposes of this section, deter-
minations made by the State agency which es-
tablish that a family or a group day care home
is located in a ‘low income area’ shall be in ef-
fect for 3 years, unless the State agency deter-
mines that the area in which the home is lo-
cated is no longer a ‘low income area’.
‘‘(K) The Secretary shall make payments,
totalling not more than $5,000,000 in each of
fiscal years 1997, 1998, 1999, and 2000 to pro-
vide grants to States for the purpose of provid-
ing assistance, including grants to family or
group day care home sponsoring organizations,
to assist family or group day care homes in low-
income areas to become licensed or approved for
the program under this section. Of the amount
of funds available to each State under this sub-
paragraph, an amount not to exceed 30 percent
may be retained by the State to carry out the