554
Title VIII, Subtitle F
1395dd(e)(5)) 
is 
amended 
by 
striking
‘‘1861(mm)(1))’’ and inserting ‘‘1861(mm)(1)) and
a rural emergency access care hospital (as defined in
section 1861(oo)(1))’’.
(b) COVERAGE AND PAYMENT UNDER PART B.—
(1) 
COVERAGE
UNDER
PART
B.—Section
1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (I);
(B) by striking the period at the end of
subparagraph (J) and inserting ‘‘; and’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(K) rural emergency access care hospital
services (as defined in section 1861(oo)(2)).’’.
(2) PAYMENT BASED ON PAYMENT FOR OUT-
PATIENT
RURAL
PRIMARY
CARE
HOSPITAL
SERV-
ICES.—
(A) IN GENERAL.—Section 1833(a)(6) (42
U.S.C. 1395l(a)(6)) is amended by striking
‘‘services,’’ and inserting ‘‘services and rural
emergency access care hospital services,’’.
(B) 
PAYMENT
METHODOLOGY
DE-
SCRIBED.—Section 
1834(g) 
(42 
U.S.C.
1395m(g)) is amended—
555
Title VIII, Subtitle F
(i) in the heading, by striking ‘‘SERV-
ICES’’ and inserting ‘‘SERVICES
AND
RURAL EMERGENCY ACCESS CARE HOS-
PITAL SERVICES’’; and
(ii) by adding at the end the following
new sentence: ‘‘The amount of payment for
rural emergency access care hospital serv-
ices provided during a year shall be deter-
mined using the applicable method pro-
vided under this subsection for determining
payment for outpatient rural primary care
hospital services during the year.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to fiscal years beginning on or
after October 1, 1995.
SEC. 8504. CLASSIFICATION OF RURAL REFERRAL CEN-
TERS.
(a) PROHIBITING DENIAL OF REQUEST FOR RECLAS-
SIFICATION ON BASIS OF COMPARABILITY OF WAGES.—
(1) IN GENERAL.—Section 1886(d)(10)(D) (42
U.S.C. 1395ww(d)(10)(D)) is amended—
(A) by redesignating clause (iii) as clause
(iv); and
(B) by inserting after clause (ii) the follow-
ing new clause:
556
Title VIII, Subtitle F
‘‘(iii) Under the guidelines published by the Secretary
under clause (i), in the case of a hospital which is classi-
fied by the Secretary as a rural referral center under para-
graph (5)(C), the Board may not reject the application
of the hospital under this paragraph on the basis of any
comparison between the average hourly wage of the hos-
pital and the average hourly wage of hospitals in the area
in which it is located.’’.
(2) EFFECTIVE
DATE.—Notwithstanding sec-
tion 1886(d)(10)(C)(ii) of the Social Security Act, a
hospital may submit an application to the Medicare
Geographic Classification Review Board during the
30-day period beginning on the date of the enact-
ment of this Act requesting a change in its classi-
fication for purposes of determining the area wage
index applicable to the hospital under section
1886(d)(3)(D) of such Act for fiscal year 1997, if
the hospital would be eligible for such a change in
its classification under the standards described in
section 1886(d)(10)(D) (as amended by paragraph
(1)) but for its failure to meet the deadline for appli-
cations under section 1886(d)(10)(C)(ii).
(b) CONTINUING TREATMENT OF PREVIOUSLY DES-
IGNATED CENTERS.—Any hospital classified as a rural re-
ferral center by the Secretary of Health and Human Serv-
557
Title VIII, Subtitle F
ices under section 1886(d)(5)(C) of the Social Security
Act for fiscal year 1994 shall be classified as such a rural
referral center for fiscal year 1996 and each subsequent
fiscal year.
SEC. 8505. FLOOR ON AREA WAGE INDEX.
(a) 
IN
GENERAL.—For 
purposes 
of 
section
1886(d)(3)(E) of the Social Security Act for discharges
occurring on or after October 1, 1995, the area wage index
applicable under such section to any hospital which is not
located in a rural area (as defined in section
1886(d)(2)(D) of such Act) may not be less than the aver-
age of the area wage indices applicable under such section
to hospitals located in rural areas in the State in which
the hospital is located.
(b) BUDGET-NEUTRALITY
IN IMPLEMENTATION.—
The Secretary of Health and Human Services shall make
any adjustments required under subsection (a) in a man-
ner which assures that the aggregate payments made
under section 1886(d) of the Social Security Act in a fiscal
year for the operating costs of inpatient hospital services
are not greater or less than those which would have been
made in the year without such adjustments.
SEC. 8506. MEDICAL EDUCATION.
(a) STATE
AND
CONSORTIUM
DEMONSTRATION
PROJECTS.—
558
Title VIII, Subtitle F
(1) IN GENERAL.—
(A) PARTICIPATION OF STATES AND CON-
SORTIA.—The Secretary shall establish and
conduct a demonstration project to increase the
number and percentage of medical students en-
tering primary care practice relative to those
entering nonprimary care practice under which
the Secretary shall make payments in accord-
ance with paragraph (4)—
(i) to not more than 10 States for the
purpose of testing and evaluating mecha-
nisms to meet the goals described in sub-
section (b); and
(ii) to not more than 10 health care
training consortia for the purpose of test-
ing and evaluating mechanisms to meet
such goals.
(B) EXCLUSION
OF
CONSORTIA
IN
PAR-
TICIPATING STATES.—A consortia may not re-
ceive payments under the demonstration project
under subparagraph (A)(ii) if any of its mem-
bers is located in a State receiving payments
under the project under subparagraph (A)(i).
(2) APPLICATIONS.—
559
Title VIII, Subtitle F
(A) IN GENERAL.—Each State and consor-
tium desiring to conduct a demonstration
project under this subsection shall prepare and
submit to the Secretary an application, at such
time, in such manner, and containing such in-
formation as the Secretary may require to as-
sure that the State or consortium will meet the
goals described in subsection (b). In the case of
an application of a State, the application shall
include—
(i) information demonstrating that the
State has consulted with interested parties
with respect to the project, including State
medical associations, State hospital asso-
ciations, and medical schools located in the
State;
(ii) an assurance that no hospital con-
ducting an approved medical residency
training program in the State will lose
more than 10 percent of such hospital’s
approved medical residency positions in
any year as a result of the project; and
(iii) an explanation of a plan for eval-
uating the impact of the project in the
State.
560
Title VIII, Subtitle F
(B) 
APPROVAL
OF
APPLICATIONS.—A
State or consortium that submits an application
under subparagraph (A) may begin a dem-
onstration project under this subsection—
(i) upon approval of such application
by the Secretary; or
(ii) at the end of the 60-day period
beginning on the date such application is
submitted, unless the Secretary denies the
application during such period.
(C) NOTICE AND COMMENT.—A State or
consortium shall issue a public notice on the
date it submits an application under subpara-
graph (A) which contains a general description
of the proposed demonstration project. Any in-
terested party may comment on the proposed
demonstration project to the State or consor-
tium or the Secretary during the 30-day period
beginning on the date the public notice is is-
sued.
(3) SPECIFIC
REQUIREMENTS
FOR
PARTICI-
PANTS.—
(A) REQUIREMENTS
FOR
STATES.—Each
State participating in the demonstration project
under this section shall use the payments pro-
561
Title VIII, Subtitle F
vided under paragraph (4) to test and evaluate
either of the following mechanisms to increase
the number and percentage of medical students
entering primary care practice relative to those
entering nonprimary care practice:
(i) USE OF ALTERNATIVE WEIGHTING
FACTORS.—
(I) IN
GENERAL.—The State
may make payments to hospitals in
the State for direct graduate medical
education costs in amounts deter-
mined under the methodology pro-
vided under section 1886(h) of the
Social Security Act, except that the
State shall apply weighting factors
that are different than the weighting
factors otherwise set forth in section
1886(h)(4)(C) of the Social Security
Act.
(II) USE OF PAYMENTS FOR PRI-
MARY CARE RESIDENTS.—In applying
different 
weighting 
factors 
under
subclause (I), the State shall ensure
that the amount of payment made to
hospitals for costs attributable to pri-
562
Title VIII, Subtitle F
mary care residents shall be greater
than the amount that would have been
paid to hospitals for costs attributable
to such residents if the State had ap-
plied the weighting factors otherwise
set forth in section 1886(h)(4)(C) of
the Social Security Act.
(ii) PAYMENTS
FOR
MEDICAL
EDU-
CATION
THROUGH
CONSORTIUM.—The
State may make payments for graduate
medical education costs through payments
to a health care training consortium (or
through any entity identified by such a
consortium as appropriate for receiving
payments on behalf of the consortium) that
is established in the State but that is not
otherwise participating in the demonstra-
tion project.
(B) REQUIREMENTS FOR CONSORTIUM.—
(i) IN
GENERAL.—In the case of a
consortium participating in the demonstra-
tion project under this section, the Sec-
retary shall make payments for graduate
medical education costs through a health
care training consortium whose members
563
Title VIII, Subtitle F
provide medical residency training (or
through any entity identified by such a
consortium as appropriate for receiving
payments on behalf of the consortium).
(ii) USE OF PAYMENTS.—
(I) IN GENERAL.—Each consor-
tium receiving payments under clause
(i) shall use such funds to conduct ac-
tivities which test and evaluate mech-
anisms to increase the number and
percentage of medical students enter-
ing primary care practice relative to
those entering nonprimary care prac-
tice, and may use such funds for the
operation of the consortium.
(II) PAYMENTS TO PARTICIPAT-
ING
PROGRAMS.—The 
consortium
shall ensure that the majority of the
payments received under clause (i) are
directed to consortium members for
primary care residency programs, and
shall designate for each resident as-
signed to the consortium a hospital
operating an approved medical resi-
dency training program for purposes
564
Title VIII, Subtitle F
of enabling the Secretary to calculate
the consortium’s payment amount
under the project. Such hospital shall
be the hospital where the resident re-
ceives the majority of the resident’s
hospital-based, nonambulatory train-
ing experience.
(4) ALLOCATION
OF
PORTION
OF
MEDICARE
GME PAYMENTS FOR ACTIVITIES UNDER PROJECT.—
Notwithstanding any provision of title XVIII of the
Social Security Act, the following rules apply with
respect to each State and each health care training
consortium 
participating 
in 
the 
demonstration
project established under this subsection during a
year:
(A) In the case of a State—
(i) the Secretary shall reduce the
amount of each payment made to hospitals
in the State during the year for direct
graduate medical education costs under
section 1886(h) of the Social Security Act
by 3 percent; and
(ii) the Secretary shall pay the State
an amount equal to the Secretary’s esti-
mate of the sum of the reductions made
565
Title VIII, Subtitle F
during the year under clause (i) (as ad-
justed by the Secretary in subsequent
years for over- or under-estimations in the
amount estimated under this subparagraph
in previous years).
(B) In the case of a consortium—
(i) the Secretary shall reduce the
amount of each payment made to hospitals
who are members of the consortium during
the year for direct graduate medical edu-
cation costs under section 1886(h) of the
Social Security Act by 3 percent; and
(ii) the Secretary shall pay the consor-
tium an amount equal to the Secretary’s
estimate of the sum of the reductions made
during the year under clause (i) (as ad-
justed by the Secretary in subsequent
years for over- or under-estimations in the
amount estimated under this subparagraph
in previous years).
(5) DURATION.—A demonstration project under
this subsection shall be conducted for a period not
to exceed 5 years. The Secretary may terminate a
project if the Secretary determines that the State or
consortium conducting the project is not in substan-
566
Title VIII, Subtitle F
tial compliance with the terms of the application ap-
proved by the Secretary.
(6) EVALUATIONS AND REPORTS.—
(A) EVALUATIONS.—Each State or consor-
tium participating in the demonstration project
shall submit to the Secretary a final evaluation
within 360 days of the termination of the State
or consortium’s participation and such interim
evaluations as the Secretary may require.
(B) REPORTS
TO
CONGRESS.—Not later
than 360 days after the first demonstration
project under this section begins, and annually
thereafter for each year in which such a project
is conducted, the Secretary shall submit a re-
port to Congress which evaluates the effective-
ness of the State and consortium activities con-
ducted under such projects and includes any
legislative recommendations determined appro-
priate by the Secretary.
(7) MAINTENANCE
OF
EFFORT.—Any funds
available for the activities covered by a demonstra-
tion project under this section shall supplement, and
shall not supplant, funds that are expended for simi-
lar purposes under any State, regional, or local pro-
gram.
567
Title VIII, Subtitle F
(b) GOALS FOR PROJECTS.—The goals referred to in
this subsection for a State or consortium participating in
the demonstration project under this section are as fol-
lows:
(1) The training of an equal number of physi-
cian and nonphysician primary care providers.
(2) The recruiting of residents for graduate
medical education training programs who received a
portion of undergraduate training in a rural area.
(3) The allocation of not less than 50 percent
of the training spent in a graduate medical residency
training program at sites at which acute care inpa-
tient hospital services are not furnished.
(4) The rotation of residents in approved medi-
cal residency training programs among practices
that serve residents of rural areas.
(5) The development of a plan under which,
after a 5-year transition period, not less than 50
percent of the residents who begin an initial resi-
dency period in an approved medical residency train-
ing program shall be primary care residents.
(c) DEFINITIONS.—In this section:
(1) APPROVED MEDICAL RESIDENCY TRAINING
PROGRAM.—The term ‘‘approved medical residency
568
Title VIII, Subtitle F
training program’’ has the meaning given such term
in section 1886(h)(5)(A) of the Social Security Act.
(2) HEALTH
CARE
TRAINING
CONSORTIUM.—
The term ‘‘health care training consortium’’ means
a State, regional, or local entity consisting of at
least one of each of the following:
(A) A hospital operating an approved med-
ical residency training program at which resi-
dents receive training at ambulatory training
sites located in rural areas.
(B) A school of medicine or osteopathic
medicine.
(C) A school of allied health or a program
for the training of physician assistants (as such
terms are defined in section 799 of the Public
Health Service Act).
(D) A school of nursing (as defined in sec-
tion 853 of the Public Health Service Act).
(3) PRIMARY CARE.—The term ‘‘primary care’’
means family practice, general internal medicine,
general pediatrics, and obstetrics and gynecology.
(4) RESIDENT.—The term ‘‘resident’’ has the
meaning given such term in section 1886(h)(5)(H)
of the Social Security Act.
569
Title VIII, Subtitle F
(5) RURAL AREA.—The term ‘‘rural area’’ has
the 
meaning 
given 
such 
term 
in 
section
1886(d)(2)(D) of the Social Security Act.
Subpart B—Rural Physicians and Other Providers
SEC. 8511. PROVIDER INCENTIVES.
(a) ADDITIONAL PAYMENTS UNDER MEDICARE FOR
PHYSICIANS’ 
SERVICES
FURNISHED
IN
SHORTAGE
AREAS.—
(1) INCREASE IN AMOUNT OF ADDITIONAL PAY-
MENT.—Section 1833(m) (42 U.S.C. 1395l(m)) is
amended by striking ‘‘10 percent’’ and inserting ‘‘20
percent’’.
(2) RESTRICTION
TO
PRIMARY
CARE
SERV-
ICES.—Section 1833(m) (42 U.S.C. 1395l(m)) is
amended by inserting after ‘‘physicians’ services’’
the following: ‘‘consisting of primary care services
(as defined in section 1842(i)(4))’’.
(3) EXTENSION
OF
PAYMENT
FOR
FORMER
SHORTAGE AREAS.—
(A) IN
GENERAL.—Section 1833(m) (42
U.S.C. 1395l(m)) is amended by striking
‘‘area,’’ and inserting ‘‘area (or, in the case of
an area for which the designation as a health
professional shortage area under such section is
withdrawn, in the case of physicians’ services
570
Title VIII, Subtitle F
furnished to such an individual during the 3-
year period beginning on the effective date of
the withdrawal of such designation),’’.
(B) EFFECTIVE
DATE.—The amendment
made by subparagraph (A) shall apply to physi-
cians’ services furnished in an area for which
the designation as a health professional short-
age area under section 332(a)(1)(A) of the
Public Health Service Act is withdrawn on or
after January 1, 1996.
(4) REQUIRING CARRIERS TO REPORT ON SERV-
ICES
PROVIDED.—Section 1842(b)(3) (42 U.S.C.
1395u(b)(3)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (I); and
(B) by inserting after subparagraph (I) the
following new subparagraph:
‘‘(J) will provide information to the Secretary
not later than 30 days after the end of the contract
year on the types of providers to whom the carrier
made additional payments during the year for cer-
tain 
physicians’ 
services 
pursuant 
to 
section
1833(m), together with a description of the services
furnished by such providers during the year; and’’.
(5) STUDY.—
571
Title VIII, Subtitle F
(A) 
IN
GENERAL.—The 
Secretary 
of
Health and Human Services shall conduct a
study analyzing the effectiveness of the provi-
sion of additional payments under part B of the
medicare program for physicians’ services pro-
vided in health professional shortage areas in
recruiting and retaining physicians to provide
services in such areas.
(B) REPORT.—Not later than 1 year after
the date of the enactment of this Act, the Sec-
retary shall submit to Congress a report on the
study conducted under subparagraph (A), and
shall include in the report such recommenda-
tions as the Secretary considers appropriate.
(6) EFFECTIVE DATE.—The amendments made
by paragraphs (1), (2), and (4) shall apply to physi-
cians’ services furnished on or after January 1,
1996.
(b) DEVELOPMENT
OF MODEL STATE SCOPE
OF
PRACTICE LAW.—
(1) IN GENERAL.—The Secretary of Health and
Human Services shall develop and publish a model
law that may be adopted by States to increase the
access of individuals residing in underserved rural
areas to health care services by expanding the serv-
572
Title VIII, Subtitle F
ices which non-physician health care professionals
may provide in such areas.
(2) DEADLINE.—The Secretary shall publish
the model law developed under paragraph (1) not
later than 1 year after the date of the enactment of
this Act.
SEC. 8512. NATIONAL HEALTH SERVICE CORPS LOAN RE-
PAYMENTS EXCLUDED FROM GROSS INCOME.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 137 as section 138 and by insert-
ing after section 136 the following new section:
‘‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN RE-
PAYMENTS.
‘‘(a) GENERAL RULE.—Gross income shall not in-
clude any qualified loan repayment.
‘‘(b) QUALIFIED LOAN REPAYMENT.—For purposes
of this section, the term ‘qualified loan repayment’ means
any payment made on behalf of the taxpayer by the Na-
tional Health Service Corps Loan Repayment Program
under section 338B(g) of the Public Health Service Act.’’.
(b) CONFORMING AMENDMENT.—Paragraph (3) of
section 338B(g) of the Public Health Service Act is
573
Title VIII, Subtitle F
amended by striking ‘‘Federal, State, or local’’ and insert-
ing ‘‘State or local’’.
(c) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 of the Internal
Revenue Code of 1986 is amended by striking the item
relating to section 137 and inserting the following:
‘‘Sec. 137. National Health Service Corps loan repayments.
‘‘Sec. 138. Cross references to other Acts.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments made under section
338B(g) of the Public Health Service Act after the date
of the enactment of this Act.
SEC. 8513. TELEMEDICINE PAYMENT METHODOLOGY.
The Secretary of Health and Human Services shall
establish a methodology for making payments under part
B of the medicare program for telemedicine services fur-
nished on an emergency basis to individuals residing in
an area designated as a health professional shortage area
(under section 332(a) of the Public Health Service Act).
SEC. 
8514. 
DEMONSTRATION 
PROJECT 
TO 
INCREASE
CHOICE IN RURAL AREAS.
The Secretary of Health and Human Services (acting
through the Administrator of the Health Care Financing
Administration) shall conduct a demonstration project to
assess the advantages and disadvantages of requiring
Medicare Choice organizations under part C of title XVIII
574
Title VIII, Subtitle F
of the Social Security Act (as added by section 8002(a))
to market Medicare Choice products in certain under-
served areas which are near the standard service area for
such products.
PART 2—MEDICARE SUBVENTION
SEC. 8521. MEDICARE PROGRAM PAYMENTS FOR HEALTH
CARE SERVICES PROVIDED IN THE MILITARY
HEALTH SERVICES SYSTEM.
(a) PAYMENTS UNDER MEDICARE RISK CONTRACTS
PROGRAM.—
(1) CURRENT
PROGRAM.—Section 1876 (42
U.S.C. 1395mm) is amended by adding at the end
the following new subsection:
‘‘(k) Notwithstanding any other provision of this sec-
tion, a managed health care plan established by the Sec-
retary of Defense under chapter 55 of title 10, United
States Code, shall be considered an eligible organization
under this section, and the Secretary shall make payments
to such a managed health care plan during a year on be-
half of any individuals entitled to benefits under this title
who are enrolled in such a managed health care plan dur-
ing the year. Such payments shall be equal to 30 percent
of the amount otherwise paid to other eligible organiza-
tions under this section, and shall be made under similar
terms and conditions under which the Secretary makes
575
Title VIII, Subtitle F
payments to other eligible organizations with risk sharing
contracts under this section.’’.
(2) MEDICARE
CHOICE
PROGRAM.—Section
1855, as inserted by section 8002(a), by adding at
the end the following new subsection:
‘‘(h) PAYMENTS TO MILITARY PROGRAM.—Notwith-
standing any other provision of this section, a managed
health care plan established by the Secretary of Defense
under chapter 55 of title 10, United States Code, shall
be considered a Medicare Choice organization under this
part, and the Secretary shall make payments to such a
managed health care plan during a year on behalf of any
individuals entitled to benefits under this title who are en-
rolled in such a managed health care plan during the year.
Such payments shall be equal to 30 percent of the amount
otherwise paid to other Medicare Choice organizations
under this section, and shall be made under similar terms
and conditions under which the Secretary makes payments
to other Medicare Choice organizations with contracts in
effect under this part.’’.
(b) TEMPORARY PROVISION FOR WAIVER OF PART
B PREMIUM PENALTY.—Section 1839 (42 U.S.C. 1395r)
is amended by adding at the end the following new sub-
section:
576
Title VIII, Subtitle F
‘‘(h) The premium increase required by subsection
(b) shall not apply with respect to a person who is enrolled
with a managed care plan that is established by the Sec-
retary of Defense under chapter 55 of title 10, United
States Code, and is recognized as an eligible organization
pursuant to section 1855(h) or section 1876(k), if such
person first enrolled in such plan prior to January 1,
1998.’’.
(c) PAYMENTS UNDER PART A OF MEDICARE.—Sec-
tion 1814(c) (42 U.S.C. 1395f(c)) is amended—
(1) by redesignating the current matter as
paragraph (1); and
(2) by adding at the end the following new
paragraph:
‘‘(2) Paragraph (1) shall not apply to services
provided by facilities of the uniformed services pur-
suant to chapter 55 of title 10, United States Code,
and subject to the provisions of section 1095 of such
title. With respect to such services, payments under
this title shall be made without regard to whether
the beneficiary under this title has paid the deduct-
ible and copayments amounts generally required by
this title.’’.
(d) PAYMENTS UNDER PART B OF MEDICARE.—Sec-
tion 1835(d) (42 U.S.C. 1395n(d)) is amended—
577
Title VIII, Subtitle F
(1) by redesignating the current matter as
paragraph (1); and
(2) by adding at the end the following new
paragraph:
‘‘(2) Paragraph (1) shall not apply to services pro-
vided by facilities of the uniformed services pursuant to
chapter 55 of title 10, United States Code, and subject
to the provisions of section 1095 of such title. With respect
to such services, payments under this title shall be made
without regard to whether the beneficiary under this title
has paid the deductible and copayments amounts generally
required by this title.’’.
(e) CONFORMING AMENDMENTS
TO
THE THIRD
PARTY COLLECTION PROGRAM FOR MILITARY MEDICAL
FACILITIES.—(1) Section 1095(d) of title 10, United
States Code, is amended—
(A) by striking ‘‘XVIII or’’; and
(B) by striking ‘‘1395’’ and inserting ‘‘1396’’.
(2) Section 1095(h)(2) of such title is amended by
inserting after ‘‘includes’’ the following: ‘‘plans adminis-
tered under title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.),’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall take effect at the end of the 30-day pe-
riod beginning on the date of the enactment of this Act.
578
Title VIII, Subtitle G
Subtitle G—Other Provisions
SEC. 8601. EXTENSION AND EXPANSION OF EXISTING SEC-
ONDARY PAYER REQUIREMENTS.
(a) DATA MATCH.—
(1) 
Section 
1862(b)(5)(C) 
(42 
U.S.C.
1395y(b)(5)(C)) is amended by striking clause (iii).
(2) Section 6103(l)(12) of the Internal Revenue
Code of 1986 is amended by striking subparagraph
(F).
(b) APPLICATION
TO DISABLED INDIVIDUALS
IN
LARGE GROUP HEALTH PLANS.—
(1) IN GENERAL.—Section 1862(b)(1)(B) (42
U.S.C. 1395y(b)(1)(B)) is amended—
(A) in clause (i), by striking ‘‘clause (iv)’’
and inserting ‘‘clause (iii)’’,
(B) by striking clause (iii), and
(C) by redesignating clause (iv) as clause
(iii).
(2) CONFORMING
AMENDMENTS.—Paragraphs
(1) through (3) of section 1837(i) (42 U.S.C.
1395p(i)) and the second sentence of section
1839(b) (42 U.S.C. 1395r(b)) are each amended by
striking ‘‘1862(b)(1)(B)(iv)’’ each place it appears
and inserting ‘‘1862(b)(1)(B)(iii)’’.
579
Title VIII, Subtitle G
(c) EXPANSION OF PERIOD OF APPLICATION TO IN-
DIVIDUALS WITH END STAGE RENAL DISEASE.—Section
1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended—
(1) in the first sentence, by striking ‘‘12-
month’’ each place it appears and inserting ‘‘24-
month’’, and
(2) by striking the second sentence.
SEC. 8602. REPEAL OF MEDICARE AND MEDICAID COV-
ERAGE DATA BANK.
(a) IN GENERAL.—Section 1144 (42 U.S.C. 1320b–
14) is repealed.
(b) CONFORMING AMENDMENTS.—
(1) MEDICARE.—Section 1862(b)(5) (42 U.S.C.
1395y(b)(5)) is amended—
(A) in subparagraph (B), by striking
‘‘under—’’ and all that follows through the end
and inserting ‘‘subparagraph (A) for purposes
of carrying out this subsection.’’, and
(B) in subparagraph (C)(i), by striking
‘‘subparagraph (B)(i)’’ and inserting ‘‘subpara-
graph (B)’’.
(2) MEDICAID.—Section 1902(a)(25)(A)(i) (42
U.S.C. 1396a(a)(25)(A)(i)) is amended by striking
‘‘including the use of’’ and all that follows through
‘‘any additional measures’’.
580
Title VIII, Subtitle G
(3) ERISA.—Section 101(f) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1021(f)) is repealed.
(4) DATA MATCHES.—Section 552a(a)(8)(B) of
title 5, United States Code, is amended—
(A) by adding ‘‘; or’’ at the end of clause
(v),
(B) by striking ‘‘or’’ at the end of clause
(vi), and
(C) by striking clause (vii).
SEC. 8603. CLARIFICATION OF MEDICARE COVERAGE OF
ITEMS AND SERVICES ASSOCIATED WITH
CERTAIN MEDICAL DEVICES APPROVED FOR
INVESTIGATIONAL USE.
(a) COVERAGE.—Nothing in title XVIII of the Social
Security Act may be construed to prohibit coverage under
part A or part B of the medicare program of items and
services associated with the use of a medical device in the
furnishing of inpatient hospital services (as defined for
purposes of part A of the medicare program) solely on the
grounds that the device is not an approved device, if—
(1) the device is an investigational device; and
(2) the device is used instead of an approved
device.
581
Title VIII, Subtitle G
(b) CLARIFICATION
OF PAYMENT AMOUNT.—Not-
withstanding any other provision of title XVIII of the So-
cial Security Act, the amount of payment made under the
medicare program for any item or service associated with
the use of an investigational device in the furnishing of
inpatient hospital services (as defined for purposes of part
A of the medicare program) may not exceed the amount
of the payment which would have been made under the
program for the item or service if the item or service were
associated with the use of an approved device.
(c) DEFINITIONS.—In this section—
(1) the term ‘‘approved device’’ means a medi-
cal device which has been approved for marketing
under pre-market approval under the Federal Food,
Drug, and Cosmetic Act or cleared for marketing
under a 510(k) notice under such Act; and
(2) the term ‘‘investigational device’’ means a
medical device (other than a device described in
paragraph (1)) which is approved for investigational
use under section 520(g) of the Federal Food, Drug,
and Cosmetic Act.
SEC. 8604. ADDITIONAL EXCLUSION FROM COVERAGE.
(a) IN
GENERAL.—Section 1862(a) (42 U.S.C.
1395y(a)) is amended—
582
Title VIII, Subtitle G
(1) by striking ‘‘or’’ at the end of paragraph
(14),
(2) by striking the period at the end of para-
graph (15) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (15) the fol-
lowing new paragraph:
‘‘(16) where such expenses are for items or
services, or to assist in the purchase, in whole or in
part, of health benefit coverage that includes items
or services, for the purpose of causing, or assisting
in causing, the death, suicide, euthanasia, or mercy
killing of a person.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to payment for items and serv-
ices furnished on or after the date of the enactment of
this Act.
SEC. 8605. EXTENDING MEDICARE COVERAGE OF, AND AP-
PLICATION OF HOSPITAL INSURANCE TAX
TO, ALL STATE AND LOCAL GOVERNMENT
EMPLOYEES.
(a) IN GENERAL.—
(1) APPLICATION
OF
HOSPITAL
INSURANCE
TAX.—Section 3121(u)(2) of the Internal Revenue
Code of 1986 is amended by striking subparagraphs
(C) and (D).
583
Title VIII, Subtitle G
(2) COVERAGE
UNDER
MEDICARE.—Section
210(p) of the Social Security Act (42 U.S.C. 410(p))
is amended by striking paragraphs (3) and (4).
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to services performed
after December 31, 1996.
(b) TRANSITION
IN BENEFITS
FOR STATE
AND
LOCAL GOVERNMENT EMPLOYEES
AND FORMER EM-
PLOYEES.—
(1) IN GENERAL.—
(A) EMPLOYEES
NEWLY
SUBJECT
TO
TAX.—For purposes of sections 226, 226A, and
1811 of the Social Security Act, in the case of
any individual who performs services during the
calendar quarter beginning January 1, 1997,
the wages for which are subject to the tax im-
posed by section 3101(b) of the Internal Reve-
nue Code of 1986 only because of the amend-
ment made by subsection (a), the individual’s
medicare qualified State or local government
employment (as defined in subparagraph (B))
performed before January 1, 1997, shall be
considered to be ‘‘employment’’ (as defined for
purposes of title II of such Act), but only for
purposes of providing the individual (or another
584
Title VIII, Subtitle G
person) with entitlement to hospital insurance
benefits under part A of title XVIII of such Act
for months beginning with January 1997.
(B) MEDICARE
QUALIFIED
STATE
OR
LOCAL
GOVERNMENT
EMPLOYMENT
DE-
FINED.—In this paragraph, the term ‘‘medicare
qualified State or local government employ-
ment’’ means medicare qualified government
employment described in section 210(p)(1)(B)
of the Social Security Act (determined without
regard to section 210(p)(3) of such Act, as in
effect before its repeal under subsection (a)(2)).
(2) AUTHORIZATION
OF
APPROPRIATIONS.—
There are authorized to be appropriated to the Fed-
eral Hospital Insurance Trust Fund from time to
time such sums as the Secretary of Health and
Human Services deems necessary for any fiscal year
on account of—
(A) payments made or to be made during
such fiscal year from such Trust Fund with re-
spect to individuals who are entitled to benefits
under title XVIII of the Social Security Act
solely by reason of paragraph (1),
(B) the additional administrative expenses
resulting or expected to result therefrom, and
585
Title VIII, Subtitle G
(C) any loss in interest to such Trust
Fund resulting from the payment of those
amounts, in order to place such Trust Fund in
the same position at the end of such fiscal year
as it would have been in if this subsection had
not been enacted.
(3) INFORMATION TO INDIVIDUALS WHO ARE
PROSPECTIVE MEDICARE BENEFICIARIES BASED ON
STATE AND LOCAL GOVERNMENT EMPLOYMENT.—
Section 226(g) of the Social Security Act (42 U.S.C.
426(g)) is amended—
(A) 
by 
redesignating 
paragraphs 
(1)
through (3) as subparagraphs (A) through (C),
respectively,
(B) by inserting ‘‘(1)’’ after ‘‘(g)’’, and
(C) by adding at the end the following new
paragraph:
‘‘(2) The Secretary, in consultation with State and
local governments, shall provide procedures designed to
assure that individuals who perform medicare qualified
government employment by virtue of service described in
section 210(a)(7) are fully informed with respect to (A)
their eligibility or potential eligibility for hospital insur-
ance benefits (based on such employment) under part A
of title XVIII, (B) the requirements for, and conditions
586
Title VIII, Subtitle G
of, such eligibility, and (C) the necessity of timely applica-
tion as a condition of becoming entitled under subsection
(b)(2)(C), giving particular attention to individuals who
apply for an annuity or retirement benefit and whose eligi-
bility for such annuity or retirement benefit is based on
a disability.’’
(c) TECHNICAL AMENDMENTS.—
(1) Subparagraph (A) of section 3121(u)(2) of
the Internal Revenue Code of 1986 is amended by
striking ‘‘subparagraphs (B) and (C),’’ and inserting
‘‘subparagraph (B),’’.
(2) Subparagraph (B) of section 210(p)(1) of
the Social Security Act (42 U.S.C. 410(p)(1)) is
amended by striking ‘‘paragraphs (2) and (3).’’ and
inserting ‘‘paragraph (2).’’
(3) Section 218 of the Social Security Act (42
U.S.C. 418) is amended by striking subsection (n).
(4) The amendments made by this subsection
shall apply after December 31, 1996.
587
Title VIII, Subtitle H
Subtitle 
H—Monitoring 
Achieve-
ment of Medicare Reform Goals
SEC. 8701. ESTABLISHMENT OF BUDGETARY AND PROGRAM
GOALS.
(a) IN GENERAL.—The Secretary shall establish pro-
gram budgetary and program goals for the medicare pro-
gram consistent with this section.
(b) BUDGETARY GOALS.—The budgetary goal is to
restrict total outlays under the medicare program as fol-
lows:
(1) For fiscal year 1996, $173,500,000,000.
(2) For fiscal year 1997, $187,300,000,000.
(3) For fiscal year 1998, $200,800,000,000.
(4) For fiscal year 1999, $215,200,000,000.
(5) For fiscal year 2000, $220,500,000,000.
(6) For fiscal year 2001, $248,000,000,000.
(7) For fiscal year 2002, $267,100,000,000.
(c) PROGRAM GOALS.—The program goals shall be
consistent with the following:
(1) There should be an equitable distribution of
funds between per beneficiary spending on payments
to Medicare Choice organizations under part C of
the medicare program and on payments to providers
on a fee-for-service basis under parts A and B of the
program.
588
Title VIII, Subtitle H
(2) Payments to Medicare Choice organizations
should be established in a manner that promotes the
availability of Medicare Choice products in all re-
gions of the country and that permits such organiza-
tions to offer adequate coverage.
SEC. 8702. MEDICARE REFORM COMMISSION.
(a) ESTABLISHMENT.—There is established a com-
mission to be known as the Medicare Reform Commission
(in this section referred to as the ‘‘Commission’’).
(b) DUTIES.—
(1) IN GENERAL.—The Commission shall exam-
ine how the medicare program has met the budg-
etary and program goals established under section
8701.
(2) PERIODIC REPORTS.—
(A) IN GENERAL.—The Commission shall
issue a report on April 1, 1998, and on March
1 of every third subsequent year, on the status
of the medicare program in relation to the
budgetary and program goals specified in sec-
tion 8601.
(B) CONTENTS.—Each report shall include
the following information about the medicare
program in the most recent fiscal year and
projects for the succeeding 3 fiscal years:
589
Title VIII, Subtitle H
(i) The actuarial value of the tradi-
tional medicare benefit package.
(ii) The projected rate of growth of
outlays under the traditional medicare pro-
gram.
(iii) The ability of Medicare Choice or-
ganizations to offer an adequate benefit
package under part C of the medicare pro-
gram.
(iv) The extent of Medicare Choice
products made available to medicare bene-
ficiaries in the different regions of the
country.
(3) RECOMMENDATIONS.—
(A) IN GENERAL.—If a report under para-
graph (2) finds that any of the following prob-
lems exists, the Commission shall include rec-
ommendations to respond to the problem:
(i) The actuarial value of the tradi-
tional medicare benefit package exceeds
the payment rate under the Medicare
Choice program.
(ii) The rate of growth of the tradi-
tional medicare program under parts A
and B is projected to result in medicare
590
Title VIII, Subtitle H
outlays exceeding the outlay targets speci-
fied in section 8701.
(iii) The payments under the Medi-
care Choice program are not sufficient to
allow contractors to provide an adequate
benefit package.
(iv) The selection of Medicare Choice
products are limited or not available in
parts of the country.
(B) TYPES OF RECOMMENDATIONS.—The
recommendations provided under subparagraph
(A) may include—
(i) in response to the problem de-
scribed in subparagraph (A)(ii), reduction
in payments to providers under parts A
and B or an increase in cost sharing by
beneficiaries; and
(ii) in response to the problems de-
scribed in subparagraphs (A)(iii) and
(A)(iv), an adjustment to payment rates to
Medicare Choice organizations.
Such recommendations may not include any
change that is inconsistent with attaining the
outlay targets specified under section 8701.
591
Title VIII, Subtitle H
(4) PRESIDENTIAL RESPONSE.—If the Commis-
sion reports under this subsection that the goals es-
tablished in section 8701 are not met (or projects
that such goals will not be met during a 3-year pe-
riod), the President shall submit to Congress, within
90 days after the date of submission of the report,
specific legislative recommendations to correct the
problem. Such recommendations may include those
described in paragraph (3)(B) and may not include
any change that is inconsistent with attaining the
outlay targets specified under section 8701.
(5) CONGRESSIONAL CONSIDERATION.—
(A) IN
GENERAL.—The President’s rec-
ommendations submitted under paragraph (4)
shall not apply unless a joint resolution (de-
scribed in subparagraph (B)) approving such
recommendations is enacted, in accordance with
the provisions of subparagraph (C), before the
end of the 60-day period beginning on the date
on which a report containing such recommenda-
tions is submitted by the President under para-
graph (4). For purposes of applying the preced-
ing sentence and subparagraphs (B) and (C),
the days on which either House of Congress is
not in session because of an adjournment of
592
Title VIII, Subtitle H
more than three days to a day certain shall be
excluded in the computation of a period.
(B) JOINT RESOLUTION OF APPROVAL.—A
joint resolution described in this subparagraph
means only a joint resolution which is intro-
duced within the 10-day period beginning on
the date on which the report described in sub-
paragraph (A) is submitted and—
(i) which does not have a preamble;
(ii) the matter after the resolving
clause of which is as follows: ‘‘That Con-
gress approves the recommendations of the
President under section 8702(b)(4) of the
Medicare Preservation Act, as submitted
by the President on lllllll.’’,
the blank space being filled in with the ap-
propriate date; and
(iii) the title of which is as follows:
‘‘Joint resolution approving Presidential
recommendations submitted under section
8702(b)(4) of the Medicare Preservation
Act, as submitted by the President on
lllllll.’’, the blank space being
filled in with the appropriate date.
593
Title VIII, Subtitle H
(C) PROCEDURES FOR CONSIDERATION OF
RESOLUTION
OF
APPROVAL.—Subject to sub-
paragraph (D), the provisions of section 2908
(other than subsection (a)) of the Defense Base
Closure and Realignment Act of 1990 shall
apply to the consideration of a joint resolution
described in subparagraph (B) in the same
manner as such provisions apply to a joint reso-
lution described in section 2908(a) of such Act.
(D) SPECIAL RULES.—For purposes of ap-
plying subparagraph (C) with respect to such
provisions—
(i) any reference to the Committee on
Armed Services of the House of Represent-
atives shall be deemed a reference to the
Committee on Ways and Means and any
reference to the Committee on Armed
Services of the Senate shall be deemed a
reference to the Committee on Finance of
the Senate; and
(ii) any reference to the date on which
the President transmits a report shall be
deemed a reference to the date on which
the President submits the recommenda-
tions under paragraph (4).
594
Title VIII, Subtitle H
(c) MEMBERSHIP.—
(1) APPOINTMENT.—The Commission shall be
composed of 5 members appointed by the President,
of which 4 of whom are appointed from a list (of at
least 5 nominees) submitted by each of the following:
(A) The Speaker of the House of Rep-
resentatives.
(B) The Minority Leader of the House of
Representatives.
(C) The Majority Leader of the Senate.
(D) The Minority Leader of the Senate.
(2) TERM OF SERVICE.—Each member of the
Commission shall serve for a term of 3 years. Mem-
bers may be reappointed for additional terms.
(3) CHAIRMAN
AND
VICE
CHAIRMAN.—The
Commission shall elect a Chairman and Vice Chair-
man from among its members.
(4) VACANCIES.—Any vacancy in the member-
ship of the Commission shall be filled in the manner
in which the original appointment was made and
shall not affect the power of the remaining members
to execute the duties of the Commission.
(5) QUORUM.—A quorum shall consist of 3
members of the Commission, except that 2 members
may conduct a hearing under subsection (e).
595
Title VIII, Subtitle H
(6) MEETINGS.—The Commission shall meet at
the call of its Chairman or a majority of its mem-
bers.
(7) COMPENSATION AND REIMBURSEMENT OF
EXPENSES.—Members of the Commission are not
entitled to receive compensation for service on the
Commission. Members may be reimbursed for travel,
subsistence, and other necessary expenses incurred
in carrying out the duties of the Commission.
(d) STAFF AND CONSULTANTS.—
(1) STAFF.—The Commission may appoint and
determine the compensation of such staff as may be
necessary to carry out the duties of the Commission.
Such appointments and compensation may be made
without regard to the provisions of title 5, United
States Code, that govern appointments in the com-
petitive services, and the provisions of chapter 51
and subchapter III of chapter 53 of such title that
relate to classifications and the General Schedule
pay rates.
(2) CONSULTANTS.—The Commission may pro-
cure such temporary and intermittent services of
consultants under section 3109(b) of title 5, United
States Code, as the Commission determines to be
necessary to carry out the duties of the Commission.
596
Title VIII, Subtitle H
(e) POWERS.—
(1) HEARINGS
AND
OTHER
ACTIVITIES.—For
the purpose of carrying out its duties, the Commis-
sion may hold such hearings and undertake such
other activities as the Commission determines to be
necessary to carry out its duties.
(2) STUDIES BY GAO.—Upon the request of the
Commission, the Comptroller General shall conduct
such studies or investigations as the Commission de-
termines to be necessary to carry out its duties.
(3) COST
ESTIMATES
BY
CONGRESSIONAL
BUDGET OFFICE.—
(A) Upon the request of the Commission,
the Director of the Congressional Budget Office
shall provide to the Commission such cost esti-
mates as the Commission determines to be nec-
essary to carry out its duties.
(B) The Commission shall reimburse the
Director of the Congressional Budget Office for
expenses relating to the employment in the of-
fice of the Director of such additional staff as
may be necessary for the Director to comply
with requests by the Commission under sub-
paragraph (A).
597
Title VIII, Subtitle H
(4) DETAIL OF FEDERAL EMPLOYEES.—Upon
the request of the Commission, the head of any Fed-
eral agency is authorized to detail, without reim-
bursement, any of the personnel of such agency to
the Commission to assist the Commission in carry-
ing out its duties. Any such detail shall not interrupt
or otherwise affect the civil service status or privi-
leges of the Federal employee.
(5) TECHNICAL
ASSISTANCE.—Upon the re-
quest of the Commission, the head of a Federal
agency shall provide such technical assistance to the
Commission as the Commission determines to be
necessary to carry out its duties.
(6) USE OF MAILS.—The Commission may use
the United States mails in the same manner and
under the same conditions as Federal agencies and
shall, for purposes of the frank, be considered a
commission of Congress as described in section 3215
of title 39, United States Code.
(7) OBTAINING
INFORMATION.—The Commis-
sion may secure directly from any Federal agency
information necessary to enable it to carry out its
duties, if the information may be disclosed under
section 552 of title 5, United States Code. Upon re-
quest of the Chairman of the Commission, the head
598
Title VIII, Subtitle H
of such agency shall furnish such information to the
Commission. In particular, the Administrator of the
Health Care Financing Administration and the Di-
rector of the Office of Management and Budget
shall provide the Commission with access to data for
the conduct of its work.
(8) ADMINISTRATIVE
SUPPORT
SERVICES.—
Upon the request of the Commission, the Adminis-
trator of General Services shall provide to the Com-
mission on a reimbursable basis such administrative
support services as the Commission may request.
(9) ACCEPTANCE OF DONATIONS.—The Com-
mission may accept, use, and dispose of gifts or do-
nations of services or property.
(10) PRINTING.—For purposes of costs relating
to printing and binding, including the cost of per-
sonnel detailed from the Government Printing Of-
fice, the Commission shall be deemed to be a com-
mittee of the Congress.
(f) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated such sums as may be
necessary to carry out this section. Amounts appropriated
to carry out this section shall remain available until ex-
pended.
599
Title VIII, Subtitle I
Subtitle I—Lock-Box Provisions for
Medicare Part B Savings from
Growth Reductions
SEC. 8801. ESTABLISHMENT OF MEDICARE GROWTH RE-
DUCTION TRUST FUND FOR PART B SAVINGS.
Part B of title XVIII is amended by inserting after
section 1841 the following new section:
‘‘MEDICARE GROWTH REDUCTION TRUST FUND
‘‘SEC. 1841A. (a)(1) There is hereby created on the
books of the Treasury of the United States a trust fund
to be known as the ‘Federal Medicare Growth Reduction
Trust Fund’ (in this section referred to as the ‘Trust
Fund’). The Trust Fund shall consist of such gifts and
bequests as may be made as provided in section 201(i)(1)
and amounts appropriated under paragraph (2).
‘‘(2) There are hereby appropriated to the Trust
Fund amounts equivalent to 100 percent of the Sec-
retary’s estimate of the reductions in expenditures under
this part that are attributable to the Medicare Preserva-
tion Act of 1995. The amounts appropriated by the pre-
ceding sentence shall be transferred from time to time (not
less frequently than monthly) from the general fund in the
Treasury to the Trust Fund.
‘‘(3)(A) Subject to subparagraph (B), with respect to
monies transferred to the Trust Fund, no transfers, au-
600
Title VIII, Subtitle J
thorizations of appropriations, or appropriations are per-
mitted.
‘‘(B) Beginning with fiscal year 2003, the Secretary
may expend funds in the Trust Fund to carry out this
title, but only to the extent provided by Congress in ad-
vance through a specific amendment to this section.
‘‘(b) The provisions of subsections (b) through (e) of
section 1841 shall apply to the Trust Fund in the same
manner as they apply to the Federal Supplementary Medi-
cal Insurance Trust Fund, except that the Board of Trust-
ees and Managing Trustee of the Trust Fund shall be
composed of the members of the Board of Trustees and
the Managing Trustee, respectively, of the Federal Supple-
mentary Medical Insurance Trust Fund.’’.
Subtitle J—Clinical Laboratories
SEC. 8901. EXEMPTION OF PHYSICIAN OFFICE LABORA-
TORIES.
Section 353(d) of the Public Health Service Act (42
U.S.C. 263a(d)) is amended—
(1) by redesignating paragraphs (2), (3), and
(4) as paragraphs (3), (4), and (5) and by adding
after paragraph (1) the following:
‘‘(2) EXEMPTION OF PHYSICIAN OFFICE LAB-
ORATORIES.—
601
Title VIII, Subtitle J
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), a clinical laboratory in a
physician’s office (including an office of a group
of physicians) which is directed by a physician
and in which examinations and procedures are
either performed by a physician or by individ-
uals supervised by a physician solely as an ad-
junct to other services provided by the physi-
cian’s office is exempt from this section.
‘‘(B) EXCEPTION.—A clinical laboratory
described in subparagraph (A) is not exempt
from this section when it performs a pap smear
(Papanicolaou Smear) analysis.
‘‘(C) DEFINITION.—For purposes of sub-
paragraph (A), the term ‘physician’ has the
same meaning as is prescribed for such term by
section 1861(r) of the Social Security Act (42
U.S.C. 1395x(r)).’’;
(2) in paragraph (3) (as so redesignated) by
striking ‘‘(3)’’ and inserting ‘‘(4)’’; and
(3) in paragraphs (4) and (5) (as so redesig-
nated) by striking ‘‘(2)’’ and inserting ‘‘(3)’’.
602
Title IX, Subtitle A
TITLE IX—WELFARE REFORM
SEC. 9000. AMENDMENT OF THE SOCIAL SECURITY ACT.
Except as otherwise expressly provided, wherever in
this title an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Social Security Act.
Subtitle A—Temporary
Employment Assistance
SEC. 9101. STATE PLAN.
(a) IN GENERAL.—Title IV (42 U.S.C. 601 et seq.)
is amended by striking part A and inserting the following:
‘‘PART A—TEMPORARY EMPLOYMENT
ASSISTANCE
‘‘SEC. 400. APPROPRIATION.
‘‘For the purpose of providing assistance to families
with needy children and assisting parents of children in
such families to obtain and retain private sector work to
the extent possible, and public sector or volunteer work
if necessary, through the Work First Employment Block
Grant program (hereafter in this title referred to as the
‘Work First program’), there is hereby authorized to be
appropriated, and is hereby appropriated, for each fiscal
year a sum sufficient to carry out the purposes of this
part. The sums made available under this section shall be
603
Title IX, Subtitle A
used for making payments to States which have approved
State plans for temporary employment assistance.
‘‘Subpart 1—State Plans for Temporary Employment
Assistance
‘‘SEC. 401. ELEMENTS OF STATE PLANS.
‘‘A State plan for temporary employment assistance
shall provide a description of the State program which car-
ries out the purpose described in section 400 and shall
meet the requirements of the following sections of this
subpart.
‘‘SEC. 402. FAMILY ELIGIBILITY FOR TEMPORARY EMPLOY-
MENT ASSISTANCE.
‘‘(a) IN GENERAL.—The State plan shall provide that
any family—
‘‘(1) with 1 or more children (or any expectant
family, at the option of the State), defined as needy
by the State; and
‘‘(2) which fulfills the conditions set forth in
subsection (b),
shall be eligible for cash assistance under the plan, except
as otherwise provided under this part.
‘‘(b) 
INDIVIDUAL
RESPONSIBILITY
PLAN.—The
State plan shall provide that not later than 30 days after
the approval of the application for temporary employment
assistance, a parent qualifying for assistance shall execute
604
Title IX, Subtitle A
an individual responsibility plan as described in section
403. If a child otherwise eligible for assistance under this
part is residing with a relative other than a parent, the
State plan may require the relative to execute such a plan
as a condition of the family receiving such assistance.
‘‘(c) LIMITATIONS ON ELIGIBILITY.—
‘‘(1) LENGTH OF TIME.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraphs (B), (C), (D), and (E), the
State plan shall provide that the family of an
individual who, after attaining age 18 years (or
age 19 years, at the option of the State), has
received assistance under the plan for 60
months, shall no longer be eligible for cash as-
sistance under the plan.
‘‘(B) HARDSHIP
EXCEPTION.—With re-
spect to any family, the State plan shall not in-
clude in the determination of the 60-month pe-
riod under subparagraph (A) any month in
which—
‘‘(i) at the option of the State, the
family includes an individual working 20
hours per week (or more, at the option of
the State);
605
Title IX, Subtitle A
‘‘(ii) the family resides in an area
with an unemployment rate exceeding 8
percent; or
‘‘(iii) the family is experiencing other
special hardship circumstances which make
it appropriate for the State to provide an
exemption for such month, except that the
total number of exemptions under this
clause for any month shall not exceed 15
percent of the number of families to which
the State is providing assistance under the
plan.
‘‘(C) EXCEPTION FOR TEEN PARENTS.—
With respect to any family, the State plan shall
not include in the determination of the 60-
month period under subparagraph (A) any
month in which the parent—
‘‘(i) is under age 18 (or age 19, at the
option of the State); and
‘‘(ii) is making satisfactory progress
while attending high school or an alter-
native technical preparation school.
‘‘(D) EXCEPTION
FOR
INDIVIDUALS
EX-
EMPT FROM WORK REQUIREMENTS.—With re-
spect to any family, the State plan shall not in-
606
Title IX, Subtitle A
clude in the determination of the 60-month pe-
riod under subparagraph (A) any month in
which 1 or each of the parents—
‘‘(i) is seriously ill, incapacitated, or
of advanced age;
‘‘(ii)(I) except for a child described in
subclause (II), is responsible for a child
under age 1 year (or age 6 months, at the
option of the State), or
‘‘(II) in the case of a 2nd or subse-
quent child born during such period, is re-
sponsible for a child under age 3 months;
‘‘(iii) is pregnant in the 3rd trimester;
or
‘‘(iv) is caring for a family member
who is ill or incapacitated.
‘‘(E) 
EXCEPTION
FOR
CHILD-ONLY
CASES.—With respect to any child who has not
attained age 18 (or age 19, at the option of the
State) and who is eligible for assistance under
this part, but not as a member of a family oth-
erwise eligible for assistance under this part
(determined without regard to this paragraph),
the State plan shall not include in the deter-
mination of the 60-month period under sub-
607
Title IX, Subtitle A
paragraph (A) any month in which such child
has not attained such age.
‘‘(F) OTHER PROGRAM ELIGIBILITY.—The
State plan shall provide that if a family is no
longer eligible for cash assistance under the
plan due to the imposition of the 60-month pe-
riod under subparagraph (A) or due to the im-
position of a penalty under subparagraph
(A)(ii) or (B)(ii) of section 403(e)(1)—
‘‘(i) for purposes of determining eligi-
bility for any other Federal or federally as-
sisted program based on need, such family
shall continue to be considered eligible for
such cash assistance;
‘‘(ii) for purposes of determining the
amount of assistance under any other Fed-
eral or federally assisted program based on
need, such family shall continue to be con-
sidered receiving such cash assistance; and
‘‘(iii) the State may, at the option of
the State, after having assessed the needs
of the child or children of the family, pro-
vide for such needs with a voucher for such
family—
608
Title IX, Subtitle A
‘‘(I) determined on the same
basis as the State would provide as-
sistance under the State plan to such
a family with 1 less individual,
‘‘(II) designed appropriately to
pay third parties for shelter, goods,
and services received by the child or
children, and
‘‘(III) payable directly to such
third parties.
‘‘(2) TREATMENT OF INTERSTATE MIGRANTS.—
The State plan may apply to a category of families
the rules for such category under a plan of another
State approved under this part, if a family in such
category has moved to the State from the other
State and has resided in the State for less than 12
months.
‘‘(3) INDIVIDUALS ON OLD-AGE ASSISTANCE OR
SSI INELIGIBLE FOR TEMPORARY EMPLOYMENT AS-
SISTANCE.—The State plan shall provide that no as-
sistance shall be furnished any individual under the
plan with respect to any period with respect to which
such individual is receiving old-age assistance under
the State plan approved under section 102 of title
I or supplemental security income under title XVI.
609
Title IX, Subtitle A
‘‘(4) CHILDREN FOR WHOM FEDERAL, STATE,
OR LOCAL FOSTER CARE MAINTENANCE OR ADOP-
TION ASSISTANCE PAYMENTS ARE MADE.—A child
with respect to whom foster care maintenance pay-
ments or adoption assistance payments are made
under part E or under State or local law shall not,
for the period for which such payments are made, be
regarded as a needy child under this part, and such
child’s income and resources shall be disregarded in
determining the eligibility of the family of such child
for temporary employment assistance.
‘‘(5) DENIAL OF ASSISTANCE FOR 10 YEARS TO
A PERSON FOUND TO HAVE FRAUDULENTLY MIS-
REPRESENTED RESIDENCE IN ORDER TO OBTAIN AS-
SISTANCE IN 2 OR MORE STATES.—The State plan
shall provide that no assistance will be furnished any
individual under the plan during the 10-year period
that begins on the date the individual is convicted in
Federal or State court of having made, a fraudulent
statement or representation with respect to the place
of residence of the individual in order to receive ben-
efits or services simultaneously from 2 or more
States under programs that are funded under this
part, title XIX, or the Food Stamp Act of 1977, or
610
Title IX, Subtitle A
benefits in 2 or more States under the supplemental
security income program under title XVI.
‘‘(6) DENIAL
OF
ASSISTANCE
FOR
FUGITIVE
FELONS
AND
PROBATION
AND
PAROLE
VIOLA-
TORS.—
‘‘(A) IN GENERAL.—The State plan shall
provide that no assistance will be furnished any
individual under the plan for any period if dur-
ing such period the State agency has knowledge
that such individual is—
‘‘(i) fleeing to avoid prosecution, or
custody or confinement after conviction,
under the laws of the place from which the
individual flees, for a crime, or an attempt
to commit a crime, which is a felony under
the laws of the place from which the indi-
vidual flees, or which, in the case of the
State of New Jersey, is a high mis-
demeanor under the laws of such State; or
‘‘(ii) violating a condition of probation
or parole imposed under Federal or State
law.
‘‘(B) EXCHANGE OF INFORMATION WITH
LAW ENFORCEMENT AGENCIES.—Notwithstand-
ing any other provision of law, the State plan
611
Title IX, Subtitle A
shall provide that the State shall furnish any
Federal, State, or local law enforcement officer,
upon the request of the officer, with the current
address of any recipient of assistance under the
plan, if the officer furnishes the agency with the
name of the recipient and notifies the agency
that—
‘‘(i) such recipient—
‘‘(I) is described in clause (i) or
(ii) of subparagraph (A); or
‘‘(II) has information that is nec-
essary for the officer to conduct the
officer’s official duties; and
‘‘(ii) the location or apprehension of
the recipient is within such officer’s official
duties.
‘‘(d) DETERMINATION OF ELIGIBILITY.—
‘‘(1) DETERMINATION
OF
NEED.—The State
plan shall provide that the State agency take into
consideration any income and resources of any indi-
vidual the State determines should be considered in
determining the need of the child or relative claim-
ing temporary employment assistance, subject to sec-
tion 407.
612
Title IX, Subtitle A
‘‘(2) RESOURCE
AND
INCOME
DETERMINA-
TION.—In determining the total resources and in-
come of the family of any needy child, the State plan
shall provide the following:
‘‘(A) RESOURCES.—The State’s resource
limit, including a description of the policy deter-
mined by the State regarding any exclusion al-
lowed for vehicles owned by family members, re-
sources set aside for future needs of a child, in-
dividual development accounts, or other policies
established by the State to encourage savings.
‘‘(B) FAMILY
INCOME.—The extent to
which earned or unearned income is disregarded
in determining eligibility for, and amount of,
assistance.
‘‘(C) CHILD SUPPORT.—The State’s policy,
if any, for determining the extent to which child
support received in excess of $50 per month on
behalf of a member of the family is disregarded
in determining eligibility for, and the amount
of, assistance.
‘‘(D) CHILD’S EARNINGS.—The treatment
of earnings of a child living in the home.
‘‘(E) EARNED INCOME TAX CREDIT.—The
State agency shall disregard any refund of Fed-
613
Title IX, Subtitle A
eral income taxes made to a family receiving
temporary employment assistance by reason of
section 32 of the Internal Revenue Code of
1986 (relating to earned income tax credit) and
any payment made to such a family by an em-
ployer under section 3507 of such Code (relat-
ing to advance payment of earned income cred-
it).
‘‘(3) VERIFICATION SYSTEM.—The State plan
shall provide that information is requested and ex-
changed for purposes of income and eligibility ver-
ification in accordance with a State system which
meets the requirements of section 1137.
‘‘SEC. 403. INDIVIDUAL RESPONSIBILITY PLAN.
‘‘(a) ASSESSMENT.—The State agency responsible
for administering the State plan shall make an initial as-
sessment of the skills, prior work experience, and employ-
ability of each applicant for, or recipient of, assistance
under the State plan who—
‘‘(1) has attained 18 years of age; or
‘‘(2) has not completed high school or obtained
a certificate of high school equivalency, and is not
attending secondary school.
‘‘(b) INDIVIDUAL RESPONSIBILITY PLANS.—
614
Title IX, Subtitle A
‘‘(1) IN GENERAL.—On the basis of the assess-
ment made under subsection (a) with respect to an
individual, the State agency, in consultation with the
individual, shall develop an individual responsibility
plan for the individual, which—
‘‘(A) shall provide that participation by the
individual in job search activities shall be a con-
dition of eligibility for assistance under the
State plan approved under part A, except dur-
ing any period for which the individual is em-
ployed full-time in an unsubsidized job in the
private sector;
‘‘(B) sets forth an employment goal for the
individual and a plan for moving the individual
immediately into private sector employment;
‘‘(C) sets forth the obligations of the indi-
vidual, which may include a requirement that
the individual attend school, maintain certain
grades and attendance, keep school age children
of the individual in school, immunize children,
attend parenting and money management class-
es, or do other things that will help the individ-
ual become and remain employed in the private
sector;
615
Title IX, Subtitle A
‘‘(D) may require that the individual enter
the State program established under part F, if
the caseworker determines that the individual
will need education, training, job placement as-
sistance, wage enhancement, or other services
to become employed in the private sector;
‘‘(E) shall provide that the individual
must—
‘‘(i) assign to the State any rights to
support from any other person the individ-
ual may have in such individual’s own be-
half or in behalf of any other family mem-
ber for whom the individual is applying for
or receiving assistance; and
‘‘(ii) cooperate with the State—
‘‘(I) in establishing the paternity
of a child born out of wedlock with re-
spect to whom assistance is claimed,
and
‘‘(II) in obtaining support pay-
ments for the individual and for a
child with respect to whom such as-
sistance is claimed, or in obtaining
any other payments or property due
the individual or the child,
616
Title IX, Subtitle A
unless (in either case) the individual is found to
have good cause for refusing to cooperate as de-
termined by the State agency in accordance
with standards prescribed by the Secretary,
which standards shall take into consideration
the best interests of the child on whose behalf
assistance is claimed.
‘‘(F) to the greatest extent possible shall
be designed to move the individual into what-
ever private sector employment the individual is
capable of handling as quickly as possible, and
to increase the responsibility and amount of
work the individual is to handle over time;
‘‘(G) shall describe what services the State
will provide the individual so that the individual
will be able to obtain and keep employment in
the private sector, and describe the job counsel-
ing and other services that will be provided by
the State; and
‘‘(H) at the option of the State, may re-
quire the individual to undergo appropriate sub-
stance abuse treatment.
‘‘(2) TIMING.—The State agency shall comply
with paragraph (1) with respect to an individual—
617
Title IX, Subtitle A
‘‘(A) within 90 days (or, at the option of
the State, 180 days) after the effective date of
this part, in the case of an individual who, as
of such effective date, is a recipient of assist-
ance under the State plan approved under this
part; or
‘‘(B) within 30 days (or, at the option of
the State, 90 days) after the individual is deter-
mined to be eligible for such assistance, in the
case of any other individual.
‘‘(c) PROVISION OF PROGRAM AND EMPLOYMENT IN-
FORMATION.—The State shall inform all applicants for
and recipients of assistance under the State plan approved
under this part of all available services under the State
plan for which they are eligible.
‘‘(d) REQUIREMENT THAT RECIPIENTS ENTER THE
WORK FIRST PROGRAM.—
‘‘(1) IN GENERAL.—Beginning with fiscal year
2004, the State shall place recipients of assistance
under the State plan approved under this part, who
have not become employed in the private sector with-
in 1 year after signing an individual responsibility
plan, in the first available slot in the State program
established under part F, except as provided in
paragraph (2).
618
Title IX, Subtitle A
‘‘(2) EXCEPTIONS.—A state may not be re-
quired to place a recipient of such assistance in the
State program established under part F if the recipi-
ent—
‘‘(A) is ill, incapacitated, or of advanced
age;
‘‘(B) has not attained 18 years of age;
‘‘(C) is caring for a child or parent who is
ill or incapacitated; or
‘‘(D) is enrolled in school or in educational
or training programs that will lead to private
sector employment.
‘‘(e) PENALTIES.—
‘‘(1) STATE NOT OPERATING A WORK FIRST OR
WORKFARE PROGRAM.—In the case of a State that
is not operating a program under part F or G:
‘‘(A) FAILURE TO COMPLY WITH INDIVID-
UAL RESPONSIBILITY PLAN OR AGREEMENT OF
MUTUAL RESPONSIBILITY.—
‘‘(i) PROGRESSIVE
REDUCTIONS
IN
ASSISTANCE
FOR
1ST
AND
2ND
FAIL-
URES.—The amount of assistance other-
wise to be provided under the State plan
approved under this part to a family that
includes an individual who fails without
619
Title IX, Subtitle A
good cause to comply with an individual
responsibility plan (or, if the State has es-
tablished a program under subpart 1 of
part F and the individual is required to
participate in the program, an agreement
of mutual responsibility) signed by the in-
dividual (other than by reason of conduct
described in paragraph (2)) shall be re-
duced by—
‘‘(I) 33 percent for the 1st such
act of noncompliance; or
‘‘(II) 66 percent for the 2nd such
act of noncompliance.
‘‘(ii) DENIAL OF ASSISTANCE FOR 3RD
FAILURE.—In the case of the 3rd such act
of noncompliance, the family of which the
individual is a member shall not thereafter
be eligible for assistance under the State
plan approved under this part.
‘‘(iii) ACTS
OF
NONCOMPLIANCE.—
For purposes of this paragraph, a 1st act
of noncompliance by an individual contin-
ues for more than 1 calendar month shall
be considered a 2nd act of noncompliance,
and a 2nd act of noncompliance that con-
620
Title IX, Subtitle A
tinues for more than 3 calendar months
shall be considered a 3rd act of noncompli-
ance.
‘‘(B) DENIAL OF ASSISTANCE TO ADULTS
REFUSING TO WORK, LOOK FOR WORK, OR AC-
CEPT A BONA FIDE OFFER OF EMPLOYMENT.—
‘‘(i) REFUSAL TO WORK OR LOOK FOR
WORK.—If an unemployed individual who
has attained 18 years of age refuses to
work or look for work—
‘‘(I) in the case of the 1st such
refusal, assistance under the State
plan approved under this part shall
not be payable with respect to the in-
dividual until the later of—
‘‘(aa) a period of not less
than 6 months after the date of
the first such refusal; or
‘‘(bb) the first date the indi-
vidual agrees to work or look for
work; or
‘‘(II) in the case of the 2nd such
refusal, the family of which the indi-
vidual is a member shall not there-
after be eligible for assistance under
621
Title IX, Subtitle A
the State plan approved under this
part.
‘‘(ii) REFUSAL
TO
ACCEPT
A
BONA
FIDE OFFER OF EMPLOYMENT.—If an un-
employed individual who has attained 18
years of age refuses to accept a bona fide
offer of employment, the family of which
the individual is a member shall not there-
after be eligible for assistance under the
State plan approved under this part.
‘‘(2) OTHER STATES.—In the case of any other
State, the State shall reduce, by such amount as the
State considers appropriate, the amount of assist-
ance otherwise payable under the State plan ap-
proved under this part to a family that includes an
individual who fails without good cause to comply
with an individual responsibility plan signed by the
individual.
‘‘SEC. 404. PAYMENT OF ASSISTANCE.
‘‘(a) STANDARDS OF ASSISTANCE.—The State plan
shall specify standards of assistance, including—
‘‘(1) the composition of the unit for which as-
sistance will be provided;
622
Title IX, Subtitle A
‘‘(2) a standard, expressed in money amounts,
to be used in determining the need of applicants and
recipients;
‘‘(3) a standard, expressed in money amounts,
to be used in determining the amount of the assist-
ance payment; and
‘‘(4) the methodology to be used in determining
the payment amount received by assistance units.
‘‘(b) LEVEL OF ASSISTANCE.—Except as otherwise
provided in this title, the State plan shall provide that—
‘‘(1) the determination of need and the amount
of assistance for all applicants and recipients shall
be made on an objective and equitable basis; and
‘‘(2) families of similar composition with similar
needs and circumstances shall be treated similarly.
‘‘(c) CORRECTION OF PAYMENTS.—The State plan
shall provide that the State agency will promptly take all
necessary 
steps 
to 
correct 
any 
overpayment 
or
underpayment of assistance under such plan, including the
request for Federal tax refund intercepts as provided
under section 416.
‘‘(d) 
OPTIONAL
VOLUNTARY
DIVERSION
PRO-
GRAM.—The State plan shall, at the option of the State,
and in such part or parts of the State as the State may
select, provide that—
623
Title IX, Subtitle A
‘‘(1) upon the recommendation of the case-
worker who is handling the case of a family eligible
for assistance under the State plan, the State shall,
in lieu of any other assistance under the State plan
to the family during a time period of not more than
3 months, make a lump-sum payment to the family
for the time period in an amount not to exceed—
‘‘(A) the value of the monthly benefits that
would otherwise be provided to the family under
the State plan; multiplied by
‘‘(B) the number of months in the time pe-
riod;
‘‘(2) a lump-sum payment pursuant to subpara-
graph (A) shall not be made more than once to any
family; and
‘‘(3) if, during a time period for which the
State has made a lump-sum payment to a family
pursuant to subparagraph (A), the family applies for
and (but for the lump-sum payment) would be eligi-
ble under the State plan for a monthly benefit that
is greater than the value of the monthly benefit
which would have been provided to the family under
the State plan at the time of the calculation of the
lump sum payment, then, notwithstanding subpara-
graph (A), the State shall, for that part of the time
624
Title IX, Subtitle A
period that remains after the family becomes eligible
for the greater monthly benefit, provide monthly
benefits to the family in an amount not to exceed—
‘‘(A) the amount by which the value of the
greater monthly benefit exceeds the value of the
former monthly benefit, multiplied by the num-
ber of months in the time period; divided by
‘‘(B) the whole number of months remain-
ing in the time period.’’.
‘‘SEC. 405. OTHER PROGRAMS.
‘‘(a) WORK FIRST PROGRAM; WORKFARE OR JOB
PLACEMENT VOUCHER PROGRAM.—The State plan shall
provide that the State has in effect and operation—
‘‘(1) a work first program that meets the re-
quirements of part F; and
‘‘(2) a workfare program that meets the re-
quirements of part G, or a job placement voucher
program that meets the requirements of part H, but
not both.
‘‘(b) PROVISION OF POSITIONS AND VOUCHERS.—
The State plan shall provide that the State shall provide
a position in the workfare program established by the
State under part G, or a job placement voucher under the
job placement voucher program established by the State
under part H to any individual who, by reason of section
625
Title IX, Subtitle A
487(b), is prohibited from participating in the work first
program operated by the State, and shall not provide such
a position or such a voucher to any other individual.
‘‘(c) PROVISION
OF
CASE
MANAGEMENT
SERV-
ICES.—The State plan shall provide that the State shall
provide to participants in such programs such case man-
agement services as are necessary to ensure the integrated
provision of benefits and services under such programs.
‘‘(d) STATE CHILD SUPPORT AGENCY.—The State
plan shall—
‘‘(1) provide that the State has in effect a plan
approved under part D and operates a child support
program in substantial compliance with such plan;
‘‘(2) provide that the State agency administer-
ing the plan approved under this part shall be re-
sponsible for assuring that—
‘‘(A) the benefits and services provided
under plans approved under this part and part
D are furnished in an integrated manner, in-
cluding coordination of intake procedures with
the agency administering the plan approved
under part D;
‘‘(B) all applicants for, and recipients of,
temporary employment assistance are encour-
aged, assisted, and required (as provided under
626
Title IX, Subtitle A
section 403(b)(1)(E)(ii)) to cooperate in the es-
tablishment and enforcement of paternity and
child support obligations and are notified about
the services available under the State plan ap-
proved under part D; and
‘‘(C) procedures require referral of pater-
nity and child support enforcement cases to the
agency administering the plan approved under
part D not later than 10 days after the applica-
tion for temporary employment assistance; and
‘‘(3) provide for prompt notice (including the
transmittal of all relevant information) to the State
child support collection agency established pursuant
to part D of the furnishing of temporary employ-
ment assistance with respect to a child who has been
deserted or abandoned by a parent (including a child
born out-of-wedlock without regard to whether the
paternity of such child has been established).
‘‘(e) CHILD WELFARE SERVICES AND FOSTER CARE
AND ADOPTION ASSISTANCE.—The State plan shall pro-
vide that the State has in effect—
‘‘(1) a State plan for child welfare services ap-
proved under part B; and
‘‘(2) a State plan for foster care and adoption
assistance approved under part E,
627
Title IX, Subtitle A
and operates such plans in substantial compliance with the
requirements of such parts.
‘‘(f) REPORT OF CHILD ABUSE, ETC.—The State
plan shall provide that the State agency will—
‘‘(1) report to an appropriate agency or official,
known or suspected instances of physical or mental
injury, sexual abuse or exploitation, or negligent
treatment or maltreatment of a child receiving as-
sistance under the State plan under circumstances
which indicate that the child’s health or welfare is
threatened thereby; and
‘‘(2) provide such information with respect to a
situation described in paragraph (1) as the State
agency may have.
‘‘(g) AVAILABILITY OF ASSISTANCE IN RURAL AREAS
OF STATE.—The State plan shall consider and address the
needs of rural areas in the State to ensure that families
in such areas receive assistance to become self-sufficient.
‘‘(h) FAMILY PRESERVATION.—
‘‘(1) IN GENERAL.—The State plan shall de-
scribe the efforts by the State to promote family
preservation and stability, including efforts—
‘‘(A) to encourage fathers to stay home
and be a part of the family;
628
Title IX, Subtitle A
‘‘(B) to keep families together to the ex-
tent possible; and
‘‘(C) except to the extent provided in para-
graph (2), to treat 2-parent families and 1-par-
ent families equally with respect to eligibility
for assistance.
‘‘(2) MAINTENANCE
OF
TREATMENT.—The
State may impose eligibility limitations relating spe-
cifically to 2-parent families to the extent such limi-
tations are no more restrictive than such limitations
in effect in the State plan in fiscal year 1995.
‘‘SEC. 406. ADMINISTRATIVE REQUIREMENTS FOR STATE
PLAN.
‘‘(a) STATEWIDE PLAN.—The State plan shall be in
effect in all political subdivisions of the State, and, if ad-
ministered by the subdivisions, be mandatory upon such
subdivisions. If such plan is not administered uniformly
throughout the State, the plan shall describe the adminis-
trative variations.
‘‘(b) SINGLE ADMINISTRATING AGENCY.—The State
plan shall provide for the establishment or designation of
a single State agency to administer the plan or supervise
the administration of the plan.
‘‘(c) FINANCIAL PARTICIPATION.—The State plan
shall provide for financial participation by the State in the
629
Title IX, Subtitle A
same manner and amount as such State participates
under title XIX, except that with respect to the sums ex-
pended for the administration of the State plan, the per-
centage shall be 50 percent.
‘‘(d) REASONABLE PROMPTNESS.—The State plan
shall provide that all individuals wishing to make applica-
tion for temporary employment assistance shall have op-
portunity to do so, and that such assistance be furnished
with reasonable promptness to all eligible individuals.
‘‘(e) AUTOMATED DATA PROCESSING SYSTEM.—The
State plan shall, at the option of the State, provide for
the establishment and operation of an automated state-
wide management information system designed effectively
and efficiently, to assist management in the administra-
tion of the State plan approved under this part, so as—
‘‘(1) to control and account for—
‘‘(A) all the factors in the total eligibility
determination process under such plan for as-
sistance, and
‘‘(B) the costs, quality, and delivery of
payments and services furnished to applicants
for and recipients of assistance; and
‘‘(2) to notify the appropriate officials for child
support, food stamp, and social service programs,
and the medical assistance program approved under
630
Title IX, Subtitle A
title XIX, whenever a recipient becomes ineligible for
such assistance or the amount of assistance provided
to a recipient under the State plan is changed.
‘‘(f) DISCLOSURE OF INFORMATION.—The State plan
shall provide for safeguards which restrict the use or dis-
closure of information concerning applicants or recipients.
‘‘(g) DETECTION OF FRAUD.—The State plan shall
provide, in accordance with regulations issued by the Sec-
retary, for appropriate measures to detect fraudulent ap-
plications for temporary employment assistance before the
establishment of eligibility for such assistance.
‘‘Subpart 2—Administrative Provisions
‘‘SEC. 411. APPROVAL OF PLAN.
‘‘(a) IN GENERAL.—The Secretary shall approve a
State plan which fulfills the requirements under subpart
1 within 120 days of the submission of the plan by the
State to the Secretary.
‘‘(b) DEEMED APPROVAL.—If a State plan has not
been rejected by the Secretary during the period specified
in subsection (a), the plan shall be deemed to have been
approved.
‘‘SEC. 412. COMPLIANCE.
In the case of any State plan for temporary employ-
ment assistance which has been approved under section
411, if the Secretary, after reasonable notice and oppor-
631
Title IX, Subtitle A
tunity for hearing to the State agency administering or
supervising the administration of such plan, finds that in
the administration of the plan there is a failure to comply
substantially with any provision required by subpart 1 to
be included in the plan, the Secretary shall notify such
State agency that further payments will not be made to
the State (or in the Secretary’s discretion, that payments
will be limited to categories under or parts of the State
plan not affected by such failure) until the Secretary is
satisfied that such prohibited requirement is no longer so
imposed, and that there is no longer any such failure to
comply. Until the Secretary is so satisfied the Secretary
shall make no further payments to such State (or shall
limit payments to categories under or parts of the State
plan not affected by such failure).
‘‘SEC. 413. PAYMENTS TO STATES.
‘‘(a) COMPUTATION OF AMOUNT.—Subject to section
412, from the sums appropriated therefor, the Secretary
of the Treasury shall pay to each State which has an ap-
proved plan for temporary employment assistance, for
each quarter, beginning with the quarter commencing Oc-
tober 1, 1996, an amount equal to the Federal medical
assistance percentage (as defined in section 1905(b)) of
the expenditures by the State under such plan.
632
Title IX, Subtitle A
‘‘(b) METHOD OF COMPUTATION AND PAYMENT.—
The method of computing and paying such amounts shall
be as follows:
‘‘(1) The Secretary shall, prior to the beginning
of each quarter, estimate the amount to be paid to
the State for such quarter under the provisions of
subsection (a), such estimate to be based on—
‘‘(A) a report filed by the State containing
its estimate of the total sum to be expended in
such quarter in accordance with the provisions
of such subsection and stating the amount ap-
propriated or made available by the State and
its political subdivisions for such expenditures
in such quarter, and if such amount is less than
the State’s proportionate share of the total sum
of such estimated expenditures, the source or
sources from which the difference is expected to
be derived;
‘‘(B) records showing the number of needy
children in the State; and
‘‘(C) such other information as the Sec-
retary may find necessary.
‘‘(2) The Secretary of Health and Human Serv-
ices shall then certify to the Secretary of the Treas-
634
Title IX, Subtitle A
quarter greater or less than the amount estimated
by the Secretary of Health and Human Services for
such prior quarter.
‘‘(c) METHOD OF PAYMENT.—The Secretary of the
Treasury shall thereupon, through the Fiscal Service of
the Department of the Treasury and prior to audit or set-
tlement by the General Accounting Office, pay to the
State, at the time or times fixed by the Secretary of
Health and Human Services, the amount so certified.
‘‘SEC. 414. QUALITY ASSURANCE, DATA COLLECTION, AND
REPORTING SYSTEM.
‘‘(a) QUALITY ASSURANCE.—
‘‘(1) IN GENERAL.—Under the State plan, a
quality assurance system shall be developed based
upon a collaborative effort involving the Secretary,
the State, the political subdivisions of the State, and
assistance recipients, and shall include quantifiable
program outcomes related to self sufficiency in the
categories of welfare-to-work, payment accuracy, and
child support.
‘‘(2) MODIFICATIONS TO SYSTEM.—As deemed
necessary, but not more often than every 2 years,
the Secretary, in consultation with the State, the po-
litical subdivisions of the State, and assistance re-
cipients, shall make appropriate changes in the de-
635
Title IX, Subtitle A
sign and administration of the quality assurance sys-
tem, including changes in benchmarks, measures,
and data collection or sampling procedures.
‘‘(b) DATA COLLECTION AND REPORTING.—
‘‘(1) IN GENERAL.—The State plan shall pro-
vide for a quarterly report to the Secretary regard-
ing the data described in paragraphs (2) and (3)
and such additional data needed for the quality as-
surance system. The data collection and reporting
system under this subsection shall promote account-
ability, continuous improvement, and integrity in the
State plans for temporary employment assistance
and Work First.
‘‘(2) DISAGGREGATED DATA.—The State shall
collect the following data items on a monthly basis
from disaggregated case records of applicants for
and recipients of temporary employment assistance
from the previous month:
‘‘(A) The age of adults and children (in-
cluding pregnant women).
‘‘(B) Marital or familial status of cases:
married (2-parent family), widowed, divorced,
separated, or never married; or child living with
other adult relative.
636
Title IX, Subtitle A
‘‘(C) The gender, race, educational attain-
ment, work experience, disability status (wheth-
er the individual is seriously ill, incapacitated,
or caring for a disabled or incapacitated child)
of adults.
‘‘(D) The amount of cash assistance and
the amount and reason for any reduction in
such assistance. Any other data necessary to
determine the timeliness and accuracy of bene-
fits and welfare diversions.
‘‘(E) Whether any member of the family
receives benefits under any of the following:
‘‘(i) Any housing program.
‘‘(ii) The food stamp program under
the Food Stamp Act of 1977.
‘‘(iii) The Head Start programs car-
ried out under the Head Start Act.
‘‘(iv) Any job training program.
‘‘(F) The number of months since the most
recent application for assistance under the plan.
‘‘(G) The total number of months for
which assistance has been provided to the fami-
lies under the plan.
‘‘(H) 
The 
employment 
status, 
hours
worked, and earnings of individuals while re-
637
Title IX, Subtitle A
ceiving assistance, whether the case was closed
due to employment, and other data needed to
meet the work performance rate.
‘‘(I) Status in Work First and workfare,
including the number of hours an individual
participated and the component in which the in-
dividual participated.
‘‘(J) The number of persons in the assist-
ance unit and their relationship to the youngest
child. Nonrecipients in the household and their
relationship to the youngest child.
‘‘(K) Citizenship status.
‘‘(L) Shelter arrangement.
‘‘(M) Unearned income (not including tem-
porary employment assistance), such as child
support, and assets.
‘‘(N) The number of children who have a
parent who is deceased, incapacitated, or unem-
ployed.
‘‘(O) Geographic location.
‘‘(3) AGGREGATED DATA.—The State shall col-
lect the following data items on a monthly basis
from aggregated case records of applicants for and
recipients of temporary employment assistance from
the previous month:
638
Title IX, Subtitle A
‘‘(A) The number of adults receiving as-
sistance.
‘‘(B) The number of children receiving as-
sistance.
‘‘(C) The number of families receiving as-
sistance.
‘‘(D) The number of assistance units who
had their grants reduced or terminated and the
reason for the reduction or termination, includ-
ing sanction, employment, and meeting the time
limit for assistance).
‘‘(E) The number of applications for as-
sistance; the number approved and the number
denied and the reason for denial.
‘‘(4) LONGITUDINAL STUDIES.—The State shall
submit selected data items for a cohort of individ-
uals who are tracked over time. This longitudinal
sample shall be used for selected data items de-
scribed in paragraphs (2) and (3), as determined ap-
propriate by the Secretary.
‘‘(c) ADDITIONAL DATA.—The report required by
subsection (b) for a fiscal year quarter shall also include
the following:
639
Title IX, Subtitle A
‘‘(1) REPORT ON USE OF FEDERAL FUNDS TO
COVER ADMINISTRATIVE COSTS AND OVERHEAD.—A
statement of—
‘‘(A) the percentage of the Federal funds
paid to the State under this part for the fiscal
year quarter that are used to cover administra-
tive costs or overhead; and
‘‘(B) the total amount of State funds that
are used to cover such costs or overhead.
‘‘(2) REPORT
ON
STATE
EXPENDITURES
ON
PROGRAMS FOR NEEDY FAMILIES.—A statement of
the total amount expended by the State during the
fiscal year quarter on programs for needy families,
with the amount spent on the program under this
part, and the purposes for which such amount was
spent, separately stated.
‘‘(3) REPORT ON NONCUSTODIAL PARENTS PAR-
TICIPATING IN WORK ACTIVITIES.—The number of
noncustodial parents in the State who participated
in work activities during the fiscal year quarter.
‘‘(4) 
REPORT
ON
CHILD
SUPPORT
COL-
LECTED.—The total amount of child support col-
lected by the State agency administering the State
plan under part D on behalf of a family receiving as-
sistance under this part.
640
Title IX, Subtitle A
‘‘(5) REPORT
ON
CHILD
CARE.—The total
amount expended by the State for child care under
this part, along with a description of the types of
child care provided, such as child care provided in
the case of a family that has ceased to receive assist-
ance under this part because of increased hours of,
or increased income from, employment, or in the
case of a family that is not receiving assistance
under this part but would be at risk of becoming eli-
gible for such assistance if child care was not pro-
vided.
‘‘(6) REPORT
ON
TRANSITIONAL
SERVICES.—
The total amount expended by the State for provid-
ing transitional services to a family that has ceased
to receive assistance under this part because of in-
creased hours of, or increased income from, employ-
ment, along with a description of such services.
‘‘(d) COLLECTION
PROCEDURES.—The Secretary
shall provide case sampling plans and data collection pro-
cedures as deemed necessary to make statistically valid es-
timates of plan performance.
‘‘(e) VERIFICATION.—The Secretary shall develop
and implement procedures for verifying the quality of the
data submitted by the State, and shall provide technical
assistance, funded by the compliance penalties imposed
641
Title IX, Subtitle A
under section 412, if such data quality falls below accept-
able standards.
‘‘SEC. 415. COMPILATION AND REPORTING OF DATA.
‘‘(a) CURRENT PROGRAMS.—The Secretary shall, on
the basis of the Secretary’s review of the reports received
from the States under section 414, compile such data as
the Secretary believes necessary, and from time to time,
publish the findings as to the effectiveness of the programs
developed and administered by the States under this part.
The Secretary shall annually report to the Congress on
the programs developed and administered by each State
under this part.
‘‘(b) RESEARCH, DEMONSTRATION
AND EVALUA-
TION.—Of the amount specified under section 413(a), an
amount equal to 0.25 percent is authorized to be expended
by the Secretary to support the following types of re-
search, demonstrations, and evaluations:
‘‘(1) STATE-INITIATED RESEARCH.—States may
apply for grants to cover 90 percent of the costs of
self-evaluations of programs under State plans ap-
proved under this part.
‘‘(2) DEMONSTRATIONS.—
‘‘(A) IN
GENERAL.—The Secretary may
implement and evaluate demonstrations of inno-
vative and promising strategies to—
642
Title IX, Subtitle A
‘‘(i) improve child well-being through
reductions in illegitimacy, teen pregnancy,
welfare dependency, homelessness, and
poverty;
‘‘(ii) test promising strategies by non-
profit and for-profit institutions to increase
employment, earning, child support pay-
ments, and self-sufficiency with respect to
temporary employment assistance clients
under State plans; and
‘‘(iii) foster the development of child
care.
‘‘(B) ADDITIONAL
PARAMETERS.—Dem-
onstrations implemented under this para-
graph—
‘‘(i) may provide one-time capital
funds to establish, expand, or replicate
programs;
‘‘(ii) 
may 
test 
performance-based
grant to loan financing in which programs
meeting performance targets receive grants
while programs not meeting such targets
repay funding on a pro-rated basis; and
‘‘(iii) should test stategies in multiple
States and types of communities.
643
Title IX, Subtitle A
‘‘(3) FEDERAL EVALUATIONS.—
‘‘(A) IN
GENERAL.—The Secretary shall
conduct research on the effects, benefits, and
costs of different approaches to operating wel-
fare programs, including an implementation
study based on a representative sample of
States and localities, documenting what policies
were adopted, how such policies were imple-
mented, the types and mix of services provided,
and other such factors as the Secretary deems
appropriate.
‘‘(B) RESEARCH ON RELATED ISSUES.—
The Secretary shall also conduct research on is-
sues related to the purposes of this part, such
as strategies for moving welfare recipients into
the workforce quickly, reducing teen preg-
nancies and out-of-wedlock births, and provid-
ing adequate child care.
‘‘(C) STATE REIMBURSEMENT.—The Sec-
retary may reimburse a State for any research-
related costs incurred pursuant to research con-
ducted under this paragraph.
‘‘(D) USE
OF
RANDOM
ASSIGNMENT.—
Evaluations authorized under this paragraph
644
Title IX, Subtitle A
should use random assignment to the maximum
extent feasible and appropriate.
‘‘(4) REGIONAL INFORMATION CENTERS.—
‘‘(A) IN
GENERAL.—The Secretary shall
establish not less than 5, nor more than 7 re-
gional information centers located at major re-
search universities or consortiums of univer-
sities to ensure the effective implementation of
welfare reform and the efficient dissemination
of information about innovations, evaluation
outcomes, and training initiatives.
‘‘(B) 
CENTER
RESPONSIBILITIES.—The
Centers shall have the following functions:
‘‘(i) Disseminate information about ef-
fective income support and related pro-
grams, along with suggestions for the rep-
lication of such programs.
‘‘(ii) Research the factors that cause
and sustain welfare dependency and pov-
erty in the regions served by the respective
centers.
‘‘(iii) Assist the States in the region
formulate and implement innovative pro-
grams and improvements in existing pro-
645
Title IX, Subtitle A
grams that help clients move off welfare
and become productive citizens.
‘‘(iv) Provide training as appropriate
to staff of State agencies to enhance the
ability of the agencies to successfully place
Work First clients in productive employ-
ment or self-employment.
‘‘(C) CENTER
ELIGIBILITY
TO
PERFORM
EVALUATIONS.—The Centers may compete for
demonstration and evaluation contracts devel-
oped under this section.
‘‘SEC. 416. COLLECTION OF OVERPAYMENTS FROM FED-
ERAL TAX REFUNDS.
‘‘(a) IN GENERAL.—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 Federal taxes paid are payable to such individual, re-
gardless 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, the Sec-
retary 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.
647
Title IX, Subtitle A
and consistent with the specific provisions of this
section, will be the same as those issued pursuant to
section 464(b) applicable to collection of past-due
child support.’’.
(b) 
PAYMENTS
TO
PUERTO
RICO.—Section
1108(a)(1) (42 U.S.C. 1308(a)(1)) is amended—
(1) in subparagraph (F), by striking ‘‘or’’; and
(2) by striking subparagraph (G) and inserting
the following:
‘‘(G) $82,000,000 with respect to each of
fiscal years 1989 through 1995, or
‘‘(H) $102,500,000 with respect to the fis-
cal year 1996 and each fiscal year thereafter;’’.
(c) CONFORMING AMENDMENTS RELATING TO COL-
LECTION OF OVERPAYMENTS.—
(1) Section 6402 of the Internal Revenue Code
of 1986 (relating to authority to make credits or re-
funds) is 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), re-
spectively; and
(C) by inserting after subsection (d) the
following:
648
Title IX, Subtitle A
‘‘(g) COLLECTION OF OVERPAYMENTS UNDER TITLE
IV–A OF THE 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 416 of the Social Security Act (concerning
recovery of overpayments to individuals under State plans
approved under part A of title IV of such Act).’’.
(2) Section 552a(a)(8)(B)(iv)(III) of title 5,
United States Code, is amended by striking ‘‘section
464 or 1137 of the Social Security Act’’ and insert-
ing ‘‘section 416, 464, or 1137 of the Social Secu-
rity Act’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall be effective with respect to calendar quarters
beginning on or after October 1, 1996.
(2) SPECIAL RULE.—In the case of a State that
the Secretary of Health and Human Services deter-
mines requires State legislation (other than legisla-
tion appropriating funds) in order to meet the re-
quirements imposed by the amendment made by
subsection (a), the State shall not be regarded as
649
Title IX, Subtitle B
failing to comply with the requirements of such
amendment before the first day of the first calendar
quarter beginning after the close of the first regular
session of the State legislature that begins after the
date of enactment of this Act. For purposes of this
paragraph, in the case of a State that has a 2-year
legislative session, each year of the session shall be
treated as a separate regular session of the State
legislature.
Subtitle B—Make Work Pay
SEC. 9201. TRANSITIONAL MEDICAID BENEFITS.
(a) STATE OPTION OF EXTENSION OF MEDICAID EN-
ROLLMENT FOR FORMER AFDC RECIPIENTS FOR 1 AD-
DITIONAL YEAR.—
(1) IN
GENERAL.—Section 1925(b)(1) (42
U.S.C. 1396r–6(b)(1)) is amended by striking the
period at the end and inserting the following: ‘‘, and
that the State may, at its option, offer to each such
family the option of extending coverage under this
subsection for any of the first 2 succeeding 6-month
periods, in the same manner and under the same
conditions as the option of extending coverage under
this subsection for the first succeeding 6-month pe-
riod.’’.
650
Title IX, Subtitle B
(2) 
CONFORMING
AMENDMENTS.—Section
1925(b) (42 U.S.C. 1396r–6(b)) is amended—
(A) in the heading, by striking ‘‘EXTEN-
SION’’ and inserting ‘‘EXTENSIONS’’;
(B) in the heading of paragraph (1), by
striking ‘‘REQUIREMENT’’ and inserting ‘‘IN
GENERAL’’;
(C) in paragraph (2)(B)(ii)—
(i) in the heading, by striking ‘‘PE-
RIOD’’ and inserting ‘‘PERIODS’’, and
(ii) by striking ‘‘in the period’’ and in-
serting ‘‘in any of the 6-month periods’’;
(D) in paragraph (3)(A), by striking ‘‘the
6-month period’’ and inserting ‘‘any 6-month
period’’;
(E) in paragraph (4)(A), by striking ‘‘the
extension period’’ and inserting ‘‘any extension
period’’; and
(F) in paragraph (5)(D)(i), by striking ‘‘is
a 3-month period’’ and all that follows and in-
serting the following: ‘‘is, with respect to a par-
ticular 6-month additional extension period pro-
vided under this subsection, a 3-month period
beginning with the 1st or 4th month of such ex-
tension period.’’.
651
Title IX, Subtitle B
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to calendar quarters beginning
on or after October 1, 1997, without regard to whether
or not final regulations to carry out such amendments
have been promulgated by such date.
SEC. 9202. NOTICE OF AVAILABILITY REQUIRED TO BE PRO-
VIDED TO APPLICANTS AND FORMER RECIPI-
ENTS OF TEMPORARY FAMILY ASSISTANCE,
FOOD STAMPS, AND MEDICAID.
(a) TEMPORARY FAMILY ASSISTANCE.—Section 406,
as added by the amendment made by section 9101(a) of
this Act, is amended by adding at the end the following:
‘‘(h) NOTICE
OF AVAILABILITY
OF EITC.—The
State plan shall provide that the State agency referred to
in subsection (b) must provide written notice of the exist-
ence and availability of the earned income credit under
section 32 of the Internal Revenue Code of 1986 to—
‘‘(1) any individual who applies for assistance
under the State plan, upon receipt of the applica-
tion; and
‘‘(2) any individual whose assistance under the
State plan (or under the State plan approved under
part A of this title (as in effect before the effective
date of title IX of the Omnibus Budget Reconcili-
652
Title IX, Subtitle B
ation Act of 1995) is terminated, in the notice of
termination of benefits.’’.
(b) FOOD STAMPS.—Section 11(e) of the Food
Stamp Act of 1977 (7 U.S.C. 2020(e)) is amended—
(1) in paragraph (24) by striking ‘‘and’’ at the
end;
(2) in paragraph (25) by striking the period at
the end and inserting ‘‘; and’’; and
(3) by inserting after paragraph (25) the fol-
lowing:
‘‘(26) that whenever a household applies for
food stamp benefits, and whenever such benefits are
terminated with respect to a household, the State
agency shall provide to each member of such house-
hold notice of—
‘‘(A) the existence of the earned income
tax credit under section 32 of the Internal Rev-
enue Code of 1986; and
‘‘(B) the fact that such credit may be ap-
plicable to such member.’’.
(c) 
MEDICAID.—Section 
1902(a) 
(42 
U.S.C.
1396a(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(61);
653
Title IX, Subtitle B
(2) by striking the period at the end of para-
graph (62) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (62) the fol-
lowing new paragraph:
‘‘(63) provide that the State shall provide notice
of the existence and availability of the earned income
tax credit under section 32 of the Internal Revenue
Code of 1986 to each individual applying for medical
assistance under the State plan and to each individ-
ual whose eligibility for medical assistance under the
State plan is terminated.’’.
SEC. 9203. NOTICE OF AVAILABILITY OF EARNED INCOME
TAX CREDIT AND DEPENDENT CARE TAX
CREDIT TO BE INCLUDED ON W–4 FORM.
(a) IN GENERAL.—Section 11114 of the Omnibus
Budget Reconciliation Act of 1990 (26 U.S.C. 21 note),
relating to program to increase public awareness, is
amended by adding at the end the following new sentence:
‘‘Such means shall include printing a notice of the avail-
ability of such credits on the forms used by employees to
determine the proper number of withholding exemptions
under chapter 24 of such Code.’’
654
Title IX, Subtitle B
SEC. 9204. ADVANCE PAYMENT OF EARNED INCOME TAX
CREDIT THROUGH STATE DEMONSTRATION
PROGRAMS.
(a) IN GENERAL.—Section 3507 of the Internal Rev-
enue Code of 1986 (relating to the advance payment of
the earned income tax credit) is amended by adding at
the end the following:
‘‘(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 paragraph (3), the Secretary (in
consultation with the Secretary of Health and
Human Services) may designate not more than
4 State Advance Payment Demonstrations.
States selected for the demonstrations may
have, in the aggregate, no more than 5 percent
of the total number of households participating
in the program under the Food Stamp program
655
Title IX, Subtitle B
in the immediately preceding fiscal year. Ad-
ministrative costs of a State in conducting a
demonstration under this section may be in-
cluded for matching under section 413(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,
1996.
‘‘(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, 1996, and before
January 1, 2000.
‘‘(ii) SPECIAL RULES.—
‘‘(I) 
REVOCATION
OF
DESIGNA-
TIONS.—The Secretary may revoke any
designation made under this paragraph if
the Secretary determines that the State is
not complying substantially with the pro-
posal described in paragraph (3) submitted
by the State.
656
Title IX, Subtitle B
‘‘(II) AUTOMATIC TERMINATION OF DES-
IGNATIONS.—Any failure by a State to
comply with the reporting requirements de-
scribed in paragraphs (3)(F) and (3)(G)
shall have the effect of immediately termi-
nating the designation under this para-
graph and rendering paragraph (5)(A)(ii)
inapplicable to subsequent payments.
‘‘(3) PROPOSALS.—No State may be designated
under paragraph (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
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
657
Title IX, Subtitle B
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 income tax credit,
‘‘(F) commits the State to furnishing to
each participating resident by January 31 of
each year a written statement showing—
‘‘(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,
658
Title IX, Subtitle B
‘‘(H) commits the State to treat any ad-
vance earned income payments as described in
paragraph (5) and any repayments of excessive
advance earned income payments as described
in paragraph (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, 1996.
‘‘(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 shall conform to the fullest ex-
tent possible with the provisions of sub-
section (c).
‘‘(ii) SPECIAL RULE.—A State may,
at its election, apply the rules of subsection
(c)(2)(B) by substituting ‘between 60 per-
659
Title IX, Subtitle B
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 determined on
the basis of the payroll periods of participating
residents, on a single statewide schedule, or on
any other reasonable basis prescribed by the
State in its proposal; however, in no event may
advance 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—
660
Title IX, Subtitle B
‘‘(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),
‘‘(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
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) IF
ADVANCE
PAYMENTS
EXCEED
TAXES DUE.—If for any calendar quarter the
aggregate amount of advance earned income
payments made by the responsible State agency
661
Title IX, Subtitle B
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-
held under section 3401 (relating to wage with-
holding), and as being 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,
the term ‘excessive advance income payment’
means that portion of any advance earned in-
come payment that, when combined with other
advance earned income payments previously
662
Title IX, Subtitle B
made to the same participating resident during
the same calendar year, exceeds the amount of
earned income tax credit to which that partici-
pating resident is entitled under section 32 for
that year.
‘‘(C) REPAYMENT AMOUNT.—For purposes
of this subsection, the term ‘repayment amount’
means an amount 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
‘‘(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.—
For purposes of this subsection, the term ‘re-
payment calendar quarter’ means the second
calendar quarter of the third calendar year be-
663
Title IX, Subtitle B
ginning after the calendar year in which an ex-
cessive earned income payment is made.
‘‘(7) DEFINITIONS.—For purposes of this sub-
section—
‘‘(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.
‘‘(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—
664
Title IX, Subtitle B
‘‘(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)(D) 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 described in sub-
sections (b)(1), (b)(2), (b)(3), and (b)(4)
(except that for purposes of this clause,
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.’’.
(b) TECHNICAL ASSISTANCE.—The Secretaries of the
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—
665
Title IX, Subtitle B
(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 repay 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
(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 1997
through 2000.
666
Title IX, Subtitle B
SEC. 9205. FUNDING OF CHILD CARE SERVICES.
(a) REPEAL OF CHILD CARE PROGRAMS UNDER THE
CHILD CARE AND DEVELOPMENT BLOCK GRANT ACT
OF1990.—The Child Care and Development Block Grant
Act of 1990 (42 U.S.C. 9858 et seq.) is hereby repealed.
(b) FUNDING OF CHILD CARE SERVICES THROUGH
SOCIAL SERVICES BLOCK GRANT PROGRAM.—Title XX
(42 U.S.C. 1397–1397f) is amended by adding at the end
the following:
‘‘SEC. 2008. CHILD CARE.
‘‘(a) CONDITIONAL GRANT.—
‘‘(1) IN GENERAL.—In addition to any payment
under section 2002 or 2007, the Secretary shall
make a grant to each State with a plan approved
under this section for a fiscal year in an amount
equal to the special allotment of the State for the
fiscal year.
‘‘(2) LIMITATIONS ON AUTHORIZATION OF AP-
PROPRIATIONS.—For grants under this section,
there are authorized to be appropriated to the Sec-
retary not more than—
‘‘(A) $1,400,000,000 for fiscal year 1997;
‘‘(B) $1,450,000,000 for each of fiscal
years 1998, 1999, and 2000; and
‘‘(C) $1,500,000,000 for each of fiscal
years 2001 and 2002.
667
Title IX, Subtitle B
‘‘(b) STATE PLANS.—
‘‘(1) CONTENT.—A plan meets the require-
ments of this paragraph if the plan—
‘‘(A) identifies an appropriate State agency
to be the lead agency responsible for admin-
istering at the State level, and coordinating
with local governments, the activities of the
State pursuant to this section;
‘‘(B) describes the activities the State will
carry out with funds provided under this sec-
tion;
‘‘(C) provides assurances that the funds
provided under this section will be used to sup-
plement, not supplant, State and local funds as
well as Federal funds provided under any Act
and applied to child care activities in the State
during fiscal year 1989;
‘‘(D) provides assurances that the State
will not expend more than 7 percent of the
funds provided to the States under this section
for the fiscal year for administrative expenses;
‘‘(E) provides assurances that, in providing
child care assistance, the State will give priority
to families with low income and families living
in a low-income geographical area;
668
Title IX, Subtitle B
‘‘(F) ensures that child care providers re-
imbursed under this section meet applicable
standards of State and local law;
‘‘(G) provides assurances that the lead
agency will coordinate the use of funds provided
under this section with the use of other Federal
resources for child care provided under this Act,
and with other Federal, State, or local child
care and preschool programs operated in the
State;
‘‘(H) provides for the establishment of
such fiscal and accounting procedures as may
be necessary to—
‘‘(i) ensure a proper accounting of
Federal funds received by the State under
this section; and
‘‘(ii) ensure the proper verification of
the reports submitted by the State under
subsection (f)(2);
‘‘(I) provides assurances that the State will
not impose more stringent standards and licens-
ing or regulatory requirements on child care
providers receiving funds provided under this
section than those imposed on other child care
providers in the State;
669
Title IX, Subtitle B
‘‘(J) provides assurances that the State
will not implement any policy or practice which
has the effect of significantly restricting paren-
tal choice by—
‘‘(i) expressly or effectively excluding
any category of care or type of provider
within a category of care;
‘‘(ii) limiting parental access to or
choices from among various categories of
care or types of providers; or
‘‘(iii) excluding a significant number
of providers in any category of care; and
‘‘(K) provides assurances that parents will
be informed regarding their options under this
section, including the option of receiving a child
care certificate or voucher.
‘‘(2) FORM.—A State may submit a plan that
meets the requirements of paragraph (1) in the form
of amendments to the State plan submitted pursu-
ant to section 658E of the Child Care and Develop-
ment Block Grant Act of 1990, as in effect before
the effective date of section 9205 of the Omnibus
Budget Reconciliation Act of 1995.
‘‘(3) APPROVAL.—Not later than 90 days after
the date the State submits a plan to the Secretary
670
Title IX, Subtitle B
under this subsection, the Secretary shall either ap-
prove or disapprove the plan. If the Secretary dis-
approves the plan, the Secretary shall provide the
State with an explanation and recommendations for
changes in the plan to gain approval.
‘‘(c) SPECIAL ALLOTMENTS.—The special allotment
of a State for a fiscal year equals the amount that bears
the same ratio to the amount appropriated pursuant to
this section for the fiscal year, as the number of children
who have not attained 13 years of age and are residing
with families in the State bears to the total number of
such children in all States with plans approved under this
section for the fiscal year, determined on the basis of the
most recent data available from the Department of Com-
merce at the time the special allotment is determined.
‘‘(d) PAYMENTS TO STATES.—
‘‘(1) PAYMENTS.—
‘‘(A) COMPUTATION
OF
AMOUNT.—From
the sums appropriated therefor, the Secretary
of the Treasury shall pay to each State which
has a plan approved under this section for a fis-
cal year, for each quarter, beginning with the
quarter commencing October 1, 1996, an
amount equal to 1⁄4 of the special allotment of
the State for the fiscal year.
671
Title IX, Subtitle B
‘‘(B) METHOD OF COMPUTATION AND PAY-
MENT.—The method of computing and paying
such amounts shall be as follows:
‘‘(i) ESTIMATE.—The Secretary shall,
before each quarter, estimate the amount
to be paid to the State for the quarter
under this section, based on a report filed
by the State containing the State’s esti-
mate of the total sum to be expended by
the State in such quarter in accordance
with subsection (e).
‘‘(ii) CERTIFICATION.—The Secretary
of Health and Human Services shall then
certify to the Secretary of the Treasury the
amount so estimated by the Secretary of
Health and Human Services reduced or in-
creased, as the case may be, by any sum
by which the Secretary of Health and
Human Services finds that the estimate for
any prior quarter was greater or less than
the amount which should have been paid to
the State for such quarter, except that
such increases or reductions shall not be
made to the extent that such sums have
been applied to make the amount certified
672
Title IX, Subtitle B
for any prior quarter greater or less than
the amount estimated by the Secretary of
Health and Human Services for such prior
quarter.
‘‘(iii) METHOD
OF
PAYMENT.—The
Secretary of the Treasury shall thereupon,
through the Fiscal Service of the Depart-
ment of the Treasury and prior to audit or
settlement by the General Accounting Of-
fice, pay to the State, at the time or times
fixed by the Secretary of Health and
Human Services, the amount so certified.
‘‘(2) DEADLINE FOR EXPENDITURE OF FUNDS
BY
STATES.—Except as provided in paragraph
(3)(A), each State to which funds are paid under
this section for a fiscal year shall expend such funds
in the fiscal year or in the immediately succeeding
fiscal year.
‘‘(3) REDISTRIBUTION OF UNEXPENDED SPE-
CIAL ALLOTMENTS.—
‘‘(A) REMITTANCE TO THE SECRETARY.—
Each State to which funds are paid under this
section for a fiscal year shall remit to the Sec-
retary that part of such funds which the State
intends not to, or does not, expend in the fiscal
673
Title IX, Subtitle B
year or in the immediately succeeding fiscal
year.
‘‘(B) 
REDISTRIBUTION.—The 
Secretary
shall increase the special allotment of each
State with a plan approved under this part for
a fiscal year that does not remit any amount to
the Secretary for the fiscal year by an amount
equal to—
‘‘(i) the aggregate of the amounts re-
mitted pursuant to subparagraph (A) for
the fiscal year; multiplied by
‘‘(ii) the adjusted State share for the
fiscal year.
‘‘(C) ADJUSTED STATE SHARE.—As used
in subparagraph (B)(ii), the term ‘adjusted
State share’ means, with respect to a fiscal
year—
‘‘(i) the special allotment of the State
for the fiscal year (before any increase
under subparagraph (B)); divided by
‘‘(ii)(I) the sum of the special allot-
ments of all States with plans approved
under this part for the fiscal year; minus
674
Title IX, Subtitle B
‘‘(II) the aggregate of the amounts re-
mitted to the Secretary pursuant to sub-
paragraph (A) for the fiscal year.
‘‘(e) USE OF FUNDS.—
‘‘(1) IN GENERAL.—Funds provided under this
section shall be used to expand parent choices in se-
lecting child care, to address deficiencies in the sup-
ply of child care, and to expand and improve child
care services, with an emphasis on providing such
services to low-income families and geographical
areas. Subject to the approval of the Secretary,
States to which funds are paid under this section
shall use such funds to carry out child care pro-
grams and activities through cash grants, certifi-
cates, or contracts with families, or public or private
entities as the State determines appropriate. States
shall take parental preference into account to the
maximum extent possible in carrying out child care
programs.
‘‘(2) SPECIFIC
USES.—Each State to which
funds are paid under this section may expend such
funds for—
‘‘(A) child care services for infants, sick
children, children with special needs, and chil-
dren of adolescent parents;
675
Title IX, Subtitle B
‘‘(B) after-school and before-school pro-
grams and programs during nontraditional
hours for the children of working parents;
‘‘(C) programs for the recruitment and
training of day care workers, including older
Americans;
‘‘(D) grant and loan programs to enable
child care workers and providers to meet State
and local standards and requirements;
‘‘(E) child care programs developed by
public and private sector partnerships;
‘‘(F) State efforts to provide technical as-
sistance designed to help providers improve the
services offered to parents and children; and
‘‘(G) other child care-related programs
consistent with the purpose of this section and
approved by the Secretary.
‘‘(3) LIMITATIONS ON USE OF FUNDS.—A State
to which funds are paid under this section for a fis-
cal year shall use not less than 80 percent of such
funds to provide direct child care assistance to low-
income parents through child care certificates or
vouchers, contracts, or grants.
‘‘(4) METHODS OF FUNDING.—Funds for child
care services under this title shall be for the benefit
676
Title IX, Subtitle B
of parents and shall be provided through child care
vouchers or certificates provided directly to parents
or through contracts or grants with public or private
providers.
‘‘(5) PARENTAL RIGHTS OF CHOICE.—Any par-
ent who receives a child care certificate under this
title may use such certificate with any child care
provider, including those providers which have reli-
gious activities, if such provider is freely chosen by
the parent from among the available alternatives.
‘‘(6) CHILD CARE CERTIFICATES.—
‘‘(A) IN GENERAL.—For purposes of this
title, a child care certificate is a certificate is-
sued by a State directly to a parent or legal
guardian for use only as payment for child care
services in any child care facility eligible to re-
ceive funds under this Act.
‘‘(B) REDEMPTION.—If the demand for
child care services of families qualified to re-
ceive such services from a State under this Act
exceeds the available supply of such services,
the State shall ration assistance to obtain such
services using procedures that do not disadvan-
tage parents using child care certificates, rel-
ative to other methods of financing, in either
677
Title IX, Subtitle B
the waiting period or the pecuniary value of
such services.
‘‘(C) COMMENCEMENT
OF
CERTIFICATE
PROGRAM.—Beginning not later than 1 year
after the date of the enactment of this section,
each State that receives funds under this title
shall offer a child care certificate program in
accordance with this section.
‘‘(D) AUTHORITY
TO
USE
CHILD
CARE
FUNDS
FOR
CERTIFICATE
PROGRAM.—Each
State to which funds are paid under this title
may use the funds provided to the State under
this title which are required to be used for child
care activities to plan and establish the State’s
child care certificate program.
‘‘(7) OPTION
OF
RECEIVING
A
CHILD
CARE
CERTIFICATE.—Each parent or legal guardian who
receives assistance pursuant to this title shall be
provided with the option of enrolling their child with
an eligible child care provider that receives funds
through grants, contracts, or child care certificates
provided under this title. Such parent shall have the
right to use such certificates to purchase child care
services from an eligible provider of their choice. The
State shall ensure that parental preference is consid-
678
Title IX, Subtitle B
ered to the maximum extent possible in awarding
grants or contracts.
‘‘(8) RIGHTS OF RELIGIOUS CHILD CARE PRO-
VIDERS.—Notwithstanding any other provision of
law, a religious child care provider who receives
funds under this Act may require adherence by em-
ployees to the religious tenets or teachings of the
provider.
‘‘(9) ELIGIBLE CHILD CARE PROVIDERS.—Any
child care provider who meets applicable standards
of State and local law shall be eligible to receive
funds under this section. As used in this paragraph,
the term ‘child care provider’ includes—
‘‘(A) proprietary for-profit entities, rel-
atives, informal day care homes, religious child
care providers, day care centers, and any other
entities that the State determines appropriate
subject to approval of the Secretary;
‘‘(B) nonprofit organizations under sub-
sections (c) and (d) of section 501 of the Inter-
nal Revenue Code of 1986;
‘‘(C) professional or employee associations;
‘‘(D) consortia of small businesses; and
679
Title IX, Subtitle B
‘‘(E) units of State and local governments,
and elementary, secondary, and post-secondary
educational institutions.
‘‘(10) PROHIBITED USES.—Any State to which
funds are paid under this section may not use such
funds—
‘‘(A) to satisfy any State matching require-
ment imposed under any Federal grant;
‘‘(B) for the purchase or improvement of
land, or the purchase, construction, or perma-
nent improvement (other than minor remodel-
ing) of any building or other facility; or
‘‘(C) to provide any service which the State
makes generally available to the residents of the
State without cost to such residents and with-
out regard to the income of such residents.
‘‘(f) REPORTING REQUIREMENTS.—
‘‘(1) NOTICE TO SECRETARY OF UNEXPENDED
FUNDS.—Each State which has not completely ex-
pended the funds paid to the State under this sec-
tion for a fiscal year in the fiscal year or the imme-
diately succeeding fiscal year shall notify the Sec-
retary of any amount not so expended.
‘‘(2) STATE REPORTS ON USE OF FUNDS.—Not
later than 18 months after the date of the enact-
680
Title IX, Subtitle B
ment of this section, and each year thereafter, the
State shall prepare and submit to the Secretary, in
such form as the Secretary shall prescribe, a report
describing the State’s use of funds paid to the State
under this section, including—
‘‘(A) the number, type, and distribution of
services and programs under this section;
‘‘(B) the average cost of child care, by type
of provider;
‘‘(C) the number of children serviced under
this section;
‘‘(D) the average income and distribution
of incomes of the families being served;
‘‘(E) efforts undertaken by the State pur-
suant to this section to promote and ensure
health and safety and improve quality; and
‘‘(F) such other information as the Sec-
retary considers appropriate.
‘‘(3) GUIDELINES
FOR
STATE
REPORTS; CO-
ORDINATION
WITH
REPORTS
UNDER
SECTION
2006.—Within 6 months after the date of the enact-
ment of this section, the Secretary shall establish
guidelines for State reports under paragraph (2). To
the extent feasible, the Secretary shall coordinate
such reporting requirement with the reports required
682
Title IX, Subtitle B
‘‘(B) collect, publish, and make available to
the public a listing of State child care standards
at least once every 3 years; and
‘‘(C) provide technical assistance to assist
States to carry out this section, including as-
sistance on a reimbursable basis.
‘‘(2) ENFORCEMENT.—
‘‘(A) REVIEW
OF
COMPLIANCE
WITH
STATE PLAN.—The Secretary shall review and
monitor State compliance with this section and
the plans approved under this section for the
State, and shall have the power to terminate
payments to the State in accordance with sub-
paragraph (B).
‘‘(B) NONCOMPLIANCE.—
‘‘(i) IN GENERAL.—If the Secretary,
after reasonable notice to a State and op-
portunity for a hearing, finds that—
‘‘(I) there has been a failure by
the State to comply substantially with
any provision or requirement set forth
in the plan approved under this sec-
tion for the State; or
‘‘(II) in the operation of any pro-
gram for which assistance is provided
683
Title IX, Subtitle B
under this section there is a failure by
the State to comply substantially with
any provision of this section;
the Secretary shall notify the State of the
findings and that no further payments may
be made to such State under this section
(or, in the case of noncompliance in the op-
eration of a program or activity, that no
further payments to the State will be made
with respect to such program or activity)
until the Secretary is satisfied that there
is no longer any such failure to comply or
that the noncompliance will be promptly
corrected.
‘‘(ii) ADDITIONAL SANCTIONS.—In the
case of a finding of noncompliance made
pursuant to clause (i), the Secretary may,
in addition to imposing the sanctions de-
scribed in such subparagraph, impose the
other 
appropriate 
sanctions, 
including
recoupment of money improperly expended
for purposes prohibited or not authorized
by this section, and disqualification from
the receipt of financial assistance under
this section.
684
Title IX, Subtitle B
‘‘(iii) NOTICE.—The notice required
under subparagraph (A) shall include a
specific identification of any additional
sanction being imposed under clause (ii).
‘‘(C) ISSUANCE OF RULES.—The Secretary
shall establish by rule procedures for—
‘‘(i) receiving, processing, and deter-
mining the validity of complaints concern-
ing any failure of a State to comply with
the State plan or any requirement of this
section; and
‘‘(ii) imposing sanctions under this
subsection.
‘‘SEC. 2009. CHILD CARE DURING PARTICIPATION IN EM-
PLOYMENT, EDUCATION, AND TRAINING; EX-
TENDED ELIGIBILITY.
‘‘(a) CHILD CARE GUARANTEE.—
‘‘(1) IN GENERAL.—Each State agency referred
to in section 2008(b)(1)(A) shall guarantee child
care in accordance with section 2008—
‘‘(A) for any individual who is participat-
ing in an education or training activity (includ-
ing participation in a program established
under part G of title IV) if the State agency ap-
proves the activity and determines that the indi-
685
Title IX, Subtitle B
vidual is participating satisfactorily in the activ-
ity;
‘‘(B) for each family with a dependent
child (as defined in section 413(a)(2)(E)) re-
quiring such care to the extent that such care
is determined by the State agency to be nec-
essary for an individual in the family to accept
employment or remain employed, including in a
community service job under part G of title IV;
and
‘‘(C) to the extent that the State agency
determines that such care is necessary for the
employment of an individual, if the family of
which the individual is a member has ceased to
receive assistance under the State plan ap-
proved under part A of title IV by reason of in-
creased hours of, or income from, such employ-
ment, subject to paragraph (2) of this sub-
section.
‘‘(2) LIMITATIONS ON ELIGIBILITY FOR TRANSI-
TIONAL CHILD CARE.—A family shall not be eligible
for child care under paragraph (1)(C)—
‘‘(A) for more than 12 months after the
last month for which the family received assist-
ance described in such paragraph;
686
Title IX, Subtitle B
‘‘(B) if the family did not receive such as-
sistance in at least 3 of the most recent 6
months in which the family received such assist-
ance;
‘‘(C) if the family does not include a child
who is (or, if needy, would be) a dependent
child 
(within 
the 
meaning 
of 
section
413(a)(2)(E));
‘‘(D) for any month beginning after the
caretaker relative (within the meaning of such
part) in the family has terminated his or her
employment without good cause; or
‘‘(E) with respect to a child, for any month
beginning after the caretaker relative in the
family has refused to cooperate with the State
in establishing or enforcing the obligation of
any parent of the child to provide support for
the child, without good cause as determined by
the State agency in accordance with standards
prescribed by the Secretary which shall take
into consideration the best interests of the
child.
‘‘(b) STATE ENTITLEMENT
TO PAYMENTS.—Each
State with a plan approved under section 2008 shall be
687
Title IX, Subtitle B
entitled to receive from the Secretary for any fiscal year
an amount equal to—
‘‘(1) the total amount expended by the State to
carry out subsection (a) during the fiscal year; mul-
tiplied by
‘‘(2) the Federal medical assistance percentage
(as defined in the last sentence of section 1118).’’.
(c) EFFECTIVE DATE.—The amendments and re-
peals made by this section shall take effect on October
1, 1996.
SEC. 9206. CERTAIN FEDERAL ASSISTANCE INCLUDIBLE IN
GROSS INCOME.
(a) IN GENERAL.—Part II of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically included in gross income) is amended by
adding at the end the following new section:
‘‘SEC. 91. CERTAIN FEDERAL ASSISTANCE.
‘‘(a) IN GENERAL.—Gross income shall include an
amount equal to the specified Federal assistance received
by the taxpayer during the taxable year.
‘‘(b) SPECIFIED FEDERAL ASSISTANCE.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘specified Federal
assistance’ means—
688
Title IX, Subtitle B
‘‘(A) assistance provided under a State
plan approved under part A of title IV of the
Social Security Act (relating to temporary em-
ployment assistance program),
‘‘(B) assistance provided under any food
stamp program, and
‘‘(C) supplemental security income benefits
under title XVI of the Social Security Act (in-
cluding supplemental security income benefits
of the type described in section 1616 of such
Act or section 212 of Public Law 93-66).
‘‘(2) SPECIAL RULE.—In the case of assistance
provided under a program described in subsection
(d)(2), such term shall include only the assistance
required to be provided under section 21 or 22 (as
the case may be) of the Food Stamp Act of 1977.
‘‘(c) INDIVIDUALS SUBJECT TO TAX.—For purposes
of this section—
‘‘(1) TEMPORARY
EMPLOYMENT
ASSISTANCE
PROGRAM.—Assistance 
described 
in 
subsection
(b)(1)(A) shall be treated as received by the relative
with whom the dependent child is living (within the
meaning of section 406(c) of the Social Security
Act).
689
Title IX, Subtitle B
‘‘(2) FOOD STAMPS.—In the case of assistance
described in subsection (b)(1)(B)—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), such assistance shall be
treated as received ratably by each of the indi-
viduals taken into account in determining the
amount of such assistance for the benefit of
such individuals.
‘‘(B) ASSISTANCE TO CHILDREN TREATED
AS RECEIVED BY PARENTS, ETC.—The amount
of assistance which would (but for this subpara-
graph) be treated as received by a child shall be
treated as received as follows:
‘‘(i) If there is an includible parent,
such amount shall be treated as received
by the includible parent (or if there is
more than 1 includible parent, as received
ratably by each includible parent).
‘‘(ii) If there is no includible parent
and there is an includible grandparent,
such amount shall be treated as received
by the includible grandparent (or if there
is more than 1 includible grandparent, as
received ratably by each includible grand-
parent).
690
Title IX, Subtitle B
‘‘(iii) If there is no includible parent
or grandparent, such amount shall be
treated as received ratably by each includ-
ible adult.
‘‘(C) DEFINITIONS.—For purposes of sub-
paragraph (B)—
‘‘(i) CHILD.—The term ‘child’ means
any individual who has not attained age 16
as of the close of the taxable year. Such
term shall not include any individual who
is an includible parent of a child (as de-
fined in the preceding sentence).
‘‘(ii) ADULT.—The term ‘adult’ means
any individual who is not a child.
‘‘(iii) INCLUDIBLE.—The term ‘in-
cludible’ means, with respect to any indi-
vidual, an individual who is included in de-
termining the amount of assistance paid to
the household which includes the child.
‘‘(iv) PARENT.—The term ‘parent’ in-
cludes the stepfather and stepmother of
the child.
‘‘(v) 
GRANDPARENT.—The 
term
‘grandparent’ means any parent of a par-
ent of the child.
691
Title IX, Subtitle B
‘‘(d) FOOD STAMP PROGRAM.—For purposes of sub-
section (b), the term ‘food stamp program’ means—
‘‘(1) the food stamp program (as defined in sec-
tion 3(h) of the Food Stamp Act of 1977), and
‘‘(2) the portion of the program under sections
21 and 22 of such Act which provides food assist-
ance.’’
(b) REPORTING.—
(1) IN GENERAL.—Subpart B of part III of
subchapter A of chapter 61 of such Code is amended
by adding at the end the following new section:
‘‘SEC. 6050Q. PAYMENTS OF CERTAIN FEDERAL ASSIST-
ANCE.
‘‘(a) REQUIREMENT
OF REPORTING.—The appro-
priate official shall make a return, according to the forms
and regulations prescribed by the Secretary, setting
forth—
‘‘(1) the aggregate amount of specified Federal
assistance paid to any individual during any cal-
endar year, and
‘‘(2) the name, address, and TIN of such indi-
vidual.
‘‘(b) STATEMENTS TO BE FURNISHED TO PERSONS
WITH RESPECT TO WHOM INFORMATION IS REQUIRED.—
Every person required to make a return under subsection
692
Title IX, Subtitle B
(a) shall furnish to each individual whose name is required
to be set forth in such return a written statement show-
ing—
‘‘(1) the aggregate amount of payments made
to the individual which are required to be shown on
such return, and
‘‘(2) the name of the agency making the pay-
ments.
The written statement required under the preceding sen-
tence shall be furnished to the individual on or before Jan-
uary 31 of the year following the calendar year for which
the return under subsection (a) was required to be made.
‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this section—
‘‘(1) APPROPRIATE OFFICIAL.—The term ‘ap-
propriate official’ means—
‘‘(A) in the case of specified Federal as-
sistance described in section 91(b)(1)(A), the
head of the State agency administering the plan
under which such assistance is provided,
‘‘(B) in the case of specified Federal as-
sistance described in section 91(b)(1)(B), the
head of the State agency administering the pro-
gram under which such assistance is provided,
and
693
Title IX, Subtitle B
‘‘(C) in the case of specified Federal assist-
ance described in section 91(b)(1)(C), the Sec-
retary of Health and Human Services.
‘‘(2) SPECIFIED
FEDERAL
ASSISTANCE.—The
term ‘specified Federal assistance’ has the meaning
given such term by section 91(b).
‘‘(3) AMOUNTS TREATED AS PAID.—The rules
of section 91(c) shall apply for purposes of deter-
mining to whom specified Federal assistance is
paid.’’
(2) PENALTIES.—
(A) 
Subparagraph 
(B) 
of 
section
6724(d)(1) of such Code is amended by redesig-
nating clauses (ix) through (xiv) as clauses (x)
through (xv), respectively, and by inserting
after clause (viii) the following new clause:
‘‘(ix) section 6050Q (relating to pay-
ments of certain Federal assistance),’’.
(B) Paragraph (2) of section 6724(d) of
such Code is amended by redesignating sub-
paragraphs (Q) through (T) as subparagraphs
(R) through (U), respectively, and by inserting
after subparagraph (P) the following new sub-
paragraph:
694
Title IX, Subtitle B
‘‘(Q) section 6050Q(b) (relating to pay-
ments of certain Federal assistance),’’.
(c) TEMPORARY EMPLOYMENT ASSISTANCE PRO-
GRAM, SUPPLEMENTAL SECURITY INCOME, AND FOOD
STAMP BENEFITS NOT TAKEN INTO ACCOUNT FOR PUR-
POSES OF THE EARNED INCOME TAX CREDIT.—Section
32 of the Internal Revenue Code of 1986 (relating to the
earned income tax credit), is amended by adding at the
end the following new subsection:
‘‘(k) ADJUSTED GROSS INCOME DETERMINED WITH-
OUT REGARD TO CERTAIN FEDERAL ASSISTANCE.—For
purposes of this section, adjusted gross income shall be
determined without regard to any amount which is includ-
ible in gross income solely by reason of section 91.’’
(d) CLERICAL AMENDMENTS.—
(1) The table of sections for part II of sub-
chapter B of chapter 1 of such Code is amended by
adding at the end the following new item:
‘‘Sec. 91. Certain Federal assistance.’’
(2) The table of sections for subpart B of part
III of subchapter A of chapter 61 of such Code is
amended by adding at the end the following new
item:
‘‘Sec. 6050Q. Payments of certain Federal assistance.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to benefits received after December
695
Title IX, Subtitle B
31, 1995, except that the amendment made by subsection
(c) shall apply to taxable years beginning after such date.
SEC. 9207. DEPENDENT CARE CREDIT TO BE REFUNDABLE;
HIGH-INCOME TAXPAYERS INELIGIBLE FOR
CREDIT.
(a) CREDIT TO BE REFUNDABLE.—
(1) IN GENERAL.—Section 21 of the Internal
Revenue Code of 1986 (relating to expenses for
household and dependent care services necessary for
gainful employment) is hereby moved to subpart C
of part IV of subchapter A of chapter 1 of such
Code (relating to refundable credits) and inserted
after section 34.
(2) TECHNICAL AMENDMENTS.—
(A) Section 35 of such Code is redesig-
nated as section 36.
(B) Section 21 of such Code is redesig-
nated as section 35.
(C) Paragraph (1) of section 35(a) of such
Code (as redesignated by subparagraph (B)) is
amended by striking ‘‘this chapter’’ and insert-
ing ‘‘this subtitle’’.
(D) Subparagraph (C) of section 129(a)(2)
of such Code is amended by striking ‘‘section
21(e)’’ and inserting ‘‘section 35(e)’’.
696
Title IX, Subtitle B
(E) Paragraph (2) of section 129(b) of
such Code is amended by striking ‘‘section
21(d)(2)’’ and inserting ‘‘section 35(d)(2)’’.
(F) Paragraph (1) of section 129(e) of
such Code is amended by striking ‘‘section
21(b)(2)’’ and inserting ‘‘section 35(b)(2)’’.
(G) Subsection (e) of section 213 of such
Code is amended by striking ‘‘section 21’’ and
inserting ‘‘section 35’’.
(H) Paragraph (2) of section 1324(b) of
title 31, United States Code, is amended by in-
serting before the period ‘‘, or from section 35
of such Code’’.
(I) The table of sections for subpart C of
part IV of subchapter A of chapter 1 of such
Code is amended by striking the item relating
to section 35 and inserting the following:
‘‘Sec. 35. Expenses for household and dependent care services
necessary for gainful employment.
‘‘Sec. 36. Overpayments of tax.’’.
(J) The table of sections for subpart A of
such part IV is amended by striking the item
relating to section 21.
(b) HIGHER-INCOME TAXPAYERS INELIGIBLE FOR
CREDIT.—Subsection (a) of section 35 of such Code, as
redesignated by subsection (a), is amended by adding at
the end the following new paragraph:
697
Title IX, Subtitle C
‘‘(3) PHASEOUT
OF
CREDIT
FOR
HIGHER-IN-
COME TAXPAYERS.—The amount of the credit which
would (but for this paragraph) be allowed by this
section shall be reduced (but not below zero) by an
amount which bears the same ratio to such amount
of credit as the excess of the taxpayer’s adjusted
gross income for the taxable year over $60,000 bears
to $20,000. Any reduction determined under the
preceding sentence which is not a multiple of $10
shall be rounded to the nearest multiple of $10.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
Subtitle C—Work First
SEC. 9301. WORK FIRST PROGRAM.
(a) ESTABLISHMENT
AND
OPERATION
OF
PRO-
GRAM.—Title IV (42 U.S.C. 601 et seq.) is amended by
striking part F and inserting the following:
‘‘Part F—Work First Program
‘‘SEC. 481. STATE ROLE.
‘‘(a) PROGRAM REQUIREMENTS.—Any State may es-
tablish and operate a work first program that meets the
following requirements:
‘‘(1) OBJECTIVE.—The objective of the pro-
gram is for each program participant to find and
698
Title IX, Subtitle C
hold a full-time unsubsidized paid job, and for this
goal to be achieved in a cost-effective fashion.
‘‘(2) METHOD.—The method of the program is
to connect recipients of assistance under the State
plan approved under part A with the private sector
labor market as soon as possible and offer them the
support and skills necessary to remain in the labor
market. Each component of the program should be
permeated with an emphasis on employment and
with an understanding that minimum wage jobs are
a stepping stone to more highly paid employment.
The program shall provide recipients with education,
training, 
job 
search 
and 
placement, 
wage
supplementation, temporary subsidized jobs, or such
other services that the State deems necessary to help
a recipient obtain private sector employment.
‘‘(3) JOB
CREATION.—The creation of jobs,
with an emphasis on private sector jobs, shall be a
component of the program and shall be a priority for
each State office with responsibilities under the pro-
gram.
‘‘(4) FORMS OF ASSISTANCE.—The State shall
provide assistance to participants in the program in
the form of education, training, job placement serv-
ices (including vouchers for job placement services),
699
Title IX, Subtitle C
work supplementation programs, temporary sub-
sidized job creation, job counseling, assistance in es-
tablishing microenterprises, or other services to pro-
vide individuals with the support and skills necessary
to obtain and keep employment in the private sector.
‘‘(5) 2-YEAR LIMITATION ON PARTICIPATION.—
The program shall comply with section 487(b).
‘‘(6) AGREEMENTS OF MUTUAL RESPONSIBIL-
ITY.—
‘‘(A) IN
GENERAL.—The State agency
shall develop an agreement of mutual respon-
sibility for each program participant, which will
be an individualized comprehensive plan, devel-
oped by the team and the participant, to move
the participant into a full-time unsubsidized
job. The agreement should detail the education,
training, or skills that the individual will be re-
ceiving to obtain a full-time unsubsidized job,
and the obligations of the individual.
‘‘(B) HOURS OF PARTICIPATION REQUIRE-
MENT.—The agreement shall provide that the
individual shall participate in activities in ac-
cordance with the agreement for—
‘‘(i) not fewer than 20 hours per week
during fiscal years 1997 and 1998;
700
Title IX, Subtitle C
‘‘(ii) not fewer than 25 hours per
week during fiscal year 1999; and
‘‘(iii) not fewer than 30 hours per
week thereafter.
‘‘(7) CASELOAD
PARTICIPATION
RATES.—The
program shall comply with section 488.
‘‘(8) NONDISPLACEMENT.—The program may
not be operated in a manner that results in—
‘‘(A) the displacement of a currently em-
ployed worker or position by a program partici-
pant;
‘‘(B) the replacement of an employee who
has been terminated with a program partici-
pant; or
‘‘(C) the replacement of an individual who
is on layoff from the same position given to a
program participant or any equivalent position.
‘‘(b) ANNUAL REPORTS.—
‘‘(1) COMPLIANCE WITH PERFORMANCE MEAS-
URES.—Each State that operates a program under
this part shall submit to the Secretary annual re-
ports that compare the achievements of the program
with the performance-based measures established
under section 488(c).
701
Title IX, Subtitle C
‘‘(2) 
COMPLIANCE
WITH
PARTICIPATION
RATES.—Each State that operates a program under
this part for a fiscal year shall submit to the Sec-
retary a report on the participation rate of the State
for the fiscal year.
‘‘SEC. 482. REVAMPED JOBS PROGRAM.
‘‘A State that establishes a program under this part
may operate a program similar to the program known as
the ‘GAIN Program’ that has been operated by Riverside
County, California, under Federal law in effect imme-
diately before the date this part first applies to the State
of California.
‘‘SEC. 483. USE OF PLACEMENT COMPANIES.
‘‘(a) IN GENERAL.—A State that establishes a pro-
gram under this part may enter into contracts with private
companies (whether operated for profit or not for profit)
for the placement of participants in the program in posi-
tions of full-time employment, preferably in the private
sector, for wages sufficient to eliminate the need of such
participants for cash assistance.
‘‘(b) REQUIRED CONTRACT TERMS.—Each contract
entered into under this section with a company shall meet
the following requirements:
‘‘(1) PROVISION OF JOB READINESS AND SUP-
PORT
SERVICES.—The contract shall require the
702
Title IX, Subtitle C
company to provide, to any program participant who
presents to the company a voucher issued under sub-
section (d) intensive personalized support and job
readiness services designed to prepare the individual
for employment and ensure the continued success of
the individual in employment.
‘‘(2) PAYMENTS.—
‘‘(A) IN
GENERAL.—The contract shall
provide for payments to be made to the com-
pany with respect to each program participant
who presents to the company a voucher issued
under subsection (d).
‘‘(B) STRUCTURE.—The contract shall
provide for the majority of the amounts to be
paid under the contract with respect to a pro-
gram participant, to be paid after the company
has placed the participant in a position of full-
time employment and the participant has been
employed in the position for such period of not
less than 5 months as the State deems appro-
priate.
‘‘(c) COMPETITIVE BIDDING REQUIRED.—Contracts
under this section shall be awarded only after competitive
bidding.
703
Title IX, Subtitle C
‘‘(d) VOUCHERS.—The State shall issue a voucher to
each program participant whose agreement of mutual re-
sponsibility provides for the use of placement companies
under this section, indicating that the participant is eligi-
ble for the services of such a company.
‘‘SEC. 484. TEMPORARY SUBSIDIZED JOB CREATION.
‘‘A State that establishes a program under this part
may establish a program similar to the program known
as ‘JOBS Plus’ that has been operated by the State of
Oregon under Federal law in effect immediately before the
date this part first applies to the State of Oregon.
‘‘SEC. 485. MICROENTERPRISE.
‘‘(a) GRANTS AND LOANS TO NONPROFIT ORGANIZA-
TIONS FOR THE PROVISION OF TECHNICAL ASSISTANCE,
TRAINING, AND
CREDIT
TO
LOW
INCOME
ENTRE-
PRENEURS.—A State that establishes a program under
this part may make grants and loans to nonprofit organi-
zations to provide technical assistance, training, and credit
to low income entrepreneurs for the purpose of establish-
ing microenterprises.
‘‘(b) MICROENTERPRISE DEFINED.—For purposes of
this subsection, the term ‘microenterprise’ means a com-
mercial enterprise which has 5 or fewer employees, 1 or
more of whom owns the enterprise.
704
Title IX, Subtitle C
‘‘SEC. 486. WORK SUPPLEMENTATION PROGRAM.
‘‘(a) IN GENERAL.—A State that establishes a pro-
gram 
under 
this 
part 
may 
institute 
a 
work
supplementation program under which the State, to the
extent it considers appropriate, may reserve the sums that
would otherwise be payable under the State plan approved
under part A to participants in the program and use the
sums instead for the purpose of providing and subsidizing
jobs for the participants (as described in subsection
(c)(3)(A) and (B)), as an alternative to providing such as-
sistance to the participants.
‘‘(b) STATE FLEXIBILITY.—
‘‘(1) Nothing in this part, or in any State plan
approved under part A, shall be construed to prevent
a State from operating (on such terms and condi-
tions and in such cases as the State may find to be
necessary or appropriate) a work supplementation
program in accordance with this section and section
484 (as in effect immediately before the date this
part first applies to the State).
‘‘(2) Notwithstanding any other provision of
law, a State may adjust the levels of the standards
of need under the State plan as the State determines
to be necessary and appropriate for carrying out a
work supplementation program under this section.
705
Title IX, Subtitle C
‘‘(3) Notwithstanding any other provision of
law, a State operating a work supplementation pro-
gram under this section may provide that the need
standards in effect in those areas of the State in
which the program is in operation may be different
from the need standards in effect in the areas in
which the program is not in operation, and the State
may provide that the need standards for categories
of recipients may vary among such categories to the
extent the State determines to be appropriate on the
basis of ability to participate in the work
supplementation program.
‘‘(4) Notwithstanding any other provision of
law, a State may make such further adjustments in
the amounts of assistance provided under the plan
to different categories of recipients (as determined
under paragraph (3)) in order to offset increases in
benefits from needs-related programs (other than
the State plan approved under part A) as the State
determines to be necessary and appropriate to fur-
ther the purposes of the work supplementation pro-
gram.
‘‘(5) In determining the amounts to be reserved
and used for providing and subsidizing jobs under
706
Title IX, Subtitle C
this section as described in subsection (a), the State
may use a sampling methodology.
‘‘(6) Notwithstanding any other provision of
law, a State operating a work supplementation pro-
gram under this section, may reduce or eliminate the
amount of earned income to be disregarded under
the State plan as the State determines to be nec-
essary and appropriate to further the purposes of
the work supplementation program.
‘‘(c) RULES RELATING TO SUPPLEMENTED JOBS.—
‘‘(1) A work supplementation program operated
by a State under this section may provide that any
individual who is an eligible individual (as deter-
mined under paragraph (2)) shall take a supple-
mented job (as defined in paragraph (3)) to the ex-
tent that supplemented jobs are available under the
program. Payments by the State to individuals or to
employers under the work supplementation program
shall be treated as expenditures incurred by the
State for temporary employment assistance under
part A except as limited by subsection (d).
‘‘(2) For purposes of this section, an eligible in-
dividual is an individual who is in a category which
the State determines should be eligible to participate
in the work supplementation program, and who
709
Title IX, Subtitle C
program under this section shall provide that any individ-
ual who participates in the program, and any child or rel-
ative of the individual (or other individual living in the
same household as the individual) who would be eligible
for assistance under the State plan approved under part
A if the State did not have a work supplementation pro-
gram, shall be considered individuals receiving assistance
under the State plan approved under part A for purposes
of eligibility for medical assistance under the State plan
approved under title XIX.
‘‘SEC. 487. PARTICIPATION RULES.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), a State that establishes a program under this part
may require any individual receiving assistance under the
State plan approved under part A to participate in the
program.
‘‘(b) 2-YEAR LIMITATION ON PARTICIPATION.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), an individual may not participate in a
State program established under this part if the in-
dividual has participated in the State program es-
tablished under this part for 24 months after the
date the individual first signed an agreement of mu-
tual responsibility under this part, excluding any
month during which the individual worked for an av-
710
Title IX, Subtitle C
erage of at least 25 hours per week in a private sec-
tor job.
‘‘(2) AUTHORITY TO ALLOW REPEAT PARTICI-
PATION.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B) of this paragraph, a State may allow
an individual who, by reason of paragraph (1),
would be prohibited from participating in the
State program established under this part to
participate in the program for such additional
period or periods as the State determines ap-
propriate.
‘‘(B) LIMITATION ON PERCENTAGE OF RE-
PEAT PARTICIPANTS.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii) of this subparagraph,
the number of individuals allowed under
subparagraph (A) to participate during a
program year in a State program estab-
lished under this part shall not exceed—
‘‘(I) 10 percent of the total num-
ber of individuals who participated in
the State program established under
this part or the State program estab-
711
Title IX, Subtitle C
lished under part H during the imme-
diately preceding program year; or
‘‘(II) in the case of fiscal year
2004 or any succeeding fiscal year, 15
percent of such total number of indi-
viduals.
‘‘(ii) AUTHORITY TO INCREASE LIMI-
TATION.—
‘‘(I) PETITION.—A State may re-
quest the Secretary to increase to not
more than 15 percent the percentage
limitation imposed by clause (i)(I) for
a fiscal year before fiscal year 2004.
‘‘(II) AUTHORITY TO GRANT RE-
QUEST.—The Secretary may approve
a request made pursuant to subclause
(I) if the Secretary deems it appro-
priate. The Secretary shall develop
recommendations on the criteria that
should be applied in evaluating re-
quests under subclause (I).
‘‘SEC. 488. CASELOAD PARTICIPATION RATES; PERFORM-
ANCE MEASURES.
‘‘(a) PARTICIPATION RATES.—
712
Title IX, Subtitle C
‘‘(1) REQUIREMENT.—A State that operates a
program under this part shall achieve a participation
rate for the following fiscal years of not less than
the following percentage:
‘‘Fiscal year:
Percentage:
1997 .........................................................................................
1998 .........................................................................................
1999 .........................................................................................
2000 .........................................................................................
2001 .........................................................................................
2002 .........................................................................................
2003 or later ............................................................................
52.
‘‘(2) PARTICIPATION RATE DEFINED.—
‘‘(A) IN GENERAL.—As used in this sub-
section, the term ‘participation rate’ means,
with respect to a State and a fiscal year, an
amount equal to—
‘‘(i) the average monthly number of
individuals who, during the fiscal year,
participate in the State program estab-
lished under this part or (if applicable)
part G or H; divided by
‘‘(ii) the average monthly number of
individuals who are not described in sec-
tion 402(c)(1)(D) and for whom an indi-
vidual responsibility plan is in effect under
section 403 during the fiscal year.
‘‘(B) SPECIAL RULE.—For each of the 1st
12 months after an individual ceases to receive
713
Title IX, Subtitle C
assistance under a State plan approved under
part A by reason of having become employed
for more than 25 hours per week in an
unsubsidized job in the private sector, the indi-
vidual shall be considered to be participating in
the State program established under this part,
and to be an adult recipient of such assistance,
for purposes of subparagraph (A).
‘‘(3) STATE
COMPLIANCE
REPORTS.—Each
State that operates a program under this part for a
fiscal year shall submit to the Secretary a report on
the participation rate of the State for the fiscal year.
‘‘(4) EFFECT OF FAILURE TO MEET PARTICIPA-
TION RATES.—
‘‘(A) IN GENERAL.—If a State reports that
the State has failed to achieve the participation
rate required by paragraph (1) for the fiscal
year, the Secretary may make recommendations
for changes in the State program established
under this part and (if the State has estab-
lished a program under part G) the State pro-
gram established under part G. The State may
elect to follow such recommendations, and shall
demonstrate to the Secretary how the State will
achieve the required participation rates.
714
Title IX, Subtitle C
‘‘(B) SECOND
CONSECUTIVE
FAILURE.—
Notwithstanding subparagraph (A), if a State
fails to achieve the participation rate required
by paragraph (1) for 2 consecutive fiscal years,
the Secretary may—
‘‘(i) require the State to make
changes in the State program established
under this part and (if the State has estab-
lished a program under part G) the State
program established under part G; and
‘‘(ii) reduce by 5 percent the amount
otherwise payable to the State under sec-
tion 413.
‘‘(b) PERFORMANCE STANDARDS.—The Secretary
shall develop standards to be used to measure the effec-
tiveness of the programs established under this part and
part G in moving recipients of assistance under the State
plan approved under part A into full-time unsubsidized
employment.
‘‘(c) PERFORMANCE-BASED MEASURES.—
‘‘(1) ESTABLISHMENT.—The Secretary shall, by
regulation, establish measures of the effectiveness of
the State programs established under this part and
under part G in moving recipients of assistance
under the State plan approved under part A into
715
Title IX, Subtitle C
full-time unsubsidized employment, based on the
performance of such programs.
‘‘(2) ANNUAL
COMPLIANCE
REPORTS.—Each
State that operates a program under this part shall
submit to the Secretary annual reports that compare
the achievements of the program with the perform-
ance-based measures established under paragraph
(1).
‘‘SEC. 489. FEDERAL ROLE.
‘‘(a) APPROVAL OF STATE PLANS.—
‘‘(1) IN GENERAL.—Within 60 days after the
date a State submits to the Secretary a plan that
provides for the establishment and operation of a
work first program that meets the requirements of
section 481, the Secretary shall approve the plan.
‘‘(2) AUTHORITY TO EXTEND APPROVAL DEAD-
LINE.—The 60-day deadline established in para-
graph (1) with respect to a State may be extended
in accordance with an agreement between the Sec-
retary and the State.
‘‘(b) PERFORMANCE-BASED MEASURES.—The Sec-
retary shall, by regulation, establish measures of the effec-
tiveness of the State program established under this part
and (if the State has established a program under part
G) the State program established under part G in moving
716
Title IX, Subtitle C
recipients of assistance under the State plan approved
under part A into full-time unsubsidized employment,
based on the performance of such programs.
‘‘(c) EFFECT OF FAILURE TO MEET PARTICIPATION
RATES.—
‘‘(1) IN GENERAL.—If a State reports that the
State has failed to achieve the participation rate re-
quired by section 488 for the fiscal year, the Sec-
retary may make recommendations for changes in
the State program established under this part and
(if the State has established a program under part
G) the State program established under part G. The
State may elect to follow such recommendations, and
shall demonstrate to the Secretary how the State
will achieve the required participation rates.
‘‘(2) SECOND
CONSECUTIVE
FAILURE.—Not-
withstanding paragraph (1), if the State has failed
to achieve the participation rates required by section
488 for 2 consecutive fiscal years, the Secretary may
require the State to make changes in the State pro-
gram established under this part and (if the State
has established a program under part G) the State
program established under part G.
717
Title IX, Subtitle C
‘‘Part G—Workfare Program
‘‘SEC. 490. ESTABLISHMENT AND OPERATION OF PROGRAM.
‘‘(a) IN GENERAL.—A State that establishes a work
first program under part F may establish and carry out
a workfare program that meets the requirements of this
part, unless the State has established a job placement
voucher program under part H.
‘‘(b) OBJECTIVE.—The objective of the workfare pro-
gram is for each program participant to find and hold a
full-time unsubsidized paid job, and for this goal to be
achieved in a cost-effective fashion.
‘‘(c) CASE MANAGEMENT TEAMS.—The State shall
assign to each program participant a case management
team that shall meet with the participant and assist the
participant to choose the most suitable workfare job under
subsection (e), (f), or (g) and to eventually obtain a full-
time unsubsidized paid job.
‘‘(d) PROVISION OF JOBS.—The State shall provide
each participant in the program with a community service
job that meets the requirements of subsection (e) or a sub-
sidized job that meets the requirements of subsection (f)
or (g).
‘‘(e) COMMUNITY SERVICE JOBS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), each participant shall work for
not fewer than 30 hours per week (or, at the option
718
Title IX, Subtitle C
of the State, 20 hours per week during fiscal years
1997 and 1998, not fewer than 25 hours per week
during fiscal year 1999, not fewer than 30 hours per
week during fiscal years 2000 and 2001, and not
fewer than 35 hours per week thereafter) in a com-
munity service job, and be paid at a rate which is
not greater than 75 percent (or, at the option of the
State, 100 percent) of the maximum amount of as-
sistance that may be provided under the State plan
approved under part A to a family of the same size
and composition with no income.
‘‘(2) EXCEPTION.—(A) If the participant has
obtained unsubsidized part-time employment in the
private sector, the State shall provide the participant
with a part-time community service job.
‘‘(B) If the State provides a participant a part-
time community service job under subparagraph (A),
the State shall ensure that the participant works for
not fewer than 30 hours per week.
‘‘(3) WAGES
NOT
CONSIDERED
EARNED
IN-
COME.—Wages paid under a workfare program shall
not be considered to be earned income for purposes
of any provision of law.
719
Title IX, Subtitle C
‘‘(4) COMMUNITY SERVICE JOB DEFINED.—For
purposes of this section, the term ‘community serv-
ice job’ means—
‘‘(A) a job provided to a participant by the
State administering the State plan under part
A; or
‘‘(B) a job provided to a participant by any
other employer for which all or part of the
wages are paid by the State.
A State may provide or subsidize under the program
any job which the State determines to be appro-
priate.
‘‘(f) TEMPORARY SUBSIDIZED JOB CREATION.—A
State that establishes a workfare program under this part
may establish a program similar to the program operated
by the State of Oregon, which is known as ‘JOBS Plus’.
‘‘(g) WORK SUPPLEMENTATION PROGRAM.—
‘‘(1) IN GENERAL.—A State that establishes a
workfare program under this part may institute a
work supplementation program under which the
State, to the extent it considers appropriate, may re-
serve the sums that would otherwise be payable to
participants in the program as a community service
minimum wage and use the sums instead for the
720
Title IX, Subtitle C
purpose of providing and subsidizing private sector
jobs for the participants.
‘‘(2) EMPLOYER
AGREEMENT.—An employer
who provides a private sector job to a participant
under paragraph (1) shall agree to provide to the
participant an amount in wages equal to the poverty
threshold for a family of three.
‘‘(h) JOB SEARCH REQUIREMENT.—The State shall
require each participant to spend a minimum of 5 hours
per week on activities related to securing unsubsidized
full-time employment in the private sector.
‘‘(i) DURATION OF PARTICIPATION.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), an individual may not participate for
more than 2 years in a workfare program under this
part.
‘‘(2) AUTHORITY
TO
ALLOW
REPEATED
PAR-
TICIPATION.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a State may allow an individual
who, by reason of paragraph (1), would be pro-
hibited from participating in the State program
established under this part to participate in the
program for such additional period or periods
as the State determines appropriate.
721
Title IX, Subtitle C
‘‘(B) LIMITATION ON PERCENTAGE OF RE-
PEAT PARTICIPANTS.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the number of individ-
uals allowed under subparagraph (A) to
participate during a program year in a
State program established under this part
shall not exceed 10 percent of the total
number of individuals who participated in
the program during the immediately pre-
ceding program year.
‘‘(ii) AUTHORITY TO INCREASE LIMI-
TATION.—
‘‘(I) PETITION.—A State may re-
quest the Secretary to increase the
percentage 
limitation 
imposed 
by
clause (i) to not more than 15 per-
cent.
‘‘(II) AUTHORITY TO GRANT RE-
QUEST.—The Secretary may approve
a request made pursuant to subclause
(I) if the Secretary deems it appro-
priate. The Secretary shall develop
recommendations on the criteria that
722
Title IX, Subtitle C
should be applied in evaluating re-
quests under subclause (I).
‘‘(j) USE OF PLACEMENT COMPANIES.—A State that
establishes a workfare program under this part may enter
into contracts with private companies (whether operated
for profit or not for profit) for the placement of partici-
pants in the program in positions of full-time employment,
preferably in the private sector, for wages sufficient to
eliminate the need of such participants for cash assistance
in accordance with section 483.
‘‘(k) MAXIMUM OF 3 COMMUNITY SERVICE JOBS.—
A program participant may not receive more than 3 com-
munity service jobs under the program.
‘‘Part H—Job Placement Voucher Program
‘‘SEC. 490A. JOB PLACEMENT VOUCHER PROGRAM.
‘‘A State that is not operating a workfare program
under part G may establish a job placement voucher pro-
gram that meets the following requirements:
‘‘(1) The program shall offer each program par-
ticipant a voucher which the participant may use to
obtain employment in the private sector.
‘‘(2) An employer who receives a voucher issued
under the program from an individual may redeem
the voucher at any time after the individual has been
employed by the employer for 6 months, unless an-
723
Title IX, Subtitle C
other employee of the employer was displaced by the
employment of the individual.
‘‘(3) Upon presentation of a voucher by an em-
ployer to the State agency responsible for the admin-
istration of the program, the State agency shall pay
to the employer an amount equal to 50 percent of
the total amount of assistance provided under the
State plan approved under part A to the family of
which the individual is a member for the most recent
12 months for which the family was eligible for such
assistance.’’.
(c) FUNDING.—Section 413(a), as added by section
9101(a) of this Act, is amended—
(1) by striking ‘‘Subject to’’ and inserting the
following:
‘‘(1) IN GENERAL.—Subject to’’; and
(2) by inserting after and below the end the fol-
lowing:
‘‘(2) WORK FIRST AND OTHER PROGRAMS.—(A)
Each State that is operating a program in accord-
ance with a plan approved under part F and a pro-
gram in accordance with part G or H shall be enti-
tled to payments under paragraph (3) for any fiscal
year in an amount equal to the sum of the applicable
percentages (specified in such paragraph) of its ex-
724
Title IX, Subtitle C
penditures to carry out such programs (subject to
limitations prescribed by or pursuant to such parts
or this part on expenditures that may be included
for purposes of determining payment under para-
graph (3)), but such payments for any fiscal year in
the case of any State may not exceed the limitation
determined under subparagraph (B) with respect to
the State.
‘‘(B) The limitation determined under this sub-
paragraph with respect to a State for any fiscal year
is the amount that bears the same ratio to the
amount specified in subparagraph (C) for such fiscal
year as the average monthly number of adult recipi-
ents (as defined in subparagraph (D)) in the State
in the preceding fiscal year bears to the average
monthly number of such recipients in all the States
for such preceding year.
‘‘(C)(i) The amount specified in this subpara-
graph is—
‘‘(I) $1,600,000,000 for fiscal year 1997;
‘‘(II) $1,600,000,000 for fiscal year 1998;
‘‘(III) $1,900,000,000 for fiscal year 1999;
‘‘(IV) $2,500,000,000 for fiscal year 2000;
and
725
Title IX, Subtitle C
‘‘(V) $3,200,000,000 for fiscal year 2001;
and
‘‘(VI) $4,700,000,000 for fiscal year 2002;
and
‘‘(VII) the amount determined under
clause (ii) for fiscal year 2003 and each suc-
ceeding fiscal year.
‘‘(ii) The amount determined under this clause
for a fiscal year is the product of the following:
‘‘(I) The amount specified in this subpara-
graph for the immediately preceding fiscal year.
‘‘(II) 1.00 plus the percentage (if any) by
which—
‘‘(aa) the average of the Consumer
Price Index (as defined in section 1(f)(5)
of the Internal Revenue Code of 1986) for
the most recent 12-month period for which
such information is available; exceeds
‘‘(bb) the average of the Consumer
Price Index (as so defined) for the 12-
month period ending on June 30 of the
2nd preceding fiscal year.
‘‘(III) The amount that bears the same
ratio to the amount specified in this subpara-
graph for the immediately preceding fiscal year
726
Title IX, Subtitle C
as the number of individuals whom the Sec-
retary estimates will participate in programs
operated under part F, G, or H during the fis-
cal year bears to the total number of individuals
who participated in such programs during such
preceding fiscal year.
‘‘(D) For purposes of this paragraph, the term
‘adult recipient’ in the case of any State means an
individual other than a dependent child (unless such
child is the custodial parent of another dependent
child) whose needs are met (in whole or in part)
with assistance provided under the State plan ap-
proved under this part.
‘‘(E) For purposes of subparagraph (D), the
term ‘dependent child’ means a needy child (i) who
has been deprived of parental support or care by
reason of the death, continued absence from the
home (other than absence occasioned solely by rea-
son of the performance of active duty in the uni-
formed services of the United States), or physical or
mental incapacity of a parent, and who is living with
his father, mother, grandfather, grandmother, broth-
er, sister, stepfather, stepmother, stepbrother, step-
sister, uncle, aunt, first cousin, nephew, or niece, in
a place of residence maintained by one or more of
727
Title IX, Subtitle C
such relatives as his or their own home, and (ii) who
is (I) under the age of eighteen, or (II) at the option
of the State, under the age of nineteen and a full-
time student in a secondary school (or in the equiva-
lent level of vocational or technical training), if, be-
fore he attains age nineteen, he may reasonably be
expected to complete the program of such secondary
school (or such training).
‘‘(F) For purposes of subparagraph (E), the
term ‘relative with whom any dependent child is liv-
ing’ means the individual who is one of the relatives
specified in subparagraph (E) and with whom such
child is living (within the meaning of such sub-
section) in a place of residence maintained by such
individual (himself or together with any one or more
of the other relatives so specified) as his (or their)
own home.
‘‘(3)(A) In lieu of any payment under para-
graph (1) therefor, the Secretary shall pay to each
State that is operating a program in accordance
with a plan approved under part F and a program
in accordance with part G or H, with respect to ex-
penditures by the State to carry out such programs,
an amount equal to—
728
Title IX, Subtitle C
‘‘(i) with respect to so much of such ex-
penditures in a fiscal year as do not exceed the
State’s expenditures in the fiscal year 1987
with respect to which payments were made to
such State from its allotment for such fiscal
year pursuant to part C of this title as then in
effect, 90 percent; and
‘‘(ii) with respect to so much of such ex-
penditures in a fiscal year as exceed the amount
described in clause (i)—
‘‘(I) 50 percent, in the case of expend-
itures for administrative costs made by a
State in operating such programs for such
fiscal year (other than the personnel costs
for staff employed full-time in the oper-
ation of such program) and the costs of
transportation and other work-related sup-
portive services; and
‘‘(II) 60 percent or the Federal medi-
cal assistance percentage (as defined in the
last sentence of section 1118), whichever is
the greater, in the case of expenditures
made by a State in operating such pro-
grams for such fiscal year (other than for
costs described in subclause (I)).
729
Title IX, Subtitle C
‘‘(B) With respect to the amount for which pay-
ment is made to a State under subparagraph (A)(i),
the State’s expenditures for the costs of operating
such programs may be in cash or in kind, fairly eval-
uated.
‘‘(C) Not more than 10 percent of the amount
payable to a State under this paragraph for a quar-
ter may be for expenditures made during the quarter
with respect to program participants who are not eli-
gible for assistance under the State plan approved
under this part.’’.
(d) SECRETARY’S SPECIAL ADJUSTMENT FUND.—
Section 413(a), as added by section 9101(a) of this Act,
is amended by adding at the end the following:
‘‘(4) 
SECRETARY’S
SPECIAL
ADJUSTMENT
FUND.—(A) There shall be available to the Sec-
retary from the amount appropriated for payments
under paragraph (2) for States’ programs under
parts F and G for fiscal year 1996, $300,000,000
for special adjustments to States’ limitations on
Federal payments for such programs.
‘‘(B) A State may, not later than March 1 and
September 1 of each fiscal year, submit to the Sec-
retary a request to adjust the limitation on pay-
ments under this section with respect to its program
730
Title IX, Subtitle C
under part F (and, in fiscal years after 1997) its
program under part G for the following fiscal year.
The Secretary shall only consider such a request
from a State which has, or which demonstrates con-
vincingly on the basis of estimates that it will, sub-
mit allowable claims for Federal payment in the full
amount available to it under paragraph (2) in the
current fiscal year and obligated 95 percent of its
full amount in the prior fiscal year. The Secretary
shall by regulation prescribe criteria for the equi-
table allocation among the States of Federal pay-
ments pursuant to adjustments of the limitations re-
ferred to in the preceding sentence in the case where
the requests of all States that the Secretary finds
reasonable exceed the amount available, and, within
30 days following the dates specified in this para-
graph, will notify each State whether one or more
of its limitations will be adjusted in accordance with
the State’s request and the amount of the adjust-
ment (which may be some or all of the amount re-
quested).
‘‘(C) The Secretary may adjust the limitation
on Federal payments to a State for a fiscal year
under paragraph (2), and upon a determination by
the Secretary that (and the amount by which) a
731
Title IX, Subtitle C
State’s limitation should be raised, the amount spec-
ified in such paragraph shall be considered to be so
increased for the following fiscal year.
‘‘(D) The amount made available under sub-
paragraph (A) for special adjustments shall remain
available to the Secretary until expended. That
amount shall be reduced by the sum of the adjust-
ments approved by the Secretary in any fiscal year,
and the amount shall be increased in a fiscal year
by the amount by which all States’ limitations under
paragraph (2) of this subsection and section 2008
for a fiscal year exceeded the sum of the Federal
payments under such provisons of law for such fiscal
year, but for fiscal years after 1997, such amount
at the end of such fiscal year shall not exceed
$400,000,000.’’.
(e) CONFORMING AMENDMENTS.—
(1) 
Section 
1115(b)(2)(A) 
(42 
U.S.C.
1315(b)(2)(A)) is amended by striking ‘‘, and
402(a)(19) (relating to the work incentive pro-
gram)’’.
(2) Section 1108 (42 U.S.C. 1308) is amend-
ed—
732
Title IX, Subtitle C
(A) in subsection (a), by striking ‘‘or, in
the case of part A of title IV, section 403(k)’’;
and
(B) in subsection (d), by striking ‘‘(exclu-
sive of any amounts on account of services and
items to which, in the case of part A of such
title, section 403(k) applies)’’.
(3) Section 1902(a)(10)(A)(i)(I) (42 U.S.C.
1396a(a)(19)(A)(i)(I)) is amended—
(A) by striking ‘‘402(a)(37), 406(h), or’’;
and
(B) by striking ‘‘482(e)(6)’’ and inserting
‘‘486(f)’’.
(4) Section 1928(a)(1) (42 U.S.C. 1396s(a)(1))
is amended by striking ‘‘482(e)(6)’’ and inserting
‘‘486(f)’’.
(f) INTENT OF THE CONGRESS.—The Congress in-
tends for State activities under section 484 of the Social
Security Act (as added by the amendment made by section
9301(a) of this Act) to emphasize the use of the funds
that would otherwise be used to provide individuals with
assistance under part A of title IV of the Social Security
Act and with food stamp benefits under the Food Stamp
Act of 1977, to subsidize the wages of such individuals
in temporary jobs.
733
Title IX, Subtitle C
(g) SENSE OF THE CONGRESS.—It is the sense of
the Congress that States should target individuals who
have not attained 25 years of age for participation in the
program established by the State under part F of title IV
of the Social Security Act (as added by the amendment
made by section 9301(a) of this section) in order to break
the cycle of welfare dependency.
SEC. 9302. REGULATIONS.
The Secretary of Health and Human Services shall
prescribe such regulations as may be necessary to imple-
ment the amendments made by this subtitle.
SEC. 9303. APPLICABILITY TO STATES.
(a) STATE OPTION TO ACCELERATE APPLICABIL-
ITY.—If a State formally notifies the Secretary of Health
and Human Services that the State desires to accelerate
the applicability to the State of the amendments made by
this subtitle, the amendments shall apply to the State on
and after such earlier date as the State may select.
(b) STATE OPTION TO DELAY APPLICABILITY UNTIL
WAIVERS EXPIRE.—The amendments made by this sub-
title shall not apply to a State with respect to which there
is in effect a waiver issued under section 1115 of the So-
cial Security Act for the State program established under
part F of title IV of such Act, until the waiver expires,
if the State formally notifies the Secretary of Health and
734
Title IX, Subtitle D
Human Services that the State desires to so delay such
effective date.
(c) AUTHORITY OF THE SECRETARY OF HEALTH
AND HUMAN SERVICES TO DELAY APPLICABILITY TO A
STATE.—If a State formally notifies the Secretary of
Health and Human Services that the State desires to
delay the applicability to the State of the amendments
made by this title, the amendments shall apply to the
State on and after any later date agreed upon by the Sec-
retary and the State.
Subtitle D—Family Responsibility
And Improved Child Support
Enforcement
CHAPTER 
1—ELIGIBILITY 
AND 
OTHER
MATTERS CONCERNING TITLE IV–D
PROGRAM CLIENTS
SEC. 9401. STATE OBLIGATION TO PROVIDE PATERNITY ES-
TABLISHMENT 
AND 
CHILD 
SUPPORT 
EN-
FORCEMENT SERVICES.
(a) STATE LAW REQUIREMENTS.—Section 466(a)
(42 U.S.C. 666(a)) is amended by inserting after para-
graph (11) the following:
‘‘(12) USE OF CENTRAL CASE REGISTRY AND
CENTRALIZED
COLLECTIONS
UNIT.—Procedures
under which—
749
Title IX, Subtitle D
‘‘(A) for fiscal year 1997, 69 percent,
‘‘(B) for fiscal year 1998, 72 percent, and
‘‘(C) for fiscal year 1999 and succeeding
fiscal years, 75 percent.’’.
(b) MAINTENANCE OF EFFORT.—Section 455 (42
U.S.C. 655) is amended—
(1) in subsection (a)(1), in the matter preced-
ing subparagraph (A), by striking ‘‘From’’ and in-
serting ‘‘Subject to subsection (c), from’’; and
(2) by inserting after subsection (b) the follow-
ing new subsection:
‘‘(c) MAINTENANCE OF EFFORT.—Notwithstanding
the provisions of subsection (a), total expenditures for the
State program under this part for fiscal year 1997 and
each succeeding fiscal year, reduced by the percentage
specified for such fiscal year under subsection (a)(2)(A),
(B), or (C)(i), shall not be less than such total expendi-
tures for fiscal year 1996, reduced by 66 percent.’’.
SEC. 9412. PERFORMANCE-BASED INCENTIVES AND PEN-
ALTIES.
(a) INCENTIVE ADJUSTMENTS TO FEDERAL MATCH-
ING RATE.—Section 458 (42 U.S.C. 658) is amended to
read as follows:
‘‘INCENTIVE ADJUSTMENTS TO MATCHING RATE
‘‘SEC. 458. (a) INCENTIVE ADJUSTMENT.—(1) IN
GENERAL.—In order to encourage and reward State child
769
Title IX, Subtitle D
(B) by striking ‘‘so much of’’; and
(C) by striking ‘‘which the Secretary’’ and
all that follows and inserting ‘‘, and’’; and
(2) by adding at the end the following new
paragraph:
‘‘(3)(A) The Secretary shall pay to each State, for
each quarter in fiscal year 1996, 90 percent of so much
of State expenditures described in subparagraph (1)(B) as
the Secretary finds are for a system meeting the require-
ments specified in section 454(16), or meeting such re-
quirements without regard to clause (D) thereof.
‘‘(B)(i) The Secretary shall pay to each State, for
each quarter in fiscal years 1997 through 2001, the per-
centage specified in clause (ii) of so much of State expend-
itures described in subparagraph (1)(B) as the Secretary
finds are for a system meeting the requirements specified
in section 454(16) and 454A, subject to clause (iii).
‘‘(ii) The percentage specified in this clause, for pur-
poses of clause (i), is the higher of—
‘‘(I) 80 percent, or
‘‘(II) the percentage otherwise applicable to
Federal payments to the State under subparagraph
(A) (as adjusted pursuant to section 458).’’.