TITLE I—DISCRETIONARY
SAVINGS
SEC. 1001. SHORT TITLE.
This title may be cited as the ‘‘Discretionary Spend-
ing Reduction and Control Act of 1995’’.
SEC. 1002. DISCRETIONARY SPENDING LIMITS.
(a) LIMITS.—Section 601(a)(2) of the Congressional
Budget Act of 1974 is amended by striking subparagraphs
(A), (B), (C), (D), and (F), by redesignating subpara-
graph (E) as subparagraph (A) and by striking ‘‘and’’ at
the end of that subparagraph, and by inserting after sub-
paragraph (A) the following new subparagraphs:
‘‘(B) with respect to fiscal year 1996, for
the discretionary category: $502,994,000,000 in
new budget authority and $537,946,000,000 in
outlays;
‘‘(C) with respect to fiscal year 1997, for
the discretionary category: $497,816,000,000 in
new budget authority and $531,793,000,000 in
outlays;
‘‘(D) with respect to fiscal year 1998, for
the discretionary category: $489,046,000,000 in
new budget authority and $523,703,000,000 in
outlays;
‘‘(E) with respect to fiscal year 1999, for
the discretionary category: $491,586,000,000 in
new budget authority and $522,063,000,000 in
outlays; and
‘‘(F) with respect to fiscal year 2000, for
the discretionary category: $492,282,000,000 in
new budget authority and $521,690,000,000 in
outlays;’’.
(b) COMMITTEE
ALLOCATIONS
AND
ENFORCE-
MENT.—Section 602 of the Congressional Budget Act of
1974 is amended—
(1) in subsection (c), by striking ‘‘1995’’ and
inserting ‘‘2000’’ and by striking its last sentence;
and
(2) in subsection (d), by striking ‘‘1992 TO
1995’’ in the side heading and inserting ‘‘1995 TO
2000’’ and by striking ‘‘1992 through 1995’’ and in-
serting ‘‘1995 through 2000’’.
(c) FIVE-YEAR
BUDGET
RESOLUTIONS.—Section
606 of the Congressional Budget Act of 1974 is amend-
ed—
(1) in subsection (a), by striking ‘‘1992, 1993,
1994, or 1995’’ and inserting ‘‘1995, 1996, 1997,
1998, 1999, or 2000’’; and
(2) in subsection (d)(1), by striking ‘‘1992,
1993, 1994, and 1995’’ and inserting ‘‘1995, 1996,
1997, 1998, 1999, and 2000’’, and by striking ‘‘(i)
and (ii)’’.
(d) EFFECTIVE DATE.—Section 607 of the Congres-
sional Budget Act of 1974 is amended by striking ‘‘1991
to 1998’’ and inserting ‘‘1995 to 2000’’.
(e) SEQUESTRATION
REGARDING
CRIME
TRUST
FUND.—(1) Section 251A(b)(1) of the Balanced Budget
and Emergency Deficit Control Act of 1985 is amended
by striking subparagraphs (B), (C), and (D) and its last
two sentences and inserting the following:
‘‘(B) 
For 
fiscal 
year 
1996,
$1,827,000,000.
‘‘(C) For fiscal year 1997, $3,082,000,000.
‘‘(D) 
For 
fiscal 
year 
1998,
$3,840,000,000.
‘‘(E) 
For 
fiscal 
year 
1999,
$4,415,000,000.
‘‘(F) 
For 
fiscal 
year 
2000,
$4,874,000,000.
‘‘The appropriate levels of new budget authority are
as follows: for fiscal year 1996, $3,357,000,000; for
fiscal year 1997, $3,915,000,000; for fiscal year
1998, 
$4,306,000,000; 
for 
fiscal 
year 
1999,
$5,089,000,000; 
and 
for 
fiscal 
year 
2000,
$5,089,000,000.’’.
(2) The last two sentences of section 310002 of the
Violent Crime Control and Law Enforcement Act of 1994
(42 U.S.C. 14212) are repealed.
SEC. 1003. GENERAL STATEMENT AND DEFINITIONS.
(a) GENERAL STATEMENT.—Section 250(b) of the
Balanced Budget and Emergency Deficit Control Act of
1985 is amended by striking the first sentence and insert-
ing the following: ‘‘This part provides for the enforcement
of deficit reduction through discretionary spending limits
and pay-as-you-go requirements for fiscal years 1995
through 2000.’’.
(b) DEFINITIONS.—Section 250(c) of the Balanced
Budget and Emergency Deficit Control Act of 1985 is
amended—
(1) by striking paragraph (4) and inserting the
following:
‘‘(4) The term ‘category’ means all discre-
tionary appropriations.’’;
(2) by striking paragraph (6) and inserting the
following:
‘‘(6) The term ‘budgetary resources’ means new
budget authority, unobligated balances, direct spend-
ing authority, and obligation limitations.’’;
(3) in paragraph (9), by striking ‘‘1992’’ and
inserting ‘‘1995’’;
(4) in paragraph (14), by striking ‘‘1995’’ and
inserting ‘‘2000’’; and
(5) by striking paragraph (17) and by redesig-
nating paragraphs (18) through (21) as paragraphs
(17) through (20), respectively.
SEC. 1004. ENFORCING DISCRETIONARY SPENDING LIMITS.
Section 251 of the Balanced Budget and Emergency
Deficit Control Act of 1985 is amended—
(1) in the side heading of subsection (a), by
striking ‘‘1991–1998’’ and inserting ‘‘1995–2000’’;
(2) in the first sentence of subsection (b)(1), by
striking ‘‘1992, 1993, 1994, 1995, 1996, 1997 or
1998’’ and inserting ‘‘1995, 1996, 1997, 1998,
1999, or 2000’’ and by striking ‘‘through 1998’’ and
inserting ‘‘through 2000’’;
(3) in subsection (b)(1), by striking subpara-
graphs (B) and (C) and by striking ‘‘the following:’’
and all that follows through ‘‘The adjustments’’ and
inserting ‘‘the following: the adjustments’’;
(4) in subsection (b)(2), by striking ‘‘1991,
1992, 1993, 1994, 1995, 1996, 1997, or 1998’’ and
inserting ‘‘1995, 1996, 1997, 1998, 1999, or 2000’’
and by striking ‘‘through 1998’’ and inserting
‘‘through 2000’’;
(5) by striking subparagraphs (A), (B), and (C)
of subsection (b)(2);
(6) in subsection (b)(2)(E), by striking clauses
(i), (ii), and (iii) and by striking ‘‘(iv) if, for fiscal
years 1994, 1995, 1996, 1997, and 1998’’ and in-
serting ‘‘If, for fiscal years 1995, 1996, 1997, 1998,
1999, and 2000’’; and
(7) in subsection (b)(2)(F), strike everything
after ‘‘the adjustment in outlays’’ and insert ‘‘for a
category for a fiscal year shall not exceed 0.5 per-
cent of the adjusted discretionary spending limit on
outlays for that fiscal year in fiscal year 1996, 1997,
1998, 1999, or 2000.’’.
SEC. 1005. ENFORCING PAY-AS-YOU-GO.
Section 252 of the Balanced Budget and Emergency
Deficit Control Act of 1985 is amended—
(1) in the side heading of subsection (a), by
striking ‘‘1992–1998’’ and inserting ‘‘1995–2000’’;
(2) in subsection (d), by striking ‘‘1998’’ each
place it appears and inserting ‘‘2000’’; and
(3) in subsection (e), by striking ‘‘1991 through
1998’’ and inserting ‘‘1995 through 2000’’ and by
striking ‘‘through 1995’’ and inserting ‘‘through
2000’’.
SEC. 1006. REPORTS AND ORDERS.
Section 254 of the Balanced Budget and Emergency
Deficit Control Act of 1985 is amended—
(1) in subsection (d)(2), by striking ‘‘1998’’
and inserting ‘‘2000’’; and
(2) in subsection (g), by striking ‘‘1998’’ each
place it appears and inserting ‘‘2000’’.
SEC. 1007. TECHNICAL CORRECTION.
Section 258 of the Balanced Budget and Emergency
Deficit Control Act of 1985, entitled ‘‘Modification of
Presidential Order’’, is repealed.
SEC. 1008. EFFECTIVE DATE.
(a) EXPIRATION.—Section 275(b) of the Balanced
Budget and Emergency Deficit Control Act of 1985 is
amended by striking ‘‘1995’’ and inserting ‘‘2000’’.
(b) EXPIRATION.—Section 14002(c)(3) of the Omni-
bus Budget Reconciliation Act of 1993 (2 U.S.C. 900
note; 2 U.S.C. 665 note) is repealed.
SEC. 1009. SPECIAL RULE ON INTERRELATIONSHIP BE-
TWEEN CHANGES IN DISCRETIONARY SPEND-
ING LIMITS AND PAY-AS-YOU-GO REQUIRE-
MENTS.
(a)(1) Section 252 of the Balanced Budget and
Emergency Deficit Control Act of 1985 is amended by
adding at the end the following new subsection:
‘‘(f) SPECIAL RULE
ON INTERRELATIONSHIP
BE-
TWEEN SECTIONS 251, 251A, and 252.—Whenever the
Committee on the Budget of the House of Representatives
or the Senate reports legislation that decreases the discre-
tionary spending limits for budget authority and outlays
for a fiscal year set forth in section 601(a)(2) of the Con-
gressional Budget Act of 1974 or in section 251A(b) of
the Balanced Budget and Emergency Deficit Control Act
of 1985, or both, then, for purposes of subsection (b), an
amount equal to that decrease in the discretionary spend-
ing limit for outlays shall be treated as direct spending
legislation decreasing the deficit for that fiscal year.’’.
(2) Section 310(a) of the Congressional Budget Act
of 1974 is amended by striking ‘‘or’’ at the end of para-
graph (3), by redesignating paragraph (4) as paragraph
(5) and by striking ‘‘and (3)’’ in such redesignated para-
graph (5) and inserting ‘‘(3), and (4)’’, and by inserting
after paragraph (3) the following new paragraph:
‘‘(4) carry out section 252(f) of the Balanced
Budget and Emergency Deficit Control Act of 1985;
or’’.
(b) For purposes of section 252(f) of the Balanced
Budget and Emergency Deficit Control Act of 1985 (as
amended by subsection (a)(1))—
(1) this Act shall be deemed to be legislation re-
ported by the Committee on the Budget of the
House of Representatives; and
(2)(A) reductions in the discretionary spending
limit for outlays set forth in section 601(a)(2) of the
Congressional Budget Act of 1974 for fiscal years
1999 and 2000 under section 1002 shall be meas-
ured as reductions from the discretionary spending
limit for outlays for fiscal year 1998 as in effect im-
mediately before the enactment of this Act; and
(B) reductions in the discretionary spending
limit for outlays set forth in section 251A(b) of the
Balanced Budget and Emergency Deficit Control
Act of 1985 for fiscal years 1999 and 2000 under
section 1002 shall be measured as reductions from
the level for outlays for fiscal year 1999 and 2000,
as the case may be, referred to in the last two sen-
tences of section 251A(b)(1) as in effect immediately
before the enactment of this Act.
(c) In the final sequestration report of the Director
of the Office of Management and Budget for fiscal year
1996—
(1) 
all 
adjustments 
required 
by 
section
251(b)(2) of the Balanced Budget and Emergency
Deficit Control Act of 1985 made after the seques-
tration preview report for fiscal year 1996 shall be
made to the discretionary spending limits set forth
in 601(a)(2) of the Congressional Budget Act of
1974 as amended by section 1002; and
(2) all statutory changes in the discretionary
spending limits set forth in 601(a)(2) of the Con-
gressional Budget Act of 1974 made after issuance
of the sequestration preview report for fiscal year
1996 of the Director of the Office of Management
and Budget and before the date of enactment of this
Act shall be made to those limits as amended by sec-
tion 1002.
TITLE 
II—EXTENSION 
OF 
AU-
THORITY OF FEDERAL COM-
MUNICATIONS 
COMMISSION
TO USE COMPETITIVE BID-
DING
SEC. 2001. EXTENSION OF AUTHORITY.
Section 309(j)(11) of the Communications Act of
1934 (47 U.S.C. 309(j)(11)) is amended by striking ‘‘Sep-
tember 30, 1998’’ and inserting ‘‘September 30, 2000’’.
TITLE 
III—PRIVATIZATION 
OF
THE UNITED STATES ENRICH-
MENT CORPORATION
SEC. 3001. SHORT TITLE AND REFERENCE.
(a) SHORT TITLE.—This title may be cited as the
‘‘USEC Privatization Act’’.
(b) REFERENCE.—Except as otherwise expressly pro-
vided, whenever in this title an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be consid-
ered to be made to a section or other provision of the
Atomic Energy Act of 1954 (42 U.S.C. 2011 et seq.).
SEC. 3002. PRODUCTION FACILITY.
Paragraph v. of section 11 (42 U.S.C. 2014 v.) is
amended by striking ‘‘or the construction and operation
of a uranium enrichment production facility using Atomic
Vapor Laser Isotope Separation technology’’.
SEC. 3003. DEFINITIONS.
Section 1201 (42 U.S.C. 2297) is amended—
(1) in paragraph (4), by inserting before the pe-
riod the following: ‘‘and any successor corporation
established through privatization of the Corpora-
tion’’;
(2) by redesignating paragraphs (10) through
(13) as paragraphs (14) through (17), respectively,
and by inserting after paragraph (9) the following
new paragraphs:
‘‘(10) The term ‘low-level radioactive waste’ has
the meaning given such term in section 102(9) of
the Low-Level Radioactive Waste Policy Amend-
ments Act of 1985 (42 U.S.C. 2021b(9)).
‘‘(11) The term ‘mixed waste’ has the meaning
given such term in section 1004(41) of the Solid
Waste Disposal Act (42 U.S.C. 6903(41)).
‘‘(12) The term ‘privatization’ means the trans-
fer of ownership of the Corporation to private inves-
tors pursuant to chapter 25.
‘‘(13) The term ‘privatization date’ means the
date on which 100 percent of ownership of the Cor-
poration has been transferred to private investors.’’;
(3) by inserting after paragraph (17) (as redes-
ignated) the following new paragraph:
‘‘(18) The term ‘transition date’ means July 1,
1993.’’; and
(4) by redesignating the unredesignated para-
graph (14) as paragraph (19).
SEC. 3004. EMPLOYEES OF THE CORPORATION.
(a) PARAGRAPH (2).—Paragraphs (1) and (2) of sec-
tion 1305(e) (42 U.S.C. 2297b–4(e)(1)(2)) are amended
to read as follows:
‘‘(1) IN GENERAL.—It is the purpose of this
subsection to ensure that the privatization of the
Corporation shall not result in any adverse effects
on the pension benefits of employees at facilities that
are operated, directly or under contract, in the per-
formance of the functions vested in the Corporation.
‘‘(2) APPLICABILITY OF EXISTING COLLECTIVE
BARGAINING
AGREEMENT.—The Corporation shall
abide by the terms of the collective bargaining agree-
ment in effect on the privatization date at each indi-
vidual facility.’’.
(b) PARAGRAPH
(4).—Paragraph (4) of section
1305(e) (42 U.S.C. 2297b–4(e)(4)) is amended—
(1) by striking ‘‘AND DETAILEES’’ in the head-
ing;
(2) by striking the first sentence;
(3) in the second sentence, by inserting ‘‘from
other Federal employment’’ after ‘‘transfer to the
Corporation’’; and
(4) by striking the last sentence.
SEC. 3005. MARKETING AND CONTRACTING AUTHORITY.
(a) MARKETING AUTHORITY.—Section 1401(a) (42
U.S.C. 2297c(a)) is amended effective on the privatization
date (as defined in section 1201(13) of the Atomic Energy
Act of 1954)—
(1) by amending the subsection heading to read
‘‘MARKETING AUTHORITY.—’’; and
(2) by striking the first sentence.
(b) TRANSFER OF CONTRACTS.—Section 1401(b) (42
U.S.C. 2297c(b)) is amended—
(1) in paragraph (2)(B), by adding at the end
the following: ‘‘The privatization of the Corporation
shall not affect the terms of, or the rights or obliga-
tions of the parties to, any such power purchase con-
tract.’’; and
(2) by adding at the end the following:
‘‘(3) EFFECT OF TRANSFER.—
‘‘(A) As a result of the transfer pursuant
to paragraph (1), all rights, privileges, and ben-
efits under such contracts, agreements, and
leases, including the right to amend, modify, ex-
tend, revise, or terminate any of such contracts,
agreements, or leases were irrevocably assigned
to the Corporation for its exclusive benefit.
‘‘(B) Notwithstanding the transfer pursu-
ant to paragraph (1), the United States shall
remain obligated to the parties to the contracts,
agreements, and leases transferred pursuant to
paragraph (1) for the performance of the obli-
gations of the United States thereunder during
the term thereof. The Corporation shall reim-
burse the United States for any amount paid by
the United States in respect of such obligations
arising after the privatization date to the extent
such amount is a legal and valid obligation of
the Corporation then due.
‘‘(C) After the privatization date, upon any
material amendment, modification, extension,
revision, replacement, or termination of any
contract, agreement, or lease transferred under
paragraph (1), the United States shall be re-
leased from further obligation under such con-
tract, agreement, or lease, except that such ac-
tion shall not release the United States from
obligations arising under such contract, agree-
ment, or lease prior to such time.’’.
(c) PRICING.—Section 1402 (42 U.S.C. 2297c–1) is
amended to read as follows:
‘‘SEC. 1402. PRICING.
‘‘The Corporation shall establish prices for its prod-
ucts, materials, and services provided to customers on a
basis that will allow it to attain the normal business objec-
tives of a profitmaking corporation.’’.
(d) LEASING OF GASEOUS DIFFUSION FACILITIES OF
DEPARTMENT.—Effective on the privatization date (as de-
fined in section 1201(13) of the Atomic Energy Act of
1954), section 1403 (42 U.S.C. 2297c–2) is amended by
adding at the end the following:
‘‘(h) LOW-LEVEL RADIOACTIVE WASTE AND MIXED
WASTE.—
‘‘(1) RESPONSIBILITY
OF
THE
DEPARTMENT;
COSTS.—
‘‘(A) With respect to low-level radioactive
waste and mixed waste generated by the Cor-
poration as a result of the operation of the fa-
cilities and related property leased by the Cor-
poration pursuant to subsection (a) or as a re-
sult of treatment of such wastes at a location
other than the facilities and related property
leased by the Corporation pursuant to sub-
section (a) the Department, at the request of
the Corporation, shall—
‘‘(i) accept for treatment or disposal
of all such wastes for which treatment or
disposal technologies and capacities exist,
whether within the Department or else-
where; and
‘‘(ii) accept for storage (or ultimately
treatment or disposal) all such wastes for
which treatment and disposal technologies
or capacities do not exist, pending develop-
ment of such technologies or availability of
such capacities for such wastes.
‘‘(B) All low-level wastes and mixed wastes
that the Department accepts for treatment,
storage, or disposal pursuant to subparagraph
(A) shall, for the purpose of any permits, li-
censes, authorizations, agreements, or orders
involving the Department and other Federal
agencies or State or local governments, be
deemed to be generated by the Department and
the Department shall handle such wastes in ac-
cordance with any such permits, licenses, au-
thorizations, agreements, or orders. The De-
partment shall obtain any additional permits, li-
censes, or authorizations necessary to handle
such wastes, shall amend any such agreements
or orders as necessary to handle such wastes,
and shall handle such wastes in accordance
therewith.
‘‘(C) The Corporation shall reimburse the
Department for the treatment, storage, or dis-
posal of low-level radioactive waste or mixed
waste pursuant to subparagraph (A) in an
amount equal to the Department’s costs but in
no event greater than an amount equal to that
which would be charged by commercial, State,
regional, or interstate compact entities for
treatment, storage, or disposal of such waste.
‘‘(2) AGREEMENTS
WITH
OTHER
PERSONS.—
The Corporation may also enter into agreements for
the treatment, storage, or disposal of low-level radio-
active waste and mixed waste generated by the Cor-
poration as a result of the operation of the facilities
and related property leased by the Corporation pur-
suant to subsection (a) with any person other than
the Department that is authorized by applicable laws
and regulations to treat, store, or dispose of such
wastes.’’.
(e) LIABILITIES.—
(1) Subsection (a) of section 1406 (42 U.S.C.
2297c–5(a)) is amended—
(A) by inserting ‘‘AND PRIVATIZATION’’
after ‘‘TRANSITION’’ in the heading; and
(B) by adding at the end the following:
‘‘As of the privatization date, all liabilities at-
tributable to the operation of the Corporation
from the transition date to the privatization
date shall be direct liabilities of the United
States.’’.
(2) Subsection (b) of section 1406 (42 U.S.C.
2297c–5(b)) is amended—
(A) by inserting ‘‘AND PRIVATIZATION’’
after ‘‘TRANSITION’’ in the heading; and
(B) by adding at the end the following:
‘‘As of the privatization date, any judgment en-
tered against the Corporation imposing liability
arising out of the operation of the Corporation
from the transition date to the privatization
date shall be considered a judgment against the
United States.’’.
(3) Subsection (d) of section 1406 (42 U.S.C.
2297c–5(d)) is amended—
(A) by inserting ‘‘AND PRIVATIZATION’’
after ‘‘TRANSITION’’ in the heading; and
(B) by striking ‘‘the transition date’’ and
inserting ‘‘the privatization date (or, in the
event the privatization date does not occur, the
transition date)’’.
(f) TRANSFER OF URANIUM.—Title II (42 U.S.C.
2297 et seq.) is amended by redesignating section 1408
as section 1409 and by inserting after section 1407 the
following:
‘‘SEC. 1408. TRANSFER OF URANIUM.
‘‘The Secretary may, before the privatization date,
transfer to the Corporation without charge raw uranium,
low-enriched uranium, and highly enriched uranium.’’.
SEC. 3006. PRIVATIZATION OF THE CORPORATION.
(a) ESTABLISHMENT OF PRIVATE CORPORATION.—
Chapter 25 (42 U.S.C. 2297d et seq.) is amended by add-
ing at the end the following new section:
‘‘SEC. 1503. ESTABLISHMENT OF PRIVATE CORPORATION.
‘‘(a) ESTABLISHMENT.—
‘‘(1) IN GENERAL.—In order to facilitate pri-
vatization, the Corporation may provide for the es-
tablishment of a private corporation organized under
the laws of any of the several States. Such corpora-
tion shall have among its purposes the following:
‘‘(A) To help maintain a reliable and eco-
nomical domestic source of uranium enrichment
services.
‘‘(B) To undertake any and all activities as
provided in its corporate charter.
‘‘(2) AUTHORITIES.—The corporation estab-
lished pursuant to paragraph (1) shall be authorized
to—
‘‘(A) enrich uranium, provide for uranium
to be enriched by others, or acquire enriched
uranium (including low-enriched uranium de-
rived from highly enriched uranium);
‘‘(B) conduct, or provide for conducting,
those research and development activities relat-
ed to uranium enrichment and related processes
and activities the corporation considers nec-
essary or advisable to maintain itself as a com-
mercial enterprise operating on a profitable and
efficient basis;
‘‘(C) enter into transactions regarding ura-
nium, enriched uranium, or depleted uranium
with—
‘‘(i) persons licensed under section 53,
63, 103, or 104 in accordance with the li-
censes held by those persons;
‘‘(ii) persons in accordance with, and
within the period of, an agreement for co-
operation arranged under section 123; or
‘‘(iii) persons otherwise authorized by
law to enter into such transactions;
‘‘(D) enter into contracts with persons li-
censed under section 53, 63, 103, or 104, for
as long as the corporation considers necessary
or desirable, to provide uranium or uranium en-
richment and related services;
‘‘(E) enter into contracts to provide ura-
nium or uranium enrichment and related serv-
ices in accordance with, and within the period
of, an agreement for cooperation arranged
under section 123 or as otherwise authorized by
law; and
‘‘(F) take any and all such other actions as
are permitted by the law of the jurisdiction of
incorporation of the corporation.
‘‘(3) TRANSFER OF ASSETS.—For purposes of
implementing the privatization, the Corporation may
transfer some or all of its assets and obligations to
the corporation established pursuant to this section,
including—
‘‘(A) all of the Corporation’s assets, includ-
ing all contracts, agreements, and leases, in-
cluding all uranium enrichment contracts and
power purchase contracts;
‘‘(B) all funds in accounts of the Corpora-
tion held by the Treasury or on deposit with
any bank or other financial institution;
‘‘(C) all of the Corporation’s rights, duties,
and obligations, accruing subsequent to the pri-
vatization date, under the power purchase con-
tracts covered by section 1401(b)(2)(B); and
‘‘(D) all of the Corporation’s rights, duties,
and obligations, accruing subsequent to the pri-
vatization date, under the lease agreement be-
tween the Department and the Corporation exe-
cuted by the Department and the Corporation
pursuant to section 1403.
‘‘(4) MERGER OR CONSOLIDATION.—For pur-
poses of implementing the privatization, the Cor-
poration may merge or consolidate with the corpora-
tion established pursuant to subsection (a)(1) if such
action is contemplated by the plan for privatization
approved by the President under section 1502(b).
The Board shall have exclusive authority to approve
such merger or consolidation and to take all further
actions necessary to consummate such merger or
consolidation, and no action by or in respect of
shareholders shall be required. The merger or con-
solidation shall be effected in accordance with, and
have the effects of a merger or consolidation under,
the laws of the jurisdiction of incorporation of the
surviving corporation, and all rights and benefits
provided under this title to the Corporation shall
apply to the surviving corporation as if it were the
Corporation.
‘‘(5) TAX TREATMENT OF PRIVATIZATION.—
‘‘(A) TRANSFER OF ASSETS OR MERGER.—
No income, gain, or loss shall be recognized by
any person by reason of the transfer of the Cor-
poration’s assets to, or the Corporation’s merg-
er with, the corporation established pursuant to
subsection (a)(1) in connection with the privat-
ization.
‘‘(B) CANCELLATION OF DEBT AND COM-
MON STOCK.—No income, gain, or loss shall be
recognized by any person by reason of any can-
cellation of any obligation or common stock of
the Corporation in connection with the privat-
ization.
‘‘(b) OSHA REQUIREMENTS.—For purposes of the
regulation of radiological and nonradiological hazards
under the Occupational Safety and Health Act of 1970,
the corporation established pursuant to subsection (a)(1)
shall be treated in the same manner as other employers
licensed by the Nuclear Regulatory Commission. Any
interagency agreement entered into between the Nuclear
Regulatory Commission and the Occupational Safety and
Health Administration governing the scope of their respec-
tive regulatory authorities shall apply to the corporation
as if the corporation were a Nuclear Regulatory Commis-
sion licensee.
‘‘(c) LEGAL STATUS OF PRIVATE CORPORATION.—
‘‘(1) NOT FEDERAL AGENCY.—The corporation
established pursuant to subsection (a)(1) shall not
be an agency, instrumentality, or establishment of
the United States Government and shall not be a
Government corporation or Government-controlled
corporation.
‘‘(2) 
NO
RECOURSE
AGAINST
UNITED
STATES.—Obligations of the corporation established
pursuant to subsection (a)(1) shall not be obliga-
tions of, or guaranteed as to principal or interest by,
the Corporation or the United States, and the obli-
gations shall so plainly state.
‘‘(3) NO CLAIMS COURT JURISDICTION.—No ac-
tion under section 1491 of title 28, United States
Code, shall be allowable against the United States
based on the actions of the corporation established
pursuant to subsection (a)(1).
‘‘(d) BOARD OF DIRECTOR’S ELECTION AFTER PUB-
LIC OFFERING.—In the event that the privatization is im-
plemented by means of a public offering, an election of
the members of the board of directors of the Corporation
by the shareholders shall be conducted before the end of
the 1-year period beginning the date shares are first of-
fered to the public pursuant to such public offering.
‘‘(e) ADEQUATE PROCEEDS.—The Secretary of En-
ergy shall not allow the privatization of the Corporation
unless before the sale date the Secretary determines that
the estimated sum of the gross proceeds from the sale of
the Corporation will be an adequate amount.’’.
(b) OWNERSHIP
LIMITATIONS.—Chapter 25 (as
amended by subsection (a)) is amended by adding at the
end the following new section:
‘‘SEC. 1504. OWNERSHIP LIMITATIONS.
‘‘(a) SECURITIES LIMITATION.—In the event that the
privatization is implemented by means of a public offering,
during a period of 3 years beginning on the privatization
date, no person, directly or indirectly, may acquire or hold
securities representing more than 10 percent of the total
votes of all outstanding voting securities of the Corpora-
tion.
‘‘(b) APPLICATION.—Subsection (a) shall not apply—
‘‘(1) to any employee stock ownership plan of
the Corporation,
‘‘(2) to underwriting syndicates holding shares
for resale, or
‘‘(3) in the case of shares beneficially held for
others, to commercial banks, broker-dealers, clearing
corporations, or other nominees.
‘‘(c) No director, officer, or employee of the Corpora-
tion may acquire any securities, or any right to acquire
securities, of the Corporation—
‘‘(1) in the public offering of securities of the
Corporation in the implementation of the privatiza-
tion,
‘‘(2) pursuant to any agreement, arrangement,
or understanding entered into before the privatiza-
tion date, or
‘‘(3) before the election of directors of the Cor-
poration under section 1503(d) on any terms more
favorable than those offered to the general public.’’.
(c) EXEMPTION FROM LIABILITY.—Chapter 25 (as
amended by subsection (b)) is amended by adding at the
end the following new section:
‘‘SEC. 1505. EXEMPTION FROM LIABILITY.
‘‘(a) IN GENERAL.—No director, officer, employee, or
agent of the Corporation shall be liable, for money dam-
ages or otherwise, to any party if, with respect to the sub-
ject matter of the action, suit, or proceeding, such person
was fulfilling a duty, in connection with any action taken
in connection with the privatization, which such person in
good faith reasonably believed to be required by law or
vested in such person.
‘‘(b) EXCEPTION.—The privatization shall be subject
to the Securities Act of 1933 and the Securities Exchange
Act of 1934. The exemption set forth in subsection (a)
shall not apply to claims arising under such Acts or under
the Constitution or laws of any State, territory, or posses-
sion of the United States relating to transactions in secu-
rities, which claims are in connection with a public offer-
ing implementing the privatization.’’.
(d) RESOLUTION OF CERTAIN ISSUES.—Chapter 25
(as amended by subsection (c)) is amended by adding at
the end the following new section:
‘‘SEC. 1506. RESOLUTION OF CERTAIN ISSUES.
‘‘(a) CORPORATION ACTIONS.—Notwithstanding any
provision of any agreement to which the Corporation is
a party, the Corporation shall not be considered to be in
breach, default, or violation of any such agreement be-
cause of any provision of this chapter or any action the
Corporation is required to take under this chapter.
‘‘(b) RIGHT TO SUE WITHDRAWN.—The United
States hereby withdraws any stated or implied consent for
the United States, or any agent or officer of the United
States, to be sued by any person for any legal, equitable,
or other relief with respect to any claim arising out of,
or resulting from, acts or omissions under this chapter.’’.
(e) APPLICATION OF PRIVATIZATION PROCEEDS.—
Chapter 25 (as amended by subsection (d)) is amended
by adding at the end the following new section:
‘‘SEC. 1507. APPLICATION OF PRIVATIZATION PROCEEDS.
‘‘The proceeds from the privatization shall be in-
cluded in the budget baseline required by the Balanced
Budget and Emergency Deficit Control Act of 1985 and
shall be counted as an offset to direct spending for pur-
poses of section 252 of such Act, notwithstanding section
257(e) of such Act.’’.
(f) CONFORMING AMENDMENT.—The table of con-
tents for chapter 25 is amended by inserting after the item
for section 1502 the following:
‘‘Sec. 1503. Establishment of Private Corporation.
‘‘Sec. 1504. Ownership Limitations.
‘‘Sec. 1505. Exemption from Liability.
‘‘Sec. 1506. Resolution of Certain Issues.
‘‘Sec. 1507. Application of Privatization Proceeds.’’.
(g) Section 193 (42 U.S.C. 2243) is amended by add-
ing at the end the following:
‘‘(f) LIMITATION.—If the privatization of the United
States Enrichment Corporation results in the Corporation
being—
‘‘(1) owned, controlled, or dominated by a for-
eign corporation or a foreign government, or
‘‘(2) otherwise inimical to the common defense
or security of the United States,
any license held by the Corporation under sections 53 and
63 shall be terminated.’’.
(h) PERIOD FOR CONGRESSIONAL REVIEW.—Section
1502(d) (42 U.S.C. 2297d–1(d)) is amended by striking
‘‘less than 60 days after notification of the Congress’’ and
inserting ‘‘less than 60 days after the date of the report
to Congress by the Comptroller General under subsection
(c)’’.
SEC. 3007. PERIODIC CERTIFICATION OF COMPLIANCE.
Section 1701(c)(2) (42 U.S.C. 2297f(c)(2)) is
amended by striking ‘‘ANNUAL APPLICATION FOR CER-
TIFICATE OF COMPLIANCE.—The Corporation shall apply
at least annually to the Nuclear Regulatory Commission
for a certificate of compliance under paragraph (1).’’ and
inserting ‘‘PERIODIC APPLICATION FOR CERTIFICATE OF
COMPLIANCE.—The Corporation shall apply to the Nu-
clear Regulatory Commission for a certificate of compli-
ance under paragraph (1) periodically, as determined by
the Nuclear Regulatory Commission, but not less than
every 5 years.’’.
SEC. 3008. LICENSING OF OTHER TECHNOLOGIES.
Subsection (a) of section 1702 (42 U.S.C. 2297f–
1(a)) is amended by striking ‘‘other than’’ and inserting
‘‘including’’.
SEC. 3009. CONFORMING AMENDMENTS.
(a) REPEALS IN ATOMIC ENERGY ACT OF 1954 AS
OF THE PRIVATIZATION DATE.—
(1) REPEALS.—As of the privatization date (as
defined in section 1201(13) of the Atomic Energy
Act of 1954), the following sections (as in effect on
such privatization date) of the Atomic Energy Act of
1954 are repealed:
(A) Section 1202.
(B) Sections 1301 through 1304.
(C) Sections 1306 through 1316.
(D) Sections 1404 and 1405.
(E) Section 1601.
(F) Sections 1603 through 1607.
(2) CONFORMING AMENDMENT.—The table of
contents of such Act is amended by repealing the
items referring to sections repealed by paragraph
(1).
(b) STATUTORY MODIFICATIONS.—As of such privat-
ization date, the following shall take effect:
(1) For purposes of title I of the Atomic En-
ergy Act of 1954, all references in such Act to the
‘‘United States Enrichment Corporation’’ shall be
deemed to be references to the corporation estab-
lished pursuant to section 1503 of the Atomic En-
ergy Act of 1954 (as added by section 6(a)).
(2) Section 1018(1) of the Energy Policy Act of
1992 (42 U.S.C. 2296b–7(1)) is amended by strik-
ing ‘‘the United States’’ and all that follows through
the period and inserting ‘‘the corporation referred to
in section 1201(4) of the Atomic Energy Act of
1954.’’.
(3) Section 9101(3) of title 31, United States
Code, is amended by striking subparagraph (N), as
added by section 902(b) of Public Law 102–486.
(c) REVISION OF SECTION 1305.—As of such privat-
ization date, section 1305 of the Atomic Energy Act of
1954 (42 U.S.C 2297b–4) is amended—
(1) by repealing subsections (a), (b), (c), and
(d), and
(2) in subsection (e)—
(A) by striking the subsection designation
and heading,
(B) by redesignating paragraphs (1) and
(2) (as added by section 4(a)) as subsections
(a) and (b) and by moving the margins 2-ems
to the left,
(C) by striking paragraph (3), and
(D) by redesignating paragraph (4) (as
amended by section 4(b)) as subsection (c), and
by moving the margins 2-ems to the left.
TITLE IV—RETIREMENT
SEC. 4001. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This title may be cited as the
‘‘Congressional and Federal Employee Retirement Equali-
zation Act’’.
(b) TABLE OF CONTENTS.—The table of contents for
this title is as follows:
Sec. 4001. Short title; table of contents.
Sec. 4002. Amendment of title 5, United States Code.
Sec. 4003. Individual contributions.
Sec. 4004. Average pay.
Sec. 4005. Accrual rates.
Sec. 4006. Elimination of Members’ option to elect not to participate in FERS.
SEC. 4002. AMENDMENT OF TITLE 5, UNITED STATES CODE.
Except as otherwise expressly provided, whenever 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 title 5, United States Code.
SEC. 4003. INDIVIDUAL CONTRIBUTIONS.
(a) CSRS.—
(1) IN
GENERAL.—The table under section
8334(c) is amended—
(A) in the matter relating to an employee
by striking
‘‘7 ........
After December 31,
1969.’’
and inserting the following:
‘‘7 ........
January 1, 1970, to De-
cember 31, 1995.
‘‘81⁄2 .....
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.’’;
(B) in the matter relating to a Member or
employee for Congressional employee service by
striking
‘‘71⁄2 .....
After December 31,
1969.’’
and inserting the following:
‘‘71⁄2 .....
January 1, 1970, to De-
cember 31, 1995.
‘‘81⁄2 .....
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.’’;
(C) in the matter relating to a Member for
Member service by striking
‘‘8 ........
After December 31,
1969.’’
and inserting the following:
‘‘8 ........
January 1, 1970, to De-
cember 31, 1995.
‘‘81⁄2 .....
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.’’;
(D) in the matter relating to a law enforce-
ment officer for law enforcement service and
firefighter for firefighter service by striking
‘‘71⁄2 .....
After December 31,
1974.’’
and inserting the following:
‘‘71⁄2 .....
January 1, 1975, to De-
cember 31, 1995.
‘‘9 ........
January 1, 1996, to De-
cember 31, 1996.
‘‘91⁄2 .....
January 1, 1997, to De-
cember 31, 1997.
‘‘10 ......
After December 31,
1997.’’;
(E) in the matter relating to a bankruptcy
judge by striking
‘‘8 ........
After December 31,
1983.’’
and inserting the following:
‘‘8 ........
January 1, 1984, to De-
cember 31, 1995.
‘‘81⁄2 .....
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.’’;
(F) in the matter relating to a judge of the
United States Court of Appeals for the Armed
Forces for service as a judge of that court by
striking
‘‘8 ........
On and after the date of
the enactment of the
Department of De-
fense Authorization
Act, 1984.’’
and inserting the following:
‘‘8 ........
The date of the enact-
ment of the Depart-
ment of Defense Au-
thorization Act, 1984,
to December 31,
1995.
‘‘81⁄2 .....
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.’’;
(G) in the matter relating to a United
States magistrate by striking
‘‘8 ........
After September 30,
1987.’’
and inserting the following:
‘‘8 ........
October 1, 1987, to De-
cember 31, 1995.
‘‘81⁄2 .....
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.’’; and
(H) in the matter relating to a Claims
Court judge by striking
‘‘8 ........
After September 30,
1988.’’
and inserting the following:
‘‘8 ........
October 1, 1988, to De-
cember 31, 1995.
‘‘81⁄2 .....
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.’’.
(2) DEDUCTIONS.—The first sentence of section
8334(a)(1) is amended to read as follows: ‘‘The em-
ploying agency shall deduct and withhold from the
basic pay of an employee, Member, Congressional
employee, law enforcement officer, firefighter, bank-
ruptcy judge, judge of the United States Court of
(ii) by adding at the end the follow-
ing:
‘‘(5) Effective with respect to any period of military
service after December 31, 1995, the percentage of basic
pay under section 204 of title 37 payable under paragraph
(1) shall be equal to the same percentage as would be ap-
plicable under section 8334(c) for that same period for
service as an ‘employee’, subject to paragraph (1)(B).’’.
(B) 
VOLUNTEER
SERVICE.—Section
8334(l) is amended—
(i) in paragraph (1) by striking the
period at the end and inserting ‘‘, subject
to paragraph (4).’’; and
(ii) by adding at the end the follow-
ing:
‘‘(4) Effective with respect to any period of service
after December 31, 1995, the percentage of the readjust-
ment allowance or stipend (as the case may be) payable
under paragraph (1) shall be equal to the same percentage
as would be applicable under section 8334(c) for that same
period for service as an ‘employee’.’’.
(b) FERS.—
(1) IN GENERAL.—Section 8422(a) is amended
by striking paragraph (2) and inserting the follow-
ing:
‘‘(2) The percentage to be deducted and withheld
from basic pay for any pay period shall be equal to—
‘‘(A) the applicable percentage under paragraph
(3), minus
‘‘(B) the percentage then in effect under section
3101(a) of the Internal Revenue Code of 1986 (re-
lating to rate of tax for old-age, survivors, and dis-
ability insurance).
‘‘(3) The applicable percentage under this paragraph,
for civilian service after December 31, 1995, shall be as
follows:
Percent-
age of
basic
pay
Service period
‘‘Employee .................................................
81⁄2 .......
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.
‘‘Congressional employee ..........................
81⁄2 .......
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.
‘‘Member ...................................................
81⁄2 .......
January 1, 1996, to De-
cember 31, 1996.
‘‘9 ........
January 1, 1997, to De-
cember 31, 1997.
‘‘91⁄2 .....
After December 31,
1997.
‘‘Law enforcement officer .........................
9 ..........
January 1, 1996, to De-
cember 31, 1996.
‘‘91⁄2 .....
January 1, 1997, to De-
cember 31, 1997.
‘‘10 ......
After December 31,
1997.
‘‘Firefighter ...............................................
9 ..........
January 1, 1996, to De-
cember 31, 1996.
Percent-
age of
basic
pay
Service period
‘‘91⁄2 .....
January 1, 1997, to De-
cember 31, 1997.
‘‘10 ......
After December 31,
1997.
‘‘Air traffic controller ...............................
9 ..........
January 1, 1996, to De-
cember 31, 1996.
‘‘91⁄2 .....
January 1, 1997, to De-
cember 31, 1997.
‘‘10 ......
After December 31,
1997.’’.
(2) OTHER SERVICE.—
(A) MILITARY SERVICE.—Section 8422(e)
is amended—
(i) in paragraph (1)(A) by inserting
‘‘and subject to paragraph (6),’’ after ‘‘Ex-
cept as provided in subparagraph (B),’’;
and
(ii) by adding at the end the follow-
ing:
‘‘(6) Effective with respect to any period of military
service after December 31, 1995, the percentage of basic
pay under section 204 of title 37 payable under paragraph
(1) shall be equal to the same percentage as would be ap-
plicable under section 8422(a)(3) for that same period for
service as an ‘employee’, subject to paragraph (1)(B).’’.
(B) 
VOLUNTEER
SERVICE.—Section
8422(f) is amended—
(i) in paragraph (1) by striking the
period at the end and inserting ‘‘, subject
to paragraph (4).’’; and
(ii) by adding at the end the follow-
ing:
‘‘(4) Effective with respect to any period of service
after December 31, 1995, the percentage of the readjust-
ment allowance or stipend (as the case may be) payable
under paragraph (1) shall be equal to the same percentage
as would be applicable under section 8422(a)(3) for that
same period for service as an employee.’’.
(c) EXEMPTION.—
(1) IN GENERAL.—Section 1005(d) of title 39,
United States Code, is amended by adding at the
end the following:
‘‘(3) For purposes of applying chapters 83 and 84
of title 5 with respect to any officer or employee of the
Postal Service, section 4003 of the Congressional and
Federal Employee Retirement Equalization Act shall be
treated as if it had not been enacted.’’.
(2) TECHNICAL AMENDMENT.—The second sen-
tence of section 1005(d)(1) of title 39, United States
Code, is amended by striking the period and insert-
ing ‘‘, subject to paragraph (3).’’.
(d) EFFECTIVE DATE.—This section shall take effect
on January 1, 1996.
SEC. 4004. AVERAGE PAY.
(a) CSRS.—
(1) IN GENERAL.—Subchapter III of chapter
83 is amended by inserting after section 8339 the
following:
‘‘§ 8339a. Special rules relating to average pay
‘‘(a) Notwithstanding section 8331(4), for purposes
of computing any annuity or survivor annuity under this
subchapter, eligibility for which is based on a separation
occurring after December 31, 1995, ‘average pay’ shall,
if the separation occurs—
‘‘(1) during calendar year 1996, have the mean-
ing given such term by subsection (b)(1); or
‘‘(2) after calendar year 1996, have the mean-
ing given such term by subsection (b)(2).
‘‘(b) For purposes of this section—
‘‘(1) the meaning given the term ‘average pay’
by this paragraph shall be the meaning such term
would have under section 8331(4) if ‘4 consecutive
years’ were substituted for ‘3 consecutive years’ and
‘4 years’ were substituted for ‘3 years’; and
‘‘(2) the meaning given the term ‘average pay’
by this paragraph shall be the meaning such term
would have under section 8331(4) if ‘5 consecutive
years’ were substituted for ‘3 consecutive years’ and
‘5 years’ were substituted for ‘3 years’.
‘‘(c) Nothing in this section shall be considered to
apply with respect to any annuity or survivor annuity eligi-
bility for which is based on a separation occurring before
January 1, 1996.
‘‘(d) The Office of Personnel Management shall pre-
scribe such regulations as may be necessary to carry out
this section.’’.
(2) TECHNICAL AMENDMENTS.—
(A) Section 8331(4) is amended by strik-
ing ‘‘effect;’’ and inserting ‘‘effect, subject to
section 8339a;’’.
(B) The table of sections for chapter 83 is
amended by inserting after the item relating to
section 8339 the following:
‘‘8339a. Special rules relating to average pay.’’.
(b) FERS.—
(1) IN GENERAL.—Chapter 84 is amended by
inserting after section 8461 the following:
‘‘§ 8461a. Special rules relating to average pay
‘‘(a) Notwithstanding section 8401(3), for purposes
of computing any annuity or survivor annuity under this
chapter, eligibility for which is based on a separation oc-
curring after December 31, 1995, ‘average pay’ shall, if
the separation occurs—
‘‘(1) during calendar year 1996, have the mean-
ing given such term by subsection (b)(1); or
‘‘(2) after calendar year 1996, have the mean-
ing given such term by subsection (b)(2).
‘‘(b) For purposes of this section—
‘‘(1) the meaning given the term ‘average pay’
by this paragraph shall be the meaning such term
would have under section 8401(3) if ‘4 consecutive
years’ were substituted for ‘3 consecutive years’ and
‘4 years’ were substituted for ‘3 years’; and
‘‘(2) the meaning given the term ‘average pay’
by this paragraph shall be the meaning such term
would have under section 8401(3) if ‘5 consecutive
years’ were substituted for ‘3 consecutive years’ and
‘5 years’ were substituted for ‘3 years’.
‘‘(c) Nothing in this section shall be considered to
apply with respect to any annuity or survivor annuity eligi-
bility for which is based on a separation occurring before
January 1, 1996.
‘‘(d) The Office of Personnel Management shall pre-
scribe such regulations as may be necessary to carry out
this section.’’.
(2) TECHNICAL AMENDMENTS.—
(A) Section 8401(3) is amended by strik-
ing ‘‘effect;’’ and inserting ‘‘effect, subject to
section 8461a;’’.
(B) The table of sections for chapter 84 is
amended by inserting after the item relating to
section 8461 the following:
‘‘8461a. Special rules relating to average pay.’’.
(c) REGULATIONS.—The Office of Personnel Man-
agement shall prescribe such regulations as may be nec-
essary to carry out the purposes of this section, including
regulations to provide that section 302(a)(6) of the Fed-
eral Employees’ Retirement System Act of 1986 (5 U.S.C.
8331 note) shall be carried out in a manner consistent
with the amendments made by this section.
SEC. 4005. ACCRUAL RATES.
(a) CSRS.—
(1) MEMBERS.—
(A) IN
GENERAL.—Section 8339(c) is
amended by striking all that follows ‘‘with re-
spect to—’’ and inserting the following:
‘‘(1) so much of his service as a Member as is
or was performed before January 1, 1996;
‘‘(2) so much of his military service as—
‘‘(A) is creditable for the purpose of this
subsection; and
‘‘(B) is or was performed before January
1, 1996; and
‘‘(3) so much of his Congressional employee
service as is or was performed before January 1,
1996;
by multiplying 21⁄2 percent of his average pay by the years
of that service.’’.
(B) 
TECHNICAL
AMENDMENT.—Section
8332(d) is amended by striking ‘‘section
8339(c)(1)’’ and inserting ‘‘section 8339(c)’’.
(2) 
CONGRESSIONAL
EMPLOYEES.—Section
8339(b) is amended—
(A) by inserting ‘‘so much of’’ after ‘‘is
computed with respect to’’; and
(B) by inserting ‘‘as is or was performed
before January 1, 1996,’’ before ‘‘by multiply-
ing’’.
(b) FERS.—
(1) MEMBERS.—Section 8415(b) is amended by
striking ‘‘shall’’ and inserting ‘‘shall, to the extent
that such service is or was performed before Janu-
ary 1, 1996,’’.
(2) 
CONGRESSIONAL
EMPLOYEES.—Section
8415(c) is amended by striking ‘‘shall’’ and inserting
‘‘shall, to the extent that such service is or was per-
formed before January 1, 1996,’’.
(3) PROVISIONS
RELATING
TO
THE
1.1
PER-
CENT ACCRUAL RATE.—Section 8415(g) is amend-
ed—
(A) in paragraph (1) by striking ‘‘an em-
ployee under paragraph (2),’’ and inserting ‘‘an
employee or Member under paragraph (2),’’;
(B) in paragraph (2) by inserting ‘‘or
Member’’ after ‘‘in the case of an employee’’
and by striking ‘‘Congressional employee,’’; and
(C) by adding at the end the following:
‘‘(3) Notwithstanding any other provision of this sub-
section—
‘‘(A) this subsection shall not apply in the case
of a Member or Congressional employee whose sepa-
ration (on which entitlement to annuity is based) oc-
curs before January 1, 1996; and
‘‘(B) in the case of a Member or Congressional
employee to whom this subsection applies, the 1.1
percent accrual rate shall apply only with respect to
any period of service other than a period with re-
spect to which the 1.7 percent accrual rate applies
under subsection (b) or (c).’’.
SEC. 4006. ELIMINATION OF MEMBERS’ OPTION TO ELECT
NOT TO PARTICIPATE IN FERS.
(a) IN GENERAL.—Section 8401(20) is amended by
striking ‘‘2106,’’ and all that follows through the semi-
colon and inserting ‘‘2106;’’.
(b) EFFECTIVE DATE; SAVINGS PROVISION.—
(1) EFFECTIVE
DATE.—Subsection (a) shall
take effect on January 1, 1996.
(2) 
SAVINGS
PROVISION.—The 
amendment
made by subsection (a) shall not affect any election
made before such subsection takes effect.
TITLE V—MEDICARE SAVINGS
EXTENSIONS
SEC. 5001. SHORT TITLE.
This title may be cited as the ‘‘Medicare Presidential
Budget Savings Extension Act of 1995’’.
Subtitle A—Provisions Relating to
Part A of the Medicare Program
SEC. 5101. MAINTAINING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES
FOR SKILLED NURSING FACILITY SERVICES.
(a) BASING UPDATES TO PER DIEM COST LIMITS ON
LIMITS FOR FISCAL YEAR 1993.—
(1) IN GENERAL.—The last sentence of section
1888(a) of the Social Security Act (42 U.S.C.
1395yy(a)) is amended by adding at the end the fol-
lowing: ‘‘(except that such updates may not take
into account any changes in the routine service costs
of skilled nursing facilities occurring during cost re-
porting periods which began during fiscal year 1994
or fiscal year 1995).’’.
(2) NO
EXCEPTIONS
PERMITTED
BASED
ON
AMENDMENT.—The Secretary of Health and Human
Services shall not consider the amendment made by
paragraph (1) in making any adjustments pursuant
to section 1888(c) of the Social Security Act.
(b) PAYMENTS
DETERMINED
ON
PROSPECTIVE
BASIS.—Any change made by the Secretary of Health and
Human Services in the amount of any prospective pay-
ment paid to a skilled nursing facility under section
1888(d) of the Social Security Act for cost reporting peri-
ods beginning on or after October 1, 1995, may not take
into account any changes in the costs of services occurring
during cost reporting periods which began during fiscal
year 1994 or fiscal year 1995.
Subtitle B—Provisions Relating to
Part B of the Medicare Program
SEC. 5201. SETTING THE PART B PREMIUM AT 25 PERCENT
OF 
PROGRAM 
EXPENDITURES 
PERMA-
NENTLY.
(a) IN GENERAL.—Section 1839(a)(3) of the Social
Security Act (42 U.S.C. 1395r(a)(3)) is amended by strik-
ing ‘‘The monthly premium’’ and all that follows through
‘‘November 1.’’ and inserting the following: ‘‘The monthly
premium shall be equal to 50 percent of the monthly actu-
arial rate for enrollees age 65 and over, as determined ac-
cording to paragraph (1), for that succeeding calendar
year.’’.
(b) CONFORMING AMENDMENTS.—Section 1839 of
such Act (42 U.S.C. 1395r) is amended—
(1) in subsection (a)(2), by striking ‘‘(b) and
(e)’’ and inserting ‘‘(b), (c), (e), and (f)’’;
(2) in the last sentence of subsection (a)(3), by
striking ‘‘and the derivation of the dollar amounts
specified in this paragraph’’; and
(3) in subsection (e)—
(A) by striking ‘‘(1)(A) Notwithstanding’’
and all that follows through ‘‘(B)’’,
(B) by striking paragraph (2), and
(C) by redesignating clauses (i) through
(v) as paragraphs (1) through (5).
Subtitle C—Provisions Relating to
Parts A and B of the Medicare
Program
SEC. 5301. PERMANENT EXTENSION OF CERTAIN SECOND-
ARY PAYER PROVISIONS.
(a) DATA MATCH.—
(1) Section 1862(b)(5)(C) of the Social Security
Act (42 U.S.C. 1395y(b)(5)(C)) is amended by strik-
ing 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) of
the Social Security Act (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) of such Act (42
U.S.C. 1395p(i)) and the second sentence of section
1839(b) of such Act (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)’’.
(c) PERIOD OF APPLICATION TO INDIVIDUALS WITH
END STAGE RENAL DISEASE.—Section 1862(b)(1)(C) of
the Social Security Act (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 ‘‘18-
month’’, and
(2) by striking the second sentence.
SEC. 5302. MAINTAINING SAVINGS RESULTING FROM TEM-
PORARY FREEZE ON PAYMENT INCREASES
FOR HOME HEALTH SERVICES.
(a) BASING UPDATES TO PER VISIT COST LIMITS ON
LIMITS
FOR
FISCAL
YEAR
1993.—Section
1861(v)(1)(L)(iii) of the Social Security Act (42 U.S.C.
1395x(v)(1)(L)(iii)) is amended by adding at the end the
following sentence: ‘‘In establishing limits under this sub-
paragraph, the Secretary may not take into account any
changes in the costs of the provision of services furnished
by home health agencies with respect to cost reporting pe-
riods which began on or after July 1, 1994, and before
July 1, 1996.’’.
(b) NO EXCEPTIONS PERMITTED BASED ON AMEND-
MENT.—The Secretary of Health and Human Services
shall not consider the amendment made by subsection (a)
in making any exemptions and exceptions pursuant to sec-
tion 1861(v)(1)(L)(ii) of the Social Security Act.
TITLE 
VI—CONTRACT 
WITH
AMERICA TAX RELIEF ACT OF
1995
SEC. 6001. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This title may be cited as the
‘‘Contract With America Tax Relief Act of 1995’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this title an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
TITLE V—CONTRACT WITH AMERICA TAX RELIEF ACT OF 1995
Sec. 6001. Short title; amendment of 1986 Code.
Subtitle A—American Dream Restoration
Sec. 6101. Family tax credit.
Sec. 6102. Credit to reduce marriage penalty.
Sec. 6103. Establishment of American Dream Savings Accounts.
Sec. 6104. Spousal IRA computed on basis of compensation of both spouses.
Subtitle B—Senior Citizens’ Equity
PART I—REPEAL OF INCREASE IN TAX ON SOCIAL SECURITY BENEFITS
Sec. 6201. Repeal of increase in tax on social security benefits.
PART II—TREATMENT OF LONG-TERM CARE INSURANCE AND SERVICES
Sec. 6211. Treatment of long-term care insurance.
Sec. 6212. Qualified long-term care services treated as medical care.
Sec. 6213. Certain exchanges of life insurance contracts for long-term care in-
surance contracts not taxable.
Sec. 6214. Exclusion from gross income for amounts withdrawn from certain
retirement plans for long-term care insurance.
PART III—TREATMENT OF ACCELERATED DEATH BENEFITS
Sec. 6221. Treatment of accelerated death benefits by recipient.
Sec. 6222. Tax treatment of companies issuing qualified accelerated death ben-
efit riders.
PART IV—INCLUSION IN GROSS INCOME OF EXCESS LONG-TERM CARE
BENEFITS
Sec. 6231. Inclusion in income of excess long-term care benefits.
Sec. 6232. Reporting requirements.
Subtitle C—Job Creation and Wage Enhancement
PART I—CAPITAL GAINS REFORM
SUBPART A—CAPITAL GAINS REDUCTION FOR TAXPAYERS OTHER THAN
CORPORATIONS
Sec. 6301. Capital gains deduction.
Sec. 6302. Indexing of certain assets acquired after December 31, 1994, for
purposes of determining gain.
SUBPART B—CAPITAL GAINS REDUCTION FOR CORPORATIONS
Sec. 6311. Reduction of alternative capital gain tax for corporations.
SUBPART C—CAPITAL LOSS DEDUCTION ALLOWED WITH RESPECT TO SALE
OR EXCHANGE OF PRINCIPAL RESIDENCE
Sec. 6316. Capital loss deduction allowed with respect to sale or exchange of
principal residence.
PART II—COST RECOVERY PROVISIONS
Sec. 6321. Depreciation adjustment for certain property placed in service after
December 31, 1994.
Sec. 6322. Treatment of abandonment of lessor improvements at termination of
lease.
PART III—ALTERNATIVE MINIMUM TAX RELIEF
Sec. 6331. Phaseout of application of alternative minimum tax to corporations.
PART IV—TAXPAYER DEBT BUY-DOWN
Sec. 6341. Designation of amounts for reduction of public debt.
Sec. 6342. Public debt reduction trust fund.
ther spouse claims the benefits of section 911, 931,
or 933 for such taxable year.
‘‘(c) MARRIAGE PENALTY REDUCTION CREDIT.—For
purposes of this section—
‘‘(1) IN GENERAL.—The marriage penalty re-
duction credit is an amount equal to the excess (if
any) of—
‘‘(A) the joint tax amount of the taxpayer,
over
‘‘(B) the sum of the unmarried tax
amounts for each spouse.
‘‘(2) UNMARRIED TAX AMOUNT.—For purposes
of paragraph (1), the unmarried tax amount, with
respect to an individual, is the amount of tax which
would be imposed by section 1(c) if such individual’s
taxable income were equal to the excess (if any) of—
‘‘(A) such individual’s qualified earned in-
come for the taxable year, over
‘‘(B) the sum of—
‘‘(i) an amount equal to the basic
standard 
deduction 
under 
section
63(c)(2)(C) for the taxable year, plus
‘‘(ii) the exemption amount (as de-
fined in section 151(d)) for such taxable
year.
‘‘(3) JOINT
TAX
AMOUNT.—For purposes of
paragraph (1), the joint tax amount is the amount
of tax which would be imposed by section 1(a) if the
taxpayer’s taxable income were equal to the excess
(if any) of—
‘‘(A) the taxpayer’s qualified earned in-
come for the taxable year, over
‘‘(B) the sum of—
‘‘(i) an amount equal to the basic
standard 
deduction 
under 
section
63(c)(2)(A) for the taxable year, plus
‘‘(ii) an amount equal to twice the ex-
emption amount (as so defined) for such
taxable year.
‘‘(d) QUALIFIED EARNED INCOME.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘qualified earned
income’ means an amount equal to the excess (if
any) of—
‘‘(A) the earned income for the taxable
year, over
‘‘(B) an amount equal to the sum of the
deductions described in paragraphs (1), (2),
(6), (7), and (12) of section 62(a) to the extent
that such deductions are properly allocable to
or chargeable against earned income for such
taxable year.
The amount of qualified earned income shall be de-
termined without regard to any community property
laws.
‘‘(2) EARNED INCOME.—For purposes of para-
graph (1)—
‘‘(A) IN GENERAL.—The term ‘earned in-
come’ means income which is earned income
within the meaning of section 401(c)(2)(C) or
911(d)(2) (determined without regard to the
phrase ‘not in excess of 30 percent of his share
of the net profits of such trade or business’ in
subparagraph (B) thereof).
‘‘(B) EXCEPTION.—Such term shall not in-
clude any amount—
‘‘(i) not includible in gross income,
‘‘(ii) received as a pension or annuity,
‘‘(iii) paid or distributed out of an in-
dividual retirement plan (within the mean-
ing of section 7701(a)(37)),
‘‘(iv) received as deferred compensa-
tion, or
‘‘(v) received for services performed
by an individual in the employ of his
spouse (within the meaning of section
3121(b)(3)(B)).
‘‘(e) AMOUNT
OF CREDIT TO BE DETERMINED
UNDER TABLES.—
‘‘(1) IN GENERAL.—The amount of the credit
allowed by this section shall be determined under ta-
bles prescribed by the Secretary.
‘‘(2) REQUIREMENTS FOR TABLES.—The tables
prescribed under paragraph (1) shall reflect the pro-
visions of subsection (c) and shall round to the near-
est $25 any amount of credit which is less than the
maximum credit under subsection (b)(1).’’
(b) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1
is amended by inserting after the item relating to section
23 the following new item:
‘‘Sec. 24. Credit to reduce marriage penalty.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 6103. ESTABLISHMENT OF AMERICAN DREAM SAVINGS
ACCOUNTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to pension, profit-sharing, stock
bonus plans, etc.) is amended by inserting after section
408 the following new section:
‘‘SEC. 408A. AMERICAN DREAM SAVINGS ACCOUNTS.
‘‘(a) GENERAL RULE.—Except as provided in this
section, an American Dream Savings Account shall be
treated for purposes of this title in the same manner as
an individual retirement plan.
‘‘(b) AMERICAN DREAM SAVINGS ACCOUNT.—For
purposes of this title, the term ‘American Dream Savings
Account’ or ‘ADS account’ means an individual retirement
plan which is designated at the time of the establishment
of the plan as an American Dream Savings Account. Such
designation shall be made in such manner as the Secretary
may prescribe.
‘‘(c) CONTRIBUTION RULES.—
‘‘(1) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a contribution
to an ADS account.
‘‘(2) CONTRIBUTION LIMIT.—
‘‘(A) 
IN
GENERAL.—The 
aggregate
amount of contributions (other than rollover
contributions) for any taxable year to all ADS
accounts maintained for the benefit of an indi-
vidual shall not exceed the lesser of—
‘‘(i) $2,000, or
‘‘(ii) an amount equal to the com-
pensation includible in the individual’s
gross income for such taxable year.
‘‘(B) $4,000 LIMITATION FOR CERTAIN AD-
DITIONAL MARRIED INDIVIDUALS.—
‘‘(i) IN GENERAL.—In the case of an
individual to whom this subparagraph ap-
plies for the taxable year, the limitation of
subparagraph (A)(ii) shall be equal to the
sum of—
‘‘(I) the compensation includible
in such individual’s gross income for
the taxable year, plus
‘‘(II) the compensation includible
in the gross income of such individ-
ual’s spouse for the taxable year re-
duced by the amount of the limitation
under subparagraph (A) applicable to
such spouse for such taxable year.
‘‘(ii) INDIVIDUALS TO WHOM CLAUSE
(i) APPLIES.—Clause (i) shall apply to any
individual if—
‘‘(I) such individual files a joint
return for the taxable year, and
‘‘(II) the amount of compensa-
tion (if any) includible in such individ-
ual’s gross income for the taxable year
is less than the compensation includ-
ible in the gross income of such indi-
vidual’s spouse for the taxable year.
‘‘(C) ADJUSTMENT FOR INFLATION.—
‘‘(i) IN GENERAL.—In the case of a
taxable year beginning in a calendar year
after 1996, the $2,000 amount contained
in subparagraph (A) shall be increased by
an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjust-
ment under section 1(f)(3) for the cal-
endar year in which the taxable year
begins, determined by substituting
‘calendar year 1995’ for ‘calendar
year 1992’ in subparagraph (B) there-
of.
‘‘(ii) ROUNDING.—If any amount as
adjusted under clause (i) is not a multiple
of $50, such amount shall be rounded to
the nearest multiple of $50.
‘‘(D) TAX ON EXCESS CONTRIBUTIONS.—
Section 4973 shall be applied separately with
respect to individual retirement plans which are
ADS accounts and individual retirement plans
which are not ADS accounts; except that, for
purposes of applying such section with respect
to individual retirement plans which are ADS
accounts, excess contributions shall be consid-
ered to be any amounts in excess of the limita-
tion under subsection (c)(2)(A).
‘‘(3) CONTRIBUTIONS PERMITTED AFTER AGE
701⁄2.—Contributions to an ADS account may be
made even after the individual for whom the account
is maintained has attained age 701⁄2.
‘‘(4) MANDATORY
DISTRIBUTION
RULES
NOT
TO APPLY, ETC.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), subsections (a)(6) and (b)(3)
of section 408 (relating to required distribu-
tions) and section 4974 (relating to excise tax
on certain accumulations in qualified retirement
plans) shall not apply to any ADS account.
‘‘(B) POST-DEATH DISTRIBUTIONS.—Rules
similar to the rules of section 401(a)(9) (other
than subparagraph (A) thereof) shall apply for
purposes of this section.
‘‘(5) LIMITATIONS
ON
ROLLOVER
CONTRIBU-
TIONS.—No rollover contribution may be made to an
ADS account unless—
‘‘(A) such contribution is from another
ADS account, or
‘‘(B) such contribution is from an individ-
ual retirement plan (other than an ADS ac-
count) and is made before January 1, 1998.
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) GENERAL RULES.—
‘‘(A) EXCLUSION FROM GROSS INCOME.—
No portion of a qualified distribution from an
ADS account shall be includible in gross in-
come.
‘‘(B) EXCEPTION FROM PENALTY TAX.—
Section 72(t) shall not apply to—
‘‘(i) any qualified distribution from an
ADS account, and
‘‘(ii) any qualified special purpose dis-
tribution (whether or not a qualified dis-
tribution) from an ADS account.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ means any payment or distribu-
tion—
‘‘(i) made on or after the date on
which the individual attains age 591⁄2,
‘‘(ii) made to a beneficiary (or to the
estate of the individual) on or after the
death of the individual,
‘‘(iii) attributable to the individual’s
being disabled (within the meaning of sec-
tion 72(m)(7)), or
‘‘(iv) which is a qualified special pur-
pose distribution.
‘‘(B) DISTRIBUTIONS WITHIN 5 YEARS.—
No payment or distribution shall be treated as
a qualified distribution if—
‘‘(i) it is made within the 5-taxable
year period beginning with the 1st taxable
year for which the individual made a con-
tribution to an ADS account (or such indi-
vidual’s spouse made a contribution to an
ADS account) established for such individ-
ual, or
‘‘(ii) in the case of a payment or dis-
tribution properly allocable to a rollover
contribution (or income allocable thereto),
it is made within 5 years after the date on
which such rollover contribution was made,
as determined under regulations prescribed
by the Secretary.
Clause (ii) shall not apply to a rollover con-
tribution from an ADS account.
‘‘(3) INCOME INCLUSION FOR ROLLOVERS FROM
NON-ADS ACCOUNTS.—In the case of any amount
paid or distributed out of an individual retirement
plan (other than an ADS account) which is paid into
an ADS account (established for the benefit of the
payee or distributee, as the case may be) before the
close of the 60th day after the day on which the
payment or distribution is received—
‘‘(A) sections 72(t) and 408(d)(3) shall not
apply, and
‘‘(B) any amount required to be included
in gross income by reason of this paragraph
shall be so included ratably over the 4-taxable
year period beginning with the taxable year in
which the payment or distribution is made.
‘‘(e) QUALIFIED
SPECIAL
PURPOSE
DISTRIBU-
TION.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified special purpose distribution’
means any payments or distributions from an ADS
account to the individual for whose benefit such ac-
count is established—
‘‘(A) if such payments or distributions are
qualified first-time homebuyer distributions, or
‘‘(B) to the extent such payments or dis-
tributions do not exceed—
‘‘(i) the qualified higher education ex-
penses of the taxpayer for the taxable year
in which received, and
‘‘(ii) the qualified medical expenses of
the taxpayer for the taxable year in which
received.
‘‘(2) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTIONS.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘qualified first-time home-
buyer distribution’ means any payment or dis-
tribution received by an individual to the extent
such payment or distribution is used by the in-
dividual before the close of the 60th day after
the day on which such payment or distribution
is received to pay qualified acquisition costs
with respect to a principal residence for such
individual as a first-time homebuyer.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this para-
graph—
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if such individual (and, if married,
such individual’s spouse) had no present
ownership interest in a principal residence
during the 3-year period ending on the
date of acquisition of the principal resi-
dence to which this paragraph applies.
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which a binding contract
to construct or reconstruct such a
principal residence is entered into.
‘‘(D) SPECIAL RULE WHERE DELAY IN AC-
QUISITION.—If any payment or distribution out
of an ADS account fails to meet the require-
ments of subparagraph (A) solely by reason of
a delay or cancellation of the purchase, con-
struction, or reconstruction of the residence, the
amount of the payment or distribution may be
contributed to an ADS account as provided in
subsection (d)(3)(A)(i) of section 408 (deter-
mined by substituting ‘120th day’ for ‘60th
day’ in such subsection), except that—
‘‘(i) subsection (d)(3)(B) of such sec-
tion shall not be applied to such contribu-
tion, and
‘‘(ii) such amount shall not be taken
into account in determining whether sub-
section (d)(3)(A)(i) of such section applies
to any other amount.
‘‘(3) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means tuition, fees,
books, supplies, and equipment required for the
enrollment or attendance of—
‘‘(i) the taxpayer,
‘‘(ii) the taxpayer’s spouse, or
‘‘(iii) the taxpayer’s child (as defined
in section 151(c)(3)) or grandchild,
at an eligible educational institution (as defined
in section 135(c)(3)).
‘‘(B) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.
‘‘(4) QUALIFIED MEDICAL EXPENSES.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘qualified medical ex-
penses’ means any amounts paid during the
taxable year, not compensated for by insurance
or otherwise, for medical care (as defined in
section 213(d)) of the taxpayer, his spouse, or
a dependent (as defined in section 152).
‘‘(B) LONG-TERM CARE INSURANCE PRE-
MIUMS TREATED AS MEDICAL EXPENSES.—For
purposes 
of 
subparagraph 
(A), 
section
213(d)(1)(C) shall not apply but the term
‘qualified medical expenses’ shall include pre-
miums for long-term care insurance (as defined
in section 7702B(b)) for coverage of the tax-
payer or his spouse.
‘‘(f) OTHER DEFINITIONS.—For purposes of this sec-
tion—
‘‘(1) ROLLOVER
CONTRIBUTIONS.—The term
‘rollover contributions’ means contributions de-
scribed in sections 402(c), 403(a)(4), 403(b)(8), or
408(d)(3).
‘‘(2) COMPENSATION.—The term ‘compensa-
tion’ has the meaning given such term by section
219(f).’’
(b) TERMINATION OF NONDEDUCTIBLE IRA CON-
TRIBUTIONS.—
(1) Section 408(o) is amended by adding at the
end the following new paragraph:
‘‘(5) TERMINATION.—This subsection shall not
apply to any designated nondeductible contribution
for any taxable year beginning after December 31,
1995.’’
(2) Section 219(f) of is amended by striking
paragraph (7).
(c) EXCESS DISTRIBUTIONS TAX NOT TO APPLY.—
Subparagraph (B) of section 4980A(e)(1) is amended by
inserting ‘‘other than an ADS account (as defined in sec-
tion 408A(b))’’ after ‘‘retirement plan’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart A of part I of subchapter D of chapter 1 is
amended by inserting after the item relating to section
408 the following new item:
‘‘Sec. 408A. American Dream Savings Accounts.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 6104. SPOUSAL IRA COMPUTED ON BASIS OF COM-
PENSATION OF BOTH SPOUSES.
(a) IN GENERAL.—Subsection (c) of section 219 (re-
lating to special rules for certain married individuals) is
amended to read as follows:
‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDI-
VIDUALS.—
‘‘(1) IN GENERAL.—In the case of an individual
to whom this paragraph applies for the taxable year,
the limitation of subsection (b)(1) shall be equal to
the lesser of—
‘‘(A) $2,000, or
‘‘(B) the sum of—
‘‘(i) the compensation includible in
such individual’s gross income for the tax-
able year, plus
‘‘(ii) the compensation includible in
the gross income of such individual’s
spouse for the taxable year reduced by the
amount allowable as a deduction under
subsection (a) to such spouse for such tax-
able year.
‘‘(2) INDIVIDUALS
TO
WHOM
PARAGRAPH
(1)
APPLIES.—Paragraph (1) shall apply to any individ-
ual if—
‘‘(A) such individual files a joint return for
the taxable year, and
‘‘(B) the amount of compensation (if any)
includible in such individual’s gross income for
the taxable year is less than the compensation
includible in the gross income of such individ-
ual’s spouse for the taxable year.’’
(b) TECHNICAL AMENDMENT.—Paragraph (2) of
section 219(f) (relating to other definitions and special
rules) is amended by striking ‘‘subsections (b) and (c)’’
and inserting ‘‘subsection (b)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
Subtitle B—Senior Citizens’ Equity
PART I—REPEAL OF INCREASE IN TAX ON
SOCIAL SECURITY BENEFITS
SEC. 6201. REPEAL OF INCREASE IN TAX ON SOCIAL SECU-
RITY BENEFITS.
(a) IN GENERAL.—Subsection (a) of section 86 (re-
lating to social security and tier 1 railroad retirement ben-
efits) is amended by adding at the end the following new
paragraph:
‘‘(3) PHASEOUT OF ADDITIONAL AMOUNT.—In
the case of any taxable year beginning in a calendar
year after 1995 and before 2000, paragraph (2)
shall be applied by substituting the percentage deter-
mined under the following table for ‘85 percent’ each
place it appears:
‘‘In the case of a taxable year
beginning in calendar year:
The percentage is:
1996 .......................................................................
75 percent
1997 .......................................................................
65 percent
1998 .......................................................................
60 percent
1999 .......................................................................
55 percent.’’
(b) TERMINATION OF ADDITIONAL AMOUNT.—Para-
graph (2) of section 86(a) is amended by adding at the
end the following new flush sentence:
‘‘This paragraph shall not apply to any taxable year
beginning after December 31, 1999.’’
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (3) of section 871(a) is amend-
ed—
(A) by striking ‘‘85 percent’’ in subpara-
graph (A) and inserting ‘‘50 percent’’, and
(B) by inserting before the last sentence
the following new flush sentence:
‘‘In the case of any taxable year beginning in a cal-
endar year after 1995 and before 2000, subpara-
graph (A) shall be applied by substituting the per-
centage determined for such calendar year under
section 86(a)(3) for ‘50 percent’.’’
(2)(A) Subparagraph (A) of section 121(e)(1)
of the Social Security Amendments of 1983 (Public
Law 98–21) is amended—
(i) by striking ‘‘(A) There’’ and inserting
‘‘There’’;
(ii) by striking ‘‘(i)’’ immediately following
‘‘amounts equivalent to’’; and
(iii) by striking ‘‘, less (ii)’’ and all that
follows and inserting a period.
(B) Paragraph (1) of section 121(e) of such Act
is amended by striking subparagraph (B).
(C) Paragraph (3) of section 121(e) of such Act
is amended by striking subparagraph (B) and by re-
designating subparagraph (C) as subparagraph (B).
(D) Paragraph (2) of section 121(e) of such
Act is amended in the first sentence by striking
‘‘paragraph (1)(A)’’ and inserting ‘‘paragraph (1)’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 1995.
(2) SUBSECTION
(c)(2).—The amendments
made by subsection (c)(2) shall apply to tax liabil-
ities for taxable years beginning after December 31,
1995.
PART II—TREATMENT OF LONG-TERM CARE
INSURANCE AND SERVICES
SEC. 6211. TREATMENT OF LONG-TERM CARE INSURANCE.
(a) GENERAL RULE.—Chapter 79 (relating to defini-
tions) is amended by inserting after section 7702A the fol-
lowing new section:
‘‘SEC. 7702B. TREATMENT OF LONG-TERM CARE INSUR-
ANCE.
‘‘(a) IN GENERAL.—For purposes of this title—
‘‘(1) a long-term care insurance contract shall
be treated as an accident and health insurance con-
tract,
‘‘(2) amounts (other than policyholder divi-
dends, as defined in section 808, or premium re-
funds) received under a long-term care insurance
contract shall be treated as amounts received for
personal injuries and sickness and shall be treated
as reimbursement for expenses actually incurred for
medical care (as defined in section 213(d)),
‘‘(3) any plan of an employer providing cov-
erage under a long-term care insurance contract
shall be treated as an accident and health plan with
respect to such coverage,
‘‘(4) except as provided in subsection (d)(3),
amounts paid for a long-term care insurance con-
tract providing the benefits described in subsection
(b)(2)(A) shall be treated as payments made for in-
surance for purposes of section 213(d)(1)(D), and
‘‘(5) a long-term care insurance contract shall
be treated as a guaranteed renewable contract sub-
ject to the rules of section 816(e).
‘‘(b) LONG-TERM CARE INSURANCE CONTRACT.—
For purposes of this title—
‘‘(1) IN GENERAL.—The term ‘long-term care
insurance contract’ means any insurance contract
if—
‘‘(A) the only insurance protection pro-
vided under such contract is coverage of quali-
fied long-term care services,
‘‘(B) such contract does not pay or reim-
burse expenses incurred for services or items to
the extent that such expenses are reimbursable
under title XVIII of the Social Security Act or
would be so reimbursable but for the applica-
tion of a deductible or coinsurance amount,
‘‘(C) such contract is guaranteed renew-
able,
‘‘(D) such contract does not provide for a
cash surrender value or other money that can
be—
‘‘(i) paid, assigned, or pledged as col-
lateral for a loan, or
‘‘(ii) borrowed,
other than as provided in subparagraph (E) or
paragraph (2)(C), and
‘‘(E) all refunds of premiums, and all pol-
icyholder dividends or similar amounts, under
such contract are to be applied as a reduction
in future premiums or to increase future bene-
fits.
‘‘(2) SPECIAL RULES.—
‘‘(A) PER
DIEM, ETC. PAYMENTS
PER-
MITTED.—A contract shall not fail to be de-
scribed in subparagraph (A) or (B) of para-
graph (1) by reason of payments being made on
a per diem or other periodic basis without re-
gard to the expenses incurred during the period
to which the payments relate.
‘‘(B) SPECIAL RULES RELATING TO MEDI-
CARE.—
‘‘(i) Paragraph (1)(B) shall not apply
to expenses which are reimbursable under
title XVIII of the Social Security Act only
as a secondary payor.
‘‘(ii) No provision of law shall be con-
strued or applied so as to prohibit the of-
fering of a long-term care insurance con-
tract on the basis that the contract coordi-
nates its benefits with those provided
under such title.
‘‘(C) REFUNDS OF PREMIUMS.—Paragraph
(1)(E) shall not apply to any refund on the
death of the insured, or on a complete surren-
‘‘(vi) Continence.
Nothing in this section shall be construed to re-
quire a contract to take into account all of the
preceding activities of daily living.
‘‘(3) MAINTENANCE OR PERSONAL CARE SERV-
ICES.—The term ‘maintenance or personal care serv-
ices’ means any care the primary purpose of which
is the provision of needed assistance with any of the
disabilities as a result of which the individual is a
chronically ill individual (including the protection
from threats to health and safety due to severe cog-
nitive impairment).
‘‘(4) 
LICENSED
HEALTH
CARE
PRACTI-
TIONER.—The term ‘licensed health care practi-
tioner’ means any physician (as defined in section
1861(r)(1) of the Social Security Act) and any reg-
istered professional nurse, licensed social worker, or
other individual who meets such requirements as
may be prescribed by the Secretary.
‘‘(d) TREATMENT OF COVERAGE PROVIDED AS PART
OF A LIFE INSURANCE CONTRACT.—Except as otherwise
provided in regulations prescribed by the Secretary, in the
case of any long-term care insurance coverage (whether
or not qualified) provided by a rider on a life insurance
contract—
‘‘(1) IN GENERAL.—This section shall apply as
if the portion of the contract providing such cov-
erage is a separate contract.
‘‘(2) 
APPLICATION
OF
7702.—Section
7702(c)(2) (relating to the guideline premium limi-
tation) shall be applied by increasing the guideline
premium limitation with respect to a life insurance
contract, as of any date—
‘‘(A) by the sum of any charges (but not
premium payments) against the life insurance
contract’s cash surrender value (within the
meaning of section 7702(f)(2)(A)) for such cov-
erage made to that date under the contract, less
‘‘(B) any such charges the imposition of
which reduces the premiums paid for the con-
tract 
(within 
the 
meaning 
of 
section
7702(f)(1)).
‘‘(3) APPLICATION OF SECTION 213.—No deduc-
tion shall be allowed under section 213(a) for
charges against the life insurance contract’s cash
surrender value described in paragraph (2), unless
such charges are includible in income as a result of
the application of section 72(e)(10) and the rider is
a long-term care insurance contract under sub-
section (b).
‘‘(4) PORTION DEFINED.—For purposes of this
subsection, the term ‘portion’ means only the terms
and benefits under a life insurance contract that are
in addition to the terms and benefits under the con-
tract without regard to the coverage under a long-
term care insurance contract.’’
(b) RESERVE
METHOD.—Clause (iii) of section
807(d)(3)(A) is amended by inserting ‘‘(other than a long-
term care insurance contract, as defined in section
7702B(b))’’ after ‘‘insurance contract’’.
(c) LONG-TERM CARE INSURANCE NOT PERMITTED
UNDER CAFETERIA PLANS OR FLEXIBLE SPENDING AR-
RANGEMENTS.—
(1) CAFETERIA
PLANS.—Section 125(f) is
amended by adding at the end the following new
sentence: ‘‘Such term shall not include any long-
term care insurance contract (as defined in section
7702B(b)).’’
(2) FLEXIBLE
SPENDING
ARRANGEMENTS.—
The text of section 106 (relating to contributions by
employer to accident and health plans) is amended
to read as follows:
‘‘(a) GENERAL RULE.—Except as provided in sub-
section (b), gross income of an employee does not include
employer-provided coverage under an accident or health
plan.
‘‘(b) INCLUSION OF LONG-TERM CARE BENEFITS
PROVIDED THROUGH FLEXIBLE SPENDING ARRANGE-
MENTS.—
‘‘(1) IN GENERAL.—Effective on and after Jan-
uary 1, 1996, gross income of an employee shall in-
clude employer-provided coverage for qualified long-
term care services (as defined in section 7702B(c))
to the extent that such coverage is provided through
a flexible spending or similar arrangement.
‘‘(2) FLEXIBLE
SPENDING
ARRANGEMENT.—
For purposes of this subsection, a flexible spending
arrangement is a benefit program which provides
employees with coverage under which—
‘‘(A) specified incurred expenses may be
reimbursed (subject to reimbursement maxi-
mums and other reasonable conditions), and
‘‘(B) the maximum amount of reimburse-
ment which is reasonably available to a partici-
pant for such coverage is less than 500 percent
of the value of such coverage.
In the case of an insured plan, the maximum
amount reasonably available shall be determined on
the basis of the underlying coverage.’’
(d) CONTINUATION COVERAGE EXCISE TAX NOT TO
APPLY.—Subsection (f) of section 4980B is amended by
adding at the end the following new paragraph:
‘‘(9) CONTINUATION OF LONG-TERM CARE COV-
ERAGE NOT REQUIRED.—A group health plan shall
not be treated as failing to meet the requirements of
this subsection solely by reason of failing to provide
coverage under any long-term care insurance con-
tract (as defined in section 7702B(b)).’’
(e) AMOUNTS PAID TO RELATIVES TREATED AS NOT
PAID FOR MEDICAL CARE.—Section 213(d) is amended
by adding at the end the following new paragraph:
‘‘(10) CERTAIN
PAYMENTS
TO
RELATIVES
TREATED AS NOT PAID FOR MEDICAL CARE.—An
amount paid for a qualified long-term care service
(as defined in section 7702B(c)) provided to an indi-
vidual shall be treated as not paid for medical care
if such service is provided—
‘‘(A) by a relative (directly or through a
partnership, corporation, or other entity) unless
the relative is a licensed professional with re-
spect to such services, or
‘‘(B) by a corporation or partnership which
is related (within the meaning of section 267(b)
or 707(b)) to the individual.
For purposes of this paragraph, the term ‘relative’
means an individual bearing a relationship to the in-
dividual which is described in any of paragraphs (1)
through (8) of section 152(a). This paragraph shall
not apply for purposes of section 105(b) with respect
to reimbursements through insurance.’’
(f) CLERICAL AMENDMENT.—The table of sections
for chapter 79 is amended by inserting after the item re-
lating to section 7702A the following new item:
‘‘Sec. 7702B. Treatment of long-term care insurance.’’.
(g) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to contracts issued after De-
cember 31, 1995.
(2) CONTINUATION OF EXISTING POLICIES.—In
the case of any contract issued before January 1,
1996, which met the long-term care insurance re-
quirements of the State in which the contract was
sitused at the time the contract was issued—
(A) such contract shall be treated for pur-
poses of the Internal Revenue Code of 1986 as
a long-term care insurance contract (as defined
in section 7702B(b) of such Code), and
(B) services provided under, or reimbursed
by, such contract shall be treated for such pur-
(A) the issuance of a rider which is treated
as a long-term care insurance contract under
section 7702B, and
(B) the addition of any provision required
to conform any other long-term care rider to be
so treated,
shall not be treated as a modification or material
change of such contract.
SEC. 6212. QUALIFIED LONG-TERM CARE SERVICES TREAT-
ED AS MEDICAL CARE.
(a) GENERAL RULE.—Paragraph (1) of section
213(d) (defining medical care) is amended by striking
‘‘or’’ at the end of subparagraph (B), by redesignating
subparagraph (C) as subparagraph (D), and by inserting
after subparagraph (B) the following new subparagraph:
‘‘(C) for qualified long-term care services
(as defined in section 7702B(c)), or’’.
(b) TECHNICAL AMENDMENTS.—
(1) Subparagraph (D) of section 213(d)(1) (as
redesignated by subsection (a)) is amended by strik-
ing ‘‘subparagraphs (A) and (B)’’ and inserting
‘‘subparagraphs (A), (B), and (C)’’.
(2)(A) Paragraph (1) of section 213(d) is
amended by adding at the end the following new
flush sentence:
‘‘In the case of a long-term care insurance contract
(as defined in section 7702B(b)), only eligible long-
term care premiums (as defined in paragraph (11))
shall be taken into account under subparagraph
(D).’’
(B) Subsection (d) of section 213 is amended
by adding at the end the following new paragraph:
‘‘(11) 
ELIGIBLE
LONG-TERM
CARE
PRE-
MIUMS.—
‘‘(A) IN GENERAL.—For purposes of this
section, the term ‘eligible long-term care pre-
miums’ means the amount paid during a tax-
able year for any long-term care insurance con-
tract (as defined in section 7702B(b)) covering
an individual, to the extent such amount does
not exceed the limitation determined under the
following table:
‘‘In the case of an individual
with an attained age before the
The limitation
close of the taxable year of:
is:
40 or less ...................................................
$200
More than 40 but not more than 50 .........
375
More than 50 but not more than 60 .........
750
More than 60 but not more than 70 .........
2,000
More than 70 .............................................
2,500.
‘‘(B) INDEXING.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 1996, each dollar amount contained
in subparagraph (A) shall be increased by
the medical care cost adjustment of such
amount for such calendar year. If any in-
crease determined under the preceding sen-
tence is not a multiple of $10, such in-
crease shall be rounded to the nearest mul-
tiple of $10.
‘‘(ii) MEDICAL
CARE
COST
ADJUST-
MENT.—For purposes of clause (i), the
medical care cost adjustment for any cal-
endar year is the percentage (if any) by
which—
‘‘(I) the medical care component
of the Consumer Price Index (as de-
fined in section 1(f)(5)) for August of
the preceding calendar year, exceeds
‘‘(II) such component for August
of 1995.
The Secretary shall, in consultation with
the Secretary of Health and Human Serv-
ices, prescribe an adjustment which the
Secretary determines is more appropriate
for purposes of this paragraph than the
adjustment described in the preceding sen-
tence, and the adjustment so prescribed
shall apply in lieu of the adjustment de-
scribed in the preceding sentence.’’
(3) Paragraph (6) of section 213(d) is amend-
ed—
(A) by striking ‘‘subparagraphs (A) and
(B)’’ and inserting ‘‘subparagraphs (A), (B),
and (C)’’, and
(B) by striking ‘‘paragraph (1)(C)’’ in sub-
paragraph 
(A) 
and 
inserting 
‘‘paragraph
(1)(D)’’.
(4) Paragraph (7) of section 213(d) is amended
by striking ‘‘subparagraphs (A) and (B)’’ and insert-
ing ‘‘subparagraphs (A), (B), and (C)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 6213. CERTAIN EXCHANGES OF LIFE INSURANCE CON-
TRACTS FOR LONG-TERM CARE INSURANCE
CONTRACTS NOT TAXABLE.
(a) IN GENERAL.—Subsection (a) of section 1035
(relating to certain exchanges of insurance contracts) is
amended by striking the period at the end of paragraph
(3) and inserting ‘‘; or’’, and by adding at the end the
following new paragraph:
‘‘(4) a contract of life insurance or an endow-
ment or annuity contract for a long-term care insur-
ance contract (as defined in section 7702B(b)).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 
6214. 
EXCLUSION 
FROM 
GROSS 
INCOME 
FOR
AMOUNTS WITHDRAWN FROM CERTAIN RE-
TIREMENT PLANS FOR LONG-TERM CARE IN-
SURANCE.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 (relating to items specifically excluded from gross
income) is amended by redesignating section 137 as sec-
tion 138 and by inserting after section 136 the following
new section:
‘‘SEC. 137. DISTRIBUTIONS FROM CERTAIN RETIREMENT
PLANS FOR LONG-TERM CARE INSURANCE.
‘‘(a) GENERAL RULE.—The amount which would
(but for this section) be includible in the gross income of
an individual for the taxable year by reason of eligible dis-
tributions during the taxable year shall be reduced (but
not below zero) by the aggregate premiums paid by such
individual during such taxable year for any long-term care
insurance contract (as defined in section 7702B(b)) for
100
(2) Section 403(b)(11) is amended by striking
‘‘or’’ at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting
‘‘, or’’, and by inserting after subparagraph (B) the
following new subparagraph:
‘‘(C) for the payment of premiums for a
long-term care insurance contract (as defined in
section 7702B(b)) for coverage of the employee
or the spouse of the employee.’’
(3) Subparagraph (A) of section 457(d)(1) is
amended by striking ‘‘or’’ at the end of clause (ii),
by striking ‘‘and’’ at the end of clause (iii) and in-
serting ‘‘or’’, and by inserting after clause (iii) the
following new clause:
‘‘(iv) the date distributions for pre-
miums for a long-term care insurance con-
tract (as defined in section 7702B(b)) for
coverage of such individual or the spouse
of such individual are made, and’’.
(4) The table of sections for part III of sub-
chapter B of chapter 1 is amended by striking the
last item and inserting the following new items:
‘‘Sec. 137. Distributions from certain retirement plans for long-
term care insurance.
‘‘Sec. 138. Cross references to other Acts.’’
101
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and distributions after
December 31, 1995.
PART III—TREATMENT OF ACCELERATED DEATH
BENEFITS
SEC. 6221. TREATMENT OF ACCELERATED DEATH BENE-
FITS BY RECIPIENT.
(a) IN GENERAL.—Section 101 (relating to certain
death benefits) is amended by adding at the end the fol-
lowing new subsection:
‘‘(g) TREATMENT
OF
CERTAIN
ACCELERATED
DEATH BENEFITS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the following amounts shall be treated as an
amount paid by reason of the death of an insured:
‘‘(A) Any amount received under a life in-
surance contract on the life of an insured who
is a terminally ill individual.
‘‘(B) Any amount received under a life in-
surance contract on the life of an insured who
is a chronically ill individual (as defined in sec-
tion 7702B(c)(2)) but only if such amount is
received under a rider or other provision of
such contract which is treated as a long-term
care insurance contract under section 7702B.
102
‘‘(2) 
TREATMENT
OF
VIATICAL
SETTLE-
MENTS.—
‘‘(A) IN GENERAL.—In the case of a life
insurance contract on the life of an insured de-
scribed in paragraph (1), if—
‘‘(i) any portion of such contract is
sold to any viatical settlement provider, or
‘‘(ii) any portion of the death benefit
is assigned to such a provider,
the amount paid for such sale or assignment
shall be treated as an amount paid under the
life insurance contract by reason of the death of
such insured.
‘‘(B) VIATICAL SETTLEMENT PROVIDER.—
The term ‘viatical settlement provider’ means
any person regularly engaged in the trade or
business of purchasing, or taking assignments
of, life insurance contracts on the lives of
insureds described in paragraph (1) if—
‘‘(i) such person is licensed for such
purposes in the State in which the insured
resides, or
‘‘(ii) in the case of an insured who re-
sides in a State not requiring the licensing
of such persons for such purposes, such
103
person meets the requirements of sections
8 and 9 of the Viatical Settlements Model
Act of the National Association of Insur-
ance Commissioners.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) TERMINALLY ILL INDIVIDUAL.—The
term ‘terminally ill individual’ means an indi-
vidual who has been certified by a physician as
having an illness or physical condition which
can reasonably be expected to result in death in
24 months or less after the date of the certifi-
cation.
‘‘(B) PHYSICIAN.—The term ‘physician’
has the meaning given to such term by section
1861(r)(1) of the Social Security Act (42
U.S.C. 1395x(r)(1)).
‘‘(4) EXCEPTION FOR BUSINESS-RELATED POLI-
CIES.—This subsection shall not apply in the case of
any amount paid to any taxpayer other than the in-
sured if such taxpayer has an insurable interest with
respect to the life of the insured by reason of the in-
sured being a director, officer, or employee of the
taxpayer or by reason of the insured being finan-
104
cially interested in any trade or business carried on
by the taxpayer.
‘‘(5) CROSS REFERENCE.—
‘‘For inclusion in gross income of excess benefits,
see section 91.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to amounts received after De-
cember 31, 1995.
SEC. 6222. TAX TREATMENT OF COMPANIES ISSUING
QUALIFIED ACCELERATED DEATH BENEFIT
RIDERS.
(a) QUALIFIED ACCELERATED DEATH BENEFIT RID-
ERS TREATED AS LIFE INSURANCE.—Section 818 (relat-
ing to other definitions and special rules) is amended by
adding at the end the following new subsection:
‘‘(g) QUALIFIED ACCELERATED DEATH BENEFIT
RIDERS TREATED AS LIFE INSURANCE.—For purposes of
this part—
‘‘(1) IN GENERAL.—Any reference to a life in-
surance contract shall be treated as including a ref-
erence to a qualified accelerated death benefit rider
on such contract.
‘‘(2) QUALIFIED ACCELERATED DEATH BENE-
FIT RIDERS.—For purposes of this subsection, the
term ‘qualified accelerated death benefit rider’
means any rider on a life insurance contract if the
105
only payments under the rider are payments meeting
the requirements of section 101(g).
‘‘(3) EXCEPTION FOR LONG-TERM CARE RID-
ERS.—Paragraph (1) shall not apply to any rider
which is treated as a long-term care insurance con-
tract under section 7702B.’’
(b) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendment made by
this section shall take effect on January 1, 1996.
(2) ISSUANCE OF RIDER NOT TREATED AS MA-
TERIAL CHANGE.—For purposes of applying sections
101(f), 7702, and 7702A of the Internal Revenue
Code of 1986 to any contract—
(A) the issuance of a qualified accelerated
death benefit rider (as defined in section 818(g)
of such Code (as added by this Act)), and
(B) the addition of any provision required
to conform an accelerated death benefit rider to
the requirements of such section 818(g),
shall not be treated as a modification or material
change of such contract.
107
‘‘(B) the exclusion amount applicable to
such benefits.
‘‘(2) LONG-TERM CARE BENEFITS.—The term
‘long-term care benefits’ means—
‘‘(A) payments and other benefits under
long-term care insurance contracts (as defined
in section 7702B(b)) to the extent excludable
from gross income by reason of section
7702B(a)(2), and
‘‘(B) payments which are excludable from
gross income by reason of section 101(g).
‘‘(3) EXCLUSION AMOUNT.—
‘‘(A) IN GENERAL.—In the case of long-
term care benefits received by the taxpayer dur-
ing the taxable year by reason of the taxpayer
being a chronically ill individual, the term ‘ex-
clusion amount’ means the aggregate of $200
for each day during such year on which the in-
dividual is a chronically ill individual. In the
case of individuals who are married to each
other and who are both chronically ill individ-
uals, the preceding sentence shall be applied
separately with respect to each spouse.
‘‘(B) OTHER TAXPAYERS.—In the case of
long-term care benefits received during the tax-
108
able year by a taxpayer by reason of another in-
dividual being a chronically ill individual, the
term ‘exclusion amount’ means so much of such
other individual’s exclusion amount (for such
other individual’s taxable year which begins in
the calendar year in which the taxpayer’s tax-
able year begins) as is allocated by such other
individual to the taxpayer. Such an allocation
shall be made at the time and in the manner
prescribed by the Secretary; and once made,
shall be irrevocable.
‘‘(d) CHRONICALLY ILL INDIVIDUAL.—For purposes
of this section, the term ‘chronically ill individual’ has the
meaning given to such term by section 7702B(c)(2).
‘‘(e) INFLATION ADJUSTMENT
OF $200 BENEFIT
LIMIT.—In the case of a calendar year after 1996, the
$200 amount contained in subsection (c)(3)(A) shall be
increased at the same time and in the same manner as
amounts are increased pursuant to section 213(d)(11).’’
(b) CLERICAL AMENDMENT.—The table of sections
for such part II is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 91. Excess long-term care benefits.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
109
SEC. 6232. REPORTING REQUIREMENTS.
(a) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 61 is amended by adding at the end
the following new section:
‘‘SEC. 6050Q. CERTAIN LONG-TERM CARE BENEFITS.
‘‘(a) REQUIREMENT
OF REPORTING.—Any person
who pays long-term care benefits shall make a return, ac-
cording to the forms or regulations prescribed by the Sec-
retary, setting forth—
‘‘(1) the aggregate amount of such benefits
paid by such person to any individual during any
calendar 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
(a) shall furnish to each individual whose name is required
to be set forth in such return a written statement show-
ing—
‘‘(1) the name of the person making the pay-
ments, and
‘‘(2) the aggregate amount of long-term care
benefits paid to the individual which are required to
be shown on such return.
110
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) LONG-TERM CARE BENEFITS.—For purposes of
this section, the term ‘long-term care benefit’ has the
meaning given such term by section 91(c).’’
(b) PENALTIES.—
(1) Subparagraph (B) of section 6724(d)(1) is
amended by redesignating clauses (ix) through (xiv)
as clauses (x) through (xv), respectively, and by in-
serting after clause (viii) the following new clause:
‘‘(ix) section 6050Q (relating to cer-
tain long-term care benefits),’’.
(2) Paragraph (2) of section 6724(d) is amend-
ed by redesignating subparagraphs (Q) through (T)
as subparagraphs (R) through (U), respectively, and
by inserting after subparagraph (P) the following
new subparagraph:
‘‘(Q) section 6050Q(b) (relating to certain
long-term care benefits),’’.
(c) CLERICAL AMENDMENT.—The table of sections
for subpart B of part III of subchapter A of chapter 61
is amended by adding at the end the following new item:
‘‘Sec. 6050Q. Certain long-term care benefits.’’
111
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to benefits paid after December
31, 1995.
Subtitle C—Job Creation and Wage
Enhancement
PART I—CAPITAL GAINS REFORM
Subpart A—Capital Gains Reduction for Taxpayers
Other Than Corporations
SEC. 6301. CAPITAL GAINS DEDUCTION.
(a) IN GENERAL.—Part I of subchapter P of chapter
1 (relating to treatment of capital gains), as amended by
subsection (d)(1), is amended by inserting after section
1201 the following new section:
‘‘SEC. 1202. CAPITAL GAINS DEDUCTION.
‘‘(a) GENERAL RULE.—If for any taxable year a tax-
payer other than a corporation has a net capital gain, 50
percent of such gain shall be a deduction from gross
income.
‘‘(b) ESTATES AND TRUSTS.—In the case of an es-
tate or trust, the deduction shall be computed by excluding
the portion (if any) of the gains for the taxable year from
sales or exchanges of capital assets which, under sections
652 and 662 (relating to inclusions of amounts in gross
income of beneficiaries of trusts), is includible by the in-
112
come beneficiaries as gain derived from the sale or ex-
change of capital assets.
‘‘(c) COORDINATION WITH TREATMENT OF CAPITAL
GAIN UNDER LIMITATION ON INVESTMENT INTEREST.—
For purposes of this section, the net capital gain for any
taxable year shall be reduced (but not below zero) by the
amount which the taxpayer takes into account as invest-
ment income under section 163(d)(4)(B)(iii).
‘‘(d) SPECIAL RULE FOR COLLECTIBLES.—
‘‘(1) IN GENERAL.—At the election of the tax-
payer, the rate of tax imposed by section 1 on the
excess of—
‘‘(A) the amount which would be the net
capital gain for the taxable year without regard
to the application of section 1222(12) to collect-
ibles specified in such election, over
‘‘(B) the net capital gain for such year,
shall not exceed 28 percent.
‘‘(2) ELECTION.—Any election under this sub-
section, and any specification therein, once made,
shall be irrevocable.
‘‘(3) COORDINATION WITH INDEXING.—Any col-
lectible specified in such an election shall be treated
as not being an indexed asset for purposes of section
1022.
117
vided in the amendments made by paragraph
(13) of this subsection.
Such an election may be made only during the 1-
year period beginning on the date of the enactment
of this Act and, once made, shall be irrevocable.
(2) Section 1 is amended by striking subsection
(h).
(3) Paragraph (1) of section 170(e) is amended
by striking ‘‘the amount of gain’’ in the material fol-
lowing subparagraph (B)(ii) and inserting ‘‘50 per-
cent (25⁄35 in the case of a corporation) of the
amount of gain’’.
(4)(A) Paragraph (2) of section 172(d) is
amended to read as follows:
‘‘(2) CAPITAL GAINS AND LOSSES.—
‘‘(A) LOSSES OF TAXPAYERS OTHER THAN
CORPORATIONS.—In the case of a taxpayer
other than a corporation, the amount deductible
on account of losses from sales or exchanges of
capital assets shall not exceed the amount in-
cludible on account of gains from sales or ex-
changes of capital assets.
‘‘(B) DEDUCTION UNDER SECTION 1202.—
The deduction under section 1202 shall not be
allowed.’’
118
(B) Subparagraph (B) of section 172(d)(4) is
amended by striking ‘‘paragraphs (1) and (3)’’ and
inserting ‘‘paragraphs (1), (2)(B), and (3)’’.
(5) The last sentence of section 453A(c)(3) is
amended by striking all that follows ‘‘long-term cap-
ital gain,’’ and inserting ‘‘the maximum rate on net
capital gain under section 1201 or the deduction
under section 1202 (whichever is appropriate) shall
be taken into account.’’
(6) Paragraph (4) of section 642(c) is amended
to read as follows:
‘‘(4) ADJUSTMENTS.—To the extent that the
amount otherwise allowable as a deduction under
this subsection consists of gain from the sale or ex-
change of capital assets held for more than 1 year,
proper adjustment shall be made for any deduction
allowable to the estate or trust under section 1202
(relating to deduction for excess of capital gains over
capital losses). In the case of a trust, the deduction
allowed by this subsection shall be subject to section
681 (relating to unrelated business income).’’
(7) Paragraph (3) of section 643(a) is amended
by adding at the end thereof the following new sen-
tence: ‘‘The deduction under section 1202 (relating
119
to deduction of excess of capital gains over capital
losses) shall not be taken into account.’’
(8) Subparagraph (C) of section 643(a)(6) is
amended by inserting ‘‘(i)’’ before ‘‘there shall’’ and
by inserting before the period ‘‘, and (ii) the deduc-
tion under section 1202 (relating to capital gains de-
duction) shall not be taken into account’’.
(9) Paragraph (4) of section 691(c) is amended
by striking ‘‘sections 1(h), 1201, and 1211’’ and in-
serting ‘‘sections 1201, 1202, and 1211’’.
(10) The second sentence of section 871(a)(2)
is amended by inserting ‘‘such gains and losses shall
be determined without regard to section 1202 (relat-
ing to deduction for capital gains) and’’ after ‘‘ex-
cept that’’.
(11)(A) Paragraph (2) of section 904(b) is
amended by striking subparagraph (A), by redesig-
nating subparagraph (B) as subparagraph (A), and
by inserting after subparagraph (A) (as so redesig-
nated) the following new subparagraph:
‘‘(B) OTHER TAXPAYERS.—In the case of
a taxpayer other than a corporation, taxable in-
come from sources outside the United States
shall include gain from the sale or exchange of
120
capital assets only to the extent of foreign
source capital gain net income.’’
(B) Subparagraph (A) of section 904(b)(2), as
so redesignated, is amended—
(i) by striking all that precedes clause (i)
and inserting the following:
‘‘(A) CORPORATIONS.—In the case of a
corporation—’’, and
(ii) by striking in clause (i) ‘‘in lieu of ap-
plying subparagraph (A),’’.
(C) Paragraph (3) of section 904(b) is amended
by striking subparagraphs (D) and (E) and inserting
the following new subparagraph:
‘‘(D) RATE DIFFERENTIAL PORTION.—The
rate differential portion of foreign source net
capital gain, net capital gain, or the excess of
net capital gain from sources within the United
States over net capital gain, as the case may
be, is the same proportion of such amount as
the excess of the highest rate of tax specified in
section 11(b) over the alternative rate of tax
under section 1201(a) bears to the alternative
rate of tax under section 1201(a).’’
(12) Subsection (d) of section 1044 is amended
by striking the last sentence.
121
(13)(A) Paragraph (2) of section 1211(b) is
amended to read as follows:
‘‘(2) the sum of—
‘‘(A) the excess of the net short-term cap-
ital loss over the net long-term capital gain, and
‘‘(B) one-half of the excess of the net long-
term capital loss over the net short-term capital
gain.’’
(B) So much of paragraph (2) of section
1212(b) as precedes subparagraph (B) thereof is
amended to read as follows:
‘‘(2) SPECIAL RULES.—
‘‘(A) ADJUSTMENTS.—
‘‘(i) For purposes of determining the
excess referred to in paragraph (1)(A),
there shall be treated as short-term capital
gain in the taxable year an amount equal
to the lesser of—
‘‘(I) the amount allowed for the
taxable year under paragraph (1) or
(2) of section 1211(b), or
‘‘(II) the adjusted taxable income
for such taxable year.
‘‘(ii) For purposes of determining the
excess referred to in paragraph (1)(B),
122
there shall be treated as short-term capital
gain in the taxable year an amount equal
to the sum of—
‘‘(I) the amount allowed for the
taxable year under paragraph (1) or
(2) of section 1211(b) or the adjusted
taxable income for such taxable year,
whichever is the least, plus
‘‘(II) the excess of the amount
described in subclause (I) over the net
short-term capital loss (determined
without regard to this subsection) for
such year.’’
(C) Subsection (b) of section 1212 is
amended by adding at the end the following
new paragraph:
‘‘(3) TRANSITIONAL RULE.—In the case of any
amount which, under paragraph (1) and section
1211(b) (as in effect for taxable years beginning be-
fore January 1, 1996), is treated as a capital loss
in the first taxable year beginning after December
31, 1995, paragraph (1) and section 1211(b) (as so
in effect) shall apply (and paragraph (1) and section
1211(b) as in effect for taxable years beginning
after December 31, 1995, shall not apply) to the ex-
123
tent such amount exceeds the total of any net cap-
ital gains (determined without regard to this sub-
section) of taxable years beginning after December
31, 1995.’’
(14) Paragraph (1) of section 1402(i) is amend-
ed by inserting ‘‘, and the deduction provided by sec-
tion 1202 shall not apply’’ before the period at the
end thereof.
(15) Subsection (e) of section 1445 is amend-
ed—
(A) in paragraph (1) by striking ‘‘35 per-
cent (or, to the extent provided in regulations,
28 percent)’’ and inserting ‘‘25 percent (or, to
the extent provided in regulations, 19.8 per-
cent)’’, and
(B) in paragraph (2) by striking ‘‘35 per-
cent’’ and inserting ‘‘25 percent’’.
(16)(A) 
The 
second 
sentence 
of 
section
7518(g)(6)(A) is amended—
(i) by striking ‘‘during a taxable year to
which section 1(h) or 1201(a) applies’’, and
(ii) by striking ‘‘28 percent (34 percent’’
and inserting ‘‘19.8 percent (25 percent’’.
124
(B) 
The 
second 
sentence 
of 
section
607(h)(6)(A) of the Merchant Marine Act, 1936 is
amended—
(i) by striking ‘‘during a taxable year to
which section 1(h) or 1201(a) of such Code ap-
plies’’, and
(ii) by striking ‘‘28 percent (34 percent’’
and inserting ‘‘19.8 percent (25 percent’’.
(e) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter P of chapter 1 is amended by
inserting after the item relating to section 1201 the follow-
ing new item:
‘‘Sec. 1202. Capital gains deduction.’’
(f) EFFECTIVE DATE.—
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by
this section shall apply to taxable years ending after
December 31, 1994.
(2) CONTRIBUTIONS.—The amendment made
by subsection (d)(3) shall apply to contributions on
or after January 1, 1995.
(3) USE OF LONG-TERM LOSSES.—The amend-
ments made by subsection (d)(13) shall apply to tax-
able years beginning after December 31, 1995.
125
(4) WITHHOLDING.—The amendment made by
subsection (d)(15) shall apply only to amounts paid
after the date of the enactment of this Act.
SEC. 6302. INDEXING OF CERTAIN ASSETS ACQUIRED
AFTER DECEMBER 31, 1994, FOR PURPOSES
OF DETERMINING GAIN.
(a) IN GENERAL.—Part II of subchapter O of chap-
ter 1 (relating to basis rules of general application) is
amended by inserting after section 1021 the following new
section:
‘‘SEC. 1022. INDEXING OF CERTAIN ASSETS ACQUIRED
AFTER DECEMBER 31, 1994, FOR PURPOSES
OF DETERMINING GAIN.
‘‘(a) GENERAL RULE.—
‘‘(1) INDEXED
BASIS
SUBSTITUTED
FOR
AD-
JUSTED BASIS.—Solely for purposes of determining
gain on the sale or other disposition by a taxpayer
(other than a corporation) of an indexed asset which
has been held for more than 3 years, the indexed
basis of the asset shall be substituted for its ad-
justed basis.
‘‘(2) EXCEPTION
FOR
DEPRECIATION, ETC.—
The deductions for depreciation, depletion, and am-
ortization shall be determined without regard to the
126
application of paragraph (1) to the taxpayer or any
other person.
‘‘(b) INDEXED ASSET.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘indexed asset’ means—
‘‘(A) common stock in a C corporation
(other than a foreign corporation), and
‘‘(B) tangible property,
which is a capital asset or property used in the trade
or business (as defined in section 1231(b)).
‘‘(2) STOCK
IN
CERTAIN
FOREIGN
CORPORA-
TIONS INCLUDED.—For purposes of this section—
‘‘(A) IN
GENERAL.—The term ‘indexed
asset’ includes common stock in a foreign cor-
poration which is regularly traded on an estab-
lished securities market.
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to—
‘‘(i) stock of a foreign investment
company (within the meaning of section
1246(b)),
‘‘(ii) stock in a passive foreign invest-
ment company (as defined in section
1296),
127
‘‘(iii) stock in a foreign corporation
held by a United States person who meets
the requirements of section 1248(a)(2),
and
‘‘(iv) stock in a foreign personal hold-
ing company (as defined in section 552).
‘‘(C) TREATMENT OF AMERICAN DEPOSI-
TORY RECEIPTS.—An American depository re-
ceipt for common stock in a foreign corporation
shall be treated as common stock in such cor-
poration.
‘‘(c) INDEXED BASIS.—For purposes of this sec-
tion—
‘‘(1) GENERAL RULE.—The indexed basis for
any asset is—
‘‘(A) the adjusted basis of the asset, in-
creased by
‘‘(B) the applicable inflation adjustment.
‘‘(2) APPLICABLE INFLATION ADJUSTMENT.—
The applicable inflation adjustment for any asset is
an amount equal to—
‘‘(A) the adjusted basis of the asset, multi-
plied by
‘‘(B) the percentage (if any) by which—