I
104TH CONGRESS
1ST SESSION
H. R. 1267
To reconnect families to the world of work, make work pay strengthen
families, require personal responsibility, and support State flexibility.
IN THE HOUSE OF REPRESENTATIVES
MARCH 21, 1995
Mr. DEAL of Georgia (for himself, Mr. CLEMENT, Mr. TANNER, Mr. STEN-
HOLM, Mrs. LINCOLN, Mrs. THURMAN, and Mr. PAYNE of Virginia) in-
troduced the following bill; which was referred to the Committee on Eco-
nomic and Educational Opportunities, and in addition to the Committees
on the Judiciary, Commerce, National Security, Banking and Financial
Services, and Agriculture, for a period to be subsequently determined by
the Speaker, in each case for consideration of such provisions as fall with-
in the jurisdiction of the committee concerned
A BILL
To reconnect families to the world of work, make work
pay strengthen families, require personal responsibility,
and support State flexibility.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Individual Responsibil-
ity Act of 1995’’.
SEC. 2. TABLE OF CONTENTS.
The table of contents of this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Amendment of the Social Security Act.
TITLE I—TIME-LIMITED TRANSITIONAL ASSISTANCE
Sec. 101. Limitation on duration of AFDC benefits.
Sec. 102. Establishment of Federal data base.
TITLE II—MAKE WORK PAY
Subtitle A—Health Care
Sec. 201. Transitional medicaid benefits.
Subtitle B—Earned Income Tax Credit
Sec. 211. Notice of availability required to be provided to applicants and former
recipients of AFDC, food stamps, and medicaid.
Sec. 212. Notice of availability of earned income tax credit and dependent care
tax credit to be included on W–4 form.
Sec. 213. Advance payment of earned income tax credit through State dem-
onstration programs.
Subtitle C—Child Care
Sec. 221. Dependent care credit to be refundable; high-income taxpayers ineli-
gible for credit.
Sec. 222. Funding of child care services.
Subtitle D—AFDC Work Disregards
Sec. 231. Option to increase disregard of earned income.
Sec. 232. State option to establish voluntary diversion program.
Sec. 233. Elimination of quarters of coverage requirement for married teens
under AFDC–UP program.
Subtitle E—AFDC Asset Limitations
Sec. 241. Increase in resource thresholds; separate threshold for vehicles.
Sec. 242. Limited disregard of amounts saved for post-secondary education, the
purchase of a first home, or the establishment or operation of
a microenterprise.
TITLE III—THE WORK FIRST PROGRAM
Sec. 301. Work first program.
Sec. 302. Regulations.
Sec. 303. Applicability to States.
Sec. 304. Sense of the Congress relating to availability of work first program
in rural areas.
Sec. 305. Grants to community-based organizations.
TITLE IV—FAMILY RESPONSIBILITY AND IMPROVED CHILD
SUPPORT ENFORCEMENT
Subtitle A—Eligibility and Other Matters Concerning Title IV–D Program
Clients
Sec. 401. State obligation to provide paternity establishment and child support
enforcement services.
Sec. 402. Distribution of payments.
Sec. 403. Due process rights.
Sec. 404. Privacy safeguards.
Subtitle B—Program Administration and Funding
Sec. 411. Federal matching payments.
Sec. 412. Performance-based incentives and penalties.
Sec. 413. Federal and State reviews and audits.
Sec. 414. Required reporting procedures.
Sec. 415. Automated data processing requirements.
Sec. 416. Director of CSE program; staffing study.
Sec. 417. Funding for secretarial assistance to State programs.
Sec. 418. Reports and data collection by the Secretary.
Subtitle C—Locate and Case Tracking
Sec. 421. Central State and case registry.
Sec. 422. Centralized collection and disbursement of support payments.
Sec. 423. Amendments concerning income withholding.
Sec. 424. Locator information from interstate networks.
Sec. 425. Expanded Federal Parent Locator Service.
Sec. 426. Use of social security numbers.
Subtitle D—Streamlining and Uniformity of Procedures
Sec. 431. Adoption of uniform State laws.
Sec. 432. Improvements to full faith and credit for child support orders.
Sec. 433. State laws providing expedited procedures.
Subtitle E—Paternity Establishment
Sec. 441. Sense of the Congress.
Sec. 442. Availability of parenting social services for new fathers.
Sec. 443. Cooperation requirement and good cause exception.
Sec. 444. Federal matching payments.
Sec. 445. Performance-based incentives and penalties.
Sec. 446. State laws concerning paternity establishment.
Sec. 447. Outreach for voluntary paternity establishment.
Subtitle F—Establishment and Modification of Support Orders
Sec. 451. National Child Support Guidelines Commission.
Sec. 452. Simplified process for review and adjustment of child support orders.
Subtitle G—Enforcement of Support Orders
Sec. 461. Federal income tax refund offset.
Sec. 462. Internal Revenue Service collection of arrears.
Sec. 463. Authority to collect support from Federal employees.
Sec. 464. Enforcement of child support obligations of members of the Armed
Forces.
Sec. 465. Motor vehicle liens.
Sec. 466. Voiding of fraudulent transfers.
Sec. 467. State law authorizing suspension of licenses.
Sec. 468. Reporting arrearages to credit bureaus.
Sec. 469. Extended statute of limitation for collection of arrearages.
Sec. 470. Charges for arrearages.
Sec. 471. Denial of passports for nonpayment of child support.
Sec. 472. International child support enforcement.
Sec. 473. Seizure of lottery winnings, settlements, payouts, awards, and be-
quests, and sale of forfeited property, to pay child support ar-
rearages.
Sec. 474. Liability of grandparents for financial support of children of their
minor children.
Sec. 475. Sense of the Congress regarding programs for noncustodial parents
unable to meet child support obligations.
Subtitle H—Medical Support
Sec. 481. Technical correction to ERISA definition of medical child support
order.
Sec. 482. Extension of medicaid eligibility for families losing AFDC due to in-
creased child support collections.
Subtitle I—Effect of Enactment
Sec. 491. Effective dates.
Sec. 492. Severability.
TITLE V—TEEN PREGNANCY AND FAMILY STABILITY
Subtitle A—Federal Role
Sec. 501. State option to deny AFDC for additional children.
Sec. 502. Minors receiving AFDC required to live under responsible adult su-
pervision.
Sec. 503. National clearinghouse on adolescent pregnancy.
Sec. 504. Incentive for teen parents to attend school.
Sec. 505. State option to disregard 100–hour rule under AFDC–UP program.
Sec. 506. State option to disregard 6–month limitation on AFDC–UP benefits.
Sec. 507. Elimination of quarters of coverage requirement under AFDC–UP
program for families in which both parents are teens.
Sec. 508. Denial of Federal housing benefits to minors who bear children out-
of-wedlock.
Sec. 509. State option to deny AFDC to minor parents.
Subtitle B—State Role
Sec. 511. Teenage pregnancy prevention and family stability.
Sec. 512. Availability of family planning services.
TITLE VI—PROGRAM SIMPLIFICATION
Subtitle A—Increased State Flexibility
Sec. 601. State option to provide AFDC through electronic benefit transfer sys-
tems.
Sec. 602. Deadline for action on application for waiver of requirement applica-
ble to program of aid to families with dependent children.
Subtitle B—Coordination of AFDC and Food Stamp Programs
Sec. 611. Amendments to part A of title IV of the Social Security Act.
Sec. 612. Amendments to the Food Stamp Act of 1977.
Subtitle C—Fraud Reduction
Sec. 631. Sense of the Congress in support of the efforts of the administration
to address the problems of fraud and abuse in the supple-
mental security income program.
Sec. 632. Study on feasibility of single tamper-proof identification card to serve
programs under both the Social Security Act and health reform
legislation.
Subtitle D—Additional Provisions
Sec. 641. State options regarding unemployed parent program.
Sec. 642. Definition of essential person.
Sec. 643. ‘‘Fill-the-gap’’ budgeting.
Sec. 644. Repeal of requirement to make certain supplemental payments in
States paying less than their needs standards.
Sec. 645. Collection of AFDC overpayments from Federal tax refunds.
Sec. 646. Territories.
Sec. 647. Disregard of student income.
Sec. 648. Lump-sum income.
TITLE VII—CHILD PROTECTION BLOCK GRANT PROGRAM
Sec. 701. Establishment of programs.
Sec. 702. Repeals and conforming amendments.
Sec. 703. Effective date.
TITLE VIII—SSI REFORM
Subtitle A—Eligibility of Children for Benefits
Sec. 801. Restrictions on eligibility.
Sec. 802. Continuing disability reviews for certain children.
Sec. 803. Disability review required for SSI recipients who are 18 years of age.
Sec. 804. Applicability.
Subtitle B—Denial of SSI Benefits by Reason of Disability to Drug Addicts
and Alcoholics
Sec. 811. Denial of SSI benefits by reason of disability to drug addicts and
alcoholics.
TITLE IX—FINANCING
Subtitle A—Treatment of Aliens
Sec. 901. Extension of deeming of income and resources under AFDC, SSI,
and food stamp programs.
Sec. 902. Requirements for sponsor’s affidavits of support.
Sec. 903. Extending requirement for affidavits of support to family-related and
diversity immigrants.
Subtitle B—Limitation on Emergency Assistance Expenditures
Sec. 911. Limitation on expenditures for emergency assistance.
Subtitle C—Tax Provisions
Sec. 921. Certain Federal assistance includible in gross income.
Sec. 922. Earned income tax credit denied to individuals not authorized to be
employed in the United States.
Sec. 923. Phaseout of earned income credit for individuals having more than
$2,500 of taxable interest and dividends.
Sec. 924. AFDC and food stamp benefits not taken into account for purposes
of the earned income tax credit.
TITLE X—FOOD ASSISTANCE REFORM
Subtitle A—Food Stamp Program Integrity and Reform
Sec. 1001. Authority to establish authorization periods.
Sec. 1002. Specific period for prohibiting participation of stores based on lack
of business integrity.
Sec. 1003. Information for verifying eligibility for authorization.
Sec. 1004. Waiting period for stores that initially fail to meet authorization cri-
teria.
Sec. 1005. Bases for suspensions and disqualifications.
Sec. 1006. Authority to suspend stores violating program requirements pending
administrative and judicial review.
Sec. 1007. Disqualification of retailers who are disqualified from the WIC pro-
gram.
Sec. 1008. Permanent debarment of retailers who intentionally submit falsified
applications.
Sec. 1009. Expanded civil and criminal forfeiture for violations of the Food
Stamp Act.
Sec. 1010. Expanded authority for sharing information provided by retailers.
Sec. 1011. Expanded definition of ‘‘coupon’’.
Sec. 1012. Doubled penalties for violating food stamp program requirements.
Sec. 1013. Mandatory claims collection methods.
Sec. 1014. Reduction of basic benefit level.
Sec. 1015. Pro-rating benefits after interruptions in participation.
Sec. 1016. Work requirement for able-bodied recipients.
Sec. 1017. Extending current claims retention rates.
Sec. 1018. Coordination of employment and training programs.
Sec. 1019. Promoting expansion of electronic benefits transfer.
Sec. 1020. One-year freeze of standard deduction.
Sec. 1021. Nutrition assistance for Puerto Rico.
Sec. 1022. Other amendments to the Food Stamp Act of 1977.
Subtitle B—Commodity Distribution
Sec. 1051. Short title.
Sec. 1052. Availability of commodities.
Sec. 1053. State, local and private supplementation of commodities.
Sec. 1054. State plan.
Sec. 1055. Allocation of commodities to States.
Sec. 1056. Priority system for State distribution of commodities.
Sec. 1057. Initial processing costs.
Sec. 1058. Assurances; anticipated use.
Sec. 1059. Authorization of appropriations.
Sec. 1060. Commodity supplemental food program.
Sec. 1061. Commodities not income.
Sec. 1062. Prohibition against certain State charges.
Sec. 1063. Definitions.
Sec. 1064. Regulations.
Sec. 1065. Finality of determinations.
Sec. 1066. Relationship to other programs.
Sec. 1067. Settlement and adjustment of claims.
Sec. 1068. Repealers; amendments.
TITLE XI—DEFICIT REDUCTION
Sec. 1101. Dedication of savings to deficit reduction.
TITLE XII—EFFECTIVE DATE
Sec. 1201. Effective date.
SEC. 3. AMENDMENT OF THE SOCIAL SECURITY ACT.
Except as otherwise expressly provided, wherever in
this Act an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Social Security Act.
TITLE I—TIME-LIMITED
TRANSITIONAL ASSISTANCE
SEC. 101. LIMITATION ON DURATION OF AFDC BENEFITS.
Section 402(a) (42 U.S.C. 602(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(44);
(2) by striking the period at the end of para-
graph (45) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (45) the fol-
lowing:
‘‘(46) in the case of a State that has exercised
the option provided for in paragraph (52), provide
that—
‘‘(A) a family shall not be eligible for aid
under the State plan if a member of the family
is—
‘‘(i) prohibited from participating in
the State program established under sub-
part 1 of part G by reason of section
497(b); or
‘‘(ii) prohibited from participating in
the State program established under sub-
part 2 of part G by reason of section
499(a)(4); and
‘‘(B) each member of the family shall be
considered to be receiving such aid for purposes
of eligibility for medical assistance under the
State plan approved under title XIX for so long
as the family would be eligible for such aid but
for subparagraph (A).’’.
SEC. 102. ESTABLISHMENT OF FEDERAL DATA BASE.
Section 402 (42 U.S.C. 602) is amended by inserting
after subsection (c) the following:
‘‘(d) The Secretary shall establish and maintain a
data base of participants in State programs established
under parts F and G which shall be made available to the
States for use in administering subsection (a)(46).’’.
TITLE II—MAKE WORK PAY
Subtitle A—Health Care
SEC. 201. TRANSITIONAL MEDICAID BENEFITS.
(a) EXTENSION
OF MEDICAID ENROLLMENT
FOR
FORMER AFDC RECIPIENTS FOR 1 ADDITIONAL YEAR.—
(1) IN
GENERAL.—Section 1925(b)(1) (42
U.S.C. 1396r–6(b)(1)) is amended by striking the
period at the end and inserting the following: ‘‘, and
that the State shall offer to each such family the op-
tion of extending coverage under this subsection for
any of the first 2 succeeding 6-month periods, in the
same manner and under the same conditions as the
option of extending coverage under this subsection
for the first succeeding 6-month period.’’.
(2) 
CONFORMING
AMENDMENTS.—Section
1925(b) (42 U.S.C. 1396r–6(b)) is amended—
(A) in the heading, by striking ‘‘EXTEN-
SION’’ and inserting ‘‘EXTENSIONS’’;
(B) in the heading of paragraph (1), by
striking ‘‘REQUIREMENT’’ and inserting ‘‘IN
GENERAL’’;
(C) in paragraph (2)(B)(ii)—
(i) in the heading, by striking ‘‘PE-
RIOD’’ and inserting ‘‘PERIODS’’, and
(ii) by striking ‘‘in the period’’ and in-
serting ‘‘in each of the 6-month periods’’;
(D) in paragraph (3)(A), by striking ‘‘the
6-month period’’ and inserting ‘‘any 6-month
period’’;
(E) in paragraph (4)(A), by striking ‘‘the
extension period’’ and inserting ‘‘any extension
period’’; and
(F) in paragraph (5)(D)(i), by striking ‘‘is
a 3-month period’’ and all that follows and in-
serting the following: ‘‘is, with respect to a par-
ticular 6-month additional extension period pro-
vided under this subsection, a 3-month period
beginning with the 1st or 4th month of such ex-
tension period.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to calendar quarters beginning
on or after October 1, 1997, without regard to whether
or not final regulations to carry out such amendments
have been promulgated by such date.
Subtitle B—Earned Income Tax
Credit
SEC. 211. NOTICE OF AVAILABILITY REQUIRED TO BE PRO-
VIDED TO APPLICANTS AND FORMER RECIPI-
ENTS OF AFDC, FOOD STAMPS, AND MEDIC-
AID.
(a) AFDC.—Section 402(a) (42 U.S.C. 602(a)), as
amended by sections 101 and 102 of this Act, is
amended—
(1) by striking ‘‘and’’ at the end of paragraph
(46);
(2) by striking the period at the end of para-
graph (47) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (47) the fol-
lowing:
‘‘(48) provide that the State agency must pro-
vide written notice of the existence and availability
of the earned income credit under section 32 of the
Internal Revenue Code of 1986 to—
‘‘(A) any individual who applies for aid
under the State plan, upon receipt of the appli-
cation; and
‘‘(B) any individual whose aid under the
State plan is terminated, in the notice of termi-
nation of benefits.’’.
(b) FOOD STAMPS.—Section 11(e) of the Food
Stamp Act of 1977 (7 U.S.C. 2020(e)) is amended—
(1) in paragraph (24) by striking ‘‘and’’ at the
end;
(2) in paragraph (25) by striking the period at
the end and inserting ‘‘; and’’; and
(3) by inserting after paragraph (25) the fol-
lowing:
‘‘(26) that whenever a household applies for
food stamp benefits, and whenever such benefits are
terminated with respect to a household, the State
agency shall provide to each member of such house-
hold notice of—
‘‘(A) the existence of the earned income
tax credit under section 32 of the Internal Rev-
enue Code of 1986; and
‘‘(B) the fact that such credit may be ap-
plicable to such member.’’.
(c) 
MEDICAID.—Section 
1902(a) 
(42 
U.S.C.
1396a(a)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(61);
(2) by striking the period at the end of para-
graph (62) and inserting ‘‘; and’’; and
(3) by adding at the end the following new
paragraph:
‘‘(63) provide that the State shall provide notice
of the existence and availability of the earned income
tax credit under section 32 of the Internal Revenue
Code of 1986 to each individual applying for medical
assistance under the State plan and to each individ-
ual whose eligibility for medical assistance under the
State plan is terminated.’’.
SEC. 212. NOTICE OF AVAILABILITY OF EARNED INCOME
TAX CREDIT AND DEPENDENT CARE TAX
CREDIT TO BE INCLUDED ON W–4 FORM.
Section 11114 of the Omnibus Budget Reconciliation
Act of 1990 (26 U.S.C. 21 note), relating to program to
increase public awareness, is amended by adding at the
end the following new sentence: ‘‘Such means shall include
printing a notice of the availability of such credits on the
forms used by employees to determine the proper number
of withholding exemptions under chapter 24 of the Inter-
nal Revenue Code of 1986.’’.
SEC. 213. ADVANCE PAYMENT OF EARNED INCOME TAX
CREDIT THROUGH STATE DEMONSTRATION
PROGRAMS.
(a) IN GENERAL.—Section 3507 of the Internal Rev-
enue Code of 1986 (relating to the advance payment of
the earned income tax credit) is amended by adding at
the end the following:
‘‘(g) STATE DEMONSTRATIONS.—
‘‘(1) IN GENERAL.—In lieu of receiving earned
income advance amounts from an employer under
subsection (a), a participating resident shall receive
advance earned income payments from a responsible
State agency pursuant to a State Advance Payment
Program that is designated pursuant to paragraph
(2).
‘‘(2) DESIGNATIONS.—
‘‘(A) IN
GENERAL.—From among the
States submitting proposals satisfying the re-
quirements of subsection (g)(3), the Secretary
(in consultation with the Secretary of Health
and Human Services) may designate not more
than 4 State Advance Payment Demonstra-
tions. States selected for the demonstrations
may have, in the aggregate, no more than 5
percent of the total number of household par-
ticipating in the program under the Food
Stamp program in the immediately preceding
fiscal year, Administrative costs of a State in
conducting a demonstration under this section
may be included for matching under section
403(a) of the Social Security Act and section
16(a) of the Food Stamp Act of 1977.
‘‘(B) 
WHEN
DESIGNATION
MAY
BE
MADE.—Any designation under this paragraph
shall be made no later than December 31,
1995.
‘‘(C) PERIOD FOR WHICH DESIGNATION IS
IN EFFECT.—
‘‘(i) 
IN
GENERAL.—Designations
made under this paragraph shall be effec-
tive for advance earned income payments
made after December 31, 1995, and before
January 1, 1999.
‘‘(ii) SPECIAL RULES.—
‘‘(I) REVOCATION
OF
DESIGNA-
TIONS.—The Secretary may revoke
the designation under this paragraph
if the Secretary determines that the
State is not complying substantially
with the proposal described in para-
graph (3) submitted by the State.
‘‘(II) AUTOMATIC
TERMINATION
OF DESIGNATIONS.—Any failure by a
State to comply with the reporting re-
quirements described in paragraphs
(3)(F) and (3)(G) has the effect of
immediately terminating the designa-
tion under this paragraph (2) and
rendering paragraph (5)(A)(ii) inap-
plicable to subsequent payments.
‘‘(3) PROPOSALS.—No State may be designated
under subsection (g)(2) unless the State’s proposal
for such designation—
‘‘(A) identifies the responsible State agen-
cy,
‘‘(B) describes how and when the advance
earned income payments will be made by that
agency, including a description of any other
State or Federal benefits with which such pay-
ments will be coordinated,
‘‘(C) describes how the State will obtain
the information on which the amount of ad-
vance earned income payments made to each
participating resident will be determined in ac-
cordance with paragraph (4),
‘‘(D) describes how State residents who
will be eligible to receive advance earned income
payments will be selected, notified of the oppor-
tunity to receive advance earned income pay-
ments from the responsible State agency, and
given the opportunity to elect to participate in
the program,
‘‘(E) describes how the State will verify, in
addition to receiving the certifications and
statement described in paragraph (7)(D)(iv),
the eligibility of participating residents for the
earned tax credit,
‘‘(F) commits the State to furnishing to
each participating resident and to the Secretary
by January 31 of each year a written statement
showing—
‘‘(i) the name and taxpayer identifica-
tion number of the participating resident,
and
‘‘(ii) the total amount of advance
earned income payments made to the par-
ticipating resident during the prior cal-
endar year,
‘‘(G) commits the State to furnishing to
the Secretary by December 1 of each year a
written statement showing the name and tax-
payer identification number of each participat-
ing resident,
‘‘(H) commits the State to treat the ad-
vanced earned income payments as described in
subsection (g)(5) and any repayments of exces-
sive advance earned income payments as de-
scribed in subsection (g)(6),
‘‘(I) commits the State to assess the devel-
opment and implementation of its State Ad-
vance Payment Program, including an agree-
ment to share its findings and lessons with
other interested States in a manner to be de-
scribed by the Secretary, and
‘‘(J) is submitted to the Secretary on or
before June 30, 1995.
‘‘(4) AMOUNT
AND
TIMING
OF
ADVANCE
EARNED INCOME PAYMENTS.—
‘‘(A) AMOUNT.—
‘‘(i) IN
GENERAL.—The method for
determining the amount of advance earned
income payments made to each participat-
ing resident is to conform to the full extent
possible with the provisions of subsection
(c).
‘‘(ii) SPECIAL RULE.—A State may,
at its election, apply the rules of subsection
(c)(2)(B) by substituting ‘between 60 per-
cent and 75 percent of the credit percent-
age in effect under section 32(b)(1) for an
individual with the corresponding number
of qualifying children’ for ‘60 percent of
the credit percentage in effect under sec-
tion 32(b)(1) for such an eligible individual
with 1 qualifying child’ in clause (i) and
‘the same percentage (as applied in clause
(i))’ for ‘60 percent’ in clause (ii).
‘‘(B) TIMING.—The frequency of advance
earned income payments may be made on the
basis of the payroll periods of participating resi-
dents, on a single statewide schedule, or on any
other reasonable basis prescribed by the State
in its proposal; however, in no event may ad-
vance earned income payments be made to any
participating resident less frequently than on a
calendar-quarter basis.
‘‘(5) PAYMENTS TO BE TREATED AS PAYMENTS
OF WITHHOLDING AND FICA TAXES.—
‘‘(A) IN GENERAL.—For purposes of this
title, advance earned income payments during
any calendar quarter—
‘‘(i) shall neither be treated as a pay-
ment of compensation nor be included in
gross income, and
‘‘(ii) shall be treated as made out of—
‘‘(I) amounts required to be de-
ducted by the State and withheld for
the calendar quarter by the State
under section 3401 (relating to wage
withholding), and
‘‘(II) amounts required to be de-
ducted for the calendar quarter under
section 3102 (relating to FICA em-
ployee taxes), and
‘‘(III) amounts of the taxes im-
posed on the State for the calendar
quarter under section 3111 (relating
to FICA employer taxes),
as if the State had paid to the Secretary,
on the day on which payments are made to
participating residents, an amount equal to
such payments.
‘‘(B) ADVANCE PAYMENTS EXCEED TAXES
DUE.—If for any calendar quarter the aggre-
gate amount of advance earned income pay-
ments made by the responsible State agency
under a State Advance Payment Program ex-
ceeds the sum of the amounts referred to in
subparagraph (A)(ii) (without regard to para-
graph (6)(A)), each such advance earned in-
come payment shall be reduced by an amount
which bears the same ratio to such excess as
such advance earned income payment bears to
the aggregate amount of all such advance
earned income payments.
‘‘(6) STATE
REPAYMENT
OF
EXCESSIVE
AD-
VANCE EARNED INCOME PAYMENTS.—
‘‘(A) IN GENERAL.—Notwithstanding any
other provision of law, in the case of an exces-
sive advance earned income payment a State
shall be treated as having deducted and with-
held under section 3401 (relating to wage with-
holding), and therefore is required to pay to the
United States, the repayment amount during
the repayment calendar quarter.
‘‘(B) EXCESSIVE
ADVANCE
EARNED
IN-
COME PAYMENT.—For purposes of this section,
an excessive advance income payment is that
portion of any advance earned income payment
that, when combined with other advance earned
income payments previously made to the same
participating resident during the same calendar
year, exceeds the amount of earned income tax
credit to which that participating resident is en-
titled under section 32 for that year.
‘‘(C) REPAYMENT
AMOUNT.—The repay-
ment amount is equal to 50 percent of the ex-
cess of—
‘‘(i) excessive advance earned income
payments made by a State during a par-
ticular calendar year, over
‘‘(ii) the sum of—
‘‘(I) 4 percent of all advance
earned income payments made by the
State during that calendar year, and
‘‘(II) 
the 
excessive 
advance
earned income payments made by the
State during that calendar year that
have been collected from participating
residents by the Secretary.
‘‘(D) REPAYMENT CALENDAR QUARTER.—
The repayment calendar quarter is the second
calendar quarter of the third calendar year
after the calendar year in which an excessive
earned income payment is made.
‘‘(7) DEFINITIONS.—For purposes of this sec-
tion—
‘‘(A) STATE
ADVANCE
PAYMENT
PRO-
GRAM.—The term ‘State Advance Payment
Program’ means the program described in a
proposal submitted for designation under para-
graph (1) and designated by the Secretary
under paragraph (2).
‘‘(B) RESPONSIBLE STATE AGENCY.—The
term ‘responsible State agency’ means the sin-
gle State agency that will be making the ad-
vance earned income payments to residents of
the State who elect to participate in a State Ad-
vance Payment Program.
‘‘(C) ADVANCE
EARNED
INCOME
PAY-
MENTS.—The term ‘advance earned income
payments’ means an amount paid by a respon-
sible State agency to residents of the State pur-
suant to a State Advance Payment Program.
‘‘(D) 
PARTICIPATING
RESIDENT.—The
term ‘participating resident’ means an individ-
ual who—
‘‘(i) is a resident of a State that has
in effect a designated State Advance Pay-
ment Program,
‘‘(ii) makes the election described in
paragraph (3)(C) pursuant to guidelines
prescribed by the State,
‘‘(iii) certifies to the State the number
of qualifying children the individual has,
and
‘‘(iv) provides to the State the certifi-
cations and statement set forth in sub-
sections (b)(1), (b)(2), (b)(3), and (b)(4)
(except that for purposes of this clause
(iv), the term ‘any employer’ shall be sub-
stituted for ‘another employer’ in sub-
section (b)(3)), along with any other infor-
mation required by the State.’’.
(b) TECHNICAL ASSISTANCE.—The Secretaries of
Treasury and Health and Human Services shall jointly en-
sure that technical assistance is provided to State Advance
Payment Programs and that these programs are rigor-
ously evaluated.
(c) ANNUAL REPORTS.—The Secretary shall issue
annual reports detailing the extent to which—
(1) residents participate in the State Advance
Payment Programs,
(2) participating residents file Federal and
State tax returns,
(3) participating residents report accurately the
amount of the advance earned income payments
made to them by the responsible State agency dur-
ing the year, and
(4) recipients of excessive advance earned in-
come payments repaid those amounts.
The report shall also contain an estimate of the amount
of advance earned income payments made by each respon-
sible State agency but not reported on the tax returns of
a participating resident and the amount of excessive ad-
vance earned income payments.
(d) AUTHORIZATION OF APPROPRIATIONS.—For pur-
poses of providing technical assistance described in sub-
section (b), preparing the reports described in subsection
(c), and providing grants to States in support of des-
ignated State Advance Payment Programs, there are au-
thorized to be appropriated in advance to the Secretary
of the Treasury and the Secretary of Health and Human
Services a total of $1,400,000 for fiscal years 1996
through 1999.
Subtitle C—Child Care
SEC. 221. DEPENDENT CARE CREDIT TO BE REFUNDABLE;
HIGH-INCOME TAXPAYERS INELIGIBLE FOR
CREDIT.
(a) CREDIT TO BE REFUNDABLE.—
(1) IN GENERAL.—Section 21 of the Internal
Revenue Code of 1986 (relating to expenses for
household and dependent care services necessary for
gainful employment) is hereby moved to subpart C
of part IV of subchapter A of chapter 1 of such
Code (relating to refundable credits) and inserted
after section 34.
(2) TECHNICAL AMENDMENTS.—
(A) Section 35 of such Code is redesig-
nated as section 36.
(B) Section 21 of such Code is redesig-
nated as section 35.
(C) Paragraph (1) of section 35(a) of such
Code (as redesignated by subparagraph (B)) is
amended by striking ‘‘this chapter’’ and insert-
ing ‘‘this subtitle’’.
(D) Subparagraph (C) of section 129(a)(2)
of such Code is amended by striking ‘‘section
21(e)’’ and inserting ‘‘section 35(e)’’.
(E) Paragraph (2) of section 129(b) of
such Code is amended by striking ‘‘section
21(d)(2)’’ and inserting ‘‘section 35(d)(2)’’.
(F) Paragraph (1) of section 129(e) of
such Code is amended by striking ‘‘section
21(b)(2)’’ and inserting ‘‘section 35(b)(2)’’.
(G) Subsection (e) of section 213 of such
Code is amended by striking ‘‘section 21’’ and
inserting ‘‘section 35’’.
(H) Paragraph (2) of section 1324(b) of
title 31, United States Code, is amended by in-
serting before the period ‘‘, or from section 35
of such Code’’.
(I) The table of sections for subpart C of
part IV of subchapter A of chapter 1 of such
Code is amended by striking the item relating
to section 35 and inserting the following:
‘‘Sec. 35. Expenses for household and dependent care services
necessary for gainful employment.
‘‘Sec. 36. Overpayments of tax.’’.
(J) The table of sections for subpart A of
such part IV is amended by striking the item
relating to section 21.
(b) HIGHER-INCOME TAXPAYERS INELIGIBLE FOR
CREDIT.—Subsection (a) of section 35 of such Code, as
redesignated by subsection (a), is amended by adding at
the end the following new paragraph:
‘‘(3) PHASEOUT
OF
CREDIT
FOR
HIGHER-IN-
COME TAXPAYERS.—The amount of the credit which
would (but for this paragraph) be allowed by this
section shall be reduced (but not below zero) by an
amount which bears the same ratio to such amount
of credit as the excess of the taxpayer’s adjusted
gross income for the taxable year over $60,000 bears
to $20,000. Any reduction determined under the
preceding sentence which is not a multiple of $10
shall be rounded to the nearest multiple of $10.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 222. FUNDING OF CHILD CARE SERVICES.
(a) ELIMINATION OF CHILD CARE PROGRAMS.—
(1) AFDC AND
TRANSITIONAL
CHILD
CARE
PROGRAMS.—
(A) 
REPEALER.—Section 
402(g) 
(42
U.S.C. 602(g)) is hereby repealed.
(B) CONFORMING AMENDMENTS.—
(i) Section 403(a)(3) (42 U.S.C.
603(a)(3)) is amended by striking ‘‘other
than services furnished pursuant to section
402(g)’’.
(ii) Section 403(e) (42 U.S.C. 603(e))
is amended—
(I) by striking ‘‘, 402(a)(43), and
402(g)(1),’’ 
and 
inserting 
‘‘and
402(a)(43)’’; and
(II) by striking the 2nd sentence.
(2) AT-RISK CHILD CARE PROGRAM.—Sections
402(i) and 403(n) (42 U.S.C. 602(i) and 603(n))
are hereby repealed.
(3) CHILD CARE PROGRAMS UNDER THE CHILD
CARE
AND
DEVELOPMENT
BLOCK
GRANT
ACT
OF
1990.—The Child Care and Development Block
Grant Act of 1990 (42 U.S.C. 9858 et seq.) is here-
by repealed.
(b) FUNDING OF CHILD CARE SERVICES THROUGH
SOCIAL SERVICES BLOCK GRANT PROGRAM.—Title XX
(42 U.S.C. 1397–1397f) is amended by adding at the end
the following:
‘‘SEC. 2008. CHILD CARE.
‘‘(a) CONDITIONAL ENTITLEMENT.—In addition to
any payment under section 2002 or 2007, each State with
a plan approved under this section for a fiscal year shall
be entitled to payment of an amount equal to the special
allotment of the State for the fiscal year.
‘‘(b) STATE PLANS.—
‘‘(1) CONTENT.—A plan meets the require-
ments of this paragraph if the plan—
‘‘(A) identifies an appropriate State agency
to be the lead agency responsible for admin-
istering at the State level, and coordinating
with local governments, the activities of the
State pursuant to this section;
‘‘(B) describes the activities the State will
carry out with funds provided under this sec-
tion;
‘‘(C) provides assurances that the funds
provided under this section will be used to sup-
plement, not supplant, State and local funds as
well as Federal funds provided under any Act
and applied to child care activities in the State
during fiscal year 1989;
‘‘(D) provides assurances that the State
will not expend more than 7 percent of the
funds provided to the States under this section
for the fiscal year for administrative expenses;
‘‘(E) provides assurances that, in providing
child care assistance, the State will give priority
to families with low income and families living
in a low-income geographical area;
‘‘(F) ensures that child care providers re-
imbursed under this section meet applicable
standards of State and local law;
‘‘(G) provides assurances that the lead
agency will coordinate the use of funds provided
under this section with the use of other Federal
resources for child care provided under this Act,
and with other Federal, State, or local child
care and preschool programs operated in the
State;
‘‘(H) provides for the establishment of
such fiscal and accounting procedures as may
be necessary to—
‘‘(i) ensure a proper accounting of
Federal funds received by the State under
this section; and
‘‘(ii) ensure the proper verification of
the reports submitted by the State under
subsection (f)(2);
‘‘(I) provides assurances that the State will
not impose more stringent standards and licens-
ing or regulatory requirements on child care
providers receiving funds provided under this
section than those imposed on other child care
providers in the State;
‘‘(J) provides assurances that the State
will not implement any policy or practice which
has the effect of significantly restricting paren-
tal choice by—
‘‘(i) expressly or effectively excluding
any category of care or type of provider
within a category of care;
‘‘(ii) limiting parental access to or
choices from among various categories of
care or types of providers; or
‘‘(iii) excluding a significant number
of providers in any category of care; and
‘‘(K) provides assurances that parents will
be informed regarding their options under this
section, including the option of receiving a child
care certificate or voucher.
‘‘(2) FORM.—A State may submit a plan that
meets the requirements of paragraph (1) in the form
of amendments to the State plan submitted pursu-
ant to section 658E of the Child Care and Develop-
ment Block Grant Act of 1990, as in effect before
the effective date of section 222 of the Individual
Responsibility Act of 1995.
‘‘(3) APPROVAL.—Not later than 90 days after
the date the State submits a plan to the Secretary
under this subsection, the Secretary shall either ap-
prove or disapprove the plan. If the Secretary dis-
approves the plan, the Secretary shall provide the
State with an explanation and recommendations for
changes in the plan to gain approval.
‘‘(c) SPECIAL ALLOTMENTS.—
‘‘(1) IN GENERAL.—The special allotment of a
State for a fiscal year equals the amount that bears
the same ratio to the amount specified in paragraph
(2) for the fiscal year, as the number of children
who have not attained 13 years of age and are resid-
ing with families in the State bears to the total
number of such children in all States with plans ap-
proved under this section for the fiscal year, deter-
mined on the basis of the most recent data available
from the Department of Commerce at the time the
special allotment is determined.
‘‘(2) AMOUNT SPECIFIED.—The amount speci-
fied in this paragraph is—
‘‘(A) $1,400,000,000 for fiscal year 1997;
and
‘‘(B) $1,450,000,000 for each of fiscal
years 1998, 1999, and 2000.
‘‘(d) PAYMENTS TO STATES.—
‘‘(1) PAYMENTS.—The Secretary shall provide
funds to each State with a plan approved under this
section for a fiscal year from the special allotment
of the State for the fiscal year, in accordance with
section 6503 of title 31, United States Code.
‘‘(2) EXPENDITURE OF FUNDS BY STATES.—
Except as provided in paragraph (3)(A), each State
to which funds are paid under this section for a fis-
cal year shall expend such funds in the fiscal year
or in the immediately succeeding fiscal year.
‘‘(3) REDISTRIBUTION OF UNEXPENDED SPE-
CIAL ALLOTMENTS.—
‘‘(A) REMITTANCE TO THE SECRETARY.—
Each State to which funds are paid under this
section for a fiscal year shall remit to the Sec-
retary that part of such funds which the State
intends not to, or does not, expend in the fiscal
year or in the immediately succeeding fiscal
year.
‘‘(B) 
REDISTRIBUTION.—The 
Secretary
shall increase the special allotment of each
State with a plan approved under this part for
a fiscal year that does not remit any amount to
the Secretary for the fiscal year by an amount
equal to—
‘‘(i) the aggregate of the amounts re-
mitted pursuant to subparagraph (A) for
the fiscal year; multiplied by
‘‘(ii) the adjusted State share for the
fiscal year.
‘‘(C) ADJUSTED STATE SHARE.—As used
in subparagraph (B)(ii), the term ‘adjusted
State share’ means, with respect to a fiscal
year—
‘‘(i) the special allotment of the State
for the fiscal year (before any increase
under subparagraph (B)); divided by
‘‘(ii)(I) the sum of the special allot-
ments of all States with plans approved
under this part for the fiscal year; minus
‘‘(II) the aggregate of the amounts re-
mitted to the Secretary pursuant to sub-
paragraph (A) for the fiscal year.
‘‘(e) USE OF FUNDS.—
‘‘(1) IN GENERAL.—Funds provided under this
section shall be used to expand parent choices in se-
lecting child care, to address deficiencies in the sup-
ply of child care, and to expand and improve child
care services, with an emphasis on providing such
services to low-income families and geographical
areas. Subject to the approval of the Secretary,
States to which funds are paid under this section
shall use such funds to carry out child care pro-
grams and activities through cash grants, certifi-
cates, or contracts with families, or public or private
entities as the State determines appropriate. States
shall take parental preference into account to the
maximum extent possible in carrying out child care
programs.
‘‘(2) SPECIFIC
USES.—Each State to which
funds are paid under this section may expend such
funds for—
‘‘(A) child care services for infants, sick
children, children with special needs, and chil-
dren of adolescent parents;
‘‘(B) after-school and before-school pro-
grams and programs during nontraditional
hours for the children of working parents;
‘‘(C) programs for the recruitment and
training of day care workers, including older
Americans;
‘‘(D) grant and loan programs to enable
child care workers and providers to meet State
and local standards and requirements;
‘‘(E) child care programs developed by
public and private sector partnerships;
‘‘(F) State efforts to provide technical as-
sistance designed to help providers improve the
services offered to parents and children; and
‘‘(G) other child care-related programs
consistent with the purpose of this section and
approved by the Secretary.
‘‘(3) LIMITATIONS ON USE OF FUNDS.—A State
to which funds are paid under this section for a fis-
cal year shall use not less than 80 percent of such
funds to provide direct child care assistance to low-
income parents through child care certificates or
vouchers, contracts, or grants.
‘‘(4) METHODS OF FUNDING.—Funds for child
care services under this title shall be for the benefit
of parents and shall be provided through child care
vouchers or certificates provided directly to parents
or through contracts or grants with public or private
providers.
‘‘(5) PARENTAL RIGHTS OF CHOICE.—Any par-
ent who receives a child care certificate under this
title may use such certificate with any child care
provider, including those providers which have reli-
gious activities, if such provider is freely chosen by
the parent from among the available alternatives.
‘‘(6) CHILD CARE CERTIFICATES.—
177
(1) TO PART D OF TITLE IV OF THE SOCIAL SE-
CURITY
ACT.—Section 
454(8)(B) 
(42 
U.S.C.
654(8)(B)) is amended to read as follows:
‘‘(B) the Federal Parent Locator Service
established under section 453;’’.
(2) TO FEDERAL UNEMPLOYMENT TAX ACT.—
Section 3304(16) of the Internal Revenue Code of
1986 is amended—
(A) by striking ‘‘Secretary of Health, Edu-
cation, and Welfare’’ each place such term ap-
pears and inserting ‘‘Secretary of Health and
Human Services’’;
(B) in subparagraph (B), by striking
‘‘such information’’ and all that follows and in-
serting ‘‘information furnished under subpara-
graph (A) or (B) is used only for the purposes
authorized under such subparagraph;’’;
(C) by striking ‘‘and’’ at the end of sub-
paragraph (A);
(D) by redesignating subparagraph (B) as
subparagraph (C); and
(E) by inserting after subparagraph (A)
the following new subparagraph:
‘‘(B) wage and unemployment compensa-
tion information contained in the records of