H. R. 6111—41
(D) by inserting after subparagraph (A)(ii) (as so 
redesignated) the following: 
‘‘(B) the issue meets the requirement of clause (i) or 
(ii) of section 6702(b)(2)(A).’’. 
(3) 
STATEMENT
OF
GROUNDS.—Section 
6330(b)(1) 
is 
amended by striking ‘‘under subsection (a)(3)(B)’’ and inserting 
‘‘in writing under subsection (a)(3)(B) and states the grounds 
for the requested hearing’’. 
(c) TREATMENT OF FRIVOLOUS REQUESTS FOR HEARINGS UPON 
FILING OF NOTICE OF LIEN.—Section 6320 is amended—
(1) in subsection (b)(1), by striking ‘‘under subsection 
(a)(3)(B)’’ and inserting ‘‘in writing under subsection (a)(3)(B) 
and states the grounds for the requested hearing’’, and 
(2) in subsection (c), by striking ‘‘and (e)’’ and inserting 
‘‘(e), and (g)’’. 
(d) TREATMENT OF FRIVOLOUS APPLICATIONS FOR OFFERS-IN-
COMPROMISE
AND INSTALLMENT AGREEMENTS.—Section 7122 is 
amended by adding at the end the following new subsection: 
‘‘(f) FRIVOLOUS SUBMISSIONS, ETC.—Notwithstanding any other 
provision of this section, if the Secretary determines that any por-
tion of an application for an offer-in-compromise or installment 
agreement submitted under this section or section 6159 meets the 
requirement of clause (i) or (ii) of section 6702(b)(2)(A), then the 
Secretary may treat such portion as if it were never submitted 
and such portion shall not be subject to any further administrative 
or judicial review.’’. 
(e) CLERICAL AMENDMENT.—The table of sections for part I 
of subchapter B of chapter 68 is amended by striking the item 
relating to section 6702 and inserting the following new item:
‘‘Sec. 6702. Frivolous tax submissions.’’.
(f) EFFECTIVE DATE.—The amendments made by this section 
shall apply to submissions made and issues raised after the date 
on which the Secretary first prescribes a list under section 6702(c) 
of the Internal Revenue Code of 1986, as amended by subsection 
(a). 
SEC. 
408. 
ADDITION 
OF 
MENINGOCOCCAL 
AND 
HUMAN 
PAPILLOMAVIRUS VACCINES TO LIST OF TAXABLE VAC-
CINES. 
(a) MENINGOCOCCAL VACCINE.—Section 4132(a)(1) (defining tax-
able vaccine) is amended by adding at the end the following new 
subparagraph: 
‘‘(O) Any meningococcal vaccine.’’. 
(b) HUMAN PAPILLOMAVIRUS VACCINE.—Section 4132(a)(1), as 
amended by subsection (a), is amended by adding at the end the 
following new subparagraph: 
‘‘(P) Any vaccine against the human papillomavirus.’’. 
(c) EFFECTIVE DATE.—
(1) SALES, ETC.—The amendments made by this section 
shall apply to sales and uses on or after the first day of 
the first month which begins more than 4 weeks after the 
date of the enactment of this Act. 
(2) DELIVERIES.—For purposes of paragraph (1) and section 
4131 of the Internal Revenue Code of 1986, in the case of 
sales on or before the effective date described in such paragraph
H. R. 6111—42
for which delivery is made after such date, the delivery date 
shall be considered the sale date. 
SEC. 409. CLARIFICATION OF TAXATION OF CERTAIN SETTLEMENT 
FUNDS MADE PERMANENT. 
(a) IN GENERAL.—Subsection (g) of section 468B is amended 
by striking paragraph (3). 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect as if included in section 201 of the Tax Increase 
Prevention and Reconciliation Act of 2005. 
SEC. 410. MODIFICATION OF ACTIVE BUSINESS DEFINITION UNDER 
SECTION 355 MADE PERMANENT. 
(a) IN
GENERAL.—Subparagraphs (A) and (D) of section 
355(b)(3) are each amended by striking ‘‘and on or before December 
31, 2010’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall take effect as if included in section 202 of the Tax Increase 
Prevention and Reconciliation Act of 2005. 
SEC. 411. REVISION OF STATE VETERANS LIMIT MADE PERMANENT. 
(a) IN GENERAL.—Subparagraph (B) of section 143(l)(3) is 
amended by striking clause (iv). 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect as if included in section 203 of the Tax Increase 
Prevention and Reconciliation Act of 2005. 
SEC. 412. CAPITAL GAINS TREATMENT FOR CERTAIN SELF-CREATED 
MUSICAL WORKS MADE PERMANENT. 
(a) IN GENERAL.—Paragraph (3) of section 1221(b) is amended 
by striking ‘‘before January 1, 2011,’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect as if included in section 204 of the Tax Increase 
Prevention and Reconciliation Act of 2005. 
SEC. 413. REDUCTION IN MINIMUM VESSEL TONNAGE WHICH QUALI-
FIES FOR TONNAGE TAX MADE PERMANENT. 
(a) IN GENERAL.—Paragraph (4) of section 1355(a) is amended 
by striking ‘‘10,000 (6,000, in the case of taxable years beginning 
after December 31, 2005, and ending before January 1, 2011)’’ 
and inserting ‘‘6,000’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect as if included in section 205 of the Tax Increase 
Prevention and Reconciliation Act of 2005. 
SEC. 414. MODIFICATION OF SPECIAL ARBITRAGE RULE FOR CERTAIN 
FUNDS MADE PERMANENT. 
(a) IN GENERAL.—Section 206 of the Tax Increase Prevention 
and Reconciliation Act of 2005 is amended by striking ‘‘and before 
August 31, 2009’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect as if included in section 206 of the Tax Increase 
Prevention and Reconciliation Act of 2005. 
SEC. 415. GREAT LAKES DOMESTIC SHIPPING TO NOT DISQUALIFY 
VESSEL FROM TONNAGE TAX. 
(a) IN GENERAL.—Section 1355 (relating to definitions and spe-
cial rules) is amended by redesignating subsection (g) as subsection
H. R. 6111—43
(h) and by inserting after subsection (f) the following new sub-
section: 
‘‘(g) GREAT LAKES DOMESTIC SHIPPING
TO
NOT DISQUALIFY 
VESSEL.—
‘‘(1) IN GENERAL.—If the electing corporation elects (at such 
time and in such manner as the Secretary may require) to 
apply this subsection for any taxable year to any qualifying 
vessel which is used in qualified zone domestic trade during 
the taxable year—
‘‘(A) solely for purposes of subsection (a)(4), such use 
shall be treated as use in United States foreign trade 
(and not as use in United States domestic trade), and 
‘‘(B) subsection (f) shall not apply with respect to such 
vessel for such taxable year. 
‘‘(2) EFFECT OF TEMPORARILY OPERATING VESSEL IN UNITED 
STATES DOMESTIC TRADE.—In the case of a qualifying vessel 
to which this subsection applies—
‘‘(A) IN
GENERAL.—An electing corporation shall be 
treated as using such vessel in qualified zone domestic 
trade during any period of temporary use in the United 
States domestic trade (other than qualified zone domestic 
trade) if the electing corporation gives timely notice to 
the Secretary stating—
‘‘(i) that it temporarily operates or has operated 
in the United States domestic trade (other than quali-
fied zone domestic trade) a qualifying vessel which 
had been used in the United States foreign trade or 
qualified zone domestic trade, and 
‘‘(ii) its intention to resume operation of the vessel 
in the United States foreign trade or qualified zone 
domestic trade. 
‘‘(B) NOTICE.—Notice shall be deemed timely if given 
not later than the due date (including extensions) for the 
corporation’s tax return for the taxable year in which the 
temporary cessation begins. 
‘‘(C) PERIOD DISREGARD IN EFFECT.—The period of tem-
porary use under subparagraph (A) continues until the 
earlier of the date of which—
‘‘(i) the electing corporation abandons its intention 
to resume operations of the vessel in the United States 
foreign trade or qualified zone domestic trade, or 
‘‘(ii) the electing corporation resumes operation of 
the vessel in the United States foreign trade or quali-
fied zone domestic trade. 
‘‘(D) NO DISREGARD IF DOMESTIC TRADE USE EXCEEDS 
30 DAYS.—Subparagraph (A) shall not apply to any quali-
fying vessel which is operated in the United States domestic 
trade (other than qualified zone domestic trade) for more 
than 30 days during the taxable year. 
‘‘(3) ALLOCATION OF INCOME AND DEDUCTIONS TO QUALI-
FYING SHIPPING ACTIVITIES.—In the case of a qualifying vessel 
to which this subsection applies, the Secretary shall prescribe 
rules for the proper allocation of income, expenses, losses, and 
deductions between the qualified shipping activities and the 
other activities of such vessel. 
‘‘(4) QUALIFIED ZONE DOMESTIC TRADE.—For purposes of 
this subsection—
H. R. 6111—44
‘‘(A) IN GENERAL.—The term ‘qualified zone domestic 
trade’ means the transportation of goods or passengers 
between places in the qualified zone if such transportation 
is in the United States domestic trade. 
‘‘(B) QUALIFIED ZONE.—The term ‘qualified zone’ means 
the Great Lakes Waterway and the St. Lawrence Seaway.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to taxable years beginning after the date of the enact-
ment of this Act. 
SEC. 416. USE OF QUALIFIED MORTGAGE BONDS TO FINANCE RESI-
DENCES FOR VETERANS WITHOUT REGARD TO FIRST-
TIME HOMEBUYER REQUIREMENT. 
(a) IN GENERAL.—Section 143(d)(2) (relating to exceptions to 
3-year requirement) is amended by striking ‘‘and’’ at the end of 
subparagraph (B), by adding ‘‘and’’ at the end of subparagraph 
(C), and by inserting after subparagraph (C) the following new 
subparagraph: 
‘‘(D) in the case of bonds issued after the date of 
the enactment of this subparagraph and before January 
1, 2008, financing of any residence for a veteran (as defined 
in section 101 of title 38, United States Code), if such 
veteran has not previously qualified for and received such 
financing by reason of this subparagraph,’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to bonds issued after the date of the enactment of 
this Act. 
SEC. 417. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL RESI-
DENCE BY CERTAIN EMPLOYEES OF THE INTELLIGENCE 
COMMUNITY. 
(a) IN
GENERAL.—Subparagraph (A) of section 121(d)(9) 
(relating to exclusion of gain from sale of principal residence) is 
amended by striking ‘‘duty’’ and all that follows and inserting 
the following: 
‘‘duty—
‘‘(i) as a member of the uniformed services, 
‘‘(ii) as a member of the Foreign Service of the 
United States, or 
‘‘(iii) as an employee of the intelligence commu-
nity.’’. 
(b) EMPLOYEE
OF
INTELLIGENCE
COMMUNITY
DEFINED.—
Subparagraph (C) of section 121(d)(9) is amended by redesignating 
clause (iv) as clause (v) and by inserting after clause (iii) the 
following new clause: 
‘‘(iv) EMPLOYEE
OF
INTELLIGENCE
COMMUNITY.—
The term ‘employee of the intelligence community’ 
means an employee (as defined by section 2105 of 
title 5, United States Code) of—
‘‘(I) the Office of the Director of National Intel-
ligence, 
‘‘(II) the Central Intelligence Agency, 
‘‘(III) the National Security Agency, 
‘‘(IV) the Defense Intelligence Agency, 
‘‘(V) 
the 
National 
Geospatial-Intelligence 
Agency, 
‘‘(VI) the National Reconnaissance Office,
H. R. 6111—45
‘‘(VII) any other office within the Department 
of Defense for the collection of specialized national 
intelligence through reconnaissance programs, 
‘‘(VIII) any of the intelligence elements of the 
Army, the Navy, the Air Force, the Marine Corps, 
the Federal Bureau of Investigation, the Depart-
ment of Treasury, the Department of Energy, and 
the Coast Guard, 
‘‘(IX) the Bureau of Intelligence and Research 
of the Department of State, or 
‘‘(X) any of the elements of the Department 
of Homeland Security concerned with the analyses 
of foreign intelligence information.’’. 
(c) SPECIAL RULE.—Subparagraph (C) of section 121(d)(9), as 
amended by subsection (b), is amended by adding at the end the 
following new clause: 
‘‘(vi) SPECIAL
RULE
RELATING
TO
INTELLIGENCE 
COMMUNITY.—An employee of the intelligence commu-
nity shall not be treated as serving on qualified 
extended duty unless such duty is at a duty station 
located outside the United States.’’. 
(d) CONFORMING
AMENDMENT.—The heading for section 
121(d)(9) is amended to read as follows: ‘‘UNIFORMED SERVICES, 
FOREIGN SERVICE, AND INTELLIGENCE COMMUNITY’’. 
(e) EFFECTIVE DATE.—The amendments made by this section 
shall apply to sales or exchanges after the date of the enactment 
of this Act and before January 1, 2011. 
SEC. 418. SALE OF PROPERTY BY JUDICIAL OFFICERS. 
(a) IN GENERAL.—Section 1043(b) (relating to the sale of prop-
erty to comply with conflict-of-interest requirements) is amended—
(1) in paragraph (1)—
(A) in subparagraph (A), by inserting ‘‘, or a judicial 
officer,’’ after ‘‘an officer or employee of the executive 
branch’’; and 
(B) in subparagraph (B), by inserting ‘‘judicial canon,’’ 
after ‘‘any statute, regulation, rule,’’; 
(2) in paragraph (2)—
(A) in subparagraph (A), by inserting ‘‘judicial canon,’’ 
after ‘‘any Federal conflict of interest statute, regulation, 
rule,’’; and 
(B) in subparagraph (B), by inserting after ‘‘the 
Director of the Office of Government Ethics,’’ the following: 
‘‘in the case of executive branch officers or employees, or 
by the Judicial Conference of the United States (or its 
designee), in the case of judicial officers,’’; and 
(3) in paragraph (5)(B), by inserting ‘‘judicial canon,’’ after 
‘‘any statute, regulation, rule,’’. 
(b) JUDICIAL OFFICER DEFINED.—Section 1043(b) is amended 
by adding at the end the following new paragraph: 
‘‘(6) JUDICIAL OFFICER.—The term ‘judicial officer’ means 
the Chief Justice of the United States, the Associate Justices 
of the Supreme Court, and the judges of the United States 
courts of appeals, United States district courts, including the 
district courts in Guam, the Northern Mariana Islands, and 
the Virgin Islands, Court of Appeals for the Federal Circuit, 
Court of International Trade, Tax Court, Court of Federal
H. R. 6111—46
Claims, Court of Appeals for Veterans Claims, United States 
Court of Appeals for the Armed Forces, and any court created 
by Act of Congress, the judges of which are entitled to hold 
office during good behavior.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to sales after the date of enactment of this Act. 
SEC. 419. PREMIUMS FOR MORTGAGE INSURANCE. 
(a) IN GENERAL.—Section 163(h)(3) (relating to qualified resi-
dence interest) is amended by adding at the end the following 
new subparagraph: 
‘‘(E) MORTGAGE
INSURANCE
PREMIUMS
TREATED
AS 
INTEREST.—
‘‘(i) IN GENERAL.—Premiums paid or accrued for 
qualified mortgage insurance by a taxpayer during the 
taxable year in connection with acquisition indebted-
ness with respect to a qualified residence of the tax-
payer shall be treated for purposes of this section as 
interest which is qualified residence interest. 
‘‘(ii) PHASEOUT.—The amount otherwise treated as 
interest under clause (i) shall be reduced (but not 
below zero) by 10 percent of such amount for each 
$1,000 ($500 in the case of a married individual filing 
a separate return) (or fraction thereof) that the tax-
payer’s adjusted gross income for the taxable year 
exceeds $100,000 ($50,000 in the case of a married 
individual filing a separate return). 
‘‘(iii) LIMITATION.—Clause (i) shall not apply with 
respect to any mortgage insurance contracts issued 
before January 1, 2007. 
‘‘(iv) TERMINATION.—Clause (i) shall not apply to 
amounts—
‘‘(I) paid or accrued after December 31, 2007, 
or 
‘‘(II) properly allocable to any period after such 
date.’’. 
(b) DEFINITION AND SPECIAL RULES.—Section 163(h)(4) (relating 
to other definitions and special rules) is amended by adding at 
the end the following new subparagraphs: 
‘‘(E) QUALIFIED
MORTGAGE
INSURANCE.—The term 
‘qualified mortgage insurance’ means—
‘‘(i) mortgage insurance provided by the Veterans 
Administration, the Federal Housing Administration, 
or the Rural Housing Administration, and 
‘‘(ii) private mortgage insurance (as defined by sec-
tion 2 of the Homeowners Protection Act of 1998 (12 
U.S.C. 4901), as in effect on the date of the enactment 
of this subparagraph). 
‘‘(F) SPECIAL RULES FOR PREPAID QUALIFIED MORTGAGE 
INSURANCE.—Any amount paid by the taxpayer for qualified 
mortgage insurance that is properly allocable to any mort-
gage the payment of which extends to periods that are 
after the close of the taxable year in which such amount 
is paid shall be chargeable to capital account and shall 
be treated as paid in such periods to which so allocated. 
No deduction shall be allowed for the unamortized balance 
of such account if such mortgage is satisfied before the
H. R. 6111—47
end of its term. The preceding sentences shall not apply 
to amounts paid for qualified mortgage insurance provided 
by the Veterans Administration or the Rural Housing 
Administration.’’. 
(c) INFORMATION RETURNS RELATING
TO MORTGAGE INSUR-
ANCE.—Section 6050H (relating to returns relating to mortgage 
interest received in trade or business from individuals) is amended 
by adding at the end the following new subsection: 
‘‘(h) RETURNS RELATING TO MORTGAGE INSURANCE PREMIUMS.—
‘‘(1) IN GENERAL.—The Secretary may prescribe, by regula-
tions, that any person who, in the course of a trade or business, 
receives from any individual premiums for mortgage insurance 
aggregating $600 or more for any calendar year, shall make 
a return with respect to each such individual. Such return 
shall be in such form, shall be made at such time, and shall 
contain such information as the Secretary may prescribe. 
‘‘(2) STATEMENT TO BE FURNISHED TO INDIVIDUALS WITH 
RESPECT TO WHOM INFORMATION IS REQUIRED.—Every person 
required to make a return under paragraph (1) shall furnish 
to each individual with respect to whom a return is made 
a written statement showing such information as the Secretary 
may prescribe. Such written statement shall be furnished on 
or before January 31 of the year following the calendar year 
for which the return under paragraph (1) was required to 
be made. 
‘‘(3) SPECIAL RULES.—For purposes of this subsection—
‘‘(A) rules similar to the rules of subsection (c) shall 
apply, and 
‘‘(B) the term ‘mortgage insurance’ means—
‘‘(i) mortgage insurance provided by the Veterans 
Administration, the Federal Housing Administration, 
or the Rural Housing Administration, and 
‘‘(ii) private mortgage insurance (as defined by sec-
tion 2 of the Homeowners Protection Act of 1998 (12 
U.S.C. 4901), as in effect on the date of the enactment 
of this subsection).’’. 
(d) EFFECTIVE DATE.—The amendments made by this section 
shall apply to amounts paid or accrued after December 31, 2006. 
SEC. 420. MODIFICATION OF REFUNDS FOR KEROSENE USED IN AVIA-
TION. 
(a) IN GENERAL.—Paragraph (4) of section 6427(l) (relating 
to nontaxable uses of diesel fuel and kerosene) is amended to 
read as follows: 
‘‘(4) REFUNDS FOR KEROSENE USED IN AVIATION.—
‘‘(A) KEROSENE USED IN COMMERCIAL AVIATION.—In the 
case of kerosene used in commercial aviation (as defined 
in section 4083(b)) (other than supplies for vessels or air-
craft within the meaning of section 4221(d)(3)), paragraph 
(1) shall not apply to so much of the tax imposed by 
section 4041 or 4081, as the case may be, as is attributable 
to—
‘‘(i) the Leaking Underground Storage Tank Trust 
Fund financing rate imposed by such section, and 
‘‘(ii) so much of the rate of tax specified in section 
4041(c) or 4081(a)(2)(A)(iii), as the case may be, as 
does not exceed 4.3 cents per gallon.
H. R. 6111—48
‘‘(B) KEROSENE USED IN NONCOMMERCIAL AVIATION.—
In the case of kerosene used in aviation that is not commer-
cial aviation (as so defined) (other than any use which 
is exempt from the tax imposed by section 4041(c) other 
than by reason of a prior imposition of tax), paragraph 
(1) shall not apply to—
‘‘(i) any tax imposed by subsection (c) or (d)(2) 
of section 4041, and 
‘‘(ii) so much of the tax imposed by section 4081 
as is attributable to—
‘‘(I) the Leaking Underground Storage Tank 
Trust Fund financing rate imposed by such section, 
and 
‘‘(II) so much of the rate of tax specified in 
section 4081(a)(2)(A)(iii) as does not exceed the 
rate specified in section 4081(a)(2)(C)(ii). 
‘‘(C) PAYMENTS TO ULTIMATE, REGISTERED VENDOR.—
‘‘(i) IN GENERAL.—With respect to any kerosene 
used in aviation (other than kerosene described in 
clause (ii) or kerosene to which paragraph (5) applies), 
if the ultimate purchaser of such kerosene waives (at 
such time and in such form and manner as the Sec-
retary shall prescribe) the right to payment under 
paragraph (1) and assigns such right to the ultimate 
vendor, then the Secretary shall pay the amount which 
would be paid under paragraph (1) to such ultimate 
vendor, but only if such ultimate vendor—
‘‘(I) is registered under section 4101, and 
‘‘(II) meets the requirements of subparagraph 
(A), (B), or (D) of section 6416(a)(1). 
‘‘(ii) PAYMENTS
FOR
KEROSENE
USED
IN
NON-
COMMERCIAL AVIATION.—The amount which would be 
paid under paragraph (1) with respect to any kerosene 
to which subparagraph (B) applies shall be paid only 
to the ultimate vendor of such kerosene. A payment 
shall be made to such vendor if such vendor—
‘‘(I) is registered under section 4101, and 
‘‘(II) meets the requirements of subparagraph 
(A), (B), or (D) of section 6416(a)(1).’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 6427(l) is amended by striking paragraph (5) 
and by redesignating paragraph (6) as paragraph (5). 
(2) Section 4082(d)(2)(B) is amended by striking ‘‘section 
6427(l)(6)(B)’’ and inserting ‘‘section 6427(l)(5)(B)’’. 
(3) Section 6427(i)(4)(A) is amended—
(A) by striking ‘‘paragraph (4)(B), (5), or (6)’’ each place 
it appears and inserting ‘‘paragraph (4)(C) or (5)’’, and 
(B) by striking ‘‘(l)(5), and (l)(6)’’ and inserting 
‘‘(l)(4)(C)(ii), and (l)(5)’’. 
(4) Section 6427(l)(1) is amended by striking ‘‘paragraph 
(4)(B)’’ and inserting ‘‘paragraph (4)(C)(i)’’. 
(5) Section 9502(d) is amended—
(A) in paragraph (2), by striking ‘‘and (l)(5)’’, and 
(B) in paragraph (3), by striking ‘‘or (5)’’. 
(6) Section 9503(c)(7) is amended—
(A) by amending subparagraphs (A) and (B) to read 
as follows:
H. R. 6111—49
‘‘(A) 4.3 cents per gallon of kerosene subject to section 
6427(l)(4)(A) with respect to which a payment has been 
made by the Secretary under section 6427(l), and 
‘‘(B) 21.8 cents per gallon of kerosene subject to section 
6427(l)(4)(B) with respect to which a payment has been 
made by the Secretary under section 6427(l).’’, and 
(B) in the matter following subparagraph (B), by 
striking ‘‘or (5)’’. 
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by this section 
shall apply to kerosene sold after September 30, 2005. 
(2) SPECIAL RULE FOR PENDING CLAIMS.—In the case of 
kerosene sold for use in aviation (other than kerosene to which 
section 6427(l)(4)(C)(ii) of the Internal Revenue Code of 1986 
(as added by subsection (a)) applies or kerosene to which section 
6427(l)(5) of such Code (as redesignated by subsection (b)) 
applies) after September 30, 2005, and before the date of the 
enactment of this Act, the ultimate purchaser shall be treated 
as having waived the right to payment under section 6427(l)(1) 
of such Code and as having assigned such right to the ultimate 
vendor if such ultimate vendor has met the requirements of 
subparagraph (A), (B), or (D) of section 6416(a)(1) of such 
Code. 
(d) SPECIAL RULE FOR KEROSENE USED IN AVIATION ON A FARM 
FOR FARMING PURPOSES.—
(1) REFUNDS FOR PURCHASES AFTER DECEMBER 31, 2004, 
AND BEFORE OCTOBER 1, 2005.—The Secretary of the Treasury 
shall pay to the ultimate purchaser of any kerosene which 
is used in aviation on a farm for farming purposes and which 
was purchased after December 31, 2004, and before October 
1, 2005, an amount equal to the aggregate amount of tax 
imposed on such fuel under section 4041 or 4081 of the Internal 
Revenue Code of 1986, as the case may be, reduced by any 
payment to the ultimate vendor under section 6427(l)(5)(C) 
of such Code (as in effect on the day before the date of the 
enactment of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: a Legacy for Users). 
(2) USE ON A FARM FOR FARMING PURPOSES.—For purposes 
of paragraph (1), kerosene shall be treated as used on a farm 
for farming purposes if such kerosene is used for farming 
purposes (within the meaning of section 6420(c)(3) of the 
Internal Revenue Code of 1986) in carrying on a trade or 
business on a farm situated in the United States. For purposes 
of the preceding sentence, rules similar to the rules of section 
6420(c)(4) of such Code shall apply. 
(3) TIME FOR FILING CLAIMS.—No claim shall be allowed 
under paragraph (1) unless the ultimate purchaser files such 
claim before the date that is 3 months after the date of the 
enactment of this Act. 
(4) NO DOUBLE BENEFIT.—No amount shall be paid under 
paragraph (1) or section 6427(l) of the Internal Revenue Code 
of 1986 with respect to any kerosene described in paragraph 
(1) to the extent that such amount is in excess of the tax 
imposed on such kerosene under section 4041 or 4081 of such 
Code, as the case may be.
H. R. 6111—50
(5) APPLICABLE
LAWS.—For purposes of this subsection, 
rules similar to the rules of section 6427(j) of the Internal 
Revenue Code of 1986 shall apply. 
SEC. 421. REGIONAL INCOME TAX AGENCIES TREATED AS STATES FOR 
PURPOSES 
OF 
CONFIDENTIALITY 
AND 
DISCLOSURE 
REQUIREMENTS. 
(a) IN GENERAL.—Paragraph (5) of section 6103(b) is amended 
to read as follows: 
‘‘(5) STATE.—
‘‘(A) IN GENERAL.—The term ‘State’ means—
‘‘(i) any of the 50 States, the District of Columbia, 
the Commonwealth of Puerto Rico, the Virgin Islands, 
the Canal Zone, Guam, American Samoa, and the 
Commonwealth of the Northern Mariana Islands, 
‘‘(ii) for purposes of subsections (a)(2), (b)(4), (d)(1), 
(h)(4), and (p), any municipality—
‘‘(I) with a population in excess of 250,000 
(as determined under the most recent decennial 
United States census data available), 
‘‘(II) which imposes a tax on income or wages, 
and 
‘‘(III) with which the Secretary (in his sole 
discretion) 
has 
entered 
into 
an 
agreement 
regarding disclosure, and 
‘‘(iii) for purposes of subsections (a)(2), (b)(4), (d)(1), 
(h)(4), and (p), any governmental entity—
‘‘(I) which is formed and operated by a quali-
fied group of municipalities, and 
‘‘(II) with which the Secretary (in his sole 
discretion) 
has 
entered 
into 
an 
agreement 
regarding disclosure. 
‘‘(B) REGIONAL INCOME TAX AGENCIES.—For purposes 
of subparagraph (A)(iii)—
‘‘(i) QUALIFIED
GROUP
OF
MUNICIPALITIES.—The 
term ‘qualified group of municipalities’ means, with 
respect to any governmental entity, 2 or more munici-
palities—
‘‘(I) each of which imposes a tax on income 
or wages, 
‘‘(II) each of which, under the authority of 
a State statute, administers the laws relating to 
the imposition of such taxes through such entity, 
and 
‘‘(III) which collectively have a population in 
excess of 250,000 (as determined under the most 
recent decennial United States census data avail-
able). 
‘‘(ii) REFERENCES TO STATE LAW, ETC.—For pur-
poses of applying subparagraph (A)(iii) to the sub-
sections referred to in such subparagraph, any ref-
erence in such subsections to State law, proceedings, 
or tax returns shall be treated as references to the 
law, proceedings, or tax returns, as the case may be, 
of the municipalities which form and operate the 
governmental entity referred to in such subparagraph.
H. R. 6111—51
‘‘(iii) DISCLOSURE
TO
CONTRACTORS
AND
OTHER 
AGENTS.—Notwithstanding any other provision of this 
section, no return or return information shall be dis-
closed to any contractor or other agent of a govern-
mental entity referred to in subparagraph (A)(iii) 
unless such entity, to the satisfaction of the Secretary—
‘‘(I) has requirements in effect which require 
each such contractor or other agent which would 
have access to returns or return information to 
provide safeguards (within the meaning of sub-
section (p)(4)) to protect the confidentiality of such 
returns or return information, 
‘‘(II) agrees to conduct an on-site review every 
3 years (or a mid-point review in the case of con-
tracts or agreements of less than 3 years in dura-
tion) of each contractor or other agent to determine 
compliance with such requirements, 
‘‘(III) submits the findings of the most recent 
review conducted under subclause (II) to the Sec-
retary as part of the report required by subsection 
(p)(4)(E), and 
‘‘(IV) certifies to the Secretary for the most 
recent annual period that such contractor or other 
agent is in compliance with all such requirements. 
The certification required by subclause (IV) shall 
include the name and address of each contractor and 
other agent, a description of the contract or agreement 
with such contractor or other agent, and the duration 
of such contract or agreement. The requirements of 
this clause shall not apply to disclosures pursuant 
to subsection (n) for purposes of Federal tax adminis-
tration and a rule similar to the rule of subsection 
(p)(8)(B) shall apply for purposes of this clause.’’. 
(b) SPECIAL RULES FOR DISCLOSURE.—Subsection (d) of section 
6103 is amended by adding at the end the following new paragraph: 
‘‘(6) LIMITATION
ON
DISCLOSURE
REGARDING
REGIONAL 
INCOME TAX AGENCIES TREATED AS STATES.—For purposes of 
paragraph (1), inspection by or disclosure to an entity described 
in subsection (b)(5)(A)(iii) shall be for the purpose of, and only 
to the extent necessary in, the administration of the laws 
of the member municipalities in such entity relating to the 
imposition of a tax on income or wages. Such entity may not 
redisclose any return or return information received pursuant 
to paragraph (1) to any such member municipality.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to disclosures made after December 31, 2006. 
SEC. 422. DESIGNATION OF WINES BY SEMI-GENERIC NAMES. 
(a) IN GENERAL.—Subsection (c) of section 5388 (relating to 
use of semi-generic designations) is amended by adding at the 
end the following new paragraph: 
‘‘(3) SPECIAL RULE FOR USE OF CERTAIN SEMI-GENERIC DES-
IGNATIONS.—
‘‘(A) IN GENERAL.—In the case of any wine to which 
this paragraph applies—
‘‘(i) paragraph (1) shall not apply,
H. R. 6111—52
‘‘(ii) in the case of wine of the European Commu-
nity, designations referred to in subparagraph (C)(i) 
may be used for such wine only if the requirement 
of subparagraph (B)(ii) is met, and 
‘‘(iii) in the case any other wine bearing a brand 
name, or brand name and fanciful name, semi-generic 
designations may be used for such wine only if the 
requirements of clauses (i), (ii), and (iii) of subpara-
graph (B) are met. 
‘‘(B) REQUIREMENTS.—
‘‘(i) The requirement of this clause is met if there 
appears in direct conjunction with the semi-generic 
designation an appropriate appellation of origin dis-
closing the origin of the wine. 
‘‘(ii) The requirement of this clause is met if the 
wine conforms to the standard of identity, if any, for 
such wine contained in the regulations under this sec-
tion or, if there is no such standard, to the trade 
understanding of such class or type. 
‘‘(iii) The requirement of this clause is met if the 
person, or its successor in interest, using the semi-
generic designation held a Certificate of Label Approval 
or Certificate of Exemption from Label Approval issued 
by the Secretary for a wine label bearing such brand 
name, or brand name and fanciful name, before March 
10, 2006, on which such semi-generic designation 
appeared. 
‘‘(C) WINES TO WHICH PARAGRAPH APPLIES.—
‘‘(i) IN
GENERAL.—Except as provided in clause 
(ii), this paragraph shall apply to any grape wine which 
is designated as Burgundy, Claret, Chablis, Cham-
pagne, Chianti, Malaga, Marsala, Madeira, Moselle, 
Port, Retsina, Rhine Wine or Hock, Sauterne, Haut 
Sauterne, Sherry, or Tokay. 
‘‘(ii) EXCEPTION.—This paragraph shall not apply 
to wine which—
‘‘(I) contains less than 7 percent or more than 
24 percent alcohol by volume, 
‘‘(II) is intended for sale outside the United 
States, or 
‘‘(III) does not bear a brand name.’’. 
(b) EFFECTIVE DATE.—The amendments made by this section 
shall apply to wine imported or bottled in the United States on 
or after the date of enactment of this Act. 
SEC. 423. MODIFICATION OF RAILROAD TRACK MAINTENANCE CREDIT. 
(a) IN GENERAL.—Section 45G(d) (defining qualified railroad 
track maintenance expenditures) is amended—
(1) by inserting ‘‘gross’’ after ‘‘means’’, and 
(2) by inserting ‘‘(determined without regard to any consid-
eration for such expenditures given by the Class II or Class 
III railroad which made the assignment of such track)’’ after 
‘‘Class II or Class III railroad’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect as if included in the amendment made by section 
245(a) of the American Jobs Creation Act of 2004.
H. R. 6111—53
SEC. 424. MODIFICATION OF EXCISE TAX ON UNRELATED BUSINESS 
TAXABLE INCOME OF CHARITABLE REMAINDER TRUSTS. 
(a) IN GENERAL.—Subsection (c) of section 664 (relating to 
exemption from income taxes) is amended to read as follows: 
‘‘(c) TAXATION OF TRUSTS.—
‘‘(1) INCOME TAX.—A charitable remainder annuity trust 
and a charitable remainder unitrust shall, for any taxable 
year, not be subject to any tax imposed by this subtitle. 
‘‘(2) EXCISE TAX.—
‘‘(A) IN
GENERAL.—In the case of a charitable 
remainder annuity trust or a charitable remainder unitrust 
which has unrelated business taxable income (within the 
meaning of section 512, determined as if part III of sub-
chapter F applied to such trust) for a taxable year, there 
is hereby imposed on such trust or unitrust an excise 
tax equal to the amount of such unrelated business taxable 
income. 
‘‘(B) CERTAIN RULES TO APPLY.—The tax imposed by 
subparagraph (A) shall be treated as imposed by chapter 
42 for purposes of this title other than subchapter E of 
chapter 42. 
‘‘(C) TAX COURT PROCEEDINGS.—For purposes of this 
paragraph, the references in section 6212(c)(1) to section 
4940 shall be deemed to include references to this para-
graph.’’. 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall apply to taxable years beginning after December 31, 2006. 
SEC. 425. LOANS TO QUALIFIED CONTINUING CARE FACILITIES MADE 
PERMANENT. 
(a) IN GENERAL.—Subsection (h) of section 7872 (relating to 
exception for loans to qualified continuing care facilities) is amended 
by striking paragraph (4). 
(b) EFFECTIVE DATE.—The amendment made by this section 
shall take effect as if included in section 209 of the Tax Increase 
Prevention and Reconciliation Act of 2005. 
SEC. 426. TECHNICAL CORRECTIONS. 
(a) TECHNICAL
CORRECTION
RELATING
TO
LOOK-THROUGH 
TREATMENT OF PAYMENTS BETWEEN RELATED CONTROLLED FOREIGN 
CORPORATIONS UNDER THE FOREIGN PERSONAL HOLDING COMPANY 
RULES.—
(1) IN GENERAL.—
(A) The first sentence of section 954(c)(6)(A) is amended 
by striking ‘‘which is not subpart F income’’ and inserting 
‘‘which is neither subpart F income nor income treated 
as effectively connected with the conduct of a trade or 
business in the United States’’. 
(B) Section 954(c)(6)(A) is amended by striking the 
last sentence and inserting the following: ‘‘The Secretary 
shall prescribe such regulations as may be necessary or 
appropriate to carry out this paragraph, including such 
regulations as may be necessary or appropriate to prevent 
the abuse of the purposes of this paragraph.’’. 
(2) EFFECTIVE DATE.—The amendments made by this sub-
section shall take effect as if included in section 103(b) of 
the Tax Increase Prevention and Reconciliation Act of 2005.
H. R. 6111—54
(b) TECHNICAL CORRECTION REGARDING AUTHORITY TO EXER-
CISE REASONABLE CAUSE AND GOOD FAITH EXCEPTION.—
(1) IN GENERAL.—Section 903(d)(2)(B)(iii) of the American 
Jobs Creation Act of 2004, as amended by section 303(a) of 
the Gulf Opportunity Zone Act of 2005, is amended by inserting 
‘‘or the Secretary’s delegate’’ after ‘‘the Secretary of the 
Treasury’’. 
(2) EFFECTIVE DATE.—The amendment made by this sub-
section shall take effect as if included in the provisions of 
the American Jobs Creation Act of 2004 to which it relates. 
DIVISION B—MEDICARE AND OTHER 
HEALTH PROVISIONS 
SEC. 1. SHORT TITLE OF DIVISION. 
This division may be cited as the ‘‘Medicare Improvements 
and Extension Act of 2006’’. 
TITLE I—MEDICARE IMPROVED 
QUALITY AND PROVIDER PAYMENTS 
SEC. 101. PHYSICIAN PAYMENT AND QUALITY IMPROVEMENT. 
(a) ONE-YEAR INCREASE IN MEDICARE PHYSICIAN FEE SCHEDULE 
CONVERSION FACTOR.—Section 1848(d) of the Social Security Act 
(42 U.S.C. 1395w–4(d)) is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(7) CONVERSION FACTOR FOR 2007.—
‘‘(A) IN GENERAL.—The conversion factor that would 
otherwise be applicable under this subsection for 2007 shall 
be the amount of such conversion factor divided by the 
product of—
‘‘(i) 1 plus the Secretary’s estimate of the percent-
age increase in the MEI (as defined in section 
1842(i)(3)) for 2007 (divided by 100); and 
‘‘(ii) 1 plus the Secretary’s estimate of the update 
adjustment factor under paragraph (4)(B) for 2007. 
‘‘(B) NO
EFFECT
ON
COMPUTATION
OF
CONVERSION 
FACTOR FOR 2008.—The conversion factor under this sub-
section shall be computed under paragraph (1)(A) for 2008 
as if subparagraph (A) had never applied.’’. 
(b) QUALITY REPORTING SYSTEM.—Section 1848 of the Social 
Security Act (42 U.S.C. 1395w–4) is amended by adding at the 
end the following new subsection: 
‘‘(k) QUALITY REPORTING SYSTEM.—
‘‘(1) IN GENERAL.—The Secretary shall implement a system 
for the reporting by eligible professionals of data on quality 
measures specified under paragraph (2). Such data shall be 
submitted in a form and manner specified by the Secretary 
(by program instruction or otherwise), which may include 
submission of such data on claims under this part. 
‘‘(2) USE OF CONSENSUS-BASED QUALITY MEASURES.—
‘‘(A) FOR 2007.—
H. R. 6111—55
‘‘(i) IN GENERAL.—For purposes of applying this 
subsection for the reporting of data on quality meas-
ures for covered professional services furnished during 
the period beginning July 1, 2007, and ending 
December 31, 2007, the quality measures specified 
under this paragraph are the measures identified as 
2007 physician quality measures under the Physician 
Voluntary Reporting Program as published on the 
public website of the Centers for Medicare & Medicaid 
Services as of the date of the enactment of this sub-
section, except as may be changed by the Secretary 
based on the results of a consensus-based process in 
January of 2007, if such change is published on such 
website by not later than April 1, 2007. 
‘‘(ii) SUBSEQUENT
REFINEMENTS
IN
APPLICATION 
PERMITTED.—The Secretary may, from time to time 
(but not later than July 1, 2007), publish on such 
website (without notice or opportunity for public com-
ment) modifications or refinements (such as code addi-
tions, corrections, or revisions) for the application of 
quality measures previously published under clause 
(i), but may not, under this clause, change the quality 
measures under the reporting system. 
‘‘(iii) 
IMPLEMENTATION.—Notwithstanding 
any 
other provision of law, the Secretary may implement 
by program instruction or otherwise this subsection 
for 2007. 
‘‘(B) FOR 2008.—
‘‘(i) IN GENERAL.—For purposes of reporting data 
on quality measures for covered professional services 
furnished during 2008, the quality measures specified 
under this paragraph for covered professional services 
shall be measures that have been adopted or endorsed 
by a consensus organization (such as the National 
Quality Forum or AQA), that include measures that 
have been submitted by a physician specialty, and 
that the Secretary identifies as having used a con-
sensus-based process for developing such measures. 
Such measures shall include structural measures, such 
as the use of electronic health records and electronic 
prescribing technology. 
‘‘(ii) PROPOSED SET OF MEASURES.—Not later than 
August 15, 2007, the Secretary shall publish in the 
Federal Register a proposed set of quality measures 
that the Secretary determines are described in clause 
(i) and would be appropriate for eligible professionals 
to use to submit data to the Secretary in 2008. The 
Secretary shall provide for a period of public comment 
on such set of measures. 
‘‘(iii) FINAL
SET
OF
MEASURES.—Not later than 
November 15, 2007, the Secretary shall publish in 
the Federal Register a final set of quality measures 
that the Secretary determines are described in clause 
(i) and would be appropriate for eligible professionals 
to use to submit data to the Secretary in 2008. 
‘‘(3) COVERED
PROFESSIONAL
SERVICES
AND
ELIGIBLE 
PROFESSIONALS DEFINED.—For purposes of this subsection:
H. R. 6111—56
‘‘(A) COVERED PROFESSIONAL SERVICES.—The term ‘cov-
ered professional services’ means services for which pay-
ment is made under, or is based on, the fee schedule 
established under this section and which are furnished 
by an eligible professional. 
‘‘(B) 
ELIGIBLE
PROFESSIONAL.—The 
term 
‘eligible 
professional’ means any of the following: 
‘‘(i) A physician. 
‘‘(ii) 
A 
practitioner 
described 
in 
section 
1842(b)(18)(C). 
‘‘(iii) A physical or occupational therapist or a 
qualified speech-language pathologist. 
‘‘(4) USE OF REGISTRY-BASED REPORTING.—As part of the 
publication of proposed and final quality measures for 2008 
under clauses (ii) and (iii) of paragraph (2)(B), the Secretary 
shall address a mechanism whereby an eligible professional 
may provide data on quality measures through an appropriate 
medical registry (such as the Society of Thoracic Surgeons 
National Database), as identified by the Secretary. 
‘‘(5) IDENTIFICATION UNITS.—For purposes of applying this 
subsection, the Secretary may identify eligible professionals 
through billing units, which may include the use of the Provider 
Identification Number, the unique physician identification 
number (described in section 1833(q)(1)), the taxpayer identi-
fication number, or the National Provider Identifier. For pur-
poses of applying this subsection for 2007, the Secretary shall 
use the taxpayer identification number as the billing unit. 
‘‘(6) EDUCATION AND OUTREACH.—The Secretary shall pro-
vide for education and outreach to eligible professionals on 
the operation of this subsection. 
‘‘(7) LIMITATIONS ON REVIEW.—There shall be no adminis-
trative or judicial review under section 1869, section 1878, 
or otherwise, of the development and implementation of the 
reporting system under paragraph (1), including identification 
of quality measures under paragraph (2) and the application 
of paragraphs (4) and (5). 
‘‘(8) IMPLEMENTATION.—The Secretary shall carry out this 
subsection acting through the Administrator of the Centers 
for Medicare & Medicaid Services.’’. 
(c) TRANSITIONAL BONUS INCENTIVE PAYMENTS FOR QUALITY 
REPORTING IN 2007.—
(1) IN GENERAL.—With respect to covered professional serv-
ices furnished during a reporting period (as defined in para-
graph (6)(C)) by an eligible professional, if—
(A) there are any quality measures that have been 
established under the physician reporting system that are 
applicable to any such services furnished by such profes-
sional for such period, and 
(B) the eligible professional satisfactorily submits (as 
determined under paragraph (2)) to the Secretary data 
on such quality measures in accordance with such reporting 
system for such reporting period, 
in addition to the amount otherwise paid under part B of 
title XVIII of the Social Security Act, subject to paragraph 
(3), there also shall be paid to the eligible professional (or 
to an employer or facility in the cases described in clause 
(A) of section 1842(b)(6) of the Social Security Act (42 U.S.C.
H. R. 6111—57
1395u(b)(6))) from the Federal Supplementary Medical Insur-
ance Trust Fund established under section 1841 of such Act 
(42 U.S.C. 1395t) an amount equal to 1.5 percent of the Sec-
retary’s estimate (based on claims submitted not later than 
two months after the end of the reporting period) of the allowed 
charges under such part for all such covered professional serv-
ices furnished during the reporting period. 
(2) SATISFACTORY REPORTING DESCRIBED.—For purposes of 
paragraph (1), an eligible professional shall be treated as satis-
factorily submitting data on quality measures for covered 
professional services for a reporting period if quality measures 
have been reported as follows: 
(A) THREE OR FEWER QUALITY MEASURES APPLICABLE.—
If there are no more than 3 quality measures that are 
provided under the physician reporting system and that 
are applicable to such services of such professional fur-
nished during the period, each such quality measure has 
been reported under such system in at least 80 percent 
of the cases in which such measure is reportable under 
the system. 
(B) FOUR OR MORE QUALITY MEASURES APPLICABLE.—
If there are 4 or more quality measures that are provided 
under the physician reporting system and that are 
applicable to such services of such professional furnished 
during the period, at least 3 such quality measures have 
been reported under such system in at least 80 percent 
of the cases in which the respective measure is reportable 
under the system. 
(3) PAYMENT LIMITATION.—
(A) IN GENERAL.—In no case shall the total payment 
made under this subsection to an eligible professional (or 
to an employer or facility in the cases described in clause 
(A) of section 1842(b)(6) of the Social Security Act) exceed 
the product of—
(i) the total number of quality measures for which 
data are submitted under the physician reporting 
system for covered professional services of such profes-
sional that are furnished during the reporting period; 
and 
(ii) 300 percent of the average per measure pay-
ment amount specified in subparagraph (B). 
(B) AVERAGE PER MEASURE PAYMENT AMOUNT SPECI-
FIED.—The average per measure payment amount specified 
in this subparagraph is an amount, estimated by the Sec-
retary (based on claims submitted not later than two 
months after the end of the reporting period), equal to—
(i) the total of the amount of allowed charges under 
part B of title XVIII of the Social Security Act for 
all covered professional services furnished during the 
reporting period on claims for which quality measures 
are reported under the physician reporting system; 
divided by 
(ii) the total number of quality measures for which 
data are reported under such system for covered profes-
sional services furnished during the reporting period. 
(4) FORM OF PAYMENT.—The payment under this subsection 
shall be in the form of a single consolidated payment.
H. R. 6111—58
(5) APPLICATION.—
(A) PHYSICIAN REPORTING SYSTEM RULES.—Paragraphs 
(5), (6), and (8) of section 1848(k) of the Social Security 
Act, as added by subsection (b), shall apply for purposes 
of this subsection in the same manner as they apply for 
purposes of such section. 
(B) COORDINATION
WITH
OTHER
BONUS
PAYMENTS.—
The provisions of this subsection shall not be taken into 
account in applying subsections (m) and (u) of section 1833 
of the Social Security Act (42 U.S.C. 1395l) and any pay-
ment under such subsections shall not be taken into 
account in computing allowable charges under this sub-
section. 
(C) IMPLEMENTATION.—Notwithstanding any other 
provision of law, the Secretary may implement by program 
instruction or otherwise this subsection. 
(D) VALIDATION.—
(i) IN GENERAL.—Subject to the succeeding provi-
sions of this subparagraph, for purposes of determining 
whether a measure is applicable to the covered profes-
sional services of an eligible professional under para-
graph (2), the Secretary shall presume that if an 
eligible professional submits data for a measure, such 
measure is applicable to such professional. 
(ii) METHOD.—The Secretary shall validate (by 
sampling or other means as the Secretary determines 
to be appropriate) whether measures applicable to cov-
ered professional services of an eligible professional 
have been reported. 
(iii) DENIAL OF PAYMENT AUTHORITY.—If the Sec-
retary determines that an eligible professional has not 
reported measures applicable to covered professional 
services of such professional, the Secretary shall not 
pay the bonus incentive payment. 
(E) LIMITATIONS ON REVIEW.—
(i) IN GENERAL.—There shall be no administrative 
or judicial review under section 1869 or 1878 of the 
Social Security Act or otherwise of—
(I) the determination of measures applicable 
to services furnished by eligible professionals 
under this subsection; 
(II) the determination of satisfactory reporting 
under paragraph (2); 
(III) the determination of the payment limita-
tion under paragraph (3); and 
(IV) the determination of the bonus incentive 
payment under this subsection. 
(ii) TREATMENT
OF
DETERMINATIONS.—A deter-
mination under this subsection shall not be treated 
as a determination for purposes of section 1869 of 
the Social Security Act. 
(6) DEFINITIONS.—For purposes of this subsection: 
(A) ELIGIBLE
PROFESSIONAL; COVERED
PROFESSIONAL 
SERVICES.—The terms ‘‘eligible professional’’ and ‘‘covered 
professional services’’ have the meanings given such terms 
in section 1848(k)(3) of the Social Security Act, as added 
by subsection (b).
H. R. 6111—59
(B) PHYSICIAN REPORTING SYSTEM.—The term ‘‘physi-
cian reporting system’’ means the system established under 
section 1848(k) of the Social Security Act, as added by 
subsection (b). 
(C) REPORTING PERIOD.—The term ‘‘reporting period’’ 
means the period beginning on July 1, 2007, and ending 
on December 31, 2007. 
(D) SECRETARY.—The term ‘‘Secretary’’ means the Sec-
retary of Health and Human Services. 
(d) PHYSICIAN ASSISTANCE AND QUALITY INITIATIVE FUND.—
Section 1848 of the Social Security Act, as amended by subsection 
(b), is further amended by adding at the end the following new 
subsection: 
‘‘(l) PHYSICIAN ASSISTANCE AND QUALITY INITIATIVE FUND.—
‘‘(1) ESTABLISHMENT.—The Secretary shall establish under 
this subsection a Physician Assistance and Quality Initiative 
Fund (in this subsection referred to as the ‘Fund’) which shall 
be available to the Secretary for physician payment and quality 
improvement initiatives, which may include application of an 
adjustment to the update of the conversion factor under sub-
section (d). 
‘‘(2) FUNDING.—
‘‘(A) AMOUNT AVAILABLE.—There shall be available to 
the 
Fund 
for 
expenditures 
an 
amount 
equal 
to 
$1,350,000,000. 
‘‘(B) TIMELY OBLIGATION OF ALL AVAILABLE FUNDS FOR 
SERVICES
FURNISHED
DURING
2008.—The Secretary shall 
provide for expenditures from the Fund in a manner 
designed to provide (to the maximum extent feasible) for 
the obligation of the entire amount specified in subpara-
graph (A) for payment with respect to physicians’ services 
furnished during 2008. 
‘‘(C) PAYMENT FROM TRUST FUND.—The amount speci-
fied in subparagraph (A) shall be available to the Fund, 
as expenditures are made from the Fund, from the Federal 
Supplementary Medical Insurance Trust Fund under sec-
tion 1841. 
‘‘(D) FUNDING LIMITATION.—Amounts in the Fund shall 
be available in advance of appropriations in accordance 
with subparagraph (B) but only if the total amount obli-
gated from the Fund does not exceed the amount available 
to the Fund under subparagraph (A). The Secretary may 
obligate funds from the Fund only if the Secretary deter-
mines (and the Chief Actuary of the Centers for Medicare 
& Medicaid Services and the appropriate budget officer 
certify) that there are available in the Fund sufficient 
amounts to cover all such obligations incurred consistent 
with the previous sentence. 
‘‘(E) CONSTRUCTION.—In the case that expenditures 
from the Fund are applied to, or otherwise affect, a conver-
sion factor under subsection (d) for a year, the conversion 
factor under such subsection shall be computed for a subse-
quent year as if such application or effect had never 
occurred.’’. 
(e) IMPLEMENTATION.—For purposes of implementing the provi-
sions of, and amendments made by, this section, the Secretary 
of Health and Human Services shall provide for the transfer, from
H. R. 6111—60
the Federal Supplementary Medical Insurance Trust Fund estab-
lished under section 1841 of the Social Security Act (42 U.S.C. 
1395t), of $60,000,000 to the Centers for Medicare & Medicaid 
Services Program Management Account for the period of fiscal 
years 2007, 2008, and 2009. 
SEC. 102. EXTENSION OF FLOOR ON MEDICARE WORK GEOGRAPHIC 
ADJUSTMENT. 
Section 1848(e)(1)(E) of the Social Security Act (42 U.S.C. 
1395w–4(e)(1)(E)) is amended by striking ‘‘before January 1, 2007’’ 
and inserting ‘‘before January 1, 2008’’. 
SEC. 103. UPDATE TO THE COMPOSITE RATE COMPONENT OF THE 
BASIC CASE-MIX ADJUSTED PROSPECTIVE PAYMENT 
SYSTEM FOR DIALYSIS SERVICES. 
(a) IN GENERAL.—Section 1881(b)(12)(G) of the Social Security 
Act (42 U.S.C. 1395rr(b)(12)(G)) is amended to read as follows: 
‘‘(G) The Secretary shall increase the amount of the composite 
rate component of the basic case-mix adjusted system under 
subparagraph (B) for dialysis services—
‘‘(i) furnished on or after January 1, 2006, and before 
April 1, 2007, by 1.6 percent above the amount of such com-
posite rate component for such services furnished on December 
31, 2005; and 
‘‘(ii) furnished on or after April 1, 2007, by 1.6 percent 
above the amount of such composite rate component for such 
services furnished on March 31, 2007.’’. 
(b) GAO REPORT ON HOME DIALYSIS PAYMENT.—Not later than 
January 1, 2009, the Comptroller General of the United States 
shall submit to Congress a report on the costs for home hemodialysis 
treatment and patient training for both home hemodialysis and 
peritoneal dialysis. Such report shall also include recommendations 
for a payment methodology for payment under section 1881 of 
the Social Security Act (42 U.S.C. 1395rr) that measures, and 
is based on, the costs of providing such services and takes into 
account the case mix of patients. 
SEC. 104. EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN 
PATHOLOGY SERVICES UNDER MEDICARE. 
Section 542(c) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (as enacted into law by 
section 1(a)(6) of Public Law 106–554), as amended by section 
732 of the Medicare Prescription Drug, Improvement, and Mod-
ernization Act of 2003 (Public Law 108–173), is amended by striking 
‘‘and 2006’’ and inserting ‘‘, 2006, and 2007’’. 
SEC. 105. EXTENSION OF MEDICARE REASONABLE COSTS PAYMENTS 
FOR 
CERTAIN 
CLINICAL 
DIAGNOSTIC 
LABORATORY 
TESTS FURNISHED TO HOSPITAL PATIENTS IN CERTAIN 
RURAL AREAS. 
Effective as if included in the enactment of section 416 of 
the Medicare Prescription Drug, Improvement, and Modernization 
Act of 2003 (42 U.S.C. 1395l–4), subsection (b) of such section 
is amended by striking ‘‘2-year period’’ and inserting ‘‘3-year period’’.
H. R. 6111—61
SEC. 106. HOSPITAL MEDICARE REPORTS AND CLARIFICATIONS. 
(a) CORRECTION OF MID-YEAR RECLASSIFICATION EXPIRATION.—
Notwithstanding any other provision of law, in the case of a sub-
section (d) hospital (as defined for purposes of section 1886 of 
the Social Security Act (42 U.S.C. 1395ww)) with respect to which 
a reclassification of its wage index for purposes of such section 
would (but for this subsection) expire on March 31, 2007, such 
reclassification of such hospital shall be extended through Sep-
tember 30, 2007. The previous sentence shall not be effected in 
a budget-neutral manner. 
(b) REVISION OF THE MEDICARE WAGE INDEX CLASSIFICATION 
SYSTEM.—
(1) MEDPAC REPORT.—
(A) IN
GENERAL.—The Medicare Payment Advisory 
Commission shall submit to Congress, by not later than 
June 30, 2007, a report on its study of the wage index 
classification system applied under Medicare prospective 
payment systems, including under section 1886(d)(3)(E) of 
the Social Security Act (42 U.S.C. 1395ww(d)(3)(E)). Such 
report shall include any alternatives the Commission rec-
ommends to the method to compute the wage index under 
such section. 
(B) FUNDING.—Out of any funds in the Treasury not 
otherwise appropriated, there are appropriated to the Medi-
care Payment Advisory Commission, $2,000,000 for fiscal 
year 2007 to carry out this paragraph. 
(2) PROPOSAL TO REVISE THE HOSPITAL WAGE INDEX CLASSI-
FICATION SYSTEM.—The Secretary of Health and Human Serv-
ices, taking into account the recommendations described in 
the report under paragraph (1), shall include in the proposed 
rule published under section 1886(e)(5)(A) of the Social Security 
Act (42 U.S.C. 1395ww(e)(5)(A)) for fiscal year 2009 one or 
more proposals to revise the wage index adjustment applied 
under 
section 
1886(d)(3)(E) 
of 
such 
Act 
(42 
U.S.C. 
1395ww(d)(3)(E)) for purposes of the Medicare prospective pay-
ment system for inpatient hospital services. Such proposal (or 
proposals) shall consider each of the following: 
(A) Problems associated with the definition of labor 
markets for purposes of such wage index adjustment. 
(B) The modification or elimination of geographic 
reclassifications and other adjustments. 
(C) The use of Bureau of Labor Statistics data, or 
other data or methodologies, to calculate relative wages 
for each geographic area involved. 
(D) Minimizing variations in wage index adjustments 
between and within Metropolitan Statistical Areas and 
Statewide rural areas. 
(E) The feasibility of applying all components of the 
proposal to other settings, including home health agencies 
and skilled nursing facilities. 
(F) Methods to minimize the volatility of wage index 
adjustments, while maintaining the principle of budget 
neutrality in applying such adjustments. 
(G) The effect that the implementation of the proposal 
would have on health care providers and on each region 
of the country.
H. R. 6111—62
(H) Methods for implementing the proposal, including 
methods to phase-in such implementation. 
(I) Issues relating to occupational mix, such as staffing 
practices and any evidence on the effect on quality of 
care and patient safety and any recommendations for alter-
native calculations. 
(c) ELIMINATION OF UNNECESSARY REPORT.—Section 1886 of 
the Social Security Act (42 U.S.C. 1395ww) is amended—
(1) in subsection (d)(4)(C), by striking clause (iv); and 
(2) in subsection (e), by striking paragraph (3). 
SEC. 107. PAYMENT FOR BRACHYTHERAPY. 
(a) EXTENSION OF PAYMENT RULE.—Section 1833(t)(16)(C) of 
the Social Security Act (42 U.S.C. 1395l(t)(16)(C)) is amended by 
striking ‘‘January 1, 2007’’ and inserting ‘‘January 1, 2008’’. 
(b) ESTABLISHMENT OF SEPARATE PAYMENT GROUPS.—
(1) IN
GENERAL.—Section 1833(t)(2)(H) of such Act (42 
U.S.C. 1395l(t)(2)(H)) is amended by inserting ‘‘and for stranded 
and non-stranded devices furnished on or after July 1, 2007’’ 
before the period at the end. 
(2) IMPLEMENTATION.—The Secretary of Health and Human 
Services may implement the amendment made by paragraph 
(1) by program instruction or otherwise. 
SEC. 108. PAYMENT PROCESS UNDER THE COMPETITIVE ACQUISITION 
PROGRAM (CAP). 
(a) IN GENERAL.—Section 1847B(a)(3) of the Social Security 
Act (42 U.S.C. 1395w–3b(a)(3)) is amended—
(1) in subparagraph (A)(iii), by striking ‘‘and biologicals’’ 
and all that follows and inserting ‘‘and biologicals shall be 
made only to such contractor upon receipt of a claim for a 
drug or biological supplied by the contractor for administration 
to a beneficiary.’’; and 
(2) by adding at the end the following new subparagraph: 
‘‘(D) POST-PAYMENT REVIEW PROCESS.—The Secretary 
shall establish (by program instruction or otherwise) a 
post-payment review process (which may include the use 
of statistical sampling) to assure that payment is made 
for a drug or biological under this section only if the drug 
or biological has been administered to a beneficiary. The 
Secretary shall recoup, offset, or collect any overpayments 
determined by the Secretary under such process.’’. 
(b) CONSTRUCTION.—Nothing in this section shall be construed 
as—
(1) requiring the conduct of any additional competition 
under subsection (b)(1) of section 1847B of the Social Security 
Act (42 U.S.C. 1395w–3b); or 
(2) requiring any additional process for elections by physi-
cians under subsection (a)(1)(A)(ii) of such section or additional 
selection by a selecting physician of a contractor under sub-
section (a)(5) of such section. 
(c) EFFECTIVE DATE.—The amendments made by subsection 
(a) shall apply to payment for drugs and biologicals supplied under 
section 1847B of the Social Security Act (42 U.S.C. 1395w–3b)—
(1) on or after April 1, 2007; and 
(2) on or after July 1, 2006, and before April 1, 2007, 
for claims that are unpaid as of April 1, 2007.
H. R. 6111—63
SEC. 109. QUALITY REPORTING FOR HOSPITAL OUTPATIENT SERVICES 
AND AMBULATORY SURGICAL CENTER SERVICES. 
(a) OUTPATIENT HOSPITAL SERVICES.—
(1) IN
GENERAL.—Section 1833(t) of the Social Security 
Act (42 U.S.C. 1395l(t)) is amended—
(A) in paragraph (3)(C)(iv), by inserting ‘‘subject to 
paragraph (17),’’ after ‘‘For purposes of this subparagraph,’’; 
and 
(B) by adding at the end the following new paragraph: 
‘‘(17) QUALITY REPORTING.—
‘‘(A) REDUCTION IN UPDATE FOR FAILURE TO REPORT.—
‘‘(i) IN
GENERAL.—For purposes of paragraph 
(3)(C)(iv) for 2009 and each subsequent year, in the 
case of a subsection (d) hospital (as defined in section 
1886(d)(1)(B)) that does not submit, to the Secretary 
in accordance with this paragraph, data required to 
be submitted on measures selected under this para-
graph with respect to such a year, the OPD fee 
schedule increase factor under paragraph (3)(C)(iv) for 
such year shall be reduced by 2.0 percentage points. 
‘‘(ii) NON-CUMULATIVE APPLICATION.—A reduction 
under this subparagraph shall apply only with respect 
to the year involved and the Secretary shall not take 
into account such reduction in computing the OPD 
fee schedule increase factor for a subsequent year. 
‘‘(B) FORM AND MANNER OF SUBMISSION.—Each sub-
section (d) hospital shall submit data on measures selected 
under this paragraph to the Secretary in a form and 
manner, and at a time, specified by the Secretary for pur-
poses of this paragraph. 
‘‘(C) DEVELOPMENT OF OUTPATIENT MEASURES.—
‘‘(i) IN
GENERAL.—The Secretary shall develop 
measures that the Secretary determines to be appro-
priate for the measurement of the quality of care 
(including medication errors) furnished by hospitals 
in outpatient settings and that reflect consensus among 
affected parties and, to the extent feasible and prac-
ticable, shall include measures set forth by one or 
more national consensus building entities. 
‘‘(ii) CONSTRUCTION.—Nothing in this paragraph 
shall be construed as preventing the Secretary from 
selecting measures that are the same as (or a subset 
of) the measures for which data are required to be 
submitted under section 1886(b)(3)(B)(viii). 
‘‘(D) REPLACEMENT OF MEASURES.—For purposes of this 
paragraph, the Secretary may replace any measures or 
indicators in appropriate cases, such as where all hospitals 
are effectively in compliance or the measures or indicators 
have been subsequently shown not to represent the best 
clinical practice. 
‘‘(E) AVAILABILITY OF DATA.—The Secretary shall estab-
lish procedures for making data submitted under this para-
graph available to the public. Such procedures shall ensure 
that a hospital has the opportunity to review the data 
that are to be made public with respect to the hospital 
prior to such data being made public. The Secretary shall 
report quality measures of process, structure, outcome,
H. R. 6111—64
patients’ perspectives on care, efficiency, and costs of care 
that relate to services furnished in outpatient settings in 
hospitals on the Internet website of the Centers for Medi-
care & Medicaid Services.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
1886(b)(3)(B)(viii)(III) 
of 
such 
Act 
(42 
U.S.C. 
1395ww(b)(3)(B)(viii)(III)) is amended by inserting ‘‘(including 
medication errors)’’ after ‘‘quality of care’’. 
(b) APPLICATION TO AMBULATORY SURGICAL CENTERS.—Section 
1833(i) of such Act (42 U.S.C. 1935l(i)) is amended—
(1) in paragraph (2)(D), by redesignating clause (iv) as 
clause (v) and by inserting after clause (iii) the following new 
clause: 
‘‘(iv) The Secretary may implement such system in a manner 
so as to provide for a reduction in any annual update for failure 
to report on quality measures in accordance with paragraph (7).’’; 
and 
(2) by adding at the end the following new paragraph: 
‘‘(7)(A) For purposes of paragraph (2)(D)(iv), the Secretary may 
provide, in the case of an ambulatory surgical center that does 
not submit, to the Secretary in accordance with this paragraph, 
data required to be submitted on measures selected under this 
paragraph with respect to a year, any annual increase provided 
under the system established under paragraph (2)(D) for such year 
shall be reduced by 2.0 percentage points. A reduction under this 
subparagraph shall apply only with respect to the year involved 
and the Secretary shall not take into account such reduction in 
computing any annual increase factor for a subsequent year. 
‘‘(B) Except as the Secretary may otherwise provide, the provi-
sions of subparagraphs (B), (C), (D), and (E) of paragraph (17) 
of section 1833(t) shall apply with respect to services of ambulatory 
surgical centers under this paragraph in a similar manner to the 
manner in which they apply under such paragraph and, for purposes 
of this subparagraph, any reference to a hospital, outpatient setting, 
or outpatient hospital services is deemed a reference to an ambula-
tory surgical center, the setting of such a center, or services of 
such a center, respectively.’’. 
(c) EFFECTIVE DATE.—The amendments made by this section 
shall apply to payment for services furnished on or after January 
1, 2009. 
SEC. 110. REPORTING OF ANEMIA QUALITY INDICATORS FOR MEDI-
CARE PART B CANCER ANTI-ANEMIA DRUGS. 
(a) IN GENERAL.—Section 1842 of the Social Security Act (42 
U.S.C. 1395u) is amended by adding at the end the following 
new subsection: 
‘‘(u) Each request for payment, or bill submitted, for a drug 
furnished to an individual for the treatment of anemia in connection 
with the treatment of cancer shall include (in a form and manner 
specified by the Secretary) information on the hemoglobin or 
hematocrit levels for the individual.’’. 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to drugs furnished on or after January 1, 2008. The 
Secretary of Health and Human Services shall address the 
implementation of such amendment in the rulemaking process 
under section 1848 of the Social Security Act (42 U.S.C. 1395w–